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U.S. Office of Personnel Management.
Final rule.
The U.S. Office of Personnel Management (OPM) is issuing final regulations on certain pay administration rules dealing with employees in nonforeign areas outside the 48 contiguous States. We are revising provisions related to special rates, locality rates, and retained rates. Some of the revisions are necessary to address the effects of implementing the Non-Foreign Area Retirement Equity Assurance Act of 2009, while others are to improve the administration of special rates.
Carey Jones by telephone at (202) 606-2858; by fax at (202) 606-0824; or by email at
On August 1, 2011, the U.S. Office of Personnel Management (OPM) published proposed regulations (76 FR 45710) to revise certain pay administration rules for employees in “nonforeign areas,” which include Alaska, Hawaii, Guam, Puerto Rico, the Virgin Islands, and certain other areas listed in 5 CFR 591.205. Some of the revisions are necessary to address the effects of implementing the Non-Foreign Area Retirement Equity Assurance Act of 2009 (NAREAA), as contained in subtitle B of title XIX of the National Defense Authorization Act for Fiscal Year 2010 (Pub. L. 111-84, October 28, 2009), while others are to improve the administration of special rates.
The 45-day comment period ended on September 15, 2011. During the comment period, we received comments from three Senators, one agency, and six individuals. This supplementary information addresses the comments we received. The agency concurred with OPM's proposed changes as written.
In the supplementary information accompanying the proposed regulations, we stated that certain provisions of NAREAA required additional increases in special rate schedules to levels beyond what may be justified to prevent significant recruitment or retention difficulties. We stated that, accordingly, OPM may consider reducing special rate schedules in nonforeign areas. We proposed to provide OPM with discretionary authority to establish a separate special rate schedule that temporarily maintains the higher special rates for current employees covered by a given special rate schedule before the effective date of the schedule reduction. This means that future hires would be covered by a lower special rate schedule established consistent with labor market conditions while current employees would have “grandfather” coverage under a higher special rate schedule that would provide pay protection, but would be phased out over time.
The Senators and one individual were concerned about the proposal. Specifically, the individual does not want OPM to phase out any special rates. The Senators were concerned that OPM has decided to eliminate additional adjustments for special rate employees and by the suggestion that the adjusted rates may be higher than justified without supporting analysis. The Senators were also concerned that the proposal could lead to losses in take-home pay if cost-of-living allowance (COLA) reductions are not adequately considered and the phase-out is done too quickly. (As locality pay increases, payable COLA rates must be reduced as specified in section 1912(b) of NAREAA. As a consequence, covered employees may receive both locality pay and a reduced COLA for a number of years, until the applicable COLA rate is reduced to zero.) They stated that pay reductions could impair agencies' recruitment and retention efforts and recommended that any decreases in special rates be done gradually in order to protect pay.
During the January 2010-January 2012 transition period, additional adjustments are being added to the original special rates to compensate for COLA reductions, as required by NAREAA. The original special rates without the NAREAA additional adjustments were set at levels necessary to address recruitment and/or retention difficulties. We note that most of the special rate schedules established in nonforeign areas were derived from nationwide or worldwide schedules for which the special rates were set without consideration of the fact that employees in the nonforeign areas would receive COLA on top of special rates. Thus, the total pay rates may have been beyond what was necessary to prevent significant recruitment or retention problems in the nonforeign areas. Accordingly, as part of the annual review of special rates, we have asked agencies to conduct reviews to determine whether they need the special rates set at a level above the original special rates, taking into consideration the remaining COLA that will be paid on top of the special rates. See CPM 2011-11, issued July 8, 2011, at
OPM has not yet determined how it will adjust special rates for employees in nonforeign areas after January 1, 2012, because we are waiting for agencies to complete their reviews of special rates that apply to their employees. OPM will announce its decisions resulting from the annual review of special rates in a memorandum that is typically issued in December. Under 5 U.S.C. 1103(b)(4), the Director of OPM is not required to publish in the
OPM is adopting as final the proposed change providing the discretionary authority to establish a separate special rate schedule that temporarily maintains
OPM is also adopting the proposal to add locality pay and nonforeign COLA as circumstances and factors OPM may consider in evaluating the need for special rates. This means that OPM can take into account any COLA reductions or locality pay increases as it is determining how to adjust special rate schedules in nonforeign areas.
Another individual requested that OPM's regulations provide locality pay for employees in foreign areas. OPM does not have the authority to provide locality pay for employees in foreign areas because 5 U.S.C. 5304(f) does not cover foreign areas.
A third individual was concerned that there is no provision in NAREAA allowing non-appropriated fund (NAF) employees covered by NAREAA to receive a rate exceeding the maximum of the NAF pay band. The individual asked OPM to address NAF pay issues in the regulations.
These regulations do not address NAF pay issues because OPM has the authority to regulate pay setting only for NAF employees who move to the General Schedule. We note that, under section 1918(b) of NAREAA, administrators of pay systems not administered by OPM must carry out the provisions of NAREAA consistent with OPM rules, subject to the concurrence of OPM. Thus, if there are nonforeign area employees in the NAF pay system who are covered by NAREAA and who are receiving a retained rate similar to a retained rate under 5 U.S.C. 5363, then the NAF pay system administrator should prescribe rules consistent with OPM's regulations on retained rates.
On December 27, 2010, OPM issued a memorandum (CPM 2010-23) that provided a special (more generous) rule for adjusting retained rates under 5 U.S.C. 5363 for employees in nonforeign areas receiving COLAs during the January 2010-January 2012 transition period. Without the special rule, some retained rate employees may have experienced a reduction in gross pay during the transition period because the increase in pay resulting from a retained rate adjustment may have been less than the loss in pay resulting from the COLA reduction. OPM stated in the supplementary information accompanying the proposed regulations that OPM was not proposing to continue the special rule after the transition period. OPM explained that a continuing exception to the statutory retained rate adjustment rule would not be appropriate. The NAREAA section 1918(a)(2) authority under which OPM established the special retained rate adjustment rule applies only during the transition period, when locality pay is being increased by significant amounts and there are corresponding large reductions in COLA payments.
The Senators and an individual recommended that OPM continue the special retained rate adjustment rule beyond the transition period. The Senators believed that the rule was consistent with Congressional intent to protect employees' pay. They cited the sense of Congress in section 1915(a) of NAREAA, which states: “It is the sense of Congress that the application of this subtitle to any employee should not result in a decrease in the take home pay of that employee.” The Senators further maintained that there is no basis for distinguishing between the transition period and the post-transition period in terms of providing employee pay protection.
While a sense of Congress does not have the effect of law, OPM has recognized that it is an expression of the general intent of Congress. OPM has taken this intent into account in implementing NAREAA, while complying with the requirements of NAREAA and other applicable law.
In NAREAA, Congress did provide for special treatment during the transition period. For example, section 1918(a)(2) gave OPM authority to enact special rules governing the adjustment of pay rates during the transition period for certain employees (including retained rate employees). Also, section 1915(b)(1) established special rules governing the adjustment of special rates during the transition period. The transition period is distinguishable from the post-transition period because locality pay is being phased in by providing large increases each year equal to one-third of the applicable locality rate, which results in correspondingly large reductions in COLA payments. This was the basis for Congress enacting special authorities for the transition period.
Since certain NAREAA provisions are applicable only to the transition period, OPM understands that the law generally intended a return to the normal pay rules after the transition period, absent a specific NAREAA provision providing otherwise. For example, OPM expects to apply the normal provisions of its special rates authority in 5 U.S.C. 5305 in making determinations regarding the adjustment of special rates after January 1, 2012, rather than rely on the formula in NAREAA section 1915(b). Likewise, OPM expects to follow the normal retained rate adjustment rules in 5 U.S.C. 5363 after the transition period. Any reduction in take-home pay would not be attributable to the application of NAREAA, but to the application of the regular pay laws.
We note that the idea of protecting take-home pay has always been problematic, since take-home pay for each individual is affected by various deductions, some of which can be controlled by the employee and some of which have nothing to do with the application of NAREAA. Also, a focus on take-home pay fails to take into account the benefits of replacing COLA with basic pay. Basic pay is used to compute retirement annuities, Government contributions towards Thrift Savings Plan accounts, life insurance benefits, and other payments and benefits.
When OPM established a more generous retained rate adjustment rule during the NAREAA transition period, it did so because analysis showed that the large reductions in COLA payments during the transition period could result in a significant reduction in a retained rate employee's gross total pay. Our analysis shows that such reductions will not occur when locality pay increases and corresponding COLA reductions are more modest. That difference does provide a basis for treating the transition period differently than the post-transition period.
It is important to remember that employees receiving a retained rate are, by definition, being paid above the regular salary range for their position. That salary range, including the maximum rate of the range that is the eventual target salary for the retained rate employee, is receiving the full pay adjustments. By design, retained rate employees receive lesser increases so that they can fall back into the normal salary range over time and be paid appropriately for their position.
The three Senators recommended that OPM use the authority in NAREAA section 1918(a)(3) to establish a more generous retained rate adjustment rule for the post-transition period. Section 1918(a)(3) provides that OPM may establish “rules governing the establishment and adjustment of saved or retained rates for any employee whose rate of pay exceeds applicable pay limitations on the first day of the
As indicated by our responses above, we are not using the authority in NAREAA section 1918(a)(3) to adopt a more generous retained rate adjustment rule for certain grandfathered employees at this time; however, we will study and analyze this issue further. For General Schedule employees, OPM will use the more generous retained rate adjustment rule on January 1, 2012. The next possible application of the retained rate adjustment rule after January 2012 will be in January 2013 under current law. That gives us some time to further consider this matter.
The Senators and an individual supported OPM's proposed rule change to 5 CFR 536.310 to lift the EX-IV pay cap for employees who are receiving special rates in excess of the rate for EX-IV on January 1, 2012, that are converted to retained rates consistent with section 1913 of NAREAA. It has come to our attention that the exception to the level IV cap should apply to other employees. In the memorandum announcing the special retained rate adjustment rule to be used during the transition period, OPM stated “the Executive Schedule level IV cap on retained rates under 5 CFR 536.306(a) does not apply to a retained rate adjusted under this special authority.” Therefore, we are revising 5 CFR 536.310(a) to provide that a nonforeign area employee who is receiving a retained rate in excess of EX-IV on January 1, 2012, consistent with NAREAA, may continue to receive this rate until the retained rate becomes equal to or falls below the rate for EX- IV, or the employee ceases to be entitled to pay retention under § 536.308. This includes employees who are receiving special rates in excess of EX-IV on January 1, 2012, that are converted to retained rates consistent with section 1913 of NAREAA.
Another individual was concerned about nonforeign area employees whose pay is limited by the biweekly cap on premium pay under 5 U.S.C. 5547(a) and 5 CFR 550.105. Specifically, the individual states that such employees who are receiving law enforcement availability pay (LEAP) under 5 U.S.C. 5545a have experienced reductions in total pay because, as the employee's locality pay increases and COLA decreases under NAREAA, the employee's LEAP is reduced so that the sum of the employee's basic pay and premium pay does not exceed the biweekly cap on premium pay. (COLA is not subject to the biweekly premium pay cap while locality pay is subject to the biweekly premium pay cap.) The individual requests that OPM use the authority in section 1918(a)(3) of NAREAA to issue regulations preventing employees subject to the biweekly premium pay limitation in nonforeign areas from experiencing reductions in total pay.
We are not adopting this recommendation. Section 1918(a)(3) provides OPM the authority to prescribe rules governing the establishment and adjustment of saved or retained rates for any employee whose rate of pay exceeds applicable pay limitations on the first day of the first pay period beginning on or after January 1, 2012. The authority is intended to apply to nonforeign area employees who have a rate in excess of applicable pay limitations on the last day of the transition period and who will have a saved or retained rate. That does not fit the premium pay situations cited by the commenter. There is no authority to prevent premium pay from being reduced as a result of the biweekly cap on premium pay. Any reduction is due to application of the longstanding premium pay cap law, not the application of NAREAA. We note that employees whose official worksites are within the continental United States may also experience reductions in their premium pay as a result of the biweekly premium pay cap when their locality pay increases.
The Office of Management and Budget has reviewed this rule in accordance with E.O. 13563 and E.O. 12866.
I certify that these regulations will not have a significant economic impact on a substantial number of small entities because they will apply only to Federal agencies and employees.
Administrative practice and procedure, Freedom of information, Government employees, Law enforcement officers, Reporting and recordkeeping requirements, Wages.
Accordingly, OPM is amending 5 CFR parts 530, 531, and 536 as follows:
5 U.S.C. 5305 and 5307; subpart C also issued under 5 U.S.C. 5338, sec. 4 of the Performance Management and Recognition System Termination Act of 1993 (Pub. L. 103-89), 107 Stat. 981, and sec. 1918 of Public Law 111-84, 123 Stat. 2619.
The revisions and additions read as follows:
(b) * * *
(4) Locality pay authorized under 5 U.S.C. 5304 for the area involved;
(5) A nonforeign area cost-of-living allowance authorized under 5 U.S.C. 5941(a)(1) for the area involved; or
(c) In setting the level of special rates within a rate range for a category of employees, OPM will compute the special rate supplement by adding a fixed dollar amount or a fixed percentage to all GS rates within that range, except that an alternate method may be used—
(1) For grades GS-1 and GS-2, where within-grade increases vary throughout the range; and
(2) In the nonforeign areas listed in 5 CFR 591.205 for special rate schedules established before January 1, 2012.
(e) Using its authority in section 1918(a)(1) of the Non-Foreign Area Retirement Equity Assurance Act of 2009 in combination with its authority under 5 U.S.C. 5305, OPM may establish a separate special rate schedule for a category of employees who are in GS positions covered by a nonforeign area special rate schedule in effect on January 1, 2012, and who are employed in a nonforeign area before an OPM-specified effective date. Such a separate schedule may be established if the existing special rate schedule is being reduced. An employee's coverage under the separate special rate schedule is contingent on the employee being continuously employed in a covered GS position in the nonforeign area after the OPM-specified effective date. Such a separate special rate schedule must be designed to provide temporary pay protection and be phased out over time until all affected employees are covered under the pay schedule that would otherwise apply to the category of employees in question.
(a) * * *
(10) The level of any locality pay authorized under 5 U.S.C. 5304 and any nonforeign area cost-of-living allowance authorized under 5 U.S.C. 5941(a)(1) for the area involved.
The revision reads as follows:
(a) The purposes for which a locality rate is considered to be a rate of basic pay in computing other payments or benefits to the extent provided by 5 CFR 531.610, except as otherwise provided in paragraphs (b) and (c) of this section;
5 U.S.C. 5115, 5307, and 5338; sec. 4 of Public Law 103-89, 107 Stat. 981; and E.O. 12748, 56 FR 4521, 3 CFR, 1991 Comp., p. 316; Subpart B also issued under 5 U.S.C. 5303(g), 5305, 5333, 5334(a) and (b), and 7701(b)(2); Subpart D also issued under 5 U.S.C. 5335 and 7701(b)(2); Subpart E also issued under 5 U.S.C. 5336; Subpart F also issued under 5 U.S.C. 5304, 5305, and 5941(a); E.O. 12883, 58 FR 63281, 3 CFR, 1993 Comp., p. 682; and E.O. 13106, 63 FR 68151, 3 CFR, 1998 Comp., p. 224.
(g) Nonforeign area cost-of-living allowances and post differentials under 5 U.S.C. 5941 and 5 CFR part 591, subpart B;
5 U.S.C. 5361-5366; sec. 4 of the Performance Management and Recognition System Termination Act of 1993 (Pub. L. 103-89), 107 Stat. 981; § 536.301(b) also issued under 5 U.S.C. 5334(b); § 536.308 also issued under sec. 301(d)(2) of the Federal Workforce Flexibility Act of 2004 (Pub. L. 108-411), 118 Stat. 2305; § 536.310 also issued under sections 1913 and 1918 of the Non-Foreign Area Retirement Equity Assurance Act of 2009 (subtitle B of title XIX of Pub. L.111-84), 123 Stat. 2619; § 536.405 also issued under 5 U.S.C. 552, Freedom of Information Act, Public Law 92-502.
(a) Notwithstanding §§ 536.304(b)(3) and 536.306(a), an employee who is receiving a retained rate in excess of Executive Schedule level IV on January 1, 2012, consistent with the Non-Foreign Retirement Equity Assurance Act of 2009 (subtitle B of title XIX of Pub. L. 111-84), may continue to receive a retained rate higher than Executive Schedule level IV until—
(1) The retained rate becomes equal to or falls below Executive Schedule level IV; or
(2) The employee ceases to be entitled to pay retention under § 536.308.
(b) Notwithstanding 5 U.S.C. 5361(1) and § 536.102(b)(2), an employee who is employed on a temporary or term basis is not barred from receiving a retained rate if such employee—
(1) Is receiving a special rate above Executive Schedule level IV on January 1, 2012, and is covered by paragraph (a) of this section; or
(2) Is receiving a special rate incorporating an additional adjustment under section 1915(b)(1) of the Non-Foreign Retirement Equity Assurance Act (subtitle B of title XIX of Pub. L. 111-84) at the time the employee's special rate schedule is reduced or terminated.
Federal Aviation Administration (FAA), DOT.
Final rule.
We are superseding an existing airworthiness directive (AD) for the engines identified above. That AD currently requires initial and repetitive visual inspections of the forward engine mount assembly side links for cracks, stripping and reapplying the Sermetel W coating on the side links at every exposure of the side link. This new AD requires those same inspections, stripping and reapplying the Sermetel W coating, and adds two part numbers
This AD is effective December 12, 2011.
The Director of the Federal Register approved the incorporation by reference of certain publications listed in the AD as of December 12, 2011.
For service information identified in this AD, contact GE Aviation M/D Rm. 285, One Neumann Way, Cincinnati, OH 45215;
You may examine the AD docket on the Internet at
Tomasz Rakowski, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 12 New England Executive Park, Burlington, MA 01803;
We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to supersede AD 2006-12-24, amendment 39-14650 (71 FR 34807, June 16, 2006). That AD applies to the specified products. The NPRM published in the
We gave the public the opportunity to participate in developing this AD. The following is the comment received and our response.
One commenter, Propulsion & Fuel Systems Design & Analysis, asked us to add the MD-10-30F to the list of airplanes in paragraph (c) of the proposed AD (75 FR 77570, December 13, 2010). The commenter states that MD-10-30F airplanes are equipped with CF6-50C2 model engines.
We agree that the AD may apply to engines installed on the MD-10-30F airplane. However, to avoid confusion, we recently changed our applicability statement and no longer list the aircraft that use the product to which an engine or propeller AD applies. We did not change the AD in response to this comment.
We changed paragraph (c) of the proposed AD (75 FR 77570, December 13, 2010) from “(c) This AD applies to * * * and CF6-80A3 turbofan engines with left-hand links * * *.” to “(c) This AD applies to * * * and CF6-80A3 turbofan engines, including engines marked on the engine data plate as CF6-50C2-F and CF6-50C2-R, with left-hand links * * *” This change improves clarity regarding what engines this AD applies to. This change does not change the engines that are affected by this AD; this change is editorial only.
We made a minor change to the economic analysis to include the pro-rated cost of a replacement part.
We reviewed the relevant data, considered the comment received and determined that air safety and the public interest require adopting the AD as proposed except for the minor editorial changes we made for clarity. These minor changes are consistent with the intent that we proposed in the NPRM (75 FR 77570, December 13, 2010) and do not add any additional burden upon the public than was already proposed in the NPRM.
We estimate that this AD will affect 194 engines installed on airplanes of U.S. registry. We also estimate that it will take about 8 work-hours per engine to perform the actions and that the average labor rate is $85 per work-hour. We estimate that one side link assembly will fail the inspections of this AD and require replacement every 4 years at a pro-rated parts cost of $1,800 per year. Based on these figures, we estimate the total cost of the AD to U.S. operators to be $133,720 per year.
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority.
We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
We have determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify that this AD:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),
(3) Will not affect intrastate aviation in Alaska, and
(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
(a) This airworthiness directive (AD) is effective December 12, 2011.
(b) This AD supersedes AD 2006-12-24, Amendment 39-14650 (71 FR 34807, June 16, 2006).
(c) This AD applies to General Electric (GE) CF6-45A, CF6-45A2, CF6-50A, CF6-50C, CF6-50CA, CF6-50C1, CF6-50C2, CF6-50C2B, CF6-50C2D, CF6-50E, CF6-50E1, CF6-50E2, CF6-50E2B, CF6-80A, CF6-80A1, CF6-80A2, and CF6-80A3 turbofan engines, including engines marked on the engine data plate as CF6-50C2-F and CF6-50C2-R, with left-hand side links part numbers (P/Ns) 9204M94P01, 9204M94P03, 9346M99P01, and 9346M99P03, and right-hand side links, P/Ns 9204M94P02, 9204M94P04, 9346M99P02, and 9346M99P04, installed on the forward engine mount assembly (also known as Configuration 2).
(d) This AD results from a report that GE had omitted two affected side link part numbers from the applicability of the original AD. We are issuing this AD to include those part numbers and to prevent failure of the side links and possible engine separation from the airplane.
(e) You are responsible for having the actions required by this AD performed at every exposure of the side link.
(f) Inspect, strip, and reapply the Sermetel W coating on each side link at every exposure of the side link. Use the following GE service bulletins (SBs):
(1) For CF6-45/-50 series engines, use paragraphs 3.A. through 3.E. of the Accomplishment Instructions of CF6-50 S/B 72-1255, Revision 1, dated June 17, 2009.
(2) For CF6-80A series engines, use paragraphs 3.A. through 3.E. of the Accomplishment Instructions of CF6-80A S/B72-0797, Revision 1, dated June 17, 2009.
(g) A side link is exposed when one or more bolts that attach the side links to the fan frame-front high-pressure compressor case are removed or when the bolt attaching the side link to the mount platform is removed.
(h) The Manager, Engine Certification Office, FAA, may approve alternative methods of compliance for this AD. Use the procedures found in 14 CFR 39.19 to make your request.
(i) For more information about this AD, contact Tomasz Rakowski, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 12 New England Executive Park, Burlington, MA 01803;
(j) You must use the following service information to do the actions required by this AD, unless the AD specifies otherwise. The Director of the Federal Register approved the incorporation by reference (IBR) under 5 U.S.C. 552(a) and 1 CFR part 51 of the following service information on the date specified:
(1) GE CF6-50 S/B 72-1255, Revision 1, dated June 17, 2009, approved for IBR December 12, 2011.
(2) GE CF6-80A S/B 72-0797, Revision 1, dated June 17, 2009, approved for IBR December 12, 2011.
(3) For service information identified in this AD, contact GE Aviation M/D Rm. 285, One Neumann Way, Cincinnati, OH 45215;
(4) You may review copies of the service information at the FAA, Engine & Propeller Directorate, 12 New England Executive Park, Burlington, MA. For information on the availability of this material at the FAA, call (781) 238-7125.
(5) You may also review copies of the service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at an NARA facility, call (202) 741-6030, or go to
Federal Aviation Administration (FAA), DOT.
Final rule; request for comments.
We are superseding an existing airworthiness directive (AD) for Thielert Aircraft Engines GmbH (TAE) Models TAE 125-01 and TAE 125-02-99 reciprocating engines. That AD currently requires replacement of certain part numbers (P/Ns) and serial numbers (S/Ns) of clutch assemblies due to clutch failure. The failures identified above could lead to engine in-flight shutdown and loss of control of the airplane. This AD requires the same actions, but applies the corrective action to an additional 244 affected clutch assemblies. This AD was prompted by TAE identifying additional clutch assemblies with nonconforming disc springs. We are issuing this AD to correct the unsafe condition on these products.
This AD becomes effective November 22, 2011.
The Director of the Federal Register approved the incorporation by reference of Thielert Aircraft Engines GmbH Service Bulletin (SB) No. TM TAE 125-0021, Revision 1, dated August 17, 2011, and SB No. TM TAE 125-1011 P1, Revision 2, dated August 31, 2011, listed in the AD as of November 22, 2011.
We must receive comments on this AD by December 22, 2011.
You may send comments by any of the following methods:
•
•
•
•
You may examine the AD docket on the Internet at
Alan Strom, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 12 New England Executive Park, Burlington, MA 01803;
On August 16, 2010, we issued AD 2010-18-02, Amendment 39-16415 (75 FR 52240, August 25, 2010), for certain TAE models TAE 125-01 and TAE 125-02-99 reciprocating engines. That AD resulted from reports of engine in-flight shutdowns. Preliminary investigations by TAE showed that nonconforming disc springs (improper heat treatment) used in a certain production batch of the clutch caused the shutdowns. That AD requires replacement of certain clutch assemblies. We issued that AD to prevent in-flight shutdown leading to loss of control of the airplane.
Since we issued AD 2010-18-02 (75 FR 52240, August 25, 2010), TAE identified an additional 244 affected clutch assemblies with nonconforming disc springs. The European Aviation Safety Agency (EASA) has issued AD 2011-0152-E, dated August 18, 2011, which requires replacement of additional clutch assemblies.
We reviewed TAE SB No. TM TAE 125-0021, Revision 1, dated August 17, 2011, and SB No. TM TAE 125-1011 P1 Revision 2, dated August 31, 2011. The SBs describe procedures for removing the affected clutch assemblies from service, and contain the expanded list of serial numbers of affected clutch assemblies.
We are issuing this AD because we evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.
This AD requires, for engines with affected clutch assemblies that have accumulated 100 flight hours or more, replacement of affected clutch assemblies before further flight, and for engines with affected clutch assemblies that have accumulated less than 100 flight hours, replacement of affected clutch assemblies before accumulating 100 flight hours.
An unsafe condition exists that requires the immediate adoption of this AD. The FAA has found that the risk to the flying public justifies waiving notice and comment prior to adoption of this rule because of TAE identifying 244 additional clutch assemblies with nonconforming disc springs and the need for operators to comply with some of the AD actions before further flight. Therefore, we determined that notice and opportunity for public comment before issuing this AD are impracticable and that good cause exists for making this amendment effective in fewer than 30 days.
This AD is a final rule that involves requirements affecting flight safety, and we did not provide you with notice and opportunity to provide your comments before it becomes effective. However, we invite you to send any written data, views, or arguments about this AD. Send your comments to an address listed under the
We will post all comments we receive, without change, to
We estimate that this AD will affect about 104 engines installed on airplanes of U.S. registry. We also estimate that it will take about 16 work-hours per engine to perform the clutch assembly replacement. The average labor rate is $85 per work-hour. Required parts will cost about $1,796. Based on these figures, we estimate the cost of the AD on U.S. operators to be $328,224.
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.
We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify this AD:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),
(3) Will not affect intrastate aviation in Alaska, and
(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This AD is effective November 22, 2011.
This AD supersedes AD 2010-18-02, Amendment 39-16415, (75 FR 52240, August 25, 2010).
This AD applies to Thielert Aircraft Engines GmbH (TAE):
(1) TAE 125-01 reciprocating engines (commercial designation Centurion 1.7), all serial numbers (S/Ns), if a clutch assembly part number (P/N) 02-7210-11001R13 is installed, and
(2) TAE 125-02-99 reciprocating engines (commercial designation Centurion 2.0), all S/Ns, if a clutch assembly P/N 05-7211-K006001 or P/N 05-7211-K006002 is installed.
This AD was prompted by TAE identifying additional clutch assemblies that could fail with nonconforming disc springs. These failures could lead to engine in-flight shutdown and loss of control of the airplane. We are issuing this AD to correct the unsafe condition on these products.
Unless already done, do the following actions.
(1) After the effective date of this AD, for clutch assembly P/N 02-7210-11001R13, P/N 05-7211-K006001 and P/N 05-7211-K006002, with an S/N listed in TAE Service Bulletin (SB) No. TM TAE 125-0021, Revision 1, dated August 17, 2011, or SB No. TM TAE 125-1011 P1, Revision 2, dated August 31, 2011, do the following:
(i) For engines with affected clutch assemblies that have accumulated 100 flight hours or more on the effective date of this AD, replace the clutch assembly before further flight.
(ii) For engines with affected clutch assemblies that have accumulated less than 100 flight hours on the effective date of this AD, replace the clutch assembly before accumulating 100 flight hours.
(2) After the effective date of this AD:
(i) Do not install an engine having a clutch assembly that is listed by S/N in TAE SB No. TM TAE 125-0021, Revision 1, dated August 17, 2011, or SB No. TM TAE 125-1011 P1, Revision 2, dated August 31, 2011, and
(ii) Do not install any clutch assembly listed by S/N in TAE SB No. TM TAE 125-0021, Revision 1, dated August 17, 2011, or SB No. TM TAE 125-1011 P1, Revision 2, dated August 31, 2011, into any engine.
The Manager, Engine Certification Office, FAA, may approve AMOCs to this AD. Use the procedures found in 14 CFR 39.19 to make your request.
(1) Refer to MCAI EASA AD 2011-0152-E, dated August 18, 2011, for related information.
(2) Contact Alan Strom, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 12 New England Executive Park, Burlington, MA 01803;
(1) You must use Thielert Aircraft Engines GmbH Service Bulletin No. TM TAE 125-0021, Revision 1, dated August 17, 2011, and Service Bulletin No. TM TAE 125-1011 P1, Revision 2, dated August 31, 2011, to identify the affected clutch assemblies requiring replacement by this AD.
(2) The Director of the Federal Register approved the incorporation by reference of this service information under 5 U.S.C. 552(a) and 1 CFR part 51.
(3) For service information identified in this AD, contact Thielert Aircraft Engines GmbH, Platanenstrasse 14 D-09350, Lichtenstein, Germany;
(4) You may review copies at the FAA, New England Region, 12 New England Executive Park, Burlington, MA; or at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call (202) 741-6030, or go to:
Environmental Protection Agency (EPA).
Direct final rule.
EPA is taking direct final action to approve a revision to the Virginia State Implementation Plan (SIP). The revision pertains to regulatory language in its nitrogen oxides (NO
This rule is effective on January 6, 2012 without further notice, unless EPA receives adverse written comment by December 7, 2011. If EPA receives such comments, it will publish a timely withdrawal of the direct final rule in the
Submit your comments, identified by Docket ID Number EPA-R03-OAR-2011-0773 by one of the following methods:
A.
B.
C.
D.
Marilyn Powers, (215) 814-2308, or by email at
Throughout this document, whenever “we,” “us,” or “our” is used, we mean EPA. On September 27, 2010, the Commonwealth of Virginia Department of Environmental Quality (VADEQ) submitted a formal revision to its State Implementation Plan (SIP).
The SIP revision pertains to the NO
On September 27, 2010, VADEQ submitted a SIP revision that extends the NO
In 1995, Virginia adopted legislation that provides, subject to certain conditions, for an environmental assessment (audit) “privilege” for voluntary compliance evaluations performed by a regulated entity. The legislation further addresses the relative burden of proof for parties either asserting the privilege or seeking disclosure of documents for which the privilege is claimed. Virginia's legislation also provides, subject to certain conditions, for a penalty waiver for violations of environmental laws when a regulated entity discovers such violations pursuant to a voluntary compliance evaluation and voluntarily discloses such violations to the Commonwealth and takes prompt and appropriate measures to remedy the violations. Virginia's Voluntary Environmental Assessment Privilege Law, Va. Code Sec. 10.1-1198, provides a privilege that protects from disclosure documents and information about the content of those documents that are the product of a voluntary environmental assessment. The Privilege Law does not extend to documents or information (1) that are generated or developed before the commencement of a voluntary environmental assessment; (2) that are prepared independently of the assessment process; (3) that demonstrate a clear, imminent and substantial danger to the public health or environment; or (4) that are required by law.
On January 12, 1998, the Commonwealth of Virginia Office of the Attorney General provided a legal opinion that states that the Privilege Law, Va. Code Sec. 10.1-1198, precludes granting a privilege to documents and information “required by law,” including documents and information “required by Federal law to maintain program delegation, authorization or approval,” since Virginia must “enforce Federally authorized environmental programs in a manner that is no less stringent than their Federal counterparts. * * *” The opinion concludes that “[r]egarding § 10.1-1198, therefore, documents or other information needed for civil or criminal enforcement under one of these programs could not be privileged because such documents and information are essential to pursuing enforcement in a manner required by Federal law to maintain program delegation, authorization or approval.” Virginia's Immunity law, Va. Code Sec. 10.1-1199, provides that “[t]o the extent consistent with requirements imposed by Federal law,” any person making a voluntary disclosure of information to a state agency regarding a violation of an environmental statute, regulation, permit, or administrative order is granted immunity from administrative or civil penalty. The Attorney General's January 12, 1998 opinion states that the quoted language renders this statute inapplicable to enforcement of any Federally authorized programs, since “no immunity could be afforded from administrative, civil, or criminal penalties because granting such immunity would not be consistent with
Therefore, EPA has determined that Virginia's Privilege and Immunity statutes will not preclude the Commonwealth from enforcing its program consistent with the Federal requirements. In any event, because EPA has also determined that a state audit privilege and immunity law can affect only state enforcement and cannot have any impact on Federal enforcement authorities, EPA may at any time invoke its authority under the CAA, including, for example, sections 113, 167, 205, 211 or 213, to enforce the requirements or prohibitions of the state plan, independently of any state enforcement effort. In addition, citizen enforcement under section 304 of the CAA is likewise unaffected by this, or any, state audit privilege or immunity law.
EPA is approving the SIP revision submitted by VADEQ on September 27, 2009 that extends the NO
Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the CAA and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:
• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Order 12866 (58 FR 51735, October 4, 1993);
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and
• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
In addition, this rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), because the SIP is not approved to apply in Indian country located in the state, and EPA notes that it will not impose substantial direct costs on tribal governments or preempt tribal law.
The Congressional Review Act, 5 U.S.C. 801
Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by January 6, 2012. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. Parties with objections to this direct final rule are encouraged to file a comment in response to the parallel notice of proposed rulemaking for this action published in the proposed rules section of today's
Environmental protection, Air pollution control, Incorporation by reference, Nitrogen dioxide, Ozone, Sulfur oxides.
40 CFR Part 52 is amended as follows:
42 U.S.C. 7401
(c) * * *
Federal Communications Commission.
Final rule; announcement of effective date.
The Federal Communications Commission published a document in the
The amendments to 47 CFR 1.7001 and 47 CFR 43.11 in the final rule published July 2, 2008, at 73 FR 37869 are effective November 7, 2011.
Jeremy Miller, Industry Analysis and Technology Division, Wireline Competition Bureau, at (202) 418-1507, or via the Internet at
The Federal Communications Commission has received OMB approval for the rules contained in information collection OMB Control No. 3060-0816, Local Telephone Competition and Broadband Reporting. The information collection was adopted in two orders: (1) The Report and Order and Notice of Proposed Rulemaking, Development of Nationwide Broadband Data To Evaluate Reasonable and Timely Deployment of Advanced Services to All Americans, Improvement of Wireless Broadband Subscribership Data, and Development of Data on Interconnected Voice over Internet Protocol (VoIP) Subscribership in WC Docket No. 07-38, which appears at 73 FR 37869, July 2, 2008, and (2) the Order on Reconsideration, Development of Nationwide Broadband Data To Evaluate Reasonable and Timely Deployment of Advanced Services to All Americans, Improvement of Wireless Broadband Subscribership Data, and Development of Data on Interconnected Voice over Internet Protocol (VoIP) Subscribership in WC Docket No. 07-38, which appears at 73 FR 37861, July 2, 2008. These information requests required OMB approval to be effective. Through this document, the Commission announces that it has received this approval (OMB Control No. 3060-0816, Expiration Date: April 30, 2013), and that the adopted rules are in effect. Pursuant to the Paperwork Reduction Act of 1995, Public Law 104-13, an agency may not conduct or sponsor a collection of information unless it displays a currently valid control number. Notwithstanding any other provisions of law, no person shall be subject to any penalty for failing to comply with a collection of information subject to the
Accordingly, the amendments to 47 CFR 1.7001 and 47 CFR 43.11 in the final rule published July 2, 2008, at 73 FR 37869 are effective November 7, 2011.
Federal Communications Commission.
Final rule; announcement of effective date.
In this document, the Commission announces that the Office of Management and Budget (OMB) has approved, for a period of three years, the information collection associated with the Commission's Structure and Practices of the Video Relay Service Program, Memorandum Opinion and Order. The information collection requirements were approved on October 20, 2011 by OMB.
47 CFR 64.606 (a)(2)(ii)(A)(
Gregory Hlibok, Disability Rights Office, Consumer and Governmental Affairs Bureau, at (202) 559-5158 (voice and videophone), or email:
This document announces that, on October 20, 2011, OMB approved, for a period of three years, the information collection requirements contained 47 CFR 64.606 (a)(2)(ii)(A)(
To request materials in accessible formats for people with disabilities (Braille, large print, electronic files, audio format), send an email to
As required by the Paperwork Reduction Act of 1995 (44 U.S.C. 3507), the FCC is notifying the public that it received OMB approval on October 20, 2011, for the information collection requirements contained in the Commission's rules at 47 CFR 64.606 (a)(2)(ii)(A)(
Under 5 CFR part 1320, an agency may not conduct or sponsor a collection of information unless it displays a current, valid OMB Control Number.
No person shall be subject to any penalty for failing to comply with a collection of information subject to the Paperwork Reduction Act that does not display a current, valid OMB Control Number. The OMB Control Number is 3060-1150.
The foregoing notice is required by the Paperwork Reduction Act of 1995, Public Law 104-13, October 1, 1995, and 44 U.S.C. 3507.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Final rule.
NMFS is implementing approved measures in Amendment 11 to the Atlantic Mackerel, Squid, and Butterfish Fishery Management Plan, developed by the Mid-Atlantic Fishery Management Council. The approved measures include: A tiered limited access program for the Atlantic mackerel fishery; an open access incidental catch permit for mackerel; an update to essential fish habitat designations for all life stages of mackerel, longfin squid,
Effective December 7, 2011, except for the amendment to § 648.4, which is effective March 1, 2012.
Copies of supporting documents used by the Mid-Atlantic Fishery Management Council (Council), including the Final Environmental Impact Statement (FEIS) and Regulatory Impact Review (RIR)/Initial Regulatory Flexibility Analysis (IRFA), are available from: Dr. Christopher M. Moore, Executive Director, Mid-Atlantic Fishery Management Council, Suite 201, 800 N. State Street, Dover, DE 19901. The FEIS/RIR/IRFA is accessible via the Internet at
Written comments regarding the burden-hour estimates or other aspects of the collection-of-information requirements contained in this rule may be submitted to NMFS, Northeast Regional Office and by email to
Aja Szumylo, Fishery Policy Analyst, (978) 281-9195,
This final rule implements the measures in Amendment 11, which was approved on behalf of the Secretary of Commerce (Secretary) on September 30, 2011. A proposed rule was published in the
Changes in the descriptions of the management measures from the proposed rule's descriptions are noted below. Changes in the regulatory text from the proposed rule are noted under “Changes from Proposed Rule to Final Rule” in the preamble of this final rule.
As noted in the proposed rule, some of the regulations implemented through Amendment 11 are associated with the Council's Omnibus Annual Catch Limit and Accountability Measures (Omnibus) Amendment, which was approved by the Secretary on August 12, 2011, and published as a final rule on September 29, 2011 (76 FR 60606). Several sections of regulatory text are affected by both actions. Since the Omnibus Amendment and its regulatory text are now finalized, the regulatory text presented in this final rule references the updated regulations. Therefore, it differs slightly in structure, but not content, from the regulations presented in the proposed rule.
Amendment 11 implements a three-tiered limited access permit system for the mackerel fishery. Vessels that do not qualify for a limited access mackerel permit are eligible to receive the open access mackerel permit described below. Initial trip limits established for each permit category can be adjusted through the specifications process.
In order to be eligible for a limited access mackerel permit, applicants must meet both a permit history requirement and a landings requirement. The preamble of the proposed rule noted that the permit history requirement and landings requirement must be derived from the same vessel (
To meet the permit requirement, a vessel must have been issued a Federal mackerel permit that was valid on March 21, 2007, or must be replacing a vessel that was issued a Federal mackerel permit that was valid on March 21, 2007. If the vessel sunk, was destroyed, or transferred prior to March 21, 2007, and a mackerel permit was not issued to a replacement vessel as of March 21, 2007, the permit issuance criteria may be satisfied if the vessel was issued a valid Federal mackerel permit at any time between March 21, 2006, and March 21, 2007.
NMFS will use dealer data in its database to determine eligibility. If NMFS' data do not demonstrate that a vessel made landings of mackerel that satisfy the eligibility criteria for a limited access permit, applicants must submit dealer receipts that verify landings, or use other sources of information (
Vessels that fished cooperatively for mackerel in pair trawl operations may divide the catch history between the two vessels in the pair through third-party verification and supplemental information, such as previously submitted vessel trip reports (VTRs), or dealer reporting. The two owners must apply for a limited access mackerel permit jointly and must submit proof that they have agreed to the division of landings. This approach was used to qualify pair trawl vessels in Amendment 1 to the Atlantic Herring Fishery Management Plan (FMP).
To qualify for a Tier 1 Limited Access Mackerel permit, a vessel must have been issued a Federal mackerel permit that was valid on March 21, 2007, and must have landed at least 400,000 lb (181.44 mt) of mackerel in any one year between January 1, 1997, and December 31, 2005, as verified by NMFS records or documented through dealer receipts submitted by the applicant. The Tier 1 Limited Access Mackerel permit allows vessels to possess and land unlimited amounts of mackerel while the mackerel fishery is open to directed fishing.
To qualify for a Tier 2 Limited Access Mackerel permit, a vessel must have been issued a Federal mackerel permit that was valid on March 21, 2007, and must have landed at least 100,000 lb (45.36 mt) of mackerel in any one year between March 1, 1994, and December 31, 2005, as verified by NMFS records or documented through dealer receipts submitted by the applicant. The Tier 2 Limited Access Mackerel permit allows vessels to possess and land 135,000 lb (61.23 mt) of mackerel per trip while the mackerel fishery is open to directed fishing.
To qualify for a Tier 3 Limited Access Mackerel permit, a vessel must have been issued a Federal mackerel permit that was valid on March 21, 2007, and must have landed at least 1,000 lb (0.45 mt) of mackerel in any one year between March 1, 1994, and December 31, 2005, as verified by NMFS records or documented through dealer receipts submitted by the applicant. The Tier 3 Limited Access Mackerel permit allows vessels to possess and land 100,000 lb (45.36 mt) of mackerel per trip while the mackerel fishery is open for directed fishing, or while the Tier 3 allocation is still available.
The current regulations state that, during a closure of the directed mackerel fishery that occurs prior to June 1, vessels issued a mackerel permit may not fish for, possess, or land more than 20,000 lb (9.08 mt) of mackerel per trip, and that, during any closure that occurs after June 1, vessels may not fish for, possess, or land more than 50,000 lb (22.7 mt) of mackerel per trip. While the preamble to the proposed rule stated that this provision would be maintained as is, the regulatory text stated that the closure possession limit would be 20,000 lb (9.08 mt), regardless of when a closure occurs during the fishing year. NMFS clarifies in this final rule that the closure possession limit presented in the regulatory text is consistent with the intent of Amendment 11; thus, the closure possession limit for mackerel will be 20,000 lb (9.08 mt).
Amendment 11 establishes measures to govern future transactions related to limited access vessels, such as purchases, sales, or reconstruction. These measures apply to all limited access mackerel vessels. Except as noted, the provisions in this amendment are consistent with those that govern most of the other Northeast region limited access fisheries; there are some differences in the limited access program for American lobster.
Initial eligibility for a mackerel limited access permit must be established during the first year after the implementation of Amendment 11. A vessel owner is required to submit an application for a mackerel limited access permit within 12 months of the effective date of the final regulations. In order to expedite the transition to the limited access mackerel program, applicants wishing to fish for mackerel with a limited access permit after March 1, 2012, must submit an application by January 31, 2012. After March 1, 2012, current mackerel permit holders who have not yet submitted an application for a limited access mackerel permit, and individuals who have submitted incomplete or unsuccessful applications for a limited access mackerel permit, will automatically be re-designated as open access permit holders under the new mackerel permit system, and will be subject to the open access possession limit described in this final rule. These applicants will receive a letter explaining the reason for the permit's return. All applicants have until February 28, 2013, to submit an initial application.
A person who does not currently own a fishing vessel, but who has owned a qualifying vessel that has sunk, been destroyed, or transferred to another person, and the applicant has lawfully retained the valid mackerel permit and fishing history, may apply for and receive a CPH. The CPH provides a benefit to a vessel owner by securing limited access eligibility through a registration system when an individual does not currently own a vessel; the individual can later transfer the permit onto a replacement vessel. To be eligible to obtain a CPH, the applicant must show that the qualifying vessel meets the eligibility requirements for the limited access mackerel permit in question. If the vessel sank, was destroyed, or was transferred before March 21, 2007, the permit issuance criteria may be satisfied if the vessel was issued a valid Federal mackerel permit at any time between March 21, 2006, and March 21, 2007. Vessel owners who are issued a CPH can obtain a vessel permit for a replacement vessel in the future, consistent with the vessel size upgrade restrictions, based upon the vessel length, tonnage, and horsepower of the vessel on which the CPH issuance is based. Applicants wishing to place their limited access mackerel permit directly into CPH will be given the same initial application deadline as applicants applying for an active limited access mackerel permit, namely from March 1, 2012, to February 28, 2013.
A mackerel limited access permit and fishing history is presumed to transfer with a vessel at the time it is bought, sold, or otherwise transferred from one owner to another, unless it is retained through a written agreement signed by both parties in the vessel sale or transfer.
The Council proposed a provision specific to multiple vessel ownership, qualification, and replacement. The provision states that, if an individual owns more than one vessel, but only one of those vessels has the permit and landings history required to be eligible for a limited access mackerel permit, the individual can replace the vessel that it determined to be eligible with one of his/her other vessels, provided that the replacement vessel complies with the upgrade restrictions detailed below. The final rule does not contain a single regulation specific to the Council's proposed measure. Rather, the individual regulations pertaining to qualification, baselines, upgrades, and vessel replacements separately address the Council's proposed measure.
This provision does not exempt owners of multiple vessels from the permit-splitting provision, described below. For example, if a vessel owner has a limited access multispecies permit on the same vessel that created the mackerel eligibility, the entire suite of permits must be replaced onto the owner's other vessel in order to move the mackerel eligibility. In addition, if an individual owns two vessels, a 50-ft (15.2-m) vessel with a mackerel eligibility, and a 65-ft (19.8-m) vessel, the mackerel eligibility cannot be moved onto the larger vessel, because it is outside of the vessel upgrade restrictions.
Amendment 11 adopts the permit-splitting provision currently in effect for other limited access fisheries in the region. Therefore, a limited access mackerel permit may not be issued to a vessel if the vessel's permit history was used to qualify another vessel for any other limited access permit. This means all limited access permits, including limited access mackerel permits, must be transferred as a package when a vessel is replaced or sold.
However, Amendment 11 explicitly states that the permit-splitting provision does not apply to the retention of an open access mackerel permit and fishing history that occurred prior to April 3, 2009, if any limited access permits were issued to the subject vessel. Thus, vessel owners who sold a vessel with limited access permits and retained the open access mackerel permit and landings history prior to April 3, 2009, with the intention of qualifying a different vessel for a limited access mackerel permit, are allowed to do so under Amendment 11.
Consistent with previous limited access programs, no more than one vessel can qualify, at any one time, for a limited access permit or CPH based on that or another vessel's fishing and permit history, unless more than one owner has independently established fishing and permit history on the vessel during the qualification period and has either retained the fishing and permit history, as specified above, or owns the vessel at the time of initial application under Amendment 11. If more than one vessel owner claims eligibility for a limited access permit or CPH, based on a vessel's single fishing and permit history, the NMFS Regional Administrator will determine who is entitled to qualify for the permit or CPH based on information submitted and in compliance with the applicable permit provisions.
Amendment 11 specifies an appeals process for applicants who have been denied a limited access Atlantic mackerel permit. Applicants have two opportunities to appeal the denial of a limited access mackerel permit. The review of initial application denial appeals will be conducted under the authority of the Regional Administrator at NMFS's Northeast Regional Office. The review of second denial appeals will be conducted by a hearing officer appointed by the Regional Administrator, or through a National Appeals program, which is under development by NMFS and may be utilized for mackerel appeals.
An appeal of the denial of an initial permit application (first level of appeal) must be made in writing to the NMFS Northeast Regional Administrator. Under this amendment, appeals must be based on the grounds that the information used by the Regional Administrator in denying the permit was incorrect. Amendment 11 requires appeals to be submitted to the Regional Administrator, postmarked no later than 30 days after the denial of an initial
Should the appeal be denied, the applicant is allowed to request a review of the Regional Administrator's appeal decision (second level of appeal). Such a request must be in writing postmarked no later than 30 days after the appeal decision, must state the specific grounds for the appeal, and must include information to support the appeal. A hearing will not be conducted without submission of information in support of the appeal. If the request for review of the appeal decision is not made within 30 days, the appeal decision is the final administrative action of the Department of Commerce. If the National Appeals process is not fully established at the time of the party's appeal, the Regional Administrator will appoint a hearing officer. The hearing officer will make findings and a recommendation to the Regional Administrator, which are advisory only. The Regional Administrator's decision is the final administrative action of the Department of Commerce.
The owner of a vessel denied a limited access mackerel permit can fish for mackerel while the decision on appeal is pending, provided that the denial has been appealed, an appeal decision has not been made by the Regional Administrator, and the vessel has on board a letter from the Regional Administrator authorizing the vessel to fish under the limited access category for which the applicant has submitted the appeal. The Regional Administrator will issue such a letter for the pendency of any appeal. If the appeal is ultimately denied under NMFS' administrative review, the Regional Administrator will send a notice of final denial to the vessel owner, and the authorizing letter becomes invalid 5 days after the receipt of the notice of denial.
A vessel's baseline refers to those specifications (length overall, gross registered tonnage (GRT), net tonnage (NT), and horsepower (HP)) from which any future vessel size change is measured. The vessel baseline specifications for vessels issued a limited access mackerel permit will be the specifications of the vessel that was initially issued the limited access permit as of the date that the vessel qualifies for such a permit. If a vessel owner is initially issued a CPH instead of a mackerel permit, the attributes of the vessel that is the basis of the CPH will establish the size baseline against which future vessel limitations would be evaluated. If the vessel that established the CPH is less than 20 ft (6.09 m) in length overall, then the baseline specifications associated with other limited access permits in the CPH suite will be used to establish the mackerel baseline specifications. If the vessel that established the CPH is less than 20 ft (6.09 m) in length overall, the limited access mackerel eligibility was established on another vessel, and there are no other limited access permits in the CPH suite, then the applicant must submit valid documentation of the baseline specifications of the vessel that established the eligibility. If a vessel owner applying for a CPH has a contract to purchase a vessel to replace the vessel for which CPH was issued prior to the submission of the mackerel limited access permit application (for the CPH), then the vessel under contract to be purchased will form the baseline specifications for that vessel, provided an initial application for the contract vessel to replace the vessel for which the CPH was issued is received by December 31, 2012 (1 full year after the end of the initial application period).
A vessel may be upgraded in size, whether through retrofitting or replacement, and be eligible to retain or renew a limited access permit, only if the upgrade complies with the limitations in Amendment 11. The vessel's HP can be increased only once, whether through refitting or vessel replacement. Such an increase cannot exceed 20 percent of the vessel's baseline specifications. The vessel's length, GRT, and NT can increase only once, whether through refitting or vessel replacement. Any increase in any of these three specifications of vessel size cannot exceed 10 percent of the vessel's baseline specifications. If any of these three specifications is increased, any increase in the other two must be performed at the same time. This type of upgrade can be done separately from an engine HP upgrade. Amendment 11 maintains the existing specification of maximum length, size and HP for vessels engaged in the Atlantic mackerel fishery (165 ft (50.02 m), 75 GRT (680.3 mt), and 3,000 HP). Tier 1 and Tier 2 vessels must also comply with the upgrade restrictions relevant to the vessel hold volume certification described below.
In addition to the standard baseline specifications, Tier 1 and Tier 2 vessel owners are required to obtain a fish hold capacity measurement from a certified marine surveyor. The hold capacity measurement submitted at the time of application for a Tier 1 or Tier 2 limited access mackerel permit will serve as an additional permit baseline for these permit categories. The hold volume for a Tier 1 or Tier 2 permit can only be increased once, whether through refitting or vessel replacement. Any increase cannot exceed 10 percent of the vessel's baseline hold measurement. This type of upgrade can be done separately from the size and HP upgrades. In cases where the qualifying vessel has sunk or been destroyed and the mackerel permit is issued directly into CPH, the hold capacity baseline will be the hold capacity of the first replacement vessel after the permits are removed from CPH. Applicants that qualify for a Tier 1 or 2 mackerel permit would be required to submit fish hold volume measurement by December 31, 2012, or at the first vessel replacement, whichever is sooner. This requirement was not noted in the preamble, but was included in the regulatory text in the proposed rule.
The term “vessel replacement,” in general, refers to replacing an existing limited access vessel with another vessel. In addition to addressing increases in vessel size, hold capacity, and HP, Amendment 11 establishes a restriction requiring the same entity to own both the vessel (along with the limited access permit and fishing history) that is being replaced, and the replacement vessel.
Amendment 11 includes a provision to allow a vessel owner to voluntarily exit a limited access fishery. Such relinquishment is permanent. If a vessel's limited access permit history for the mackerel fishery is voluntarily relinquished to the Regional Administrator, no limited access permit for that fishery may be reissued or renewed based on that vessel's history.
Amendment 11 specifies that a vessel owner must maintain the limited access permit status for an eligible vessel by renewing the permits on an annual basis
Amendment 11 establishes an allocation for participants in the limited access mackerel fishery that hold a Tier 3 permit. Tier 3 vessels will be allocated a maximum catch of up to 7 percent of the commercial mackerel quota (the remainder of the commercial mackerel quota will be available to Tier 1 or Tier 2 vessels). The 7 percent allocation will be put into effect with the 2012 specifications for the Atlantic Mackerel, Squid, and Butterfish (MSB) fisheries, prior to the effective date of the Tier 3 limited access permit. This will allow for monitoring of the cap as Tier 3 permits are issued to successful applicants. The Tier 3 allocation will be set annually during the specifications process. During a closure of the Tier 3 mackerel fishery, vessels issued a mackerel permit may not fish for, possess, or land more than 20,000 lb (9.08 mt) of mackerel per trip. In order to monitor Tier 3 landings, Amendment 11 requires owners of vessels that hold a Tier 3 limited access mackerel permit to submit VTRs on a weekly basis.
Any vessel, even vessels that have not been issued a mackerel permit before, can be issued an open access mackerel permit that authorizes the possession and landing of up to 20,000 lb (9.07 mt) of mackerel per trip. The open access possession limit stays the same during a closure of the directed mackerel fishery.
Amendment 11 revises the EFH text descriptions for all MSB species based on updated data from the Northeast Fisheries Science Center (NEFSC) trawl survey, the Marine Resources Monitoring Assessment and Prediction Program (MARMAP), state bottom trawl surveys, NOAA's Estuarine Living Marine Resources (ELMR) program, and scientific literature on habitat requirements. The amendment designates as EFH the area associated with 95 percent of the cumulative geometric mean catches for all MSB species. There are no regulatory provisions associated with these designations. Text descriptions and maps for the new EFH designation can be found in the FEIS.
Amendment 11 establishes an allocation to the recreational fishery in order to incorporate recreational mackerel annual catch limits and accountability measures into the framework for the Council's Omnibus Amendment. The recreational allocation is set equal to 6.2 percent of the domestic mackerel allowable biological catch. This allocation corresponds to the proportion of total U.S. mackerel landings that was accounted for by the recreational fishery from 1997-2007 times 1.5. The Council can take action via specifications, a framework adjustment, or amendment to adjust any disconnect between the recreational allocation and future recreational harvests.
Six comments were submitted on Amendment 11: One on behalf of O'Hara Corporation and Starlight Inc; two identical comments by the Garden State Seafood Association (GSSA) and Lund's Fisheries Incorporated; one from the National Coalition for Marine Conservation (NCMC), a non-governmental organization devoted primarily to the conservation of highly migratory species and pelagic species such as menhaden, herring and mackerel; and two from individuals. Several issues not relevant to Amendment 11 were raised by various commenters; only the comments relevant to Amendment 11 are addressed below.
NMFS agrees that the fleet resulting from the proposed limited access program is estimated in Amendment 11 to have the capacity of catching more than expected quotas for upcoming years. However, given the short mackerel fishing season, the great variability in mackerel availability, and the inability of the fleet to harvest allowable quotas, harvest capacity appears to be less of a factor in the success of the fleet. Furthermore, hard quotas have always been used as a mechanism to control mackerel harvests, and will continue to be used following implementation of the limited access program. The institution of a limited access program serves as a constraint on the number of mackerel fishery participants, and provides an indirect control on mackerel catch.
The Council designed Tier 3 to provide access to mackerel, should localized abundance occur where mackerel is not frequently targeted. NMFS determined that, because the vessels expected to qualify for Tier 3 have historically had per-trip mackerel landings well below the initial 100,000-lb (45.36-mt) trip limit (average 637 lb (0.24 mt) per trip from 1997-2007), and have typically derived a low percentage
The final rule adjusts the timing of the implementation of the new limited access permit system (from January 1, 2012, to March 1, 2012). The final date to submit an initial application for the limited access program is changed to February 28, 2013. This rulemaking also clarifies that the fish hold measurement requirement must be submitted by Tier 1 and Tier 2 qualifiers by December 31, 2012. These timing adjustments were made to allow adequate time for applicants and qualifiers to gather and submit the required application materials, and to allow for timely processing of applications.
The proposed rule stated that applicants whose vessels sunk, were destroyed, or transferred prior to March 21, 2007, and who are applying to place their mackerel eligibility directly into CPH, could meet the permit issuance requirement if a valid federal mackerel permit was issued at any time between March 21, 2006, and March 21, 2007. This final rule extends this exemption to applicants applying for active permits, as reflected in the regulatory text presented at § 648.4(a)(5)(iii)(c)(1). Accordingly, in this final rule, if a vessel was sunk, destroyed, or transferred before March 21, 2007, and a mackerel permit was not issued to the vessel's replacement as of March 21, 2007, the permit issuance criteria can be met if the vessel was issued a valid permit at any time between March 21, 2006, and March 21, 2007, regardless of if the applicant is applying to place a limited access mackerel permit on an active vessel, or into CPH. The extension of this provision to vessels applying for active limited access mackerel permits is a logical outgrowth of the provision put forward in the proposed rule, and eliminates an otherwise unintended adverse consequence of the proposed language.
The final regulatory text presented in this rule (§§ 628.22, 628.24, 628.25, and 628.26) differs slightly in structure, but not content, from the regulations in the proposed rule. In addition, longfin squid was previously referred to as
The Administrator, Northeast Region, NMFS, determined that the amendment implemented by this final rule is necessary for the conservation and management of the MSB fisheries, and that it is consistent with the national standards of the Magnuson-Stevens Act and other applicable laws. NMFS, in making that determination, has taken into account the data, views, and comments received during the comment period.
The Council prepared an FEIS for Amendment 11; the FEIS was filed with the Environmental Protection Agency on July 1, 2011 (76 FR 38650). The FEIS describes the impacts of the proposed Amendment 11 measures on the environment. Since most of the measures would determine the level of future participation of permit holders in the mackerel fishery, the majority of the impacts are social and economic. A notice of availability was published on July 6, 2011. In approving Amendment 11 on September 30, 2011, NMFS issued a ROD identifying the selected alternatives. A copy of the ROD is available from NMFS (see
This rule has been determined to be not significant for purposes of Executive Order 12866.
A FRFA was prepared. The FRFA incorporates the IRFA, a summary of the significant issued raised by the public comments in response to the IRFA, and NMFS' response to those comments, and a summary of the analyses completed to support the action. A copy of the analyses is available from NMFS (see
A description of the reasons for this action, the objectives of the action, and the legal basis for the final rule is found in Amendment 11 and the preamble to the proposed rule and this final rule.
The purpose of this action is to limit capacity in the Atlantic mackerel fishery through the implementation of a tiered limited access program; to update EFH designations for all MSB species; and to establish an allocation for the recreational mackerel fishery.
Because the implementation of this amendment will affect current and future access to the mackerel resource, the impacts of Amendment 11 are
The measures in Amendment 11 would primarily affect participants in the mackerel fishery. All of the potentially affected businesses are considered small entities under the standards described in NMFS guidelines, because they have gross receipts that do not exceed $4 million annually. There were 2,331 vessels issued open access mackerel permits in 2010. The Small Business Administration (SBA) size standard for commercial fishing (NAICS code 114111) is $4 million in annual gross receipts. Available data indicate that no single fishing entity earned more than $4 million annually. Although there are likely to be entities that, based on rules of affiliation, would qualify as large business entities, due to lack of reliable ownership affiliation data NMFS cannot apply the business size standard at this time. Data are currently being compiled on vessel ownership that should permit a more refined assessment and determination of the number of large and small entities in the mackerel fishery for future actions. For this action, since available data are inadequate to identify affiliated vessels, each operating unit is considered a small entity for purposes of the RFA, and, therefore, there is no differential impact between small and large entities. Additionally, there are no disproportionate economic impacts on small entities. Section 6.5 in Amendment 11 describes the vessels, key ports, and revenue information for the mackerel fishery, and so that information is not repeated here.
This action contains several new collection-of-information, reporting, and recordkeeping requirements.
There will be an estimated 820 applications for a limited access mackerel permit. With an average processing time of 45 min, the total time burden for this application is 615 hr. Only 410 vessels are expected to qualify and consequently renew their permit via the renewal application each year. The renewal application is estimated to take 30 min on average to process, for a total burden of 205 hr. Up to 30 applicants are expected to appeal the denial of their permit application (other FMPs estimated between 5-7 percent of applications would move on to the appeal stage). The appeals process is estimated to take 2 hr to complete, on average, with a total burden of 60 hr. The 3-yr average total public cost burden for permit applications, appeals, and renewals is $261, which includes postage and copy fees for submissions.
Each hold volume measurement done by a certified marine surveyor is estimated to cost $4,000. An estimated 74 vessels would qualify for either a Tier 1 or Tier 2 limited access mackerel permit, and would be required to submit a hold volume measurement at the time of permit issuance. Roughly 40 vessels are expected to upgrade or replace vessels each year, and would be required to submit a hold volume measurement for the upgraded or replacement vessel. Therefore, annual total average cost over a 3-yr period is estimated to be $258,667 ($98,667 for annualized initial hold volume certifications, plus $160,000 for replacement hold volume certifications), not including travel expenses.
New limited access mackerel vessels would be subject to the same replacement, upgrade, and permit history restrictions as other limited access vessels. Completion of a replacement or upgrade application requires an estimated 3 hr per response. It is estimated that no more than 40 of the 410 vessels possessing these limited access permits will request a vessel replacement or upgrade annually. This resultant burden would be up to 120 hr. Completion of a CPH application requires an estimated 30 min per response. It is estimated that owners of no more than 30 of the 410 vessels possessing a limited access mackerel permit will request a CPH annually. The resultant burden would be up to 15 hr. The total public cost burden for replacement, upgrade, and CPH applications is $140 for postage and copy fees.
An estimated 329 Tier 3 limited access mackerel vessels would be required to submit VTRs on a weekly basis. Completion of a VTR is estimated to take 5 min per submission. The resultant burden would be 1,151.5 hr. The total public cost burden for VTR submission is $5,790.40 for postage.
The following discussion also includes a description of the economic impacts of this action compared to significant non-selected alternatives as required under the RFA for inclusion in the FRFA.
The FEIS estimates the numbers of vessel that would qualify for limited access permits under the different alternatives. In addition to the no action alternative and preferred alternative, there are six alternatives for tiered limited access programs, and two alternatives that would qualify participants in the Atlantic herring fishery for limited access mackerel permits. Information from the dealer weighout database was used to estimate how many vessels would qualify under each of the proposed limited access alternatives. The economic impacts of these alternatives on both individual vessels and the overall capacity of mackerel fleet is described in sections 5.1.4 and 7.5 of the FEIS and are summarized below.
The composition of the qualifying group that results under each of the tiered limited access programs described in this segment changes based on each alternative. In most instances, the quota allocation and trip limit alternatives described below are averages or percentages based on the composition of the qualifying group. Accordingly, the Tier allocation and trip limit alternative sets described below are different for each of the tiered limited access program alternatives.
Under the preferred alternative, 29 vessels would qualify for a Tier 1 permit, 45 vessels would qualify for a Tier 2 permit, and 329 vessels would
The eligibility criteria for a Tier 1 permit in Alternative 1B would have required a vessel to possess a mackerel permit and have landed at least 1,000,000 lb (453.6 mt) in any one year between January 1, 1997, and December 31, 2007. To qualify for a Tier 2 permit, a vessel would have been required to possess a permit and have landed at least 100,000 lb (45.36 mt) between January 1, 1988, and December 31, 2007. To qualify for a Tier 3 permit, a vessel would have been required to possess a permit and have landed at least 25,000 lb (11.34 mt) between January 1, 1988, and December 31, 2007. Under Alternative 1B, 26 vessels would qualify for a Tier 1 permit, 64 vessels would qualify for a Tier 2 permit, and 56 vessels would qualify for a Tier 3 permit, resulting in a total of 146 vessels that would qualify for the various limited access mackerel permits.
The eligibility criteria for a Tier 1 permit in Alternative 1C would have required a vessel to possess a mackerel permit and have landed at least 1,000,000 lb (453.6 mt) in any one year between January 1, 1997, and December 31, 2007. To qualify for a Tier 2 permit, a vessel would have been required to possess a permit and have landed at least 100,000 lb (45.36 mt) between January 1, 1997, and December 31, 2007. To qualify for a Tier 3 permit, a vessel would have been required to possess a permit and have landed at least 1,000 lb (.45 mt) between January 1, 1997, and December 31, 2007. As with the preferred alternative, 1C would have capped Tier 3 with a maximum allocation of up to 7 percent of the commercial mackerel quota, with no other additional allocations for any other Tiers. Under Alternative 1C, 26 vessels would qualify for a Tier 1 permit, 36 vessels would qualify for a Tier 2 permit, and 309 vessels would qualify for a Tier 3 permit, resulting in a total of 371 vessels that would qualify for the various limited access mackerel permits.
The eligibility criteria for a Tier 1 permit in Alternative 1E would have required a vessel to possess a mackerel permit and have landed at least 400,000 lb (181.44 mt) of mackerel in any one year between January 1, 1997, and December 31, 2005. To qualify for a Tier 2 permit, a vessel would have been required to possess a permit and have landed at least 100,000 lb (45.36 mt) of mackerel in any one year between January 1, 1997, and December 31, 2005. To qualify for a Tier 3 permit, a vessel would have been required to possess a permit and have landed at least 25,000 lb (11.34 mt) of mackerel in any one year between January 1, 1997, and December 31, 2007. Under Alternative 1E, 29 vessels would qualify for a Tier 1 permit, 25 vessels would qualify for a Tier 2 permit, and 50 vessels would qualify for a Tier 3 permit, resulting in a total of 104 vessels that would qualify for the various limited access mackerel permits.
The eligibility criteria for a Tier 1 permit in Alternative 1F would have required a vessel to possess a mackerel permit and have landed at least 1,000,000 lb (453.6 mt) in any one year between January 1, 1997, and December 31, 2007. To qualify for a Tier 2 permit, a vessel would have been required to possess a permit and have landed at least 100,000 lb (45.36 mt) between January 1, 1988, and December 31, 2007. To qualify for a Tier 3 permit, a vessel would have been required to possess a permit and have landed at least 10,000 lb (4.5 mt) between January 1, 1988, and December 31, 2007. Under Alternative 1F, 26 vessels would qualify for a Tier 1 permit, 64 vessels would qualify for a Tier 2 permit, and 121 vessels would qualify for a Tier 3 permit, resulting in a total of 211 vessels that would qualify for the various limited access mackerel permits.
Alternative 1G would implement a single-tiered limited access program for which 26 vessels would qualify. The eligibility criteria for a limited access permit would have required a vessel to possess a mackerel permit and have landed at least 1,000,000 lb (453.6 mt) in any one year between January 1, 1997, and December 31, 2007.
The eligibility criteria for a Tier 1 permit in Alternative 1J would have required a vessel to possess a mackerel permit and have landed at least 1,000,000 lb (453.6 mt) of mackerel in any one year between January 1, 1997, and December 31, 2007. To qualify for a Tier 2 permit, a vessel would have been required to possess a permit and have landed at least 100,000 lb (45.36 mt) of mackerel in any one year between March 1, 1994, and December 31, 2007. To qualify for a Tier 3 permit, a vessel would have been required to possess a permit and have landed at least 25,000 lb (11.34 mt) of mackerel in any one year between March 1, 1994, and December 31, 2007. Under Alternative 1J, 26 vessels would qualify for a Tier 1 permit, 55 vessels would qualify for a Tier 2 permit, and 49 vessels would qualify for a Tier 3 permit, resulting in a total of 130 vessels that would qualify for the various limited access mackerel permits.
The number of individual qualifiers resulting from these management alternatives primarily varies based on the start date and end date of the qualifying landings period, and the required landings threshold for each Tier. A comparison of Alternatives 1B and 1C illustrates the effects of different start dates on numbers of qualifiers. Alternative 1C, which has a 1997 start date, results in 42 fewer qualifying vessels (29 fewer vessels in Tier 2, 13 fewer in Tier 3) than Alternative 1B, which has a 1988 start date. While the later start dates result in fewer qualifiers in Tiers 2 and 3, the economic impacts on these individual vessels should not be significant when compared to their recent level of participation in the fishery. Vessels are still placed in a Tier based on their participation in the fishery since 1997, and analysis in Amendment 11 shows that lower Tiers generally derive a small percentage of their revenue (less than 2 percent for all alternatives) from mackerel.
Vessels that had sizable landings in 2006 or 2007 would be most impacted by the use of a 2005 qualifying landings period end date; this can be illustrated by comparing Alternative 1C (2007) and 1E (2005). With the 2007 end date in 1C, there would be 26 Tier 1 vessels and 35 Tier 2 vessels. If the end date is switched to 2005, as in 1E, three Tier 1 vessels and six Tier 2 vessels fall into lower Tiers. These vessels fell into lower Tiers because their best years of participation were more recent. Depending on the trip limits selected for the lower Tiers, these vessels may be negatively impacted by the earlier end date because they would be constrained compared to their recent participation in the mackerel fishery.
The FEIS presents an estimate of the maximum feasible annual capacity for the Tier 1 and Tier 2 vessels projected to qualify in each of proposed alternatives; this estimate indicates the maximum amount of mackerel the fleet could land under the various management alternatives in a single year. Only Tier 1 and Tier 2 were included in the analysis because, with the exception of Alternative 1G, the other tiers in the presented alternatives will be constrained by trip limits or tier allocations. The highest capacity estimates are associated with the no action alternative and Alternative 1G
Alternative 1H and 1I would grant Tier 3 permits to limited access Atlantic herring vessels that would not otherwise qualify for a limited access mackerel permit. Alternative 1H would award a Tier 3 permit to vessels with Category A or B herring permits, and Alternative 1I would award Tier 3 permits to vessels with Category A, B, or C herring permits. Individual vessels are known to target both mackerel and Atlantic herring on the same trip. This provision would prevent forced regulatory discards of incidentally captured mackerel on trips primarily targeting Atlantic herring, and would be expected to result in positive economic benefits for the Atlantic herring fleet. The Council ultimately did not select this alternative because it concluded that the preferred open access mackerel possession limit (20,000 lb (9.07 mt) per trip) would be sufficient to prevent regulatory discards. This alternative was not expected to have a large economic impact on the overall mackerel fishery, as this small number of vessels would be granted access to Tier 3, which would be limited by low trip limits or a Tier allocation.
The FEIS describes four alternatives for allocating the commercial mackerel quota between the limited access Tiers. These alternatives were proposed as another mechanism to ensure that each Tier in the limited access program maintained their historical level of participation in the mackerel fishery in the future. The action alternatives would create a shared allocation for Tier 1, Tier 3, and the open access vessels, but allocate Tier 2 the percentage of total landings that Tier 2 landed from 1997-2007 (2B), double the Tier 2 percentage from 1997-2007 (2C), or triple the Tier 2 percentage from 1997-2007 (2D). Alternatives 2C and 2D feature a provision that, if less than half of Tier 2's allocation has been harvested on April 1, would transfer half of the remaining allocation to the Tier 1/Tier 3/open access allocation.
Based on public comment after the Draft Environmental Impact Statement (DEIS) was published, the Council modified alternatives 1C and 1D (preferred) to provide accommodations for smaller, historical participants in the mackerel fishery. These alternatives would result in more Tier 3 qualifiers, and would initially award Tier 3 a fairly high trip limit in order to allow the qualifiers occasional sizeable landings of mackerel. However, these alternatives would also cap Tier 3 at a maximum of 7 percent of the commercial quota, with no additional allocations for any other Tiers. Given the selection of Alternative 1D as preferred, the Council ultimately recommended the no action alternative regarding allocations for Tier 2.
All three action alternatives base the Tier 2 quota on a minimum of 100 percent of the collective landing of potential Tier 2 vessels from 1997-2007. When combined with the tiered limited access alternatives described above, the resulting Tier 2 allocations would range from 3.5 to 3.8 percent of the annual commercial mackerel quota for Alternative 2B; 7.0 to 7.7 percent of the quota for 2C; and 10.5 to 11.5 percent of the quota for 2D. Given the lower 2011 mackerel quotas, these allocations may constrain landings for all Tiers. The quota transfer provisions in 2C and 2D could benefit Tier 1 in that they would help avoid a situation where Tier 1 is closed, but Tier 2 is left open with a significant portion of its allocation unused.
The no action alternative (preferred), which also includes a cap on Tier 3 under preferred Alternative 1D, should not have substantial economic impact on most fishery participants. While Tier 3 would include an estimated 329 vessels with a relatively high trip limit, the Tier would be capped at a maximum of 7 percent of the commercial fishery allocation, so it should not affect the directed fishery. The economic impact of the Tier 2 allocations depends on Tier activity. If fishing opportunities expand for Tier 2, the no action alternative could allow Tier 2 participants to increase their activity, which could negatively impact other Tiers also attempting to access quota. On the other hand, the no action alternative could have negative impacts on Tier 2 if Tier 1 is very active in a given year and accesses a significant amount of the quota before Tier 2 vessels are able, given Tier 1's higher capacity.
Amendment 11 includes five trip limit alternatives in addition to the no action and preferred alternative. The trip limits analyzed in the FEIS are intended to restrict vessels to a range of landings that are characteristic of trips by vessels within a Tier. Under all alternatives, Tier 1 is not constrained by a trip limit, and all other trip limits would be established annually through specifications. The preferred alternative (3F) would initially set the trip limits at 135,000 lb (61.24 mt) for Tier 2; 100,000 lb (45.36 mt) for Tier 3; and 20,000 lb (9.07 mt) for open access. Alternatives 3B, 3C, and 3D would initially set the trip limits for Tier 2, Tier 3, and open access vessels such that 99 percent, 98 percent, and 95 percent of the trips in each would not have been affected, respectively. This would result in initial trip limits ranging from 39,000-553,000 lb (14.6-206.4 mt) for Tier 2; 4,000-100,000 lb (1.5-37.3 mt) for Tier 3; and 1,000-20,000 lb (0.4-7.5 mt) for open access, depending on the selected limited access program. Alternative 3E initially exempts Tier 2 from a trip limit, and sets all other trip limts in the range described in Alternatives 3B-3D. Alternative 3G was designed to be selected with Alternative 1G (single-tiered alternative), and would initially set the open access trip limit in a range calculated for Tier 2 with Alternatives 3B-3D under Alternative 1B (61,000-121,000 lb; 22.8-45.2 mt).
The alternatives analyzed in the FEIS were designed to establish trip limits that would be higher than historical landings for a majority of the fleet. Accordingly, none of the proposed trip limits are expected to have a negative economic impact on most of the mackerel fleet. In addition, the Tiers with trip limits typically derive a small percentage of their revenue from mackerel (less than 2 percent), so the trip limits are not expected to limit the contribution of mackerel to these vessels' annual revenue. In the event that mackerel availability increases in the future, the trip limits will benefit all mackerel fishery participants in that they will keep vessels in one Tier from significantly expanding effort to the point that their activity is characteristic of a higher Tier; put another way, trip limits could reduce additional capitalization, which could have long-term economic benefits if lower fishery capacity helps sustain the mackerel resource.
Amendment 11 includes most of the provisions adopted in other limited access fisheries in the Northeast Region to govern the initial qualification process, future ownership changes, and vessel replacements. For the most part, these provisions have no direct economic impact on applicants that qualify for limited access mackerel permits. The nature of a limited access program requires rules for governing the transfer of limited access fishing permits. The procedures have been relatively standard for previous limited access programs, which makes it easier for a vessel owner issued permits for several limited access fisheries to undertake vessel transactions. The standard provisions adopted in Amendment 11 are those governing change in ownership; replacement vessels; CPH; abandonment or voluntary relinquishment of permits; and appeal and denial of permits. This action would also allow a vessel owner to retain an open access mackerel fishing history prior to the implementation of Amendment 11 to be eligible for issuance of a mackerel permit based on the eligibility of the vessel that was sold, even if the vessel was sold with other limited access permits.
The economic impacts of the limited access permit provisions are analyzed in section 7.5.4 of the Amendment 11 document. The preferred alternative that requires hold volume measurements for Tier 1 and Tier 2 vessels would cost qualifiers for these permits an estimated $4,000 per vessel, not including travel expenses, and would prevent such vessels from increasing hold volume by more than 10 percent through refitting or replacement. This provision, and other provisions that restrict vessel upgrades, may constrain future business opportunities for vessels with immediate plans for vessel refitting or replacement. However, these restrictions may have long-term benefits to fishery participants by limiting capitalization in the mackerel fishery. The proposed regulations regarding qualification with retained vessel histories may have positive economic impacts for participants that sold their vessel but retained their mackerel fishing history. However, this provision could result in more vessels qualifying for mackerel permits, which may result in increased fishery capitalization. This could have a negative impact on the mackerel fleet if any additional capitalization impacts the sustained health of the mackerel resource. The preferred alternative requiring weekly VTR submissions from Tier 3 vessels is expected to cost an additional total of $5,790.40 annually in postage for all qualifiers.
EFH designations identify the geographic domain where fishery management measures could be established to minimize the adverse impacts of fishing and non-fishing activities on MSB species. The no action alternative would maintain the current text and map designations for EFH for all MSB species and life stages. The preferred alternative would designate as EFH the area associated with 90 percent of the cumulative geometric mean catches for non-overfished species, and the area associated with 95 percent of the cumulative geometric mean catches for unknown or overfished species. The three non-preferred alternatives vary slightly from the preferred, and include: (1) 75 percent area for non-overfished species, 90 percent for unknown or overfished species; (2) 95 percent area for non-overfished species, 100 percent for unknown or overfished species; and (3) 100 percent for all species.
With the exception of egg life stage for longfin squid, all of the MSB species are pelagic and have life stages that inhabit the water column. Because the fishing gears that have the potential to adversely impact EFH are bottom-tending, the EFH for MSB species is not vulnerable to fishing impacts. None of the EFH alternatives analyzed in Amendment 11 would result in regulations affecting fishing activity. Accordingly, none of analyzed alternatives are expected to have negative economic impact on the fishing industry. Overall, the preferred alternative would allow for more effective consultations on oversight of EFH when compared to current EFH definitions, which could have positive impacts on the MSB resource.
The commercial fishery for mackerel currently closes when it reaches 90 percent of the total mackerel quota (commercial plus recreational). It is assumed that the recreational fishery will harvest 15,000 mt of the commercial quota each year, regardless of the total commercial quota, but there is no hard allocation for the recreational fishery. The no action alternative would maintain the assumption that the recreational mackerel fishery could harvest 15,000 mt of the commercial quota. If the mackerel fishery is closed at 90 percent of the commercial quota, and the recreational fishery was actually able to harvest the assumed 15,000 mt, the mackerel quota would be exceeded. For example, the commercial mackerel quota for the 2011 fishing year is 46,779 mt. If the commercial mackerel fishery is closed when 90 percent of this quota is attained (42,101 mt), and the recreational mackerel fishery has harvested the assumed 15,000 mt, then the mackerel quota would be exceeded by 22 percent (42,101 mt + 15,000 mt = 57,101 mt). Mackerel quota overages can compromise the sustainability of the resource, resulting in negative long-term economic impacts on the fishery.
The preferred alternative would designate an allocation for the recreational mackerel fishery that corresponds to the proportion of total U.S. landings that were accounted for by the recreational fishery from 1997-2007 times 1.5 (6.2 percent of total U.S. mackerel landings). Other alternatives include an allocation equal to the proportion of U.S. landings accounted for by the recreational mackerel fishery during this period (4.1 percent), and two times the proportion from this period (8.2 percent).
The allocation is unlikely to constrain the current operations of the recreational mackerel fishery. Recreational landings from 2000-2009 ranged from 530-1,633 mt, with average recreational landings of 774 mt from 2007-2009. Under the preferred alternative, the recreational sector would have received an allocation of 2,900 mt in 2011 (6.2 percent of 46,779 mt). Given recent reduced mackerel quotas, the preferred recreational mackerel allocation could constrain the commercial mackerel fishery compared to the no action alternative. However, the constraint on the commercial fishery is more related to the overall quota than to any of the potential recreational allocations considered in Amendment 11.
Finally, Amendment 11 considered the establishment of a cap for at-sea processing via transfers for the mackerel fishery. The action alternatives included caps on at-sea processing initially set equal to 7 percent, 14 percent, 21 percent, 50 percent, or 75 percent of the mackerel initial optimum yield (IOY), with the cap set annually through specifications. Though there has not been at-sea processing for mackerel by mother ship-type processors since the foreign fishery ended in the early 1990s, the Council developed this set of alternatives in response to public comment about the potential impacts if large-scale at-sea processing of mackerel were to commence in the future. In particular, commenters noted that, if there were significant amounts of at-sea
There is little information available about the possible impacts of at-sea processing in the mackerel fishery. Under the preferred no action alternative, if at-sea processing were to become significant for mackerel, an unlimited portion of the mackerel market share could be transferred to at-sea processors. Land-based mackerel processors, and the shoreside communities in which they reside, would be impacted to the extent that mackerel processing shifts to the at-sea operations. Limiting at-sea processing (action alternatives) could have economic benefits by ensuring a portion of the mackerel supply would still be available to land-based mackerel processors.
Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996 states that for each rule or group of related rules for which an agency is required to prepare a FRFA, the agency shall publish one or more guides to assist small entities in complying with the rule, and shall designate such publications as “small entity compliance guides.” The agency shall explain the actions a small entity is required to take to comply with a rule or group of rules. As part of this rulemaking process, a small entity compliance guide was prepared. The guide will be sent to all vessels owners that hold permits administered by the NMFS Northeast Regional Office. In addition, copies of this final rule and guide (
Fisheries, Fishing, Recordkeeping and reporting requirements.
For the reasons set out in the preamble, 50 CFR part 648 is amended as follows:
16 U.S.C. 1801
(a) * * *
(5) * * *
(iii)
(B)
(
(
(
(C)
(
(
(
(
(
(
(
(
(D)
(E)
(
(
(F)
(G)
(H)
(
(I)
(J)
(K)
(L)
(M)
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(
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(iv)
(v)
(c) * * *
(2) * * *
(vii) The owner of a vessel that has been issued a Tier 1 or Tier 2 limited access mackerel must submit a volumetric fish hold certification measurement, as described in paragraph (a)(5)(iii)(H) of this section, with the permit renewal application for the 2013 fishing year.
(f) * * *
(2) * * *
(i) For any vessel not issued a NE multispecies, Atlantic herring permit, or Tier 3 Limited Access mackerel permit, fishing vessel log reports, required by paragraph (b)(1)(i) of this section, must be postmarked or received by NMFS within 15 days after the end of the reporting month. If no fishing trip is made during a particular month for such a vessel, a report stating so must be submitted, as instructed by the Regional Administrator. For any vessel issued a NE multispecies permit, Atlantic herring permit, or a Tier 3 Limited Access mackerel permit, fishing vessel log reports must be postmarked or received by midnight of the first Tuesday following the end of the reporting week. If no fishing trip is made during a reporting week for such a vessel, a report stating so must be submitted and received by NMFS by midnight of the first Tuesday following the end of the reporting week, as instructed by the Regional Administrator. For the purposes of this paragraph (f)(2)(i), the date when fish are offloaded will establish the reporting week or month that the VTR must be submitted to NMFS, as appropriate. Any fishing activity during a particular reporting week (
(g) * * *
(2) * * *
(ii) * * *
(C) Possess more than the incidental catch allowance of mackerel, unless
(D) Take, retain, possess, or land mackerel, squid, or butterfish in excess of a possession limit specified in § 648.26.
(E) Possess 5,000 lb (2.27 mt) or more of butterfish, unless the vessel meets the minimum mesh requirements specified in § 648.23(a).
(F) Take, retain, possess, or land mackerel, squid, or butterfish after a total closure specified under § 648.24.
(iii) * * *
(D) If fishing with midwater trawl or purse seine gear, fail to comply with the requirements of § 648.80(d) and (e).
(iv)
(a) * * *
(3) ACL; commercial ACT, including RSA, DAH, Tier 3 allocation (up to 7 percent of the DAH), DAP; JVP if any; TALFF, if any; and recreational ACT, including RSA for mackerel; which, subject to annual review, may be specified for a period of up to 3 years. The Monitoring Committee may also recommend that certain ratios of TALFF, if any, for mackerel to purchases of domestic harvested fish and/or domestic processed fish be established in relation to the initial annual amounts.
(b) * * *
(2) * * *
(iv) * * *
(A)
(c) * * *
(3) The amount of longfin squid,
(6) Commercial seasonal quotas/closures for longfin squid and
(9) Recreational allocation for mackerel.
(b) * * *
(1)
(ii) NMFS will close the Tier 3 commercial mackerel fishery in the EEZ when the Regional Administrator projects that 90 percent of the Tier 3 mackerel allocation will be harvested, if such a closure is necessary to prevent the DAH from being exceeded. The closure of the Tier 3 commercial mackerel fishery will be in effect for the remainder of that fishing period, with incidental catches allowed as specified in § 648.26.
(a) * * *
(1)
(a)
(i) A vessel issued a Tier 1 Limited Access Mackerel Permit is authorized to fish for, possess, or land Atlantic mackerel with no possession restriction in the EEZ per trip, and may only land Atlantic mackerel once on any calendar day, which is defined as the 24-hr period beginning at 0001 hours and ending at 2400 hours, provided that the fishery has not been closed because 90 percent of the DAH has been harvested, as specified in § 648.24(b)(1)(i).
(ii) A vessel issued a Tier 2 Limited Access Mackerel Permit is authorized to fish for, possess, or land up to 135,000 lb (61.23 mt) of Atlantic mackerel in the EEZ per trip, and may only land Atlantic mackerel once on any calendar day, which is defined as the 24-hr period beginning at 0001 hours and ending at 2400 hours, provided that the fishery has not been closed because 90 percent of the DAH has been harvested, as specified in § 648.24(b)(1)(i).
(iii) A vessel issued a Tier 3 Limited Access Mackerel Permit is authorized to fish for, possess, or land up to 100,000 lb (45.36 mt) of Atlantic mackerel in the EEZ per trip, and may only land Atlantic mackerel once on any calendar day, which is defined as the 24-hr period beginning at 0001 hours and ending at 2400 hours, provided that the fishery has not been closed because 90 percent of the Tier 3 allocation has been harvested, or 90 percent of the DAH has been harvested, as specified in § 648.22(b)(1)(i) and (ii).
(iv) A vessel issued an open access mackerel permit may fish for, possess, or land up to 20,000 lb (9.08 mt) of Atlantic mackerel in the EEZ per trip, and may only land Atlantic mackerel once on any calendar day, which is defined as the 24-hr period beginning at 0001 hours and ending at 2400 hours.
(v) Both vessels involved in a pair trawl operation must be issued a valid mackerel permits to fish for, possess, or land Atlantic mackerel in the EEZ. Both vessels must be issued the mackerel permit appropriate for the amount of mackerel jointly possessed by both of the vessels participating in the pair trawl operation.
(2)
(ii) [Reserved]
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Temporary rule; inseason action.
NMFS announces temporary removal of the 2,000-lb (907.2 kg) trip limit for the Atlantic herring fishery in Management Area 3 because recent catch data indicate that 95 percent of the sub-annual catch limit in Area 3 has not been fully attained. Vessels issued a Federal Atlantic herring permit may resume fishing for and landing herring, in amounts greater than 2,000 lb (907.2-kg), consistent with their Atlantic herring permit category, effective 0001 hr, November 7, 2011, through 0001 hr, November 10, 2011. At 0001 hr, November 10, 2011, vessels will again be prohibited from fishing for, catching, possessing, transferring, or landing more than 2,000 lb (907.2-kg) of Atlantic herring per trip or calendar day.
Effective 0001 hr, November 7, 2011, through 0001 hr, November 10, 2011.
Lindsey Feldman, Fishery Management Specialist, (978) 675-2179.
Regulations governing the herring fishery are found at 50 CFR part 648. The regulations require annual specification of the overfishing limit, acceptable biological catch, annual catch limit (ACL), optimum yield, domestic harvest and processing, U.S. at-sea processing, border transfer, and sub-ACLs for each management area. The 2011 Domestic Annual Harvest is 91,200 metric tons (mt); the 2011 sub-ACL allocated to Area 3 is 38,146 mt, and 0 mt of the sub-ACL is set aside for research (75 FR 48874, August 12, 2010).
Section 648.201(a) requires NMFS to monitor catch from the herring fishery in each of the herring management areas, using dealer reports, state data, and other available information, to determine when the catch of herring is projected to reach 95 percent of the management area sub-ACL. When such a determination is made, NMFS is required to prohibit, through publication in the
Based upon information indicating that 95 percent of the sub-ACL would be reached by October 3, 2011, NMFS filed a temporary rule effective October 3 through December 31, 2011, that reduced the herring trip limit in Area 3 for all federally permitted herring vessels to 2,000 lb (907.2-kg) per trip or calendar day. The NMFS Northeast Regional Administrator has since determined, based upon the latest dealer reports, data corrections, and other available information, that the herring fleet has not yet taken 95 percent of the sub-ACL, and, as of November 2, 2011, there is approximately 2,026 mt of Atlantic herring quota still available in Area 3. So that the herring fleet is able to harvest closer to 95 percent of the Area 3 sub-ACL, consistent with applicable regulations and trip limits, this action temporarily removes the 2,000 lb (907.2-kg) trip limit implemented on October 3, 2011, and restores the trip limits, if any, in effect before October 3, 2011, until 0001 hr November 10, 2011. Effective 0001 hr, November 7, 2011, through 0001 hrs, November 10, 2011, vessels issued an All Areas or an Areas 2 and 3 Limited Access Herring Permit are authorized to
At 0001 hr November 10, 2011, all federally permitted herring vessels will again be prohibited from fishing for, catching, possessing, transferring, or landing more than 2,000 lb (907.2-kg) of herring, per trip or calendar day, in or from Area 3, through December 31, 2011. Vessels transiting Area 3 with more than 2,000 lb (907.2-kg) of herring on board may do so, provided such herring was not caught in Area 3 and that all fishing gear is stowed and not available for immediate use, as required by § 648.23(b).
Effective 0001 hr, November 7, 2011, federally permitted dealers are advised that they may purchase more than 2,000 lb (907.2-kg) of Atlantic herring caught in Area 3 by federally permitted vessels until 0001 hr November 10, 2011. At 0001 hrs November 10, 2011, federally permitted dealers will again be prohibited from purchasing herring from federally permitted herring vessels that harvest more than 2,000 lb (907.2-kg) of herring from Area 3, through 2400 hr local time, December 31, 2011.
This action is taken under 50 CFR part 648 and is exempt from review under E.O. 12866.
The Assistant Administrator for Fisheries, NOAA (AA), finds good cause pursuant to 5 U.S.C. 553(b)(B) to waive prior notice and the opportunity for public comment because it would be impracticable and contrary to the public interest. This action temporarily removes the 2,000-lb (907.2-kg) herring trip limit in Area 3 from November 7 until November 10, 2011. As of 0001 hr November 10, 2011, the Area 3 trip limit will again be reduced to 2,000 lb (907.2-kg) per trip or calendar day, through December 31, 2011. The Atlantic herring fishery opened for the 2011 fishing year at 0001 hrs on January 1, 2011. The Atlantic herring fleet was prohibited from fishing for, catching, possessing, transferring, or landing more than 2,000 lb (907.2 mt) per trip or calendar day on October 3, 2011, based on projections that 95 percent of the available Area 3 herring quota had been harvested. Catch data indicating the Atlantic herring fleet did not harvest the full amount of available quota have only very recently become available. If implementation of this temporary removal of the 2,000 lb (907.2-kg) trip limit is delayed to solicit prior public comment, the remaining quota may not be fully harvested before the end of the 2011 fishing year on December 31. If public comment and the 30-day delayed effectiveness period is allowed, this action may re-open the directed herring fishery after the herring have moved out of Area 3.
Given the seasonal nature of the herring fishery, this would make this action ineffective. The AA finds, pursuant to 5 U.S.C. 553(d)(3), good cause to waive the 30-day delayed effectiveness period for the reasons stated above.
16 U.S.C. 1801
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Agency determination.
NMFS announces that the provisions implemented in a final rule published on May 11, 2011, pursuant to NFMS' emergency authority under the Magnuson-Stevens Fishery Conservation and Management Act (MSA) will remain in effect for the remainder of the 2011 groundfish fishery. The provisions included a new rebuilding plan for petrale sole, revised rebuilding plans for other overfished species, and revised status determination criteria, harvest specifications and a precautionary harvest control rule for assessed flatfish species. This announcement is required in order to maintain the current rebuilding plans, harvest specifications and harvest control rule for assessed flatfish species.
Effective on November 7, 2011.
Background information and documents are available from William W. Stelle, Jr., Regional Administrator, Northwest Region, NMFS, 7600 Sand Point Way NE., Seattle, WA 98115-0070; or by phone at (206) 526-6150.
Sarah Williams, (206) 526-4646; (fax) (206) 526-6736;
NMFS published a final rule establishing harvest specifications and management measures for most species (75 FR 27508, May 11, 2011), in part pursuant to NMFS' emergency authority under section 305(c) of the MSA. Specifically, that action amended 50 CFR part 660 to establish new and revised rebuilding plans, establish harvest specifications consistent with those rebuilding plans and new flatfish harvest proxies. Further background information for that action is provided in the preamble text of the May 11, 2011, final rule and in the supporting documents for that action, and is not repeated here.
Opportunity for public comment on the May 11, 2011, final rule was provided. One comment was received on that rule that was not relevant to the emergency provisions.
Therefore, this document announces the agency determination to continue through December 31, 2011, the measures set forth in the May 11, 2011, rule at § 660.40 and Table 2a to part 660, subpart C.
16 U.S.C. 1801
National Marine Fisheries Service (NMFS), National Oceanic and
Temporary rule; modification of a closure.
NMFS is opening directed fishing for Pacific ocean perch in the Bering Sea subarea of the Bering Sea and Aleutian Islands management area. This action is necessary to fully use the 2011 total allowable catch of Pacific ocean perch specified for the Bering Sea subarea of the Bering Sea and Aleutian Islands management area.
Effective 1200 hrs, Alaska local time (A.l.t.), November 3, 2011, through 2400 hrs, A.l.t., December 31, 2011. Comments must be received at the following address no later than 4:30 p.m., A.l.t., November 17, 2011.
You may submit comments on this document, identified by FDMS Docket Number NOAA-NMFS-2011-0268, by any of the following methods:
•
•
•
•
Steve Whitney, (907) 586-7269.
NMFS manages the groundfish fishery in the Bering Sea and Aleutian Islands management area (BSAI) exclusive economic zone according to the Fishery Management Plan for Groundfish of the Bering Sea and Aleutian Islands management area (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.
NMFS closed the directed fishery for Pacific ocean perch (POP) in the Bering Sea subarea of the BSAI under § 679.20(d)(1)(iii) on January 1, 2011 (75 FR 11778, March 12, 2010 and 76 FR 11139, March 1, 2011).
NMFS has determined that approximately 3,800 metric tons of POP remain in the directed fishing allowance. Therefore, in accordance with § 679.25(a)(1)(i), (a)(2)(i)(C), and (a)(2)(iii)(D), and to fully utilize the 2011 total allowable catch of POP in the Bering Sea subarea of the BSAI, NMFS is terminating the previous closure and is opening directed fishing for POP in Bering Sea subarea of the BSAI. This will enhance the socioeconomic well-being of harvesters dependent upon POP in this area. The Administrator, Alaska Region considered the following factors in reaching this decision: (1) The current catch of POP in the BSAI and, (2) the harvest capacity and stated intent on future harvesting patterns of vessels participating in this fishery.
This action responds to the best available information recently obtained from the fishery. The Assistant Administrator for Fisheries, NOAA (AA), finds good cause to waive the requirement to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B), as such requirement is impracticable and contrary to the public interest. This requirement is impracticable and contrary to the public interest as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would delay the opening of POP in the Bering Sea subarea of the BSAI. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of November 1, 2011.
The AA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment.
Without this inseason adjustment, NMFS could not allow the fishery for POP in the Bering Sea subarea of the BSAI to be harvested in an expedient manner and in accordance with the regulatory schedule. Under § 679.25(c)(2), interested persons are invited to submit written comments on this action to the above address until November 17, 2011.
This action is required by § 679.20 and § 679.25 and is exempt from review under Executive Order 12866.
16 U.S.C. 1801
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
We propose to adopt a new airworthiness directive (AD) for PW4000 series turbofan engines. This proposed AD would require replacing the fuel metering unit (FMU), part number (P/N) 50U150, at the next shop visit after the effective date of this proposed AD. This proposed AD was prompted by an engine overspeed event that occurred during taxi and resulted in a high-pressure compressor (HPC) surge and tailpipe fire. We are proposing this AD to prevent engine overspeed on these engines, which could result in an uncontained engine failure and damage to the airplane.
We must receive comments on this proposed AD by January 6, 2012.
You may send comments by any of the following methods:
•
•
•
•
For service information identified in this proposed AD, contact Pratt & Whitney, 400 Main St., East Hartford, CT 06108, phone: (860) 565-8770. You may review copies of the referenced service information at the FAA, Engine & Propeller Directorate, 12 New England Executive Park, Burlington, MA 01803. For information on the availability of this material at the FAA, call (781) 238-7125.
You may examine the AD docket on the Internet at
James Gray, Aerospace Engineer, Engine Certification Office, FAA, 12 New England Executive Park, Burlington, MA 01803;
We invite you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under the
We will post all comments we receive, without change, to
We received a report of an engine overspeed during taxi, which resulted in an HPC surge and tailpipe fire. Although the event was not an uncontained engine failure, engine overspeed events compromise the integrity of the rotor and can lead to an uncontained engine failure. Our investigation concluded that the existing FMU is susceptible to a single-point failure condition in which a complete or nearly complete blockage of the FMU servo wash filter could occur. A blockage in the FMU servo wash filter could result in insufficient hydraulic pressure being available to properly control the FMU and actuator functions. Inability to control the FMU and actuator functions, if not corrected, could result in an engine overspeed and an uncontained engine failure and damage to the airplane.
We are proposing this AD because we evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.
This proposed AD would require replacing the FMU, P/N 50U150, at the next shop visit after the effective date of this proposed AD.
We estimate that this proposed AD affects 750 engines installed on airplanes of U.S. registry. We also estimate that it would take about 3.2 work-hours per product to comply with this proposed AD. The average labor rate is $85 per work-hour. Required parts would cost about $10,698 per engine. Based on these figures, we estimate the cost of the proposed AD on U.S. operators to be $8,227,500.
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.
We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures
We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify this proposed regulation:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),
(3) Will not affect intrastate aviation in Alaska, and
(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
1. The authority citation for part 39 continues to read as follows:
49 U.S.C. 106(g), 40113, 44701.
2. The FAA amends § 39.13 by adding the following new airworthiness directive (AD):
(a) We must receive comments by January 6, 2012.
(b) None.
(c) This AD applies to all PW PW4050, PW4052, PW4056, PW4060, PW4060A, PW4060C, PW4062, PW4062A, PW4152, PW4156, PW4156A, PW4158, PW4160, PW4460, PW4462, and PW4650 turbofan engines, including models with any dash number suffix.
(d) This AD was prompted by an engine overspeed event that occurred during taxi and resulted in a high-pressure compressor surge and tailpipe fire. We are issuing this AD to prevent engine overspeed on these engines, which could result in an uncontained engine failure and damage to the airplane.
(e) Comply with this AD within the compliance times specified, unless already done.
(f) At the next shop visit after the effective date of this AD, remove FMU, P/N 50U150, and install an FMU that has been modified as specified in paragraphs 2.A through 2.C of the Accomplishment Instructions of PW Alert Service Bulletin PW4ENG A73-220, Revision 1, dated May 18, 2011.
(g) Three years from the effective date of this AD, do not install FMU, P/N 50U150, onto any engine.
(h) For the purpose of this AD, a shop visit is when the engine is inducted into the shop for any maintenance involving the separation of pairs of major mating engine flanges (lettered flanges). However, the separation of engine flanges solely for the purposes of transporting the engine without subsequent engine maintenance is not an engine shop visit.
(i) The Manager, Engine Certification Office, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19.
(j) For more information about this AD, contact James Gray, Aerospace Engineer, Engine Certification Office, FAA, 12 New England Executive Park, Burlington, MA 01803;
(k) For service information identified in this AD, contact Pratt & Whitney, 400 Main St., East Hartford, CT 06108; phone: (860) 565-8770. You may review copies of the referenced service information at the FAA, Engine & Propeller Directorate, 12 New England Executive Park, Burlington, MA 01803. For information on the availability of this material at the FAA, call (781) 238-7125.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
We propose to supersede an existing airworthiness directive (AD) that applies to all Turbomeca S.A. Arriel 2B and 2B1 turboshaft engines. The existing AD currently requires checking the transmissible torque between the low-pressure (LP) pump impeller and the high-pressure (HP) pump shaft on HP/LP pump hydro-mechanical metering units (HMUs) that do not incorporate Modification TU 147. Since we issued that AD, EASA issued a new AD. This proposed AD would require inspection and possible replacement of the HMU. We are proposing this AD to prevent reduced engine power or, at worst, an uncommanded in-flight shutdown (IFSD), which can result in a forced autorotation landing or accident.
We must receive comments on this proposed AD by January 6, 2012.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
For service information identified in this AD, contact Turbomeca, 40220 Tarnos, France;
You may examine the AD docket on the Internet at
James Rosa, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 12 New England Executive Park, Burlington, MA 01803;
We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the
We will post all comments we receive, without change, to
On January 21, 2010, we issued AD 2010-03-06, Amendment 39-16189 (75 FR 5689, February 4, 2010), for all Turbomeca Arriel 2B and 2B1 turboshaft engines. That AD requires checking the transmissible torque between the LP pump impeller and the HP pump shaft on HMUs that do not incorporate Turbomeca Modification TU 147. That AD also requires replacing the HMU, if it fails that check, with an HMU that has not incorporated Modification TU 147 but passes the check, or with an HMU that incorporates Modification TU 147. That AD resulted from several events of uncoupling of the LP fuel pump impeller and the HP fuel pump shaft on Arriel 2 engines which do not incorporate modification TU 147. The uncoupling of the LP fuel pump impeller and the HP fuel pump shaft may lead to reduced engine power or, at worst, an uncommanded IFSD, which can result in a forced autorotation landing or accident.
Since we issued AD 2010-03-06 (75 FR 5689, February 4, 2010), three additional cases of uncoupling of the LP fuel pump impeller and the HP fuel pump shaft have been encountered. However, these failures were in HMUs that were modified to post-TU 147 configuration HMUs, and the investigation indicates that these HMUs that fail the transmissible torque check must also be replaced.
We reviewed Turbomeca Alert Mandatory Service Bulletin (MSB) No. A292 73 2830, Version B, dated July 10, 2009, and Alert MSB No. A292 73 2836, Version A, dated August 17, 2010. The Alert MSBs describe procedures for inspecting and replacing the HMU.
We are proposing this AD because we evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.
This proposed AD would require the checking of the transmissible torque between the LP pump impeller and the HP pump shaft on HMUs. This proposed AD would also require replacing the HMU if it fails the transmissible torque check, with an HMU that is eligible for installation.
Based on the service information, we estimate that this proposed AD would affect about 540 engines installed on helicopters of U.S. registry. We also estimate that it would take about 2.5 work-hours per engine to comply with this proposed AD. The average labor rate is $85 per work-hour. Replacement HMUs would cost about $12,000 per engine. Based on these figures, if all of the HMUs were to fail the check, we estimate the cost of the proposed AD on U.S. operators to be $6,594,750.
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority.
We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify that the proposed regulation:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),
(3) Will not affect intrastate aviation in Alaska, and
(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
1. The authority citation for part 39 continues to read as follows:
49 U.S.C. 106(g), 40113, 44701.
2. The FAA amends § 39.13 by removing airworthiness directive (AD) 2010-03-06, Amendment 39-16189 (75 FR 5689, February 4, 2010), and adding the following new AD:
The FAA must receive comments on this AD action by January 6, 2012.
This AD supersedes AD 2010-03-06, Amendment 39-16189 (75 FR 5689, February 4, 2010).
This AD applies to all Turbomeca S.A. Arriel 2B and 2B1 turboshaft engines.
This AD was prompted by three additional cases of uncoupling of the high-pressure/low-pressure (HP/LP) pump hydro-mechanical metering unit (HMU) LP fuel pump impeller and the HP fuel pump shaft, since AD 2010-03-06 (75 FR 5689, February 4, 2010) was issued. However, these failures were in HMUs that were modified to post-TU 147 configuration HMUs. The investigation indicates that these HMUs may also need to be replaced. We are issuing this AD to prevent reduced engine power or, at worst, an uncommanded in-flight shutdown, which can result in a forced autorotation landing or accident.
Comply with this AD within the compliance times specified, unless already done.
(1) Check the transmissible torque between the LP fuel pump impeller and the HP fuel pump shaft as follows:
(i) For HMUs that do not incorporate Modification TU 147, check the torque before accumulating 500 engine flight hours (EFH) since March 11, 2010 (the effective date of AD 2010-03-06 (75 FR 5689, February 4, 2010)). Use Paragraph 2 of Turbomeca Alert Mandatory Service Bulletin (MSB) No. A292 73 2830, Version B, dated July 10, 2009, to do the check.
(ii) For HMUs that incorporate Modification TU 147 and which Modification TU 147 was applied on or before March 31, 2010, and the HMUs are not listed in Figures 2 or 3 of Turbomeca Alert MSB No. A292 73 2836, Version A, dated August 17, 2010, check the torque within 750 EFH from the effective date of this AD, but no later than 14 months after the effective date of this AD. Use Paragraph 2 of Turbomeca Alert MSB No. A292 73 2836, Version A, dated August 17, 2010, to do the check.
(2) If the HMU does not pass the torque check, then replace the HMU with an HMU that is eligible for installation.
Do not install any HMU removed from service by this AD until it has been checked in accordance with Paragraph 2 of Turbomeca Alert MSB No. A292 73 2836, Version A, dated August 17, 2010, or checked in accordance with Paragraph 2 of Turbomeca Alert MSB No. A292 73 2830, Version B, dated July 10, 2009, and found eligible for installation.
The Manager, Engine Certification Office, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19.
(1) For more information about this AD, contact James Rosa, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 12 New England Executive Park, Burlington, MA 01803;
(2) For service information identified in this AD, contact Turbomeca S.A., 40220 Tarnos, France; phone: 33-05-59-74-40-00, fax: 33-05-59-74-45-15. You may review copies of the referenced service information at the FAA, Engine & Propeller Directorate, 12 New England Executive Park, Burlington, MA 01803. For information on the availability of this material at the FAA, call (781) 238-7125.
Federal Aviation Administration (FAA), DOT.
Supplemental notice of proposed rulemaking (NPRM); reopening of comment period.
We are revising an earlier proposed airworthiness directive (AD) for RR RB211-Trent 800 series turbofan engines. That NPRM proposed to revise the Trent 800 Time Limits Manual (TLM) of the Trent 800 engine maintenance manuals (EMMs). That NPRM was prompted by RR reducing the life limits of certain critical engine parts. This action revises that NPRM by proposing to supersede an existing AD to prohibit installation of one certain critical part and to increase the life of another critical part whose lives were previously reduced by that existing AD. We are proposing this supplemental NPRM to prevent the failure of critical rotating parts, which could result in uncontained failure of the engine and damage to the airplane. Because of the extensive changes since the NPRM was issued, we are reopening the comment period to allow the public the chance to comment on these proposed changes.
We must receive comments on this proposed AD by January 6, 2012.
You may send comments using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
For service information identified in this AD, contact Rolls-Royce plc, Corporate Communications, P.O. Box 31, Derby, England, DE248BJ;
You may examine the AD docket on the Internet at
Alan Strom, Aerospace Engineer, Engine
We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the
We will post all comments we receive, without change, to
We issued an NPRM to amend 14 CFR part 39 to include an AD that would apply to RR RB211-Trent 800 series turbofan engines. That NPRM published in the
Since we issued the previous NPRM (75 FR 45560, August 3, 2010), RR requested that we supersede existing AD 2003-16-18, Amendment 39-13271 (68 FR 49344, August 18, 2003). That AD currently requires a life limit for intermediate-pressure (IP) turbine rotor disc, part number (P/N) FK21117, that is lower than the life limit proposed by this supplemental NPRM. Rolls-Royce plc substantiated their proposed increased life of P/N FK21117 by rig test and analysis.
AD 2003-16-18 (68 FR 49344, August 18, 2003) also reduced the life limit for IP turbine rotor discs, P/N FK33083, and all P/N FK33083 IP turbine rotor discs are no longer in service. RR has accordingly reduced the life for P/N FK33083 discs to zero, effectively removing them as a disc approved for installation in any engine. By revising the previous NPRM (75 FR 45560, August 3, 2010) to supersede AD 2003-16-18, as discussed previously, this proposed AD would make these changes to the life of RR IP turbine rotor disc, P/N FK21117, and RR IP turbine rotor disc, P/N FK33083, mandatory. We have also determined that it is unnecessary to incorporate by reference the TLM of the Trent 800 engine EMMs. We can address the unsafe condition identified in this supplemental NPRM by mandating the reduced lives of the affected parts.
We gave the public the opportunity to comment on the previous NPRM (75 FR 45560, August 3, 2010). We have considered the comments received.
American Airlines and Delta Airlines asked us to change paragraph (e)(1) in the proposed AD from “(1) Revise the airworthiness limitations section (ALS) * * * Time Limits manual (TLM) dated June 15, 2009” to “(1) Revise the airworthiness limitations section (ALS) * * * Time Limits manual (TLM) dated no earlier than June 15, 2009.” The commenters do not want to be forced to use a TLM dated earlier than the one currently in force.
We partially agree. We agree that a more efficient method of revising the life exists, so we changed this proposed AD to specify the revised part lives in Table 1 in the Compliance section of this proposed AD. We do not agree to the requested wording as it leaves compliance with the AD open to future revisions that do not currently exist. We did not change the proposed AD further as a result of this comment.
Delta Airlines asked us to withdraw the NPRM (75 FR 45560, August 3, 2010). Delta Airlines believed the NPRM is redundant because the current TLM already requires using the proposed tasks and life limits.
We do not agree. Although the new life limits are included in the current TLM, the new life limits are reinforced when mandated by an AD. We changed this proposed AD to specify the revised part lives in Table 1 in the Compliance section of this proposed AD.
Rolls-Royce plc asked us to change paragraph (b) of the proposed AD from “None” to “AD 2003-16-18 is superseded by the current AD.”
We agree. We changed paragraph (b) of this proposed AD to state that “This AD supersedes AD 2003-16-18, Amendment 39-13271 (68 FR 49344, August 18, 2003)”.
Rolls-Royce plc has issued Alert Service Bulletin No. RB.211-72-AE935, Revision 7, dated January 19, 2009. The actions described in this service information are intended to correct the unsafe condition identified in this supplemental NPRM.
We are proposing this supplemental NPRM because we evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design. Certain changes described above expand the scope of the previous NPRM (75 FR 45560, August 3, 2010). As a result, we have determined that it is necessary to reopen the comment period to provide additional opportunity for the public to comment on this supplemental NPRM.
This supplemental NPRM would reduce the life limits of certain critical engine parts and would supersede AD 2003-16-18, Amendment 39-13271 (68 FR 49344, August 18, 2003).
Based on the service information, we estimate that this proposed AD would affect about 16 RB211-Trent 800 series turbofan engines of U.S. registry. The average labor rate is $85 per work-hour, but no labor cost is associated with this proposed AD because discs are replaced at scheduled maintenance intervals. Prorated cost of parts would cost about $45,000 per engine. Based on these figures, we estimate the cost of the proposed AD on U.S. operators to be $720,000.
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more
We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify this proposed regulation:
(1) Is not a “significant regulatory action” under Executive Order 12866;
(2) Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979);
(3) Will not affect intrastate aviation in Alaska or;
(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
1. The authority citation for part 39 continues to read as follows:
49 U.S.C. 106(g), 40113, 44701.
2. The FAA amends § 39.13 by removing airworthiness directive (AD) 2003-16-18, Amendment 39-13271 (68 FR 49344, August 18, 2003), and adding the following new AD:
We must receive comments by January 6, 2012.
This AD supersedes AD 2003-16-18, Amendment 39-13271 (68 FR 49344, August 18, 2003).
This AD applies to Rolls-Royce plc (RR) RB211-Trent 895-17, 892-17, 892B-17, 884-17, 884B-17, 877-17, and 875-17 turbofan engines.
This AD was prompted by RR reporting changes to the lives of certain life limited rotating parts. We are issuing this AD to prevent the failure of critical rotating parts, which could result in uncontained failure of the engine and damage to the airplane.
Compliance is required within 30 days after the effective date of this AD, unless already done.
(1) After the effective date of this AD, remove from service the parts listed in Table 1 of this AD before exceeding the new life limit indicated:
After the effective date of this AD, do not install any IP turbine rotor discs, P/N FK33083, into any engine.
The Manager, Engine Certification Office, FAA, may approve AMOCs to this AD. Use the procedures found in 14 CFR 39.19 to make your request.
(1) You may find additional information on calculating Standard Duty Cycles and or using HEAVY Profile Cycles, in RR TLM 05-00-01-800-801, Recording and Control of the Lives of Parts.
(2) For more information about this AD, contact Alan Strom, Aerospace Engineer, Engine Certification Office, FAA, Engine and Propeller Directorate, 12 New England Executive Park, Burlington, MA 01803;
(3) Refer to European Aviation Safety Agency Airworthiness Directive 2007-0003R1, dated January 15, 2009, and RR Alert Service Bulletin No. RB.211-72-AE935, Revision 7, dated January 19, 2009, for related information.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
We propose to adopt a new airworthiness directive (AD) for certain The Boeing Company Model 737-100, -200, -200C, and -300 series airplanes. This proposed AD was prompted by a report from the airplane manufacturer that airplanes were assembled with air distribution ducts in the environmental control system (ECS) wrapped with Boeing Material Specification (BMS) 8-39 or Aeronautical Materials Specifications (AMS) 3570 polyurethane foam insulation, a material with fire-retardant properties that deteriorate with age. This proposed AD would require reworking certain air distribution ducts in the ECS. We are proposing this AD to prevent ignition of the BMS 8-39 or AMS 3570 polyurethane foam insulation on the duct assemblies of the ECS due to a potential electrical arc, which could start a small fire and lead to a larger fire that may spread throughout the airplane through the ECS.
We must receive comments on this proposed AD by December 22, 2011.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
For service information identified in this proposed AD, contact Boeing Commercial Airplanes, Attention: Data & Services Management, P.O. Box 3707, MC 2H-65, Seattle, Washington 98124-2207;
You may examine the AD docket on the Internet at
Kimberly A. DeVoe, Aerospace Engineer, Cabin Safety and Environmental Systems Branch, ANM-150S, FAA, Seattle Aircraft Certification Office, 1601 Lind Avenue SW., Renton, Washington 98057-3356;
We invite you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under the
We will post all comments we receive, without change, to
We have received reports of duct assemblies in the ECS with burned BMS 8-39 polyurethane foam insulation on two Model 767-200 series airplanes. The airplane manufacturer has also notified us that certain Model 737-100, -200, -200C, and -300 series airplanes were assembled with duct assemblies in the ECS wrapped with BMS 8-39 or AMS 3570 polyurethane foam insulation. The fire-retardant properties of BMS 8-39 and AMS 3570 polyurethane foam insulation deteriorate with age. This, along with dust, dirt, and other carbon particulate contamination of the insulation on the ducts, adds an available fuel source for a potential fire. Once ignited, the foam insulation emits noxious smoke, does not self-extinguish, and drips droplets of liquefied polyurethane, which can further propagate a fire. Because the insulation is wrapped around the duct assemblies, which are located throughout the airplane, if the insulation is ignited a fire could potentially travel along the ducts and spread throughout the airplane. This condition, if not corrected, could result in ignition of the BMS 8-39 or AMS 3570 polyurethane foam insulation on the duct assemblies of the ECS due to a potential electrical arc, which could start a small fire and lead to a larger fire that may spread throughout the airplane through the ECS.
On January 14, 2008, we issued AD 2008-02-16, Amendment 39-15346 (73 FR 4061, January 24, 2008), applicable to certain Model 767-200 and 767-300 series airplanes.
On June 17, 2010, we issued AD 2010-14-01, Amendment 39-16344 (75 FR 38007, July 1, 2010), applicable to certain Model 747-100, 747-100B, 747-100B SUD, 747-200B, 747-200C, 747-200F, 747-300, 747-400, 747-400F, 747SR, and 747SP series airplanes.
AD 2008-02-16, Amendment 39-15346 (73 FR 4061, January 24, 2008), and AD 2010-14-01, Amendment 39-16344 (75 FR 38007, July 1, 2010), require reworking certain duct assemblies in the ECS. These ADs resulted from reports of duct assemblies in the ECS with burned BMS 8-39 polyurethane foam insulation. These ADs also resulted from reports from the airplane manufacturer that airplanes were assembled with duct assemblies in the ECS wrapped with BMS 8-39 polyurethane foam insulation, a material with fire-retardant properties that deteriorate with age. We issued these ADs to prevent a potential electrical arc from igniting the BMS 8-39 polyurethane foam insulation on the duct assemblies of the ECS, which could propagate a small fire and lead to a larger fire that might spread throughout the airplane through the ECS.
We reviewed Boeing Service Bulletin 737-21A1132, Revision 3, dated February 16, 2011. This service bulletin describes procedures for reworking and part-marking the following affected duct assemblies ECS systems. The rework includes doing a pressure and leak test following installation of the new insulation.
• Captain's outlet air distribution ducts
• Control cabin air distribution ducts
• Distribution manifold
• Passenger air distribution gasper air ducts
We are proposing this AD because we evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.
This proposed AD would require accomplishing the actions specified in the service information described previously, except as discussed under “Differences Between the Proposed AD and the Service Information.”
Boeing Service Bulletin 737-21A1132, Revision 3, dated February 16, 2011, recommends reworking the affected duct assemblies “during the next heavy maintenance check, within 24,000 flight-hours from the date on this service bulletin.” This proposed AD would require operators to rework the affected duct assemblies within 72 months after the effective date of the AD. In developing the compliance time for this action, we considered the degree of urgency associated with addressing the subject unsafe condition. We also considered the availability of required parts and the practical aspect of reworking the affected duct assemblies within an interval that parallels normal scheduled maintenance for most affected operators. The average heavy maintenance schedule for the affected fleet is between 60 and 72 months; therefore, the proposed compliance time of 72 months is equivalent to the recommended compliance time of “during the next heavy maintenance check, within 24,000 flight-hours,” and it represents an appropriate interval in which an ample number of required parts will be available to modify the affected fleet without adversely affecting the safety of these airplanes. This difference has been coordinated with the Boeing Company.
We estimate that this proposed AD affects 292 airplanes of U.S. registry.
We estimate the following costs to comply with this proposed AD:
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.
We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify this proposed regulation:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),
(3) Will not affect intrastate aviation in Alaska, and
(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
1. The authority citation for part 39 continues to read as follows:
49 U.S.C. 106(g), 40113, 44701.
2. The FAA amends § 39.13 by adding the following new airworthiness directive (AD):
We must receive comments by December 22, 2011.
None.
This AD applies to The Boeing Company Model 737-100, -200, -200C, and -300 series airplanes, certificated in any category; as identified in Boeing Service Bulletin 737-21A1132, Revision 3, dated February 16, 2011.
Joint Aircraft System Component (JASC)/Air Transport Association (ATA) of America Code 21, Air conditioning.
This AD was prompted by a report from the airplane manufacturer that airplanes were assembled with air distribution ducts in the environmental control system (ECS) wrapped with Boeing Material Specification (BMS) 8-39 or Aeronautical Materials Specifications (AMS) 3570 polyurethane foam insulation, a material with fire retardant properties that
Comply with this AD within the compliance times specified, unless already done.
Within 72 months after the effective date of this AD, rework the applicable duct assemblies in the ECS specified in and in accordance with the Accomplishment Instructions and Appendix A of Boeing Service Bulletin 737-21A1132, Revision 3, dated February 16, 2011.
The service bulletin accomplishment instructions might refer to other procedures. When the words “refer to” are used and the operator has an accepted alternative procedure, the accepted alternative procedure can be used to comply with the AD. When the words “in accordance with” are included in the instruction, the procedure in the design approval holder document must be used to comply with the AD.
Reworking the applicable duct assemblies in the ECS in accordance with the Accomplishment Instructions and Appendix A of Boeing Service Bulletin 737-21A1132, Revision 2, dated June 13, 2007, before the effective date of this AD is acceptable for compliance with the corresponding actions required by paragraph (g) of this AD.
As of the effective date of this AD, no person may install an ECS duct assembly with BMS 8-39 or AMS 3570 polyurethane foam insulation on any airplane.
(1) The Manager, Seattle Aircraft Certification Office (ACO), FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the manager of the ACO, send it to the attention of the person identified in the Related Information section of this AD. Information may be emailed to:
(2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office.
(1) For more information about this AD, contact Kimberly A. DeVoe, Aerospace Engineer, Cabin Safety and Environmental Systems Branch, ANM-150S, FAA, Seattle Aircraft Certification Office, 1601 Lind Avenue SW., Renton, Washington 98057-3356;
(2) For service information identified in this AD, contact Boeing Commercial Airplanes, Attention: Data & Services Management, P.O. Box 3707, MC 2H-65, Seattle, Washington 98124-2207;
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
We propose to adopt a new airworthiness directive (AD) for the products listed above. This proposed AD results from mandatory continuing airworthiness information (MCAI) originated by an aviation authority of another country to identify and correct an unsafe condition on an aviation product. The MCAI describes the unsafe condition as:
[T]here have been a number of occurrences with Messier-Dowty MLG [main landing gear] units where the main fitting failed, due to fatigue cracking in the area of the filler and bleeder holes, and occurrences where the sliding member failed, due to fatigue cracking at the area of chrome run-out/lower radius of the sliding tube portion of the sliding member.
Investigation has revealed that the most probable cause of * * * cracks is high compressive stress during braking at higher deceleration levels outside the regular fatigue load spectrum. [T]he high compressive stress locally exceeds the elasticity limit of the material, leaving a residual tensile stress at release of the heavy braking load. Subsequently, this local residual tensile stress results in a negative effect on the fatigue life of the component.
This condition, if not detected and corrected, could lead to failure of the MLG, possibly resulting in loss of control of the aeroplane during the landing rollout. * * *
We must receive comments on this proposed AD by December 22, 2011.
You may send comments by any of the following methods:
•
•
•
•
For Fokker service information identified in this proposed AD, contact Fokker Services B.V., Technical Services Dept., P.O. Box 231, 2150 AE Nieuw-Vennep, the Netherlands;
For Messier-Dowty service information identified in this proposed AD, contact Messier Services Americas, Customer Support Center, 45360 Severn Way, Sterling, Virginia 20166-8910;
You may review copies of the referenced service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, Washington. For information on the availability of this material at the FAA, call (425) 227-1221.
You may examine the AD docket on the Internet at
Tom Rodriguez, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, Washington 98057-3356;
We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the
We will post all comments we receive, without change, to
The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Community, has issued EASA Airworthiness Directive 2009-0269R1, dated March 11, 2010 (referred to after this as “the MCAI”), to correct an unsafe condition for the specified products. The MCAI states:
Since introduction of the F28 Mark 0100 aeroplane into airline service, there have been a number of occurrences with Messier-Dowty MLG [main landing gear] units where the main fitting failed, due to fatigue cracking in the area of the filler and bleeder holes, and occurrences where the sliding member failed, due to fatigue cracking at the area of chrome run-out/lower radius of the sliding tube portion of the sliding member.
Investigation has revealed that the most probable cause of both the main fitting and sliding member cracks is high compressive stress during braking at higher deceleration levels outside the regular fatigue load spectrum. Starting at deceleration stress levels somewhat below limit load, the high compressive stress locally exceeds the elasticity limit of the material, leaving a residual tensile stress at release of the heavy braking load. Subsequently, this local residual tensile stress results in a negative effect on the fatigue life of the component.
This condition, if not detected and corrected, could lead to failure of the MLG, possibly resulting in loss of control of the aeroplane during the landing rollout. To address this unsafe condition, the Civil Aviation Authority of the Netherlands (CAA-NL) issued AD NL-2005-012 (EASA approval 2005-6363) [which corresponds to FAA 2007-04-23, Amendment 39-14956 (72 FR 8615, February 27, 2007)] to require repetitive inspections of the sliding member (Fokker Services SBF100-32-144) and AD NL-2006-003 (EASA approval 2006-0041) to require repetitive inspections of the main fitting (Fokker Services SBF100-32-146). Messier-Dowty has now developed a modification, resulting in a strengthened sliding member and a strengthened main fitting, which is the terminating action for these repetitive inspections.
For the reasons described above, this [EASA] AD requires the modification and reidentification of the affected MLG units, or replacement of the affected MLG units with modified units.
This [EASA] AD has been revised to * * * state that modification of an aeroplane * * * also constitutes terminating action for the actions required by CAA-NL AD (BLA) 2002-115/2 dated October 8, 2004 [which partially corresponds to FAA AD 2008-20-03, Amendment 39-15682 (73 FR 56452, September 29, 2008)].
Fokker Services B.V. has issued:
• Fokker Service Bulletin SBF100-32-155, dated July 23, 2009;
• Fokker Service Bulletin SBF100-32-097, dated September 30, 1995;
• Fokker Service Bulletin SBF100-32-132, dated December 5, 2001; and
• Fokker Service Bulletin SBF100-32-156, Revision 1, dated June 29, 2009.
Messier-Dowty has issued Service Bulletin F100-32-112, dated July 17, 2009. The actions described in this service information are intended to correct the unsafe condition identified in the MCAI.
This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with the State of Design Authority, we have been notified of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all pertinent information and determined an unsafe condition exists and is likely to exist or develop on other products of the same type design.
We have reviewed the MCAI and related service information and, in general, agree with their substance. But we might have found it necessary to use different words from those in the MCAI to ensure the AD is clear for U.S. operators and is enforceable. In making these changes, we do not intend to differ substantively from the information provided in the MCAI and related service information.
We might also have proposed different actions in this AD from those in the MCAI in order to follow FAA policies. Any such differences are highlighted in a NOTE within the proposed AD.
Based on the service information, we estimate that this proposed AD would affect about 4 products of U.S. registry. We also estimate that it would take about 30 work-hours per product to comply with the basic requirements of this proposed AD. The average labor rate is $85 per work-hour. Required parts would cost about $520,000 per product. Where the service information lists required parts costs that are covered under warranty, we have assumed that there will be no charge for these costs. As we do not control warranty coverage for affected parties, some parties may incur costs higher than estimated here. Based on these figures, we estimate the cost of the proposed AD on U.S. operators to be $2,090,200, or $522,550 per product.
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.
We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify this proposed regulation:
1. Is not a “significant regulatory action” under Executive Order 12866;
2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and
3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
1. The authority citation for part 39 continues to read as follows:
49 U.S.C. 106(g), 40113, 44701.
2. The FAA amends § 39.13 by adding the following new AD:
(a) We must receive comments by December 22, 2011.
(b) This AD affects: AD 98-06-26, Amendment 39-10404 (63 FR 13502, March 20, 1998); AD 98-13-32, Amendment 39-10623 (63 FR 34581, June 25, 1998); AD 2004-14-01, Amendment 39-13710 (69 FR 41391, July 9, 2004); AD 2007-04-23, Amendment 39-14956 (72 FR 8615, February 27, 2007); AD 2008-20-03, Amendment 39-15682 (73 FR 56452, September 29, 2008); and AD 2010-21-12, Amendment 39-16472 (75 FR 63042, October 14, 2010).
(c) This AD applies to Fokker Services B.V. Model F.28 Mark 0100 airplanes, certificated in any category, all serial numbers, equipped with Messier-Dowty (formerly Dowty-Rotol, Dowty Aerospace Gloucester) main landing gear (MLG).
(d) Air Transport Association (ATA) of America Code 32: Landing Gear.
(e) The mandatory continuing airworthiness information (MCAI) states:
[T]here have been a number of occurrences with Messier-Dowty MLG [main landing gear] units where the main fitting failed, due to fatigue cracking in the area of the filler and bleeder holes, and occurrences where the sliding member failed, due to fatigue cracking at the area of chrome run-out/lower radius of the sliding tube portion of the sliding member.
Investigation has revealed that the most probable cause of * * * cracks is high compressive stress during braking at higher deceleration levels outside the regular fatigue load spectrum. [T]he high compressive stress locally exceeds the elasticity limit of the material, leaving a residual tensile stress at release of the heavy braking load. Subsequently, this local residual tensile stress results in a negative effect on the fatigue life of the component.
This condition, if not detected and corrected, could lead to failure of the MLG, possibly resulting in loss of control of the aeroplane during the landing rollout. * * *
(f) You are responsible for having the actions required by this AD performed within the compliance times specified, unless the actions have already been done.
(g) Within 48 months after the effective date of this AD, do an inspection of the MLG to determine whether Messier-Dowty (formerly Dowty-Rotol, Dowty Aerospace Gloucester) main landing gear (MLG) units having Part Number (P/N) 201072011, 201072012, 201072013, 201072014, 201072015, or 201072016 are installed on the airplane. A review of airplane maintenance records is acceptable in lieu of this inspection if the part number of the MLG unit can be conclusively determined from that review. If any of those part numbers is found, do the requirements of paragraph (h) of this AD.
(h) If, during the inspection required by paragraph (g) of this AD, any Messier-Dowty (formerly Dowty-Rotol, Dowty Aerospace Gloucester) main landing gear (MLG) units having Part Number (P/N) 201072011, 201072012, 201072013, 201072014, 201072015, or 201072016 are found, within 48 months after the effective date of this AD, do the actions specified in paragraph (h)(1) or (h)(2) of this AD.
(1) Replace each MLG unit having P/N 201072011, 201072012, 201072013, 201072014, 201072015, or 201072016, with a MLG unit having P/N 201072017, P/N 201072019, or P/N 201072021 (for LH), as applicable; or P/N 201072018, P/N 201072020 or P/N 201072022 (for RH), as applicable; in accordance with the Accomplishment Instructions of Fokker Service Bulletin SBF100-32-155, dated July 23, 2009, and do the actions required in paragraph (j) of this AD.
(2) Modify and re-identify each affected MLG unit identified in paragraph (c) of this AD, in accordance with the Accomplishment Instructions of Messier-Dowty Service Bulletin F100-32-112, dated July 17, 2009, and do the actions required in paragraph (j) of this AD.
(i) As of the effective date of this AD, no person may install on any airplane a MLG unit having P/N 201072011, P/N 201072012, P/N 201072013, P/N 201072014, P/N 201072015, or P/N 201072016.
(j) Before further flight after accomplishing the actions required by paragraph (h) of this AD, remove the airplane flight manual amendment and placard that were installed as required by AD 2008-20-03, Amendment 39-15682 (73 FR 56452, September 29, 2008).
(k) Prior to or concurrently with the action (replacement or modification) as required by paragraph (h) of this AD, accomplish the following actions:
(1) Install the torque link spacer with changed outer diameter, in accordance with the Accomplishment Instructions of Fokker Service Bulletin SBF100-32-097, dated September 30, 1995.
(2) Remove, if installed, the water spray deflectors, in accordance with the Accomplishment Instructions of Fokker Service Bulletin SBF100-32-132, dated December 5, 2001.
(3) Replace all P/N AE70690E, P/N AE70691E, P/N AE99111E, and P/N AE99119E brake quick-disconnect couplings with improved units in accordance with Part 2 of the Accomplishment Instructions of Fokker Service Bulletin SBF100-32-156, Revision 1, dated June 29, 2009. Accomplishing the actions required by this paragraph terminates the requirements of AD 2010-21-12, Amendment 39-16472 (75 FR 63042, October 14, 2010) for that airplane only.
(l) Accomplishing the actions required by paragraph (h) of this AD terminates the requirements of the following ADs for that airplane only: AD 98-06-26, Amendment 39-10404 (63 FR 13502, March 20, 1998); AD 98-13-32, Amendment 39-10623 (63 FR 34581, June 25, 1998); AD 2007-04-23, Amendment 39-14956 (72 FR 8615, February 27, 2007); and AD 2008-20-03, Amendment 39-15682 (73 FR 56452, September 29, 2008).
(m) Accomplishing the actions required by paragraph (h) of this AD terminates the requirements of AD 2004-14-01, Amendment 39-13710 (69 FR 41391, July 9, 2004), for that airplane only.
(n) The following provisions also apply to this AD:
(1)
(2)
(o) Refer to MCAI European Aviation Safety Agency (EASA) Airworthiness Directive 2009-0269R1, dated March 11, 2010; Fokker Service Bulletins SBF100-32-155, dated July 23, 2009, SBF100-32-097, dated September 30, 1995, SBF100-32-132, dated December 5, 2001, and SBF100-32-156, Revision 1, dated June 29, 2009; and Messier-Dowty Service Bulletin F100-32-112, dated July 17, 2009; for related information.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
We propose to adopt a new airworthiness directive (AD) for all Airbus Model A300 B4-600, B4-600R, and F4-600R series airplanes, and Model C4-605R Variant F airplanes (collectively called A300-600 series airplanes), and Model A310 series airplanes that would supersede an existing AD. This proposed AD results from mandatory continuing airworthiness information (MCAI) originated by an aviation authority of another country to identify and correct an unsafe condition on an aviation product. The MCAI describes the unsafe condition as:
One operator experienced failures of four Fuel Level Sensor-Amplifier (FLSA) and Multi Tank Indicators (MTI) units. FLSA and MTI failures have been identified as having been caused by incorrect connector sleeves materials fitted to the MTI units.
Degradation of the electrical insulation sleeves of the Low-level indication lamps on the MTI of the flight deck can cause a short circuit that might result in high voltage being conveyed to the high and low level sensors in the wing tanks. This condition, if not corrected, could cause the level sensor to heat above acceptable limits, possibly resulting in fuel tank explosion, and consequent loss of the aeroplane.
We must receive comments on this proposed AD by December 22, 2011.
You may send comments by any of the following methods:
•
•
•
•
For Airbus service information identified in this proposed AD, contact Airbus SAS-EAW (Airworthiness Office), 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone +33 5 61 93 36 96; fax +33 5 61 93 44 51; email:
You may examine the AD docket on the Internet at
Dan Rodina, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, Washington 98057-3356; telephone (425) 227-2125; fax (425) 227-1149.
We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the
We will post all comments we receive, without change, to
On December 28, 2008, we issued AD 2009-02-04, Amendment 39-15794 (74 FR 7792, February 20, 2009). That AD required actions intended to address an unsafe condition on all Airbus Model A300-600 airplanes.
Since we issued AD 2009-02-04, Amendment 39-15794 (74 FR 7792, February 20, 2009), Airbus has issued new service information to correct interference between sensors and a fuel pipe at the connector level. We have determined that the following actions are necessary:
• Replacing the cockpit MTI,
• Replacing the high-level, low-level, and overflow sensors and their harness connectors with fused sensors and new harness connectors,
• Reinstating the low-level warning indication to the cockpit MTI, and
• Adding Model A310 series airplanes to the applicability of this proposed AD. The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Community, has issued EASA Airworthiness Directive 2010-0175, dated August 18, 2010 (referred to after this as “the MCAI”), to correct an unsafe condition for the specified products. The MCAI states:
One operator experienced failures of four Fuel Level Sensor-Amplifier (FLSA) and Multi Tank Indicators (MTI) units. FLSA and MTI failures have been identified as having been caused by incorrect connector sleeves materials fitted to the MTI units.
Degradation of the electrical insulation sleeves of the Low-level indication lamps on the MTI of the flight deck can cause a short circuit that might result in high voltage being conveyed to the high and low level sensors in the wing tanks. This condition, if not corrected, could cause the level sensor to heat above acceptable limits, possibly resulting in fuel tank explosion, and consequent loss of the aeroplane.
As an interim action, EASA AD 2008-0055 [which corresponds to FAA AD 2009-02-04, Amendment 39-15794 (74 FR 7792, February 20, 2009)], was issued requiring the accomplishment of wiring modifications to protect the FLSA and the Flight Warning Computers from 115V [volt] AC [alternating current] and 28V DC [direct current] short circuits within the cockpit MTI.
EASA AD 2009-0144, which required the replacement of the affected sensors and their harness connectors with modified units in accordance with the instructions of Airbus Service Bulletin (SB) A300-28-6095 at original issue or SB A300-28-9013 at original issue, as applicable, was further on cancelled because the installation of the new inner tank fused low-level sensors was not possible, due to interference between some sensors and a fuel pipe at connector level.
Airbus SB A300-28-6095 and SB A300-28-9013 have been revised to clear this interference. The replacement of the affected sensors and their harness connectors according to the instructions of these SBs is now possible.
This [EASA] AD supersedes [EASA] AD 2008-0055 and introduces the following actions:
The following service information has been issued. The actions described in this service information are intended to correct the unsafe condition identified in the MCAI.
• Airbus Mandatory Service Bulletin A300-28-6095, Revision 01, dated February 2, 2010.
• Airbus Mandatory Service Bulletin A300-28-6101, dated June 4, 2008.
• Airbus Mandatory Service Bulletin A300-28-6103, Revision 01, dated May 18, 2010.
• Airbus Mandatory Service Bulletin A310-28-2167, dated June 4, 2008.
• GE Aviation Service Bulletin 1404KID-28-466, Revision 1, dated July 15, 2008.
• GE Aviation Service Bulletin 1406KID-28-467, Revision 1, dated July 15, 2008.
• GE Aviation Service Bulletin 1410KID-28-468, Revision 1, dated July 15, 2008.
• GE Aviation Service Bulletin 1420KID-28-469, Revision 1, dated July 23, 2008.
This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with the State of Design Authority, we have been notified of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all pertinent information and determined an unsafe condition exists and is likely to exist or develop on other products of the same type design.
We have reviewed the MCAI and related service information and, in general, agree with their substance. But we might have found it necessary to use different words from those in the MCAI to ensure the AD is clear for U.S. operators and is enforceable. In making these changes, we do not intend to differ substantively from the information provided in the MCAI and related service information.
We might also have proposed different actions in this AD from those in the MCAI in order to follow FAA policies. Any such differences are highlighted in a NOTE within the proposed AD.
Based on the service information, we estimate that this proposed AD would affect about 210 products of U.S. registry.
The actions that are required by AD 2009-02-04, Amendment 39-15794 (74 FR 7792, February 20, 2009) and retained in this proposed AD take about 5 work-hours per product, at an average labor rate of $85 per work hour. Required parts cost about $0 per product. Based on these figures, the estimated cost of the currently required actions is $425 per product.
We estimate that it would take about 44 work-hours per product to comply with the new basic requirements of this proposed AD. The average labor rate is $85 per work-hour. Required parts would cost about $207 per product. Where the service information lists required parts costs that are covered under warranty, we have assumed that there will be no charge for these costs. As we do not control warranty coverage for affected parties, some parties may incur costs higher than estimated here. Based on these figures, we estimate the cost of the proposed AD on U.S. operators to be $828,870, or $3,947 per product.
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.
We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that
We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify this proposed regulation:
1. Is not a “significant regulatory action” under Executive Order 12866;
2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and
3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
1. The authority citation for part 39 continues to read as follows:
49 U.S.C. 106(g), 40113, 44701.
2. The FAA amends § 39.13 by removing Amendment 39-15794 (74 FR 7792, February 20, 2009) and adding the following new AD:
(a) We must receive comments by December 22, 2011.
(b) This AD supersedes AD 2009-02-04, Amendment 39-15794 (74 FR 7792, February 20, 2009).
(c) This AD applies to Airbus Model A300 B4-601, B4-603, B4-620, B4-622, B4-605R, B4-622R, F4-605R, F4-622R, and C4-605R Variant F airplanes, and Model A310-203, -204, -221, -222, -304, -322, -324, and -325 airplanes; certificated in any category; all certified models, all manufacturer serial numbers.
(d) Air Transport Association (ATA) of America Code 28: Fuel.
(e) The mandatory continuing airworthiness information (MCAI) states:
One operator experienced failures of four Fuel Level Sensor-Amplifier (FLSA) and Multi Tank Indicators (MTI) units. FLSA and MTI failures have been identified as having been caused by incorrect connector sleeves materials fitted to the MTI units.
Degradation of the electrical insulation sleeves of the Low-level indication lamps on the MTI of the flight deck can cause a short circuit that might result in high voltage being conveyed to the high and low level sensors in the wing tanks. This condition, if not corrected, could cause the level sensor to heat above acceptable limits, possibly resulting in fuel tank explosion, and consequent loss of the aeroplane.
(f) You are responsible for having the actions required by this AD performed within the compliance times specified, unless the actions have already been done.
(g) For Model A300-600 airplanes: Unless already done, within 3 months after March 27, 2009 (the effective date of AD 2009-02-04, Amendment 39-15794 (74 FR 7792, February 20, 2009)): Modify the wiring in the right-hand electronics rack in accordance with the Accomplishment Instructions of Airbus Mandatory Service Bulletin A300-28A6096, Revision 02, dated July 4, 2008. Previous accomplishment of the modification before March 27, 2009, in accordance with Airbus Mandatory Service Bulletin A300-28A6096, dated October 19, 2007; or Revision 01, dated April 16, 2008; meets the requirements in this paragraph. Doing the required actions in paragraph (h) or (i) of this AD, as applicable, terminates the actions required by this paragraph.
(h) For Model A300-600 series airplanes on which Airbus modification 06213 has been embodied in production: Within 24 months after the effective date of this AD, do the actions required by paragraphs (h)(1), (h)(2), and (h)(3) of this AD. Doing the actions in this paragraph terminates the requirements of paragraph (g) of this AD.
(1) Replace the cockpit MTI, in accordance with the Accomplishment Instructions of Airbus Mandatory Service Bulletin A300-28-6101, dated June 4, 2008.
(2) Before further flight after doing the replacement specified in paragraph (h)(1) of this AD: Replace the high-level, low-level, and overflow sensors and their harness connectors, with fused sensors and new harness connectors, in accordance with the Accomplishment Instructions of Airbus Mandatory Service Bulletin A300-28-6095, Revision 01, dated February 2, 2010.
(3) Before further flight after doing the replacement specified in paragraph (h)(2) of this AD: Re-instate the low-level warning indication to the cockpit MTI, in accordance with the Accomplishment Instructions of Airbus Mandatory Service Bulletin A300-28-6103, Revision 01, dated May 18, 2010.
(i) For Model A300-600 series airplanes on which Airbus modification 06213 has not been embodied in production: Within 24 months after the effective date of this AD, do the actions required by paragraphs (i)(1), (i)(2), and (i)(3) of this AD. Doing the actions in this paragraph terminates the requirements of paragraph (g) of this AD.
(1) Replace the cockpit MTI, in accordance with the Accomplishment Instructions of Airbus Mandatory Service Bulletin A300-28-6101, dated June 4, 2008.
(2) Before further flight after doing the replacement specified in paragraph (i)(1) of this AD: Re-instate the low-level warning indication to the cockpit MTI, in accordance with the Accomplishment Instructions of Airbus Mandatory Service Bulletin A300-28-6103, Revision 01, dated May 18, 2010.
(3) Before further flight after doing the action specified in paragraph (i)(2) of this AD: Replace the high-level, low-level, and overflow sensors and their harness connectors, with fused sensors and new harness connectors, in accordance with the Accomplishment Instructions of Airbus Mandatory Service Bulletin A300-28-6095, Revision 01, dated February 2, 2010.
(j) For Model A310 series airplanes: Within 24 months after the effective date of this AD, replace the cockpit MTI, in accordance with the Accomplishment Instructions of Airbus Mandatory Service Bulletin A310-28-2167, dated June 4, 2008.
(k) Re-instating the low-level warning indication to the cockpit MTI in accordance with the Accomplishment Instructions of Airbus Mandatory Service Bulletin A300-28-6103, dated May 20, 2009, before the effective date of this AD, is acceptable for compliance with the corresponding re-instatement required by paragraphs (h)(3) and (i)(2) of this AD.
(l) As of the effective date of this AD, no person may install, on any airplane, any MTI
(1) Airbus Mandatory Service Bulletin A300-28-6101, dated June 4, 2008.
(2) Airbus Mandatory Service Bulletin A310-28-2167, dated June 4, 2008.
(3) GE Aviation Service Bulletin 1404KID-28-466, Revision 1, dated July 15, 2008.
(4) GE Aviation Service Bulletin 1406KID-28-467, Revision 1, dated July 15, 2008.
(5) GE Aviation Service Bulletin 1410KID-28-468, Revision 1, dated July 15, 2008.
(6) GE Aviation Service Bulletin 1420KID-28-469, Revision 1, dated July 23, 2008.
This AD differs from the MCAI and/or service information as follows: No differences.
(m) The following provisions also apply to this AD:
(1)
(2)
(n) Refer to MCAI European Aviation Safety Agency Airworthiness Directive 2010-0175, dated August 18, 2010; Airbus Mandatory Service Bulletin A300-28-6095, Revision 01, dated February 2, 2010; Airbus Mandatory Service Bulletin A300-28-6101, dated June 4, 2008; Airbus Mandatory Service Bulletin A300-28-6103, Revision 01, dated May 18, 2010; Airbus Mandatory Service Bulletin A310-28-2167, dated June 4, 2008; GE Aviation Service Bulletin 1404KID-28-466, Revision 1, dated July 15, 2008; GE Aviation Service Bulletin 1406KID-28-467, Revision 1, dated July 15, 2008; GE Aviation Service Bulletin 1410KID-28-468, Revision 1, dated July 15, 2008; and GE Aviation Service Bulletin 1420KID-28-469, Revision 1, dated July 23, 2008; for related information.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
This action proposes to amend two VHF Omnidirectional Range (VOR) Federal airways in Alaska, V-320 and V-440, due to the relocation of the Anchorage VOR navigation aid. This action is necessary for the continued safe and efficient management of Instrument Flight Rules (IFR) operations within the National Airspace System.
Comments must be received on or before December 22, 2011.
Send comments on this proposal to the U.S. Department of Transportation, Docket Operations, M-30, 1200 New Jersey Avenue SE., West Building Ground Floor, Room W12-140, Washington, DC 20590-0001;
Colby Abbott, Airspace, Regulation and ATC Procedures Group, Office of Airspace Services, Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591;
Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal.
Communications should identify both docket numbers (FAA Docket No. FAA-2011-1014 and Airspace Docket No. 11-AAL-19) and be submitted in triplicate to the Docket Management Facility (see
Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA-2011-1014 and Airspace Docket No. 11-AAL-19.” The postcard will be date/time stamped and returned to the commenter.
All communications received on or before the specified closing date for comments will be considered before taking action on the proposed rule. The proposal contained in this action may be changed in light of comments received. All comments submitted will be available for examination in the public docket both before and after the closing date for comments. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket.
An electronic copy of this document may be downloaded through the Internet at
You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office (see
Persons interested in being placed on a mailing list for future NPRMs should
Docket No. FAA-2011-0010, Airspace Docket No. 11-AAL-1 published on April 28, 2011 (76 FR 23687), that amends all Alaska Federal Airways affected by the relocation of the Anchorage VOR navigation aid, subsequently had the effective date delayed until further notice (76 FR 35097; June 16, 2011). The FAA then determined that V-320 and V-440 did not have satisfactory signal reception coverage in the vicinity of Anchorage, AK, and removed them from the rule, to be amended in a future rulemaking (76 FR 65106; October 20, 2011). This action would amend the above airways as the signal reception of the relocated navigation aid is satisfactory to meet Minimum Enroute Altitude (MEA) requirements.
The FAA is proposing an amendment to Title 14 Code of Federal Regulations (14 CFR) part 71 to amend Alaska Federal airways V-320 and V-440. The airway descriptions would reflect the Anchorage VOR relocation from Fire Island, AK, to Ted Stevens Anchorage International Airport, Anchorage, AK. Additionally, the proposed descriptions incorporate new navigation aid radials to describe airway intersections necessary to retain a 10,000 feet MEA currently used by air traffic control for instrument flight rules aircraft in the vicinity of Anchorage, AK.
The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. Therefore, this proposed regulation: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under Department of Transportation (DOT) Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this proposed rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority.
This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it amends Federal airways in Alaska.
Alaskan VOR Federal Airways are published in paragraph 6010(b) of FAA Order 7400.9V, dated August 9, 2011, and effective September 15, 2011, which is incorporated by reference in 14 CFR 71.1. The domestic VOR Federal Airways listed in this document will be published subsequently in the Order.
This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1E, “Environmental Impacts: Policies and Procedures,” prior to any FAA final regulatory action.
Airspace, Incorporation by reference, Navigation (air).
In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:
1. The authority citation for part 71 continues to read as follows:
49 U.S.C. 106(g), 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.
2. The incorporation by reference in 14 CFR 71.1 of FAA Order 7400.9V, Airspace Designations and Reporting Points, dated August 9, 2011, and effective September 15, 2011, is amended as follows:
Bureau of Industry and Security, Department of Commerce.
Proposed rule.
This proposed rule describes how articles the President determines no longer warrant control under Category VIII (aircraft and related items) of the United States Munitions List (USML) would be controlled under the Commerce Control List (CCL) in new Export Control Classification Numbers (ECCNs) 9A610, 9B610, 9C610, 9D610, and 9E610. In addition, this proposed rule would control military aircraft and related items now controlled under ECCNs 9A018, 9D018 and 9E018 under new ECCNs 9A610, 9D610 and 9E610. This proposed rule also addresses license exception availability for items controlled by the five new ECCNs that would be created.
This is the second in a planned series of proposed rules describing how various types of articles the President determines, as part of the Administration's Export Control Reform Initiative, no longer warrant USML control, would be controlled on the CCL and by the EAR. This proposed rule is being published in conjunction with a
In addition, this proposed rule would modify aspects of the Bureau of Industry Security's (BIS) July 15, 2011 proposed rule by adding cross references to ECCNs 9A018, 9D018 and 9E018; by adding provisions relating to License Exception Strategic Trade Authorization (STA) eligibility to clarify that its scope extends to the United States Government, to any person in the United States, and to the “development” or “production” of items; and by including a general policy of denial for 600 series items for destinations that are subject to a United States arms embargo under the regional stability reasons for control.
Comments must be received by December 22, 2011.
You may submit comments by any of the following methods:
•
• By email directly to
• By mail or delivery to Regulatory Policy Division, Bureau of Industry and Security, U.S. Department of Commerce, Room 2099B, 14th Street and Pennsylvania Avenue NW., Washington, DC 20230. Refer to RIN 0694-AF36.
Gene Christiansen, Office of National Security and Information Technology Controls, tel. (202) 482-2984, email
On July 15, 2011, as part of the Administration's ongoing Export Control Reform Initiative, BIS published a proposed rule (76 FR 41958) (“the July 15 proposed rule”) that set forth a framework for how articles the President determines, in accordance with section 38(f) of the Arms Export Control Act (AECA) (22 U.S.C. 2778(f)), would no longer warrant control on the United States Munitions List (USML) instead would be controlled on the Commerce Control List (CCL). With that proposed rule, BIS also described its proposal for how military vehicles and related articles in USML Category VII that no longer warrant control under the USML would be controlled on the CCL.
Following the structure of the July 15 proposed rule, this proposed rule describes BIS's proposal for how a second group of items—various military aircraft and related articles that are controlled by USML Category VIII—would be controlled on the CCL. The proposed changes described in this proposed rule and the State Department's proposed amendment to Category VIII of the USML are based on a review of Category VIII by the Defense Department, which worked with the Departments of State and Commerce in preparing the proposed amendments. The review was focused on identifying the types of articles that are now controlled by USML Category VIII that are either (i) Inherently military and otherwise warrant control on the USML or (ii) if it is a type common to civil aircraft applications, possess parameters or characteristics that provide a critical military or intelligence advantage to the United States, and that are almost exclusively available from the United States. If an article satisfied one or both of those criteria, the article remained on the USML. If an article did not satisfy either standard but was nonetheless a type of article that is, as a result of differences in form and fit, “specially designed” for military applications, then it was identified in the new ECCNs proposed in this notice. The licensing policies and other EAR-specific controls for such items also described in this notice would enhance national security by (i) Allowing for greater interoperability with our NATO and other allies while still maintaining and expanding robust controls and, in some cases, prohibitions on exports or reexports to other countries and for proscribed end users and end uses; (ii) enhancing our defense industrial base by, for example, reducing the current incentives for foreign companies to design out or avoid U.S.-origin ITAR-controlled content, particularly with respect to generic, unspecified parts and components; and (iii) permitting the U.S. Government to focus its resources on controlling, monitoring, investigating, analyzing, and, if need be, prohibiting exports and reexports of more significant items to destinations, end uses, and end users of greater concern than our NATO allies and other multi-regime partners.
Pursuant to section 38(f) of the AECA, the President shall review the USML “to determine what items, if any, no longer warrant export controls under” the AECA. The President must report the results of the review to Congress and wait 30 days before removing any such items from the USML. The report must “describe the nature of any controls to be imposed on that item under any other provision of law.” 22 U.S.C. 2778(f)(1). This proposed rule describes how certain military aircraft and related articles in USML Category VIII would be controlled by the EAR and its CCL if the President determines that the articles no longer warrant control on the USML.
In the July 15 proposed rule, BIS proposed creating a series of new ECCNs to control items that would be moved from the USML to the CCL, or that are items from the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual Use Goods and Technologies Munitions List (Wassenaar Arrangement Munitions List or WAML) that are already controlled elsewhere on the CCL. The proposed rule referred to this series as the “600 series” because the third character in each of the new ECCNs would be a “6.” The first two characters of the 600 series ECCNs serve the same function as any other ECCN as described in § 738.2 of the EAR. The first character is a digit in the range 0 through 9 that identifies the Category on the CCL in which the ECCN is located. The second character is a letter in the range A through E that identifies the product group within a CCL Category. In the 600 series, the third character is the number 6. With few exceptions, the final two characters identify the WAML category that covers items that are the same or similar to items in a particular 600 series ECCN.
BIS will publish additional
In addition to the proposals mentioned above, this proposed rule would make the following modifications to the July 15 proposed rule.
• Additions to proposed paragraph (a)(13) in § 740.2;
• Changes to the proposed Note to paragraph (c)(1) in § 740.20;
• Changes to ECCNs 9A018, 9D018 and 9E018;
• Addition of new Category 9 600 series ECCNs to § 742.6(a)(1); and
• Changes in eligible users for 600 Series under License Exception STA in § 740.2(a)(13).
A complete discussion of these modifications is described in the section “Scope of this Proposed Rule.” BIS will consider comments on the original proposals only for the specific paragraph, note, and ECCNs referenced above, and only in the context of the proposed rule's modifications to them.
This proposed rule would create five new 600 series ECCNs in CCL Category 9—9A610, 9B610, 9C610, 9D610, and 9E610—that would control articles the President determines no longer warrant control under USML Category VIII. Consistent with the regulatory construct identified in the July 15 proposed rule, this rule also would move items currently classified under ECCNs 9A018, 9D018, and 9E018 to the new ECCNs. As part of the proposed changes, these three 018 ECCNs would cross-reference the new classifications in the 600 series. As noted in the July 15 proposed rule, moving items from 018 ECCNs to the appropriate 600 series ECCNs would consolidate WAML and formerly USML items into one series of ECCNs.
The rule would also create a new Supplement No. 4 to part 740 that would prohibit the use of License Exceptions STA or GOV to export or reexport, except to U.S. government agencies or personnel, ECCN 9D610 software and ECCN 9E610 technology (other than “build-to-print technology”) for the production of specific types of parts and components classified under ECCN 9A610.x.
License Exception STA under § 740.20(c)(1) generally would be available for eligible end items (as described in § 740.20(g) of the July 15 proposed rule) and all other 600 series items if, at the time of export, reexport or transfer (in-country) the item is destined (i) For ultimate end use by the armed forces, police, paramilitary, law enforcement, customs, correctional, fire, and search and rescue agencies of a government in one of the § 740.20(c)(1) countries (the “STA-36”) or of the United States Government; or (ii) for the “production” or “development” of an item for ultimate end use by any of those foreign government agencies in any of the thirty-six § 740.20(c)(1) countries, by the United States Government, or by any person in the United States. This condition means that exports and reexports to non-governmental end users in one of the STA-36 countries under STA would be permissible so long as the item at issue would ultimately be provided to, or for the production or development of an item to be provided to and for end use by, any of the foregoing agencies of a government of a STA-36 country, the United States Government, or any person in the United States. This eligibility under License Exception STA is proposed because the U.S. Government recognizes that there would be a significant volume of desirable trade between and among private companies in the STA-36 countries regarding “600 series” end items that would ultimately be for use by one of the foregoing government agencies of an STA-36 country, the United States Government, and manufacturers in the United States. This proposal protects U.S. export control interests while at the same time facilitating permissible exports, reexports, and transfers (in-country) with the governments of the STA-36 countries and the United States. BIS particularly welcomes comments on the types of government agencies that would be eligible to ultimately receive items through this license exception. If, for example, there are types of agencies or persons that have been omitted from this list but that commenters believe should be included, commenters should provide BIS with this information, including specific examples of such agencies or persons.
The proposed changes are discussed in more detail below.
Certain military aircraft and related articles the President determines no longer warrant control in USML Category VIII would be controlled under proposed new ECCNs 9A610, 9B610, 9C610, 9D610, and 9E610. These new ECCNs follow the 600 series construct identified in the July 15 proposed rule.
Paragraphs .a through .k of ECCN 9A610 would consist of “end items,” as that term was defined in the July 15 proposed rule, and some types of related parts, components, accessories, attachments, equipment, and systems. Paragraphs .b, .c, .d, and .e would be reserved to make paragraphs .f through .i align with paragraphs on the WAML covering similar items. Paragraphs .l, .m, and .n would control Unmanned Aerial Vehicle (UAV)-related items that are not identified on the USML or the WAML, but which are identified on the Missile Technology Control Regime (MTCR) Equipment, Software and Technology Annex and which are proposed to be subject to the MT Column 1 reason for control. Paragraphs .o through .w would be reserved for possible future use. Paragraph .x would consist of parts, components, accessories and attachments (including certain unfinished products that have reached a stage in manufacturing where they are clearly identifiable as commodities controlled by paragraph .x) that are “specially designed” for a commodity in paragraphs .a through .k or a defense article in USML Category VIII. Paragraph .y would consist of 25 specific types of commodities that, if specially designed for a commodity subject to control in this 9A610 or a defense article in USML Category VIII, warrant less strict controls because they have little or no military significance. Commodities listed in paragraph .y would be controlled for antiterrorism (AT Column 1) reasons, which imposes a license requirement for five countries and, in accordance with the July 15 proposed rule, if destined for a military end use to the People's Republic of China, as described in § 744.21.
This proposed rule does not add aircraft gas turbine engines to the proposed new ECCN 9A610. Instead, the Administration plans to issue a proposed rule later that would describe the U.S. Government's controls on gas turbine engines and related items for military aircraft, ships, and vehicles, which is currently anticipated to be new ECCN 9A619. Although this numbering deviates slightly from the WAML numbering approach, BIS believes that it would be more efficient to list all 600 series controls for gas turbine engines and related items in one ECCN. The anticipated new ECCN will correspond to a new USML Category XIX that the State Department would propose creating to control USML-controlled gas turbine engines and related articles. When BIS publishes the proposed rule to address gas turbine engines and related items for military aircraft, missiles, ships, and vehicles, cross references to the proposed new ECCN would be added to the new ECCNs proposed by this rule.
ECCN 9B610.a would consist of test, inspection, and production equipment specially designed for the development or production of aircraft and related commodities and articles controlled by ECCN 9A610 or USML Category VIII. ECCN 9B610.b would consist of environmental test facilities designed or modified for military aircraft and related commodities. These new ECCN paragraphs would also implement WAML Category 18, which applies to production equipment and components for items on the WAML generally, with respect to production equipment for military aircraft, and environmental test facilities for such aircraft and related commodities. ECCN 9B610.c would implement a Missile Technology Control Regime control on production facilities specially designed for certain
ECCN 9C610 would consist of materials specially designed for aircraft and related commodities controlled by ECCN 9A610 that are not specified elsewhere on the CCL, such as in CCL Category 1, or on the USML. USML subcategory XIII(f) would continue to control structural materials “specifically designed, developed, configured, modified, or adapted for defense articles,” such as aircraft controlled by USML subcategory VIII(a). The State Department plans to publish a proposed revision to XIII(f) that would make it a more positive list of the structural materials that are controlled by USML XIII(f). When that occurs, BIS will publish a corresponding proposed revision to ECCN 9C610 so that it controls such items specially designed for ECCN 9A610 items and USML Category VIII items that are not positively listed in any revised USML XIII(f).
ECCN 9D610 would consist of software specially designed for commodities in 9A610, 9B610, or 9C610. ECCN 9D610 would also contain a “Note to License Exceptions Section” referring readers to the proposed Supplement No. 4 to part 740, which would limit the use of License Exceptions GOV and STA for ECCN 9D610 software for the production or development of 15 types of parts and components.
ECCN 9E610 would consist of technology that is required commodities in 9A610, 9B610, 9C610, or software 9D610. ECCN 9E610 would also contain a “Note to License Exceptions Section” referring to proposed Supplement No. 4 to part 740, discussed below, which would limit the use of License Exceptions GOV and STA for ECCN 9E610 technology (other than “build-to-print technology”) for the production of 15 types of ECCN 9A610.x parts and components.
ECCNs 9A610, 9B610, 9C610, 9D610, and 9E610 would each have a special paragraph designated “.y.99” to cover items that would otherwise fall within the scope of one of the ECCNs because, for example, they were “specially designed” for a military use, but which (i) Had been previously determined by the Department of State to be subject to the EAR and (ii) were not listed on the CCL. Items in these .y.99 paragraphs would be subject to antiterrorism controls.
Items currently classified under ECCN 9A018 paragraphs .a, .c, .d, .e and .f would be moved to ECCN 9A610. In conjunction with the establishment of the new ECCN 9X610 entries and consistent with the July 15 proposed rule's statement that 018 entries would remain in the CCL for a time, but only for cross-reference purposes, this rule would amend ECCNs 9A018, 9D018, and 9E018 to be solely cross references to the new 600 series ECCNs that cover the items currently in those 018 ECCNs. ECCN 9A018 would refer to ECCN 9A610 for aircraft related commodities (
This proposed rule would remove § 770.2(i) “Interpretation 9 Civil aircraft and Civil aircraft equipment (including parts, accessories, attachments, components and related training equipment).” That section explains the licensing authorities of the Departments of State and Commerce with respect to aircraft and related items. It would no longer be needed given the text of proposed ECCN 9A610.
In the July 15 proposed rule, BIS proposed moving items classified under ECCN 9A018.b (certain ground vehicles) to newly proposed ECCN 0A606.b.4. With that rule, BIS identified a corresponding proposed amendment to ECCN 9A018 that cross-referenced ECCN 0A606.b.4 for former ECCN 9A018.b items. This rule proposes to further amend ECCN 9A018, maintaining the proposed reference to ECCN 0A606.b.4 for items currently classified under ECCN 9A018.b and cross-referencing ECCN 9A610 for all other items currently classified under ECCN 9A018 (
The July 15 proposed rule indicated that software and technology applying to ground vehicle-related commodities, currently classified under ECCNs 9D018 and 9E018, would be classified under newly proposed ECCNs 0D606 and 0E606. However, the July 15 proposed rule did not propose cross-referencing language to be included in ECCNs 9D018 and 9E018. As noted above, BIS is now proposing amendments to ECCNs 9D018 and 9E018 to cross-reference ECCNs 9D610 and 9E610, for software and technology applying to those classified under ECCN 9A018 paragraphs .a, .c, .d, .e and .f. In conjunction with this proposal, BIS is also proposing amendments to ECCNs 9D018 and 9E018 that reference ECCNs 0D606 and 0E606 for software and technology applying to those items classified under ECCN 9A018.b.
Certain software and technology related to parts and components covered by .x items paragraphs of 600 series ECCNs warrant more restrictive license exception applicability than other software and technology currently on the CCL. This rule proposes creating a new Supplement No. 4 to Part 740 (600 Series Items Subject to Limits Regarding License Exceptions GOV and STA) that would identify 600 series items that may not be exported, reexported, or transferred (in-country) pursuant to License Exceptions STA (§ 740.20 of the EAR) or GOV (§ 740.11 of the EAR). The supplement would be structured to list by CCL category the items for which license exception applicability is limited.
New Supplement No. 4 to part 740 would list 15 types of parts and components that would be classified under new ECCN 9A610.x and would state that License Exception STA (§ 740.20 of the EAR) may not be used to export, reexport, or transfer (in-country) any software classified under ECCN 9D610 or technology classified under ECCN 9E610—other than “build-to-print technology”—for the production or development of any types of the listed ECCN 9A610.x parts and components. Further, the supplement would state that License Exception GOV, other than the paragraphs that authorize shipments to U.S. government agencies for official use or U.S. government personnel for personal use or official use (§ 740.11(b)(2)(i) and (ii) of the EAR), is not available for the export or reexport of software and technology (other than “build-to-print technology”) for the production or development of the ECCN 9A610.x parts and components listed in the supplement.
A new note to § 740.20(c)(1) would be added, and § 740.2(a)(13) would be clarified regarding the License Exception STA eligibility of end items and all other 600 series items. In the July 15 proposed rule, the export of a 600 series item is eligible for License Exception STA if, at the time of export, reexport or transfer (in-country), the item is destined for ultimate end use by the armed forces, police, paramilitary, law enforcement, customs and border protection, correctional, fire, and search and rescue agencies of a government in one of the STA-36 countries. This proposed rule would make 600 series items eligible for License Exception STA for such uses and also when exported, reexported, or transferred for the production or development of an item for ultimate end use by a STA-36
A new definition for “build-to-print technology” would be added to § 772.1. This definition is needed to add precision to that term as used in new Supplement No. 4 to part 740.
This rule proposes amending License Exception GOV (§ 740.11) by adding references to the new proposed Supplement No. 4 to Part 740 supplement's prohibitions in paragraphs (a)(5), (b)(2)(iii)(A), (b)(2)(iv)(A), and (c)(2)(iv), as well as in a note to (d)(1). Similarly, this rule proposes to amend License Exception STA (§ 740.20) by adding a reference to the proposed prohibitions in paragraph (b)(3).
As discussed in further detail below, the July 15 proposed rule stated that one reason for control for items classified in the 600 series is Regional Stability Column 1. Items classified under proposed ECCN 9A610, other than ECCN 9A610.y items, as well as related technology and software classified under ECCNs 9D610 and 9E610, would be controlled for this reason, among others. Correspondingly, this proposed rule would revise § 742.6 of the EAR to apply the RS Column 1 licensing policy to commodities classified under ECCN 9A610, 9B610, 9C610 (except paragraphs .y of those ECCNs), and to related software and technology classified under ECCNs 9D610 and 9E610. This proposed rule would also amend the RS Column 1 licensing policy to impose a general policy of denial for “600 series” items if the destination is subject to a United States arms embargo and a general policy of denial for items specially designed or required for F-14 aircraft.
As referenced above, the purpose of the July 15 proposed rule was to set up the framework for creating ECCNs that would cover articles that the President determines no longer warrant coverage on the USML, but for which export control under the EAR is appropriate. To facilitate that goal, the July 15 proposed rule contained definitions and concepts that were meant to be applied across Categories. However, as BIS undertakes rulemakings to move specific categories of items from the USML to the CCL, there may be unforeseen issues or complications that may require BIS to reexamine those definitions and concepts. The comment period for the July 15 proposed rule closed on September 13, 2011.
To the extent that this rule's proposals affect any provision in July 15 proposed rule or the July 15 proposed rule's provisions affect this proposed rule, BIS will consider comments on those provisions so long as they are in the context of the changes proposed in this rule. For example, BIS will consider comments on how the movement of Category VIII items from the USML to the CCL affects a definition, restriction, or provision that was contained in the July 15 proposed rule. BIS will also consider comments on the impact of a definition of a term in the July 15 proposed rule when that term is used in this proposed rule. BIS will not consider comments of a general nature regarding the July 15 proposed rule that are submitted in response to this rulemaking.
BIS believes that the following aspects of the July 15 proposed rule are among those that could affect this proposed rule:
•
• Definitions of terms in § 772.1;
• Restrictions on use of license exceptions in §§ 740.2, 740.10, 740.11, and 740.20;
• Change to national security licensing policy in § 742.4;
• Requirement to request authorization to use License Exception STA for end items in 600 series ECCNs and procedures for submitting such requests in §§ 740.2, 740.20, 748.8 and Supp. No. 2 to part 748;
• Licensing policy in § 742.4(b)(1)(ii); and
• Addition of 600 series items to Supplement No. 2 to Part 744—List of Items Subject to the Military End-Use Requirement of § 744.21.
BIS believes that the following aspects of this proposed rule are among those that could affect the provisions of the July 15 proposed rule:
Addition of U.S. arms embargo policy regarding 600 series items set forth in § 742.4(b)(1)(ii) (national security) of the July 15 proposed rule to § 742.6(b)(1) (regional stability) of this proposed rule;
• Addition of denial policy regarding 600 series items for F-14 aircraft set forth in § 742.6(b)(1) of this proposed rule.
In December 2010, the Departments of Commerce and State published Advanced Notices of Proposed Rulemaking that described the Administration's plan to make the USML and the CCL positive, tiered, and aligned so that they eventually can be combined into a single control list (
Based, in part, on a review of the comments received in response to the December 2010 notices, the Administration also has determined that fundamentally altering the structure of the USML by tiering and aligning it on a category-by-category basis would significantly disrupt the export control compliance systems and procedures of exporters and reexporters. For example, until the entire USML is revised and becomes final, some USML categories
Finally, in order to prevent any aircraft-related commodity specially designed for a military use that is not described in the proposed revisions to the USML from inadvertently dropping out of the U.S. Government's export controls, the rule proposes to use the catch-all phrase “specially designed,” as defined in the July 15 proposed rule, in the new ECCNs to control commodities not otherwise identified on the revised USML or elsewhere in the ECCN. The primary examples of this approach are ECCN 9A610.a, which controls any aircraft “specially designed” for a military use not identified on the USML or elsewhere on the CCL, and ECCN 9A610.x, which controls any part, component, accessory, or attachment “specially designed” for a military aircraft and not otherwise identified on the USML or elsewhere in the CCL. This approach is also part of a core objective of the Export Control Reform Initiative, which is to create a bright jurisdictional line between the USML and the CCL. As evidenced by the proposed revisions to USML Category VIII published by the State Department concurrently with this proposed rule, the Administration is following through on its commitment that the USML not contain generic, catch-all controls on every “part,” “component,” “accessory,” or “attachment” that is in any way specifically designed, modified, adapted, or configured, regardless of its military significance, for a defense article. The proposed USML revision is a substantially more positive list than the current list. Thus, to the extent an item is “specially designed” for a military use, it is subject to a 600 series ECCN in the EAR unless specifically identified on the ITAR's USML.
BIS believes that the principal effect of this rule will be to provide greater flexibility for exports and reexports to NATO member countries and other multiple-regime-member countries of items the President determines no longer warrant control on the United States Munitions List. This greater flexibility will be in the form of: application of the EAR's
Section 734.3 of the EAR provides,
The July 15 proposed rule would impose certain limits for 600 series items moving from existing 018 controls on the CCL. BIS believes that even with the July 15 proposed restrictions on the use of license exceptions and the additional restrictions identified in this proposed rule, restrictions on items currently on the USML would be reduced, particularly with respect to exports to NATO members and multiple-regime member countries, if those items were moved from the USML to proposed ECCN 9A610. BIS also believes that, in practice, the movement of items from ECCN 9A018 to ECCN 9A610 would have little effect on license exception availability for those items because existing restrictions or the terms of the license exceptions themselves already preclude most transactions that would be precluded by the July 15 proposed amendments to § 740.2 of the EAR. However, BIS is aware of two situations (the use of License Exceptions GOV and STA) in which movement of items in ECCN 9A018 to ECCN 9A610 could, in practice, impose greater limits on use of license exceptions than currently is the case.
First, the July 15 proposed rule would limit use of License Exception GOV for 600 series commodities to situations in which the United States Government is the consignee and end user or to situations in which the consignee or end user is the government of a country listed in § 740.20(c)(1). Currently, commodities classified under ECCN 9A018 may be exported under any provision of License Exception GOV to any destination authorized by that provision if all of the conditions of that provision are met and nothing else in the EAR precludes such shipment.
Second, the July 15 proposed rule would limit use of License Exception STA for “end items” in 600 series ECCNs to those end items for which a specific request for License Exception STA eligibility, filed in conjunction with a license application, has been approved and would require that the end item be for ultimate end use by a foreign government agency of a type specified in the July 15 proposed rule. The July 15 proposed rule also would limit exports of 600 series parts, components, accessories, and attachments under License Exception STA for ultimate end use by the same set of end users. Neither restriction currently applies to use of License Exception STA for commodities classified under ECCN 9A018. In addition, the July 15 proposed rule would limit shipment of 600 series items under License Exception STA to destinations listed in § 740.20(c)(1). Currently, commodities classified under ECCN 9A018.c, .d, .e, and .f (which would be moved to ECCN 9A610 under
The Administration has stated since the beginning of the Export Control Reform Initiative that the reforms will be consistent with the obligations of the United States to the multilateral export control regimes. Accordingly, the Administration will, in this and subsequent proposed rules, exercise its national discretion to implement, clarify, and, to the extent feasible, align its controls with those of the regimes. For example, the proposed ECCN 9A610 tracks, to the extent possible, the numbering structure and text of WAML category 10 pertaining to military aircraft not subject to the ITAR. It also implements in 9A610.x the controls in WAML category 16 for forgings, castings, and other unfinished products; in 9B610.a and .b the controls in WAML category 18 for production equipment; in 9D610 the applicable controls in WAML category 21 for software; and in 9E610 the applicable controls in WAML category 22 for technology.
This proposed rule would identify the specific paragraphs in proposed ECCNs 9A610, 9B610, 9D610, and 9E610 that list items that are also on the MTCR Equipment, Software and Technology Annex and apply the MT Column 1 reason for control to those paragraphs. This action would impose the missile technology based license requirements and licensing policy of § 742.5 of the EAR to those items. Those items are currently subject to the ITAR, which does not specify the multilateral regime on which a license requirement is based. Listing these items on the CCL with the reason for control stated will correlate the underlying MTCR control with export license requirements and licensing policy.
Pursuant to the framework identified in the July 15 proposed rule, commodities classified under ECCN 9A610 (other than ECCN 9A610.l, .m, .n, and. y), along with related test, inspection and production equipment, materials, software and technology classified under ECCNs 9B610, 9C610, 9D610 and 9E610 (other than ECCNs 9B610.c. and 9X610.y) would be subject to the licensing policies set forth in § 742.4(b)(1) (national security, column 1). Commodities classified under ECCN 9A610.l, .m and .n, along with related test, inspection and production equipment, software and technology classified under ECCNs 9B610.c, 9D610 and 9E610 would be subject to the licensing policy set forth in § 742.5(b) (missile technology) because they are listed on the Missile Technology Control Regime Equipment, Software and Technology Annex. They would not be subject to national security controls because they are not identified on the WAML. All commodities in ECCN 9A610 (other than 9A610.y which is subject to an antiterrorism reason for control only and the prohibitions in Part 744) along with related test, inspection and production equipment, materials, software and technology classified under ECCNs 9B610, 9C610, 9D610 and 9E610 (other than 9X610.y) would be subject to the licensing policies set forth in § 742.6(a)(1) (regional stability, column 1).
The July 15 proposed rule would change § 742.4 to set forth a general policy of denial for 600 series items for destinations that are subject to a United States arms embargo, which would apply to all items controlled for national security reasons under this proposed rule. This proposed rule adds that general policy of denial to § 742.6(b)(1) (regional stability column 1). This addition is needed so that the general denial policy for 600 series items would apply to items in proposed ECCNs 9A610, 9B610, 9D610 and 9E610 that are subject to the missile technology and regional stability reasons for control but not to the national security reason for control. This rule also adds a general policy of denial to § 742.6(b)(1) for items specially designed or required for F-14 aircraft because Iran is the only country that has such aircraft in its active inventory.
The Administration recognizes that some items that would fall within the scope of the proposed new ECCNs will have been subject to commodity jurisdiction (CJ) determinations issued by the United States Department of State. The State Department will have either determined that the item was subject to the jurisdiction of the ITAR or that it was not. (See 22 CFR 120.3 and 120.4). Under this proposed rule, items the State Department determined to be not subject to the ITAR and that are now not described on the CCL would be subject to the AT-only controls of the “.y99” paragraph of the applicable ECCN if they would otherwise be within the scope of the ECCN. Thus, for example, ECCN 9A610.x would control any part, component, accessory, or attachment not specifically identified in the USML or elsewhere in the ECCN if it was “specially designed” for a military aircraft. If a particular part, component, accessory, or attachment was, as defined, “specially designed” for a military aircraft and was at the time of a CJ determination not identified on the CCL, it would be controlled under 9A610.y.99. If it was identified or, as a matter of law or the result of a subsequent commodity classification (“CCATS”) determination by Commerce, controlled by another legacy ECCN, such as 9A991.d, 7A994, or 9A003, that ECCN would continue to apply to the item. This general approach will, pending public comment, be repeated in subsequent proposed rules pertaining to other categories of items.
If, however, the State Department had made a CJ determination that a particular item was subject to the jurisdiction of ITAR but that item is not described on the final, implemented version of a revised USML category, a new CJ determination would not be required unless there was doubt about the application of the new USML category to the item. (See 22 CFR 120.4). Thus, unless there were doubts about the jurisdictional status of a particular item, exporters and reexporters would be entitled to rely on the revised USML categories when making jurisdictional determinations, notwithstanding past CJ determinations that, under the previous version of the USML, the item was ITAR controlled.
Finally, if the State Department had made a CJ determination that a particular item was subject to the jurisdiction of the ITAR and that item remains in the revised USML, the item would remain subject to the jurisdiction of the ITAR.
• Section 738.2(d)(2)(ii)—Adds a reference to STA paragraphs in some 600 series ECCNs that clarify STA eligibility regarding those ECCNs.
• Section 740.2—Republishes proposed new paragraph (a)(13) from the July 15 proposed rule with changes to make License Exception STA eligible for exports, reexports, and in-country transfers of items that would be used in the production of items for governments
• Section 740.11—Amends License Exception GOV to add references to Supplement No. 4 to part 740 and partially restates the prohibition on using provisions of License Exception GOV to export or reexport certain technology and software listed in that supplement, other than exports and reexports to personnel and agencies of the U.S. Government.
• Section 740.20—Amends License Exception STA to refer to Supp. No. 4 to part 740 and partially restate the prohibition on using license exception STA to export, reexport or transfer (in-country) certain technology and software listed in that supplement. Republishing a “Note to paragraph (c)(1)” from the July 15 proposed rule with additional text to make License Exception STA eligible for exports, reexports and in-country transfers of items that would be for or used for the production or development of items for governments of countries listed in 740.20(c)(1), or for the United States Government or any person in the United States.
• Supplement No. 4 to part 740—Prohibits using License Exception STA or provisions of License Exception GOV other than those authorizing exports and reexports to personnel and agencies of the U.S. Government to export, reexport or transfer software and technology (other than “build-to-print technology”) for the development or production of specified ECCN 9A610.x items.
• Section 742.6—ECCNs 9A610, 9B610, 9C610, 9D610 and 9E610 are added to § 742.6(a)(1) to impose a RS Column 1 license requirement and licensing policy. Section 742.6(b)(1) would be amended to apply a general denial policy for applications to export or reexport “600 series” to destinations that are subject to a United States arms embargo and to export items specially designed for or required for F-14 aircraft to any destination.
• Section 770.2—Removes paragraph (i)—Interpretation 9: Civil aircraft and civil aircraft equipment.
• Section 772.1—Adds a definition of “build-to-print technology.”
• Supplement No. 1 to part 774—Adds ECCNs 9A610, 9B610, 9C610, 9D610 and 9E610. Replaces existing text of ECCNs 9A018, 9D018 and 9E018 with cross-references to ECCNs 0A606, 0D606 and 0E606 for items related to ground vehicles that have been moved to those ECCNs and with references to new ECCNs 9A610, 9D610 and 9E610 for all other items (
BIS seeks comments on this proposed rule. BIS will consider all comments received on or before December 22, 2011. All comments (including any personally identifying information or information for which a claim of confidentially is asserted either in those comments or their transmittal emails) will be made available for public inspection and copying. Parties who wish to comment anonymously may do so by submitting their comments via Regulations.gov, leaving the fields that would identify the commenter blank and including no identifying information in the comment itself.
1. Executive Orders 13563 and 12866 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distribute impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule has been designated a “significant regulatory action,” although not economically significant, under section 3(f) of Executive Order 12866. Accordingly, the rule has been reviewed by the Office of Management and Budget (OMB).
2. Notwithstanding any other provision of law, no person is required to respond to, nor is subject to a penalty for failure to comply with, a collection of information, subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
As stated in the proposed rule published at 76 FR 41958 (July 15, 2011), BIS believes that the combined effect of all rules to be published adding items to EAR that would be removed from the ITAR as part of the administration's Export Control Reform Initiative would increase the number of license applications to be submitted by approximately 16,000 annually resulting in an increase in burden hours of 5,067 (16,000 transactions at 17 minutes each) under control number 0694-0088.
Some items formerly on the USML would become eligible for License Exception STA under this rule. Other such items may become eligible for License Exception STA upon approval of a request submitted in conjunction with a license application. As stated in the July 15 proposed rule, BIS believes that the increased use of License Exception STA resulting from the combined effect of all rules to be published adding items to EAR that would be removed from the ITAR as part of the administration's Export Control Reform Initiative would increase the burden associated with control number 0694-0137 by about 23,858 hours (20,450 transactions @ 1 hour and 10 minutes each).
BIS expects that this increase in burden would be more than offset by a reduction in burden hours associated with approved collections related to the ITAR. This proposed rule addresses controls on military aircraft and related parts, components, production equipment, materials, software, and technology. The largest impact of the proposed rule would be with respect to exporters of parts and components because, under the proposed rule, most U.S. and foreign military aircraft currently in service would continue to be subject to the ITAR. Because, with few exceptions, the ITAR allows exemptions from license requirements only for exports to Canada, most exports to integrators for U.S government equipment and most exports of routine maintenance parts and components for our NATO and other close allies require State Department authorization. In addition, the exports necessary to produce parts and components for defense articles in the inventories of the United States and its NATO and other close allies require State Department authorizations. Under the EAR, as proposed, a small number of low level parts would not require a license to most destinations. Most other parts, components, accessories, and attachments would become eligible for export to NATO and other close allies under License Exception STA. Use of License Exception STA imposes a paperwork and compliance burden because, for example, exporters must furnish information about the item being exported to the consignee and obtain from the consignee an acknowledgement and commitment to comply with the EAR. It is, however, the Administration's understanding that complying with the requirements of STA is likely to be less burdensome
Even in situations in which a license would be required under the EAR, the burden is likely to be reduced compared to the license requirement of the ITAR. In particular, license applications for exports of technology controlled by ECCN 9E610 are likely to be less complex and burdensome than the authorizations required to export ITAR-controlled technology,
3. This rule does not contain policies with Federalism implications as that term is defined under E.O. 13132.
4. The Regulatory Flexibility Act (RFA), as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 U.S.C. 601
The Bureau of Industry and Security (BIS) does not collect data on the size of entities that apply for and are issued export licenses. Although BIS is unable to estimate the exact number of small entities that would be affected by this rule, it acknowledges that this rule would affect some unknown number.
This proposed rule is part of the Administration's Export Control Reform Initiative. Under that initiative, the United States Munitions List (22 CFR part 121) (USML) would be revised to be a “positive” list,
Changing the jurisdictional status of Category VIII items would reduce the burden on small entities (and other entities as well) through:
In addition, parts and components controlled under the ITAR remain under ITAR control when incorporated into foreign-made items, regardless of the significance or insignificance of the item, discouraging foreign buyers from incorporating such U.S. content. The availability of
Twenty-five types of parts and components, identified in ECCN 9A610.y, would be designated immediately as parts and components that, even if specially designed for a military use, have little or no military significance. These parts and components, which under the ITAR require a license to nearly all destinations, would, under the EAR, require a license to only five destinations and, if destined for a military end use, the People's Republic of China.
Many exports and reexports of the Category VIII articles that would be placed on the CCL by this rule, particularly parts and components, would become eligible for license exceptions that apply to shipments to United States Government agencies, shipments valued at less than $1,500, parts and components being exported for use as replacement parts, temporary exports, and License Exception Strategic Trade Authorization (STA), reducing the number of licenses that exporters of these items would need. License Exceptions under the EAR would allow suppliers to send routine replacement parts and low level parts to NATO and other close allies and export control regime partners for use by those governments and for use by contractors building equipment for those governments or for the United States government without having to obtain export licenses. Under License Exception STA, the exporter would need to furnish information about the item being exported to the consignee and obtain a statement from the consignee that, among other things, would commit the consignee to comply with the EAR and other applicable U.S. laws. Because such statements and obligations can apply to an unlimited number of transactions and have no expiration date, they would impose a net reduction in burden on transactions that the government routinely approves through the license application process that the License Exception STA statements would replace.
Even for exports and reexports in which a license would be required, the process would be simpler and less costly under the EAR. When a USML Category VIII article is moved to the CCL, the number of destinations for which a license is required would
Under the USML licensing procedure, an applicant must include a purchase order or contract with its application. There is no such requirement under the CCL licensing procedure. This difference gives the CCL applicant at least two advantages. First, the applicant has a way of determining whether the U.S. government will authorize the transaction before it enters into potentially lengthy, complex and expensive sales presentations or contract negotiations. Under the USML procedure, the applicant will need to caveat all sales presentations with a reference to the need for government approval and is more likely to have to engage in substantial effort and expense only to find that the government will reject the application. Second, a CCL license applicant need not limit its application to the quantity or value of one purchase order or contract. It may apply for a license to cover all of its expected exports or reexports to a particular consignee over the life of a license (normally two years, but may be longer if circumstances warrant a longer period), reducing the total number of licenses for which the applicant must apply.
In addition, many applicants exporting or reexporting items that this rule would transfer from the USML to the CCL would realize cost savings through the elimination of some or all registration fees currently assessed under the USML's licensing procedure. Currently, USML applicants must pay to use the USML licensing procedure even if they never actually are authorized to export. Registration fees for manufacturers and exporters of articles on the USML start at $2,500 per year, increase to $2,750 for organizations applying for one to ten licenses per year and further increases to $2,750 plus $250 per license application (subject to a maximum of three percent of total application value) for those who need to apply for more than ten licenses per year. There are no registration or application processing fees for applications to export items listed on the CCL. Once the Category VIII items that are the subject to this rulemaking are moved from the USML to the CCL, entities currently applying for licenses from the Department of State would find their registration fees reduced if the number of USML licenses those entities need declines. If an entity's entire product line is moved to the CCL, then its ITAR registration and registration fee requirement would be eliminated.
For items currently on the CCL that would be moved from existing ECCNs to the new 600 series, license exception availability would be narrowed somewhat and the applicable
BIS is unable to determine the precise number of small entities that would be affected by this rule. Based on the facts and conclusions set forth above, BIS believes that any burdens imposed by this rule would be offset by the reduction in the number of items that would require a license, increased opportunities for use of license exceptions for exports to certain countries, simpler export license applications, reduced or eliminated registration fees and application of a
Exports.
Administrative practice and procedure, Exports, Reporting and recordkeeping requirements.
Exports, Terrorism.
Exports, Reporting and recordkeeping requirements.
For the reasons stated in the preamble, the Export Administration Regulations (15 CFR parts 730-774) are proposed to be amended as follows:
1. The authority citations paragraph for part 738 continues to read as follows:
50 U.S.C. app. 2401
2. Section 738.2(d)(2)(ii) is amended by adding a sentence immediately following the fifth sentence that reads as follows:
(d) * * *
(2) * * *
(ii) * * * In some “600 series” ECCNs, the STA license exception paragraph or a note to the License Exceptions section contains additional information about License Exception STA applicability to that ECCN.
3. The authority citations paragraph for part 740 continues to read as follows:
50 U.S.C. app. 2401
4. Section 740.2 is amended by adding a paragraph (a)(13) to read as follows:
(a) * * *
(13) Items classified under the “600 series” are not eligible for any license exception, except as described in paragraph (a)(13)(i), (ii), or (iii) of this section. For MT-controlled items, including “600 series” ECCNs, see the restrictions on all license exceptions in paragraph (a)(5) of this section. Under the restriction in paragraph (a)(5), no such “600 series” ECCNs are eligible for license exceptions. You may not use a license exception to authorize a MT-controlled item in the “600 series.”
(i) “600 series” “end items” may only be authorized by the following license exceptions:
(A) License Exception LVS (§ 740.3);
(B) License Exception TMP (§ 740.9);
(C) License Exception RPL (§ 740.10);
(D) License Exception GOV (§ 740.11(b)(2)(ii) or (b)(2)(iii)). License Exception GOV paragraph (b)(2)(iii) is only available for countries listed in § 740.20(c)(1); or
(E) License Exception STA under § 740.20(c)(1), provided License
Exception STA has been identified by BIS in writing or published as an eligible license exception for the particular “600 series” “end item” in response to a License Exception STA eligibility request in accordance with § 740.20(g) of the EAR and the ultimate end use for the end item is by a government in one of the countries listed in § 740.20(c)(1) or by the United States Government, or is for the “development” or “production” of an item for use by one of those governments or a person in the United States. Except for MT-controlled items, exports and reexports to non-governmental end users in a country listed in § 740.20(c)(1) are authorized through License Exception STA under § 740.20(c)(1) so long as the item at issue at the time of export, reexport, or transfer (in-country) is ultimately destined for end use by the armed forces, police, paramilitary, law enforcement, customs, correctional, fire, and search and rescue agencies of a government of one of the § 740.20(c)(1) countries or by the United States Government, or is for the “development” or “production” of an item for use by one of those agencies of those governments or a person in the United States.
(ii) “600 series” “parts,” “components,” “accessories” and “attachments,” or any item classified in a “600 series” product group B or C ECCN may only be authorized by the following license exceptions:
(A) License Exception LVS (§ 740.3);
(B) License Exception TMP (§ 740.9);
(C) License Exception RPL (§ 740.10);
(D) License Exception GOV (§ 740.11(b)(2)(ii) or (b)(2)(iii)). License Exception GOV paragraph (b)(2)(iii) is only available for countries listed in § 740.20(c)(1) ; or
(E) License Exception STA under § 740.20(c)(1), provided the ultimate end use for the “parts,” “components,” “accessories and attachments” or for any item classified in a “600 series” product group B or C ECCN is by a government in one of the countries listed in § 740.20(c)(1) or by the United States Government, or is for the “development” or “production” of an item for use by one of those governments or a person in the United States. Exports and reexports to non-governmental end users in a country listed in § 740.20(c)(1) are authorized through License Exception STA under § 740.20(c)(1) so long as the item at issue at the time of export, reexport, or transfer (in-country) is ultimately destined for end use by the armed forces, police, paramilitary, law enforcement, customs, correctional, fire, and search and rescue agencies of a government of one of the § 740.20(c)(1) countries or by the United States Government, or is for the “development” or “production” of an item for use by one of those agencies of those governments or a person in the United States. This paragraph does not alter the limitations on the use of License Exception STA contained in § 740.20(b)(2).
(iii) “600 series” “software” and “technology” may only be authorized by the following license exceptions:
(A) License Exception GOV (§ 740.11(b)(2)(ii) or (b)(2)(iii)). License Exception GOV paragraph (b)(2)(iii) is only available for countries listed in § 740.20(c)(1);
(B) License Exception TSU (§ 740.13(a) or (b)); or
(C) License Exception STA (§ 740.20(c)(1)), provided the ultimate end use for the “software” or “technology” is by a government in one of the countries listed in § 740.20(c)(1) or by the United States Government, or is for the “development” or “production” of an item for use by one of those governments or a person in the United States. Exports and reexports to non-governmental end users in a country listed in § 740.20(c)(1) are authorized through License Exception STA under § 740.20(c)(1) so long as the item at issue at the time of export, reexport or transfer (in-country) is ultimately destined for end use by the armed forces, police, paramilitary, law enforcement, customs, correctional, fire, and search and rescue agencies of a government of one of the § 740.20(c)(1) countries or by the United States Government, or is for the “development” or “production” of an item for use by one of those agencies of those governments or a person in the United States. This paragraph does not alter the limitations on the use of License Exception STA contained in § 740.20(b)(2).
5. Section 740.11 is amended by:
a. adding a new paragraph (a)(5),
b. revising paragraph (b)(2)(iii)(A),
c. revising paragraph (b)(2)(iv)(A),
d. revising paragraphs (c)(2)(ii) and (c)(2)(iii) and adding a new paragraph (c)(2)(iv), and
e. adding a note to paragraph (d)(1), to read as follows:
(a) * * *
(5) This paragraph (a) does not authorize exports or reexports of technology prohibited by Supplement No. 4 to this part.
(b) * * *
(2) * * *
(iii)(A)
(iv) (A)
(c) * * *
(2) * * *
(ii) Inspection samples collected in the U.S. pursuant to the Convention;
(iii) Commodities and software that are no longer in OPCW official use (such items must be disposed of in accordance with the EAR); and
(iv) Technology prohibited by Supplement No. 4 to this part.
(d) * * *
(1) * * *
This paragraph (d) does not authorize any export or reexport prohibited by Supplement No. 4 to this part.
6. Section 740.20 is amended by adding a paragraph (b)(3) and a note to paragraph (c)(1) to read as follows:
(b) * * *
(3) License Exception STA may not be used to export, reexport, or transfer (in-country) any technology prohibited by Supplement No. 4 to this part.
(c) * * *
License Exception STA under § 740.20(c)(1) may be used to authorize the export, reexport, or transfer (in-country) of “600 series” items, provided the ultimate end use for such items is by, or for the “production” or “development” of an item to be used by, the armed forces, police, paramilitary, law enforcement, customs, correctional, fire, and search and rescue agencies of one of the countries listed in § 740.20(c)(1) or the United States Government or a person in the United States. For “600 series” end items, see paragraph (g) of this section. This means that exports and reexports to non-governmental end users in a country listed in § 740.20(c)(1) are authorized through License Exception STA under § 740.20(c)(1) so long as the item at issue at the time of export, reexport, or transfer (in-country) is ultimately destined for either (i) end use by the armed forces, police, paramilitary, law enforcement, customs, correctional, fire, and search and rescue agencies of a government of one of the § 740.20(c)(1) countries or the United States Government; or (ii) the “production” or “development” of an item for ultimate end use by such a government entity in one of the § 740.20(c)(1) countries or the United States Government or a person in the United States. This provision does not alter the limitations on the use of License Exception STA contained in § 740.20(b)(2).
7. Part 740 is amended by adding a Supplement No. 4 to read as follows:
This supplement lists certain parts and components that are classified under the .x paragraphs of “600 series” ECCNs and imposes limitations on the use of License Exceptions GOV (§ 740.11 of the EAR) and STA (§ 740.20 of the EAR) with respect to exports, reexports, and transfers (in-country) of “development” and “production” software or technology related to those parts and components. The restrictions and the parts and components are listed by Commerce Control List category.
(a)
(1) Static structural members;
(2) Exterior skins, removable fairings, non-removable fairings, radomes, access doors and panels, and in-flight opening doors;
(3) Control surfaces, leading edges, trailing edges, and leading edge flap seals;
(4) Leading edge flap actuation system commodities (
(5) Engine inlets and ducting;
(6) Fatigue life monitoring systems “specially designed” to relate actual usage to the analytical or design spectrum and to compute amount of fatigue life “specially designed” for aircraft controlled by either USML subcategory VIII(a) or ECCN 9A610.a, except for Military Commercial Derivative Aircraft;
(7) Landing gear, and “parts” and “components” “specially designed” therefor, “specially designed” for use in aircraft weighing more than 21,000 pounds controlled by either USML subcategory VIII(a) or ECCN 9A610.a, except for Military Commercial Derivative Aircraft;
(8) Conformal fuel tanks and “parts” and “components” “specially designed” therefor;
(9) Electrical “equipment,” “parts,” and “components” “specially designed” for electro-magnetic interference (EMI)—
(10) HOTAS (Hand-on Throttle and Stick) controls, HOCAS (Hands on Collective and Stick), Active Inceptor Systems (
(11) Integrated Vehicle Health Management Systems (IVHMS), Condition Based Maintenance (CBM) Systems, and Flight Data Monitoring (FDM) systems;
(12) Equipment “specially designed” for system prognostic and health management of aircraft;
(13) Active Vibration Control Systems;
(14) Fuel Cells “specially designed” for use in UAV or Lighter-than-Air-Vehicles; or
(15) Self-sealing fuel bladders “specially designed” to pass a .50 caliber or larger gunfire test (MIL-DTL-5578, MIL-DTL-27422).
(b) RESERVED
8. The authority citations paragraph for part 742 continues to read as follows:
50 U.S.C. app. 2401
9. Section 742.6 is amended by revising paragraph (a)(1) and by adding a sentence immediately following the first sentence of paragraph (b)(1) to read as follows:
(a) * * *
(1)
* * *
(b)
* * *
10. The authority citation paragraph for part 774 continues to read as follows:
50 U.S.C. app. 2401
11. Section 770.2 is amended by removing and reserving paragraph (i).
12. The authority citation paragraph for part 772 continues to read as follows:
50 U.S.C. app. 2401
13. Section 772.1 is amended by adding in alphabetical order a definition for “build-to-print technology” to read as follows:
* * *
“Build-to-Print technology” is “production” “technology” that is sufficient for an inherently capable end user to produce or repair a commodity from engineering drawings without (i) Revealing “development” “technology,” such as design methodology, engineering analysis, detailed manufacturing or process know-how; (ii) revealing the production engineering or process improvement aspect of the “technology;” or (iii) requiring assistance from the provider of the technology to produce or repair the commodity. Acceptance, test, or inspection criteria pertaining to the commodity at issue is included within the scope of “build-to-print technology” only if it is the minimum necessary to verify that the commodity is acceptable.
* * *
14. The authority citation paragraph for part 774 continues to read as follows:
50 U.S.C. app. 2401
15. In Supplement No. 1 to part 774, Category 9, revise Export Control Classification Number 9A018 to read as follows:
No items currently are in this ECCN. See ECCN 0A606.b.4 for the ground transport vehicles and unarmed all-wheel drive vehicles that immediately prior to [Insert effective date of final rule that moves these vehicles] were classified under 9A018.b. See ECCN 9A610 for the aircraft, aircraft engines, refuelers, ground equipment, parachute, harnesses, instrument flight trainers and parts and accessories and attachments for the forgoing that immediately prior to [Insert effective date of final rule that moves these items] were classified under 9A018.a, .c, .d, .e, or .f.
16. In Supplement No. 1 to part 774, Category 9, add a new Export Control Classification Number 9A610 between Export Control Classification Numbers 9A120 and 9A980 to read as follows:
a. “Military Aircraft” “specially designed” for a military use that are not enumerated in USML paragraph VIII(a).
For purposes of paragraph .a the term “military aircraft” includes the following types of aircraft to the extent they were “specially designed” for a military use and are not enumerated in USML paragraph VIII(a): trainer aircraft; cargo aircraft; utility fixed wing aircraft; military helicopters; observation aircraft; military non-expansive balloons and other lighter than air aircraft and unarmed military aircraft, regardless of origin or designation, manufactured before 1956 and unmodified since manufacture. Aircraft with modifications made to incorporate safety of flight features or other FAA or NTSB modifications such as transponders and air data recorders are “unmodified” for the purposes of this paragraph .a.
b. [Reserved].
c. [Reserved].
d. [Reserved].
e. [Reserved].
f. Pressure refuelers, pressure refueling “equipment,” “equipment” “specially designed” to facilitate operations in confined areas, and ground equipment “specially designed” for aircraft controlled by either USML paragraph VIII(a) or ECCN 9A610.a.
g. Military crash helmets and protective masks, pressurized breathing equipment and partial pressure suits for use in aircraft controlled by either USML paragraph VIII(a) or ECCN 9A610.a, anti-g suits, liquid oxygen converters “specially designed” for aircraft controlled by either USML subcategory VIII(a) or ECCN 9A610.a, and catapults and cartridge actuated devices for emergency escape of personnel from aircraft controlled by either USML subcategory VIII(a) or ECCN 9A610.a.
h. Canopies, harnesses, platforms, electronic release mechanisms “specially designed” for use with aircraft controlled by either USML paragraph VIII(a) or ECCN 9A610.a, parachutes and paragliders “specially designed” or modified for military use, and “equipment” “designed” or modified for military high altitude parachutists, such as suits, special helmets, breathing systems, and navigation equipment.
i. Automatic piloting systems for parachuted loads; equipment “specially designed” for military use for controlled opening jumps at any height, including oxygen equipment.
j. Ground effect machines (GEMS), including surface effect machines and air cushion vehicles, “specially designed” for use by a military.
k. Military aircraft instrument flight trainers that are not “specially designed” to simulate combat. (See USML Cat IX for controls on such trainers that are “specially designed” to simulate combat).
l. Apparatus and devices designed or modified for the handling, control, activation or launching of UAVs or drones controlled by either USML paragraph VIII(a) or ECCN 9A610.a, and capable of a range equal to or greater than 300 km.
m. Radar altimeters designed or modified for use in UAVs or drones controlled by either USML paragraph VIII(a) or ECCN 9A610.a., and capable of delivering at least 500 kilograms payload to a range of at least 300 km.
n. Hydraulic, mechanical, electro-optical, or electromechanical flight control systems (including fly-by-wire systems) and attitude control equipment designed or modified for UAVs or drones controlled by either USML paragraph VIII(a) or ECCN 9A610.a., and capable of delivering at least 500 kilograms payload to a range of at least 300 km.
o. through w. [Reserved]
x. “Parts,” “components,” “accessories and attachments” that are “specially designed” for a commodity subject to control in paragraphs .a through .k of this ECCN or a defense article in USML Category VIII and not elsewhere specified on the USML or the CCL.
Forgings, castings, and other unfinished products, such as extrusions and machined bodies, that have reached a stage in manufacturing where they are clearly identifiable by material composition, geometry, or function as commodities controlled by ECCN 9A610.x are controlled by ECCN 9A610.x.
“Parts,” “components,” “accessories and attachments” specified in USML subcategory VIII(f) or VIII(h) are subject to the controls of that paragraph. “Parts,” “components,” “accessories and attachments” specified in ECCN 9A610.y are subject to the controls of that paragraph.
y. Specific “parts,” “components,” “accessories and attachments” “specially designed” for a commodity subject to control in this ECCN or a defense article in USML Category VIII and not elsewhere specified in the USML or the CCL, and other aircraft commodities “specially designed” for a military use, as follows:
y.1. Aircraft tires;
y.2. Analog cockpit gauges and indicators;
y.3. Audio selector panels;
y.4. Check valves for hydraulic and pneumatic systems;
y.5. Crew rest equipment;
y.6. Ejection seat mounted survival aids;
y.7. Energy dissipating pads for cargo (for pads made from paper or cardboard);
y.8. Filters and filter assemblies for hydraulic, oil and fuel systems;
y.9. Galleys;
y.10. Hydraulic and fuel hoses, straight and unbent lines, fittings, clips, couplings, nutplates, and brackets;
y.11. Lavatories;
y.12. Life rafts;
y.13. Magnetic compass, magnetic azimuth detector;
y.14. Medical litter provisions;
y.15. Mirrors, cockpit;
y.16. Passenger seats including palletized seats;
y.17. Potable water storage systems;
y.18. Public address (PA) systems;
y.19. Steel brake wear pads (does not include sintered mix or carbon/carbon materials)
y.20. Underwater beacons;
y.21. Urine collection bags/pads/cups/pumps;
y.22. Windshield washer and wiper systems;
y.23. Filtered and unfiltered cockpit panel knobs, indicators, switches, buttons, and dials;
y.24. Lead-acid and Nickel-Cadmium batteries; and
y.25. Propellers, propeller systems, and propeller blades used with reciprocating engines.
y.26. to y.98. [RESERVED]
y.99. Commodities that would otherwise be controlled elsewhere in this entry but that (i) Have been determined to be subject to the EAR in a commodity jurisdiction determination issued by the U.S. Department of State and (ii) are not otherwise identified elsewhere on the CCL.
17. In Supplement No. 1 to part 774, Category 9, add a new Export Control Classification Number 9B610 between Export Control Classification Numbers 9B117 and 9B990 to read as follows:
a. Test, inspection, and production “equipment” “specially designed” for the “production” or “development” of commodities enumerated in ECCN 9A610 (except 9A610.y) or USML Category VIII, and “parts,” “components,” “accessories and attachments” “specially designed” therefor.
b. Environmental test facilities designed or modified for the certification, qualification, or testing of commodities enumerated in ECCN 9A610 (except for 9A610.y) or USML Category VIII and “parts,” “components,” “accessories and attachments” “specially designed” therefor.
c. “Production facilities” “specially designed” for UAVs or drones that are (i) controlled by either USML paragraph VIII(a) or ECCN 9A610.a and (ii) capable of a range equal to or greater than 300 km.
d. through x. [RESERVED]
y. Specific test, inspection, and production “equipment” “specially designed” for the “production” or “development” of commodities enumerated in ECCN 9A610 (except for 9A610.y) or USML Category VIII and “parts,” “components,” “accessories and attachments” “specially designed” therefor, as follows:
y.1. through y.98 [RESERVED]
y.99. Commodities that would otherwise be controlled elsewhere in this entry but that (i) have been determined to be subject to the EAR in a commodity jurisdiction determination issued by the U.S. Department of State and (ii) are not otherwise identified elsewhere on the CCL.
18. In Supplement No. 1 to part 774, Category 9, add a new Export Control Classification Number 9B610 between Export Control Classification Numbers 9C110 and the product group header that reads “D. Software” to read as follows:
a. Materials “specially designed” for commodities enumerated in ECCN 9A610 (except 9A610.y) not elsewhere specified in the USML or the CCL.
Materials enumerated elsewhere in the CCL, such as in a CCL Category 1 ECCN, are controlled pursuant to controls of the applicable ECCN.
Materials “specially designed” for an aircraft enumerated in USML Category VIII and for an aircraft enumerated in ECCN 9A610 are subject to the controls of this ECCN.
b. to .x. [RESERVED]
y. Specific materials “specially designed” for commodities enumerated in ECCN 9A610 (except for 9A610.y), as follows:
y.1. through y.98 [RESERVED]
y.99. Materials that would otherwise be controlled elsewhere in this entry but that (i) have been determined to be subject to the EAR in a commodity jurisdiction determination issued by the U.S. Department of State and (ii) are not otherwise identified elsewhere on the CCL.
19. In Supplement No. 1, Category 9, revise Export Control Classification Number 9D018 to read as follows:
No items currently are in this ECCN. See ECCN [Insert appropriate Category 0 ECCN] for “software” related to the ground transport vehicles and unarmed all-wheel drive vehicles that immediately prior to [Insert effective date of final rule that moves these vehicles] were classified under 9A018.b. See ECCN 9D610 for “software” related to the aircraft, refuelers, ground equipment, parachute, harnesses, instrument flight trainers, and parts and accessories and attachments for the forgoing that immediately prior to [Insert effective date of final rule that moves these items] were classified under 9A018.a, .c, .d, .e, or .f.
20. In Supplement No. 1, Category 9, add a new Export Control Classification Number 9D610 between Export Control Classification Numbers 9D105 and 9D990 to read as follows:
Supplement No. 4 to part 740 precludes use of License Exceptions GOV (other than those provisions authorizing exports and reexports to personnel and agencies for the U.S. government) and STA with respect to “development” and “production” “software”
a. “Software” (other than software controlled in paragraph .y of this entry) “specially designed” for the “development,” “production,” operation or maintenance of commodities controlled by ECCN 9A610 (except 9A610.l, .m, .n, or .y), ECCN 9B610 (except 9B610.c or .y), or ECCN 9C610 (except 9C610.y).
b. “Software” (other than software controlled in paragraph .y of this entry) “specially designed” for the “development,” “production,” operation or maintenance of commodities controlled by ECCN 9A610.l, .m, or .n; or ECCN 9B610.c.
c. Software” (other than software controlled in paragraph .y of this entry) “specially designed” for the “development,” “production,” operation, installation, maintenance, repair, overhauling or refurbishing of commodities controlled by ECCN 9A610.l, .m, or .n; or ECCN 9B610.c
d. to x. [RESERVED]
y. Specific “software” “specially designed” for the “production,” “development,” or operation or maintenance of commodities enumerated in ECCN 9A610, 9B610, or 9C610, as follows:
y.1. Specific “software” “specially designed” for the “production,” “development,” operation or maintenance of commodities enumerated in ECCN 9A610.y, 9B610.y, or 9C610.y.
y.2 through y.98 [RESERVED]
y.99. Software that would otherwise be controlled elsewhere in this entry but that (i) has been determined to be subject to the EAR in a commodity jurisdiction determination issued by the U.S. Department of State and (ii) is not otherwise identified elsewhere on the CCL.
21. In Supplement No. 1, Category 9, revise Export Control Classification Number 9E018 to read as follows:
No items currently are in this ECCN. See ECCN 0E606 for technology related to the ground transport vehicles and unarmed all-wheel drive vehicles that immediately prior to [Insert effective date of final rule that moves these vehicles] were classified under 9A018.b. See ECCN 9E610 for technology related to the aircraft, refuelers, ground equipment, parachute, harnesses, instrument flight trainers and parts and accessories and attachments for the forgoing that immediately prior to [Insert effective date of final rule that moves these items] were classified under 9A018.a, .c, .d, .e, or .f.
22. In Supplement No. 1, Category 9, add a new Export Control Classification Number 9E610 between Export Control Classification Numbers 9E102 and 9E990 to read as follows:
Supplement No. 4 to part 740 limits use of License Exceptions GOV (other than those provisions authorizing exports and reexports to personnel and agencies for the US government) and STA with respect to “development” and “production” “technology” for specific types of “parts” and “components” controlled by ECCN 9A610.x. and identified in the supplement other than “build-to-print technology.”
a. “Technology” (other than technology controlled by paragraph .y of this entry) “required” for the “development,” “production,” operation, installation, maintenance, repair, overhaul, or refurbishing of commodities or software controlled by ECCN 9A610, 9B610, 9C610 or 9D610.
b. through x. [RESERVED]
y. Specific “technology” “required” for the “production,” “development,” operation, installation, maintenance, repair, or overhaul of commodities enumerated in ECCN 9A610, 9B610, 9C610, or 9D610, as follows:
y.1. Specific “technology” “required” for the “production,” “development,” operation, installation, maintenance, repair or overhaul of commodities enumerated in ECCN 9A610.y, 9B610.y, 9C610.y, or 9D610.y.
y.2. through y.98 [RESERVED]
y.99. “Technology” that would otherwise be controlled elsewhere in this entry but that (i) has been determined to be subject to the EAR in a commodity jurisdiction determination issued by the U.S. Department of State and (ii) is not otherwise identified elsewhere on the CCL.
Federal Trade Commission (“FTC” or “Commission”).
Advance notice of proposed rulemaking; request for public comment.
The Commission systematically reviews all its rules and guides to ensure that they continue to achieve their intended purpose without unduly burdening commerce. As part of this systematic review, the Commission requests public comment on the overall
Comments must be received on or before January 3, 2012.
Interested parties may file a comment online or on paper, by following the instructions in the Request for Comment part of the
Robert M. Frisby, Attorney, (202) 326-2098, or Edwin Rodriguez, Attorney, (202) 326-3147, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue NW., Washington, DC 20580.
The Textile Fiber Products Identification Act (“Textile Act”), 15 U.S.C. 70-70k, requires marketers to attach a label to each covered textile product disclosing: (1) The generic names and percentages by weight of the constituent fibers in the product; (2) the name under which the manufacturer or other responsible company does business or, in lieu thereof, the registered identification number (“RN number”) of such company; and (3) the name of the country where the product was processed or manufactured. The Textile Act also contains advertising and record-keeping provisions.
Section 7(c) of the Textile Act authorizes the Commission to “make such rules and regulations, including the establishment of generic names of manufactured fibers * * * as may be necessary and proper for administration and enforcement.” 15 U.S.C. 70e(c). Pursuant to the Textile Act, the Commission promulgated the Rules and Regulations Under the Textile Fiber Products Identification Act (“Textile Rules” or “Rules”), 16 CFR Part 303.
The Commission completed its last review of the Rules in 1998, and modified the Rules nine times during the period 1998 to 2009. Specifically, as a result of the 1998 review, the Commission, among other things, streamlined the labeling requirements and approved additional generic fiber names through the incorporation of ISO 2076: 1998, “Textiles—Man-made fibres—Generic Names” in Section 303.7.
Since 1992, the Commission's regulatory review program has systematically reviewed Commission regulations to ensure that they continue to achieve their intended goals without unduly burdening commerce. The Commission schedules its regulations and guides for review on a ten-year cycle;
When the Commission reviews a rule or guide, it publishes a notice in the
As part of this process, the Commission seeks comment on several specific issues stemming from informal inquiries received by Commission staff. These inquiries suggest that clarification or modification of certain Rule provisions, as well as the Commission's consumer and business education materials explaining them, could improve industry and consumer understanding of the requirements of the Textile Act and the Rules or otherwise improve the Rules. Such improvements could foster greater compliance with the Rules and help the FTC implement the Textile Act more effectively. These issues are explained below.
First, the International Standards Organization developed ISO 2076: 2010, an updated version of ISO 2076: 1999(E), “Textiles—Man-made fibres—Generic Names,” referenced in Section 303.7. This development may warrant modifying Section 303.7 to incorporate the updated version of ISO 2076.
Second, inquiries regarding the disclosure requirements for products containing elastic material and trimmings suggest a possible need to clarify Sections 303.10 and 303.12 of the Rules.
Third, inquiries regarding the disclosure of fiber content percentages in multiple languages also suggest a possible need to clarify the Rules. Section 303.4 requires label disclosures in English. Labels may include disclosures in other languages; however, Section 303.16(c) provides that such “non-required” information “shall not minimize, detract from, or conflict with required information and shall not be false, deceptive, or misleading.” Commission staff have received reports that some labels provide fiber content information in English plus other languages. The Commission seeks comment on the voluntary practice of disclosing required information in multiple languages. In particular, the Commission seeks comment on whether voluntary multilingual labeling practices cause consumer confusion, and if so, how to avoid such confusion while providing the benefits of disclosures in multiple languages.
Fourth, inquiries regarding the disclosure requirements applicable to written advertising, including Internet advertising,
Fifth, inquiries regarding whether the Textile Act and Rules apply to certain products suggest a possible need to clarify Section 303.45. That section excludes all textile fiber products from the operation of the Textile Act except for those products specifically listed as covered under the Rules.
Sixth, the Rules include a number of undefined textile-related terms. The Commission seeks comment on whether it needs to add or clarify any definitions.
Seventh, the Commission seeks comment on whether it needs to clarify or otherwise modify its consumer and business education materials addressing the Rules. It also seeks comment on whether it should continue to print paper copies of its consumer and business education materials.
In addition, the Commission seeks comment on the benefits and costs of the Textile Act requirement that businesses identify themselves on labels using either their names or identifiers issued by the FTC (
Finally, the Commission seeks comment on the extent to which retailers obtain guarantees and continuing guarantees. It also seeks comment on the costs of obtaining guarantees for textile products and whether changes in the extent and manner of importation indicate that the guarantee provisions of the Act and Rules should be modified.
The Commission solicits comments on the following specific questions related to the Textile Rules.
(1) Is there a continuing need for the Rules as currently promulgated? Why or why not?
(2) What benefits have the Rules provided to, or what significant costs have the Rules imposed on, consumers? Provide any evidence supporting your position.
(3) What modifications, if any, should the Commission make to the Rules to increase their benefits or reduce their costs to consumers?
(a) Provide any evidence supporting your proposed modifications.
(b) How would these modifications affect the costs and benefits of the Rules
(4) What impact have the Rules had in promoting the flow of truthful information to consumers and preventing the flow of deceptive information to consumers? Provide any evidence supporting your position.
(5) What benefits, if any, have the Rules provided to, or what significant costs, including costs of compliance, have the Rules imposed on businesses, particularly small businesses? Provide any evidence supporting your position.
(6) What modifications, if any, should be made to the Rules to increase their benefits or reduce their costs to businesses, particularly small businesses?
(a) Provide any evidence supporting your proposed modifications.
(b) How would these modifications affect the costs and benefits of the Rules for consumers and businesses, particularly small businesses?
(7) Provide any evidence concerning the degree of industry compliance with the Rules. Does this evidence indicate that the Rules should be modified? If so, why and how? If not, why not?
(8) Provide any evidence concerning whether any of the Rules' provisions are no longer necessary. Explain why these provisions are unnecessary.
(9) What potentially unfair or deceptive practices concerning textile labeling, not covered by the Rules, are occurring in the marketplace?
(a) Provide any evidence, such as empirical data, consumer perception studies, or consumer complaints, demonstrating the extent of such practices.
(b) Provide any evidence demonstrating whether such practices cause consumer injury.
(c) With reference to such practices, should the Rules be modified? If so, why and how? If not, why not?
(10) What modifications, if any, should be made to the Rules to account for current or impending changes in technology or economic conditions?
(a) Provide any evidence supporting the proposed modifications.
(b) How would these modifications affect the costs and benefits of the Rules for consumers and businesses, particularly small businesses?
(11) Do the Rules overlap or conflict with other Federal, state, or local laws or rules, such as those enforced by U.S. Customs and Border Protection? If so, how?
(a) Provide any evidence supporting your position.
(b) With reference to the asserted conflicts, should the Rules be modified? If so, why and how? If not, why not?
(c) Provide any evidence concerning whether the Rules have assisted in promoting national consistency with respect to textile labeling and advertising.
(12) Are there foreign or international laws, regulations, or standards with respect to textile labeling or advertising that the Commission should consider as it reviews the Rules? If so, what are they?
(a) Should the Rules be modified in order to harmonize with these international laws, regulations, or standards? If so, why and how? If not, why not?
(b) How would such harmonization affect the costs and benefits of the Rules for consumers and businesses, particularly small businesses?
(c) Provide any evidence supporting your position.
(13) Should the Commission modify Section 303.7 to address the development of ISO 2076: 2010, “Textiles—Man-made fibres—Generic names,” an updated version of ISO 2076: 1999(E), “Textiles—Man-made fibres—Generic Names,” referenced in Section 303.7? If so, why and how? If not, why not?
(a) Provide any evidence supporting your position.
(b) How would the modification affect the costs and benefits of the Rules for consumers and businesses, particularly small businesses?
(14) Should the Commission modify Section 303.1(n), 303.10, or 303.12 to clarify the disclosure requirements relating to products containing elastic material? If so, why and how? If not, why not?
(a) Provide any evidence supporting your position.
(b) How would these modifications affect the costs and benefits of the Rules for consumers and businesses, particularly small businesses?
(15) Should the Commission modify Section 303.12 to revise the description and list of examples of “trimmings”? If so, why and how? If not, why not?
(a) Provide any evidence supporting your position.
(b) How would these modifications affect the costs and benefits of the Rules for consumers and businesses, particularly small businesses?
(16) Should the Commission modify Section 303.16(c) or consider any additional measures regarding non-required information such as the voluntary use of multilingual labels? In particular, do multilingual labels pose the potential to confuse consumers and, if so, how could such confusion be avoided while providing the benefits of disclosures in multiple languages?
(a) Provide any evidence supporting your position.
(b) How would these modifications affect the costs and benefits of the Rules for consumers and businesses, particularly small businesses?
(17) Should the Commission modify Section 303.41 or 303.42 to clarify or otherwise revise the disclosure requirements applicable to written advertising, including Internet advertising? If so, why and how? If not, why not?
(a) Provide any evidence supporting your position.
(b) How would these modifications affect the costs and benefits of the Rules for consumers and businesses, particularly small businesses?
(18) Should the Commission modify Section 303.45 to clarify or otherwise revise the list of exclusions from the Textile Act and Rules? If so, why and how? If not, why not?
(a) Provide any evidence supporting your position.
(b) How would these modifications affect the costs and benefits of the Rules for consumers and businesses, particularly small businesses?
(19) Should the Commission modify the Rules to add or clarify definitions of terms set forth in the Rules? If so, why and how? If not, why not?
(a) Provide any evidence supporting your position.
(b) How would these modifications affect the costs and benefits of the Rules for consumers and businesses, particularly small businesses?
(20) Is our business compliance guidance and consumer education about the Rules useful? Can it be improved? If so, how?
(a) Should the Commission consider consumer education or other measures to help non-English-speaking consumers obtain the information that must be disclosed under the Textile Act and Rules?
(b) Should the Commission print copies of consumer education materials, or is a pdf at
(21) Regarding the Textile Act requirement in 15 U.S.C. 70b(b)(3) that businesses identify themselves on labels using either their names or identifiers issued by the FTC, what are the benefits and costs of allowing businesses to use alternative identifiers, such as numbers issued by other nations? Provide any evidence supporting your position.
(22) To what extent do retailers obtain valid separate or continuing guarantees that comply with the requirements of the Textile Act and Rules,
(a) Do retailers who obtain such guarantees obtain them for all, most, some, or few of the textile products they sell?
(b) Why do retailers decline to obtain such guarantees?
(c) Have changes in technology, such as the use of electronic documents, affected the ability of retailers to obtain valid separate or continuing guarantees? If so, why and how? If not, why not?
(d) Provide any evidence concerning the extent to which retailers obtain such guarantees and the reasons why retailers decline to obtain them.
(23) What proportion of textile products sold in the U.S. are imported? What proportion of imported products are imported directly by retailers? What proportion are imported by businesses located in the United States for resale or distribution to retailers? How have these proportions changed since the Textile Act and Rules became effective?
(a) Have changes in the extent or manner in which textile products are imported affected the ability of retailers to obtain valid separate or continuing guarantees? If so, does the ability of retailers to obtain such guarantees differ depending on whether the textile products are imported directly by retailers versus imported by businesses for resale or distribution to retailers?
(b) Provide any evidence concerning the costs of obtaining valid guarantees for imported textile products and the impact of such costs on the ability of retailers to obtain valid guarantees.
(c) Do changes in the extent or manner in which textile products are imported indicate that the Textile Act and Rules should be modified? If so, why and how? If not, why not?
You can file a comment online or on paper. For the Commission to consider your comment, we must receive it on or before January 3, 2012. Write “Textile Rules, 16 CFR Part 303, Project No. P948404” on your comment. Your comment—including your name and your state—will be placed on the public record of this proceeding, including, to the extent practicable, on the public Commission Web site, at
If you want the Commission to give your comment confidential treatment, you must file it in paper form, with a request for confidential treatment, and you must follow the procedure explained in FTC Rule 4.9(c), 16 CFR 4.9(c).
Postal mail addressed to the Commission is subject to delay due to heightened security screening. As a result, we encourage you to submit your comments online. To make sure that the Commission considers your online comment, you must file it at
If you file your comment on paper, write “Textile Rules, 16 CFR Part 303, Project No. P948404” on your comment and on the envelope and mail or deliver it to the following address: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex G), 600 Pennsylvania Avenue NW., Washington, DC 20580. If possible, submit your paper comment to the Commission by courier or overnight service.
Visit the Commission Web site at
Advertising, Labeling, Recordkeeping, Textile fiber products.
15 U.S.C. 70
By direction of the Commission.
Department of State.
Proposed rule.
As part of the President's Export Control Reform effort, the Department of State proposes to amend the International Traffic in Arms Regulations (ITAR) to revise Category VIII (aircraft and related articles) of the U.S. Munitions List (USML) to describe more precisely the military aircraft and related defense articles warranting control on the USML.
The Department of State will accept comments on this proposed rule until December 22, 2011.
Interested parties may submit comments within 45 days of the date of publication by one of the following methods:
• E-mail:
• Internet: At
The Directorate of Defense Trade Controls (DDTC), U.S. Department of State, administers the International Traffic in Arms Regulations (ITAR) (22 CFR parts 120-130). The items subject to the jurisdiction of the ITAR, i.e., “defense articles,” are identified on the ITAR's U.S. Munitions List (USML) (22 CFR 121.1). With few exceptions, items not subject to the export control jurisdiction of the ITAR are subject to the jurisdiction of the Export Administration Regulations (“EAR,” 15 CFR parts 730-774, which includes the Commerce Control List in part 774), administered by the Bureau of Industry and Security (BIS), U.S. Department of Commerce. Both the ITAR and the EAR impose license requirements on exports and reexports. Items not subject to the ITAR or to the exclusive licensing jurisdiction of any other set of regulations are subject to the EAR.
The Departments of State and Commerce described in their respective Advanced Notices of Proposed Rulemaking (ANPRM) in December 2010 the Administration's plan to make the USML and the CCL positive, tiered, and aligned so that eventually they can be combined into a single control list (see “Commerce Control List: Revising Descriptions of Items and Foreign Availability,” 75 FR 76664 (Dec. 9, 2010) and “Revision to the United States Munitions List,” 75 FR 76935 (Dec. 10, 2010)). The notices also called for the establishment of a “bright line” between the USML and the CCL to reduce government and industry uncertainty regarding export jurisdiction by clarifying whether particular items are subject to the jurisdiction of the ITAR or the EAR. While these remain the Administration's ultimate Export Control Reform objectives, their concurrent implementation would be problematic in the near term. In order to more quickly reach the national security objectives of greater interoperability with our allies, enhancing our defense industrial base, and permitting the U.S. Government to focus its resources on controlling and monitoring the export and reexport of more significant items to destinations, end uses, and end users of greater concern than our NATO and other multi-regime partners, the Administration has decided, as an interim step, to propose and implement revisions to both the USML and the CCL that are more positive, but not yet tiered.
Specifically, based in part on a review of the comments received in response to the December 2010 notices, the Administration has determined that fundamentally altering the structure of the USML by tiering and aligning them on a category-by-category basis would significantly disrupt the export control compliance systems and procedures of exporters and reexporters. For example, until the entire USML was revised and became final, some USML categories would follow the legacy numbering and control structures while the newly revised categories would follow a completely different numbering structure. In order to allow for the national security benefits to flow from re-aligning the jurisdictional status of defense articles that no longer warrant control on the USML on a category-by-category basis while minimizing the impact on exporters' internal control and jurisdictional and classification marking systems, the Administration plans to proceed with building positive lists now and afterward return to structural changes.
This proposed rule revises USML Category VIII, covering aircraft and related articles, to establish a clearer line between the USML and the CCL regarding controls over military aircraft and related articles. The proposed revision narrows the types of aircraft and related items controlled on the USML to only those that warrant control under the stringent requirements of the Arms Export Control Act. Changes include moving similar articles currently controlled in multiple categories into a single category or subcategory (e.g., inertial navigations systems for aircraft formerly controlled under Category VIII(e) will likely be moved to controls either in Category XII or the CCL in future proposed rules and, as noted in proposed Category VIII(b), gas turbine engines for articles controlled in this category will likely be included in proposed Category XIX, which will be the subject of a separate notice). Other former Category VIII subcategories have been “reserved” because the Department is proposing to change the jurisdictional status of the items covered therein so that they would become subject to the EAR, most likely under ECCN 9A610 or 9A619.
This proposed rule also revises § 121.3 to more clearly define “aircraft” for purposes of the revised USML Category VIII.
The most significant aspect of this more positive, but not yet tiered, proposed USML category is that it does not contain controls on all generic parts, components, accessories, and attachments that are specifically designed or modified for a defense article, regardless of their significance to maintaining a military advantage for the United States. Rather, it contains, with one principal exception, a positive list of specific types of parts, components, accessories, and attachments that continue to warrant control on the USML. The exception pertains to parts, components, accessories, and attachments “specially designed” for the following U.S.-origin aircraft that have low observable features or characteristics: B-1B, B-2, F-15SE, F/A18E/F/G, F-22, F-35 (and variants thereof), F-117, or United States Government technology demonstrators.
All other parts, components, accessories, and attachments “specially designed” for a military aircraft and other articles now subject to USML Category VIII would become subject to the new 600 series controls in Category 9 of the CCL to be published separately by the Department of Commerce. The Administration has also proposed revisions to the jurisdictional status of certain militarily less significant end items that do not warrant USML control, but the primary impact of this proposed change will be with respect to current USML controls on parts, components, accessories, and attachments that no longer warrant USML control.
Although one of the goals of the export control reform initiative is to describe USML controls without using design intent criteria, a few of the controls in the proposed revision nonetheless use the term “specially designed.” It is, therefore, necessary for the Department to define the term. Two definitions have been proposed to date.
The Department first provided a draft definition for “specially designed” in the December 2010 ANPRM (75 FR 76935) and noted the term would be used minimally in the USML, and then only to remain consistent with the Wassenaar Arrangement or other
The Department of Commerce subsequently published on July 15, 2011, for public comment, the Administration's proposed definition of “specially designed” that would be common to the CCL and the USML. The public provided more than 40 comments on that proposed definition on or before the September 13 deadline for comments. The Departments of State, Commerce, and Defense are now reviewing those comments and related issues, and the Departments of State and Commerce plan to publish for public comment another proposed rule on a definition of “specially designed” that would be common to the USML and the CCL. For the purpose of evaluation of this proposed rule, reviewers should use the definition provided in the December 2010 ANPRM.
As the U.S. Government works through the proposed revisions to the USML, some solutions have been adopted that were determined to be the best of available options. With the thought that multiple perspectives would be beneficial to the USML revision process, the Department welcomes the assistance of users of the lists and requests input on the following: (1) A key goal of this rulemaking is to ensure the USML and the CCL together control all the items that meet Wassenaar Arrangement commitments embodied in Munitions List Category 10 (ML 10). To that end, the public is asked to identify any potential lack of coverage brought about by the proposed rules for Category VIII contained in this FRN and the new Category 9 ECCNs published separately by the Department of Commerce when reviewed together.
(2) While many of the aircraft controlled in paragraph (a) of Category VIII are defined based on objective parameters, some are not. For example, unmanned aerial vehicles controlled under (a)(6) are simply described as “military.” This is to differentiate those unmanned aerial vehicles currently controlled under Category VIII from those currently controlled, and will remain so controlled, under ECCN 9A012. The public is asked to provide input on regulatory language that would control those with an objective description that precludes removal from the USML and does not inadvertently designate as “defense articles” aircraft currently subject to the EAR.
The Department of State is of the opinion that controlling the import and export of defense articles and services is a foreign affairs function of the United States Government and that rules implementing this function are exempt from § 553 (Rulemaking) and § 554 (Adjudications) of the Administrative Procedure Act. Although the Department is of the opinion that this rule is exempt from the rulemaking provisions of the APA, the Department is publishing this rule with a 45-day provision for public comment and without prejudice to its determination that controlling the import and export of defense services is a foreign affairs function. As noted above, and also without prejudice to the Department position that this rulemaking is not subject to the APA, the Department previously published a related Advance Notice of Proposed Rulemaking (RIN 1400-AC78), and accepted comments for 60 days.
Since this proposed amendment is not subject to 5 U.S.C. 553, it does not require analysis under the Regulatory Flexibility Act.
This proposed amendment does not involve a mandate that will result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any year and it will not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995.
This proposed amendment has been found not to be a major rule within the meaning of the Small Business Regulatory Enforcement Fairness Act of 1996.
This proposed amendment will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, in accordance with Executive Order 13132, it is determined that this proposed amendment does not have sufficient federalism implications to require consultations or warrant the preparation of a federalism summary impact statement. The regulations implementing Executive Order 12372 regarding intergovernmental consultation on Federal programs and activities do not apply to this proposed amendment.
The Department is of the opinion that controlling the import and export of defense articles and services is a foreign affairs function of the United States Government and that rules governing the conduct of this function are exempt from the requirements of Executive Order 12866. However, the Department has reviewed the proposed rule to ensure its consistency with the regulatory philosophy and principles set forth in the Executive Order.
The Department of State has reviewed the proposed amendment in light of sections 3(a) and 3(b)(2) of Executive Order 12988 to eliminate ambiguity, minimize litigation, establish clear legal standards, and reduce burden.
The Department of State has determined that this rulemaking will not have tribal implications, will not impose substantial direct compliance costs on Indian tribal governments, and will not pre-empt tribal law. Accordingly, the requirement of Executive Order 13175 does not apply to this rulemaking.
The Department of State has considered this rule in light of Executive Order 13563, dated January 18, 2011, and affirms that this regulation is consistent with the guidance therein.
This proposed amendment does not impose any new reporting or recordkeeping requirements subject to the Paperwork Reduction Act, 44 U.S.C. Chapter 35.
Arms and munitions, Exports.
Accordingly, for the reasons set forth above, Title 22, Chapter I, Subchapter M, parts 120 and 121 are proposed to be amended as follows:
1. Section Contents is revised to read as follows:
2. The authority citation for part 121 continues to read as follows:
Secs. 2, 38, and 71, Pub. L. 90-629, 90 Stat. 744 (22 U.S.C. 2752, 2778, 2797); E.O. 11958, 42 FR 4311; 3 CFR, 1977 Comp. p. 79; 22 U.S.C. 2651a; Pub. L. 105-261, 112 Stat. 1920.
3. Section 121.1 is amended by revising U.S. Munitions List Category VIII to read as follows:
(a) Aircraft (see § 121.3 of this subchapter) as follows:
*(1) Bombers;
*(2) Fighters, fighter bombers, and fixed-wing attack aircraft;
*(3) Jet-powered trainers used to train pilots for fighter, attack, or bomber aircraft;
*(4) Attack helicopters;
*(5) Unarmed military unmanned aerial vehicles (UAVs);
*(6) Armed unmanned aerial vehicles;
*(7) Military intelligence, surveillance, and reconnaissance aircraft;
*(8) Electronic warfare, airborne warning and control aircraft;
(9) Air refueling aircraft and Strategic airlift aircraft;
(10) Target drones;
(11) Aircraft equipped with any mission systems controlled under this subchapter; or
(12) Aircraft capable of being refueled in flight including hover-in-flight refueling (HIFR).
(b) [Reserved—for items formerly controlled under this subcategory see Category XIX and an ECCN to be determined]
(c) [Reserved]
(d) Launching and recovery equipment “specially designed” for defense articles described in paragraph (a) of this category.
(e) [Reserved]
(f) Developmental aircraft and “specially designed” parts, components, accessories, and attachments therefor developed under a contract with the U.S. Department of Defense.
(g) [Reserved]
(h) Aircraft components, parts, accessories, attachments, and associated equipment as follows:
(1) Components, parts, accessories, attachments, and equipment “specially designed” for the following U.S.-origin aircraft: B-1B, B-2, F-15SE, F/A18E/F/G, F-22, F-35 (and variants thereof), F-117, or United States Government technology demonstrators. Components, parts, accessories, attachments, and equipment of the F-15SE, and F/A-18 E/F/G that are common to earlier models of these aircraft, unless listed below, are subject to the jurisdiction of the Export Administration Regulations;
(2) Face gear gearboxes, split-torque gearboxes, variable speed gearboxes, synchronization shafts, interconnecting drive shafts, and gearboxes with internal pitch line velocities exceeding 15,000 feet per minute and parts and components “specially designed” therefor;
(3) Tail boom, stabilator and automatic rotor blade folding systems and parts and components “specially designed” therefor;
(4) Aircraft wing folding systems and parts and components “specially designed” therefor;
(5) Tail hooks and arresting gear and parts and components “specially designed” therefor;
(6) Bomb racks, missile launchers, missile rails, weapon pylons, pylon-to-launcher adapters, UAV launching systems, and external stores support systems and parts and components “specially designed” therefor;
(7) Damage/failure-adaptive flight control systems;
(8) Threat-adaptive autonomous flight control systems;
(9) Non-surface-based flight control systems and effectors, e.g., thrust vectoring from gas ports other than main engine thrust vector, “specially designed” for aircraft;
(10) Radar altimeters with output power management or signal modulation (i.e., frequency hopping, chirping, direct sequence-spectrum spreading) LPI (low probability of intercept) capabilities;
(11) Air-to-air refueling systems and hover-in-flight refueling (HIFR) systems and parts and components “specially designed” therefor;
(12) UAV flight control systems and vehicle management systems with swarming capability, i.e., UAVs interact with each other to avoid collisions and stay together, or, if weaponized, coordinate targeting;
(13) Aircraft lithium-ion batteries that provide 28 VDC or 270 VDC;
(14) Lift fans, clutches, and roll posts for short take-off, vertical landing (STOVL) aircraft and parts and components “specially designed” for such lift fans and roll posts;
(15) Helmet Mounted Cueing Systems, Joint Helmet Mounted Cueing Systems (JHMCS), Helmet Mounted Displays, Display and Sight Helmets (DASH), and variants thereof;
(16) Fire control computers, mission computers, vehicle management computers, integrated core processers, stores management systems, armaments control processors, aircraft-weapon interface units and computers (e.g., AGM-88 HARM Aircraft Launcher Interface Computer (ALIC)) “specially designed” for aircraft;
(17) Radomes “specially designed” for operation in multiple or nonadjacent radar bands or designed to withstand a combined thermal shock greater than 4.184 x 10
(18) Drive systems and flight control systems “specially designed” to function after impact of a 7.62 mm or larger projectile; or
(19) Any component, part, accessory, attachment, equipment, or system that:
(i) is classified;
(ii) contains classified software;
(iii) is manufactured using classified production data; or
(iv) is being developed using classified information.
“Classified” in this subcategory means classified pursuant to Executive Order 13526, or predecessor order, and a security classification guide developed pursuant thereto or equivalent, or to the corresponding classification rules of another government.
(i) Technical data (as defined in § 120.10 of this subchapter) and defense services (as defined in § 120.9 of this subchapter) directly related to the defense articles enumerated in paragraphs (a) through (h) of this category. (See § 125.4 of this subchapter for exemptions.)
4. Section 121.3 is revised to read as follows:
(a) In Category VIII, except as described in (b) below, “aircraft” means
(1) Are U.S.-origin aircraft that bear an original military designation of A, B, E, F, K, M, P, R or S;
(2) Are foreign-origin aircraft “specially designed” to provide functions equivalent to those of the aircraft listed in (a)(1) of this section;
(3) Are armed or are “specially designed” to be used as a platform to deliver munitions or otherwise destroy targets (e.g., firing lasers, launching rockets, firing missiles, dropping bombs, or strafing);
(4) Are strategic airlift aircraft capable of airlifting payloads over 35,000 lbs to ranges over 2,000 nm without being refueled in-flight into short or unimproved airfields;
(5) Are capable of being refueled in-flight; or
(6) Incorporate any “mission systems” controlled under this subchapter. “Mission systems” are defined as “systems” (see § 121.8(g) of this subchapter) that are defense articles that perform specific military functions beyond airworthiness, such as by providing military communication, radar, active missile counter measures, target designation, surveillance, or sensor capabilities.
(b) Aircraft “specially designed” for military applications that are not identified in (a) of this section are subject to the EAR under an ECCN to be determined, including any unarmed military aircraft, regardless of origin or designation, manufactured prior to 1956 and unmodified since manufacture. Modifications made to incorporate safety of flight features or other FAA or NTSB modifications such as transponders and air data recorders are considered “unmodified” for the purposes of this subparagraph.
Environmental Protection Agency (EPA).
Proposed rule.
EPA proposes to approve the State Implementation Plan (SIP) revision submitted by the Commonwealth of Virginia that revises regulatory language that inadvertently ended its nitrogen oxides (NO
Comments must be received in writing by December 7, 2011.
Submit your comments, identified by Docket ID Number EPA-R03-OAR-2011-0773 by one of the following methods:
A.
B.
C.
D.
Marilyn Powers, (215) 814-2308, or by email at
For further information, please see the information provided in the direct final action, with the same title, that is located in the “Rules and Regulations” section of this
Please note that if EPA receives adverse comment on an amendment, paragraph, or section of this rule approving Virginia's revision to its NOx Budget Trading program and if that provision may be severed from the remainder of the rule, EPA may adopt as final those provisions of the rule that are not the subject of an adverse comment.
Environmental Protection Agency (EPA).
Proposed rule.
EPA is proposing to approve, with one condition, State Implementation Plan (SIP) revisions submitted by the Pennsylvania Department of Environmental Protection (PADEP) on June 17, 2011. These revisions include the 1997 fine particulate matter (PM
These revisions also add the definition of PM
Written comments must be received on or before December 7, 2011.
Submit your comments, identified by Docket ID Number EPA-R03-OAR-2011-0854 by one of the following methods:
A. http://
B.
C.
D.
Jacqueline Lewis at (215) 814-2037 or by email at
On June 17, 2011, PADEP submitted a revision to the Allegheny County portion of the Pennsylvania SIP. The SIP revision includes an attainment demonstration and base-year inventory for the Liberty-Clairton Area developed by ACHD, which includes an analysis of RACM/RACT, RFP, contingency measures to be implemented if violations occur after attainment or if RFP requirements are not met, and MVEBs for purposes of transportation conformity. In addition, the SIP submittal includes amendments to Allegheny County regulations that adopt the air quality standards and associated definitions necessary to implement the 1997 and 2006 PM
EPA is proposing to approve, with one exception, Pennsylvania's SIP revisions submitted to EPA on June 17, 2011 for the purpose of demonstrating attainment of the 1997 PM
EPA is also proposing to approve amendments to ACHD regulations that add the definition of PM
On July 18, 1997 (62 FR 36852), EPA established new NAAQS for PM
Epidemiological studies have shown statistically significant correlations between elevated PM
Following promulgation of a new or revised NAAQS, EPA is required by the CAA section 107(d) to designate areas throughout the nation as attaining or not attaining the NAAQS. On January 5, 2005 (70 FR 944), EPA published initial air quality designations for the 1997 PM
On October 17, 2006 (71 FR 61144), EPA strengthened the 24-hour PM
EPA designated the Liberty-Clairton Area nonattainment for both the 1997 annual and 24-hour PM
EPA is implementing the 1997 PM
On April 25, 2007, EPA issued the Clean Air Fine Particle Implementation Rule for the 1997 PM
CAA section 172 requires a state to submit a plan for each of its nonattainment areas that demonstrates attainment of the applicable ambient air quality standard as expeditiously as practicable, but no later than the specified attainment date. Under the PM
1. Technical analyses that locate, identify, and quantify sources of emissions that are contributing to violations of the PM
2. Analyses of future year emissions reductions and air quality improvement resulting from already-adopted national, state, and local programs and from potential new state and local measures to meet the RACM/RACT and RFP requirements in the area;
3. Adopted emissions reduction measures with schedules for implementation; and
4. Contingency measures required under section 172(c)(9) of the CAA. See, 40 CFR 51.1007 and 72 FR 20586 at 20605.
EPA recognizes NO
As discussed previously, a state must submit emissions inventories for each of the four PM
EPA further explained that a technical demonstration to reverse the presumption for NO
ACHD submitted 2002 baseline inventories for each of the four precursor emissions and for direct PM
CAA section 172(c)(3) requires a state to submit a plan provision that includes a “comprehensive, accurate, current inventory of actual emissions from all sources of the relevant pollutant.” The PM
The base year and future year baseline planning inventories for direct PM
For the 2002 area sources, ACHD provided an inventory that contained estimations of emissions by multiplying an emission factor by some known indicator or activity level for each category at the county level. These estimates were apportioned to the Liberty-Clairton Area based on population counts.
The 2002 Nonroad Mobile Sources emissions inventory was prepared with EPA's NONROAD2005 model. This model estimates fuel consumption and emissions of total hydrocarbons, carbon monoxide, NO
Table 1 below shows the Liberty-Clairton Area emissions inventory summary for direct PM
Table 2 below shows the Liberty-Clairton Area emissions inventory summary for direct PM
To understand the PM
Direct PM from local sources are at the heart of the PM
With respect to control strategies for direct PM
a. Batteries 7, 8, and 9 were permanently shut down on April 16, 2009. The original date for shut down was December 31, 2012 in the consent order and agreement. The new Battery C will replace the production of Batteries 7, 8, and 9 at significantly lower emissions due to newer and cleaner technology. This project reduces emissions of direct PM
b. 25 heating walls on Battery 19 will be replaced by October 31, 2012. The battery will meet its opacity limits by December 31, 2012, including, as necessary, implementing an advanced patching plan.
In September 2010, ACHD and U.S. Steel amended the March 2008 consent order and agreement to include the construction of new low emission quench towers for Batteries 13-15 and Batteries 19-20 by December 31, 2013. The new quench towers 5A and 7A will be used as the primary quench towers for Batteries 13-15 and Batteries 19-20, respectively. The current quench towers 5 and 7 will serve as auxiliary quench towers. The new quench towers 5A and 7A will reduce emissions of direct PM
Additional reductions are achieved by a June 2007 ACHD and U.S. Steel consent decree to rebuild the B Battery heating walls, which was to be completed by June 30, 2010, and replacement of 25 heating walls on Battery 19 by October 2012 to meet opacity limits. Table 3 below summarizes the reductions that are relied on in the Liberty-Clairton Area PM
The majority of direct PM
CAA section 172(c)(1) requires that each attainment plan “provide for the implementation of all reasonably available control measures as expeditiously as practicable (including such reductions in emissions from existing sources in the area as may be obtained through the adoption, at a minimum, of reasonably available control technology), and shall provide for attainment of the national primary ambient air quality standards.” EPA defines RACM as measures that a state finds are both reasonably available and contribute to attainment as expeditiously as practicable in its nonattainment area. Thus, what constitutes RACM/RACT in a PM
Consistent with subpart 1 of Part D of the CAA, EPA is requiring a combined approach to RACM and RACT for PM
The PM
ACHD undertook a process to identify and evaluate potential reasonably available control measures that could contribute to expeditious attainment of the PM
For the U.S. Steel Clairton Plant, many alternatives were considered for the coke batteries and quench towers. For the Coke batteries, there were very few alternatives were available, since some of the nation's strictest standards are already in place for this facility. Of the alternatives considered, none were considered technically feasible for integration into the process. For the quench towers, among the many alternatives considered were short towers with single baffles, wet low emission quench, coke stabilization quenching process, and Kress indirect cooling system. However, they were all found to be unacceptable due to the cost effectiveness, potential magnitude and timing of emissions reductions and availability of space. For the Koppers Industries Inc. Clairton Plant, alternatives were considered for the tar refining process and the manufacturing of the rod pitch. For both the tar refining process and manufacturing of the rod pitch, the alternatives considered resulted in no additional emissions reductions. For the Mid Continent Coal and Coke Company, the total PM
Based on our review of potential RACM/RACT in the Liberty-Clairton Area PM
The PM
Air quality modeling is used to establish emissions attainment targets, the combination of emissions of PM
The procedures for modeling PM
ACHD's conceptual description of its PM
The Liberty-Clairton PM
The regional modeling demonstration for the Liberty-Clairton Area used the Community Multiscale Air Quality (CMAQ) model. The CMAQ modeling was performed by the Bureau of Air Quality Analysis and Research, New York State Department of Environmental Conservation (DEC) using Mid-Atlantic/Northeast Visibility Union Regional Planning Organization (MANE-VU) inventory with a base year of 2002. Regional controls for SO
The CALPUFF modeling system uses CALMET, a diagnostic 3-dimensional meteorological model, and CALPOST, a post processing program. The CALPUFF model, which uses a much finer scale than the regional model, was used to help better resolve local topographic features that influence emission dispersion and address spatial relationships between local sources and the monitors in the Liberty-Clairton Area. The CALPUFF grid spacing for the 150 km regional source analysis domain was one kilometer and 100 meters for the 20 kilometer local scale analysis domain. The CALMET processor was used to recreate some of the more complex atmospheric flows in the Liberty-Clairton Area.
The MANE-VU regional analysis used northeastern United States emissions inventories for all source classifications. The year 2002 was used for the baseline emissions inventory and 2014 for the projected inventory for the Liberty-Clairton Area. Regional projections used on-the-books/on-the-way (OTB/OTW) controls through the 2012 timeframe. Since no additional projections were available at the time, and since Liberty-Clairton controls focus on direct PM
The monitored attainment test for PM
The Liberty-Clairton Area has two PM
EPA's modeling guidance states that additional analyses are recommended to determine if attainment will be likely, even if the modeled attainment test is “passed.” The guidance recommends supplementary analyses in all cases. EPA's modeling guidance describes how to use a photochemical grid model and additional analytical methods to complete a weight of evidence (WOE) analysis to estimate if emissions control strategies will lead to attainment. A WOE analysis is a supporting analysis that helps to determine if the results of the photochemical modeling system are, or are not, correctly predicting future air quality.
All models, including the CMAQ model, have inherent uncertainties. Over or under prediction may result from uncertainties associated with emission inventories, meteorological data, and representation of PM
Due to the fact that the modeling results presented in Table 4 fall below the aforementioned “weight of evidence” thresholds established by EPA, a limited supplemental analysis was deemed necessary to support the 2014 attainment demonstration. ACHD provided a WOE demonstration that consisted of an analysis of monitor trends, local and national emission control programs, population trends and monitoring concentrations during periods of low production. ACHD included a summary of various local and regional emission control programs being implemented in the Area, although some of these control measures may extend beyond the Liberty-Clairton Area and therefore, may have a lesser impact. Emission control programs used for WOE include Pennsylvania's wood boiler regulation, a wood stove change out program in southwest Pennsylvania, EPA's CSAPR as it was proposed, Allegheny County's diesel fuel engine retrofit program, local and state anti-idling campaigns and Allegheny County's program to reduce diesel particulate emissions. The additional reductions from these programs were used as further evidence supporting ACHD's conclusion that its SIP modeling demonstrates compliance with the 1997 PM
Based on the technical information provided in the Liberty-Clairton Area attainment demonstration SIP revision, EPA concludes that the modeling and WOE analyses demonstrate attainment of the 1997 PM
However, because the regional CMAQ modeling relied upon EPA's CAIR program, EPA is requiring ACHD to provide an additional analysis to confirm model results, in light of EPA's promulgation of CSAPR on August 8, 2011 (76 FR 48208), to replace the remanded CAIR rule. While ACHD's SIP submittal predated EPA's promulgation of CSAPR, to ensure that the modeling demonstration is still valid, ACHD must update the analysis it included in section 13.3 of its attainment plan to include CSAPR instead of CAIR, and review and update, if appropriate, its modeling technical support document (TSD). To ensure that the analysis in the June 17, 2011 submittal is valid during the implementation of CSAPR, the results, with CSAPR, must show at least the same concentrations that resulted from the modeling demonstration with CAIR. EPA is, therefore, conditionally approving the modeling portion of the Liberty-Clairton Area attainment demonstration SIP. Final approval of the modeling demonstration portion of the SIP is contingent on ACHD's reanalysis of the elements included in section 13.3 of its attainment demonstration and the associated TSD to show that implementation of CSAPR provides at least equivalent model concentrations in the Liberty-Clairton Area as was shown in its June 17, 2011 submittal.
More detailed information about the modeling and our evaluation are available in the modeling TSD available in the docket for this rulemaking.
CAA Section 172(a)(2) provides that an area's attainment date “shall be the date by which attainment can be achieved as expeditiously as practicable, but no later than five years from the date such area was designated nonattainment, except that the Administrator may extend the attainment date to the extent the Administrator determines appropriate, for a period no greater than 10 years from the date of designation as nonattainment considering the severity of nonattainment and the availability and feasibility of pollution control measures.” Because the effective date of designations for the 1997 PM
States that request an extension of the attainment date under CAA section 172(a)(2) must provide sufficient information to show that attainment by April 5, 2010 is impracticable due to the severity of the nonattainment problem in the area and the lack of available and feasible control measures to provide for earlier attainment. See, 40 CFR 51.1004(b). States must also demonstrate that all RACM and RACT for the area are being implemented to bring about attainment of the standard by the most expeditious alternative date practicable for the area. See, 72 FR 20586 at 20601.
In the course of evaluating whether the attainment date for the Liberty-Clairton Area should be extended, EPA has considered several factors. First, EPA has considered the technical basis supporting the attainment demonstration, including whether the emissions inventories and air quality modeling, are adequate. As discussed previously, EPA is proposing to approve the emissions inventories and conditionally approve the air quality modeling on which the Liberty-Clairton 1997 PM
The Liberty-Clairton Area SIP submittal provides sufficient information to show that attainment by April 5, 2010 is impracticable due to the severity of the nonattainment problem in the area and the lack of available and feasible control measures to provide for earlier attainment. In particular, this submission includes sufficient modeling data to support a finding that the attainment date for the Liberty-Clairton Area should be April 5, 2015, and that the area qualifies for the full five-year extension of the attainment date allowable under section 172(a)(1). Furthermore, the SIP submittal provides for expeditious implementation of the available control programs. The implementation schedule for the controls is expeditious, while taking into account the time necessary for purchase and installation of the required control technologies.
Based upon the above considerations, EPA is proposing to determine that a five-year extension of the attainment date is appropriate given the severity of the nonattainment problem in the Liberty-Clairton Area, and the unavailability and infeasibility of additional control measures and, therefore, EPA is proposing to extend the attainment date in the Liberty-Clairton Area to April 5, 2015.
CAA section 172(c)(2) requires that plans for nonattainment areas shall provide for RFP. RFP is defined in section 171(1) as “such annual incremental reductions in emissions of the relevant air pollutant as are required by this part or may reasonably be required by the Administrator for the purpose of ensuring attainment of the applicable [NAAQS] by the applicable date.” For any area for which a state requests an extension of the attainment date beyond 2010, the PM
For Liberty-Clairton, as discussed in section A.3, the total reductions needed, 878 tons of PM
As explained in section III.A.3 of this proposed rulemaking action, the control strategy for attainment in the Liberty-Clairton Area is to reduce emissions of direct PM
EPA has reviewed the RFP demonstration for PM
Under CAA section 172(c)(9), all PM
Contingency measures may include federal, state and local measures already adopted and implemented or scheduled for implementation that provide emissions reductions in excess of the reductions needed to provide for RFP or expeditious attainment. EPA has approved numerous SIPs under this interpretation. See, direct final rule approving Indiana ozone SIP revision (62 FR 15844, April 3, 1997); final rule approving Illinois ozone SIP revision (62 FR 66279, December 18, 1997); direct final rule approving Rhode Island ozone SIP revision (66 FR 30811, June 8, 2001); final rule approving District of Columbia, Maryland, and Virginia ozone SIP revisions (66 FR 586, January 3, 2001); and final rule approving Connecticut ozone SIP revision (66 FR 634, January 3, 2001). The state may use the same measures for both RFP and attainment contingency, if the measures will provide reductions in the relevant years. However, should measures be triggered for failure to make RFP, the state would need to submit replacement contingency measures for attainment purposes.
The contingency measures in the Liberty-Clairton attainment demonstration for the 1997 PM
Areas with an attainment date of April 2015 are required to provide contingency measures for 2009, 2012, and 2015. Due to the shutdown of Batteries 7-9 at the U.S. Steel Clairton Plant in April 2009, reductions required for RFP in 2009 have already been achieved. This shutdown provides for excess reductions above and beyond reductions that would otherwise be required during 2009, and the excess reductions are sufficient to provide for RFP for 2012 and 2015.
The plan does not calculate the emissions reductions that are equivalent to one year's worth of RFP for NO
CAA section 176(c) requires federal actions in nonattainment and maintenance areas to conform to the goals of SIPs. This means that such actions will not: (1) Cause or contribute to violations of a NAAQS; (2) worsen the severity of an existing violation; or (3) delay timely attainment of any NAAQS or any interim milestone. Actions involving Federal Highway Administration (FHWA) or Federal Transit Administration (FTA) funding, or approval, are subject to the EPA's transportation conformity rule, codified at 40 CFR part 93, subpart A. Under this rule, Metropolitan Planning Organizations (MPOs) in nonattainment and maintenance areas coordinate with state and local air quality and transportation agencies, EPA, FHWA, and FTA to demonstrate that an area's regional transportation plans (RTPs) and transportation improvement programs (TIPs) conform to the applicable SIPs. This is typically determined by showing that estimated emissions from existing and planned highway and transit systems are less than or equal to the motor vehicle emissions budgets (MVEBs or budgets) contained in the SIP.
An MPO must use budgets in a submitted but not yet approved SIP, after EPA has determined that the budgets are adequate. Budgets in submitted SIPs may not be used before they are found adequate or are approved. In order for us to find a budget adequate, the submittal must meet the conformity adequacy requirements of 40 CFR 93.118(e)(4) and (5). Additionally, motor vehicle emissions budgets cannot be approved until EPA completes a detailed review of the entire SIP and determines that the SIP and the budgets will achieve their intended purpose (
Direct PM
The SIP submittal includes MVEBs for direct PM
EPA has evaluated the adequacy of the MVEBs in the attainment demonstration for the Liberty-Clairton Area, using the evaluation criteria detailed in the Transportation Conformity Rule as part of our review of the budgets' approvability. The details of this review may be found in Section II of the MVEBs TSD, available in the Docket for this rulemaking. The MVEBs for the Liberty-Clairton Area PM
EPA is proposing to approve, with one condition, Pennsylvania's June 17, 2011 SIP revision submitted to EPA for the purpose of demonstrating attainment of the 1997 PM
Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the CAA and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, this action merely proposes to approve state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this proposed action:
• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Order 12866 (58 FR 51735, October 4, 1993);
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and
• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
In addition, this proposed approval of the Liberty-Clairton 1997 PM
Environmental protection, Air pollution control, Nitrogen dioxide, Particulate matter, Sulfur oxides, Volatile organic compounds.
42 U.S.C. 7401
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Proposed rule; reopening of public comment period.
We, National Marine Fisheries Service (NMFS), published a proposed rule in the
The comment period for the proposed rule published June 2, 2011, at 76 FR 32026, is reopened. Written comments on this proposed rule must be received by January 6, 2012. Comments received between the close of the first comment period on August 31, 2011, and the reopening of the comment period November 7, 2011 will be considered timely received.
You may submit written comments on the proposed rule identified by 0648-BA81 by any one of the following methods:
•
•
Jean Higgins, NMFS, Pacific Islands Regional Office, (808) 944-2157; Lance Smith, NMFS, Pacific Islands Regional Office, (808) 944-2258; or Marta Nammack, NMFS, Office of Protected Resources (301) 427-8469.
On June 2, 2011, we published a proposed rule to revise the current critical habitat for the Hawaiian monk seal (
NMFS subsequently received requests to extend the public comment period. These requests identified that additional time was needed to more fully consider the proposed rulemaking and provide comments on the proposed designation. In response to these requests, we are reopening the public comment period until January 6, 2012, to receive additional local and public information and comments that may be relevant to any aspect of the proposal. We will consider additional information received prior to making a final decision on critical habitat designation.
16 U.S.C. 1531
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Proposed rule; request for comments.
NMFS issues this proposed rule to implement Amendment 6 to the Fishery Management Plan (FMP) for the Reef Fish Fishery of Puerto Rico and the U.S. Virgin Islands, Amendment 5 to the FMP for the Spiny Lobster Fishery of Puerto Rico and the U.S. Virgin Islands, Amendment 3 to the FMP for the Queen Conch Resources of Puerto Rico and the U.S. Virgin Islands, and Amendment 3 to the FMP for Corals and Reef Associated Plants and Invertebrates of Puerto Rico and the U.S. Virgin Islands (2011 Caribbean ACL Amendment) prepared by the Caribbean Fishery Management Council (Council). This proposed rule would: Establish annual catch limits (ACLs) and accountability measures (AMs) for reef fish, spiny lobster, and aquarium trade species which are not determined to be undergoing overfishing; allocate ACLs among island management areas and, in Puerto Rico only, among commercial and recreational sectors; establish recreational bag limits for reef fish and spiny lobster; remove eight conch species from the queen conch FMP; and establish framework procedures for the spiny lobster and Caribbean corals and reef associated plants and invertebrates FMPs. The 2011 Caribbean ACL Amendment would also revise management reference points and status determination criteria for selected reef fish, spiny lobster, and aquarium trade species. The intended effect of the rule is to prevent overfishing of reef fish, spiny lobster, and aquarium trade species while maintaining catch levels consistent with achieving optimum yield (OY).
Written comments must be received on or before November 22, 2011.
You may submit comments on the proposed rule identified by “NOAA-NMFS-2011-0017”, by any of the following methods:
•
•
To submit comments through the Federal e-Rulemaking Portal:
Comments received through means not specified in this rule will not be considered.
Electronic copies of the 2011 Caribbean ACL Amendment, which includes an environmental impact statement (EIS), an initial regulatory flexibility analysis (IRFA), a regulatory impact review, and a fishery impact statement may be obtained from the Southeast Regional Office Web site at
Miguel Lugo or Maria Lopez, Southeast Regional Office, NMFS, telephone: (727) 824-5305, or email:
In the exclusive economic zone (EEZ) of the U.S. Caribbean, the reef fish fishery is managed under the Fishery Management Plan (FMP) for the Reef Fish Fishery of Puerto Rico and the U.S. Virgin Islands, spiny lobster is managed under the FMP for the Spiny Lobster Fishery of Puerto Rico and the U.S.
The 2006 reauthorization of the Magnuson-Stevens Act requires that for the fisheries determined by the Secretary of Commerce (Secretary) to be not subject to overfishing, ACLs and AMs must be established in 2011 at a level that prevents overfishing and helps to achieve OY. These mandates are intended to ensure fishery resources are managed for the greatest overall benefit to the nation, particularly with respect to providing food production and recreational opportunities, and protecting marine ecosystems.
NMFS' 2011 Report on the Status of U.S. Fisheries classifies Caribbean spiny lobster, angelfishes, boxfishes, goatfishes, grunts, wrasses, jacks, scups and porgies, squirrelfishes, surgeonfishes, triggerfishes and filefishes, tilefishes, and aquarium trade species as unknown with respect to their status regarding overfishing. The eight species of conch proposed to be removed from the Queen Conch FMP are currently in the FMP as data collection only species and were not assessed through this report.
The Magnuson-Stevens Act requires that FMPs specify a number of reference points for managed fish stocks, including maximum sustainable yield (MSY), OY, and stock status determination criteria that can be used to determine when a fishery is overfished and/or undergoing overfishing. These reference points are intended to provide the means to measure the status and performance of fisheries relative to established goals. Proxies have been established for these reference points because available data in the U.S. Caribbean are not sufficient to support direct estimation of these parameters. The FMP Amendments would revise three of those proxies. First, they would use either the median or average of landings data for a determined year sequence as a proxy for MSY for all units or complexes. The time period during which average catch is calculated for those species is 1988-2009 for the commercial sector of Puerto Rico, 2000-2009 for the recreational sector of Puerto Rico, 1999-2008 for the commercial sector St. Croix, and 2000-2008 for the commercial sector of St. Thomas/St. John. These year sequences represent the longest year sequence of reliable landings data that the Council considers to be consistently reliable across the islands of the U.S. Caribbean. The MSY proxy for these species in Puerto Rico would be set by the median of the annual landings in the year sequence above. For St. Croix and St. Thomas/St. John, the MSY equals the average of annual landings for the year sequence described above. The MSY for surgeonfish and angelfish was defined as three times the single year maximum of recreational landings for Puerto Rico. The FMP amendments would also define the overfishing threshold of all species as the overfishing limit (OFL), which would equal the MSY proxy. For the majority of species units or complexes, OY would equal the MSY proxy multiplied by a reduction factor to account for any uncertainty in the scientific and management process. The reduction factor would be 10 percent for all species, except a 25 percent reduction would be applied for surgeonfish, angelfish and aquarium trade species to account for greater uncertainty for those species.
Currently, the conch complex within the Queen Conch FMP is composed of nine species. This rule would remove eight conch species from that FMP. These species are milk conch (
This rule would also implement island-specific management to enable application of AMs in response to harvesting activities on a single island (Puerto Rico, St. Croix) or island group (St. Thomas/St. John) without necessarily affecting fishing activities on the other islands or island groups. For example, if the ACL for the jacks complex is divided among Puerto Rico, St. Croix and St. Thomas/St. John and the St. Croix fishery exceeds its ACL for jacks, then an AM can be applied in the Federal waters surrounding St. Croix without necessarily affecting harvest of jacks in Federal waters surrounding Puerto Rico or St. Thomas/St. John. This rule proposes geographic boundaries between islands/island groups based upon an equidistant approach that uses a mid-point to divide the exclusive economic zone (EEZ) among islands. The three island management areas are: Puerto Rico, St. Croix, and St. Thomas/St. John.
This proposed rule would establish ACLs and AMs for angelfish, boxfish, goatfishes, grunts, wrasses, jacks, scups and porgies, squirrelfishes, surgeonfish, triggerfish and filefish, tilefish, spiny lobster, and aquarium trade species units or complexes in the Caribbean Reef Fish, Spiny Lobster, and Coral and Reef Associated Plants and Invertebrates FMPs. The harvest of Caribbean prohibited coral that are contained within the FMP for Coral and Reef Associated Plant and Invertebrates, and that are not described as aquarium trade species, is prohibited by Federal regulations. Therefore, a functional ACL of zero will be considered for these prohibited species. Additionally, the harvest prohibition serves as a functional AM to manage the ACL.
Each ACL would be sub-divided among the three islands/island groups except that the ACL for tilefish and aquarium trade species would be applicable for the entire Caribbean EEZ. Landings data records do not exist for tilefish and aquarium trade species in the U.S. Virgin Islands. For this reason, a Caribbean-wide ACL would be established for tilefish and aquarium trade species based on the Puerto Rico median landings for these species. Separate commercial and recreational sector ACLs would be established for the Puerto Rico management area where landings data are available for both sectors. For the other island management areas (St. Croix and St. Thomas/St. John), only commercial data are available, therefore, ACLs would be established for the St. Croix and St. Thomas/St. John management areas based on commercial landings data only. Commercial data used to monitor those ACLs would be derived from trip ticket reports collected from territorial governments and recreational data used to monitor the Puerto Rico recreational ACLs would be derived from the Marine Recreational Fisheries Statistics Survey, or its successor, the Marine Recreational Information Program.
U.S. Caribbean landings data generally do not provide useful information at the species level for the species addressed in the 2011 Caribbean ACL Amendment. Aggregate ACLs would be established at the complex level for species in each island management area.
The allowable biological catch (ABC) proposed for these units or complexes are derived from the OFL (MSY proxy)(or SSC-recommended OFL). In most cases, the ABC is equal to the OFL, and then reduced by 10 percent to specify ACL and OY to buffer for scientific and management uncertainty, reducing the probability that overfishing will occur. The surgeonfish and angelfish ABCs are reduced by 25 percent to specify ACL and OY to further reduce the impacts of surgeonfish and angelfish harvest on Acropora species in U.S. Caribbean waters. The aquarium trade species ABC is reduced by 25 percent due to the level of uncertainty about the fishery in the EEZ and most of the harvest occurs in territorial waters.
If implemented, the accountability measures in this rule are designed to prevent fishermen from exceeding the ACLs. Two components are considered, the first identifies the conditions under which AMs would be triggered and the second describes the action(s) that would occur if AMs are triggered. This rule would trigger AMs if an ACL has been exceeded based on a moving multi-year average of landings as described in the FMP. Both commercial and recreational landings of a species, unit, or complex vary substantially from year to year; applying a multi-year average is intended to dampen that variability. The rule would reduce the length of the fishing season for the affected species, unit or complex the year following the year it is determined that the ACL was exceeded by the amount needed to prevent such an overage from occurring again. The AM is triggered unless NMFS' SEFSC, in consultation with the Council and its SSC, determines the overage occurred because data collection and monitoring improved rather than because catches actually increased.
This rule would establish an aggregate bag limit for the recreational harvest of angelfishes, boxfishes, goatfishes, grunts, wrasses, jacks, scups and porgies, squirrelfishes, surgeonfishes, triggerfishes and filefishes, and tilefishes. The daily recreational bag limit for the described reef fish species would be five fish per person per day, with no more than one surgeonfish per person per day allowed within the aggregate. This rule would also establish a vessel limit of 15 fish per vessel per day, including no more than 4 surgeonfish per vessel per day. The rule would also set a bag limit of 3 spiny lobster per person per day with a vessel limit of 10 spiny lobster per vessel per day.
This rule proposes framework measures for both the Spiny Lobster and the Coral and Reef Associated Plants and Invertebrates FMPs. Management measures proposed to be adjusted through framework procedures include but are not limited to quotas, closures, trip limits, bag limits, size limits, gear restrictions, fishing years, and reference points. The purpose of these framework measures is to allow the Council to more expeditiously adjust management in response to changing fishery conditions.
Pursuant to section 304(b)(1)(A) of the Magnuson-Stevens Act, the NMFS Assistant Administrator has determined that this rule is consistent with Caribbean 2011 ACL Amendment, other provisions of the Magnuson-Stevens Act, and other applicable law, subject to further consideration after public comment.
This rule has been determined to be not significant for purposes of Executive Order 12866. However, ACLs are a controversial issue in the U.S. Caribbean, which is a region with populations characterized by large percents of racial/ethnic minorities, high poverty rates, and low median household incomes. Moreover, commercial fishermen of St. Croix and St. Thomas/St. John would experience a substantially disproportionate adverse economic impact relative to their counterparts in Puerto Rico.
NMFS prepared an IRFA, as required by section 603 of the Regulatory Flexibility Act, for this rule. The IRFA describes the economic impact that this rule, if adopted, would have on small entities. A description of the action, why it is being considered, and the objectives of, and legal basis for this action are contained at the beginning of this section in the preamble and in the
The rule, which consists of several actions, would: Establish recreational bag limits for spiny lobster and specified reef fish species; specify ACLs and AMs for Caribbean spiny lobster, reef fish, and aquarium trade species not determined to be undergoing overfishing; and establish framework measures to facilitate regulatory modifications.
The Magnuson Stevens Act provides the statutory basis for the rule.
No duplicative, overlapping, or conflicting Federal rules have been identified; however, Federal regulations that impose seasonal or year-round prohibitions on fishing in Federal waters of the U.S. Caribbean that may affect fishing for these Units are identified in the IRFA. The rule would not alter existing reporting or record-keeping requirements. The rule would establish recreational bag limits for Caribbean spiny lobster and reef fish and provide NMFS the authority to restrict harvest in areas of the EEZ where annual or average annual landings of a stock, complex or unit exceed the relevant ACL.
This rule is expected to directly affect businesses that harvest spiny lobster, reef fish, and aquarium trade species from Federal waters off Puerto Rico and the USVI. These businesses are in the finfish fishing (NAICS 114111), shellfish fishing (NAICS 114112) and charter fishing industries (NAICS 487210). A business is classified as a small business if it is independently owned and operated, is not dominant in its field of operation (including its affiliates), and
In 2008, there were from 868 to 874 active commercial fishermen in Puerto Rico; 74 percent of these fishermen were captains and the remaining 26 percent were crew members. The IRFA assumes each captain represents a small business in the finfish fishing and shellfish fishing industries and each member of the crew an employee of one of those businesses. Therefore, it is concluded that there are 642 to 644 small businesses in the finfish fishing and shellfish fishing industries in Puerto Rico and potentially all of these businesses could be directly affected by the rule. In 2008, there were 223 licensed commercial fishermen in St. Croix and 160 in St.Thomas/St. John. There is a moratorium on the number of U.S. Virgin Islands commercial fishing licenses, so the IRFA assumes the 223 commercial fishermen in St. Croix and 160 commercial fishermen in St. Thomas/St. John represent 383 small businesses in the finfish fishing and shellfish fishing industries in the U.S. Virgin Islands who could be directly affected by the rule.
There are an estimated 9 small businesses in the charter fishing industry in Puerto Rico, 12 such businesses in St. Thomas/St. John and 1 in St. Croix. The rule would apply to all of these small businesses.
The rule would apply to all small businesses in Puerto Rico, St. Croix and St. Thomas/St. John within the finfish fishing, shellfish fishing, and charter fishing industries. Therefore, the rule applies to a substantial number of small entities in the U.S. Caribbean in these industries.
Charter fishing operations in Puerto Rico and the U.S. Virgin Islands target pelagic species and tend not to target spiny lobster or reef fish species in Federal waters. Consequently, it is expected that small businesses in the charter fishing industry in Puerto Rico, St. Croix or St. Thomas/St. John would experience little to no adverse economic impact because of the rule.
A comparison of the proposed Puerto Rico commercial ACLs for aquarium trade species, angelfish, boxfish, goatfish, grunts, jacks, scups and porgies, spiny lobster, surgeonfish, tilefish, squirrelfish and triggerfish/filefish, to average annual commercial landings from 2006 to 2007 suggests the proposed commercial ACLs for these complexes would not require reductions in the lengths of the Federal commercial fishing seasons for these complexes in the Puerto Rico EEZ. Therefore, there would be no adverse economic impact on small businesses in Puerto Rico that harvest these species.
The proposed Puerto Rico commercial hogfish/wrasses ACL is less than the average of annual landings of hogfish/wrasses from 2006 to 2009, which suggests there would be an overage of hogfish/wrasses landings in 2011, assuming the ACL is implemented by early 2012, that would require a shortened Federal fishing season in the Puerto Rico EEZ in 2012 by approximately 7 days and similarly thereafter. Puerto Rico's commercial fishermen could mitigate for the potentially shortened hogfish/wrasses fishing season in the Puerto Rico EEZ by targeting other species during the time that the Federal hogfish/wrasses fishing season is closed or they could move into territorial waters to harvest hogfish/wrasses species during the time the Federal season is closed. Approximately 95 percent of fishable area off Puerto Rico is in territorial waters. It is expected that small businesses would mitigate for the potential loss of 1,076 lb (488 kg) of hogfish/wrasses by relocating into territorial waters during the approximately 7 days the hogfish/wrasses fishing season is closed in the Puerto Rico EEZ with little to no displacement costs.
This rule is expected to have a substantially greater adverse economic impact on small businesses in the finfish fishing and shellfish fishing industries in St. Croix and St. Thomas/St. John than in Puerto Pico. St. Croix small businesses would incur annual losses of landings of up to 24.3 percent of their average annual landings of all species that are the subject of this action. St. Thomas/St. John small businesses would incur annual losses of landings of up to 12.6 percent of their average annual landings of all species that are the subject of this action. Assuming ACLs are implemented early in 2012, St. Croix commercial fisherman are expected to lose 21 day of boxfish, 68 days of grunts, 253 days of hogfish/wrasses, 54 days of scups and porgies, 112 days of spiny lobster, 242 days of squirrelfish, 101 days of surgeonfish, and 50 days of triggerfish fishing in the EEZ in 2012, and thereafter. Additionally, assuming the ACLs are implemented in 2012 and there are shortened commercial seasons beginning in 2012, St. Thomas/St. John commercial fisherman would lose 93.5 days of angelfish, 90.8 days of boxfish, 20 days of grunts, 193 days of hogfish/wrasses, 56 days of jacks, 25 days of scups and porgies, 52 days of spiny lobster, 84 days of surgeonfish, and 5.5 days of triggerfish fishing in the EEZ in 2012, and thereafter.
The percent of fishable area in the U.S. Virgin Islands' territorial waters is significantly less than the percent of fishable area in Puerto Rico's territorial waters. Thirty-eight percent of fishable area off the U.S. Virgin Islands lies within the U.S. Caribbean EEZ, and a larger share of landings in St. Croix and St. Thomas/St. John derive from fishing in the EEZ than in Puerto Rico. Hence, it is more difficult for U.S. Virgin Islands fishermen to substitute fishing in territorial waters for fishing in Federal waters.
Among the considered but rejected significant alternatives for the action to establish the triggering mechanism for AMs were two alternatives which would use a single year's landings to trigger the AMs. Also considered but rejected were alternatives that would use a single year's landings in 2011 and then use a 2-year annual average starting in 2012 and continuing thereafter to trigger the AMs. The preferred alternative would use a 3-year average starting in 2013 and continuing thereafter. The adverse economic impact of the preferred alternative is less than the adverse economic impacts of the rejected alternatives. This adverse economic impact is less because a 3-year average allows for yearly or 2-year averages to exceed the ACL without triggering a shortened fishing season when the 3-year average may be equal to or less than the ACL.
An alternative that would include an ACL overage payback as part of the action applying an AM when an ACL is exceeded was considered but rejected because it would require a larger reduction in the Federal fishing season, and thus a larger adverse economic impact, than the preferred alternative to not implement an ACL overage payback.
The Council's preferred alternative for Action 1(b) setting the ABC for reef fish sets the ABC equal to the OFL. This alternative would have a smaller indirect adverse economic impact than considered but rejected alternatives that would set lower ABCs, and in turn establish lower ACLs. The preferred alternatives 2(p) (setting ACLs for all reef fish FMUs, except for angelfish and surgeonfish) and 2(n)(setting ACLs for angelfish and surgeonfish), would have
The preferred alternative for Action 2(b) that sets ABC equal to OFL for spiny lobster (alternative 2(g)) would have a smaller indirect adverse economic impact than considered but rejected alternatives that would set lower ABCs, which in turn could lead to lower ACLs. Preferred alternative 2(o) would have a smaller indirect adverse economic impact than the considered but rejected alternatives that would establish lower ACLs.
The preferred alternative for Action 3(b) that sets the ABC equal to the OFL for aquarium trade species (alternative 2(e)) would have a smaller adverse economic impact than considered but rejected alternatives that would establish lower ABCs and likely lower ACLs. Preferred alternative 2(k) that would set the ACL would have a smaller indirect adverse economic impact than the considered but rejected alternative that would establish a lower ACL.
Fisheries, Fishing, Puerto Rico, Reporting and recordkeeping requirements, Virgin Islands.
For the reasons set out in the preamble, 50 CFR part 622, as proposed to be amended at 76 FR 66675, October 27, 2011, is proposed to be further amended as follows:
1. The authority citation for part 622 continues to read as follows:
16 U.S.C. 1801
2. In § 622.39, paragraph (g)(2) is revised and paragraph (h) is added to read as follows:
(g) * * *
(2)
(ii) Other reef fish species combined—5 per person per day or, if 3 or more persons are aboard, 15 per vessel per day, but not to exceed 1 surgeonfish per person per day or 4 surgeonfish per vessel per day.
(h)
(2)
3. In § 622.48, paragraphs (n) and (o) are added to read as follows:
(n)
(o)
4. In § 622.49, introductory paragraph (c) is revised and paragraphs (c)(1)(i)(H) through (R), (c)(1)(ii)(H) through (Q), (c)(2)(i)(E) through (O), (c)(3)(i)(E) through (O), and (c)(4) are added to read as follows:
(c)
(1) * * *
(i) * * *
(H)
(I)
(J)
(K)
(L)
(M)
(N)
(O)
(P)
(Q)
(R)
(ii) * * *
(H)
(I)
(J)
(K)
(L)
(M)
(N)
(O)
(P)
(Q)
(2) * * *
(i) * * *
(E)
(F)
(G)
(H)
(I)
(J)
(K)
(L)
(M)
(N)
(O)
(3) * * *
(i) * * *
(E)
(F)
(G)
(H)
(I)
(J)
(K)
(L)
(M)
(N)
(O)
(4)
(A)
(B)
(ii) [Reserved]
5. Table 5 of Appendix A to part 622 is revised to read as follows:
Queen conch,
Forest Service, USDA.
Notice of meeting cancellation.
The Ashley National Forest Resource Advisory Committee was scheduled to meet on November 10, 2011 from 6 to 8 p.m. in the Forest Supervisor's Office located at 355 North Vernal Avenue, Vernal Utah 84078. The committee is authorized under the Secure Rural Schools and Community Self-Determination Act (Pub. L. 110-343) (the Act) and operates in compliance with the Federal Advisory Committee Act. The committee's charter expired in October 2011 and its renewal is under review by the Secretary of Agriculture. In compliance with the Federal Advisory Committee Act the committee will not be meeting until the charter is renewed.
The cancelled meeting was scheduled for Wednesday, November 10, 2011, from 6 to 8 p.m.
The cancelled meeting would have been held at the Forest Supervisor's Office, 355 North Vernal Avenue, Vernal, Utah 84078. Written comments concerning this cancellation may be submitted to the Designated Federal Officer.
All comments, including names and addresses when provided, are placed in the record and are available for public inspection and copying. The public may inspect comments received at 355 Vernal Avenue, Vernal, Utah 84078. Please call ahead to (435) 781-5105 to facilitate entry into the building to view comments.
JoEllen Keil, Acting Designated Federal Officer, Ashley National Forest, 355 North Vernal Avenue, Vernal, Utah 84078: Telephone: (435) 781-5136 or email at:
Individuals who use telecommunication devices for the deaf (TDD) may call the Federal Information Relay Service (FIRS) at 1-(800) 877-8339 between 8 a.m. and 8 p.m., Eastern Standard Time, Monday through Friday.
Forest Service, USDA.
Notice of meeting cancellation.
The Shasta County Resource Advisory Committee was scheduled to meet Wednesday, November 30, 2011 in Redding, California. The committee is authorized under the Secure Rural Schools and Community Self-Determination Act (Pub. L. 110-343) (the Act) and operates in compliance with the Federal Advisory Committee Act. The committee's charter expired in October 2011 and its renewal is under review by the Secretary of Agriculture. In compliance with the Federal Advisory Committee Act, the committee will not be meeting until the charter is renewed.
The cancelled meeting was scheduled for on 30, November, 2011, 8:30 a.m.
The canceled meeting would have been held at the USDA Service Center, 3644 Avtech Parkway, Redding, California 96002. Written comments concerning this cancellation may be submitted to the Designated Federal Officer.
All comments, including names and addresses when provided, are placed in the record and are available for public inspection and copying. The public may inspect comments received at 3644 Avtech Parkway, Redding, CA 96002. Please call ahead to (530) 226-2500 to facilitate entry into the building to view comments.
Donna Harmon, Designated Federal Officer, Shasta-Trinity National Forest, 3644 Avtech Parkway, Redding, CA 96002. Telephone: (530) 226-2335 or email at:
Individuals who use telecommunication devices for the deaf (TDD) may call the Federal Information Relay Service (FIRS) at 1-(800) 877-8339 between 8 a.m. and 8 p.m., Eastern Standard Time, Monday through Friday.
This is a decision consolidated pursuant to Section 6(c) of the Educational, Scientific, and Cultural Materials Importation Act of 1966 (Pub. L. 89-651, as amended by Pub. L. 106-36; 80 Stat. 897; 15 CFR part 301). Related records can be viewed between 8:30 a.m. and 5 p.m. in Room 3720, U.S. Department of Commerce, 14th and Constitution Avenue NW., Washington, DC.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; receipt of application.
Notice is hereby given that John P. Wise, Sr., Ph.D., Wise Laboratory of Environmental and Genetic Toxicology, Maine Center for Toxicology and Environmental Health University of Southern Maine, 478 Science Building, 96 Falmouth Street Portland, MA 04104-9300, has applied in due form for a permit to receive, import, and export marine mammal and sea turtle biological samples for scientific research purposes.
Written, telefaxed, or email comments must be received on or before December 7, 2011.
The application and related documents are available for review by selecting “Records Open for Public Comment” from the
These documents are also available upon written request or by appointment in the following offices: See
Written comments on this application should be submitted to the Chief, Permits, Conservation and Education Division, at the address listed above. Comments may also be submitted by facsimile to (301) 713-0376, or by email to
Those individuals requesting a public hearing should submit a written request to the Chief, Permits, Conservation and Education Division at the address listed above. The request should set forth the specific reasons why a hearing on this application would be appropriate.
Amy Sloan or Jennifer Skidmore, (301) 427-8401.
The subject permit is requested under the authority of the Marine Mammal Protection Act of 1972, as amended (MMPA; 16 U.S.C. 1361
The objectives of the proposed research are to receive, import, and export tissue samples from marine mammals and sea turtles under NMFS jurisdiction to: (1) Determine tissue levels of metals and other environmental contaminants; and (2) establish a resource of marine mammal and sea turtle cell lines for use as model systems in the investigation of various factors related to marine mammal health and as comparative tools to human studies (toxicity of metals, virology, etc.). When available, frozen and formalin-fixed tissues would be received from the same animals from which cell lines are derived. The applicant proposes to use frozen tissues for contaminant and DNA analysis, and formalin-fixed tissues for pathological studies.
The numbers of animals, by species, from which samples may be received, imported, or exported annually include: 270 sperm whale (
No take would be involved; tissues would be received from the following sources: Stranded animals; animals that die during rehabilitation attempts; animals that die in public display or captive research facilities; animals sampled by other permitted researchers; and animals killed during legal subsistence hunts. Once the cell lines are established, they may be transferred to other researchers for scientific research, including export to world-wide locations. The cell lines would not be sold for profit or used for commercial purposes.
In compliance with the National Environmental Policy Act of 1969 (42 U.S.C. 4321
Concurrent with the publication of this notice in the
Documents may be reviewed in the following locations:
Permits and Conservation Division, Office of Protected Resources, NMFS, 1315 East-West Highway, Room 13705, Silver Spring, MD 20910;
Northwest Region, NMFS, 7600 Sand Point Way NE., BIN C15700, Bldg. 1, Seattle, WA 98115-0700;
Alaska Region, NMFS, P.O. Box 21668, Juneau, AK 99802-1668;
Southwest Region, NMFS, 501 West Ocean Blvd. Suite 4200, Long Beach, CA 90802-4213;
Pacific Islands Region, NMFS, 1601 Kapiolani Blvd. Rm. 1110, Honolulu, HI 96814-4700;
Northeast Region, NMFS, 55 Great Republic Drive, Gloucester, MA 01930;
Southeast Region, NMFS, 263 13th Avenue South, Saint Petersburg, FL 33701;
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of a public meeting.
The Mid-Atlantic Fishery Management Council's (Council) Scientific and Statistical Committee (SSC) will hold a public meeting.
The meeting will be held on Monday, December 5, 2011, from 1 p.m. to 5 p.m.
The meeting will be held via webinar with a telephone-only connection option. Details on webinar registration and the telephone-only connection details are available at:
Christopher M. Moore, Ph.D., Executive Director, Mid-Atlantic Fishery Management Council, 800 North State Street, Suite 201, Dover, DE 19901; telephone: (302) 674-2331, extension 255.
The purpose of the meeting is to reconsider the 2012 ABC recommendations made to the Council for summer flounder and scup based on updated stock assessment information recently provided for both species by the Northeast Fisheries Science Center. Information about accessing the webinar can be obtained by visiting the Council's Web site at
The meeting is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to M. Jan Saunders at the Mid-Atlantic Council Office, (302) 526-5251, at least 5 days prior to the meeting date.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; issuance of permit.
Notice is hereby given that a permit has been issued to Brent Stewart, Ph.D., J.D., Hubbs SeaWorld Research Institute, 2595 Ingraham Street, San Diego, CA 92109 to conduct research on California sea lions (
The permit and related documents are available for review upon written request or by appointment in the following offices:
Permits and Conservation Division, Office of Protected Resources, NMFS, 1315 East-West Highway, Room 13705, Silver Spring, MD 20910;
Southwest Region, NMFS, 501 West Ocean Blvd., Suite 4200, Long Beach, CA 90802-4213;
Carrie Hubard or Amy Sloan, (301) 427-8401.
On August 17, 2011, notice was published in the
Permit No. 16553 authorizes Dr. Stewart to continue a long term study on the comparative ecology, demography, community ecology, foraging patterns, pathology and phenology of pinniped species in California and to further characterize the resources and habitats used by each species. California sea lions, northern elephant seals, and harbor seals may be captured and sampled at several sites: San Nicolas Island, San Miguel Island, Santa Rosa Island, Santa Cruz Island, Piedras Blancas, Cape San Martin, and Gorda. Some animals will only receive a flipper tag or a dye mark. Other animals may be physically or chemically restrained; measured and weighed; have a variety of samples taken, including: Blood, skin, blubber, and mucus membrane swabs; and have tracking or data recording instruments attached. The permit also authorizes up to four unintentional research-related mortalities of each species annually. The permit is valid through October 31, 2016.
In compliance with the National Environmental Policy Act of 1969 (42 U.S.C. 4321
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; receipt of application for permit amendment.
Notice is hereby given that Paul Ponganis, Ph.D., University of California at San Diego, La Jolla, CA, has applied for an amendment to Scientific Research Permit No. 14676.
Written, telefaxed, or email comments must be received on or before December 7, 2011.
The application and related documents are available for review by selecting “Records Open for Public Comment” from the
These documents are also available upon written request or by appointment in the following offices:
Permits and Conservation Division, Office of Protected Resources, NMFS, 1315 East-West Highway, Room 13705, Silver Spring, MD 20910;
Southwest Region, NMFS, 501 West Ocean Blvd., Suite 4200, Long Beach, CA 90802-4213;
Written comments on this application should be submitted to the Chief, Permits, Conservation and Education Division, at the address listed above. Comments may also be submitted by facsimile to (301) 713-0376, or by email to
Those individuals requesting a public hearing should submit a written request to the Chief, Permits, Conservation and Education Division at the address listed above. The request should set forth the specific reasons why a hearing on this application would be appropriate.
Tammy Adams or Amy Sloan, (301) 427-8401.
The subject amendment to Permit No. 14676 is requested under the authority of the Marine Mammal Protection Act of 1972, as amended (16 U.S.C. 1361
Permit No. 14676, issued on January 13, 2010 (75 FR 4046), authorizes the permit holder to capture up to 10 California sea lions (
The permit holder is requesting the permit be amended to include authorization for an additional procedure, deployment of a heart rate/stroke rate recorder, on up to 30 animals over the two field seasons. For this procedure, the holder requests permission to capture an additional 5 animals per year, for a total of 15 per year. The amendment would be valid through the expiration date of the original permit. The objective of this additional procedure is to further investigate the relationship of heart rate and flipper stroke rate patterns to the arterial and venous blood oxygen profiles during deep versus shallow dives.
In compliance with the National Environmental Policy Act of 1969 (42 U.S.C. 4321
Concurrent with the publication of this notice in the
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; issuance of an incidental take authorization (ITA).
In accordance with the Marine Mammal Protection Act (MMPA) regulation, notification is hereby given that NMFS has issued an Incidental Harassment Authorization (IHA) to Scripps Institution of Oceanography (SIO) to take marine mammals, by Level B harassment, incidental to conducting a low-energy marine geophysical (i.e., seismic) survey in the western tropical Pacific Ocean, November to December 2011.
Effective November 5, 2011 through January 31, 2012.
A copy of the IHA and application are available by writing to P. Michael Payne, Chief, Permits and Conservation Division, Office of Protected Resources, National Marine Fisheries Service, 1315 East-West Highway, Silver Spring, MD 20910 or by telephoning the contacts listed here.
A copy of the IHA application containing a list of the references used in this document may be obtained by writing to the above address, telephoning the contact listed here (see
The following associated documents are also available at the same Internet address: “Environmental Assessment Pursuant to the National Environmental Policy Act, 42 U.S.C. 4321,
Howard Goldstein or Jolie Harrison, Office of Protected Resources, NMFS, (301) 427-8401.
Section 101(a)(5)(D) of the MMPA (16 U.S.C. 1371(a)(5)(D)) directs the Secretary of Commerce (Secretary) to authorize, upon request, the incidental, but not intentional, taking of small numbers of marine mammals of a species or population stock, by United States citizens who engage in a specified activity (other than commercial fishing) within a specified geographical region if certain findings are made and, if the taking is limited to harassment, a notice
Authorization for the incidental taking of small numbers of marine mammals shall be granted if NMFS finds that the taking will have a negligible impact on the species or stock(s), and will not have an unmitigable adverse impact on the availability of the species or stock(s) for subsistence uses (where relevant). The authorization must set forth the permissible methods of taking, other means of effecting the least practicable impact on the species or stock and its habitat, and requirements pertaining to the mitigation, monitoring and reporting of such takings. 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.”
Section 101(a)(5)(D) of the MMPA established an expedited process by which citizens of the United States can apply for an authorization to incidentally take small numbers of marine mammals by harassment. Section 101(a)(5)(D) of the MMPA establishes a 45-day time limit for NMFS' review of an application followed by a 30-day public notice and comment period on any proposed authorizations for the incidental harassment of small numbers of marine mammals. Within 45 days of the close of the public comment period, NMFS must either issue or deny the authorization.
Except with respect to certain activities not pertinent here, the MMPA defines “harassment” as:
NMFS received an application on June 14, 2011, from SIO for the taking by harassment, of marine mammals, incidental to conducting a low-energy marine seismic survey in the western tropical Pacific Ocean. SIO, a part of the University of California San Diego, in collaboration with University of Washington (UW), Woods Hole Oceanographic Institution (WHOI), Texas A&M University (TAMU), and Kutztown University, plans to conduct a magnetic and seismic study of the Hawaiian Jurassic crust onboard an oceanographic research vessel in the western tropical Pacific Ocean north of the Marshall Islands for approximately 32 days. The survey will use a pair of Generator Injector (GI) airguns each with a discharge volume of 105 cubic inches (in
SIO plans to use one source vessel, the R/V
Acoustic stimuli (i.e., increased underwater sound) generated during the operation of the seismic airgun array may have the potential to cause a short-term behavioral disturbance for marine mammals in the survey area. This is the principal means of marine mammal taking associated with these activities and SIO has requested an authorization to take 19 species of marine mammals by Level B harassment. Take is not expected to result from the use of the MBES or SBP, for reasons discussed in this notice; nor is take expected to result from collision with the vessel because it is a single vessel moving at a relatively slow speed during seismic acquisition within the survey, for a relatively short period of time (approximately 39 days). It is likely that any marine mammal would be able to avoid the vessel.
SIO's planned seismic survey in the western tropical Pacific Ocean, as part of an integrated magnetic and seismic study of the Hawaiian Jurassic crust, will take place for approximately 32 days in November to December 2011 (see Figure 1 of the IHA application). The seismic survey will take place in water depths ranging from approximately 2,000 to 6,000 meters (m) (6,561.7 to 19,685 feet [ft]) and consist of approximately 1,600 kilometers (km) (863.9 nautical miles [nmi]) of transect lines in the study area. The survey will take place in the area 13° to 23° North, 158° to 172° East, just north of the Marshall Islands. The project is scheduled to occur from approximately November 5 to December 17, 2011. Some minor deviation from these dates is possible, depending on logistics and weather.
The goal of the research is to define the global nature and significance of variations in intensity and direction of the Earth's magnetic field during the Jurassic time period (approximately 145 to 180 million years ago), which appears to have been a period of sustained low intensity and rapid directional changes or polarity reversals compared to other periods in Earth's magnetic field history. Access to Jurassic-aged crust with good magnetic signals is very limited, with the best continuous records in ocean crust, but only one area of the ocean floor has been measured to date: The western Pacific Japanese magnetic lineations. To properly assess the global significance of the variations and to eliminate local crustal and tectonic complications, it is necessary to measure Jurassic magnetic signals in a different area of the world. The study will attempt to verify the unusual behavior of the Jurassic geomagnetic field and test whether it was behaving in a globally coherent way by conducting a near-bottom marine magnetic field survey of Pacific Hawaiian Jurassic crust located between Hawaii and Guam.
Widespread, younger, Cretaceous-aged (65 to 140 million years ago) volcanism overprinted much of the western Pacific, so it is important to know the extent of Cretaceous-aged volcanic crust. This will be assessed by carrying out a seismic reflection and refraction survey of the Hawaiian Jurassic crust. First, the autonomous underwater vehicle (AUV)
The survey will involve one source vessel, the
The survey lines will be within the area enclosed by red lines in Figure 1 of the IHA application, but the exact locations of the survey lines will be determined during transit after observing the location of the appropriate magnetic lineation by surface-towed magnetometer. Magnetic and seismic data acquisition will alternate on a daily basis; seismic surveys will take place while the AUV used to collect magnetic data is on deck to recharge its batteries. In addition to the operations of the airgun array, a Kongsberg EM300 MBES and ODEC Bathy-2000 SBP will also be operated from the
All planned geophysical data acquisition activities will be conducted by technicians provided by SIO, with on-board assistance by the scientists who have planned the study. The Principal Investigators are Drs. Masako Tominaga, Maurice A. Tivey, Daniel Lizarralde of WHOI, William W. Sager of TAMU, and Adrienne Oakley of Kutztown University. The vessel will be self-contained, and the crew will live aboard the vessel for the entire cruise.
The
NMFS outlined the purpose of the program in a previous notice for the proposed IHA (76 FR 45518, July 29, 2011). The activities to be conducted have not changed between the proposed IHA notice and this final notice announcing the issuance of the IHA. For a more detailed description of the authorized action, including vessel and acoustic source specifications, the reader should refer to the proposed IHA notice (76 FR 45518, July 29, 2011), the IHA application, EA, and associated documents referenced above this section.
A notice of proposed IHA for the SIO seismic survey was published in the
Received sound levels have been modeled by L-DEO for a number of airgun configurations, including two 105 in
Empirical data concerning the 190, 180, and 160 dB (rms) distances were acquired for various airgun arrays based on measurements during the acoustic verification studies conducted by L-DEO in the northern GOM in 2003 (Tolstoy
NMFS is confident in the peer-reviewed results of L-DEO's seismic calibration studies, which although viewed as conservative, were used to determine the sound radii for the mitigation airgun for this cruise and which factor into exposure estimates. NMFS had determined that these reviews are the best scientific data available for review of the IHA application and to support the necessary analyses and determinations under the MMPA, Endangered Species Act of 1973 (ESA; 16 U.S.C. 1531
Although, the L-DEO model does not account for site-specific environmental conditions, sound propagation varies notably less between deep water sites than it would between shallow water sites (because of the reduced significance of bottom interaction), thus decreasing the importance of deep water site-specific estimates, such as in this seismic survey. Further, the calibration study of the L-DEO model predicted that using site-specific information may actually provide less conservative EZs at greater distances. At this point in time, the alternative method of conducing site-specific attenuation measurements in the water depths that the survey is to be conducted is neither warranted nor practical for the applicant, both logistically and financially. Should the applicant endeavor to undertake a sound source verification study in the future, confidence in the results is necessary to ensure that appropriate monitoring and mitigation measures are implemented; therefore inappropriate or poorly executed efforts should be avoided and discouraged.
Based on NMFS's analysis of the likely effects of the specified activity on marine mammals and their habitat, NMFS has determined that the EZs identified in the IHA are appropriate for the survey and that additional field measurement is not necessary at this time. While exposures of marine mammals to acoustic stimuli are difficult to estimate, NMFS is confident that the levels of take authorized herein are estimated based upon the best available scientific information and estimation methodology. The 160 dB zone used to estimate exposure is appropriate and sufficient for purposes of supporting NMFS's analysis and determinations required under section 101(a)(5)(D) of the MMPA and its implementing regulations. The IHA issued to SIO provides monitoring and mitigation requirements to protect marine mammals from injury (Level A harassment), serious injury, or mortality. SIO is required to comply with the IHA's requirements.
During periods of active seismic operations, there are occasions when the airguns need to be temporarily shut-down (for example due to equipment failure, maintenance, or shut-down). In these instances, should the airguns be inactive for more than 15 min, then SIO would follow the ramp-up procedures identified in the “Mitigation” section of this document (see below) and IHA where airguns will be re-started beginning with a single GI airgun (105 in
Operationally, it would take 15 min or longer to locate the second PSO and get him or her into position on the ship's deck to monitor for the initial ramp-up procedure or 30 min of observation by two PSOs prior to energizing the sound source; thus, the use of an extended shut-down period of 15 min before requiring an initial ramp-up procedure.
(1) Because the
(2) In many cases PSOs are observing during times when SIO is not operating the seismic airguns and would observe the area prior to the 30-min observation period;
(3) The majority of the species that may be exposed do not stay underwater more than 30 min; and
(4) All else being equal and if deep-diving individuals happened to be in the area in the short time immediately prior to the pre-ramp-up monitoring, if an animal's maximum underwater dive time is 45 min, then there is only a one in three chance that the last random surfacing would occur prior to the beginning of the required 30 min
Finally, seismic vessels are moving continuously (because of the long, towed array and streamer) and NMFS believes that unless the animal submerges and follows at the speed of the vessel (highly unlikely, especially when considering that a significant part of their movement is vertical [deep-diving]), the vessel will be far beyond the length of the EZ within 30 min, and therefore it will be safe to start the airguns again.
The effectiveness of monitoring is science-based, and monitoring and mitigation measures must be “practicable.” NMFS believes that the framework for visual monitoring will: (1) Be effective at spotting almost all species for which take is requested; and (2) that imposing additional requirements, such as those suggested by the Commission, would not meaningfully increase the effectiveness of observing marine mammals approaching or entering the EZs and thus further minimize the potential for take.
(i) Species, group size, age/size/sex categories (if determinable), behavior when first sighted and after initial sighting, heading (if consistent), bearing and distance from the seismic vessel, sighting cue, apparent reaction of the airguns or vessel (e.g., none, avoidance, approach, paralleling, etc., and including responses to ramp-up), and behavioral pace; and
(ii) Time, location, heading, speed, activity of the vessel (including number of airguns operating and whether in state of ramp-up or shut-down), Beaufort wind force and sea state, visibility, and sun glare.
Last year, NMFS issued Letters of Authorization (LOAs) to the U.S. Navy for the incidental take of millions of marine mammals. Since these LOAs were issued, multiple stranding incidents of marine mammals have occurred along U.S. coastlines due to explosives, sonar, and now this seismic survey. There have been other incidents in this area that have not been made public and others that are undocumented.
In addition to this specified activity, the cetaceans of the western tropical Pacific Ocean are impacted from explosives, sonar, pollution, fishing nets and trawls, ship collisions, noise produced by ships, and other scientific and military activities. Whales and dolphins, many species which are already endangered, are essential to the oceans biodiversity, health, and safety. Also, sound pollution should start being reduced as it contaminates the ocean and interferes with the ability of sea creatures to persist. Leading scientific research institutions, such as SIO, should be aware of information regarding the current and increasing anthropogenic impacts upon ocean ecosystems. The private citizens oppose the issuance of an IHA to SIO for conducting a low-energy marine seismic survey in the western tropical Pacific Ocean. One private citizen states that NOAA must prevent by denial, all applications that cause intrusive sound waves into an already confusing and damaging array of anthropogenic created wave forms.
Although several commenter's cited many of the potential negative aspects of the introduction of anthropogenic sound in the marine environment, specific issues related to the content of this IHA request were not necessarily made and therefore proves challenging for NMFS to provide a response. The notice of the proposed IHA (76 FR 45518, July 29, 2011) included a discussion of the effects of sounds from airguns on mysticetes, odontocetes, and pinnipeds including tolerance, masking, behavioral disturbance, hearing impairment, and other non-auditory physical effects. Also, NMFS included a detailed discussion of the potential effects of this action on marine mammal habitat, including physiological and behavioral effects on marine fish, fisheries, and invertebrates. While NMFS anticipates that the specified activity may result in marine mammals avoiding certain areas due to temporary ensonification, this impact to habitat is temporary and reversible which NMFS considered in further detail in the notice of the proposed IHA (76 FR 45518, July 29, 2011) as behavioral modification. The main impact associated with the activity would be temporarily elevated noise levels and the associated direct effects on marine mammals. NMFS refers the reader to SIO's application and EA for additional information on
The U.S. Navy's training operations are considered military readiness activities. The National Defense Authorization Act of 2004 (NDAA) (Pub. L. 108-36) modified the MMPA by removing the “small numbers” and “specified geographic region” limitations and amended the definition of “harassment” as it applies to a “military readiness activity.” NMFS is unaware of marine mammal strandings along U.S. coastlines since these LOAs were issued that have been directly associated with to the U.S. Navy's use of sonar or from seismic airguns operated by academic institutions. NMFS's Marine Mammal Health and Stranding Response Program responds to marine mammals that have stranded along the U.S. coastline and assesses trends in marine mammal health and how these trends correlate with environmental data.
To meet NEPA requirements, NSF prepared an “Environmental Assessment Pursuant to the National Environmental Policy Act, 42 U.S.C. 4321,
Generally, under the MMPA, NMFS shall authorize the harassment of small numbers of marine mammals incidental to an otherwise lawful activity, provided NMFS finds that the taking will have a negligible impact on the species or stock, will not have an unmitigable adverse impact on the availability of the species or stock 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 to achieve the least practicable adverse impact. SIO has applied for an IHA and has met the necessary requirements for issuance of an IHA for small numbers of marine mammals, by Level B harassment, incidental to the low-energy marine seismic survey in the western tropical Pacific Ocean.
No injuries, serious injuries, or mortalities are anticipated to occur as a result of SIO's planned low-energy marine seismic survey in the western tropical Pacific Ocean, and none are authorized by NMFS in IHA issued to SIO. Only short-term, behavioral disturbance is anticipated to occur due to the brief and sporadic duration of the survey activities. NMFS has determined, provided that the mitigation and monitoring measures described below are implemented, that the impact of conducting a marine seismic survey in the western tropical Pacific Ocean, November to December, 2011, may result, at worst, in a temporary modification in behavior and/or low-level physiological effects (Level B harassment) of small numbers of certain species of marine mammals.
Based on the analysis contained in the IHA application, notice of the proposed IHA (76 FR 45518, July 29, 2011), and this document, of the likely effects of the specified activity on marine mammals and their habitat, which is based on the best scientific information available, and taking into consideration the implementation of the mitigation and monitoring measures, NMFS finds that SIO's planned research activities, will result in the incidental take of small numbers of marine mammals, by Level B harassment only, and that the total taking from the marine seismic survey will have a negligible impact on the affected species or stocks of marine mammals; and that impacts to affected species or stocks of marine mammals have been mitigated to the lowest level practicable. Therefore, NMFS shall issue the IHA to SIO.
Twenty-six marine mammal species (19 odontocetes, 6 mysticetes, and one pinniped) are known to or could occur in the Marshall Islands Marine Eco-region (MIME) study area. Several of these species are listed as endangered under the U.S. Endangered Species Act of 1973 (ESA; 16 U.S.C. 1531
The dugong (
The marine mammals that occur in the survey area belong to three taxonomic groups: Odontocetes (toothed cetaceans, such as dolphins), mysticetes (baleen whales), and pinnipeds (seals, sea lions, and walrus). Cetaceans are the subject of the IHA application to NMFS.
Table 1 (below) presents information on the abundance, distribution, population status, conservation status, and density of the marine mammals that may occur in the survey area during November to December 2011.
Refer to section III and IV of SIO's application for detailed information regarding the abundance and distribution, population status, and life history and behavior of these species and their occurrence in the project area. The application also presents how SIO calculated the estimated densities for the marine mammals in the survey area. NMFS has reviewed these data and determined them to be the best available scientific information for the purposes of the IHA.
Acoustic stimuli generated by the operation of the airguns, which introduce sound into the marine environment, may have the potential to cause Level B harassment of marine mammals in the survey area. The effects of sounds from airgun operations might include one or more of the following: Tolerance, masking of natural sounds, behavioral disturbance, temporary or permanent hearing impairment, or non-auditory physical or physiological effects (Richardson
Permanent hearing impairment, in the unlikely event that it occurred, would constitute injury, but temporary threshold shift (TTS) is not an injury (Southall
The notice of the proposed IHA (76 FR 45518, July 29, 2011) included a discussion of the effects of sounds from airguns on mysticetes, odontocetes, and pinnipeds including tolerance, masking, behavioral disturbance, hearing impairment, and other non-auditory physical effects. NMFS refers the reader to SIO's application and EA for additional information on the behavioral reactions (or lack thereof) by all types of marine mammals to seismic vessels.
NMFS included a detailed discussion of the potential effects of this action on marine mammal habitat, including physiological and behavioral effects on marine fish, fisheries, and invertebrates in the notice of the proposed IHA (76 FR 45518, July 29, 2011). While NMFS anticipates that the specified activity may result in marine mammals avoiding certain areas due to temporary ensonification, this impact to habitat is temporary and reversible which NMFS considered in further detail in the notice of the proposed IHA (76 FR 45518, July 29, 2011) as behavioral modification. The main impact associated with the activity would be temporarily elevated noise levels and the associated direct effects on marine mammals.
Recent work by Andre
In order to issue an ITA under section 101(a)(5)(D) of the MMPA, NMFS must set forth the permissible methods of taking pursuant to such activity, and other means of effecting the least practicable impact on such species or stock and its habitat, paying particular attention to rookeries, mating grounds, and areas of similar significance, and the availability of such species or stock for taking for subsistence uses.
SIO has based the mitigation measures described herein, to be implemented for the seismic survey, on the following:
(1) Protocols used during previous SIO seismic research cruises as approved by NMFS;
(2) Previous IHA applications and IHAs approved and authorized by NMFS; and
(3) Recommended best practices in Richardson
To reduce the potential for disturbance from acoustic stimuli associated with the activities, SIO and/or its designees shall implement the following mitigation measures for marine mammals:
(1) Exclusion zones;
(2) Speed or course alteration;
(3) Shut-down procedures; and
(4) Ramp-up procedures.
Empirical data concerning the 190, 180, and 160 dB (rms) distances were acquired for various airgun arrays based on measurements during the acoustic verification studies conducted by L-DEO in the northern GOM in 2003 (Tolstoy
The 180 and 190 dB radii are shut-down criteria applicable to cetaceans and pinnipeds, respectively, as specified by NMFS (2000); these levels were used to establish the EZs. If the PSO detects marine mammal(s) within or about to enter the appropriate EZ, the airguns will be shut-down, immediately.
Table 2 summarizes the predicted distances at which sound levels (160, 180, and 190 dB [rms]) are expected to be received from the two GI airgun array operating in deep water depths. Table 2. Distances to which sound levels ≥ 190, 180, and 160 dB re 1 μPa (rms) could be received in deep water during the seismic survey in the western tropical Pacific Ocean, November to December, 2011. Distances are based on model results provided by L-DEO.
Following a shut-down, SIO will not resume airgun activity until the marine mammal has cleared the EZ. SIO will consider the animal to have cleared the EZ if:
• A PSO has visually observed the animal leave the EZ, or
• A PSO has not sighted the animal within the EZ for 15 min for species with shorter dive durations (i.e., small odontocetes or pinnipeds), or 30 min for species with longer dive durations (i.e., mysticetes and large odontocetes, including sperm, killer, and beaked whales).
Ramp-up will begin with a single GI airgun (105 in
If the complete EZ has not been visible for at least 30 min prior to the start of operations in either daylight or nighttime, SIO will not commence the ramp-up. If one airgun has operated, ramp-up to full power will be permissible at night or in poor visibility, on the assumption that marine mammals will be alerted to the approaching seismic vessel by the sounds from the single airgun and could move away if they choose. A ramp-up from a shut-down may occur at night, but only where the EZ is small enough to be visible. SIO will not initiate a ramp-up of the airguns if a marine mammal is sighted within or near the applicable EZs during the day or close to the vessel at night.
NMFS has carefully evaluated the applicant's mitigation measures and has considered a range of other measures in the context of ensuring that NMFS prescribes the means of effecting the least practicable impact on the affected marine mammal species and stocks and their habitat. NMFS's evaluation of potential measures included consideration of the following factors in relation to one another:
(1) The manner in which, 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.
Based on NMFS's evaluation of the applicant's measures, as well as other
In order to issue an ITA for an activity, section 101(a)(5)(D) 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 IHAs 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 in the action area.
SIO will sponsor marine mammal monitoring during the present project, in order to implement the mitigation measures that require real-time monitoring, and to satisfy the monitoring requirements of the IHA. SIO's “Monitoring Plan” is described below this section. The monitoring work described here has been planned as a self-contained project independent of any other related monitoring projects that may be occurring simultaneously in the same regions. SIO is prepared to discuss coordination of its monitoring program with any related work that might be done by other groups insofar as this is practical and desirable.
SIO's PSOs will be based aboard the seismic source vessel and will watch for marine mammals near the vessel during daytime airgun operations and during any ramp-ups at night. PSOs will also watch for marine mammals near the seismic vessel for at least 30 min prior to the ramp-up of airgun operations after an extended shut-down (i.e., greater than approximately 15 min for this cruise). When feasible, PSOs will conduct observations during daytime periods when the seismic system is not operating for comparison of sighting rates and behavior with and without airgun operations and between acquisition periods. Based on PSO observations, the airguns will be shut-down when marine mammals are observed within or about to enter a designated EZ. The EZ is a region in which a possibility exists of adverse effects on animal hearing or other physical effects.
During seismic operations in the western tropical Pacific Ocean, at least three PSOs will be based aboard the
The
During daytime, the PSOs will scan the area around the vessel systematically with reticle binoculars (e.g., 7 x 50 Fujinon), Big-eye binoculars (25 x 150), optical range finders and with the naked eye. During darkness, night vision devices (NVDs) will be available, when required. The PSOs will be in wireless communication with the vessel's officers on the bridge and scientists in the vessel's operations laboratory, so they can advise promptly of the need for avoidance maneuvers or seismic source shut-down. When marine mammals are detected within or about to enter the designated EZ, the airguns will immediately be shut-down if necessary. The PSO(s) will continue to maintain watch to determine when the animal(s) are outside the EZ by visual confirmation. Airgun operations will not resume until the animal is confirmed to have left the EZ, or if not observed after 15 min for species with shorter dive durations (small odontocetes and pinnipeds) or 30 min for species with longer dive durations (mysticetes and large odontocetes, including sperm, killer, and beaked whales).
PSOs will record data to estimate the numbers of marine mammals exposed to various received sound levels and to document apparent disturbance reactions or lack thereof. Data will be used to estimate numbers of animals potentially “taken” by harassment (as defined in the MMPA). They will also provide information needed to order a shut-down of the airguns when a marine mammal is within or near the EZ. Observations will also be made during daytime periods when the
When a sighting is made, the following information about the sighting will be recorded:
1. Species, group size, age/size/sex categories (if determinable), behavior when first sighted and after initial sighting, heading (if consistent), bearing and distance from seismic vessel, sighting cue, apparent reaction to the airguns or vessel (e.g., none, avoidance, approach, paralleling, etc.), and behavioral pace.
2. Time, location, heading, speed, activity of the vessel, Beaufort sea state, visibility, and sun glare.
The data listed under (2) will also be recorded at the start and end of each observation watch, and during a watch whenever there is a change in one or more of the variables.
All observations as well as information regarding shut-downs of the seismic source, will be recorded in a standardized format. The data accuracy will be verified by the PSOs at sea, and preliminary reports will be prepared during the field program and summaries forwarded to the operating institution's shore facility and to NSF weekly or more frequently.
Vessel-based observations by the PSO will provide:
1. The basis for real-time mitigation (airgun shut-down).
2. Information needed to estimate the number of marine mammals potentially taken by harassment, which must be reported to NMFS.
3. Data on the occurrence, distribution, and activities of marine mammals in the area where the seismic study is conducted.
4. Information to compare the distance and distribution of marine mammals relative to the source vessel at times with and without seismic activity.
5. Data on the behavior and movement patterns of marine mammals seen at times with and without seismic activity.
SIO will submit a report to NMFS and NSF within 90 days after the end of the cruise. The report will describe the operations that were conducted and sightings of marine mammals near the operations. The report will provide full documentation of methods, results, and interpretation pertaining to all
In the unanticipated event that the specified activity clearly causes the take of a marine mammal in a manner prohibited by the IHA, such as an injury (Level A harassment), serious injury or mortality (e.g., ship-strike, gear interaction, and/or entanglement), SIO will immediately cease the specified activities and immediately report the incident to the Chief of the Permits and Conservation Division, Office of Protected Resources, NMFS at (301) 427-8401 and/or by email to
• Time, date, and location (latitude/longitude) of the incident;
• Name and type of vessel involved;
• Vessel's speed during and leading up to the incident;
• Description of the incident;
• Status of all sound source use in the 24 hours preceding the incident;
• Water depth;
• Environmental conditions (e.g., wind speed and direction, Beaufort sea state, cloud cover, and visibility);
• Description of all marine mammal observations in the 24 hours preceding the incident;
• Species identification or description of the animal(s) involved;
• Fate of the animal(s); and
• Photographs or video footage of the animal(s) (if equipment is available). Activities shall not resume until NMFS is able to review the circumstances of the prohibited take. NMFS shall work with SIO to determine what is necessary to minimize the likelihood of further prohibited take and ensure MMPA compliance. SIO may not resume their activities until notified by NMFS via letter or email, or telephone.
In the event that SIO discovers an injured or dead marine mammal, and the lead PSO determines that the cause of the injury or death is unknown and the death is relatively recent (i.e., in less than a moderate state of decomposition as described in the next paragraph), SIO will immediately report the incident to the Chief of the Permits and Conservation Division, Office of Protected Resources, NMFS, at (301) 427-8401, and/or by email to
In the event that SIO discovers an injured or dead marine mammal, and the lead PSO determines that the injury or death is not associated with or related to the activities authorized in the IHA (e.g., previously wounded animal, carcass with moderate to advanced decomposition, or scavenger damage), SIO will report the incident to the Chief of the Permits and Conservation Division, Office of Protected Resources, NMFS, at (301) 427-8401, and/or by email to
Except with respect to certain activities not pertinent here, the MMPA defines “harassment” as:
Any act of pursuit, torment, or annoyance which (i) has the potential to injure a marine mammal or marine mammal stock in the wild [Level A harassment]; or (ii) has the potential to disturb a marine mammal or marine mammal stock in the wild by causing disruption of behavioral patterns, including, but not limited to, migration, breathing, nursing, breeding, feeding, or sheltering [Level B harassment].
Only take by Level B harassment is anticipated and authorized as a result of the marine geophysical survey in the western tropical Pacific Ocean. Acoustic stimuli (i.e., increased underwater sound) generated during the operation of the seismic airgun array may have the potential to cause marine mammals in the survey area to be exposed to sounds at or greater than 160 dB or cause temporary, short-term changes in behavior. There is no evidence that the planned activities could result in injury, serious injury, or mortality within the specified geographic area for which NMFS has issued the IHA. Take by injury, serious injury, or mortality is thus neither anticipated nor authorized. NMFS has determined that the required mitigation and monitoring measures will minimize any potential risk for injury, serious injury, or mortality.
The following sections describe SIO's methods to estimate take by incidental harassment and present the applicant's estimates of the numbers of marine mammals that could be affected during the seismic program. The estimates are based on a consideration of the number of marine mammals that could be disturbed appreciably by operations with the two GI airgun array to be used during approximately 1,600 km of survey lines in the western tropical Pacific Ocean.
SIO assumes that, during simultaneous operations of the airgun array and the other sources, any marine mammals close enough to be affected by the MBES and SBP would already be affected by the airguns. However, whether or not the airguns are operating simultaneously with the other sources, marine mammals are expected to exhibit no more than short-term and inconsequential responses to the MBES and SBP given their characteristics (e.g., narrow, downward-directed beam) and other considerations described previously. Such reactions are not considered to constitute “taking” (NMFS, 2001). Therefore, SIO provides no additional allowance for animals that could be affected by sound sources other than airguns.
Extensive systematic ship-based surveys have been conducted by NMFS Southwest Fisheries Science Center (SWFSC) for marine mammals in the eastern, but not the western tropical Pacific Ocean. A systematic vessel-based marine mammal survey was conducted approximately 2,500 km (1,349.9 nmi) west of the planned survey area in the Commonwealth of the Northern Mariana Islands (CNMI) for the U.S. Navy during January to April, 2007 (SRS-Parsons
SIO used densities that were the effort-weighted means for the CNMI (Fulling
There is some uncertainty about the representativeness of the data and the assumptions used in the calculations, for example:
(1) The timing of most of the surveys was different, the CNMI survey was from January to April, the Hawaii survey was from August to November, and the SIO survey is from November to December;
(2) Locations were also different, with the survey area approximately 2,500 km east of the CNMI and approximately 3,500 km west of Hawaii; and
(3) Most of the Marianas survey was in high sea states that would have prevented detection of many marine mammals, especially cryptic species such as beaked whales and
SIO's estimates of exposures to various sound levels assume that the surveys will be fully completed; in fact, the ensonified areas calculated using the planned number of line-km have been increased by 25% to accommodate turns, lines that may need to be repeated, equipment testing, etc. As is typical during offshore ship surveys, inclement weather and equipment malfunctions are likely to cause delays and may limit the number of useful line-kilometers of seismic operations that can be undertaken. Furthermore, any marine mammal sightings within or near the designated EZs will result in the shut-down of seismic operations as a mitigation measure. Thus, the following estimates of the numbers of marine mammals potentially exposed to sound levels of 160 dB re 1 µPa (rms) are precautionary and probably overestimate the actual numbers of marine mammals that might be involved. These estimates also assume that there will be no weather, equipment, or mitigation delays, which is highly unlikely.
SIO estimated the number of different individuals that may be exposed to airgun sounds with received levels greater than or equal to 160 dB re 1 µPa (rms) on one or more occasions by considering the total marine area that would be within the 160 dB radius around the operating airgun array on at least one occasion, along with the expected density of marine mammals in the area. The seismic lines do not run parallel to each other in close proximity and the ensonified areas do not overlap, thus an individual mammal that was stationary would be exposed once during the survey.
The numbers of different individuals potentially exposed to greater than or equal to 160 dB (rms) were calculated by multiplying the expected species density times the anticipated area to be ensonified. The area was determined by entering the planned survey lines into a MapInfo GIS, using the GIS to identify the relevant areas by “drawing” the applicable 160 dB buffer (see Table 1 of the IHA application) around each seismic line, and then calculating the total area within the buffers. For this survey, there were no areas of overlap because of crossing lines.
Applying the approach described above, approximately 2,144 km
Table 3 (Table 4 of the IHA application) shows the estimates of the number of different individual marine mammals that potentially could be exposed to greater than or equal to 160 dB re 1 μPa (rms) during the seismic survey if no animals moved away from the survey vessel. The requested take authorization is given in Table 3 (below; the far right column of Table 4 of the IHA application). For ESA listed species, the requested take authorization has been increased to the mean group size in the CNMI (Fulling
The estimate of the number of individual cetaceans that could be exposed to seismic sounds with received levels greater than or equal to 160 dB re 1 μPa (rms) during the survey is 632 animals (118 individual cetaceans were estimated Table 4 of the IHA application). That total includes 2 Bryde's whale, 2 sei whales, 25 sperm whales, 5 pygmy sperm whales, 12 dwarf sperm whales, 10 Cuvier's beaked whales, 18 Longman's beaked whale, 2 Blainville's beaked whales, 20 rough-toothed dolphins, 20 bottlenose dolphins, 64 pantropical spotted dolphins, 98 spinner dolphins, 27 striped dolphins, 182 Fraser's dolphins, 15 Risso's dolphin, 95 melon-headed whales, 10 false killer whales, 7 killer whales, and 18 short-finned pilot whales which would represent less than 0.01%, 0.03%, 0.08%, NA, 0.11%, 0.05%, NA, less than 0.01%, 0.01%, less than 0.01%, less than 0.01%, 0.01%, less than 0.01%, 0.06%, less than 0.01%, 0.21%, 0.03%, 0.08%, and less than 0.01% of the regional populations, respectively. Most (58.2%) of the cetaceans potentially exposed are delphinids; pantropical spotted, striped, and Fraser's dolphins, as well as melon-headed whales, are estimated to be the most common species in the study area. The authorized incidental take numbers of Bryde's (2), sei (2), sperm (25), Longman's beaked (18), melon-headed (95), false killer (10), killer (7), and short-finned pilot whales (18) as well as rough-toothed (20), bottlenose (20),
SIO and NSF will coordinate the planned marine mammal monitoring program associated with the seismic survey in the western tropical Pacific Ocean with any parties that may have or express an interest in the seismic survey. UW will work with the U.S. Department of State to obtain the necessary approvals for operating in the foreign EEZ of the Republic of the Marshall Islands.
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 evaluated factors such as:
(1) The number of anticipated injuries, serious injuries, or mortalities;
(2) The number, nature, and intensity, and duration of Level B harassment (all relatively limited);
(3) The context in which the takes occur (i.e., impacts to areas of significance, impacts to local populations, and cumulative impacts when taking into account successive/contemporaneous actions when added to baseline data);
(4) The status of stock or species of marine mammals (i.e., depleted, not depleted, decreasing, increasing, stable, and impact relative to the size of the population);
(5) Impacts on habitat affecting rates of recruitment/survival; and
(6) The effectiveness of monitoring and mitigation measures (i.e., the manner and degree in which the measure is likely to reduce adverse impacts to marine mammals, the likely effectiveness of the measures, and the practicability of implementation).
For reasons stated previously in this document, and in the notice of the proposed IHA (76 FR 45518, July 29, 2011), the specified activities associated with the marine seismic survey are not likely to cause PTS, or other non-auditory injury, serious injury, or death because:
(1) The likelihood that, given sufficient notice through relatively slow ship speed, marine mammals are expected to move away from a noise source that is annoying prior to its becoming potentially injurious;
(2) The potential for temporary or permanent hearing impairment is
(3) The fact that pinnipeds would have to be closer than 20 m (65.6 ft) in deep water when the two GI airgun array is in use at 3 m (9.8 ft) tow depth from the vessel to be exposed to levels of sound believed to have even a minimal chance of causing PTS;
(4) The fact that cetaceans would have to be closer than 70 m (229.7 ft) in deep water when the two GI airgun array is in 3 m tow depth from the vessel to be exposed to levels of sound believed to have even a minimal chance of causing PTS; and
(5) The likelihood that marine mammal detection ability by trained PSOs is high at close proximity to the vessel.
No injuries, serious injuries, or mortalities are anticipated to occur as a result of SIO's planned marine seismic survey, and none are authorized by NMFS. Only short-term, behavioral disturbance is anticipated to occur due to the brief and sporadic duration of the survey activities. Table 3 in this document outlines the number of Level B harassment takes that are anticipated as a result of the activities. Due to the nature, degree, and context of Level B (behavioral) harassment anticipated and described (see “Potential Effects on Marine Mammals” section above) in this notice, the activity is not expected to impact rates of recruitment or survival for any affected species or stock. Additionally, the seismic survey will not adversely impact marine mammal habitat.
Many animals perform vital functions, such as feeding, resting, traveling, and socializing, on a diel cycle (i.e., 24 hr cycle). Behavioral reactions to noise exposure (such as disruption of critical life functions, displacement, or avoidance of important habitat) are more likely to be significant if they last more than one diel cycle or recur on subsequent days (Southall
Of the 26 marine mammal species under NMFS jurisdiction that are known to or likely to occur in the study area, six are listed as threatened or endangered under the ESA: Humpback, sei, fin, blue, and sperm whales, and Hawaiian monk seals. These species are also considered depleted under the MMPA. Of these ESA-listed species, incidental take has been authorized for sei and sperm whales. The Hawaiian monk seal population has generally been decreasing (the main Hawaiian islands population appears to be increasing). There is generally insufficient data to determine population trends for the other depleted species in the study area. To protect these animals (and other marine mammals in the study area), SIO must cease or reduce airgun operations if animals enter designated zones. No injury, serious injury, or mortality is expected to occur and due to the nature, degree, and context of the Level B harassment anticipated, the activity is not expected to impact rates of recruitment or survival.
As mentioned previously, NMFS estimates that 19 species of marine mammals under its jurisdiction could be potentially affected by Level B harassment over the course of the IHA. For each species, these numbers are small (each less than one percent) relative to the regional population size. The population estimates for the marine mammal species that may be taken by Level B harassment were provided in Table 1 of this document.
NMFS's practice has been to apply the 160 dB re 1 µPa (rms) received level threshold for underwater impulse sound levels to determine whether take by Level B harassment occurs. Southall
NMFS has determined, provided that the aforementioned mitigation and monitoring measures are implemented, that the impact of conducting a marine geophysical survey in the western tropical Pacific Ocean, November to December, 2011, may result, at worst, in a temporary modification in behavior and/or low-level physiological effects (Level B harassment) of small numbers of certain species of marine mammals. See Table 3 (above) for the requested authorized take numbers of cetaceans.
While behavioral modifications, including temporarily vacating the area during the operation of the airgun(s), may be made by these species to avoid the resultant acoustic disturbance, the availability of alternate areas within these areas and the short and sporadic duration of the research activities, have led NMFS to determine that this action will have a negligible impact on the species in the specified geographic region.
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 SIO's planned research activities, will result in the incidental take of small numbers of marine mammals, by Level B harassment only, and that the total taking from the marine seismic survey will have a negligible impact on the affected species or stocks of marine mammals; and that impacts to affected species or stocks of marine mammals have been mitigated to the lowest level practicable.
Section 101(a)(5)(D) also requires NMFS to determine that the authorization will not have an unmitigable adverse effect on the availability of marine mammal species or stocks for subsistence use. There are no relevant subsistence uses of marine mammals in the study area (offshore waters of the western tropical Pacific Ocean) that implicate MMPA section 101(a)(5)(D).
Of the species of marine mammals that may occur in the survey area, several are listed as endangered under the ESA, including the humpback, sei, fin, blue, and sperm whales, as well as the Hawaiian monk seal. Under section 7 of the ESA, NSF initiated formal consultation with the NMFS, Office of Protected Resources, Endangered Species Act Interagency Cooperation Division, on this seismic survey. NMFS's Office of Protected Resources, Permits and Conservation Division, initiated formal consultation under section 7 of the ESA with NMFS's Office of Protected Resources, Endangered Species Act Interagency Cooperation Division, to obtain a Biological Opinion (BiOp) evaluating the effects of issuing the IHA on threatened and endangered marine mammals and, if appropriate, authorizing incidental take. In November, 2011, NMFS issued a BiOp and concluded that the action and issuance of the IHA are not likely to jeopardize the continued existence of humpback, sei, fin, blue, and sperm whales, or the Hawaiian monk seal. NSF
NSF prepared an “Environmental Assessment Pursuant to the National Environmental Policy Act, 42 U.S.C. 4321,
NMFS has issued an IHA to SIO for the take, by Level B harassment, of small numbers of marine mammals incidental to conducting a marine seismic survey in the western tropical Pacific Ocean, provided the previously mentioned mitigation, monitoring, and reporting requirements are incorporated.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; proposed modification to letters of authorization; request for comments.
NMFS has received an application from the U.S. Navy (Navy) for modification of three Letters of Authorizations (LOAs) NMFS issued to take marine mammals, by harassment, incidental to conducting training exercises within the Navy's Virginia Capes (VACAPES), Jacksonville (JAX), and Cherry Point (CHPT) Range Complexes off the East Coast of the U.S. Pursuant to the Marine Mammal Protection Act (MMPA), NMFS is requesting comments on its proposal to issue three modified LOAs to the Navy to incidentally take marine mammals by harassment during the specified activity. These three LOAs, if issued, would supersede those issued on June 1, 2011, but would maintain the same expiration date (May 31, 2012).
Comments and information must be received no later than December 7, 2011.
Comments on the application should be addressed to Michael Payne, Chief, Permits, Conservation and Education Division, Office of Protected Resources, National Marine Fisheries Service, 1315 East-West Highway, Silver Spring, MD 20910. The mailbox address for providing email comments is
Instructions: All comments received are a part of the public record and will generally be posted to
A copy of the application used in this document may be obtained by writing to the address specified above, telephoning the contact listed below (see
Shane Guan, Office of Protected Resources, NMFS, (301) 427-8418.
Section 101(a)(5)(A) of the MMPA (16 U.S.C. 1361
Authorization may be granted for periods of 5 years or less if NMFS finds that the taking will have a negligible impact on the species or stock(s), and will not have an unmitigable adverse impact on the availability of the species or stock(s) for certain subsistence uses. In addition, NMFS must prescribe regulations that include permissible methods of taking and other means effecting the least practicable adverse impact on the species and its habitat, and on the availability of the species for subsistence uses, paying particular attention to rookeries, mating grounds, and areas of similar significance. The regulations also must include requirements pertaining to the monitoring and reporting of such taking.
Regulations governing the taking of marine mammals incidental to the U.S. Navy's training activities at the Navy's VACAPES, JAX, and Cherry Point range complexes were published on June 15, 2009 (VACAPES: 74 FR 28328; JAX: 74 FR 28349; CHPT: 74 FR 28370) and remain in effect through June 4, 2014. They are codified at 50 CFR part 218 subpart A (for VACAPES Range Complex), subpart B (for JAX Range Complex), and subpart C (for Cherry Point Range Complex). These regulations include mitigation, monitoring, and reporting requirements for the incidental taking of marine mammals by the Navy's range complex training exercises. For detailed information on these actions, please refer to the June 15, 2009
An interim final rule was issued on May 26, 2011 (76 FR 30552) to allow
On July 6, 2011, NMFS received a request from the U.S. Navy for modifications to three LOAs issued by NMFS on June 1, 2011, to take marine mammals incidental to training activities at VACAPES, JAX, and CHPT Range Complexes (76 FR 33266; June 8, 2011). Specifically, the Navy requests that NMFS modify these LOAs to include taking of marine mammals incidental to mine neutralization training using time-delay firing devices (TDFD) within the above Range Complexes, along with revised mitigation measures, to ensure that effects to marine mammals resulting from these activities will not exceed what was originally analyzed in the Final Rules for these Range Complexes (VACAPES: 74 FR 28328; JAX: 74 FR 28349; CHPT: 74 FR 28370). The potential effects of mine neutralization training on marine mammals were comprehensively analyzed in the Navy's 2009 final regulations for these three Range Complexes and mine neutralization training has been included in the specified activity in the associated 2009, 2010, and 2011 LOAs. However, the use of TDFD and the associated mitigation measures have not been previously contemplated, which is why NMFS believes it is appropriate to provide these proposed modified LOAs to the public for review.
On March 4, 2011, a mine neutralization training event using TDFDs is believed to have likely resulted in the death of 5 dolphins in Navy's Silver Strand Training Complex. In short, a TDFD device begins a countdown to a detonation event that cannot be stopped, for example, with a 10-min TDFD, once the detonation has been initiated, 10 minutes pass before the detonation occurs and the event cannot be cancelled during that 10 minutes. Following the March 4th event, the Navy initiated an evaluation of mine neutralization events occurring within the VACAPES, JAX, and CHPT Range Complexes and realized that TDFDs were being used at those Range Complexes. According to the Navy, less than 3% of all MINEX events would not use TDFD. As a result, the Navy subsequently suspended all underwater explosive detonations using TDFDs during training, and the three LOAs issued on June 1, 2011, by NMFS specifically do not cover marine mammals taken incidentally as a result of such training activities. While this suspension is in place, the Navy has been working with NMFS to develop a more robust monitoring and mitigation plan to ensure that marine mammal mortality and injury would not occur during mine neutralization training activities using TDFDs. The following sections provide detailed descriptions regarding the mine neutralization training activities, the current mitigation measures, and the Navy's proposed revisions to mitigation measures that are intended to prevent mortality and injury to marine mammals.
The Navy's requests the revised LOAs remain valid until June 2012. A detailed description of the Navy's LOA modification request can be found on NMFS Web site:
Explosive Ordnance Disposal (EOD) personnel require realistic training before conducting high risk, real-world operations. Such real-world operations include those similar to recent world events requiring movement of assets from sea to land and back to sea. These real-world operations involve non-permissive environments (
EOD personnel detect, identify, evaluate, neutralize, raise, tow, beach, and exploit mines. Neutralizing an influence mine (
During a mine neutralization exercise, if the mine is located on the water's surface, then EOD divers are deployed via helicopter. If the mine is located at depth, then EOD divers are deployed via small boat. The neutralization of mines in the water is normally executed with an explosive device and may involve detonation of up to 20 pounds net explosive weight of explosives. The charge is set with a TDFD since this is the method of detonating the charge in a real-world event.
TDFDs are the safest and most operationally sound method of initiating a demolition charge on a floating mine or mine at depth. TDFDs are used because of their ease of employment, light weight, low magnetic signature, and because they completely eliminate the need to re-deploy swimmers from a helicopter to recover equipment used with positive control firing devices,
By using electronic devices as an alternative to a TDFD, such as positive control devices that do not include a delay, additional metal is unnecessarily introduced into an influence ordnance operating environment, which means an environment that includes mines equipped with firing circuits (an “influence firing circuit”) that may be actuated by magnetic, pressure, or acoustic influences. While positive control devices do allow for instantaneous detonation of the charge, they introduce operationally unsound tactics, thereby increasing risks to the dive team. It is essential that the platoons train like they operate by using TDFDs. In a live mine field, MCM platoons expect there to be additional risks, such as unknown mines with different types of influence firing circuits that can be in close proximity to the mine they are prosecuting. The use of a TDFD reduces these risks by limiting the possibility of unintentionally triggering the influence firing circuits.
A Radio Firing Device (RFD), a type of positive control device, can be used to initiate the charge on a bottom mine, but it is not normally used as a primary firing device due to hazards of electromagnetic radiation to ordnance concerns of the electric detonator, Operational Risk Management (ORM) (
Adding a positive control firing device to a TDFD as a primary means of detonation is not practicable due to ORM considerations. It is not sound
Mine neutralization training, as described in the regulations, involves neutralizing either a simulated mine on the surface or at depth. The ratio between surface detonations and bottom detonations (at depth) for EOD is about 50/50. This is dependent mainly on range availability and weather conditions. During neutralization of a surface mine, EOD divers are deployed and retrieved via helicopter. However, when helicopter assets are unavailable, a small boat is used as is done with neutralization of a mine at depth. During training exercises, regardless of whether a helicopter or small boat is used, a minimum of two small boats participate in the exercise.
For a surface mine neutralization training event involving a helicopter or a boat, the minimum time-delay that is reasonable for EOD divers to make their way outside of the detonation plume radius/human safety buffer zone (typically 1,000 ft (334 yd)) is 10 min. For mine neutralization training events at depth using small boats, the time-delay can be minimized to 5 min. However, this would require the instructors to handle initiation of the detonation and therefore would result in decreased training value for students.
The range area and associated support equipment are required for a 6-8 hour window. Training exercises are conducted during daylight hours for safety reasons.
The Navy is proposing to conduct MINEX activities using TDFDs. The number and description of MINEX events would remain otherwise unchanged from the 2011 Request for Letter of Authorization (DoN 2011) for each of the three Range Complexes.
Current mitigation measures for mine neutralizing training as required under the June 2011 LOAs issued to the Navy in the three Range Complexes included:
(A) This activity shall only occur in W-50 of the VACAPES Range Complex, Undet North and Undet South of the JAX Range Complex, and Mine Neutralization Box of Area 15 of the CHPT Range Complex.
(B) Observers shall survey the Zone of Influence (ZOI), a 700 yd (640 m) radius from detonation location for marine mammals from all participating vessels during the entire operation. A survey of the ZOI (minimum of 3 parallel tracklines 219 yd [200 m] apart) using support craft shall be conducted at the detonation location 30 minutes prior through 30 minutes post detonation. Aerial survey support shall be utilized whenever assets are available.
(C) Detonation operations shall be conducted during daylight hours only.
(D) If a marine mammal is sighted within the ZOI, the animal shall be allowed to leave of its own volition. The Navy shall suspend detonation exercises and ensure the area is clear of marine mammals for a full 30 minutes prior to detonation.
(E) No detonation shall be conducted using time-delay devices.
(F) Divers placing the charges on mines and dive support vessel personnel shall survey the area for marine mammals and shall report any sightings to the surface observers. These animals shall be allowed to leave of their own volition and the ZOI shall be clear of marine mammals for 30 minutes prior to detonation.
(G) No detonations shall take place within 3.2 nm (6 km) of an estuarine inlet.
(H) No detonations shall take place within 1.6 nm (3 km) of shoreline.
(I) Personnel shall record any protected species observations during the exercise as well as measures taken if species are detected within the ZOI.
NMFS worked with the Navy and developed a series of modifications to improve monitoring and mitigation measures so that take of marine mammals will be minimized and that no risk of injury and/or mortality to marine mammal would result from the Navy's use of TDFD mine neutralization training exercises. The following proposed modifications to the mitigation and monitoring measures are specific to Mine Neutralization training exercises involving TDFDs conducted within the VACAPES, JAX, and CHPT Range Complexes.
(A) This activity shall only occur in W-50 of the VACAPES Range Complex, Undet North and Undet South of the JAX Range Complex, and Mine Neutralization Box of Area 15 of the CHPT Range Complex.
(B) Visual Observation and Exclusion Zone Monitoring.
The estimated potential for marine mammals to be exposed during MINEX training events is not expected to change with the use of TDFDs, as the same amount of explosives will be used and the same area ensonified/pressurized regardless of whether TDFDs are involved. This is due to the fact that estimated exposures are based on the probability of the animals occurring in the area when a training event is occurring, and this probability does not change because of a time-delay. However, what does change is the potential effectiveness of the current mitigation that is implemented to reduce the risk of exposure.
The locations selected for MINEX are all close to shore (~3-12 nm) and in shallow water (~ 10-20 m) in all three Range Complexes. Based on marine mammal monitoring during prior MINEX training activities and data from recent monitoring surveys, delphinids (mainly bottlenose dolphins) are the most likely species to be encountered in these areas. However, mitigation measures apply to all species and will be implemented if any marine mammal species is sighted.
The rationale used to develop new monitoring zones to reduce potential impacts to marine mammals when using a TDFD is as follows: The Navy has identified the distances at which the sound and pressure attenuate below NMFS injury criteria (
However, it is possible that some animals may travel faster than the average swim speed noted above, thus there may be a possibility that these faster swimming animals would enter the buffer zone during time-delayed to detonation. In order to compensate for the swim distance potentially covered by faster swimming marine mammals, an additional correction factor was applied to increase the size of the buffer zones radii. Specifically, three sizes of buffer zones are proposed for the ease of monitoring operations based on size of charge and length of time-delay, with an additional buffer added to account for faster swim speed. These revised buffer zones are shown in Table 3. As long as animals are not observed within the buffer zones before the time-delay detonation is set, then the animals would be unlikely to swim into the injury zone from outside the area within the time-delay window.
The current mitigation measure specifies that parallel tracklines will be surveyed at equal distances apart to cover the buffer zone. Considering that the buffer zone for protection of a delphinid may be larger than specified in the current mitigation, a more effective and practicable method for surveying the buffer zone is for the survey boats to position themselves near the mid-point of the buffer zone radius (but always outside the detonation plume radius/human safety zone) and travel in a circular pattern around the detonation location surveying both the inner (toward detonation site) and outer (away from detonation site) areas of the buffer zone, with one observer looking inward toward the detonation site and the other observer looking outward. When using 2 boats, each boat will be positioned on opposite sides of the detonation location, separated by 180 degrees. When using more than 2 boats, each boat will be positioned equidistant from one another (120 degrees separation for 3 boats, 90 degrees separation for 4 boats, etc.). Helicopters will travel in a circular pattern around the detonation location when used.
During mine neutralization exercises involving surface detonations, a helicopter deploys personnel into the water to neutralize the simulated mine. The helicopter will be used to search for any marine mammals within the buffer zone. Use of additional Navy aircraft beyond those participating in the exercise was evaluated. Due to the limited availability of Navy aircraft and logistical constraints, the use of additional Navy aircraft beyond those participating directly in the exercise was deemed impracticable. A primary logistical constraint includes coordinating the timing of the detonation with the availability of the aircraft at the exercise location. Exercises typically last most of the day and would require an aircraft to be dedicated to the event for the entire day to ensure proper survey of the buffer zone 30 minutes prior to and after the detonation. The timing of the detonation may often shift throughout the day due to training tempo and other factors,
Based on the above reasoning, the modified monitoring and mitigation for visual observation is proposed as the following:
A buffer zone around the detonation site will be established to survey for marine mammals. Events using positive detonation control will use a 700 yd radius buffer zone. Events using time-delay firing devices will use the table below to determine the radius of the buffer zone. Time-delays longer than 10 minutes will not be used. Buffer zones of 1,000 yds or less shall use a minimum of 2 boats to survey for marine mammals. Buffer zones greater than 1,000 yds radius shall use 3 boats or 1 helicopter and 2 boats to conduct surveys for marine mammals. Two dedicated observers in each of the boats will conduct continuous visual survey of the buffer zone for marine mammals for the entire duration of the training event. The buffer zone will be surveyed from 30 minutes prior to the detonation and for 30 minutes after the detonation. Other personnel besides the observers can also maintain situational awareness on the presence of marine mammals and sea turtles within the buffer zone to the best extent practical given dive safety considerations. If available, aerial visual survey support from Navy helicopters can be utilized, so long as to not jeopardize safety of flight.
When conducting the survey, boats will position themselves at the mid-point of the buffer zone radius (but always outside the detonation plume radius/human safety zone) and travel in a circular pattern around the detonation location surveying both the inner (toward detonation site) and outer (away from detonation site) areas of the buffer zone. To the extent practicable, boats will travel at 10 knots to ensure adequate coverage of the buffer zone. When using 2 boats in a 1,000 yds buffer zone, each boat will be positioned on opposite sides of the detonation location at 500 yds from the detonation point, separated by 180 degrees. When using 3 boats in a 1,400 or 1,450 yds buffer zone, each boat will be positioned equidistant from one another (120 degrees separation) at 700 or 725 yds respectively from the detonation point. Helicopter pilots will use established Navy protocols to determine the appropriate pattern (
(C) Mine neutralization training shall be conducted during daylight hours only.
(D) Maintaining Buffer Zone for 30 Minutes Prior to Detonation and Suspension of Detonation.
Visually observing the mitigation buffer zone for 30 min prior to the detonation allows for any animals that may have been submerged in the area to surface and therefore be observed so that mitigation can be implemented. Based on average dive times for the species groups that are most likely expected to occur in the areas where mine neutralization training events take place, (
Suspending the detonation after a TDFD is initiated is not possible due to safety risks to personnel. Therefore the portion of the measure that requires suspension of the detonation cannot be implemented when using a TDFD and should be removed, noting that revised mitigation measures will make it unnecessary to have to suspend detonation within the maximum of ten minutes between setting the TDFD and detonation.
Based on the above reasoning, the modified monitoring and mitigation for pre-detonation observation is proposed as the following:
If a marine mammal is sighted within the buffer zone, the animal will be allowed to leave of its own volition. The Navy will suspend detonation exercises and ensure the area is clear for a full 30 minutes prior to detonation.
When required to meet training criteria, time-delay firing devices with up to a 10 minute delay may be used. The initiation of the device will not start until the area is clear for a full 30 minutes prior to initiation of the timer.
(E) The requirement in the current LOA that “no detonation shall be conducted using time-delayed devices” is proposed to be deleted as the improved monitoring and mitigation measures will minimize the potential impacts to marine mammals and greatly reduce the likelihood of injury and/or mortality to marine mammals using TDFDs.
The availability of additional technological solutions that would enable suspension of the detonation when using a TDFD was evaluated. Currently there are no devices that would stop the timer if a marine mammal was sighted within the buffer zone after initiation of the timer.
The Navy states that procurement of new technology can take many years to be fielded. Joint service procurement can take approximately 3 years, with an additional 6 months when an item needs to go through the WSESRB (Weapon System Explosive Safety Review Board). For example, the Acoustic Firing System (AFS) has been in development for 10 years. It is supposed to be fielded “as is” to the Fleet in 2011, with the understanding that it has not met the minimum standards put forth. Once fielded, it will remain in the Product Improvement Process (PIP), which can take up to five years to have a finished product. This AFS will not be considered a true positive control firing device because current technology prevents a shorter time-delay than one minute in the firing cycle.
In 2012 another Radio Firing Device (RFD) will be fielded to the Fleet through a new program called the Special Mission Support Program. This RFD has a disposable receiver that can function in an Electronic Counter Measure (ECM) environment. Navy will evaluate and consider the use of the AFS and the new RFD for potential use as mitigation once they are fielded, but currently they are not options that can be implemented. Without further evaluation, it is not clear whether the new RFD could be used to replace TDFD at this moment.
(F) Diver and Support Vessel Surveys.
The Navy recommends, and NMFS concurs, revising this measure to clarify that it applies to divers only. The intent of the measure is for divers to observe the immediate, underwater area around the detonation site for marine mammals while placing the charge.
The modified mitigation measures is provided below:
Divers placing the charges on mines will observe the immediate, underwater area around the detonation site for marine mammals and will report any sightings to the surface observers.
(G) No detonations shall take place within 3.2 nm (6 km) of an estuaries inlet.
(H) No detonations shall take place within 1.6 nm (3 km) of shoreline.
(I) Personnel shall record any protected species observations during the exercise as well as measures taken if species are detected within the zone of influence (ZOI).
There is no change for marine mammal take estimates from what were analyzed in the final rules (VACAPES: 74 FR 28328; JAX: 74 FR 28349; CHPT: 74 FR 28370; June 15, 2009) for mine neutralization training activities in all these three Range Complexes. Take estimates were based on marine
The Comprehensive Acoustic System Simulation/Gaussian Ray Bundle (OAML, 2002) model, modified to account for impulse response, shock-wave waveform, and nonlinear shock-wave effects, was run for acoustic-environmental conditions derived from the Oceanographic and Atmospheric Master Library (OAML) standard databases. The explosive source was modeled with standard similitude formulas, as in the Churchill FEIS. Because all the sites are shallow (less than 50 m), propagation model runs were made for bathymetry in the range from 10 m to 40 m.
Estimated zones of influence (ZOIs; defined as within which the animals would experience Level B harassment) varied with the explosive weights, however, little seasonal dependence was found among all Range Complexes. Generally, in the case of ranges determined from energy metrics, as the depth of water increases, the range shortens. The single explosion TTS-energy criterion (182 dB re 1 microPa
The total ZOI, when multiplied by the animal densities and total number of events, provides the exposure estimates for that animal species for each specified charge in the VACAPES, JAX, and CHPT Range Complexes (Table 4). Since take numbers were estimated without considering marine mammal monitoring and mitigation measures, therefore, the additional monitoring and mitigation measures and the use of TDFD for mine neutralization training would not change the estimated takes from the original final rules for JAX (74 FR 28349; June 15, 2009) and CHPT (74 FR 28370; June 15, 2009) Range Complexes and from the interim final rule for VACAPES Range Complex (76 FR 33266; June 8, 2011).
Pursuant to NMFS' regulations implementing the MMPA, an applicant is required to estimate the number of animals that will be “taken” by the specified activities (
The aforementioned additional mitigation and monitoring measures will increase the buffer zone to account for marine mammal movement and increase marine mammal visual monitoring efforts to ensure that no marine mammal would be in a zone where injury and/or mortality could occur as a result of time-delayed detonation.
In addition, the estimated exposures are based on the probability of the animals occurring in the area when a training event is occurring, and this probability does not change based on the use of TDFDs or implementation of mitigation measures (
Further, there will be no increase of marine mammal takes as analyzed in previous rules governing NMFS issued incidental takes that could result from the Navy's training activities within these Range Complexes by using TDFDs.
Based on the analyses of the potential impacts from the proposed mine neutralization training exercises conducted within the Navy's VACAPES, JAX, and Cherry Point Range Complexes, especially on the proposed improvement on marine mammal monitoring and mitigation measures, NMFS has preliminarily determined that the modification of the Navy's current LOAs to include taking of marine mammals incidental to mine neutralization training using TDFD within the above Range Complexes will
There are six ESA-listed marine mammal species, three sea turtle species, and a fish species that are listed as endangered under the ESA with confirmed or possible occurrence in the VACAPES, JAX, and CHPT Range Complexes: Humpback whale, North Atlantic right whale, blue whale, fin whale, sei whale, sperm whale, loggerhead sea turtle, leatherback sea turtle, the Kemp's ridley sea turtle, and the shortnose sturgeon.
Pursuant to Section 7 of the ESA, NMFS has begun consultation internally on the issuance of the modified LOAs under section 101(a)(5)(A) of the MMPA for these activities. Consultation will be concluded prior to a determination on the issuance of the modified LOAs.
NMFS participated as a cooperating agency on the Navy's Final Environmental Impact Statements (FEIS's) for the VACAPES, JAX, and CHPT Range Complexes. NMFS subsequently adopted the Navy's EIS's for the purpose of complying with the MMPA. For the modification of the LOAs, which include TDFDs, but also specifically add monitoring and mitigation measures to minimize the likelihood of any additional impacts from TDFDs, NMFS has determined that there are no changes in the potential effects to marine mammal species and stocks as a result of the proposed mine neutralization training activities using TDFDs. Therefore, no additional NEPA analysis will be required, and the information in the existing EIS's remains sufficient.
Based on the analysis contained herein of the likely effects of the specified activity on marine mammals and their habitat and dependent upon the implementation of the mitigation measures, NMFS preliminarily finds that the total taking from Navy mine neutralization training exercises utilizing TDFDs in the VACAPES, JAX, and CHPT Range Complexes will have a negligible impact on the affected marine mammal species or stocks. NMFS has proposed issuance of three modifications to the LOAs to allow takes of marine mammals incidental to the Navy's mine neutralization training exercises using TDFDs, provided that the proposed improvements to the monitoring and mitigation measures are implemented.
United States Patent and Trademark Office, Commerce.
Notice.
To provide information on trademark examination policy and procedure, the United States Patent and Trademark Office (“USPTO”) issued the eighth edition of the
The USPTO prefers that any suggestions for improving the form and content of the TMEP be submitted via electronic mail message to
Catherine P. Cain, Office of the Deputy Commissioner for Trademark Examination Policy, by electronic mail at:
On October 15, 2011, the USPTO issued the eighth edition of the TMEP, which provides USPTO trademark examining attorneys, trademark applicants, and attorneys and representatives for trademark applicants with a reference on the practices and procedures for prosecution of applications to register marks in the USPTO. The TMEP contains guidelines for examining attorneys and materials in the nature of information and interpretation, and outlines the procedures which examining attorneys are required or authorized to follow in the examination of trademark applications.
The eighth edition incorporates USPTO trademark practice and relevant case law reported prior to September 1, 2011. The policies stated in this revision supersede any previous policies stated in prior editions, examination guides, or any other statement of USPTO policy, to the extent that there is any conflict. The eighth edition also includes a collaboration tool, offered through a program called IdeaScale®, which permits the user community to provide public comments that are accessible to both the user community and the Office. The collaboration tool is currently open to Chapters 500, 900, and 1900. The eighth edition of the TMEP may be viewed or downloaded free of charge from the USPTO Web site at
An archived copy of the seventh edition of the TMEP also remains available for reference. Links to the seventh edition, as well as to the fourth, fifth, and sixth editions, are on the USPTO Web site at
Hearing Room 420, Bethesda Towers, 4330 East West Highway, Bethesda, Maryland.
Closed to the Public.
The Commission staff will brief the Commission on the status of compliance matters.
For a recorded message containing the latest agenda information, call (301) 504-7948.
Todd A. Stevenson, Office of the Secretary, U.S. Consumer Product Safety Commission, 4330 East West Highway, Bethesda, MD 20814, (301) 504-7923.
United States Army Corps of Engineers, Los Angeles District, Regulatory Division, Defense.
Notice of Intent (NOI).
The United States (U.S.) Army Corps of Engineers (Corps), in conjunction with the County of San Diego Department of Parks and Recreation (County Parks), is preparing a joint Environmental Impact Statement/Environmental Impact Report (EIS/EIR) for the proposed San Elijo Lagoon Restoration Project (SELRP). The Corps will be lead agency under National Environmental Protection Act (NEPA) and County Parks will be the lead agency under the California Environmental Quality Act (CEQA). The development of the EIS/EIR and associated technical studies are being completed to determine the Agency Preferred Alternative, which would improve and/or restore wetland functions and services within the San Elijo Lagoon. Given the complexity of the alternatives analysis and range of potentially significant issues, the appropriate environmental document was determined by the Corps and County Parks to be a combined EIS/EIR, respectively. The Corps and the County Parks have agreed to jointly prepare the EIS/EIR to optimize efficiency and avoid duplication. The EIS/EIR is intended to be sufficient in scope to address federal, state, and local requirements for environmental analysis and permitting.
Implementing the Agency Preferred Alternative would require a Department of the Army permit pursuant to Section 404 of the Clean Water Act, which regulates the discharge of dredged, excavated, or fill material in wetlands, streams, rivers, and other waters of the U.S. and the potential impacts on the human environment from such activities. To be authorized by the Corps, the Agency Preferred Alternative must also comply with the Section 404(b)(1) Guidelines (40 Code of Federal Regulations [CFR] Part 230) and may not be contrary to the public interest.
Federal agencies coordinating in the development of the EIS include the U.S. Fish and Wildlife Service (Service), National Marine Fisheries Service (NMFS), and Environmental Protection Agency (EPA). State agencies coordinating in the development of the EIR include Department of Fish and Game (CDFG), California Coastal Commission (CCC), San Diego Regional Water Quality Control Board (RWQCB), State Water Resources Control Board, California Department of Transportation (Caltrans), and San Diego Association of Governments (SANDAG).
The EIR/EIS is currently evaluating three alternative restoration designs, the No Project/No Action alternative, and associated maintenance and long-term management and maintenance measures. In addition, alternatives are being evaluated to determine if project phasing is necessary to maintain adequate habitat for sensitive aquatic species, including light footed clapper rail (
Comments and questions regarding scoping of the Draft EIS/EIR may be addressed to Ms. Michelle Mattson, Senior Project Manager, U.S. Army Corps of Engineers, Los Angeles District, Regulatory Division, Carlsbad Field Office, Attn: CESPL-2009-00575-MLM, 6010 Hidden Valley Road, Suite 105, Carlsbad, CA 92011 or comment letters can also be sent via electronic mail to
Due to encroachment by development, restricted tidal influence, and the increase of freshwater from the watershed, the San Elijo Lagoon has gradually degraded over time. Tidal influence has been restricted by infrastructure and development at the inlet of the lagoon. The Pacific Coast Highway (PCH), the North County Transit District (NCTD) railroad, and Interstate 5 (I-5) all traverse the lagoon and further modify tidal and freshwater circulation patterns and increased sediment accumulation from the watershed. Freshwater input has increased as a result of residential and commercial land uses in the 77-square-mile hydrologic watershed. Because of these hydrologic changes, lagoon habitat is rapidly transitioning from mudflats to mid-marsh habitat through the rapid expansion of cordgrass (
Mechanical breaching of the ocean inlet is routinely performed to maintain tidal flushing within the lagoon, but benefits are only temporarily realized due to the physical and hydrological changes previously mentioned. If no action is taken to restore the lagoon, functions and services will continue to degrade, further reducing the diversity of estuarine habitats and increasing freshwater wetland and riparian habitats. Sensitive flora and fauna currently dependent on the estuarine conditions will continue to be adversely
The basic project purpose of the proposed SELRP is to restore tidal wetlands; this is a water dependent activity. The overall project purpose of the SELRP is to enhance and restore the physical and biological functions and services of the lagoon by increasing the tidal prism to support a diverse range of habitat types.
The overarching goal of the SELRP is to protect, restore, and then maintain, via and adaptive management the San Elijo Lagoon ecosystem and the adjacent uplands to support a diversity of estuarine and brackish marsh habitats and associated native species of southern California.
This goal can be further refined into three categories of objectives:
1. Physical restoration of lagoon estuarine hydrologic functions,
2. Biological restoration of lagoon estuarine habitats, and
3. Management and maintenance of the lagoon to ensure long-term viability of the restoration efforts.
Through the EIS/EIR process, an Agency Preferred Alternative will be chosen and a Restoration Plan will be developed. The Restoration Plan will be consistent with the goals and objectives listed above and will fit within the overall management strategies identified in the
• Geology and Soils: Permanent impacts through the removal of sediment accumulated in the lagoon and on-going impacts resulting from as-needed maintenance activities.
• Coastal Processes: Temporary impacts during construction, permanent impacts depending on tidal inlet location, and on-going impacts resulting from as needed maintenance activities.
• Hydrology: Temporary impacts during construction, permanent changes in water circulation, and on-going impacts resulting from as-needed maintenance of the tidal inlet and/or interior dredging.
• Water & Aquatic Sediment Quality: Impacts during construction, including turbidity, and potential impacts resulting from as-needed maintenance activities.
• Aquatic & Terrestrial Biological Resources: Temporary and permanent impacts to existing species.
• Cultural & Paleontological Resources: Impacts to archaeological resources, human remains, and sacred sites.
• Land Use: Temporary or permanent impacts to beach use depending on inlet location.
• Recreation: Temporary impacts to existing trail use during construction and potential on-going impacts resulting from as-needed maintenance activities.
• Visual Resources: Temporary impacts during construction and permanent impacts associated with changes in vegetation communities and regular tidal flooding.
• Transportation and Traffic: Impacts during construction and potential on-going impacts resulting from as-needed maintenance activities.
• Air Quality/Greenhouse Gas Emissions: Impacts during construction and on-going impacts resulting from as-needed maintenance activities.
• Noise: Impacts during construction and on-going impacts resulting from dredging or other construction equipment during as-needed maintenance activities.
• Hazards and Hazardous Materials: Impacts during construction and on-going impacts resulting from as-needed maintenance activities.
• Public Services and Utilities: Impacts during construction and on-going impacts resulting from as-needed maintenance activities.
• Alternative 1A—Intertidal Alternative (existing inlet)
• Alternative 1B—Habitat Diversity Alternative (existing inlet)
• Alternative 2A—Habitat Diversity Alternative (inlet relocated south)
• No Project/No Action
There are common design features that would be implemented in each alternative, such as micro-grading and the use of short cobble-blocking structures at the inlet. The range and characteristics of the alternatives addressed in the EIS/EIR will be more fully developed based on input from the scoping process and specialized hydrological and biological technical studies that are underway.
Parties interested in obtaining additional information about the SELRP can also visit
A series of public scoping meetings will be held on the following dates and locations:
1. Carlsbad: November 15, 2011 at 1 p.m., U.S. Fish & Wildlife Service, Conference Room 1, 6010 Hidden Valley Road, Suite 101, Carlsbad, California 92011.
2. Encinitas: November 29, 2011 at 6 p.m., City of Encinitas Community Center, 1140 Oakcrest Park Drive, Encinitas, CA 92024.
3. Solana Beach: December 1, 2011 at 6 p.m., City of Solana Beach Council Chambers, 635 South Highway 101, Solana Beach, CA 92075.
Comments on the proposed action, alternatives, or any additional concerns should be submitted in writing. Written comment letters will be accepted through December 18, 2011.
The following permits and consultations are expected:
• Corps CWA Section 404 Permit
• RWQCB CWA Section 401 Water Quality Certification
• Service Section 7 Consultation
• National Historic Preservation Act Section 106 consultation
• CDFG Section 1600 Streambed Alteration Agreement
• CCC Development Permit
• State Lands Commission Lease
• U.S. Coast Guard Navigation Permit (new inlet only)
• State Department of Parks and Recreation Encroachment Permit
Department of Education.
Comment Request.
The Department of Education (the Department), in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the reporting burden on the public and helps the public understand the Department's information collection requirements and provide the requested data in the desired format. The Director, Information Collection Clearance Division, Privacy, Information and Records Management Services, Office of Management, Office of Management, invites comments on the proposed information collection requests as required by the Paperwork Reduction Act of 1995.
Interested persons are invited to submit comments on or before January 6, 2012.
Comments regarding burden and/or the collection activity requirements should be electronically mailed to
Section 3506 of the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35) requires that Federal agencies provide interested parties an early opportunity to comment on information collection requests. The Director, Information Collection Clearance Division, Regulatory Information Management Services, Office of Management, publishes this notice containing proposed information collection requests at the beginning of the Departmental review of the information collection. The Department of Education is especially interested in public comment addressing the following issues: (1) Is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology.
Copies of the proposed information collection request may be accessed from
Individuals who use a telecommunications device for the deaf (TDD) may call the Federal Information Relay Service (FIRS) at 1-(800) 877-8339.
Take notice that the following hydroelectric application has been filed with the Commission and is available for public inspection.
a.
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d.
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g.
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j.
k. Pursuant to Section 4.32(b)(7) of 18 CFR of the Commission's regulations, if any resource agency, Indian Tribe, or person believes that an additional scientific study should be conducted in order to form an adequate factual basis for a complete analysis of the application on its merit, the resource agency, Indian Tribe, or person must file a request for a study with the Commission not later than 60 days from the date of filing of the application, and serve a copy of the request on the applicant.
l.
All documents may be filed electronically via the Internet. See 18 CFR 385.2001(a)(1)(iii) and the instructions on the Commission's Web site
m. The application is not ready for environmental analysis at this time.
n. The project would be located at an existing dam currently owned by Monroe County. The dam was built in 1854, and acquired in the 1920s by Northern States Power who rebuilt, owned, and operated a hydroelectric project at that location until it was abandoned and the generating equipment was removed, in 1969. In 1998, Monroe County rehabilitated the dam and installed new Tainter gates with cable drum hoists.
The existing Angelo dam is an earthen embankment with a maximum height of 14 feet and a total length of 507 feet. The spillway is constructed of reinforced concrete and consists of four, 13.5-foot-wide by 11.4-foot-high bays with 13.5-foot-wide by approximately 7-foot-high steel tainter gates. The proposed project would consist of: (1) A 20-foot by 20-foot by 20-foot forebay; (2) restoration of the intake structure; (3) new trash racks; (4) a 20-foot by 40-foot by 28-foot powerhouse located at the right abutment of the dam; and (5) a 205-kW vertical double regulated Kaplan turbine. The projected annual energy generation would be 948,760 kilowatt-hours. The project would interconnect to an existing 2.7kV distribution line owned by Northern States Power, at a point adjacent to the powerhouse.
The existing reservoir has a surface area of 52 acres, normally stores approximately 140 acre-feet at the spillway crest elevation, and has a normal operating range from 793 to 793.6 feet above mean sea level (msl). The maximum storage capacity is 450 acre-feet (based on an elevation of 796 feet msl at the top of the dam). The project would operate in a run-of-river mode and generate power using flows between 168 cubic feet per second (cfs) and 64 cfs. Flows greater than 168 cfs would be spilled.
o. A copy of the application is available for review at the Commission in the Public Reference Room or may be viewed on the Commission's Web site at
You may also register online at
p. With this notice, we are initiating consultation with the Wisconsin State Historic Preservation Officer (SHPO), as required by § 106, National Historic Preservation Act, and the regulations of the Advisory Council on Historic Preservation, 36, CFR, at 800.4.
q.
Take notice that on October 27, 2011, pursuant to sections 206 and 306 of the Federal Power Act, 16 U.S.C. 824e and 825e and Rule 206 of the Federal Energy Regulatory Commission's (Commission) Rules of Practice and Procedures, 18 CFR 385.206, Seneca Power Partners, L.P. (Complainant) filed a complaint against the New York Independent System Operator, Inc. (Respondent), alleging that the Respondent is violating its Tariff and engaging in unduly discriminatory conduct in improperly deriving and unilaterally modifying the reference prices used by the Respondent to compensate Complainant's Batavia generator, which has been identified as needed for reliability.
The Complainant certifies that copies of the complaint were served on the Respondent and the New York Public Service Commission.
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. The Respondent's answer and all interventions, or protests must be filed on or before the comment date. The Respondent's answer, motions to intervene, and protests must be served on the Complainants.
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
Take notice that on October 27, 2011, pursuant to sections 206 and 306 of the Federal Power Act (FPA), 16 U.S.C. 824e and 825e and Rule 206 of the Rules of Practice and Procedure of the Federal Energy Regulatory Commission (Commission), 18 CFR 385.206 (2011), DC Energy, LLC (DC Energy) and DC Energy Mid-Atlantic LLC (DCE Mid-Atlantic) (collectively Complainants) filed a Complaint against the PJM Interconnection, L.L.C. (PJM) (Respondent) concerning the applicability of certain charges to virtual transactions.
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. The Respondent's answer and all interventions, or protests must be filed on or before the comment date. The Respondent's answer, motions to intervene, and protests must be served on the Complainants.
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
The staff of the Office of Energy Projects is in the process of reviewing its Upland Erosion Control, Revegetation and Maintenance Plan (Plan) and Wetland and Waterbody Construction and Mitigation Procedures (Procedures), dated January 17, 2003, to determine if there are appropriate updates or improvements to be made at this time. In accordance with Order 603,
The Plan and Procedures are referred to at 18 Code of Federal Regulations (CFR) 380.12(i)(5) and 380.12(d)(2), respectively, as well as 18 CFR 157.206(b)(3)(iv). Full texts of the current versions of the Plan and Procedures can be viewed on the Federal Energy Regulatory Commission (FERC or Commission) Web site at
We anticipate issuing our draft changes to the Plan and Procedures in early 2012 and will make them available for public comment. We will then consider all timely comments on the drafts before issuing the final versions.
Interested parties can help us determine the appropriate updates and improvements to make by providing us comments or suggestions that focus on the specific sections requiring clarification, updates to reflect current laws and regulations, or improved measures to avoid or minimize environmental impacts. The more specific your comments, the more useful they will be. A detailed explanation of your submissions and/or any references of scientific studies associated with your comments would greatly help us with this process.
For your convenience, there are three methods you can use to submit your comments to the Commission. In all instances, please reference the docket number (AD12-2-000) with your submission. The Commission encourages electronic filing of comments and has expert eFiling staff available to assist you at (202) 502-8258 or
(1) You may file your comments electronically by using the eComment feature, which is located on the Commission's Web site at
(2) You may file your comments electronically by using the
(3) You may file a paper copy of your comments at the following address: Kimberly D. Bose, Secretary, Federal Energy Regulatory Commission, 888 First Street NE., Room 1A, Washington, DC 20426.
All of the information related to the proposed updates to the Plan and Procedures and submitted comments can be found on the FERC Web site (
In addition, the Commission offers a free service called eSubscription which allows you to keep track of all formal issuances and submittals in specific dockets. This can reduce the amount of time you spend researching proceedings by automatically providing you with notification of these filings, document summaries, and direct links to the documents. Go to
Take notice that the following hydroelectric application has been filed with the Commission and is available for public inspection:
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
All documents may be filed electronically via the Internet. See, 18 CFR 385.2001(a)(1)(iii) and the instructions on the Commission's Web site at
Please include the project number (P-2146-132) on any comments, motions, or recommendations filed.
k.
l.
m. Individuals desiring to be included on the Commission's mailing list should so indicate by writing to the Secretary of the Commission.
n.
o.
Take notice that on October 26, 2011, pursuant to Rules 207(a)(2) and 212 of the Rules of the Federal Energy Regulatory Commission's (Commission) Rules of Practice and Procedures, 18 CFR 385.207(a)(2) and 385.212, Hess Corporation (Complainant) filed a Petition for Declaratory Order requesting that the Commission determine that PJM Interconnection, L.L.C.'s (Respondent) current Open Access Transmission Tariff (OATT) permits the Respondent to make a minor adjustment to two phase angle regulators (PAR) owned by Public Service Electric and Gas Company for purposes of modeling Complainant's pending interconnection request for a proposed 625 MW gas-fired electric generating facility to be located in Newark, New Jersey. In the alternative, pursuant to section 206 of the Federal Power Act, 16 U.S.C. 824e and Rule 206 of the Commission's Rules of Practice and Procedure, 18 CFR 385.206, Complainant filed a formal complaint, requesting that the Commission revise the Respondent's Tariff and/or associated Manuals as necessary to require the Complainant to adjust PARs to accommodate generator interconnections, such as the interconnection of the Newark Energy Center, when such adjustment would not harm the reliability of the Respondent's system or impose costs on other customers.
The Complainant certifies that copies of the complaint were served on the contacts for the Respondent as listed on the Commission's list of Corporate Officials.
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. The Respondent's answer and all interventions, or protests must be filed on or before the comment date. The Respondent's answer, motions to intervene, and protests must be served on the Complainants.
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
Environmental Protection Agency (EPA).
Notice.
This document announces the Office of Management and Budget (OMB) responses to Agency Clearance requests, in compliance with the Paperwork Reduction Act (44 U.S.C. 3501
Rick Westlund (202) 566-1682, or email at
EPA ICR Number 1363.21; Toxic Chemical Release Reporting; 40 CFR part 372; was approved on 10/14/2011; OMB Number 2025-0009; expires on 10/31/2014; Approved without change.
EPA ICR Number 0318.12; Clean Watersheds Needs Survey (Renewal); was approved on 10/20/2011; OMB Number 2040-0050; expires on 10/31/2014; Approved with change.
EPA ICR Number 0820.11; Hazardous Waste Generator Standards (Renewal); 40 CFR 262.34, 262.40(c), 262.43, 262.44(c), 262.53-262.57, 262.60, 265.190-265.193, and 265.196; was approved on 10/25/2011; OMB Number 2050-0035; expires on 10/31/2014; Approved without change.
EPA ICR Number 1284.09; NSPS for Polymeric Coating of Supporting Substrates Facilities; 40 CFR part 60, subparts A and VVV; was approved on 10/25/2011; OMB Number 2060-0181; expires on 10/31/2014; Approved without change.
EPA ICR Number 1630.10; Oil Pollution Act Facility Response Plans (Renewal); 40 CFR 112.20 and 112.21; was approved on 10/25/2011; OMB Number 2050-0135; expires on 10/31/2014; Approved without change.
EPA ICR Number 0559.11; Application for Reference and Equivalent Method Determination (Renewal); 40 CFR 53.4, 53.9 (f),(h),(i), 53.14, 53.15, and 53.16(a)-(d),(f); was approved on 10/31/2011; OMB Number 2080-0005; expires on 10/31/2014; Approved without change.
EPA ICR Number 2436.01; Revisions to the Emergency and Hazardous Chemical Inventory Forms (Tier I and Tier II), Section 312 of the Emergency Planning and Community Right-to-Know Act (EPCRA) (Proposed Rule); OMB filed comment on 10/25/2011.
EPA ICR Number 2421.01; Carbon Dioxide (CO2) Streams in Geologic Sequestration Activities (Proposed Rule); in 40 CFR 261.4(h); OMB filed comment on 10/25/2011.
EPA ICR Number 2439.01; NESHAP for Natural Gas Transmission and Storage; in 40 CFR part 63, subparts A and HHH; OMB filed comment on 10/25/2011.
EPA ICR Number 2440.01; NESHAP for Oil and Natural Gas Production; in 40 CFR part 63, subparts A and HH; OMB filed comment on 10/25/2011.
Environmental Protection Agency (EPA).
Notice.
In compliance with the Paperwork Reduction Act (44 U.S.C. 3501
Additional comments may be submitted on or before December 7, 2011.
Submit your comments, referencing Docket ID No. EPA-HQ-OAR-2007-1138, to (1) EPA online using
Holly Pugliese, Compliance and Innovative Strategies Division, Office of Transportation and Air Quality, Environmental Protection Agency, 2000 Traverwood Dr., Ann Arbor, Michigan, 48105;
EPA has submitted the following ICR to OMB for review and approval according to the procedures prescribed in 5 CFR 1320.12. On June 29, 2011 (76
EPA has established a public docket for this ICR under Docket ID No. EPA-HQ-OAR-2007-1138, which is available for online viewing at
Use EPA's electronic docket and comment system at
Environmental Protection Agency (EPA).
Notice.
EPA Region 10 today issues a final action for six effluent limits for produced water under the National Pollutant Discharge Elimination System (NPDES) General Permit for Oil and Gas Exploration, Development and Production Facilities in State and Federal Waters in Cook Inlet, Permit No. AKG-31-5000 (Permit). The effluent limits subject to the final action are: mercury, copper, total aromatic hydrocarbons (TAH), total aqueous hydrocarbons (TAqH), silver, and whole effluent toxicity (WET), pursuant to the provisions of the Clean Water Act (CWA or “the Act”), 33 U.S.C. 1251. The Permit continues to allow facilities to apply for permit coverage for exploration, development, and production facilities in Cook Inlet, Alaska that are included in the Coastal and Offshore Subcategories of the Oil and Gas Extraction Point Source Category.
The final Permit action shall become effective on December 7, 2011.
Copies of the final Permit action, Response to Comment document, and final 401 certification are available by contacting
Hanh Shaw, Office of Water and Watersheds, U.S. Environmental Protection Agency, Region 10, 1200 6th Avenue, Suite 900, Mail Stop OWW-130, Seattle, WA 98101-3140, (206) 553-0171,
This action is taken under the authority of Section 402 of the Clean Water Act as amended, 42 U.S.C. 1342. I hereby provide public notice of the final Permit action in accordance with 40 CFR 124.10.
Environmental Protection Agency (EPA).
Notice of final permit.
This notice announces the NPDES general permit for point source discharges from the application of pesticides to waters of the United States, also referred to as the Pesticide General Permit (PGP). A draft PGP was published on June 4, 2010 for public comment. 75 FR 31775. All ten EPA Regions today are issuing the final NPDES PGP, which will be available in those areas where EPA is the NPDES permitting authority. This action is in response to the Sixth Circuit Court's ruling that vacated an EPA regulation that excluded discharges of biological pesticides and chemical pesticides that leave a residue from the application of pesticides to, or over, including near waters of the United States from the need to obtain an NPDES permit if the application was done in accordance with other laws. EPA requested and was granted a stay of the Court's mandate to provide time to draft and implement the permit noticed today. The stay of the mandate expires on October 31, 2011; after which, NPDES permits will be required for such point source discharges to waters of the United States.
This action is effective on October 31, 2011.
For further information on this final NPDES general permit, contact the appropriate EPA Regional Office listed in Section I.F, or contact Jack Faulk, EPA Headquarters, Office of Water, Office of Wastewater Management at tel.: (202) 564-0768 or email:
This supplementary information section is organized as follows:
You may be affected by this action if your application of pesticides, under the use patterns in Section III.B., results in a discharge to waters of the United States in one of the geographic areas identified in Section III.A. Potentially affected entities, as categorized in the North American Industry Classification System (NAICS), may include, but are not limited to:
1.
2.
Electronic versions of this final permit and fact sheet are available on EPA's NPDES Web site at
An electronic version of the public docket is available through EPA's electronic public docket and comment system, EPA Dockets. You may use EPA Dockets at
For EPA Region 1, contact George Papadopoulos at USEPA Region 1, 5 Post Office Square—Suite 100, Boston, MA 02109-3912; or at tel.: (617) 918-1579; or email at
For EPA Region 2, contact Maureen Krudner at USEPA Region 2, 290 Broadway, New York, NY 10007-1866; or tel.: (212) 637-3874; or email at
For EPA Region 3, contact Peter Weber at USEPA Region 3, 1650 Arch Street, Mail Code: 3WP41, Philadelphia, PA 19103-2029; or at tel.: (215) 814-5749; or email at
For EPA Region 4, contact Sam Sampath at USEPA Region 4, 61 Forsyth Street SW., Atlanta, CA 30303-8960; or at tel.: (404) 562-9229; or email at
For EPA Region 5, contact Morris Beaton at USEPA Region 5, 77 West Jackson Boulevard, Mail Code: WN16J, Chicago, IL 60604-3507; or at tel.: (312) 353-0850; or email at
For EPA Region 6, contact Jenelle Hill at USEPA Region 6, 1445 Ross Avenue, Suite 1200, Mail Code: 6WO, Dallas, TX 75202-2733; or at tel.: (214) 665-9737 or email at
For EPA Region 7, contact Kimberly Hill at USEPA Region 7, 901 North Fifth Street, Mail Code: XX, Kansas City, KS 66101; or at tel.: (913) 551-7841 or email at:
For EPA Region 8, contact David Rise at USEPA Region 8, Montana Operations Office, Federal Building, 10 West 15th Street, Suite 3200, Mail Code: 8MO, Helena, MT 59626; or at tel.: (406) 457-5012 or email at:
For EPA Region 9, contact Pascal Mues, USEPA Region 9, 75 Hawthorne Street, Mail Code: WTR-5, San Francisco, CA 94105; or at tel.: (415) 972-3768 or email at:
For EPA Region 10, contact Dirk Helder, USEPA Region 10 Idaho Operations Office, 1435 North Orchard Street, Boise, ID 83706 or at tel.: (208) 378-5749 or email at:
Section 301(a) of the Clean Water Act (CWA) provides that “the discharge of any pollutant by any person shall be unlawful” unless the discharge is in compliance with certain other sections of the Act. 33 U.S.C. 1311(a). The CWA defines “discharge of a pollutant” as “(A) any addition of any pollutant to navigable waters from any point source, (B) any addition of any pollutant to the waters of the contiguous zone or the ocean from any point source other than a vessel or other floating craft.” 33 U.S.C. 1362(12). A “point source” is any “discernible, confined and discrete conveyance” but does not include “agricultural stormwater discharges and return flows from irrigated agriculture.” 33 U.S.C. 1362(14).
The term “pollutant” includes, among other things, “garbage* * * chemical wastes, biological materials * * * and industrial, municipal, and agricultural waste discharged into water.” 33 U.S.C. 1362(6).
One way a person may discharge a pollutant without violating the section
An NPDES permit authorizes the discharge of a specified amount of a pollutant or pollutants into a receiving water under certain conditions. The NPDES program relies on two types of permits: Individual and general. An individual permit is a permit specifically tailored for an individual discharger. Upon receiving the appropriate permit application(s), the permitting authority,
In contrast, a general permit covers multiple facilities/sites/activities within a specific category for a specific period of time (not to exceed 5 years). For general permits, EPA, or a state authorized to administer the NPDES program, develops and issues the general permit with dischargers then obtaining coverage under the already issued general permit, typically through submission of a Notice of Intent (NOI). A general permit is also subject to public comment, as was done for this permit on June 4, 2010, and is developed and issued by a permitting authority (in this case, EPA).
Under 40 CFR 122.28, general permits may be written to cover categories of point sources having common elements, such as facilities that involve the same or substantially similar types of operations, that discharge the same types of wastes, or that are more appropriately regulated by a general permit. Given the vast number of pesticide applicators requiring NPDES permit coverage and the discharges common to these applicators, EPA believes that it makes administrative sense to issue this general permit, rather than issuing individual permits to each applicator. Entities still have the ability to seek individual permit coverage. The general permit approach allows EPA to allocate resources in a more efficient manner and to provide more timely coverage. As with any permit, the CWA requires the general permit to contain technology-based effluent limitations, as well as any more stringent limits when necessary to meet applicable state water quality standards. Courts have approved of the use of general permits. See
EPA regulates the sale, distribution and use of pesticides in the United States under the statutory framework of FIFRA to ensure that, when used in conformance with FIFRA labeling directions, pesticides will not pose unreasonable risks to human health and the environment. All new pesticides must undergo a rigorous registration procedure under FIFRA during which EPA assesses a variety of potential human health and environmental effects associated with use of the product. Under FIFRA, EPA is required to consider the effects of pesticides on the environment by determining, among other things, whether a pesticide “will perform its intended function without unreasonable adverse effects on the environment,” and whether “when used in accordance with widespread and commonly recognized practice [the pesticide] will not generally cause unreasonable adverse effects on the environment.” 7 U.S.C. 136a(c)(5). In performing this analysis, EPA examines, among other things, the ingredients of a pesticide, the intended type of application site and directions for use, and supporting scientific studies for human health and environmental effects and exposures. The applicant for registration of the pesticide must submit data as required by EPA regulations.
When EPA approves a pesticide for a particular use, the Agency imposes labeling restrictions governing such use. Compliance with the labeling requirements ensures that the pesticide serves an intended purpose and avoids unreasonable adverse effects. It is illegal under Section 12(a)(2)(G) of FIFRA to use a registered pesticide in a manner inconsistent with its labeling. States have primary authority under FIFRA to enforce “use” violations, but both the States and EPA have ample authority to prosecute pesticide misuse when it occurs.
Over the past ten years, several courts addressed the question of whether the CWA requires NPDES permits for pesticide applications. These cases resulted in some confusion among the regulated community and other affected citizens about the applicability of the CWA to pesticides applied to waters of the United States. In 2001, the U.S. Court of Appeals for the Ninth Circuit held in
In 2002, the Ninth Circuit in
Since
Additionally, the Second Circuit Court of Appeals addressed the applicability of the CWA's NPDES permit requirements to pesticide applications. In
In 2005, the Ninth Circuit again addressed the CWA's applicability to pesticide applications. In
Recently, the Second Circuit reaffirmed the recent Sixth Circuit decision in ruling that trucks and helicopters that sprayed pesticides should be considered point sources under the CWA.
On November 27, 2006 (71 FR 68483), EPA issued a final rule (hereinafter called the “2006 NPDES Pesticides Rule”) clarifying two specific circumstances in which an NPDES permit is not required to apply pesticides to or over, including near water provided that the application is consistent with relevant Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) requirements. They are: (1) The application of pesticides directly to water to control pests; and (2) the application of pesticides to control pests that are present over, including near, water where a portion of the pesticides will unavoidably be deposited to the water to target the pests.
On January 19, 2007, EPA received petitions for review of the 2006 NPDES Pesticides Rule from both environmental and industry groups. Petitions were filed in eleven circuit courts with the case,
Based on the Court's decision, chemical pesticides that leave no residue do not require an NPDES permit. However, EPA assumes for purpose of this permit that all chemical pesticides have a residue, and, therefore would need a permit unless it can be shown that there is no residual. Unlike chemical pesticides (where the residual is the pollutant), the Court further found that biological pesticides are pollutants regardless of whether the application results in residuals and such discharges need an NPDES permit.
In response to this decision, on April 9, 2009, EPA requested a two-year stay of the mandate to provide the Agency time to develop a general permit, to assist NPDES-authorized states to develop their NPDES permits, and to provide outreach and education to the regulated community and other stakeholders. On June 8, 2009, the Sixth Circuit granted EPA the two-year stay of the mandate until April 9, 2011. On November 2, 2009, Industry Petitioners of the Sixth Circuit Case petitioned the Supreme Court to review the Sixth Circuit's decision. On February 22, 2010, the Supreme Court issued its decision denying petitions to review the Sixth Circuit decision.
As a result of the Court's decision on the 2006 NPDES Pesticides Rule, at the end of the two-year stay, NPDES permits will be required for point source discharges to waters of the U.S. of biological pesticides, and of chemical pesticides that leave a residue. Until April 9, 2011, the rule remains in effect and NPDES permits are not required.
In response to the Court's decision, EPA is issuing this final general permit for four specific pesticide use patterns with an effective date of April 9, 2011,
Neither the Court's ruling nor EPA's issuance of this general permit affects the existing CWA exemptions for irrigation return flow and agricultural stormwater runoff, which are excluded from the definition of a point source under Section 502(14) of the CWA and do not require NPDES permit coverage.
EPA worked closely with states and other stakeholders to develop the PGP. Because 44 states are required to develop their own permits, EPA held three face-to-face meetings and regular conference calls with environmental and agricultural agencies in each state, in order to share information and ideas on how to permit this new class of NPDES permittees. EPA also conducted or attended approximately 150 meetings with industry experts, environmental interest groups, and other interested stakeholders.
EPA published the draft NPDES Pesticide General Permit and accompanying fact sheet in the
On April 1, 2011, EPA posted a pre-publication version of its draft final Pesticide General Permit for discharges of pesticide applications to U.S. waters. This draft final permit was not considered a “final agency action,” and the Agency did not solicit public comment on this draft final permit. EPA provided a preview of the draft final permit to assist states in developing their own permits and for the regulated community to become familiar with the permit's requirements before it was to become effective. This reflected EPA's commitment to transparency and responding to the needs of stakeholders. The draft final permit posted on April 1, 2011 contains largely identical requirements to the final permit being published today. The principal change is the addition of conditions to protect listed species as a result of consultation with the National Marine Fisheries Service (NMFS) under the Endangered Species Act (ESA). There have also been changes to the timing of NOI submission deadlines and some additional clarifying changes, but these do not alter the intent of the pre-publication version posted in April.
The PGP will provide permit coverage for discharges in areas where EPA is the NPDES permitting authority. The geographic coverage of today's final permit is listed below. Where this permit covers activities on Indian Country lands, those areas are as listed below within the borders of that state:
• Massachusetts, including Indian Country lands within Massachusetts
• Indian Country lands within Connecticut
• New Hampshire
• Indian Country lands within Rhode Island
• Federal Facilities within Vermont
• Indian Country lands within New York
• Puerto Rico
• The District of Columbia
• Federal Facilities within Delaware
• Indian Country lands within Alabama
• Indian Country lands within Florida
• Indian Country lands within Mississippi
• Indian Country lands within North Carolina
• Indian Country lands within Michigan
• Indian Country lands within Minnesota, excluding Sokaogon Chippewa Community
• Indian Country lands within Wisconsin, excluding Lac du Flambeau Band of Lake Superior Chippewa Indians and Fond du Lac Reservation
• Indian Country lands within Louisiana
• New Mexico, including Indian Country lands within New Mexico, except Navajo Reservation Lands (see Region 9) and Ute Mountain Reservation Lands (see Region 8)
• Oklahoma, including Indian Country lands
• Discharges in Texas that are not under the authority of the Texas Commission on Environmental Quality (formerly TNRCC), including activities associated with the exploration, development, or production of oil or gas or geothermal resources, including transportation of crude oil or natural gas by pipeline, including Indian Country lands within Texas
• Indian Country lands within Iowa
• Indian Country lands within Kansas
• Indian Country lands within Nebraska, except Pine Ridge Reservation lands (see Region 8)
• Federal Facilities within Colorado, including those on Indian Country lands within Colorado as well as the portion of the Ute Mountain Reservation located in New Mexico
• Indian Country lands within the State of Colorado, as well as the portion of the Ute Mountain Reservation located in New Mexico
• Indian Country lands within Montana
• Indian Country lands within North Dakota
• Indian Country lands within South Dakota, as well as the portion of the Pine Ridge Reservation located within Nebraska (see Region 7)
• Indian Country lands within Utah, except Goshute and Navajo Reservation lands (see Region 9)
• Indian Country lands within Wyoming
• American Samoa
• Indian Country lands within Arizona as well as Navajo Reservation lands within New Mexico (see Region 6) and Utah (see Region 8), excluding for Hualapai Reservation
• Indian Country lands within California
• Guam
• Johnston Atoll
• Midway Island and Wake Island and other unincorporated U.S. possessions
• Northern Mariana Islands
• Indian Country lands within Nevada, as well as the Duck Valley Reservation within Idaho, the Fort McDermitt Reservation within Oregon (see Region 10) and the Goshute Reservation within Utah (see Region 8)
• Alaska, including Indian Country lands
• The State of Idaho, including Indian Country lands within Idaho, except Duck Valley Reservation lands (see Region 9), excluding Puyallup Tribe Reservation
• Indian Country lands within Oregon, except Fort McDermitt Reservation lands (see Region 9)
• Federal Facilities in Washington, including those located on Indian Country lands within Washington, excluding Puyallup Tribe Reservation
The final general permit regulates discharges to waters of the United States from the application of (1) biological pesticides, and (2) chemical pesticides that leave a residue for the following four pesticide use patterns.
•
•
•
•
The scope of activities encompassed by these pesticide use patterns is described in greater detail in Part III.1.1. of the fact sheet for the final general permit.
The following is a summary of the final PGP's requirements:
• The PGP defines Operator (
• All Applicators are required to minimize pesticide discharges by using only the amount of pesticide and frequency of pesticide application necessary to control the target pest, maintain pesticide application equipment in proper operating condition, control discharges as necessary to meet applicable water quality standards, and monitor for and report any adverse incidents.
• All Decision-makers are required, to the extent not determined by the Applicator, to minimize pesticide discharges by using only the amount of pesticide and frequency of pesticide application necessary to control the target pest. All Decision-makers are also required to control discharges as necessary to meet applicable water quality standards and monitor for and report any adverse incidents.
• Coverage under this permit is available only for discharges and discharge-related activities that are not likely to adversely affect species that are federally-listed as endangered or threatened (“listed”) under the Endangered Species Act (ESA) or habitat that is federally-designated as critical under the ESA (“critical habitat”), except for certain cases specified in the permit involving prior consultation with the Services and Declared Pest Emergencies. The permit contains several provisions addressing listed species, including for certain listed species identified in the permit as NMFS Listed Resources of Concern, that Decision-makers whose discharges may affect these resources certify compliance with one of six criteria which together ensure that any potential adverse effects have been properly considered and addressed. These NMFS Listed Resources of Concern for the PGP are identified in detail on EPA's Web site at
• Certain Decision-makers (
Permit conditions take effect as of October 31, 2011; however, Operators with eligible discharges are authorized for permit coverage through January 12, 2010 without submission of an NOI. Thus, for any discharges commencing on or before January 12, 2012 that will continue after this date, an NOI will need to be submitted no later than January 2, 2012 to ensure uninterrupted permit coverage, and for any discharge occurring after January 12, 2012, no later than 10 days before the first discharge occurring after January 12, 2012.
The following is a summary of permit terms and requirements modified from the draft PGP public noticed on June 4, 2010:
• Expanded the forest canopy pest control use pattern to also include pesticide application activities performed from the ground;
• Expanded eligibility provisions to provide for coverage for discharges to Tier 3 waters from pesticide applications made to restore or maintain water quality or to protect public health or the environment that either do not degrade water quality or that only degrade water quality on a short-term or temporary basis;
• Eliminated the requirement for certain Applicators to submit NOIs;
• Revised annual treatment area thresholds (which trigger the need for NOI submission and implementation of more comprehensive Pest Management Measures and documentation);
• Delayed discharge date for which NOIs are required for a little more than two months after permit issuance;
• Refined definitions of “Operator,” “Applicator,” and “Decision-maker,” for purposes of delineating responsibilities under the permit between Applicators and Decision-makers based on EPA's expectation for these two groups of Operators;
• Added requirement for Applicators to assess weather conditions in the treatment area to ensure pesticide application is consistent with all federal requirements;
• Added requirement for certain Operators to document visual monitoring activities, Provided different responsibilities for small Decision-makers to complete a pesticide discharge evaluation worksheet in lieu of a more comprehensive PDMP, annual report, and detailed recordkeeping; and
• Added specific permit conditions for states and Tribes in accordance with CWA section 401 certifications.
As a result of the Sixth Circuit Court decision on EPA's 2006 NPDES Pesticides Rule, operators of discharges to waters of the U.S. from the application of pesticides now require NPDES permits for those discharges. EPA expects that costs associated with complying with the effluent limitations under this general permit will be similar to costs under individual permits for similar activities; however, administrative costs for both EPA as the permitting authority and operators as permittees are expected to be lower under this general permit than under individual permits. In other words, the general permit itself can be expected to reduce rather than increase costs for permittees as compared to the baseline of individual permitting.
EPA expects the economic impact on covered entities, including small businesses, to be minimal. EPA requested additional information during
Under Executive Order (EO) 12866 (
Clean Water Act, 33 U.S.C. 1251
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Federal Communications Commission.
Notice.
The Federal Communications Commission has received Office of Management and Budget (OMB) approval for the following public information collection(s) pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The FCC may not conduct or sponsor a collection of information unless it displays a currently valid OMB control number, and no person is required to respond to a collection of information unless it displays a currently valid OMB control number.
For additional information about the information collection contact Leslie Haney,
The FCC obtained approval of this revision to the previously approved information collection to establish a voluntary electronic method of complying with the reporting that EAS participants must complete as part of their participation in the national EAS test.
In the Third Report and Order in EB Docket No. 04-296, FCC 09-10, the Commission adopted the foregoing rule requirements. In addition, the Commission decided that test data will be presumed confidential and disclosure of test data will be limited to FEMA, NWS and EOP at the Federal level. At the State level, test data will be made available only to State government emergency management agencies that have confidential treatment protections at least equal to FOIA. The process by which these agencies would receive test data will comport with those used to provide access to the Commission's NORS and DIRS data. We seek comment on this revision of the approved collection.
In the Third Report and Order, the Commission also indicated that it would establish a voluntary electronic reporting system that EAS test participants may use as part of their participation in the national EAS test. The Commission noted that using this system, EAS test participants could input the same information that they were already required to file manually via a web-based interface into a confidential database that the Commission would use to monitor and assess the test. This information would include identifying information such as station call letters, license identification number, geographic coordinates, EAS assignment (LP, NP, etc), EAS monitoring assignment, as well as a 24/7 emergency contact for the EAS Participant. The only difference, other
Federal Communications Commission.
Notice and request for comments.
The Federal Communications Commission (FCC), as part of its continuing effort to reduce paperwork burdens, invites the general public and other Federal agencies to take this opportunity to comment on the following information collection, as required by the Paperwork Reduction Act (PRA) of 1995. Comments are requested concerning (a) whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimate; (c) ways to enhance the quality, utility, and clarity of the information collected; (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology; and (e) ways to further reduce the information collection burden on small business concerns with fewer than 25 employees.
The FCC may not conduct or sponsor a collection of information unless it displays a currently valid control number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the PRA that does not display a valid Office of Management and Budget (OMB) control number.
Written PRA comments should be submitted on or before January 6, 2012. If you anticipate that you will be submitting comments, but find it difficult to do so within the period of time allowed by this notice, you should advise the contact listed below as soon as possible.
Direct all PRA comments to the Federal Communications Commission via email to
For additional information about the information collection, contact Cathy Williams at (202) 418-2918.
Federal Communications Commission.
Notice.
The Federal Communications Commission (FCC) has received Office of Management and Budget (OMB) approval for the following public information collections pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). An agency may not conduct or sponsor a collection of information unless it displays a currently valid OMB control number, and no person is required to respond to a collection of information unless it displays a currently valid control number. Comments concerning the accuracy of the burden estimates and any suggestions for reducing the burden should be directed to the person listed in the
Gregory Hlibok, Disability Rights Office, Consumer and Governmental Affairs Bureau, at (202) 559-5158 (voice and videophone), or email:
The Second Report and Order contains information collection requirements with respect to the following four requirements, all of which aims to ensure that providers are qualified to receive compensation from the Fund for the provision of iTRS and that the services are provided in compliance with the Commission's rules with no or minimal service interruption.
(A) Required Evidence for Submission for Eligibility Certification. The Second Report and Order requires that potential iTRS providers must provide full and detailed information in its application for certification that show its ability to comply with the Commission's rules. The Second Report and Order requires that applicants must provide a detailed description of how the applicant will meet all non-waived mandatory minimum standards applicable to each form of TRS offered, including documentary and other evidence, and in the case of VRS, such documentary and other evidence shall demonstrate that the applicant leases, licenses or has acquired its own facilities and operates such facilities associated with TRS call centers and employs their own communications assistants (CAs), on a full or part-time basis, to staff such call centers at the date of the application. Such evidence shall include but not be limited to:
1. For VRS applicants operating five or fewer call centers within the United States, a copy of each deed or lease for each call center operated by the applicant within the United States;
2. For VRS applicants operating more than five call centers within the United States, a copy of each deed or lease for a representative sampling (taking into account size (by number of CAs) and location) of five call centers operated by the applicant within the United States; and
3. For VRS applicants operating call centers outside of the United States, a copy of each deed or lease for each call center operated by the applicant outside of the United States;
4. For all applicants, a list of individuals or entities that hold at least a 10 percent equity interest in the applicant, have the power to vote 10 percent or more of the securities of the applicant, or exercise de jure or de facto control over the applicant, a description of the applicant's organizational structure, and the names of its executives, officers, members of its board of directors, general partners (in the case of a partnership), and managing members (in the case of a limited liability company);
5. For all applicants, a list of the number of applicant's full-time and part-time employees involved in TRS operations, including and divided by the following positions: executives and officers; video phone installers (in the case of VRS), CAs, and persons involved in marketing and sponsorship activities;
6. Where applicable, a description of the call center infrastructure, and for all core call center functions (automatic call distribution, routing, call setup, mapping, call features, billing for compensation from the Fund, and registration) a statement whether such equipment is owned, leased or licensed (and from whom if leased or licensed) and proofs of purchase, leases or license agreements, including a complete copy of any lease or license agreement for automatic call distribution;
7. For all applicants, copies of employment agreements for all of the provider's executives and CAs need not be submitted with the application, but must be retained by the applicant and submitted to the Commission upon request; and
8. For all applicants, a list of all sponsorship arrangements relating to Internet-based TRS, including any associated written agreements;
(B) Submission of Annual Report. The Second Report and Order requires that providers submit annual reports that include updates to the information listed under Section A above or certify that there are no changes to the information listed under Section A above.
(C) Requiring Providers to Seek Prior Authorization of Voluntary Interruption of Service. The Second Report and Order requires that a VRS provider seeking to voluntarily interrupt service for a period of 30 minutes or more in duration must first obtain Commission authorization by submitting a written request to the Commission's Consumer and Governmental Affairs Bureau (CGB) at least 60 days prior to any planned service interruption, with detailed information of:
(1) Its justification for such interruption;
(2) Its plan to notify customers about the impending interruption; and
(3) Its plans for resuming service, so as to minimize the impact of such disruption on consumers through a smooth transition of temporary service to another provider, and restoration of its service at the completion of such interruption.
(D) Reporting of Unforeseen Service Interruptions. With respect to brief, unforeseen service interruptions or in the event of a VRS provider's voluntary service interruption of less than 30 minutes in duration, the Second Report and Order requires that the affected provider submit a written notification to CGB within two business days of the commencement of the service interruption, with an explanation of when and how the provider has restored service or the provider's plan to do so imminently. In the event the provider has not restored service at the time such report is filed, the provider must submit a second report within two business days of the restoration of service with an explanation of when and how the provider has restored service.
On October 17, 2011, in document FCC 11-155, the Commission released a Memorandum Opinion and Order (MO&O), published at 76 FR 67070, October 31, 2011, addressing the petition for reconsideration filed by Sorenson Communications, Inc. (Sorenson). Sorenson concurrently filed a PRA comment challenging two aspects of the information collection requirements as being too burdensome. In response, the Commission modified the information collection requirements contained in the July 28, 2011 Second Report and Order. Specifically, in the MO&O, the Commission revised the language in the rules to require that providers that operate five or more domestic call centers only submit copies of proofs of purchase, leases or license agreements for technology and equipment used to support their call center functions for five of their call centers that constitute a representative sample of their centers, rather than requiring copies for all call centers. Further, the Commission clarified that the rule requiring submission of a list of all sponsorship arrangements relating to iTRS only requires that a certification applicant include on the list associated
Therefore, the information collection requirement for A. Required Evidence for Submission for Eligibility Certification, paragraphs (6) and (8) listed above is revised to read as follows:
6. A description of the technology and equipment used to support their call center functions—including, but not limited to, automatic call distribution, routing, call setup, mapping, call features, billing for compensation from the TRS Fund, and registration—and for each core function of each call center for which the applicant must provide a copy of technology and equipment proofs of purchase, leases or license agreements in accordance with paragraphs (a)-(d) listed below, a statement whether such technology and equipment is owned, leased or licensed (and from whom if leased or licensed);
(a) For VRS providers operating five or fewer call centers within the United States, a copy of each proof of purchase, lease or license agreement for all technology and equipment used to support their call center functions, for each call center operated by the applicant within the United States;
(b) For VRS providers operating more than five call centers within the United States, a copy of each proof of purchase, lease or license agreement for technology and equipment used to support their call center functions for a representative sampling (taking into account size (by number of communications assistants) and location) of five call centers operated by the applicant within the United States; a copy of each proof of purchase, lease or license agreement for technology and equipment used to support their call center functions for all call centers operated by the applicant within the United States must be retained by the applicant for three years from the date of the application, and submitted to the Commission upon request;
(c) For VRS providers operating call centers outside of the United States, a copy of each proof of purchase, lease or license agreement for all technology and equipment used to support their call center functions for each call center operated by the applicant outside of the United States; and
(d) A complete copy of each lease or license agreement for automatic call distribution.
8. For all applicants, a list of all sponsorship arrangements relating to Internet-based TRS, including on that list a description of any associated written agreements; copies of all such arrangements and agreements must be retained by the applicant for three years from the date of the application, and submitted to the Commission upon request.
Federal Communications Commission.
Notice and request for comments.
The Federal Communications Commission (FCC), as part of its continuing effort to reduce paperwork burdens, invites the general public and other Federal agencies to take this opportunity to comment on the following information collection, as required by the Paperwork Reduction Act (PRA) of 1995. Comments are requested concerning (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimate; (c) ways to enhance the quality, utility, and clarity of the information collected; (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology; and (e) ways to further reduce the information collection burden on small business concerns with fewer than 25 employees.
The FCC may not conduct or sponsor a collection of information unless it displays a currently valid control number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the PRA that does not display a valid Office of Management and Budget (OMB) control number.
Written PRA comments should be submitted on or before January 6, 2012. If you anticipate that you will be submitting comments, but find it difficult to do so within the period of time allowed by this notice, you should advise the contact listed below as soon as possible.
Direct all PRA comments to the Federal Communications Commission via email to
For additional information about the information collection, contact Cathy Williams at (202) 418-2918.
Federal Communications Commission.
Notice.
On October 18, 2011, the Commission released a public notice announcing GSA's approval of the renewal of the North American Numbering Council charter through September 23, 2013. The intended effect of this action is to make the public aware of the renewal of the North American Numbering Council charter.
Renewed through September 23, 2013.
Competition Policy Division, Wireline Competition Bureau, Federal Communications Commission, The Portals II, 445 12th Street SW., Suite 5-C162, Washington, DC 20554.
Deborah Blue, Special Assistant to the Designated Federal Officer (DFO) at (202) 418-1466 or
The General Services Administration (GSA) has renewed the charter of the North American Numbering Council (NANC or Council) through September 23, 2013. The Council will continue to advise the Federal Communications Commission (Commission) on rapidly evolving and competitively significant numbering issues facing the telecommunications industry.
In October 1995, the Commission established the NANC, a Federal advisory committee created pursuant to the Federal Advisory Committee Act, 5 U.S.C., App. 2 (1988), to advise the Commission on issues related to North American Numbering Plan (NANP) administration. The Commission filed the original charter of the Council on October 5, 1995, establishing an initial two-year term. The Wireline Competition Bureau (Bureau) has renewed this charter every two years since that date. Since the last charter renewal, the Council has provided the Commission with critically important recommendations, such as the NANC's proposed method of selecting a Local Number Portability Administrator. In addition, the Council recommended porting intervals for simple, non-simple, and project ports, along with provisioning flows to support those recommended porting intervals. The Council also provided detailed annual evaluations of the current North American Numbering Plan Administrator (NANPA), the Pooling Administrator (PA), and the Billing and Collection (B and C) Agent. The Council will continue to evaluate the performances of the NANPA, the PA, and the B and C Agent on an annual basis. Moreover, the Council is presently considering and formulating recommendations on other important numbering-related issues that will require work beyond the term of the present charter.
Federal Communications Commission.
Notice.
The Enforcement Bureau (the “Bureau”) gives notice of Mr. Jeremy R. Sheets's suspension from the schools and libraries universal service support mechanism (or “E-Rate Program”). Additionally, the Bureau gives notice that debarment proceedings are commencing against him. Mr. Sheets, or any person who has an existing contract with or intends to contract with him to provide or receive services in matters arising out of activities associated with or related to the schools and libraries support mechanism, may respond by filing an opposition, supported by documentation to Joy Ragsdale, Federal Communications Commission, Enforcement Bureau, Investigations and Hearings Division, Room 4-A236, 445 12th Street SW., Washington, DC 20554.
Oppositions and any relevant documentation must be received by December 7, 2011. Any opposition, however, must be received 30 days from the receipt of the suspension letter or November 17, 2011, whichever comes first. The Bureau will decide any opposition for reversal or modification of suspension or debarment within 90 days of its receipt of any information.
Federal Communications Commission, Enforcement Bureau, Investigations and Hearings Division, Room 4-A236, 445 12th Street SW., Washington, DC 20554.
Joy Ragsdale, Federal Communications Commission, Enforcement Bureau, Investigations and Hearings Division, Room 4-A236, 445 12th Street SW., Washington, DC 20554. Joy Ragsdale may be contacted by phone at (202) 418-1697 or email at
The Bureau has suspension and debarment authority pursuant to 47 CFR 54.8 and 47 CFR 0.111(a)(14). Suspension will help to ensure that the party to be suspended cannot continue to benefit from the schools and libraries mechanism pending resolution of the debarment process. Attached is the suspension letter, DA 11-1733, which was mailed to Mr. Sheets and released on October 18, 2011. The complete text of the notice of suspension and initiation of debarment proceedings is available for public inspection and copying during regular business hours at the FCC Reference Information Center, Portal II, 445 12th Street SW., Room CY-A257, Washington, DC 20554. In addition, the complete text is available on the FCC's Web site at
The suspension letter follows:
The Federal Communications Commission (“Commission”) has received notice of your conviction of wire fraud in violation of 18 U.S.C. 1343 in connection with your participation in the federal schools and libraries universal service support mechanism (“E-Rate program”).
The Commission established procedures to prevent persons who have “defrauded the government or engaged in similar acts through activities associated with or related to the schools and libraries support mechanism” from receiving the benefits associated with that program.
On January 24, 2011, you pled guilty to wire fraud in connection with a scheme you devised and participated in to defraud the federal E-Rate program.
Furthermore, in responding to an audit conducted in 2006 by the Universal Service Administration Company (“USAC”), you transmitted by electronic mail fraudulent invoices that falsely stated a school district applicant had paid its share of E-Rate program expenses during 2006-2007. In addition, you failed to disclose that E-Rate funding was used to purchase ineligible goods and services.
On June 21, 2011, the United States District Court for the Western District of Michigan sentenced you to serve 15 months in prison followed by two years of supervised release for defrauding the federal E-Rate program.
Pursuant to § 54.8(b) of the Commission's rules,
In accordance with the Commission's debarment rules, you may contest this suspension or the scope of this suspension by filing arguments, with any relevant documents, within 30 calendar days after receipt of this letter or after a notice is published in the
As discussed above, your guilty plea and conviction of criminal conduct in connection with the E-Rate program serves as a basis for
As with the suspension process, you may contest the proposed debarment or the scope of the proposed debarment by filing arguments and any relevant documentation within 30 calendar days of receipt of this letter or publication in the
If and when your debarment becomes effective, you will be prohibited from participating in activities associated with or related to the schools and libraries support mechanism for three years from the date of debarment.
Please direct any response, if sent by messenger or hand delivery, to Marlene H. Dortch, Secretary, Federal Communications Commission, 445 12th Street SW., Room TW-A325, Washington, DC 20554, to the attention of Joy M. Ragsdale, Attorney Advisor, Investigations and Hearings Division, Enforcement Bureau, Room 4-A236, with a copy to Theresa Z. Cavanaugh, Acting Division Chief, Investigations and Hearings Division, Enforcement Bureau, Room 4-C322, Federal Communications Commission. All messenger or hand delivery filings must be submitted without envelopes.
If you have any questions, please contact Ms. Ragsdale via U.S. postal mail, email, or by telephone at (202) 418-7931. You may contact me at (202) 418-1420 or at the email addressed noted above if Ms. Ragsdale is unavailable.
Sincerely yours,
The notificants listed below have applied under the Change in Bank Control Act (12 U.S.C. 1817(j)) and § 225.41 of the Board's Regulation Y (12 CFR 225.41) to acquire shares of a bank or bank holding company. The factors that are considered in acting on the notices are set forth in paragraph 7 of the Act (12 U.S.C. 1817(j)(7)).
The notices are available for immediate inspection at the Federal Reserve Bank indicated. The notices also will be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing to the Reserve Bank indicated for that notice or to the offices of the Board of Governors. Comments must be received not later than November 22, 2011.
A. Federal Reserve Bank of Minneapolis (Jacqueline G. King, Community Affairs Officer) 90 Hennepin Avenue, Minneapolis, Minnesota 55480-0291:
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Board of Governors of the Federal Reserve System, November 2, 2011.
Administration for Children and Families, HHS.
Notice.
Statement of Organizations, Functions, and Delegations of Authority.
The Administration for Children and Families (ACF) has reorganized the Office of the Deputy Assistant Secretary for Administration (ODASA). This reorganization renames the Office of Management Resources (OMR) to the Office of Workforce Planning and Development. In addition, it realigns the ethics, facilities, security and travel functions formerly located in OMR to the Immediate Office of the Deputy Assistant Secretary for Administration.
Jason Donaldson, Deputy Assistant Secretary for Administration, 901 D Street SW., Washington, DC 20447, (202) 401-9238.
This notice amends Part K of the Statement of Organization, Functions, and Delegations of Authority of the Department of Health and Human Services (HHS), Administration for Children and Families (ACF) as follows: Chapter KP, Office of the Deputy Assistant Secretary for Administration, (ODASA), as last amended, 71 FR 59117-59123, October 6, 2006.
I. Under Chapter KP, Office of the Deputy Assistant Secretary for Administration, KP.00 Mission, delete in its entirety and replace with the following:
II. Under Chapter KP, Office of the Deputy Assistant Secretary for Administration, KP.10 Organization, delete in its entirety and replace with the following:
III. Under Chapter KP, Office of the Deputy Assistant Secretary for Administration, KP.20 Functions, paragraph A, delete in its entirety and replace with the following:
The Deputy Assistant Secretary for Administration represents the Assistant Secretary in HHS and with other Federal agencies and task forces in defining objectives and priorities, and in coordinating activities associated with Federal reform initiatives. ODASA provides leadership of assigned ACF special initiatives arising from Departmental, Federal and non-Federal directives to improve service delivery to customers.
The Deputy Assistant Secretary for Administration provides day-to-day executive leadership and direction to the Immediate Office of the Deputy Assistant Secretary, Office of Information Services, Office of Financial Services, Office of Workforce Planning and Development, and the Office of Grants Management. The Immediate Office of the Deputy Assistant Secretary for Administration consists of the Deputy Director, Chief of Staff, and the Management Operations Team (formerly referred to as the Administrative Team), the Budget Team, Facilities Team, and Ethics Team.
The Management Operations Team coordinates human capital management needs within ODASA. The Team provides leadership, guidance, oversight and liaison functions for ODASA personnel related issues and activities as well as other administrative functions within ODASA. The Management Operations Team coordinates with the Office of Workforce Planning and Development to provide ODASA staff with a full array of personnel services, including position management, performance management, employee recognition, staffing, recruitment, employee and labor relations, employee worklife, payroll liaison, staff development, training services, and special hiring and placement programs. The Team develops and implements ACF travel policies and procedures consistent with Federal requirements. The Team provides technical assistance and oversight; coordinates ACF's use of the Travel Management System; manages employee participation in the Travel Charge Card program, and coordinates Travel Management Center services for ACF. It purchases and tracks common use supplies, stationery and publications. It plans and manages reprographic services.
The Budget Team manages the formulation and execution of ODASA's Federal administration budget and assigned ACF program and common expense budgets. The Budget Team maintains budgetary controls on ODASA accounts, reconciling accounting reports and invoices, and monitoring all spending. The Team develops, defends and executes the assigned funds for rent, repair and alterations, facilities activities, telecommunication, information technology, personnel services and training. The Team also controls ODASA's credit card for small purchases.
The Facilities Team is responsible for planning, managing, and directing ACF's facility, safety, security, and emergency management programs. The Team serves as the lead for ACF in coordination and liaison with Departmental, GSA and other Federal agencies on implementation of Federal
The Ethics Team manages the agency-wide ethics program and ensures that the agency and ACF employees are in compliance with the Executive Branch Standards of Ethical Conduct, the HHS Supplemental Standards of Ethical Conduct, the criminal conflict of interest statutes, and other ethics related laws and regulations. The Agency-wide ethics program includes the public financial disclosure reporting system, confidential financial disclosure reporting system, outside activity prior approval and annual report process, non-federal source cash or in-kind travel reimbursement, procurement integrity enforcement, standards of ethical conduct determinations, conflicts resolution, advisory committees ethics program, advice and counsel, education and training, and enforcement. The Ethics Team Officer reports directly to the DASA, who serves as the Deputy Ethics Counselor.
IV. Under Chapter KP, Office of the Deputy Assistant Secretary for Administration, KP.20 Functions, paragraph D, delete in its entirety and replace with the following:
D. The Office of Workforce Planning and Development (OWPD) advises the Deputy Assistant Secretary for Administration on human resource management, and organizational and employee development activities for ACF. OWPD provides leadership, direction and oversight for human resource management services provided to ACF through a contract and supplemental memoranda of understanding (MOUs) with the Program Support Center (PSC). OWPD, in collaboration and coordination with the PSC, provides advice and assistance to ACF managers in their personnel management activities, including recruitment, selection, position management, performance management, designated performance and incentive awards and employee assistance programs and other services to ACF employees. OWPD provides management, direction and oversight of the following personnel administrative services: the exercise of appointing authority, position classification, awards authorization, performance management evaluation, personnel action processing and recordkeeping, merit promotion, special hiring, and placement programs. OWPD serves as liaison between ACF, the Department, and the Office of Personnel Management. It provides technical advice and assistance on personnel policy, regulations, and laws. OWPD formulates and interprets policies pertaining to existing personnel administration and management matters and formulates and interprets new human resource programs and strategies. The Office, in collaboration and coordination with the PSC, provides oversight and management advisory services on all ACF employee relations issues. The Office plans and coordinates ACF employee relations and labor relations activities, including the application and interpretation of the Federal Labor Management Relations Program collective bargaining agreements, disciplinary and adverse action regulations and appeals. The Office participates in the formulation and implementation of policies, practices and matters affecting bargaining unit employees' working conditions by assuring management's compliance with the Federal Labor Relations Program (5 U.S.C. Chapter 71). The Office maintains oversight, leadership and direction of the labor-management and employee relations services provided under contract with the PSC.
OWPD is responsible for formulation, planning, analysis and development of ACF human resource policies and programs, workforce planning, and liaison functions to the Department on ACF payroll matters. The Office formulates and oversees the implementation of ACF-wide policies, regulations and procedures concerning all aspects of the Senior Executive Service (SES), and SES-equivalent recruitment, staffing, position establishment, compensation, award, performance management and related personnel areas. The Office manages the ACF SES performance recognition systems and provides services for functions of the Executive Secretary to the Executive Resources Board and the Performance Review Board. OWPD coordinates Schedule C and executive personnel activity with the Office of the Secretary and is the focal point for data, reports and analyses relating to Schedule C, SES and Executive-level personnel. OWPD advises the Deputy Assistant Secretary for Administration on organizational analysis and development including: delegations of authority; planning for new organizational elements; and planning, organizing and performing studies, analyses and evaluations related to structural, functional and organizational issues, problems, and policies to ensure organizational effectiveness. The Office
Food and Drug Administration, HHS.
Notice; request for comments.
The Food and Drug Administration (FDA) is announcing the availability of a draft document entitled “Blueprint for Prescriber Education for the Long-Acting/Extended-Release Opioid Class-Wide REMS” (Blueprint). The draft Blueprint contains core messages intended for use by continuing education (CE) providers to develop educational materials to train prescribers of long-acting and extended-release opioids under the required risk evaluation and mitigation strategy (REMS) for these products (Opioid REMS). FDA seeks stakeholder input on the document. After comments are received, FDA will revise the Blueprint as appropriate, incorporate it into the Opioid REMS when it is approved, and post it on FDA's Web site for use by CE providers.
Submit either electronic or written comments on the draft Blueprint by December 7, 2011.
See the
Michie I. Hunt, Center for Drug Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 51, rm. 6153, Silver Spring, MD 20993-0002, (301) 796-3504.
The Food and Drug Administration Amendments Act of 2007 (FDAAA) gave FDA the authority to require manufacturers to develop and implement a REMS when necessary to ensure the benefits of a drug or biological product outweigh its risks.
On February 6, 2009, FDA sent letters to manufacturers of certain opioid drug products indicating that these drugs will be required to have a REMS to ensure that the benefits of the drugs continue to outweigh the risks.
On April 19, 2011, in conjunction with the Office of National Drug Control Policy (ONDCP) release of the Obama Administration's
In the REMS notification letters, FDA provided an outline of the required prescriber education. The outline specified that the education must include information on weighing the risks and benefits of opioid therapy, choosing patients appropriately, managing and monitoring patients, and counseling patients on the safe use of these drugs. In addition, the education must include information on how to recognize evidence of, and the potential for, opioid misuse, abuse, and addiction. The REMS notification letters stated that although there is no mandatory requirement that prescribers take the course as a precondition to dispensing the medication to patients, application holders will be required to establish goals for the number of prescribers trained, collect the information about the number of prescribers who took the courses, and report the information to FDA as part of periodic required assessments.
The REMS notification letter expressed FDA's expectation that the training would be conducted by accredited, independent continuing education providers. FDA later elaborated on its vision for prescriber education stating that we expect the CE training to be provided without cost to the healthcare professionals and that sponsors would offer unrestricted grants to accredited CE providers to develop CE for the appropriate prescriber
In response to the April REMS notification letter, application holders, through an industry working group, submitted an expanded outline of the potential topics to be covered in the CE, noting that education incorporating all of the topics in the outline could require 30 or more hours of education. FDA's expectation is that the initial or basic REMS related CE that should be offered to all prescribers of long-acting and extended-release opioids should consist of a “core” content of about 2 to 3 hours. FDA has reviewed the industry submission and developed a basic outline and the core messages that FDA believes should be conveyed to prescribers in this basic educational module. After it is completed and approved as part of the REMS, the Blueprint will be posted on FDA's Web site for use by CE providers in developing CE courses. Although FDA recognizes that additional training modules could be helpful, FDA's goal is to require basic education for all prescribers of long-acting and extended-release opioids, and at this time, FDA does not intend to develop or approve messages as part of the REMS beyond those approved in the basic core module. Using the Blueprint on FDA's Web site, CE providers can develop accredited CE in the manner they choose.
With this document, FDA is announcing the availability of the Agency's draft Blueprint for prescriber education and soliciting public comment. The draft Blueprint is available on the Internet at
Interested persons may submit to the Division of Dockets Management (see
Food and Drug Administration, HHS.
Notice; extension of comment period.
The Food and Drug Administration (FDA) is extending to January 3, 2012, the comment period for the notice entitled “Draft Guidance for Industry and Food and Drug Administration Staff; De Novo Classification Process (Evaluation of Automatic Class III Designation); Availability,” that appeared in the
Submit either electronic or written comments by January 3, 2012.
Submit electronic comments on the draft guidance to
In the
The Agency received a comment that the 60-day comment period in the notice was inconsistent with the 90-day comment period in the draft guidance document. FDA is extending the comment period for the notice until January 3, 2012. The Agency believes that this extension allows adequate time for interested persons to submit comments without significantly delaying action by the Agency.
Interested persons may submit to the Division of Dockets Management (see
Persons interested in obtaining a copy of the draft guidance may do so by using the Internet. A search capability for all Center for Devices and Radiological Health (CDRH) guidance documents is available at
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is announcing the availability of a document entitled “Guidance for Industry: Clinical Considerations for Therapeutic Cancer Vaccines” dated October 2011. The guidance document provides sponsors who wish to submit an Investigational New Drug application (IND) for a therapeutic cancer vaccine with recommendations on critical clinical considerations for investigational studies of these products. The guidance also provides recommendations for the design of clinical trials for cancer vaccines conducted under an IND to support a subsequent biologics license application (BLA) for marketing approval. The guidance applies to therapeutic cancer vaccines that are intended for the treatment of patients with an existing diagnosis of cancer. The guidance does not apply to vaccines for preventative and therapeutic infectious disease indications, to products intended to induce or augment a non-specific immune response, or to products intended to prevent or decrease the incidence of cancer in individuals without a prior history of that cancer. Furthermore, the guidance does not apply to adoptive immunotherapeutic products which may mediate their therapeutic effect by targeting the tumor directly, such as T cell or NK cell products. The guidance announced in this notice finalizes the draft guidance of the same title dated September 2009.
Submit either electronic or written comments on Agency guidances at any time.
Submit written requests for single copies of the guidance to the Office of Communication, Outreach and Development (HFM-40), Center for Biologics Evaluation and Research (CBER), Food and Drug Administration, 1401 Rockville Pike, suite 200N, Rockville, MD 20852-1448. Send one self-addressed adhesive label to assist the office in processing your requests. The guidance may also be obtained by mail by calling CBER at 1 (800) 835-4709 or (301) 827-1800. See the
Submit electronic comments on the guidance to
Lori Jo Churchyard, Center for Biologics Evaluation and Research (HFM-17), Food and Drug Administration, 1401 Rockville Pike, suite 200N, Rockville, MD 20852-1448, (301) 827-6210.
FDA is announcing the availability of a document entitled “Guidance for Industry: Clinical Considerations for Therapeutic Cancer Vaccines,” dated October 2011. The guidance document provides sponsors who wish to submit an IND for a therapeutic cancer vaccine with recommendations on critical clinical considerations for investigational studies of these products. Further, the guidance provides recommendations for the design of clinical trials for cancer vaccines conducted under an IND (Title 21 Code of Federal Regulations (21 CFR) part 312) to support a subsequent BLA for marketing approval. The guidance is applicable to therapeutic cancer vaccines that are intended for the treatment of patients with an existing diagnosis of cancer. The guidance does not apply to vaccines for preventative and therapeutic infectious disease indications, to products intended to induce or augment a non-specific immune response, or to products intended to prevent, or decrease the incidence of cancer in individuals without a prior history of that cancer. Furthermore, the guidance does not apply to adoptive immunotherapeutic products which may mediate their therapeutic effect by targeting the tumor directly, such as T cell or NK cell products.
FDA has held or participated in several meetings to discuss development of cancer vaccines. For example, on February 8-9, 2007, CBER co-sponsored a workshop with the National Cancer Institute entitled “Bringing Therapeutic Cancer Vaccines and Immunotherapies through Development to Licensure.” In consideration of the input FDA received from stakeholders, the guidance provides recommendations for the design of clinical trials for cancer vaccines conducted under an IND to support a subsequent BLA for marketing approval.
In the
The guidance is being issued consistent with FDA's good guidance practices regulation (21 CFR 10.115). The guidance represents FDA's current thinking on this topic. It does not create or confer any rights for or on any person and does not operate to bind FDA or the public. An alternative approach may be used if such approach satisfies the requirements of the applicable statutes and regulations.
This guidance refers to previously approved collections of information found in FDA regulations. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The collections of information in 21 CFR part 312 have been approved under OMB control number 0910-0014; and the collection of information in 21 CFR part 50 on informed consent laws
Interested persons may submit to the Division of Dockets Management (see
Persons with access to the Internet may obtain the guidance at either
Food and Drug Administration, HHS.
Notice of public workshop.
The Food and Drug Administration (FDA) is announcing a public workshop entitled “Bridging the IDEAL and TPLC Approaches for Evidence Development for Surgical Medical Devices and Procedures.” The purpose of the public workshop is to provide a forum for discussion among FDA, governmental agencies, academia, physicians, and various stakeholders to further refine and advance the Idea Development Evaluation Assessment and Long-Term (IDEAL) initiative and Total Product Life Cycle (TPLC) frameworks related to evidence generation and evaluation for surgical devices and procedures.
If you need special accommodations due to a disability, please contact Susan Monahan at
The purpose of the public workshop is to facilitate discussion among FDA, governmental agencies, academia, clinicians, and the key stakeholders in the scientific community on issues related to evidence generation and evaluation for surgical devices and procedures. Based on complementary methodological frameworks of the IDEAL and TPLC initiatives, more comprehensive and applicable models and methodologies will be developed.
This workshop is open to all interested parties. The target audience is comprised of professionals in the scientific community interested in advancing the infrastructure and methodology for evaluating surgical devices and procedures.
We intend to discuss a large number of issues at the workshop, including, but not limited to, the following:
• The IDEAL and the FDA TPLC approach for evaluation of new medical devices, surgical operations, and invasive medical procedures;
• Unique study designs and reporting methods for evaluation of medical devices and surgeries;
• Innovative methodologies and scientific infrastructure to promote innovation;
• The role of registries and observational studies during device life cycle; and
• Integrating innovation, evaluation, and dissemination pathways for medical devices, surgical operations, and invasive medical procedures.
Background information on the public workshop, registration information, the agenda, information about lodging, and other relevant information will be posted, as it becomes available, on the Internet at
Food and Drug Administration, HHS.
Notice; request for comments.
The Food and Drug Administration (FDA) is announcing the availability of a medical product shortage report entitled “A Review of FDA's Approach to Medical Product Shortages.” The Agency is making the report available by placing it in the docket opened for a previous public workshop on drug shortages. The report discusses the Agency's approach to product shortages, particularly those products regulated by the FDA Center for Drug Evaluation and Research (CDER). FDA requests comments, until December 23, 2011, on the report and its recommendations, including whether there are additional suggestions for recommendations and how we should prioritize work on these recommendations.
Submit either electronic or written comments by December 23, 2011.
Submit electronic comments to
Peter Lurie, Office of Policy and Planning, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 32, rm. 4220, Silver Spring, MD 20993-0002, (301) 796-4800.
In the
Interested persons may submit to the Division of Dockets Management (see
Persons with access to the Internet may obtain the document at either
Health Resources and Services Administration, HHS.
Notice.
This notice requests comments on proposed eligibility criteria for the Centers of Excellence (COE) program in health professions education for under-represented minority (URM) individuals (See Title VII, Section 736 of the Public Health Service Act, 42 U.S.C. 293 (2011) as amended by the Patient Protection and Affordable Care Act, Public Law 111-148, § 5401 (2010)). When finalized, these eligibility criteria will be used to determine the eligibility of designated health professions schools to apply for COE funding in fiscal year (FY) 2012 and subsequent fiscal years. Funding is dependent on the availability of appropriated funds for the COE program. The designated health professions schools are schools of allopathic medicine, osteopathic medicine, dentistry, pharmacy, and graduate programs in behavioral or mental health. This does not apply to Historically Black Colleges and Universities (HBCUs) eligible to establish a COE, under PHS Act section 736(c)(2).
Interested persons are invited to comment within 30 days of the publication of this notice. All comments received on or before those 30 days complete will be considered.
All written comments concerning this notice should be submitted to Dr. Joan Weiss, Director, Division of Public Health and Interdisciplinary Education, at the contact information below.
Anyone requesting additional details should contact Dr. Joan Weiss, Bureau of Health Professions, Health Resources and Services Administration. Dr. Weiss may be reached in one of three following methods: (1) Via written request to: Dr. Joan Weiss, Designated Federal Official, Bureau of Health Professions, Health Resources and Services Administration, Parklawn Building, Room 9-36, 5600 Fishers Lane, Rockville, Maryland 20852; (2) via
The COE program aims to support institutions with a commitment to URMs, which includes demonstrated effectiveness in recruiting, teaching, training, and retaining current and future URM health professionals, both as practitioners and as faculty. This announcement details the proposed approach that the Secretary will use to assess whether schools and other eligible entities meet the eligible criteria defined in statute. Beginning in FY 2012, the following approach will be used to assess whether applicants meet eligibility criteria.
1. Health professions schools and programs will be ranked according to the percentage of URMs (
2. The top quartile (75th percentile) will serve as the eligibility threshold for Hispanic, Native American, and “Other” COE applicants.
3. The Integrated Postsecondary Education Data System (IPEDS) Completions survey will provide the raw data for threshold analysis. IPEDS is a system of interrelated completed surveys conducted annually by the U.S. Department of Education's National Center for Education Statistics (NCES). The IPEDS collects data on postsecondary education in the United States, including the number of students who complete a postsecondary education program by type of program and level of award (certificate or degree). The IPEDS is available at
Individual schools will be responsible for calculating their percentage of URM graduates with degrees. Schools' graduation rate percentages will be compared to the thresholds established through the methodology described above. If a school meets or exceeds the threshold, it will meet the graduation eligibility criterion for the COE program. To calculate their URM graduation percentage, health professions schools would:
1. Sum the appropriate URM (Hispanic, Native American, or “Other”) population that completed and successfully graduated from the health professions school with degrees across the most recent three years (A).
2. Sum the total student population that completed and successfully graduated from the health professions school with degrees across the most recent three years (B).
3. Divide A by B to arrive at the average designated URM percentage of successful graduates from the health professions schools with degrees across the past three years.
To be eligible for the COE program, Hispanic, Native American and “Other” applicants must meet or exceed the proposed graduation thresholds. The proposed graduation threshold in each of the eligible fields of study is the 75th percentile of URM graduation rates as reported to the IPEDS. The 75th percentile was determined based on an analysis of the IPEDS Completions survey of 2009 data within the appropriate field of study, as defined by the Classification of Instructional Program (CIP) code system. The CIP is the accepted federal government statistical standard on instructional program classifications. The “Total Programs” per discipline represents the number of programs reporting a completions rate for the given CIP code in the U.S. within the IPEDS system.
The analysis would be as follows:
* Due to the limited number of Native Americans graduating with a Doctor of Pharmacy or a graduate degree in Behavioral or Mental Health from the school of discipline, the proposed graduation rate eligibility threshold for these two disciplines is based on the mean percentage and not on the 75 percentile of Native Americans graduating with the required degree.
The catalog of Federal Domestic Assistance Number for the COE program is 93.157. This program is not subject to the provisions of Executive Order 12372, Intergovernmental Review of Federal Programs (as implemented through 45 CFR part 100). Further, these programs are not subject to the Public Health Systems Reporting Requirements. The Centers of Excellence Program application is approved under OMB No. 0915-0060.
Coast Guard, DHS.
Sixty-day notice requesting comments.
In compliance with the Paperwork Reduction Act of 1995, the U.S. Coast Guard intends to submit Information Collection Requests (ICRs) to the Office of Management and Budget (OMB), Office of Information and Regulatory Affairs (OIRA), requesting an extension of its approval for the following collections of information: 1625-0028, Course Approval and Records for Merchant Marine Training Schools and 1625-0069, Ballast Water Management for Vessels with Ballast Tanks Entering U.S. Waters. Our ICRs describe the information we seek to collect from the public. Before submitting these ICRs to OIRA, the Coast Guard is inviting comments as described below.
Comments must reach the Coast Guard on or before January 6, 2012.
You may submit comments identified by Coast Guard docket number [USCG-2011-1014] to the Docket Management Facility (DMF) at the U.S. Department of Transportation (DOT). To avoid duplicate submissions, please use only one of the following means:
(1)
(2)
(3)
(4)
The DMF maintains the public docket for this Notice. Comments and material received from the public, as well as documents mentioned in this Notice as being available in the docket, will become part of the docket and will be available for inspection or copying at room W12-140 on the West Building Ground Floor, 1200 New Jersey Avenue SE., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. You may also find the docket on the Internet at
Copies of the ICRs are available through the docket on the Internet at
Contact Ms. Kenlinishia Tyler, Office of Information Management, telephone (202) 475-3652, or fax (202) 475-3929, for questions on these documents. Contact Ms. Renee V. Wright, Program Manager, Docket Operations, (202) 366-9826 for questions on the docket.
This Notice relies on the authority of the Paperwork Reduction Act of 1995; 44 U.S.C. chapter 35, as amended. An ICR is an application to OIRA seeking the approval, extension, or renewal of a Coast Guard collection of information (Collection). The ICR contains
The Coast Guard invites comments on whether these ICRs should be granted based on the Collections being necessary for the proper performance of Departmental functions. In particular, the Coast Guard would appreciate comments addressing: (1) The practical utility of the Collections; (2) the accuracy of the estimated burden of the Collections; (3) ways to enhance the quality, utility, and clarity of information subject to the Collections; and (4) ways to minimize the burden of the Collections on respondents, including the use of automated collection techniques or other forms of information technology. In response to your comments, we may revise these ICRs or decide not to seek approval for the Collections. We will consider all comments and material received during the comment period.
We encourage you to respond to this request by submitting comments and related materials. Comments must contain the OMB Control Number of the ICR and the docket number of this request, [USCG-2011-1014], and must be received by January 6, 2012. We will post all comments received, without change, to
If you submit a comment, please include the docket number [USCG-2011-1014], indicate the specific section of the document to which each comment applies, providing a reason for each comment. You may submit your comments and material online (
You may submit your comments and material by electronic means, mail, fax, or delivery to the DMF at the address under
Anyone can search the electronic form of comments received in dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union,
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Office of the Assistant Secretary for Housing, HUD.
Notice.
The proposed information collection requirement described below will be submitted to the Office of Management and Budget (OMB) for review, as required by the Paperwork Reduction Act. The Department is soliciting public comments on the subject proposal.
Interested persons are invited to submit comments regarding this proposal. Comments should refer to
Henry S. Czauski, Acting Deputy Administrator, Office of Manufactured Housing, Department of Housing and Urban Development, 451 7th Street SW., Washington, DC 20410, telephone (202) 708-6409 (this is not a toll free number) for copies of the proposed forms and other available information.
The Department is submitting the proposed information collection to OMB for review, as required by the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35, as amended).
This Notice is soliciting comments from members of the public and affected agencies concerning the proposed collection of information to: (1) Evaluate whether the proposed collection is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (2) Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information; (3) Enhance the quality, utility, and clarity of the information to be collected; and (4) Minimize the burden of the collection of information on those who are to respond; including the use of appropriate automated collection techniques or other forms of information technology,
This Notice also lists the following information:
The Paperwork Reduction Act of 1995, 44 U.S.C., Chapter 35, as amended.
Office of the Chief Information Officer, HUD.
Notice.
The proposed information collection requirement described below has been submitted to the Office of Management and Budget (OMB) for review, as required by the Paperwork Reduction Act. The Department is soliciting public comments on the subject proposal.
The U.S. Department of the Housing and Urban Development (HUD) intends to make funding available from the FY 2012 Transformation Initiative for Research Grants related to the Choice Neighborhoods Demonstration. This information collection is for applications for funding, and reporting requirements for funded applications.
Interested persons are invited to submit comments regarding this proposal. Comments should refer to the proposal by name and/or OMB approval Number (2528-Pending) and should be sent to: HUD Desk Officer, Office of Management and Budget, New Executive Office Building, Washington, DC 20503;
Colette Pollard., Reports Management Officer, QDAM, Department of Housing and Urban Development, 451 Seventh Street SW., Washington, DC 20410; email Colette Pollard at Colette.
This notice informs the public that the Department of Housing and Urban Development has submitted to OMB a request for approval of the Information collection described below. This notice is soliciting comments from members of the public and affecting agencies concerning the proposed collection of information to: (1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (2) Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information; (3) Enhance the quality, utility, and clarity of the information to be collected; and (4) Minimize the burden of the collection of information on those who are to respond; including through the use of appropriate automated collection techniques or other forms of information technology,
This notice also lists the following information:
Section 3507 of the Paperwork Reduction Act of 1995, 44 U.S.C. 35, as amended.
Indian Arts and Crafts Board, Interior.
Notice and request for comments.
The Indian Arts and Crafts Board (IACB) collects information to identify and revise listings for the
OMB has up to 60 days to approve or disapprove the information collection request, but may respond after 30 days; therefore, public comments should be submitted to OMB by December 7, 2011, in order to be assured of consideration.
Send your written comments by facsimile (202) 395-5806 or email
Requests for additional information or copies of the
The
The service of being listed in this directory is provided free-of-charge to members of federally recognized tribes. Businesses listed in the
The Director of the Board uses this information to determine whether an individual or business applying to be listed in the
To be listed in the
The following information is collected in a single-page form that is distributed by the Indian Arts and Crafts Board. Although listing in the
(a) To determine whether an individual or business meets the eligibility requirements for inclusion in the
(b) to identify the applicant's business information to be printed in the
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid Office of Management and Budget control number. The IACB has submitted a request to OMB to renew its approval of this information collection for an additional three years. There are four types of application forms: (1) New businesses—group; (2) new businesses—individual; (3) businesses already listed—group; and (4) businesses already listed—individual. Each respondent will only be asked to complete one application form.
As required under 5 CFR 1320.8(d), a
(1)
(2) Annual reporting and recordkeeping burden.
(3) Description of the need and use of the information: Submission of this information is required to receive the benefit of being listed in the Indian Arts and Crafts Board
The Department of the Interior invites comments on:
(a) Whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(b) The accuracy of the agency's estimate of the burden of the collection and the validity of the methodology and assumptions used;
(c) Ways to enhance the quality, utility, and clarity of the information to be collected; and
(d) Ways to minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other collection techniques or other forms of information technology.
Burden means the total time, effort, or financial resources expended by persons to generate, maintain, retain, disclose, or provide information to or for a federal agency. This includes the time needed to review instructions; to develop, acquire, install and utilize technology and systems for the purpose of collecting, validating and verifying information, processing and maintaining information, and disclosing and providing information; to train personnel and to be able to respond to a collection of information, to search data sources, to complete and review the collection of information; and to transmit or otherwise disclose the information.
Office of the Secretary, Interior.
Notice of public meetings of the Invasive Species Advisory Committee.
Pursuant to the provisions of the Federal Advisory Committee Act, notice is hereby given of meetings of the Invasive Species Advisory Committee (ISAC). Comprised of 29 nonfederal invasive species experts and stakeholders from across the nation, the purpose of the Advisory Committee is to provide advice to the National Invasive Species Council, as authorized by Executive Order 13112, on a broad array of issues related to preventing the introduction of invasive species and providing for their control and minimizing the economic, ecological, and human health impacts that invasive species cause. The Council is co-chaired by the Secretary of the Interior, the Secretary of Agriculture, and the Secretary of Commerce. The duty of the Council is to provide national leadership regarding invasive species issues.
ISAC New Member Orientation (CLOSED): Monday, December 5, 2011; 9 a.m.-1:45 p.m. Meeting of the Invasive Species Advisory Committee (OPEN): Tuesday, December 6, 2011 through Thursday, December 8, 2011. The meeting will be held 8 a.m. to 5 p.m. on Tuesday, December 6, 2011 and Wednesday, December 7, 2011. On Thursday, December 8, 2011, the meeting will begin at 8 a.m., and adjourn at 12 noon.
The new member orientation will be held at the NISC offices at 1201 Eye Street NW., Washington, DC 20005. The ISAC meeting will be held at the U.S. Department of Commerce (Herbert C. Hoover Building), 1401 Constitution Avenue NW., Washington, DC 20230. The general session will be held in Room 4830.
Kelsey Brantley, National Invasive Species Council Program Specialist and ISAC Coordinator, (202) 513-7243;
Fish and Wildlife Service, Department of the Interior.
Notice of issuance.
In accordance with the Marine Mammal Protection Act of 1972, as amended (MMPA), we, the Fish and Wildlife Service, have issued letters of authorization for the nonlethal take of polar bears and Pacific walrus incidental to oil and gas industry exploration, development, and production activities in the Beaufort Sea and the adjacent northern coast of Alaska and incidental to oil and gas industry exploration activities in the Chukchi Sea and the adjacent western coast of Alaska.
Craig Perham at the Fish and Wildlife Service, Marine Mammals Management Office, 1011 East Tudor Road, Anchorage, AK 99503; (800) 362-5148 or (907) 786-3810.
On August 2, 2006, we published in the
On June 11, 2008, we published in the
Fish and Wildlife Service, Interior.
Notice.
To implement the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES or the Convention), the Parties to the Convention meet periodically to review what species in international trade should be regulated and other aspects of the implementation of CITES. The sixteenth regular meeting of the Conference of the Parties to CITES (CoP16) is tentatively scheduled to be held in March 2013 in Thailand. This is our second in a series of
We will consider all information and comments we receive on or before January 6, 2012.
You may submit comments pertaining to recommendations for resolutions, decisions, and agenda items for discussion at CoP16 by one of the following methods:
•
•
We will not consider comments sent by email or fax or to an address not listed in the
Comments and materials we receive in response to this notice will be available for public inspection on
For information pertaining to resolutions, decisions, and agenda items contact: Robert R. Gabel, Chief, Division of Management Authority, U.S. Fish and Wildlife Service, 4401 N. Fairfax Drive, Room 212, Arlington, VA 22203; telephone (703) 358-2095; facsimile (703) 358-2298. If you use a telecommunications device for the deaf (TDD), call the Federal Information Relay Service (FIRS) at (800) 877-8339. For information pertaining to species proposals contact: Rosemarie Gnam, Chief, Division of Scientific Authority, phone (703) 358-1708, fax (703) 358-2276, email:
The Convention on International Trade in Endangered Species of Wild Fauna and Flora, hereinafter referred to as CITES or the Convention, is an international treaty designed to regulate international trade in certain animal and plant species that are now, or potentially may become, threatened with extinction. These species are listed in the Appendices to CITES, which are available on the CITES Secretariat's Web site at
Currently, 175 countries, including the United States, are Parties to CITES. The Convention calls for regular biennial meetings of the Conference of the Parties, unless the Conference
This is our second in a series of
CoP16 is tentatively scheduled to be held in Thailand in March 2013.
We published our first CoP16-related
(1)
(2)
Although we have not yet received formal notice of the provisional agenda for CoP16, we invite your input on possible agenda items that the United States could recommend for inclusion, or on possible resolutions and decisions of the Conference of the Parties that the United States could submit for consideration. Copies of the agenda and the results of the last meeting of the Conference of the Parties (CoP15) in Doha, Qatar, in March 2010, as well as copies of all resolutions and decisions of the Conference of the Parties currently in effect, are available on the CITES Secretariat's Web site (
Article XI, paragraph 7 of CITES provides: “Any body or agency technically qualified in protection, conservation or management of wild fauna and flora, in the following categories, which has informed the Secretariat of its desire to be represented at meetings of the Conference by observers, shall be admitted unless at least one-third of the Parties present object:
(a) International agencies or bodies, either governmental or nongovernmental, and national governmental agencies and bodies; and
(b) National nongovernmental agencies or bodies which have been approved or this purpose by the State in which they are located.
National agencies or organizations within the United States must obtain our approval to participate in CoP16, whereas international agencies or organizations must obtain approval directly from the CITES Secretariat. We will publish information in a future
As stated above, the next regular meeting of the Conference of the Parties (CoP16) is tentatively scheduled to be held in Thailand in March 2013. The United States must submit any proposals to amend Appendix I or II, or any draft resolutions, decisions, or agenda items for discussion at CoP16, to
Through a series of additional notices and Web site postings in advance of CoP16, we will inform you about preliminary negotiating positions on resolutions, decisions, and amendments to the Appendices proposed by other Parties for consideration at CoP16, and about how to obtain observer status from us. We will also publish an announcement of a public meeting tentatively to be held approximately 3 months prior to CoP16; that meeting will enable us to receive public input on our positions regarding CoP16 issues. The procedures for developing U.S. documents and negotiating positions for a meeting of the Conference of the Parties to CITES are outlined in 50 CFR 23.87. As noted in paragraph (c) of that section, we may modify or suspend the procedures outlined there if they would interfere with the timely or appropriate development of documents for submission to the CoP and of U.S. negotiating positions.
The primary author of this notice is Clifton A. Horton, Division of Management Authority, U.S. Fish and Wildlife Service.
The authority for this action is the Endangered Species Act of 1973, as amended (16 U.S.C. 1531
Bureau of Land Management, Interior.
30-Day notice and request for comments.
The Bureau of Land Management (BLM) has submitted an information collection request to the Office of Management and Budget (OMB) for a 3-year renewal of OMB control number 1004-0201, which pertains to management of oil shale on public lands.
The OMB is required to respond to this information collection request within 60 days but may respond after 30 days. Therefore, written comments should be received on or before December 7, 2011.
Please submit comments directly to the Desk Officer for the Department of the Interior (OMB #1004-0201), Office of Management and Budget, Office of Information and Regulatory Affairs, fax (202) 395-5806, or by electronic mail at
Mavis Love at (307) 775-6258. Persons who use a telecommunication device for the deaf (TDD) may call the Federal Information Relay Service at 1-(800) 877-8339, to contact Ms. Love. You may also review the information collection request online at
The Paperwork Reduction Act (44 U.S.C. 3501-3521) and OMB regulations at 5 CFR part 1320 provide that an agency may not conduct or sponsor a collection of information unless it displays a currently valid OMB control number. Until OMB approves a collection of information, you are not obligated to respond. 44 U.S.C. 3506 and 3507. In order to obtain or renew an OMB control number, Federal agencies are required to seek public comment on information collection and recordkeeping activities (see 5 CFR 1320.8(d) and 1320.12(a)).
As required at 5 CFR 1320.8(d), the BLM published a 60-day notice in the
1. Whether the collection of information is necessary for the proper functioning of the BLM, including whether the information will have practical utility;
2. The accuracy of the BLM's estimate of the burden of collecting the information, including the validity of the methodology and assumptions used;
3. The quality, utility and clarity of the information to be collected; and
4. How to minimize the information collection burden on those who are to respond, including the use of appropriate automated, electronic, mechanical, or other forms of information technology.
Please send comments as directed under
The following information is provided for the information collection:
(1) Learn the extent and qualities of the public oil shale resource;
(2) Evaluate the environmental impacts of oil shale leasing and development;
(3) Determine the qualifications of prospective lessees to acquire and hold Federal oil shale leases;
(4) Administer statutes applicable to oil shale mining, production, resource recovery and protection, operations under oil shale leases, and exploration under leases and licenses;
(5) Ensure lessee compliance with applicable statutes, regulations, and lease terms and conditions; and
(6) Ensure that accurate records are kept of all Federal oil shale produced.
Bureau of Land Management, Interior.
Notice.
The purpose of this notice is to inform the public and interested State and local government officials of the filing of Plats of Survey in Nevada.
David D. Morlan, Chief, Branch of Geographic Sciences, Bureau of Land Management, Nevada State Office, 1340 Financial Blvd., Reno, NV 89520,
1. The Plat of Survey of the following described lands was officially filed at the Nevada State Office, Reno, Nevada on July 8, 2011: The plat, representing the dependent resurvey of a portion of the subdivisional lines and the southerly right-of-way line of Interstate Highway No. 15 through section 30, and a metes-and-bounds survey in sections 30 and 31, Township 13 South, Range 69 East, Mount Diablo Meridian, Nevada, under Group No. 890, was accepted on July 6, 2011.
The plat, representing the dependent resurvey of portions of the north and west boundaries and a portion of the subdivisional lines, and a metes-and-bounds survey in sections 5, 6 and 7, Township 14 South, Range 69 East, Mount Diablo Meridian, under Group No. 890, was accepted on July 6, 2011. These surveys were executed to meet certain administrative needs of the City of Mesquite and the Bureau of Land Management.
2. The Plat of Survey of the following described lands was officially filed at the Nevada State Office, Reno, Nevada on September 15, 2011: The plat, in two sheets, represents the dependent resurvey of a portion of the west boundary, the north boundary, and a portion of the subdivisional lines, and the subdivision of certain sections, Township 15 South, Range 67 East, Mount Diablo Meridian, Nevada, under Group No. 841, was accepted on September 13, 2011. This survey was executed to meet certain administrative needs of the Bureau of Land Management. The above-listed surveys are now the basic record for describing the lands for all authorized purposes. These surveys have been placed in the open files in the Bureau of Land Management, Nevada State Office and are available to the public as a matter of information. Copies of the surveys and related field notes may be furnished to the public upon payment of the appropriate fees.
Bureau of Land Management, Interior.
Notice.
The purpose of this notice is to request public nominations to fill three positions for the Bureau of Land Management's (BLM) Wyoming's 10-member Resource Advisory Council (RAC). The RAC provides advice and recommendations to the BLM on land use planning and management of the National System of Public Lands within the State of Wyoming.
All nominations must be received no later than December 22, 2011.
Nominations should be sent to Ms. Cindy Wertz, Wyoming State Office, Bureau of Land Management, 5353 Yellowstone Road, P.O. Box 1828, Cheyenne, WY 82003.
Ms. Cindy Wertz, Wyoming State Office, Bureau of Land Management, 5353 Yellowstone Road, P.O. Box 1828, Cheyenne, WY 82003; (307) 775-6014; or email
The Federal Land Policy and Management Act (FLPMA) (43 U.S.C. 1739) directs the Secretary of the Interior to involve the public in planning and issues related to management of lands administered by the Bureau of Land Management (BLM). Section 309 of FLPMA directs the Secretary to establish 10- to 15-member citizen-based advisory councils that are consistent with the Federal Advisory Committee Act (FACA). As required by FACA, RAC membership must be balanced and representative of the various interests concerned with the management of the public lands.
The RAC has one vacancy in category one (holders of Federal grazing permits and representatives of organizations associated with energy and mineral development, timber industry, transportation or rights-of-way, developed outdoor recreation, off-highway vehicle use, and commercial recreation), one vacancy in category two (representatives of nationally or regionally recognized environmental organizations; archaeological and historic organizations, dispersed recreation activities, and wild horse and burro organizations), and one vacancy in category three (representatives of state, county, or local elected office; employees of a state agency responsible for management of natural resources; representatives of Indian tribes within or adjacent to the area for which the council is organized; representatives of academia who are employed in natural sciences; or the public-at-large). Upon appointment, the individuals selected will fill the position until January 12, 2015. Nominees must be residents of Wyoming. BLM will evaluate nominees based on their education, training, experience, and their knowledge of the geographical area. Nominees should demonstrate a commitment to collaborative resource decision making. The Obama Administration prohibits individuals who are currently federally registered lobbyists to serve on all FACA and non-FACA boards, committees, or councils. The following must accompany all nominations:
You may download nomination forms from the following Web site:
Bureau of Land Management, Interior.
Notice.
This notice opens lands for selection by the State of Alaska (State), subject to Section 24 of the Federal Power Act (FPA). The lands include approximately 1,355 acres of National Forest System lands withdrawn for Power Site Classification No. 221 by the Secretarial Order dated May 14, 1929, and approximately 948 acres of public land withdrawn for the Federal Energy Regulatory Commission (FERC) Power Project No. 13234. This action will permit conveyance of the land to the State, if such land is otherwise available, and retain the power rights to the United States. Any land described herein that is not conveyed to the State will remain subject to the terms and conditions of the Tongass National Forest reservation and any other withdrawal of record.
Robert L. Lloyd, Bureau of Land Management, Alaska State Office, 222 West Seventh Avenue, #13, Anchorage, Alaska 99513; (907) 271-4682. Persons who use a telecommunications device for the deaf (TDD) may call the Federal Information Relay Service (FIRS) at 1-(800) 877-8339 to contact the above individual during normal business hours. The FIRS is available 24 hours a day, 7 days a week, to leave a message or question with the above individual. You will receive a reply during normal business hours.
The State has requested the land withdrawn for Power Site Classification No. 221, and FERC Power Project No. 13234, to be opened to State selection subject to Section 24 of the FPA. Upon publication of this notice, the land will be made available for conveyance to the State pursuant to Section 6(a) of the Alaska Statehood Act of July 7, 1958, 48 U.S.C. note prec. 21 and Section 906(e) of the Alaska National Interest Lands Conservation Act, 43 U.S.C. 1635(e).
By virtue of the authority vested in the Secretary of the Interior by Section 24 of the FPA of June 10, 1920, as amended, 16 U.S.C. 818, and pursuant to the determination by the FERC in DVAK-130-001, and according to the regulations under 43 CFR 2091.5-4(b), notice is hereby given that:
1. Subject to valid existing rights at 10 a.m. Alaska Time on November 7, 2011, the following described National Forest System land is hereby opened for selection by the State under the Alaska Statehood Act of July 7, 1958, 48 U.S.C. note prec. 21, subject to the provisions of Section 24 of the FPA as specified by the FERC in determination DVAK-130-001, to permit conveyance to the State, subject to valid existing rights, the provisions of existing withdrawals, and the requirements of applicable law:
All land below an altitude of 1,000 feet above sea level adjacent to Takatz Lake on Baranof Island and the stream which is its outlet into Chatham Strait, and included in the State's selection application AA-40277 located within:
The area described contains approximately 1,355 acres.
2. The State's selection applications made under Section 6(a) of the Alaska Statehood Act of July 7, 1958, 48 U.S.C. note prec. 21, and under Section 906(e) of the Alaska National Interest Lands Conservation Act, 43 U.S.C. 1635(e), become effective without further action by the State on November 7, 2011, if such land is otherwise available. Land not conveyed to the State will remain subject to the terms and conditions of the Tongass National Forest reservation, Section 24 of the FPA, and any other withdrawal of record.
43 CFR 2091.5-4(b).
Bureau of Land Management, Interior.
Notice of realty action.
The reversionary interest held by the United States in the land described in
Comments regarding the proposed sale and other pertinent documents must be received by the Bureau of Land Management (BLM) on or before December 22, 2011.
Mail written comments to June E. Hues, Field Manager, Border Field Office, 1103 N. Fancher Road, Spokane Valley, Washington 99212-1275.
Mark Hatchel, Realty Specialist, at the address listed above, (509) 536-1211, or by email at:
The purpose for the sale of the reversionary interest in the land patented to the City of West Richland, Washington, (City) is to allow and achieve the highest and best uses of the parcel and to meet the needs of the City without the threat of
Pursuant to the terms and conditions of the original patent, dated January 13, 1983, the United States retains and continues to hold a reversionary interest on the following land as described in the before-mentioned patent:
The area described contains 40 acres in Benton County.
The City's initial purpose for the parcel was as a sewage interceptor site and lagoon. This use is no longer needed. The City had requested to change the use and control of all or a portion of the parcel from municipal or recreational purposes to commercial purposes to accommodate community expansion and commercial development. Changing the use of the parcel to commercial purposes would violate the terms of the patent. Therefore, the City has requested to purchase the reversionary interest on all or a portion of the parcel. To provide purchase options to the City, the parcel was split into three government lots by means of a cadastral survey that was funded by the City. As a result of the survey, the description of the parcel determined suitable for direct sale and release to the City is now described as:
The area described contains 38.53 acres in Benton County per the official, filed survey, dated April 27, 2011.
Direct sale procedures would be conducted under the provisions found at 43 CFR 2711.3-3(a)(1) and (2) for direct sales. A direct sale to the City is appropriate in this case as the parcel was patented previously to the City and the sale of the Federal reversionary interest, if it were sanctioned to any other entity, would not protect existing equities of the City of West Richland, Washington. The sale and release of the reversionary interest of the 38.53 acres will be made in accordance with FLPMA and the applicable regulations of the Secretary of the Interior, and will be subject to the following:
1. A right-of-way for ditches or canals constructed by the authority of the United States pursuant to the Act of August 30, 1890;
2. A condition that the conveyance be subject to all valid existing rights of record;
3. The terms and conditions of the United States patent 46-83-0050, including, but not limited to, all mineral deposits in the land so patented, and to it, or persons authorized by it, the right to prospect for, mine, and remove such deposits from the same under applicable law and such regulations as the Secretary of the Interior may prescribe;
4. All parcels are subject to the requirements of Section 120(h) of the Comprehensive Environmental Response, Compensation, and Liability Act, as amended (42 U.S.C. Section 9620(h));
5. No representation, warranty, or covenant of any kind, express or implied, is given or made by the United States as to access to or from any parcel of land, the title, whether or to what extent the land may be developed, its physical condition, present or potential uses, or any other circumstance or condition; and,
6. Additional terms and conditions that the authorized officer deems appropriate. Detailed information concerning the proposed sale, including the appraisal, planning and environmental documents, and Environmental Site Assessment, are available for review at the location identified in
Public comments regarding the proposed sale of the reversionary interest may be submitted in writing to the attention of the BLM Border Field Manager (see
2711.1-2(a).
Bureau of Land Management, Interior.
Notice of realty action.
The Bureau of Land Management (BLM), Hollister Field Office, proposes to sell a parcel of public land consisting of approximately 15.97 acres, more or less, in Santa Clara County, California. The public land would be sold to Mariposa Peak, LLC, a California Limited Liability Company, for the appraised fair market value of $16,000.
Written comments regarding the proposed sale must be received by the BLM on or before December 22, 2011.
Written comments concerning the proposed sale should be sent to the Field Manager, BLM Hollister Field Office, 20 Hamilton Court, Hollister, California 95023.
Christine Sloand, Realty Specialist, BLM Hollister Field Office, 20 Hamilton Court, Hollister, California 95023, phone (831) 630-5022 or visit the Web site at
The following parcel of public land is being proposed for direct sale to Mariposa Peak, LLC, the adjoining landowner, in accordance with Sections 203 and 209 of the Federal Land Policy and Management Act of 1976 (FLPMA), as amended (43 U.S.C. 1713 and 1719).
The area described contains approximately 15.97 acres, more or less, in Santa Clara County.
The public land was first identified as suitable for disposal in the 1984 BLM Hollister Resource Management Plan (RMP) and remains available for sale under the 2007 Hollister RMP revision. The land is not needed for any other Federal purpose, and its disposal would be in the public interest. The purpose of the sale is to dispose of public land which is difficult and uneconomic to manage as part of the public lands because it is a small, isolated parcel lacking legal access. The BLM is proposing a direct sale to Mariposa Peak, LLC. Mariposa Peak, LLC, owns the adjoining land on three sides of the public land proposed for sale. A competitive sale is not considered appropriate because the public land lacks legal access and the only other adjoining landowner has informed the BLM they have no interest in purchasing the land and would not grant access to the public land. The BLM has completed a mineral potential report which concluded there are no known mineral values in the land proposed for sale. The BLM proposes that conveyance of the Federal mineral interests would occur simultaneously with the sale of the land.
On November 7, 2011, the above described land will be segregated from all forms of appropriation under the public land laws, including the mining laws, except for the sale provisions of FLPMA. Until completion of the sale, the BLM will no longer accept land use applications affecting the identified public lands, except applications for the amendment of previously filed right-of-way applications or existing authorizations to increase the term of the grants in accordance with 43 CFR 2802.15 and 2886.15. The segregation terminates upon issuance of a patent, publication in the
1. A reservation of a right-of-way to the United States for ditches and canals constructed by authority of the United States under the Act of August 30, 1890 (43 U.S.C. 945);
2. A condition that the conveyance be subject to all valid existing rights of record;
3. An appropriate indemnification clause protecting the United States from claims arising out of the patentee's use, occupancy, or operations on the patented lands; and
4. Additional terms and conditions that the authorized officer deems appropriate.
Detailed information concerning the proposed land sale including the appraisal, planning and environmental documents, and a mineral report are available for review at the BLM Hollister Field Office at the address above, by calling (831) 630-5022 or visiting our Web site at
Public comments regarding the proposed sale may be submitted in writing to the attention of the BLM Hollister Field Manager (see
Before including your address, phone number, email address, or other personal identifying information in your comment, be advised that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold from public review your personal identifying information, we cannot guarantee that we will be able to do so.
43 CFR 2711.1-2(a) and (c).
U.S. International Trade Commission.
Notice.
Notice is hereby given that the U.S. International Trade Commission has received a complaint entitled
James R. Holbein, Secretary to the Commission, U.S. International Trade Commission, 500 E Street SW., Washington, DC 20436, telephone (202) 205-2000. The public version of the complaint can be accessed on the Commission's electronic docket (EDIS) at
General information concerning the Commission may also be obtained by accessing its Internet server (
The Commission has received a complaint filed on ChriMar Systems, Inc. d/b/a CMS Technologies on November 1, 2011. The complaint alleges violations of section 337 of the Tariff Act of 1930 (19 U.S.C. 1337) in the importation into the United States, the sale for importation, and the sale within the United States after importation of
The complainant, proposed respondents, other interested parties, and members of the public are invited to file comments, not to exceed five pages in length, on any public interest issues raised by the complaint. Comments should address whether issuance of an exclusion order and/or a cease and desist order in this investigation would negatively affect the public health and welfare in the United States, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, or United States consumers. In particular, the Commission is interested in comments that:
(i) Explain how the articles potentially subject to the orders are used in the United States;
(ii) Identify any public health, safety, or welfare concerns in the United States relating to the potential orders;
(iii) Indicate the extent to which like or directly competitive articles are produced in the United States or are otherwise available in the United States, with respect to the articles potentially subject to the orders; and
(iv) Indicate whether Complainant, Complainant's licensees, and/or third party suppliers have the capacity to replace the volume of articles potentially subject to an exclusion order and a cease and desist order within a commercially reasonable time.
Written submissions must be filed no later than by close of business, five business days after the date of publication of this notice in the
Persons filing written submissions must file the original document and 12 true copies thereof on or before the deadlines stated above with the Office of the Secretary. Submissions should refer to the docket number (“Docket No. 2853”) in a prominent place on the cover page and/or the first page. The Commission's rules authorize filing submissions with the Secretary by facsimile or electronic means only to the extent permitted by section 201.8 of the rules (see Handbook for Electronic Filing Procedures,
Any person desiring to submit a document to the Commission in confidence must request confidential treatment. All such requests should be directed to the Secretary to the Commission and must include a full statement of the reasons why the Commission should grant such treatment.
This action is taken under the authority of section 337 of the Tariff Act of 1930, as amended (19 U.S.C. 1337), and of sections 201.10 and 210.50(a)(4) of the Commission's Rules of Practice and Procedure (19 CFR 201.10, 210.50(a)(4)).
By order of the Commission.
60-Day notice of information collection under review.
The Department of Justice, Office on Violence Against Women (OVW) will be submitting the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995. Comments are encouraged and will be accepted for “sixty days” until January 6, 2012. This process is conducted in accordance with 5 CFR 1320.10.
Written comments concerning this information collection should be sent to the Office of Information and Regulatory Affairs, Office of Management and Budget, Attn: DOJ Desk Officer. The best way to ensure your comments are received is to email them to
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address one or more of the following four points:
(1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(2) Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
(3) Enhance the quality, utility, and clarity of the information to be collected; and
(4) Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
(1)
(2)
(3)
(4)
(5)
(6) An estimate of the total public burden (in hours) associated with the collection: The total annual hour burden to complete the annual progress report is 2,556 hours.
If additional information is required contact: Jerri Murray, Department Clearance Officer, United States Department of Justice, Justice Management Division, Policy and Planning Staff, Two Constitution Square, 145 N Street NE., Room 2E-508, Washington, DC 20530.
60-Day notice of information collection under review.
The Department of Justice (DOJ), Civil Division, will be submitting the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995. The proposed information collection is published to obtain comments from the public and affected agencies. Comments are encouraged and will be accepted for “sixty days” until January 6, 2012. This process is conducted in accordance with 5 CFR 1320.10.
Written comments concerning this information collection should be sent to the Office of Information and Regulatory Affairs, Office of Management and Budget, Attn: DOJ Desk Officer. The best way to ensure your comments are received is to email them to
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address one or more of the following four points:
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If additional information is required contact: Jerri Murray, Department Clearance Officer, United States Department of Justice, Justice Management Division, Policy and Planning Staff, Two Constitution Square, 145 N Street NE., Room 2E-508, Washington, DC 20530.
60-Day notice of information collection under review.
The Department of Justice, Office on Violence Against Women (OVW) will be
Written comments concerning this information collection should be sent to the Office of Information and Regulatory Affairs, Office of Management and Budget, Attn: DOJ Desk Officer. The best way to ensure your comments are received is to email them to
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address one or more of the following four points:
(1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(2) Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
(3) Enhance the quality, utility, and clarity of the information to be collected; and
(4) Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
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If additional information is required contact: Jerri Murray, Department Clearance Officer, United States Department of Justice, Justice Management Division, Policy and Planning Staff, Two Constitution Square, 145 N Street NE., Room 2E-508, Washington, DC 20530.
Notice is hereby given that on October 31, 2011, a proposed Consent Decree in
In this action the United States and Delaware sought civil penalties and injunctive relief in connection with Defendant E.I. Du Pont de Nemours & Co.'s (“Dupont”) violations of (1) Sections 301(a), 309(b) and (d), and 402 of the Federal Water Pollution Control Act, also known as the Clean Water Act, 42 U.S.C. 1311(a), 1319(b) and (d), and 1342 (the “CWA”), and (2) the Delaware Environmental Protection Act, 7 Del.0C. §§ 6001
Under the proposed consent decree, Dupont has obligated itself to perform a comprehensive engineering study of the wastewater treatment plant and wastewater collection system at the Edge Moor Plant to correct any conditions which may result in violations of the above federal and state environmental protection laws. It has also agreed to pay a civil penalty of $500,000 to resolve its alleged liability. The penalty will be shared equally by the United States and Delaware.
The Department of Justice will receive for a period of thirty (30) days from the date of this publication comments relating to the Consent Decree. Comments should be addressed to the Assistant Attorney General, Environment and Natural Resources Division, and either emailed to
During the public comment period, the Consent Decree may be examined on the following Web site,
30-Day notice of information collection under review.
The Department of Justice, Office of Justice Programs, Bureau of Justice Statistics, will be submitting the following information collection request for review and approval in accordance with the Paperwork Reduction Act of 1995. The proposed information collection is published to obtain comments from the public and affected agencies. The proposed information collection was previously published in the
The purpose of this notice is to allow an additional 30 days for public comment until December 7, 2011. This process is conducted in accordance with 5 CFR 1320.10.
Written comments concerning this information collection should be sent to the Office of Information and Regulatory Affairs, Office of Management and Budget, Attn: DOJ Desk Officer. The best way to ensure your comments are received is to email them to
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address one or more of the following four points:
1. Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected; and
4. Minimize the burden of collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
Overview of this information:
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The CPSC is designed to provide BJS and other interested stakeholders with the first systematic empirical information on problem-solving courts. A goal of the census is to obtain information on problem-solving court operations, administration, and to generate accurate and reliable statistics on adult offenders who enter problem-solving court programs. The CPSC will collect information on the following categories:
a. Court Operations:
i. Does the court operate within the judiciary, have a dedicated judicial officer, or have a dedicated docket/calendar?
ii. Provide the number of problem-solving courts by type (
iii. Determine PSCs level of government operations (
b. Funding: Types and prevalence of PSC funding (
c. Commonly Used Services:
i. Count the types and prevalence of offender/victim services (
d. Participant participation:
i. Participant inclusionary and exclusionary factors,
ii. Participant point of entry (
e. Capacity and Enrollment:
i. Total number of active participants PSC can manage at any one time
ii. Current number of active participants
f. Data Collection Practices:
i. Use of automated case management systems
ii. PSCs' ability to query information
g. PSC Participant information:
i. Percentage of program participants by age, gender, racial classification,
ii. Housing status
iii. Employment status
h. PSC information for calendar year 2011 only:
i. Number of people referred and admitted to PSCs,
ii. PSCs' average participant attendance to: Scheduled judicial, community supervision meetings, treatment sessions, and drug tests
iii. Number of participants exiting program,
iv. Number of participants by gender, race, and age.
Additionally, the information collected through this census will support development of a sampling framework to examine case processing information and case dispositions of adults in problem-solving courts. Information will be collected for the 2011 calendar year.
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If additional information is required contact: Jerri Murray, Department Clearance Officer, United States Department of Justice, Justice Management Division, Policy and Planning Staff, Two Constitution Square, 145 N Street NE., Suite 2E-508, Washington, DC 20530.
Employment and Training Administration, Labor.
Notice.
The Secretary of Labor signed the annual certifications under the Federal Unemployment Tax Act, 26 U.S.C. 3301
Transmitted herewith are an original and one copy of the certifications of the states and their unemployment compensation laws for the 12-month period ending on October 31, 2011. One is required with respect to the normal federal unemployment tax credit by Section 3304 of the Internal Revenue Code of 1986 (IRC), and the other is required with respect to the additional tax credit by Section 3303 of the IRC. Both certifications list all 53 jurisdictions.
Sincerely,
In accordance with the provisions of Section 3304(c) of the Internal Revenue Code of 1986 (26 U.S.C. 3304(c)), I hereby certify the following named states to the Secretary of the Treasury for the 12-month period ending on October 31, 2011, in regard to the unemployment compensation laws of those states which heretofore have been approved under the Federal Unemployment Tax Act:
This certification is for the maximum normal credit allowable under Section 3302(a) of the Code.
Signed at Washington, DC, on October 31, 2011.
In accordance with the provisions of paragraph (1) of Section 3303(b) of the Internal Revenue Code of 1986 (26 U.S.C. 3303(b)(1)), I hereby certify the unemployment compensation laws of the following named states, which heretofore have been certified pursuant to paragraph (3) of Section 3303(b) of the Code, to the Secretary of the Treasury for the 12-month period ending on October 31, 2011:
This certification is for the maximum additional credit allowable under Section 3302(b) of the Code, subject to the limitations of Section 3302(c) of the Code.
Signed at Washington, DC, on October 31, 2011.
National Science Foundation (NSF).
Notice of availability.
The National Science Foundation publishes this notice on behalf of the Interagency Ocean Observation Committee (IOOC) to announce a 60-day public comment period for non-federal asset certification criteria. This draft certification criteria will be used to establish eligibility for non-federal assets to be integrated into the U.S. Integrated Ocean Observation System (IOOS) and to ensure compliance with all applicable standards and protocols. This criteria was developed in response to a requirement in the Integrated Coastal Ocean Observation System Act of 2009 (33 U.S.C. 3601-3610) and is applicable to all non-federal assets as defined in the Act, including Regional Information Coordination Entities (RICEs).
Written, faxed or emailed comments must be received no later than 5 p.m. eastern standard time on January 6, 2012.
The IOOC draft certification criteria is available for review from the IOOC Web site URL:
For further information about this notice, please contact the IOOC Support Office, telephone: (202) 787-1622; Email:
On 30 March 2009, President Barack Obama signed into law the Integrated Coastal and Ocean Observation System Act of 2009. Among the requirements in the Act is a directive to the IOOC to “develop contract certification standards and compliance procedures for all non-Federal assets, including regional information coordination entities, to establish eligibility for integration into the System and to ensure compliance with all applicable standards and protocols established by the Council, and ensure that regional observations are integrated into the System on a sustained basis.” The IOOC chartered two working groups consisting of subject matter experts on IOOS data partners and regional entities to draft recommended certification criteria. The recommended criteria were approved by the IOOC on 20 October 2011 and further information on the specific criteria can be obtained by contacting the IOOC Support Office as directed in the section above.
The IOOC is the federal interagency group established to lead the interagency planning and coordination of ocean observing activities including IOOS, and is represented by federal agencies, with NOAA identified as the lead federal agency by for IOOS implementation and administration.
Nuclear Regulatory Commission.
Notice of the OMB review of information collection and solicitation of public comment.
The U.S. Nuclear Regulatory Commission (NRC) has recently
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The public may examine and have copied for a fee publicly available documents, including the final supporting statement, at the NRC's PDR, Room O1-F21, One White Flint North, 11555 Rockville Pike, Rockville, Maryland 20852. OMB clearance requests are available at the NRC Web site:
Comments and questions should be directed to the OMB reviewer listed below by December 7, 2011. Comments received after this date will be considered if it is practical to do so, but assurance of consideration cannot be given to comments received after this date.
Comments can also be emailed to
The NRC Clearance Officer is Tremaine Donnell, (301) 415-6258.
For the Nuclear Regulatory Commission.
Nuclear Regulatory Commission.
Notice of the OMB review of information collection and solicitation of public comment.
The U.S. Nuclear Regulatory Commission (NRC) has recently submitted to OMB for review the following proposal for the collection of information under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35). The NRC hereby informs potential respondents that an agency may not conduct or sponsor, and that a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The NRC published a
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The public may examine and have copied for a fee publicly available documents, including the final supporting statement, at the NRC's Public Document Room, Room O-1F21, One White Flint North, 11555 Rockville Pike, Rockville, Maryland 20852. OMB clearance requests are available at the NRC Web site:
Comments and questions should be directed to the OMB reviewer listed below by December 7, 2011. Comments received after this date will be considered if it is practical to do so, but assurance of consideration cannot be
Chad Whiteman, Desk Officer, Office of Information and Regulatory Affairs (3150-0123), NEOB-10202, Office of Management and Budget, Washington, DC 20503.
Comments can also be emailed to
The NRC Clearance Officer is Tremaine Donnell, (301) 415-6258.
For the Nuclear Regulatory Commission.
The ACRS Subcommittee on Economic Simplified Boiling Water Reactor (ESBWR) will hold a meeting on November 30, 2011, Room T-2B1, 11545 Rockville Pike, Rockville, Maryland.
The entire meeting will be open to public attendance.
The agenda for the subject meeting shall be as follows:
The Subcommittee will review Chapters 9, 11, 12, and 13 of the Fermi RCOLA Safety Evaluation Report (SER). The Subcommittee will hear presentations by and hold discussions with the NRC staff, Detroit Edison Company, and other interested persons regarding this matter. The Subcommittee will gather information, analyze relevant issues and facts, and formulate proposed positions and actions, as appropriate, for deliberation by the Full Committee.
Members of the public desiring to provide oral statements and/or written comments should notify the Designated Federal Official (DFO), Christopher Brown (Telephone (301) 415-7111 or Email:
Detailed meeting agendas and meeting transcripts are available on the NRC Web site at
If attending this meeting, please enter through the One White Flint North building, 11555 Rockville Pike, Rockville, MD. After registering with security, please contact Mr. Theron Brown (240) 888-9835 to be escorted to the meeting room.
The ACRS Subcommittee on Planning and Procedures will hold a meeting on November 29, 2011, Room T-2B1, 11545 Rockville Pike, Rockville, Maryland.
The entire meeting will be open to public attendance, with the exception of a portion that may be closed pursuant to 5 U.S.C. 552b(c)(2) and (6) to discuss organizational and personnel matters that relate solely to the internal personnel rules and practices of the ACRS, and information the release of which would constitute a clearly unwarranted invasion of personal privacy.
The agenda for the subject meeting shall be as follows:
The Subcommittee will discuss proposed ACRS activities and related matters. The Subcommittee will gather information, analyze relevant issues and facts, and formulate proposed positions and actions, as appropriate, for deliberation by the Full Committee. The Designated Federal Official (DFO), Mr. Cayetano Santos (Telephone (301) 415-7270 or Email:
Information regarding topics to be discussed, changes to the agenda, whether the meeting has been canceled or rescheduled, and the time allotted to present oral statements can be obtained from the Web site cited above or by contacting the identified DFO. Moreover, in view of the possibility that the schedule for ACRS meetings may be adjusted by the Chairman as necessary to facilitate the conduct of the meeting, persons planning to attend should check with these references if such rescheduling would result in a major inconvenience.
If attending this meeting, please enter through the One White Flint North building, 11555 Rockville Pike, Rockville, MD. After registering with security, please contact Mr. Theron Brown (240) 888-9835 to be escorted to the meeting room.
Postal Regulatory Commission.
Notice.
This document informs the public that an appeal of the closing of
Submit comments electronically by accessing the “Filing Online” link in the banner at the top of the Commission's Web site (
Stephen L. Sharfman, General Counsel, at (202) 789-6820 (case-related information) or
Notice is hereby given that, pursuant to 39 U.S.C. 404(d), on October 25, 2011, the Commission received two petitions for review of the Postal Service's determination to close the East Vassalboro post office in East Vassalboro, Maine. The first petition for review was filed by Charles Ferguson. The second petition for review was filed by the Save Our Post Office Committee. The earliest postmark date is October 14, 2011. The Commission hereby institutes a proceeding under 39 U.S.C. 404(d)(5) and establishes Docket No. A2012-34 to consider Petitioners' appeal. If Petitioners would like to further explain their position with supplemental information or facts, Petitioners may either file a Participant Statement on PRC Form 61 or file a brief with the Commission no later than November 29, 2011.
After the Postal Service files the administrative record and the Commission reviews it, the Commission may find that there are more legal issues than the one set forth above, or that the Postal Service's determination disposes of one or more of those issues. The deadline for the Postal Service to file the applicable administrative record with the Commission is November 9, 2011.
The appeal and all related documents are also available for public inspection in the Commission's docket section. Docket section hours are 8 a.m. to 4:30 p.m., Eastern Time, Monday through Friday, except on Federal government holidays. Docket section personnel may be contacted via electronic mail at
Commission reserves the right to redact personal information which may infringe on an individual's privacy rights from documents filed in this proceeding.
1. The Postal Service shall file the applicable administrative record regarding this appeal no later than November 9, 2011.
2. Any responsive pleading by the Postal Service to this notice is due no later than November 9, 2011.
3. The procedural schedule listed below is hereby adopted.
4. Pursuant to 39 U.S.C. 505, Natalie Ward is designated officer of the Commission (Public Representative) to represent the interests of the general public.
5. The Secretary shall arrange for publication of this notice and order and Procedural Schedule in the
By the Commission.
Postal Regulatory Commission.
Notice.
This document informs the public that an appeal of the closing of the Rembrandt, Iowa post office has been filed. It identifies preliminary steps and provides a procedural schedule. Publication of this document will allow the Postal Service, petitioners, and others to take appropriate action.
November 9, 2011: Administrative record due (from Postal Service); November 28, 2011, 4:30 p.m., Eastern Time: Deadline for notices to intervene.
Submit comments electronically by accessing the “Filing Online” link in the banner at the top of the Commission's Web site (
Stephen L. Sharfman, General Counsel, at (202) 789-6820 (case-related information) or
Notice is hereby given that, pursuant to 39 U.S.C. 404(d), on October 25, 2011, the Commission received three petitions for review of the Postal Service's determination to close the Rembrandt post office in Rembrandt, Iowa. The first petition for review was filed by Joleen J. Anderson. The second petition for review was filed by the City of Rembrandt. The third petition for review was filed by Jerri J. Haraldson. The earliest postmark date is October 6, 2011. The Commission hereby institutes a proceeding under 39 U.S.C. 404(d)(5) and establishes Docket No. A2012-35 to consider Petitioners' appeal. If Petitioners would like to further explain their position with supplemental information or facts, Petitioners may either file a Participant Statement on PRC Form 61 or file a brief with the Commission no later than November 29, 2011.
After the Postal Service files the administrative record and the Commission reviews it, the Commission may find that there are more legal issues than the one set forth above, or that the Postal Service's determination disposes of one or more of those issues. The deadline for the Postal Service to file the applicable administrative record with the Commission is November 9, 2011.
The appeal and all related documents are also available for public inspection in the Commission's docket section. Docket section hours are 8 a.m. to 4:30 p.m., Eastern Time, Monday through Friday, except on Federal government holidays. Docket section personnel may be contacted via electronic mail at
Commission reserves the right to redact personal information which may infringe on an individual's privacy rights from documents filed in this proceeding.
1. The Postal Service shall file the applicable administrative record regarding this appeal no later than November 9, 2011.
2. Any responsive pleading by the Postal Service to this notice is due no later than November 9, 2011.
3. The procedural schedule listed below is hereby adopted.
4. Pursuant to 39 U.S.C. 505, Pamela Thompson is designated officer of the Commission (Public Representative) to represent the interests of the general public.
5. The Secretary shall arrange for publication of this notice and order and Procedural Schedule in the
By the Commission.
Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Rule 15c1-5 states that any broker-dealer controlled by, controlling, or under common control with the issuer of a security that the broker-dealer is trying to sell to or buy from a customer must give the customer written notification disclosing the control relationship at or before completion of the transaction. The Commission estimates that 241 respondents collect information annually under Rule 15c1-5 and that each respondent would spend approximately 10 hours per year collecting this information (2,410 hours in aggregate). There is no retention period requirement under Rule 15c1-5. This Rule does not involve the collection of confidential information.
Written comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's estimates of the burden of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication.
The Commission may not conduct or sponsor a collection of information unless it displays a currently valid control number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the PRA that does display a valid Office of Management (OMB) control number.
Please direct your written comments to: Thomas Bayer, Director/Chief Information Officer, Securities and Exchange Commission, c/o Remi Pavlik-Simon, 6432 General Green Way, Alexandria, VA 22312 or send an email to:
Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Rule 12f-1 (the “Rule”), originally adopted in 1934 pursuant to Sections 12(f) and 23(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78a
The information required by Rule 12f-1 enables the Commission to make the necessary findings under the Act prior to granting applications to reinstate unlisted trading privileges. This information is also made available to members of the public who may wish to comment upon the applications. Without the Rule, the Commission would be unable to fulfill these statutory responsibilities.
There are currently 15 national securities exchanges subject to Rule 12f-1. The burden of complying with Rule 12f-1 arises when a potential respondent seeks to reinstate its ability to extend unlisted trading privileges to any security for which unlisted trading privileges have been suspended by the Commission, pursuant to Section 12(f)(2)(A) of the Act. The staff estimates that each application would require approximately one hour to complete. Thus each potential respondent would incur on average one burden hour in complying with the Rule.
The Commission staff estimates that there could be as many as 15 responses annually and that each respondent's related cost of compliance with Rule 12f-1 would be $168.00, or, the cost of one hour of professional work of a paralegal needed to complete the application. The total annual related reporting cost for all potential respondents, therefore, is $2,520 (15 responses × $168.00 per response).
Compliance with Rule 12f-1 is mandatory. Rule 12f-1 does not have a record retention requirement
Written comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's estimates of the burden of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information on respondents; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication.
The Commission may not conduct or sponsor a collection of information unless it displays a currently valid control number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the PRA that does not display a valid Office of Management and Budget (OMB) control number.
Please direct your written comments to: Thomas Bayer, Director/Chief Information Officer, Securities and Exchange Commission, c/o Remi Pavlik-Simon, 6432 General Green Way, Alexandria, Virginia 22312 or send an email to:
Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Rule 12f-3 (the “Rule”), which was originally adopted in 1934 pursuant to Sections 12(f) and 23(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78a
The information required to be included in applications submitted pursuant to Rule 12f-3, is intended to provide the Commission with sufficient information to make the necessary findings under the Act to terminate or suspend by order the unlisted trading privileges granted a security on a national securities exchange. Without the Rule, the Commission would be unable to fulfill these statutory responsibilities.
The burden of complying with Rule 12f-3 arises when a potential respondent, having a demonstrable bona fide interest in the question of termination or suspension of the unlisted trading privileges of a security, determines to seek such termination or suspension. The staff estimates that each such application to terminate or suspend unlisted trading privileges requires approximately one hour to complete. Thus each potential respondent would incur on average one burden hour in complying with the Rule.
The Commission staff estimates that there could be as many as 15 responses annually and that each respondent's related cost of compliance with Rule 12f-3 would be $168.00, or, the cost of one hour of professional work of a paralegal needed to complete the application. The total annual related reporting cost for all potential respondents, therefore, is $2,520 (15 responses x $168.00/response).
Compliance with the application requirements of Rule 12f-3 is mandatory, though the filing of such applications is undertaken voluntarily. Rule 12f-3 does not have a record retention requirement
Written comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's estimates of the burden of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information on respondents; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication.
The Commission may not conduct or sponsor a collection of information unless it displays a currently valid control number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the PRA that does not display a valid Office of Management and Budget (OMB) control number.
Please direct your written comments to: Thomas Bayer, Director/Chief Information Officer, Securities and Exchange Commission, c/o Remi Pavlik-Simon, 6432 General Green Way, Alexandria, Virginia 22312 or send an email to:
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange proposes to adopt a Market-Maker Trade Prevention Order on CBOE Stock Exchange (“CBSX”). The text of the proposed rule change is available on the Exchange's Web site (
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to adopt a Market-Maker Trade Prevention (“MMTP”) Order. The proposed MMTP Order is an immediate-or-cancel order containing a designation that prevents incoming orders for a Market-Maker from executing against resting quotes and orders for the same Market-Maker.
The MMTP Order type designation is intended to prevent a Market-Maker from trading on both sides of the same transaction. Orders would be marked with the MMTP designation on an order-by-order basis. An incoming MMTP Order cannot interact with interest resting on the book from the same Market-Maker. An MMTP Order that would trade against a resting quote or order for the same Market-Maker will be cancelled, as will the resting quote or order. The MMTP Order will trade against other tradable orders and quotes entered by or on behalf of another market participant (other than those entered by or on behalf of the same Market-Maker) in accordance with the execution process described in Exchange Rule 52.1 (Matching Algorithm/Priority). When available, the MMTP Order type will be available for use by all Market-Makers in all appointments.
For example, assume the Exchange's best bid and offer is $1.00-$1.20, 1000 shares on each side. A Market-Maker marks an order to buy 1000 shares at $1.20 with the MMTP distinction, making it an MMTP Order. The MMTP Order is submitted to the Exchange and it would trade with a resting quote from the same Market-Maker for 1000 shares offered at $1.20, then both the order to buy and the resting offer quote would be canceled. However, if the resting offer quote from the same Market-Maker was for only 600 shares, then 600 shares from the order to buy would be canceled (as would the resting quote), but the other 400 shares could trade with the resting offer interest of the other market participants.
At this time, the Exchange intends to identify an incoming MMTP Order as being for the same Market-Maker if the MMTP Order and resting quote or order share any of the following: (1) User acronym, (2) login ID, or (3) sub-account code. Each Market-Maker is assigned its own acronym (sometimes multiple acronyms). However, a Market-Maker may have multiple different login IDs or sub-account codes. A login ID is the session through which a Market-Maker routes orders to the Exchange. A Market-Maker may elect to use different login IDs to route different types of communications to the Exchange. For example, a Market-Maker may choose to use login ID #1 for all orders it sends to the Exchange and login ID #2 for all quotes it sends to the Exchange. Or the Market-Maker may be much more specific, and use different login IDs for different types of orders and quotes. A sub-account code is simply a field on each order or quote that lists the account into which a trade clears at the Options Clearing Corporation (“OCC”). A Market-Maker may have different sub-account codes for each trader it employs, so that the Market-Maker may track each trader's activity. Finally, Market-Makers sometimes use different acronyms but clear into the same accounts (thereby using the same sub-accounts codes).
Allowing Market-Makers to designate orders as MMTP Orders is intended to allow firms to better manage order flow and prevent unwanted executions resulting from the interaction of executable buy and sell trading interest for the same Market-Maker, as well as prevent the potential for (or appearance of) “wash sales” that may occur as a result of the velocity of trading in today's high speed marketplace. When a Market-Maker is preparing to submit an order, the Market-Maker may not know whether or not his order is going to trade against his own resting quote. Further, many Market-Makers have multiple connections into the Exchange due to capacity- and speed-related demands. Orders routed by the same Market-Makers via different connections may, in certain circumstances, trade against each other. Finally, the Exchange notes that offering the MMTP modifiers will streamline certain regulatory functions by reducing false positive results that may occur on Exchange-generated wash trading surveillance reports when orders are executed by the same Market-Maker. For these reasons, the Exchange believes the MMTP Order provides Market-Makers enhanced order processing functionality to prevent potentially unwanted trades from occurring.
The proposed rule change is based on rule changes recently proposed by the Chicago Board Options Exchange, Inc. (“CBOE”) and C2 Options Exchange, Inc. (“C2”).
The Exchange believes the proposed rule change is consistent with the Act
The proposed rule change is based on rule changes recently proposed by the Chicago Board Options Exchange, Inc. (“CBOE”) and C2 Options Exchange, Inc. (“C2”).
CBOE does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.
No written comments were solicited or received with respect to the proposed rule change.
Because the foregoing proposed rule change: (1) Does not significantly affect the protection of investors or the public interest; (2) does not impose any significant burden on competition; and (3) by its terms does not become operative for 30 days after the date of this filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A)
A proposed rule change filed under Rule 19b-4(f)(6)
At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549.
All submissions should refer to File Number SR-CBOE-2011-102. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Partial Amendment No. 1 and Order Instituting Proceedings to Determine Whether to Approve or Disapprove a Proposed Rule Change, as modified by Partial Amendment No. 1, to Adopt FINRA Rules 2210 (Communications with the Public), 2212 (Use of Investment Companies Rankings in Retail Communications), 2213 (Requirements for the Use of Bond Mutual Fund Volatility Ratings), 2214 (Requirements for the Use of Investment Analysis Tools), 2215 (Communications with the Public Regarding Security Futures), and 2216 (Communications with the Public About Collateralized Mortgage Obligations (CMOs)) in the Consolidated FINRA Rulebook.
On July 14, 2011, the Financial Industry Regulatory Authority (“FINRA”) filed with the Securities and Exchange Commission (“SEC” or “Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act” or “Act”)
Institution of these proceedings, however, does not indicate that the Commission has reached any conclusions with respect to the proposed rule change, nor does it mean that the Commission will ultimately disapprove the proposed rule change. Rather, as discussed below, the Commission seeks additional input from interested parties on the issues presented by the proposed rule change, as modified by Partial Amendment No. 1, and on FINRA's Response Letter.
As part of the process of developing a new consolidated rulebook (“Consolidated FINRA Rulebook”), FINRA is proposing to adopt NASD Rules 2210 and 2211 and NASD Interpretive Materials 2210-1 and 2210-3 through 2210-8 as FINRA Rules 2210 and 2212 through 2216 in the Consolidated FINRA Rulebook, and to delete paragraphs (a)(1), (i), (j) and (l) of Incorporated NYSE Rule 472, Incorporated NYSE Rule Supplementary Material 472.10(1), (3), (4) and (5), and 472.90, and Incorporated NYSE Rule Interpretations 472/01 and 472/03 through 472/11. The proposed rule change would renumber NASD Rules 2210 and 2211 and NASD Interpretive Materials 2210-1 and 2210-4 as FINRA Rule 2210, NASD Interpretive Material 2210-3 as FINRA Rule 2212, NASD Interpretive Material 2210-5 as FINRA Rule 2213, NASD Interpretive Material 2210-6 as FINRA Rule 2214, NASD Interpretive Material 2210-7 as FINRA
NASD Rules 2210 and 2211, and the Interpretive Materials that follow Rule 2210, generally govern all FINRA members' communications with the public. Incorporated NYSE Rule 472 governs communications with the public of FINRA members that also are members of the New York Stock Exchange.
The proposed rule change would create a new FINRA Rule 2210 that would encompass, subject to certain changes, the provisions of current NASD Rules 2210 and 2211, NASD Interpretive Materials 2210-1 and 2210-4, and the provisions of Incorporated NYSE Rule 472 that do not pertain to research analysts and research reports. Each of the other Interpretive Materials that follow NASD Rule 2210 would receive its own FINRA rule number and would adopt the same communication categories used in FINRA Rule 2210.
As discussed in the Notice of Filing, proposed FINRA Rule 2210 would replace the current six communication categories with three new categories: Institutional communication, retail communication, and correspondence, and would prescribe approval, review, recordkeeping, filing and content requirements to such communications.
In general, the commenters to the Notice of Filing supported the proposal. Commenters, however, raised concerns regarding various aspects of the proposed rules, including, among others:
• The scope of the definition of the term “institutional investor”;
• The circumstances in which an institutional communication could be deemed a retail communication (
• The treatment of internal communications for education and training as institutional communications;
• The requirements applicable to communications prepared by research department personnel;
• The requirements to file with FINRA within 10 business days of first use certain retail communications (
• Disclosure requirements applicable to communications and public appearances that contain a recommendation (
• The treatment of public appearances generally and, in particular, postings in online interactive fora;
• The exclusion from the filing requirement for certain prospectuses and offering documents.
FINRA responded to these and other comments in its Response Letter and filed Partial Amendment 1.
FINRA's proposed changes in response to comments, as set forth in Partial Amendment No. 1 are summarized below.
First, FINRA is proposing to amend proposed FINRA Rule 2210 to clarify that a member is required to have a principal approve a retail communication that is excepted from the definition of “research report” pursuant to NASD Rule 2711(a)(9)(A) if the retail communication makes any financial or investment recommendation.
Second, FINRA is proposing to eliminate the filing requirement for retail communications concerning government securities (as defined by Section 3(a)(42) of the Exchange Act).
Third, FINRA is proposing to amend proposed FINRA Rule 2210 to clarify that a comparative illustration of the mathematical principles of tax-deferred versus taxable compounding must disclose that ordinary income tax rates will apply to withdrawals from a tax-deferred investment.
Fourth, FINRA is proposing to modify the disclosure requirements for retail communications and public appearances that include a recommendation of securities. FINRA proposes to change the category of associated persons whose financial interest would have to be disclosed pursuant to paragraph (d)(7)(A)(ii) of proposed FINRA Rule 2210. As revised, a retail communication that includes a securities recommendation would have to disclose if the member or any associated person that is directly and materially involved in the preparation of the content of the communication has a financial interest in any of the securities of the issuer whose securities are recommended, and the nature of the financial interest, unless the extent of the financial interest is nominal.
FINRA proposes a technical modification to the language in paragraph (d)(7)(A)(iii) of proposed FINRA Rule 2210 in order to make it consistent with the language in paragraph (d)(7)(A)(ii) of proposed FINRA Rule 2210, by changing the reference to “any securities of the recommended issuer” to “any of the securities of the issuer whose securities are recommended.” FINRA proposes to modify proposed paragraph 2210(d)(7)(D) to clarify that the disclosure requirements in proposed paragraph (d)(7)(A) and the provisions regarding past specific recommendations in proposed paragraph (d)(7)(C) do not apply to a communication that recommends only registered investment companies or variable insurance products; however, such communications still must have a reasonable basis for the recommendation. In addition, pursuant to proposed paragraph (d)(7)(B), a member must provide, or offer to furnish upon request, available investment information supporting the recommendation in such communications.
FINRA also proposes to revise the disclosure standards for public appearances that include securities recommendations. As revised, the requirements under proposed FINRA Rule 2210(f) would apply only to public appearances by associated persons (since members do not engage in public appearances except through their associated persons). An associated person making a public appearance would have to disclose, if applicable, his or her own financial interest in any of the securities of the issuer whose securities are recommended and the nature of the financial interest, unless the extent of the financial interest is nominal. The associated person also would have to disclose any actual, material conflict of interest of the associated person or member of which the associated person knows or has
Fifth, FINRA is proposing to add paragraph (d)(8) to proposed FINRA Rule 2210, which would exclude from the content standards of proposed paragraph (d): Prospectuses, preliminary prospectuses, fund profiles and similar documents that have been filed with the SEC. FINRA also proposes to clarify that the content standards of paragraph (d) of proposed FINRA Rule 2210 do apply to an investment company prospectus published pursuant to Securities Act Rule 482 and a free writing prospectus that has been filed with the SEC pursuant to Securities Act Rule 433(d)(1)(ii).
In view of the issues raised by the proposal, the Commission has determined to institute proceedings pursuant to Section 19(b)(2) of the Act to determine whether to approve or disapprove FINRA's proposed rule change.
The Commission is asking that commenters address the changes that FINRA proposes in Partial Amendment No. 1, the comments received on the Notice of Filing, FINRA's Response Letter, in addition to any other comments they may wish to submit about the proposed rule change. The Commission requests comment, in particular, on the following aspects of the proposal, as modified by Partial Amendment No. 1:
(1) The scope of the definition of “institutional investor” for purposes of these rules;
(2) the “reason to believe” standard under Proposed Rule 2210(a)(4)(F), which provides that “no member may treat a communication as having been distributed to an institutional investor if the member has reason to believe that the communication or any excerpt thereof will be forwarded or made available to any retail investor;”
(3) the requirements applicable to internal communications, public appearances and postings in online interactive fora;
(4) the requirements applicable to communications prepared by research department personnel;
(5) the scope of the category of associated persons whose financial interests would have to be disclosed in a retail communication that includes a recommendation of securities; and
(6) the scope of the proposed exclusion from the content standards as set forth in proposed paragraph 2210(d)(8).
Pursuant to Section 19(b)(2)(B) of the Act,
The Commission believes FINRA's proposal raises questions as to whether it is consistent with the requirements of Section 15A(b)(6) of the Act, including whether FINRA's proposal, as amended, would prevent fraudulent and manipulative acts, promote just and equitable principles of trade, and protect investors and the public interest.
The Commission requests that interested persons provide written submissions of their views, data, and arguments with respect to the issues identified above, as well as any others they may have identified with the proposal. In particular, the Commission invites the written views of interested persons concerning whether the proposed rule change, as modified by Partial Amendment No. 1, is inconsistent with Section 15A(b)(6) or any other provision of the Act, or the rules and regulations thereunder.
Although there do not appear to be any issues relevant to approval or disapproval which would be facilitated by an oral presentation of views, data, and arguments, the Commission will consider, pursuant to Rule 19b-4, any request for an opportunity to make an oral presentation.
Interested persons are invited to submit written data, views, and arguments by December 7, 2011 concerning Partial Amendment No. 1 and regarding whether the proposed rule change, as modified by Partial Amendment No. 1, should be approved or disapproved. Any person who wishes to file a rebuttal to any other person's submission must file that rebuttal by [insert date 45 days from publication in the
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, Station Place, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Notice is hereby given that Escalate Capital Partners, SBIC I, L.P., 300 W. 6th Street, Suite 2250, Austin, TX 78701, a Federal Licensee under the Small Business Investment Act of 1958, as amended (“the Act”), in connection with the financing of a small concern, has sought an exemption under Section 312 of the Act and Section 107.730, Financings which Constitute Conflicts of Interest of the Small Business Administration (“SBA”) Rules and Regulations (13 CFR 107.730). Escalate Capital Partners, SBIC I, L.P. proposes to provide debt security financing to SailPoint Technologies, Inc., 6034 West Courtyard Drive, Suite 309, Austin, TX 78730. The financing is contemplated to provide working capital and capital for acquisitions.
The financing is brought within the purview of § 107.730(a)(1) of the Regulations because AV-EC Partners I L.P., an Associate of Escalate Capital Partners, SBIC I, L.P., owns more than ten percent of SailPoint Technologies, Inc. Therefore, this transaction is considered a financing of an Associate requiring an exemption.
Notice is hereby given that any interested person may submit written comments on the transaction within fifteen days of the date of this publication to the Associate Administrator for Investment, U.S. Small Business Administration, 409 Third Street SW., Washington, DC 20416.
U.S. Small Business Administration.
Amendment 3.
This is an amendment of the Presidential declaration of a major disaster for the Commonwealth of Pennsylvania (FEMA-4030-DR), dated 09/12/2011.
Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416.
The notice of the Presidential disaster declaration for the State of Pennsylvania, dated 09/12/2011 is hereby amended to include the following areas as adversely affected by the disaster:
All other information in the original declaration remains unchanged.
U.S. Small Business Administration.
Amendment 8.
This is an amendment of the Presidential declaration of a major disaster for the State of New York (FEMA-4020-DR), dated 08/31/2011.
Incident: Hurricane Irene.
Incident Period: 08/26/2011 through 09/05/2011.
Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416.
The notice of the President's major disaster declaration for the State of New York, dated 08/31/2011 is hereby amended to extend the deadline for filing applications for physical damages as a result of this disaster to 12/15/2011.
All other information in the original declaration remains unchanged.
U.S. Small Business Administration.
Amendment 6.
This is an amendment of the Presidential declaration of a major disaster for Public Assistance Only for the State of New York (FEMA-4031-DR), dated 09/23/2011.
Submit completed loan applications to: U.S. Small Business Administration, Processing And Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416.
The notice of the President's major disaster declaration for Private Non-Profit organizations in the State of New York, dated 09/23/2011, is hereby amended to include the following areas as adversely affected by the disaster.
All other information in the original declaration remains unchanged.
U.S. Small Business Administration.
Amendment 7.
This is an amendment of the Presidential declaration of a major disaster for the State of New York (FEMA-4031-DR), dated 09/13/2011.
Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416.
The notice of the President's major disaster declaration for the State of New York, dated 09/13/2011 is hereby amended to extend the deadline for filing applications for physical damages as a result of this disaster to 12/15/2011.
All other information in the original declaration remains unchanged.
U.S. Small Business Administration.
Amendment 4.
This is an amendment of the Presidential declaration of a major disaster for Public Assistance Only for the State of Texas (FEMA-4029-DR), dated 09/21/2011.
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Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416.
The notice of the President's major disaster declaration for Private Non-Profit organizations in the State of Texas, dated 09/21/2011, is hereby amended to include the following areas as adversely affected by the disaster.
All other information in the original declaration remains unchanged.
U.S. Small Business Administration.
Notice.
This is a notice of an Administrative declaration of a disaster for the State of FLORIDA dated 10/27/2011.
Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416.
Notice is hereby given that as a result of the Administrator's disaster declaration, applications for disaster loans may be filed at the address listed above or other locally announced locations.
The following areas have been determined to be adversely affected by the disaster:
The Interest Rates are:
The number assigned to this disaster for physical damage is 12901C and for economic injury is 129020.
The State which received an EIDL Declaration # is Florida.
U.S. Small Business Administration.
Notice.
This is a Notice of the Presidential declaration of a major disaster for Public Assistance Only for the State of Louisiana (FEMA-4041-DR), dated 10/28/2011.
Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416.
Notice is hereby given that as a result of the President's major disaster declaration on 10/28/2011, Private Non-Profit organizations that provide essential services of governmental nature may file disaster loan applications at the address listed above or other locally announced locations.
The following areas have been determined to be adversely affected by the disaster:
The Interest Rates are:
The number assigned to this disaster for physical damage is 129048 and for economic injury is 129058.
The Social Security Administration (SSA) publishes a list of information collection packages requiring clearance by the Office of Management and Budget (OMB) in compliance with Public Law 104-13, the Paperwork Reduction Act of 1995, effective October 1, 1995. This notice includes revisions to OMB-approved information collections and one new information collection request.
SSA is soliciting comments on the accuracy of the agency's burden estimate; the need for the information; its practical utility; ways to enhance its quality, utility, and clarity; and ways to minimize burden on respondents, including the use of automated collection techniques or other forms of information technology. Mail, email, or fax your comments and recommendations on the information collection(s) to the OMB Desk Officer and SSA Reports Clearance Officer at the following addresses or fax numbers.
I. The information collections below are pending at SSA. SSA will submit them to OMB within 60 days from the date of this notice. To be sure we consider your comments, we must receive them no later than January 6, 2012. Individuals can obtain copies of the collection instruments by calling the SSA Reports Clearance Officer at (410) 965-8783 or by writing to the above email address.
1. Homeless with Schizophrenia Presumptive Disability Pilot Demonstration—45 CFR 46.101(b)(5)—0960-NEW. The Federal Strategic Plan to Prevent and End Homelessness 2010 calls on Federal agencies to work in partnership with State and local governments and with the private sector to end homelessness. A specific objective of the Strategic Plan is to increase economic security by improving access to mainstream programs and services.
In response to and in support of the President's efforts to end homelessness, SSA has developed the Homeless with Schizophrenia Presumptive Disability Pilot Demonstration, which tests both administrative improvements to the Supplemental Security Income (SSI) application process and interventions that provide financial stability to individuals who are homeless. The pilot will test strategies that would remove the barriers homeless adult applicants with schizophrenia or schizoaffective disorder experience when completing the SSI application process.
SSA uses two key forms to conduct the demonstration: The Research Subject Information and Consent Form and the Schizophrenia Presumptive Disability Recommendation Form. The consent form provides assurances from the participants that they understand the demonstration project and voluntarily are consenting to participate in it. The Presumptive Disability Recommendation form, filled out by a medical authority, provides information on how the applicant meets the disability criteria necessary to qualify
2. Partnership Questionnaire—20 CFR 404.1080-1082—0960-0025. SSA considers partnership income in determining entitlement to Social Security benefits. SSA uses information from Form SSA-7104 to determine several aspects of eligibility for benefits, including the accuracy of reported partnership earnings, the veracity of a retirement, and lag earnings. The respondents are applicants for, and recipients of, Title II Social Security Old Age, Survivors, and Disability Insurance benefits.
3. Statement of Funds You Provided to Another and Statement of Funds You Received—20 CFR 404.1520(b), 404.1571-.1576, 404.1584-.1593 and 416.971-.976—0960-0059. SSA uses Form SSA-821-BK to collect employment information to determine whether recipients have worked after becoming disabled and, if so, whether the work is substantial gainful activity. SSA field offices use form SSA-821-BK to obtain work information during the initial claims process, the continuing disability review process, and for SSI claims involving work issues. SSA's processing centers and the Office of Disability and International Operations use the form to obtain post-adjudicative work issues from recipients. SSA reviews and evaluates the data to determine if the applicant or recipient meets the disability requirements of the law. The respondents are applicants and recipients of Title II Social Security and SSI disability payments.
4. Application for Search of Census Records for Proof of Age—20 CFR 404.716—0960-0097. When preferred evidence of age is not available or the available evidence is not convincing, SSA may request the U.S. Department of Commerce, Bureau of the Census, to search its records to establish a claimant's date of birth. SSA collects information from claimants using the SSA-1535-U3 to provide the Census Bureau with sufficient identification information to allow an accurate search of census records. Additionally, the Census Bureau uses a completed, signed SSA-1535-U3 to bill SSA for the search. The respondents are applicants for Social Security benefits who need to establish their date of birth as a factor of entitlement.
5. Modified Benefit Formula Questionnaire—Foreign Pension—0960-0561. SSA uses Form SSA-308 to determine exactly how much (if any) of a foreign pension may be used to reduce the amount of Title II Social Security retirement or disability benefits under the modified benefit formula. The respondents are applicants for Title II Social Security retirement or disability benefits who receive foreign pensions.
6. Medical Source Statement of Ability To Do Work-Related Activities (Physical and Mental)—20 CFR 404.1512-404.1514, 404.912-404.914, 404.1517, 416.917, 404.1519-404.1520, 416.919-416.920, 404.946, 416.946, 404-1546—0960-0662. In some instances, when a claimant appeals a denied disability claim and the claimant's medical sources cannot or will not give the agency sufficient evidence to determine whether the claimant is disabled, SSA may ask the claimant to have a consultative examination at the agency's expense. The medical providers who perform these consultative examinations provide a statement on Forms HA-1151 and HA-1152 about the claimant's disability and ability to perform work-related activities. SSA uses the information to assess the work-related physical and mental capabilities of claimants who appeal SSA's previous determination on their issue of disability. The respondents are medical sources who provide reports based either on existing medical evidence or on consultative examinations.
7. Medicare Subsidy Quality Review Forms—20 CFR 418(b)(5)—0960-0707. The
8. Application to Collect a Fee for Payee Services—20 CFR 416.640(a) and 20 CFR 416.1103(f)—0960-0719.
II. SSA submitted the information collection below to OMB for clearance. Your comments regarding the information collection would be most useful if OMB and SSA receive them within 30 days from the date of this publication. To be sure we consider your comments, we must receive them no later than December 7, 2011. Individuals can obtain copies of the OMB clearance package by calling the SSA Reports Clearance Officer at (410) 965-8783 or by writing to the above email address.
Report on Individual with Mental Impairment—20 CFR 404.1513 & 416.913—0960-0058. SSA uses Form SSA-824 to obtain medical evidence from medical sources who have treated a Social Security disability claimant for a mental impairment. SSA uses the information to establish whether a claimant filing for disability benefits has a mental impairment that meets the statutory definition of disability in accordance with the
This is a correction notice. SSA published this information collection as an extension on August 1, 2011 at 76 FR 45902. Since we are revising the Privacy Act Statement, this is now a revision of an OMB-approved information collection. We are also updating the burden data.
Determinations: “Transition to Christianity: Art of Late Antiquity, 3rd-7th Century AD”
Notice is hereby given of the following determinations: Pursuant to the authority vested in me by the Act of October 19, 1965 (79 Stat. 985; 22 U.S.C. 2459), Executive Order 12047 of March 27, 1978, the Foreign Affairs Reform and Restructuring Act of 1998 (112 Stat. 2681,
For further information, including a list of the exhibit objects, contact Julie Simpson, Attorney-Adviser, Office of the Legal Adviser, U.S. Department of State (telephone: (202) 632-6467). The mailing address is U.S. Department of State, SA-5, L/PD, Fifth Floor (Suite 5H03), Washington, DC 20522-0505.
Department of State.
Notice Regarding the Summer Work Travel Program.
Effective January 1, 2012, the Department is restricting the size of the Exchange Visitor Program (J-1visa) category of Summer Work Travel to 2011 actual participant levels. The Department is also announcing, effective immediately, a moratorium on designation of new Summer Work Travel sponsor organizations.
Rick A. Ruth, Deputy Assistant Secretary, Acting, Bureau of Educational and Cultural Affairs, U.S. Department of State, SA-5, Floor 5, 2200 C Street NW., Washington, DC 20522-0505; Tel: (202) 632-2805. Email:
The Summer Work Travel (SWT) program allows foreign post-secondary students to come to the United States during their major academic break for a
The Department began an ongoing, comprehensive review of the Summer Work Travel program in spring 2010, which has resulted in significant changes to the existing regulations that govern administration of the program. A pilot program that placed more stringent requirements on participants from six countries (Russia, Ukraine, Bulgaria, Belarus, Moldova and Romania) was implemented for the 2011 season. A program-wide Interim Final Rule, which took effect on July 15, 2011: (a) Strengthens sponsor oversight requirements with respect to both program participants for whom sponsors are responsible and the third parties that sponsors rely upon to assist them in administering their programs (i.e., U.S. employers and foreign agents); (b) requires that participants from non-Visa Waiver Program countries be pre-placed in a job before the Form DS-2019 is issued; (c) requires sponsors to fully vet employers and all SWT job offers; and, (d) requires sponsors to contact current program participants on a monthly basis to monitor their welfare and whereabouts.
Yet, despite these new regulations, the number of program complaints received this year continues to remain unacceptably high and includes, among other issues, reports of improper work placements, fraudulent job offers, job cancellations upon participant arrival in the United States, inappropriate work hours, and problems regarding housing and transportation.
To ensure that these issues are appropriately addressed, the Department is continuing and augmenting its review of the Summer Work Travel program and its governing regulations. Until the Department completes its review and implements the next steps, currently designated sponsors may continue to operate under their present designations and current regulations at 22 CFR Part 62; however, until further notice, SWT program sponsors in business for the full 2011 calendar year will not be permitted to expand their number of program participants beyond their actual total 2011 participant program size. No new applications from prospective sponsors for SWT program designation will be accepted at this time.
Department of State.
Notice.
The United States Government has decided to terminate sanctions imposed on a foreign person who had engaged in CBW proliferation activities that required the imposition of sanctions pursuant to the Arms Export Control Act and the Export Administration Act of 1979.
Pamela K. Durham, Office of Missile, Biological, and Chemical Nonproliferation, Bureau of International Security and Nonproliferation, Department of State, Telephone (202) 647-4930.
Pursuant to Sections 81(d) of the Arms Export Control Act (22 U.S.C. 2798(d)) and Section 11C(d) of the Export Administration Act of 1979, as amended (50 U.S.C. app. 2410c(d)), the Under Secretary of State for Arms Control and International Security determined and certified to Congress that reliable information indicated that the following foreign person has ceased to aid or abet any foreign government, project, or entity in its efforts to acquire chemical or biological weapons capability:
This determination and certification terminates the sanctions imposed on this foreign person in 1994 pursuant to Section 81(a) and (c) of the Arms Export Control Act and Section 11C(a) and (c) of the Export Administration Act. (Volume 59 FR Public Notice 2143)
Office of the United States Trade Representative.
Notice; request for comments.
The Office of the United States Trade Representative (“USTR”) is providing notice that the People's Republic of China has requested the establishment of a dispute settlement panel under the
Although USTR will accept any comments received during the course of the dispute settlement proceedings, comments should be submitted on or before December 7, 2011, to be assured of timely consideration by USTR.
Public comments should be submitted electronically to
If (as explained below) the comment contains confidential information, then the comment should be submitted by fax only to Sandy McKinzy at (202) 395-3640.
Jared Wessel, Assistant General Counsel, Office of the United States Trade Representative, 600 17th Street NW., Washington, DC 20508, (202) 395-3150.
Section 127(b) of the Uruguay Round Agreements Act (“URAA”) (19 U.S.C. 3537(b)(1)) requires that notice and opportunity for comment be provided
On December 8, 2004, the U.S. Department of Commerce published in the
On May 22, 2006, the Department of Commerce published in the
In its request for the establishment of a panel, China alleges that the Department of Commerce improperly calculated margins of dumping by “zeroing” so-called “negative dumping margins.” Based on the use of zeroing, China alleges that the final LTFV determinations and the antidumping duty orders are inconsistent with the first sentence of Article 2.4.2 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994. In this regard, on March 6, 2006, the Department of Commerce announced that it will no longer use “zeroing” when making average-to-average comparisons in an antidumping investigation.
Interested persons are invited to submit written comments concerning the issues raised in this dispute. Persons may submit public comments electronically to
To submit comments via
The
A person requesting that information contained in a comment submitted by that person be treated as confidential business information must certify that such information is business confidential and would not customarily be released to the public by the submitter. Confidential business information must be clearly designated as such and the submission must be marked “Business Confidential” at the top and bottom of the cover page and each succeeding page. Any comment containing business confidential information must be submitted by fax to
Sandy McKinzy at (202) 395-3640. A non-confidential summary of the confidential information must be submitted to
Information or advice contained in a comment submitted, other than business confidential information, may be determined by USTR to be confidential in accordance with section 135(g)(2) of the Trade Act of 1974 (19 U.S.C. 2155(g)(2)). If the submitter believes that information or advice may qualify as such, the submitter—
(1) Must clearly so designate the information or advice;
(2) Must clearly mark the material as “Submitted In Confidence” at the top and bottom of the cover page and each succeeding page; and
(3) Must provide a non-confidential summary of the information or advice.
Pursuant to section 127(e) of the Uruguay Round Agreements Act (19 U.S.C. 3537(e)), USTR will maintain a docket on this dispute settlement proceeding accessible to the public at
Federal Highway Administration (FHWA), DOT.
Notice of limitation on claims for judicial review of actions by FHWA and other Federal agencies.
This notice announces actions taken by the FHWA and other Federal agencies that are final within the meaning of 23 U.S.C. 139(l)(1). The
By this notice, the FHWA is advising the public of final agency actions subject to 23 U.S.C. 139(l)(1). A claim seeking judicial review of the Federal agency actions on the highway project will be barred unless the claim is filed on or before May 5, 2012. If the Federal law that authorizes judicial review of a claim provides a time period of less than 180 days for filing such claim, then that shorter time period still applies.
Mr. Salvador Deocampo, District Engineer, Texas Division, Federal Highway Administration, 300 East 8th Street, Room 826 Austin, Texas 78701; telephone: (512) 536-5950; email:
Notice is hereby given that the FHWA and other Federal agencies have taken final agency actions by issuing licenses, permits, and approvals for the following highway project in the State of Texas: Farm-to-Market (FM) 1626 from Ranch-to-Market (RM) 967 to Brodie Lane in Hays and Travis Counties; Project Reference Number: TxDOT CSJ: 1539-01-005, 1539-02-018, and 1539-02-028. The proposed improvements would consist of upgrading FM 1626 by adding an additional travel lane in each direction, a continuous center turn lane, and 4-foot shoulders. The actions by the Federal agencies, and the laws under which such actions were taken, are described in the documented Environmental Assessment (EA), with a Finding of No Significant Impact (FONSI) issued October 19, 2011 and in other documents in the FHWA administrative record. The EA, FONSI, and other documents in the FHWA administrative record file are available by contacting the FHWA or the TxDOT at the addresses provided above.
This notice applies to all Federal agency decisions as of the issuance date of this notice and all laws under which such actions were taken, including but not limited to:
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23 U.S.C. 139(l)(1).
Federal Transit Administration, DOT.
Notice of request for comments.
In accordance with the Paperwork Reduction Act of 1995, this notice announces the intention of the Federal Transit Administration (FTA) to request the Office of Management and Budget (OMB) to approve the revision of the currently approved information collection: 49 U.S.C. 5335(a) and (b) National Transit Database (NTD).
Comments must be submitted before January 6, 2012
To ensure that your comments are not entered more than once into the docket, submit comments identified by the docket number by only one of the following methods:
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John D. Giorgis, National Transit Database Program Manager, FTA Office of Budget and Policy, (202) 366-5430, or email:
Interested parties are invited to send comments regarding any aspect of this information collection, including: (1) The necessity and utility of the information collection for the proper performance of the functions of the FTA; (2) the accuracy of the estimated burden; (3) ways to enhance the quality, utility, and clarity of the collected information; and (4) ways to minimize the collection burden without reducing the quality of the collected information. Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval of this information collection.
The NTD is comprised of four modules, Rural, Annual, Monthly, and Safety & Security.
Federal Transit Administration (FTA), DOT.
FTA Livability Initiative Program Funds: Announcement of Project Selections.
The U.S. Department of Transportation's (DOT) Federal Transit Administration (FTA) announces the selection of projects funded under two discretionary programs: Bus and Bus Facilities and Alternatives Analysis, in support of DOT's Livability Initiative, which was announced in the Discretionary Livability Funding Opportunity notice of funding availability on June 27, 2011. The Bus Livability program makes funds available to public transit providers to finance capital projects to replace, rehabilitate, and purchase buses and related equipment and to construct bus-related facilities, including programs of bus and bus-related projects for assistance to subrecipients that are public agencies, private companies engaged in public transportation, or private non-profit organizations. The Alternatives Analysis program makes funds available to States, authorities of States, metropolitan planning organizations, and local governmental authorities to develop alternatives analyses. The Alternatives Analysis Program assists potential sponsors of major transit capital investments (“New Starts” and “Small Starts” projects) in the evaluation of all reasonable modal and multimodal alternatives and general alignment options to address transportation needs in a defined travel corridor. Through these funding awards, FTA will support a limited number of alternatives analyses, or technical work conducted as part of proposed or on-going alternatives analyses, that seek to advance major transit investments that foster the six livability principles of the DOT-HUD-EPA Partnership for Sustainable Communities.
Successful and unsuccessful applicants should contact the appropriate FTA Regional office (Appendix) for specific information regarding applying for the funds or proposal specific questions. For general program information on the Bus and Bus Facilities Program, contact Samuel Snead, Office of Program Management, at (202) 366-2053, email:
The grantee must comply with all applicable Federal statutes, regulations, executive orders, FTA circulars, and other Federal administrative requirements in carrying out the project supported by the FTA grant. FTA emphasizes that grantees must follow all third-party procurement guidance, as described in FTA.C.4220.1F. Funds allocated in this announcement must be obligated in a grant by September 30, 2014.
Federal Transit Administration (FTA), DOT.
State of Good Repair Bus and Bus Facilities Program Announcement of Project Selections.
The U.S. Department of Transportation's (DOT) Federal Transit Administration (FTA) announces the selection of projects funded with Section 5309 Bus and Bus Facilities program funds in support of the State of Good Repair (SGR) Initiative, which was announced in the State of Good Repair
Successful and unsuccessful applicants should contact the appropriate FTA Regional office (Appendix) for specific information regarding applying for the funds or proposal specific questions. For general program information on the Bus and Bus Facilities program contact Samuel Snead, Office of Program Management, at (202) 366-1089, email:
A total of $750 million was available for FTA's SGR Initiative. A total of 519 proposals requested $3.56 billion, indicating significant demand for funds. Project proposals were evaluated based on the criteria detailed in the June 24, 2011 Notice of Funding Availability. In selecting projects for funding using Bus Program funds, FTA ensured that at least 5.5 percent of the FY 2011 Section 5309 funds, or $53.5 million, is being allocated to projects that are not in urbanized areas. Additionally, at least $35 million is being allocated for intermodal terminal projects. The projects selected and shown in Table 1 will provide funds to help maintain the nation's public transportation bus fleet, infrastructure, and equipment in a state of good repair.
Post-award reporting requirements include submission of the Federal Financial Report (FFR) and Milestone Report in TEAM as appropriate (see FTA.C.5010.1D).
The grantee must comply with all applicable Federal statutes, regulations, executive orders, FTA circulars, and other Federal administrative requirements in carrying out the project supported by the FTA grant. FTA emphasizes that grantees must follow all third-party procurement guidance, as described in FTA.C.4220.1F. Funds allocated in this announcement must be obligated in a grant by September 30, 2014.
Pipeline and Hazardous Materials Safety Administration (PHMSA), DOT.
Notice of Forum.
PHMSA is co-sponsoring a one-day Emergency Responder Forum with the National Association of Pipeline Safety Representatives and the United States Fire Administration. The purpose of the forum is to convene a meeting of emergency response and management community leaders, pipeline safety regulators, pipeline industry representatives, and interested members of the public to solicit expert counsel that will inform the development of a strategy for improving emergency responders' ability to prepare for and respond to natural gas and hazardous liquid pipeline emergencies.
The forum will be held on December 9, 2011. Name badge pick up and on-site registration will be available starting at 7 a.m., with the forum taking place from 8 a.m. until approximately 5:30 p.m. eastern time. A webcast of the proceedings will be available. Pre-registration for the forum is available until December 2, 2011, at the meeting Web site at
The workshop will be held at U.S. Department of Transportation, 1200 New Jersey Avenue SE., Washington, DC 20590 in the atrium of the west building (New Jersey Avenue entrance, across the street from the Navy Yard Metro station). Attendees should arrive early to allow for time to go through security.
A block of hotel rooms has been reserved at Courtyard by Marriott Capitol Hill/Navy Yard, (866) 329-0003. Hotel reservations must be made on or before November 17, 2011, to receive a rate of $183 for the nights of December 8 and 9, 2011. Mention “Emergency Responder Forum Room Block” for the U.S. Department of Transportation when you make your reservation to receive this rate. Please call the hotel for more information on the Americans with Disabilities Act amenities at this location.
Sam Hall at (804) 556-4678 or by email at
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Pipeline and Hazardous Materials Safety Administration (PHMSA), Department of Transportation.
Notice of public meeting.
This notice is to advise interested persons that PHMSA will conduct a public meeting in preparation for the 40th session of the United Nations Sub-Committee of Experts on the Transport of Dangerous Goods (UNSCOE TDG) to be held November 28 to December 7, 2011, in Geneva, Switzerland. During this meeting, PHMSA is also soliciting comments relative to potential new work items which may be considered for inclusion in its international agenda.
Thursday, November 17, 2011; 1 p.m.-4 p.m.
The meeting will be held at the DOT Headquarters, West Building, Conference Rooms 8-10, 1200 New Jersey Avenue SE., Washington, DC 20590.
Mr. Shane Kelley, Senior International Transportation Specialist, Office of Hazardous Materials Safety, Department of Transportation, Washington, DC 20590; (202) 366-0656.
The primary purpose of this meeting will be to prepare for the 40th session of the UNSCOE TDG. The 40th session of the UNSCOE TDG is the second of four meetings scheduled for the 2011-2012 biennium. The UNSCOE will consider proposals for the 18th Revised Edition of the United Nations Recommendations on the Transport of Dangerous Goods Model Regulations which will be implemented within relevant domestic, regional, and international regulations from January 1, 2015. Copies of proposals and the meeting agenda may be obtained from the United Nations Transport Division's Web site at:
General topics on the agenda for the UNSCOE TDG meeting include:
• Listing, classification and packing
• Electric storage systems
• Miscellaneous proposals of amendments to the Model Regulations
• Electronic data interchange (EDI) for documentation purposes
• Cooperation with the International Atomic Energy Agency (IAEA)
• Global harmonization of transport of dangerous goods regulations
• Guiding principles for the Model Regulations
• Globally Harmonized System of Classification and Labeling of Chemicals (GHS)
In addition, PHMSA is soliciting comments on how to further enhance harmonization for international transport of hazardous materials. PHMSA has finalized a broad international strategic plan and
Following the 40th session of the UNSCOE TDG, PHMSA will place a copy of the Sub-Committee's report and a summary of the results on PHMSA's Hazardous Materials Safety Web site at
On October 18, 2011, Mississippi & Skuna Valley Railroad, LLC (MSV) filed with the Surface Transportation Board (Board) a petition under 49 U.S.C. 10502 for exemption from the provisions of 49 U.S.C. 10903 to abandon its entire 21-mile rail line extending between milepost 21.0 at Bruce Junction, and milepost 0.0 at Bruce, in Yalobusha and Calhoun Counties, Miss.
MSV states that, based on information in its possession, the line does contain federally granted rights-of-way. Any documentation in MSV's possession will be made available promptly to those requesting it.
Where, as here, the carrier is abandoning its entire line, the Board generally does not impose labor protection under 49 U.S.C. 10502(g), unless the evidence indicates the existence of: (1) A corporate affiliate that will continue substantially similar rail operations; or (2) a corporate parent that will realize substantial financial benefits over and above relief from the burden of deficit operations by its subsidiary railroad.
By issuing this notice, the Board is instituting an exemption proceeding pursuant to 49 U.S.C. 10502(b). A final decision will be issued by February 3, 2012.
Any offer of financial assistance (OFA) under 49 CFR 1152.27(b)(2) will be due no later than 10 days after service of a decision granting the petition for exemption. Each OFA must be accompanied by a $1,500 filing fee.
All interested persons should be aware that, following abandonment of rail service and salvage of the line, the line may be suitable for other public use, including interim trail use. Any request for a public use condition under 49 CFR 1152.28 or for trail use/rail banking under 49 CFR 1152.29 will be due no later than November 28, 2011. Each trail use request must be accompanied by a $250 filing fee.
All filings in response to this notice must refer to Docket No. AB 1089X, and must be sent to: (1) Surface Transportation Board, 395 E Street SW., Washington, DC 20423-0001; and (2) Melanie B. Yasbin, 600 Baltimore Ave., Suite 301, Towson, MD 21204. Replies to the petition are due on or before November 28, 2011.
Persons seeking further information concerning abandonment procedures may contact the Board's Office of Public Assistance, Governmental Affairs, and Compliance at (202) 245-0238 or refer to the full abandonment or discontinuance regulations at 49 CFR part 1152. Questions concerning environmental issues may be directed to the Board's Office of Environmental Analysis (OEA) at (202) 245-0305. Assistance for the hearing impaired is available through the Federal Information Relay Service (FIRS) at 1-(800) 877-8339.
An environmental assessment (EA) (or environmental impact statement (EIS), if necessary) prepared by OEA will be served upon all parties of record and upon any agencies or other persons who commented during its preparation. Other interested persons may contact OEA to obtain a copy of the EA (or EIS). EAs in these abandonment proceedings normally will be made available within 60 days of the filing of the petition. The deadline for submission of comments on the EA generally will be within 30 days of its service.
Board decisions and notices are available on our Web site at
By the Board, Rachel D. Campbell, Director, Office of Proceedings.
Surface Transportation Board, DOT.
Notice of decision.
On November 3, 2011, the Board served a decision announcing the 2010 revenue adequacy determinations for the Nation's Class I railroads. One carrier, Union Pacific Railroad Company, was found to be revenue adequate.
Paul Aguiar, (202) 245-0323. Assistance for the hearing impaired is available through Federal Information Relay Service (FIRS) at (800) 877-8339.
The Board is required to make an annual determination of railroad revenue adequacy. A railroad is considered revenue adequate under 49 U.S.C. 10704(a) if it achieves a rate of return on net investment equal to at least the current cost of capital for the railroad industry for 2010, determined to be 11.03% in
The decision in this proceeding is posted on the Board's Web site at
This action will not significantly affect either the quality of the human environment or the conservation of energy resources.
By the Board, Chairman Elliott, Vice Chairman Begeman, and Commissioner Mulvey.
Applications for Financial Assistance (FA) or Technical Assistance (TA) awards through the FY 2012 Funding Round must be received by midnight, Eastern Time (ET), January 11, 2012.
Through the CDFI Program, the CDFI Fund provides FA awards and TA grants. FA awards are made to certified CDFIs that complete and submit the CDFI Program Application and meet the requirements set forth in this NOFA, subject to funding availability. In FY 2012, subject to the availability of funding, the CDFI Fund will also make FA awards under the Healthy Food Financing Initiative (HFFI-FA) to certified CDFIs that meet the requirements set forth in this NOFA. TA grants are made to certified CDFIs and entities proposing to become certified that complete and submit the CDFI Program Application and meet the requirements set forth in this NOFA.
The regulations governing the CDFI Program are found at 12 CFR parts 1805 and 1815 (the Regulations) and provide guidance on evaluation criteria and other requirements. Details regarding application content requirements are found in the Application and related materials. Each capitalized term in this NOFA is more fully defined in this NOFA, the Regulations, or the Application, and the CDFI Fund encourages Applicants to review the Regulations in addition to this NOFA.
C. The CDFI Fund reserves the right to fund, in whole or in part, any, all, or none of the applications submitted in response to this NOFA. The CDFI Fund reserves the right to reallocate funds from the amount that is anticipated to be available under this NOFA to other CDFI Fund programs, particularly if the CDFI Fund determines that the number of awards made under this NOFA is fewer than projected. In addition, the CDFI Fund invites applications that propose innovative Financial Products and Financial Services to address the current difficult economic conditions of our nation.
Consistent with Federal efforts to promote community revitalization, it is important for communities to develop a comprehensive neighborhood revitalization strategy that addresses neighborhood assets that are essential to transforming distressed neighborhoods into healthy and vibrant communities of opportunity. Furthermore, only through the development of comprehensive neighborhood revitalization plans that embrace the coordinated use of programs and resources in order to effectively address the interrelated needs within a community will the broader vision of neighborhood transformation occur. Although not a requirement for participating in the CDFI Program, the Federal government believes that a CDFI will be most successful when it is part of, and contributing to, an area's broader neighborhood revitalization strategy.
Subject to funding availability, the CDFI Fund expects to award, through this NOFA, approximately $123 million in appropriated funds in the following ways: (i) $15 million in FA awards to Category I/SECA Applicants; (ii) $105 million in FA awards to Category II/Core Applicants; and (iii) $3 million in TA grants to TA Applicants. In addition, through this NOFA and the Native American CDFI Assistance (NACA) Program NOFA, the CDFI Fund expects to award approximately $25 million total in FA awards to HFFI Applicants under the CDFI and NACA Programs. The CDFI Fund reserves the right to award more or less than the amounts cited above in each category in the FY 2012 Funding Round, based upon available funding and other appropriate factors.
Funds for the FY 2012 Funding Round have not yet been appropriated. If funds are not appropriated for the CDFI Program, there will not be a FY 2012 Funding Round. If funds are appropriated, the amount of such funds may be greater or less than the amounts set forth above. If funds for the FY 2012 Funding Round for the Native American CDFI Assistance (NACA) Program are not appropriated, entities eligible to apply for CDFI Program funds that would have applied for NACA Program funding, are encouraged to apply for CDFI Program funds through this NOFA.
An Applicant may submit an application for a TA award or an FA award, which includes CDFI Program FA and HFFI-FA.
FA awards provide flexible financial support to CDFIs so they may achieve the strategies outlined in their Comprehensive Business Plans. FA awards can be used in the following six categories: (i) Financial Products; (ii) Financial Services; (iii) Development Services; (iv) Loan Loss Reserves; (v) Capital Reserves; and/or (vi) Operations. For purposes of this NOFA, the six categories mean:
The CDFI Fund may provide FA awards in the form of equity investments (including secondary capital in the case of certain Insured Credit Unions), grants, loans, deposits, credit union shares, or any combination thereof. The CDFI Fund reserves the right, in its sole discretion, to provide an FA award in a form and amount other than that which the Applicant requests; however, the award amount will not exceed the Applicant's award request as stated in its application. FA awards must be used to support the Applicant's activities; FA awards cannot be used to support the activities of, or otherwise be passed through, transferred, or co-awarded to, third-party entities, whether Affiliates, Subsidiaries, or others. This includes certified CDFI bank holding companies that intend to transfer FA awards to their banks. Such transfers are not permitted. The entity that is to carry out the responsibilities of the award and deploy the award funds must be the entity that applies for the award.
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In addition to the CDFI and NACA Programs, the HFFI includes: (i) The New Markets Tax Credit (NMTC) Program, also administered by the CDFI Fund; (ii) the Community and Economic Development (CED) Program, which HHS administers; and (iii) several programs that USDA administers including, among others, the Business and Industry (B&I) Program and the Intermediary Relending Program (IRP). Each of these programs provides a unique mechanism to support initiatives aimed at increasing access to healthy food. When these programs are combined, public dollars can act far more effectively as a market catalyst by providing the full range of financing to local actors—a key step to addressing the problem of limited access to affordable and nutritious food. Instead of approaching this problem through separate agency and program silos, the HFFI will use a collaborative approach involving the resources of all three agencies.
For more information about this initiative, please visit the HFFI Web site at
(b)
HFFI-FA awards will be provided as a supplement to FA awards; therefore, only those applicants that have been selected to receive an FA award under the FY 2012 CDFI or NACA Funding Round will be eligible to receive an HFFI-FA award. Such applicants will be rated and scored separately based upon the HFFI-FA supplemental questionnaire responses. HFFI-FA Applicants will be rated, among other elements, on the extent of community need, the quality of their HFFI-FA strategy, and their capacity to execute that strategy. The CDFI Fund will collaborate with the other Federal agencies involved in the HFFI prior to making final award selections. The CDFI Fund may, at its discretion, perform additional due diligence on Applicants for this initiative. HFFI-FA awards must be used to support the Applicant's activities; the awards cannot be used to support the activities of, or otherwise be passed through, transferred, or co-awarded to, third-party entities, whether Affiliates, Subsidiaries, or others. This includes the transfer of an award from a Bank Holding Company to a Bank subsidiary.
(a) The CDFI Fund provides TA as a grant and reserves the right, in its sole
(b) For purposes of this NOFA, TA eligible uses are: (i) Personnel/salary; (ii) personnel/fringe; (iii) professional services; (iv) travel; (v) training; (vi) equipment; (vii) materials/supplies; and (viii) other costs. (Please see the Application for details on TA uses.) TA grants must be used to support the Applicant's capacity building activities. TA grants cannot be used to support the activities of, or otherwise be passed through, transferred, or co-awarded to, third-party entities, whether Affiliates, Subsidiaries, or others. This includes the transfer of an award from a Bank Holding Company to a Bank subsidiary.
Each Awardee under this NOFA must sign an Assistance Agreement before the CDFI Fund will disburse an award or grant. The Assistance Agreement contains the Award's terms and conditions. For further information, see Section VI.A of this NOFA.
The Regulations specify the eligibility requirements each Applicant must meet in order to be eligible to apply for assistance under this NOFA. CDFI Program Applicants may apply as either an FA applicant or a TA applicant, but not both. If an Applicant applies for both types of awards, it is in the sole discretion of the CDFI Fund to disqualify the Applicant from competing for either an FA award or a TA grant or to decide to give the Applicant either an FA award or a TA grant.
All FA Applicants must meet the criteria listed in Table 2. (Applicants requesting FA funding in excess of the allowable amount for Category I will be classified as Category II Applicants, regardless of their total assets, years in operation, or prior CDFI Fund awards.)
All TA Applicants must meet the following criteria:
For purposes of this NOFA, eligible FA Applicants include Certified CDFIs and Certifiable CDFIs; eligible TA Applicants include Certified CDFIs, Certifiable CDFIs, and Emerging CDFIs, defined as follows:
An Applicant may receive only one award under this FY 2012 NOFA. An Applicant may receive only one award through the FY 2012 CDFI Program Funding Round or the FY 2012 NACA Program Funding Round.
For purposes of this section, the CDFI Fund will consider an Affiliate to be any entity that meets the definition of Affiliate in the Regulations or any entity otherwise identified as an Affiliate by the Applicant in its funding application and/or its myCDFIFund account. Prior awardees should note the following:
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Applicants that are prior CDFI Fund Awardees are advised to: (i) Comply with requirements specified in assistance, allocation, and/or award agreement(s), and (ii) contact the CDFI Fund to ensure necessary actions are underway for the disbursement or de-obligation of any prior outstanding award balance(s) as referenced above. An Applicant that is unsure about the disbursement status of any prior award should contact the CDFI Fund by sending an email to
FA Applicants must obtain non-Federal matching funds, on the basis of not less than one dollar for each dollar of FA funds the CDFI Fund provides. (This requirement pertains to FA Applicants only; matching funds are not required for TA Applicants). Matching funds must be comparable in form and value to the FA award. This means that if an Applicant is requesting an FA award, the Applicant must show it has obtained matching funds through commitment(s) from non-Federal sources that are equal to the amount requested from the CDFI Fund. Applicants cannot use matching funds from a prior FA award under the CDFI Program or under another federal grant or award program to satisfy the matching funds requirement of this
2. The CDFI Fund will not consider any FA Applicant for an award that has no matching funds in-hand or firmly committed as of this NOFA's application deadline. Specifically, FA Applicants must meet the following matching funds requirements:
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(b)
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Accordingly, subject to the immediately preceding paragraph: A HFFI-FA Applicant must demonstrate that it has eligible matching funds equal to no less than 25 percent of the FA amount requested in-hand or firmly committed, on or after January 1, 2010, and on or before the deadline for the submitting the HFFI-FA supplemental questionnaire. The CDFI Fund reserves the right to rescind all or a portion of an FA award and re-allocate the rescinded award amount to other qualified Applicant(s), if an Applicant fails to obtain in-hand 100 percent of the required matching funds by March 14, 2013 (with required documentation of such receipt received by the CDFI Fund not later than March 31, 2013). The CDFI Fund may grant an extension of such matching funds deadline for specific Applicants selected to receive FA awards, if the CDFI Fund deems it appropriate. For any Applicant that demonstrates it has less than 100 percent of matching funds in-hand or firmly committed as of the application deadline, the CDFI Fund will evaluate the Applicant's ability to raise the remaining matching funds by March 14, 2013.
4. The CDFI Fund may contact the matching funds source to discuss the matching funds and the documentation that the Applicant has provided. If the CDFI Fund determines that any portion of the Applicant's matching funds is ineligible under this NOFA, the CDFI Fund, in its sole discretion, may permit the Applicant to offer alternative matching funds as a substitute for the ineligible matching funds. In such instances: (i) The Applicant must
The Regulations allow an Insured Credit Union to use retained earnings to serve as matching funds for an FA award in an amount equal to: (i) The increase in retained earnings that has occurred over the Applicant's most recent fiscal year; (ii) the annual average of such increases that has occurred over the Applicant's three most recent fiscal years; or (iii) the entire retained earnings that have been accumulated since the inception of the Applicant, as provided in the Regulations. For purposes of this NOFA, if option (iii) is used, the Applicant must increase its member and/or non-member shares or total loans outstanding by an amount equal to the amount of retained earnings committed as matching funds. This increase must occur by the end of the Awardee's second performance period, as set forth in its Assistance Agreement, and will be based on amounts reported in the Applicant's Audited or Reviewed Financial Statements or NCUA Form 5300 Call Report. The CDFI Fund will assess the likelihood of this increase during the application review process. An award will not be made to any Applicant that has not demonstrated in the relevant Financial Statements or NCUA Call Report that it has increased shares or loans by at least 25 percent of the requested FA award amount between December 31, 2010, and December 31, 2011.
Under this NOFA, all Applicants must submit their applications electronically through Grants.gov. The CDFI Fund will not accept applications through myCDFIFund accounts nor will applications be accepted via email, mail, facsimile, or other forms of communication, except in circumstances approved by the CDFI Fund beforehand.
In compliance with Public Law 106-107 and Section 5(a) of the Federal Financial Assistance Management Improvement Act, the CDFI Fund is required to accept applications submitted through the Grants.gov electronic system. The CDFI Fund strongly recommends Applicants start the registration process as soon as possible and visit
The CDFI Fund will not consider Applicants that fail to properly register in Grants.gov or to confirm they are properly registered and as a result, are unable to submit their applications before the deadline. Applicants are reminded that the CDFI Fund does not maintain the Grants.gov registration or submittal process so Applicants must contact Grants.gov directly for issues related to that aspect of the application submission process. Please see the following link for information on getting started on Grants.gov:
myCDFIFund is the CDFI Fund's primary means of communication with Applicants. Applicants are responsible for ensuring their myCDFIFund account is updated at all times. All Applicants must register as an organization and as a user with myCDFIFund before the application deadline. Applicants failing to properly register and update their myCDFIFund accounts may miss important communication with the CDFI Fund that could impact their application. For more information on myCDFIFund, please see the “Frequently Asked Questions” link posted at
The Application and related documents can be found on the Grants.gov and the CDFI Fund's Web sites. The CDFI Fund anticipates posting the Application and related documents to the CDFI Fund's Web site on the same day that the NOFA is released or shortly thereafter. Once an application is submitted to Grants.gov, the Applicant will not be allowed to change any element of the application. The CDFI Fund, however, may contact the Applicant to clarify or confirm application information.
Under the Paperwork Reduction Act (44 U.S.C. chapter 35), an agency may not conduct or sponsor a collection of information, and an individual is not required to respond to a collection of information, unless it displays a valid OMB control number. Pursuant to the Paperwork Reduction Act, the CDFI Program funding Application has been assigned the following control number: 1559-0021.
1. Please see the following table for critical deadlines that are relevant to the FY 2012 Funding Round. All times listed are Eastern Standard Time (ET):
The CDFI Fund will not accept an application, nor any portion of an application, delivered after the application deadline. The CDFI Fund will not grant exceptions or waivers. Any application that is deemed ineligible or rejected will not be returned to the Applicant.
Not applicable.
For allowable uses of FA proceeds, please see the Regulations at 12 CFR 1805.301.
Applicants must complete, and the CDFI Fund will only accept, the Application as provided in Grants.gov and the CDFI Fund's Web site. The FY 2012 Application is a fillable electronic PDF form, with pre-set text limits and font size restrictions. Applicants should not submit information that has not been specifically requested in this NOFA or the Application. Applicants should not submit documents such as strategic plans or market studies unless the CDFI Fund has specifically requested such documents in the Application.
The CDFI Fund will review each application to determine whether it is complete and the Applicant meets the eligibility requirements described in Section III of this NOFA. An incomplete application or one that does not meet eligibility requirements will be rejected.
If the Applicant has submitted a complete and eligible application, the CDFI Fund will conduct a substantive review in accordance with the criteria and procedures described in the Regulations, this NOFA, and the Application guidance. The CDFI Fund reserves the right to contact the Applicant by telephone, email, or mail for the sole purpose of clarifying or confirming application information. If contacted, the Applicant must respond within the CDFI Fund's time parameters or run the risk of their application being rejected.
(a)
(b) In the FY 2012 Funding Round, the CDFI Fund will allow FA Applicants to earn up to 4 extra distressed points for serving eligible highly distressed target markets. Such markets are identified by a quantitative index of distress based on high poverty rates, high unemployment rates, low median family income, and for non-Metro areas, population loss. Applicants can identify distressed markets by using the index, which identifies the most distressed markets with the highest rank number. The index is posted to the CDFI Fund's Web site at
(c) Applicants whose activities are part of a broader neighborhood revitalization strategy and/or that target marginalized or isolated populations will be scored more favorably under the section of the application pertaining to “Responsiveness to Target Market Needs.”
(d)
(e)
In the case of Insured Depository Institutions and Insured Credit Unions, the CDFI Fund will consider the views of the Appropriate Federal Banking Agencies. Throughout the award review process, the CDFI Fund will consult with the Appropriate Federal Banking Agency about the Applicant's financial safety and soundness. If the Appropriate Federal Banking Agency identifies safety and soundness concerns, the CDFI Fund will assess whether the concerns cause or will cause the Applicant to be incapable of undertaking the activities for which funding has been requested. If it is determined the Applicant is incapable of meeting its obligations, the CDFI Fund reserves the right to rescind the award decision. The CDFI Fund also reserves the right to require insured CDFI Applicants to improve safety and soundness conditions prior to receiving an award disbursement. In addition, the CDFI Fund will take into consideration Community Reinvestment Act assessments of Insured Depository Institutions and/or their Affiliates.
Each Applicant will be informed of the CDFI Fund's award decision through a notification in the Applicant's myCDFIFund account. This includes notification to Applicants that have not been selected for an award if the decision is based on reasons other than completeness or eligibility. Applicants that have not been selected for an award will receive a debriefing in their myCDFIFund account. The CDFI Fund will provide this feedback in a format and within a timeframe dependent on available resources.
The CDFI Fund reserves the right to reject an application if information (including administrative errors) comes to the CDFI Fund's attention that either adversely affects an Applicant's eligibility for an award, adversely affects the CDFI Fund's evaluation or scoring of an application, or indicates fraud or mismanagement on the Applicant's part. If the CDFI Fund determines any portion of the application is incorrect in a material respect, the CDFI Fund reserves the right, in its sole discretion, to reject the application. The CDFI Fund reserves the right to change its eligibility and evaluation criteria and procedures, if the CDFI Fund deems it appropriate. If the changes materially affect the CDFI Fund's award decisions the CDFI Fund will provide information about the changes through the CDFI Fund's Web site. The CDFI Fund's award decisions are final and there is no right to appeal the decisions.
Each Applicant selected to receive an award under this NOFA must enter into an Assistance Agreement with the CDFI Fund in order to receive disbursement of the award funds. The Assistance Agreement will set forth the award terms and conditions, including but not be limited to the award: (i) Amount; (ii) type; (iii) uses; (iv) targeted market or activities; (v) performance goals and measures; and (vi) reporting requirements. FA Assistance Agreements will usually have three-year performance periods; TA Assistance Agreements will usually have two-year performance periods. All FA and TA awardees that are not Insured CDFIs will be required to provide the CDFI Fund with a Certificate of Good Standing from the Secretary of State for the Awardee's state of incorporation. This certificate can often be acquired online on the secretary of state Web site for the Awardee's state of incorporation and must generally be dated within 270 days of the date the Awardee executes the Assistance Agreement. Due to considerable backlogs in state government offices, Applicants are advised to submit requests for Certificates of Good Standing at the time that they submit their applications. If prior to entering into an Assistance Agreement with the CDFI Fund, information (including administrative error) comes to the CDFI Fund's attention that either adversely affects the Awardee's eligibility for an award, or adversely affects the CDFI Fund's evaluation of the Awardee's application, or indicates fraud or mismanagement on the Awardee's part, the CDFI Fund may, in its discretion and without advance notice to the Awardee, terminate the award or take such other actions as it deems appropriate. Moreover, if prior to entering into an Assistance Agreement, the CDFI Fund determines that the Awardee or an Affiliate of the Awardee is in default of any previously executed agreement with the CDFI Fund, the CDFI Fund may, in its discretion and without advance notice to the Awardee, either terminate the award or take such other actions as it deems appropriate. For purposes of this section, the CDFI Fund will consider an Affiliate to mean any entity that meets the definition of Affiliate in the Regulations or is otherwise identified by the Awardee as an Affiliate. The CDFI Fund reserves the right, in its sole discretion, to rescind an award if the Awardee fails to return the Assistance Agreement, signed by the authorized representative of the Awardee, and/or provide the CDFI Fund with any other requested documentation, within the CDFI Fund's deadlines.
If an Awardee is a prior Awardee/Allocatee under any CDFI Fund program and is not current with the reporting requirements set forth in the previously executed agreement(s) with the CDFI Fund, the CDFI Fund reserves the right, in its sole discretion, to delay entering into an Assistance Agreement until the Awardee/Allocatee is current with the reporting requirements. Please note that the CDFI Fund only acknowledges the receipt of reports that are complete. As such, incomplete reports or reports that are deficient of required elements will not be recognized as having been received. If said prior Awardee/Allocatee is unable to meet this requirement within the timeframe the CDFI Fund sets, the CDFI Fund reserves the right, in its sole discretion, to terminate and rescind the Assistance Agreement and the award made under this NOFA.
If an Applicant is a prior Awardee under any CDFI Fund program and if: (i) it has submitted reports to the CDFI
If, at any time prior to entering into an Assistance Agreement through this NOFA, the CDFI Fund has made a final determination that an Awardee is a prior Awardee/Allocatee under any CDFI Fund program is in default of a previously executed assistance, allocation, or award agreement(s), the CDFI Fund reserves the right, in its sole discretion, to delay entering into an Assistance Agreement, until said prior Awardee/Allocatee has submitted a complete and timely report demonstrating full compliance within the CDFI Fund's timeframe. If said prior Awardee/Allocatee is unable to meet this requirement and the CDFI Fund has not specified in writing that the prior Awardee/Allocatee is otherwise eligible to receive an Award under this NOFA, the CDFI Fund reserves the right, in its sole discretion, to terminate and rescind the Assistance Agreement and the award made under this NOFA.
The CDFI Fund reserves the right, in its sole discretion, to delay entering into or not to enter into an Assistance Agreement if: (i) Within the 12-month period prior to entering into an Assistance Agreement for this funding round, the CDFI Fund has made a final determination that a prior Awardee under any CDFI Fund program whose award or allocation agreement was terminated in default, and (ii) the final reporting period end date for the applicable terminated agreement falls within the 12-month period prior to this NOFA's application deadline.
If the Awardee has previously received funding through any CDFI Fund program, and if at any time prior to entering into an Assistance Agreement through this NOFA, the CDFI Fund is made aware of a final determination, made within the last three years, in any proceeding instituted against the Awardee in, by, or before any court, governmental, or administrative body or agency, declaring that the Awardee has discriminated on the basis of race, color, national origin, disability, age, marital status, receipt of income from public assistance, religion, or sex, the CDFI Fund reserves the right, in its sole discretion, to terminate and rescind the Assistance Agreement and the award made under this NOFA.
At least on an annual basis, the CDFI Fund will collect information from each Awardee including, but not limited to, an Annual Report with the following components: (i) Financial Reports, (ii) OMB A-133 audit; (iii) A-133 Narrative Report; (iv) Institution Level Report; (v) Transaction Level Report (for Awardees receiving FA awards); (vi) Financial Status Report SF-425 (for Awardees receiving TA grants); (vii) Uses of Financial Assistance (for Awardees receiving FA awards); (viii) Uses of Technical Assistance (for Awardees receiving TA grants); (ix) Explanation of Noncompliance (as applicable); and (x) such other information as the CDFI Fund may require. Each Awardee is responsible for the timely and complete submission of the Annual Report, even if all or a portion of the documents is actually completed by another entity or signatory to the Assistance Agreement. If such other entities or signatories are required to provide Institution Level Reports, Transaction Level Reports, Financial Reports, or other documentation that the CDFI Fund may require, the Awardee is responsible for ensuring that the information submitted is timely and complete. The CDFI Fund reserves the right to contact such additional entities or signatories to the Assistance Agreement and require that additional information and documentation be provided. The CDFI Fund will use such information to monitor each Awardee's compliance with the requirements in the Assistance Agreement and to assess the impact of the CDFI Program. All reports must be electronically submitted to the CDFI Fund via the Awardee's myCDFIFund account. The Institution Level Report and the Transaction Level Report must be submitted through the CDFI Fund's Web-based data collection system, the Community Investment Impact System (CIIS). The Financial Reports may be uploaded to the Awardee's myCDFIFund account. All other components of the Annual Report may be submitted electronically, as the CDFI Fund directs. The CDFI Fund reserves the right, in its sole discretion, to modify these reporting requirements if it determines it to be appropriate and necessary; however, such reporting requirements will be modified only after notice to Awardees.
The CDFI Fund will require each FA and TA Awardee to account for and track the use of its award. This means that FA and TA Awardees must track every dollar and must inform the CDFI Fund of its uses. This will require Awardees to establish separate administrative and accounting controls, subject to the applicable OMB Circulars. The CDFI Fund will provide guidance on the format and content of the annual information to be provided, outlining and describing how the funds were used. All Awardees must provide the CDFI Fund with an accurate and completed Automated Clearinghouse (ACH) form prior to award closing and disbursement.
A. The CDFI Fund will respond to questions concerning this NOFA and the funding Application between the hours of 9 a.m. and 5 p.m. Eastern Time, starting on the date that the NOFA is published through three business days prior to the application deadline. During the three business days prior to the application deadline, the CDFI Fund will not respond to questions for Applicants until after the application deadline. Applications and other information regarding the CDFI Fund and its programs may be obtained from the CDFI Fund's Web site at
B. Applicants may contact the CDFI Fund as follows:
People who have visual or mobility impairments that prevent them from creating a Target Market map using the CDFI Fund's Web site should call (202) 622-2455 for assistance (this is not a toll free number).
The CDFI Fund will use the Applicants' and Awardees' contact information in their myCDFIFund accounts to communicate. It is imperative; therefore, that Applicants, Awardees, Subsidiaries, Affiliates, and signatories maintain accurate contact information in their accounts. This includes information like contact names, especially for the authorized representative; email addresses; fax and phone numbers; and office locations. For more information about myCDFIFund, as well as information on the Community Investment Impact System, please see the following Web site:
The CDFI Fund may conduct Webinars or host information sessions for organizations that are considering applying to, or are interested in learning about, the CDFI Fund's programs. For further information, please visit the CDFI Fund's Web site at
12 U.S.C. 4701,
Community Development Financial Institutions Fund, U.S. Department of the Treasury
Request for public comment.
This notice invites comments from the public regarding the New Markets Tax Credit (NMTC) Program, which is jointly administered by the Community Development Financial Institutions Fund (CDFI Fund) and the Internal Revenue Service (IRS). All materials submitted will be available for public inspection and copying.
All comments and submissions must be received by February 6, 2012.
Comments may be sent by mail to: Bob Ibanez, Manager, New Markets Tax Credit Program, CDFI Fund, U.S. Department of the Treasury, 601 13th Street NW., Suite 200 South, Washington, DC 20005; by email to
Information regarding the CDFI Fund may be found on the CDFI Fund's Web site at
The New Markets Tax Credit Program was authorized by the Community Renewal Tax Relief Act of 2000 (Pub. L. 106-554). It has been extended and amended since initial authorization. The CDFI Fund periodically seeks the views of the public on the NMTC Program, seeking to increase its effectiveness, while reducing cost and burden on program participants. Currently the CDFI Fund is conducting through a third-party a long term, longitudinal study of the NMTC Program, including an evaluation of investor behavior. This study will be completed in 2012. Once this study is complete, the CDFI Fund may seek comments from the public about whether additional modifications to the program should be made based upon study findings.
In response to this Request for Public Comment, the CDFI Fund invites and encourages all comments and suggestions germane to the mission, purpose and implementation of the NMTC Program. The CDFI Fund is particularly interested in comments in the following areas:
The NMTC Program targets Low-Income Communities (LICs), including Targeted Populations, as defined in 12 U.S.C. 4702(20). To encourage investment in areas experiencing greater economic distress, the CDFI Fund also provides an opportunity for applicants to score more highly by committing to making investments in Areas of Higher Distress. The CDFI Fund welcomes comments on the definition of “Low Income Community” and designation as an Area of Higher Distress. Specifically:
LICs are generally defined by statute as census tracts with a poverty rate of at least 20 percent or a median family income at or below 80 percent of the area median income. The CDFI Fund has relied upon decennial census data in determining whether census tracts meet these qualifications, and deems as eligible those census tracts which meet the statutory criteria, provided that the decennial census data shows that the “population for which poverty is determined” is greater than zero.
(a) Should the CDFI Fund consider using different standards or methodologies for determining whether census tracts meet the statutory definition of low-income communities? For example, could using different census data or a different methodology appropriately include census tracts that are currently excluded? Conversely, could using different census data or a different methodology appropriately exclude census tracts that are currently eligible (e.g., census tracts with low populations)? Please cite specific examples of census tract types (not individual census tracts) and sources of national census tract-level data the CDFI Fund could use to both map eligibility and monitor compliance.
(b) In the allocation award process, should the CDFI Fund increase the commitment percentage from 75 percent of investments made in Areas of Higher Distress in order to receive the highest scores for this sub-section of the Community Impact score (See question 25(a) of the 2011 application)? Should the CDFI Fund include additional distress indicators, alter or eliminate any existing indicators?
The NMTC Program statute (at Internal Revenue Code § 45D(d)(2)) provides the definition of a Qualified Low-Income Community Business (QALICB), including certain types of businesses that cannot qualify based upon the nature of their operations (i.e., any trade or business consisting of the operation of any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, racetrack or other facility used for gambling, or any store the principal business of which is the sale of alcoholic beverages for consumption off premises).
(a) Are there certain other types of businesses that should be discouraged or barred from receiving NMTC investments? If so, what types of businesses, and what administrative means could be utilized to discourage such investments?
(b) Should the CDFI Fund provide additional opportunities in the allocation award process for applicants to score more highly by committing to invest in certain business types over others (e.g., small business or rural investment, operating businesses vs. real estate projects, etc.)?
(c) Are there specific administrative or regulatory changes that would facilitate the financing of specific types of businesses while preserving public policy objectives and safeguards?
The authorizing statute (Title I, subtitle C, Section 121 of the Community Renewal Tax Relief Act of 2000 (Pub. L. 106-554), as amended) and the CDFI Fund require certain community accountability and primary mission standards be met in order for an entity to qualify as a Community Development Entity (CDE). Moreover, the CDFI Fund evaluates CDE Applicants on certain community accountability dimensions. The CDFI Fund welcomes comments on the community accountability of CDEs. Specifically:
(a) Should the CDFI Fund increase the community accountability standards for an entity to qualify as a CDE? For example, (1) increase the minimum percentage of Low-Income Community Representatives required on the board (governing or advisory) that is providing accountability for the CDE; or (2) require some minimum of Low-Income Community Representatives to be locally based, such as local residents and/or government officials?
(b) Should CDE community accountability standards differ for CDEs depending on whether they use governing or advisory boards to demonstrate accountability?
(c) Should the CDE be required to have Low-Income Community Representatives approve of investments made by the CDE?
(d) Should CDE activities be required to be coordinated with community stakeholders? If so, how should this coordination be conducted and demonstrated?
(e) Should the CDFI Fund implement measures to increase the transparency of CDE activities? For example, should it (i) require CDE board meetings to be open to the public and require advance public notice of such meetings; (ii) require CDEs to keep and publish minutes of board meetings; or (iii) require CDEs to make board member contact information readily available to the public?
(f) If a CDE has a Controlling Entity, should the CDFI Fund require that the Controlling Entity of the CDE also meets community accountability requirements? If so, what requirements should be applied?
(g) Should CDE community accountability requirements differ for allocatee CDEs and non-allocatee CDEs?
(h) Are there other ways in which CDEs can enhance their accountability to the Low-Income Communities in their respective service areas?
The CDFI Fund requests comments on whether additional rules, restrictions, and requirements should be imposed related to fees and expenses charged by CDEs. Specifically:
(a) Should there be greater disclosure of (and perhaps limitations on) the fees and other sources of compensation and profits that NMTC applicants propose and NMTC allocatees and their affiliates charge to (or receive from) their borrowers, investors or other parties involved in NMTC transactions? Should such information be made available by applicants and allocatees directly or through the CDFI Fund to the public or should it remain excluded from disclosure as proprietary business information?
(b) Should the CDFI Fund provide an opportunity for CDEs that commit to limit fee and other forms of compensation to earn a higher score in the allocation award process? If so, please provide specific standards that could be used.
(c) Are there specific administrative or regulatory changes that would reduce transaction costs while preserving public policy objectives and safeguards?
The CDFI Fund provides an opportunity in the allocation award process for applicants to earn a higher score in the Business Strategy section by committing to providing equity, equity-equivalent financing, debt with below-market interest rates, or debt with certain flexible terms (question 15 of the 2011 application). The CDFI Fund welcomes comments on the CDFI Fund's evaluation of the quality of an applicant's financial products. Specifically:
(a) Should the CDFI Fund adopt the use of a defined Effective Annual Percentage Rate for purposes of the application and compliance measurement? Should the CDFI Fund alter the flexible rates and terms question (question 15 of the 2011 application) to base the scoring preference on a basis point reduction from a market benchmark determined by the CDE (or a standard metric such as LIBOR) instead of a percentage? Should the benchmarks be raised?
(b) Are there specific administrative or regulatory changes that would facilitate the provision of specific financial products while preserving public policy objectives and safeguards?
Often, CDEs and NMTC investors use other sources of federally subsidized financing (e.g., historic tax credits, Section 108 loan guarantees) to help finance NMTC transactions. These sources of financing are sometimes used in addition to the Qualified Equity Investment (QEI), as part of a leveraged debt transaction, or as simultaneous investments made at the project-level. Currently, the only restriction against commingling of federal funds is that NMTCs may not be used in conjunction with Low Income Housing Tax Credits.
(a) Should there be any additional restrictions in the allocation award process regarding the use of NMTCs with other sources of federally-subsidized financing? If so, are there certain types of federal financing that should be disallowed? Should it matter whether the financing is made as part of
(b) Assuming that it is appropriate for any other source of federally-subsidized financing to be used in conjunction with NMTC investments, would it be prudent for the CDFI Fund to limit, as part of the allocation process, the overall amount of QEI dollars or project level investments that may be supported with other sources of federal financing?
(c) Are there specific administrative or regulatory changes that could facilitate the coordination of other federally subsidized financing in conjunction with NMTCs while preserving public policy objectives and safeguards?
26 U.S.C. 45D; 31 U.S.C. 321; 26 CFR 1.45D-1.
Office of the Comptroller of the Currency, Treasury (“OCC”); Board of Governors of the Federal Reserve System (“Board”); Federal Deposit Insurance Corporation (“FDIC”); and Securities and Exchange Commission (“SEC”).
Notice of proposed rulemaking.
The OCC, Board, FDIC, and SEC (individually, an “Agency,” and collectively, “the Agencies”) are requesting comment on a proposed rule that would implement Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) which contains certain prohibitions and restrictions on the ability of a banking entity and nonbank financial company supervised by the Board to engage in proprietary trading and have certain interests in, or relationships with, a hedge fund or private equity fund.
Comments should be received on or before January 13, 2012.
Interested parties are encouraged to submit written comments jointly to all of the Agencies. Commenters are encouraged to use the title “Restrictions on Proprietary Trading and Certain Interests in, and Relationships with, Hedge Funds and Private Equity Funds” to facilitate the organization and distribution of comments among the Agencies. Commenters are also encouraged to identify the number of the specific question for comment to which they are responding.
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All submissions should refer to File Number S7-41-11. This file number should be included on the subject line if email is used. To help us process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (
The Dodd-Frank Act was enacted on July 21, 2010.
Section 13 of the BHC Act requires that implementation of its provisions occur in several stages. First, the Council was required to conduct a study (“Council study”) and make recommendations by January 21, 2011 on the implementation of section 13 of the BHC Act. The Council study was issued on January 18, 2011, and included a detailed discussion of key issues related to implementation of section 13 and recommended that the Agencies consider taking a number of specified actions in issuing rules under section 13 of the BHC Act.
Authority for developing and adopting regulations to implement the prohibitions and restrictions of section 13 of the BHC Act is divided between the Agencies in the manner provided in section 13(b)(2) of the BHC Act.
In addition, the statute required the Board, acting alone, to adopt rules to implement the provisions of section 13 of the BHC Act that provide a banking entity or a nonbank financial company supervised by the Board a period of time
Section 13 of the BHC Act generally prohibits banking entities from engaging in proprietary trading or from acquiring or retaining any ownership interest in, or sponsoring, a covered fund.
• Trading in certain government obligations;
• Underwriting and market making-related activities;
• Risk-mitigating hedging activity;
• Trading on behalf of customers;
• Investments in Small Business Investment Companies (“SBICs”) and public interest investments;
• Trading for the general account of insurance companies;
• Organizing and offering a covered fund (including limited investments in such funds);
• Foreign trading by non-U.S. banking entities; and
• Foreign covered fund activities by non-U.S. banking entities.
For purposes of this Supplementary Information, trading activities subject to section 13 of the BHC Act, including those permitted under a relevant exemption, are sometimes referred to as “covered trading activities.” Similarly, activities and investments with respect to a covered fund that are subject to section 13 of the BHC Act, including those permitted under a relevant exemption, are sometimes referred to as “covered fund activities or investments.”
Additionally, section 13 of the BHC Act permits the Agencies to grant, by rule, other exemptions from the prohibitions on proprietary trading and acquiring or retaining an ownership interest in, or acting as sponsor to, a covered fund if the Agencies determine
Section 13(f) of the BHC Act separately prohibits a banking entity that serves, directly or indirectly, as the investment manager, investment adviser, or sponsor to a covered fund, and any affiliate of such a banking entity, from entering into any transaction with the fund, or any other covered fund controlled by such fund, that would be a “covered transaction” as defined in section 23A of the Federal Reserve Act (“FR Act”),
Section 13 of the BHC Act does not prohibit a nonbank financial company supervised by the Board from engaging in proprietary trading, or from having the types of ownership interests in or relationships with a covered fund that a banking entity is prohibited or restricted from having under section 13 of the BHC Act. However, section 13 of the BHC Act provides for the Board or other appropriate Agency to impose additional capital charges, quantitative limits, or other restrictions on a nonbank financial company supervised by the Board or their subsidiaries and affiliates that are engaged in such activities or maintain such relationships.
In formulating the proposed rule, the Agencies have attempted to reflect the structure of section 13 of the BHC Act, which is to prohibit a banking entity from engaging in proprietary trading or acquiring or retaining an ownership interest in, or having certain relationships with, a covered fund, while permitting such entities to continue to provide client-oriented financial services. However, the delineation of what constitutes a prohibited or permitted activity under section 13 of the BHC Act often involves subtle distinctions that are difficult both to describe comprehensively within regulation and to evaluate in practice. The Agencies appreciate that while it is crucial that rules under section 13 of the BHC Act clearly define and implement its requirements, any rule must also preserve the ability of a banking entity to continue to structure its businesses and manage its risks in a safe and sound manner, as well as to effectively deliver to its clients the types of financial services that section 13 expressly protects and permits. These client-oriented financial services, which include underwriting, market making, and traditional asset management services, are important to the U.S. financial markets and the participants in those markets, and the Agencies have endeavored to develop a proposed rule that does not unduly constrain banking entities in their efforts to safely provide such services. At the same time, providing appropriate latitude to banking entities to provide such client-oriented services need not and should not conflict with clear, robust, and effective implementation of the statute's prohibitions and restrictions. Given these complexities, the Agencies request comment on the potential impacts the proposed approach may have on banking entities and the businesses in which they engage. In particular, and as discussed further in Part VII of this Supplemental Information, the Agencies recognize that there are economic impacts that may arise from the proposed rule and its implementation of section 13 of the BHC Act, and the Agencies request comment on such impacts, including quantitative data, where possible.
In light of these larger challenges and goals, the Agencies' proposal takes a multi-faceted approach to implementing section 13 of the BHC Act. In particular, the proposed rule includes a framework that: (i) Clearly describes the key characteristics of both prohibited and permitted activities; (ii) requires banking entities to establish a comprehensive programmatic compliance regime designed to ensure compliance with the requirements of the statute and rule in a way that takes into account and reflects the unique nature of a banking entity's businesses; and (iii) with respect to proprietary trading, requires certain banking entities to calculate and report meaningful quantitative data that will assist both banking entities and the Agencies in identifying particular activity that warrants additional scrutiny to distinguish prohibited proprietary trading from otherwise permissible activities. This multi-faceted approach, which is consistent with the implementation and supervisory framework recommended in the Council study, is intended to strike an appropriate balance between accommodating prudent risk management and the continued provision of client-oriented financial services by banking entities while ensuring that such entities do not engage in prohibited proprietary trading or restricted covered fund activities or investments.
In addition, and consistent with the statutory requirement that the Agencies' rules under section 13 of the BHC Act be, to the extent possible, comparable and provide for consistent application and implementation, the Agencies have proposed a common rule and appendices. This uniform approach to implementation is intended to provide the maximum degree of clarity to banking entities and market participants and ensure that section 13's prohibitions and restrictions are applied consistently across different types of regulated entities.
As a matter of structure, the proposed rule is generally divided into four subparts and contains three appendices, as follows:
• Subpart A of the proposed rule describes the authority, scope, purpose, and relationship to other authorities of the rule and defines terms used commonly throughout the rule;
• Subpart B of the proposed rule prohibits proprietary trading, defines terms relevant to covered trading activity, establishes exemptions from
• Subpart C of the proposed rule prohibits or restricts acquiring or retaining an ownership interest in, and certain relationships with, a covered fund, defines terms relevant to covered fund activities and investments, as well as establishes exemptions from the restrictions on covered fund activities and investments and limitations on those exemptions;
• Subpart D of the proposed rule generally requires banking entities to establish an enhanced compliance program regarding compliance with section 13 of the BHC Act and the proposed rule, including written policies and procedures, internal controls, a management framework, independent testing of the compliance program, training, and recordkeeping;
• Appendix A of the proposed rule details the quantitative measurements that certain banking entities may be required to compute and report with respect to their trading activities;
• Appendix B of the proposed rule provides commentary regarding the factors the Agencies propose to use to help distinguish permitted market making-related activities from prohibited proprietary trading; and
• Appendix C of the proposed rule details the minimum requirements and standards that certain banking entities must meet with respect to their compliance program, as required under subpart D.
In addition, the Board's proposed rule also contains a subpart E, to which the provisions of the Board's Conformance Rule under section 13 of the BHC Act will be recodified from their current location in the Board's Regulation Y.
Subpart B of the proposed rule implements the statutory prohibition on proprietary trading and the various exemptions to this prohibition included in the statute. Section _.3 of the proposed rule contains the core prohibition on proprietary trading and defines a number of related terms, including “proprietary trading” and “trading account.” The proposed rule's definition of proprietary trading generally parallels the statutory definition, and includes engaging as principal for the trading account of a banking entity in any transaction to purchase or sell certain types of financial positions.
The proposed rule's definition of trading account generally parallels the statutory definition, and provides further guidance regarding the circumstances in which a position will be considered to have been taken principally for the purpose of short-term resale or benefiting from actual or expected short-term price movements, recognizing the importance of providing as much clarity as possible regarding this term, which ultimately defines the scope of accounts subject to the prohibition on proprietary trading.
Section _.3 of the proposed rule also defines a number of other relevant terms, including the term “covered financial position.” This term is used to define the scope of financial instruments subject to the prohibition on proprietary trading. Consistent with the statutory language, such covered financial positions include positions (including long, short, synthetic and other positions) in securities, derivatives, commodity futures, and options on such instruments, but do not include positions in loans, spot foreign exchange or spot commodities.
Section _.4 of the proposed rule implements the statutory exemptions for underwriting and market making-related activities. For each of these permitted activities, the proposed rule provides a number of requirements that must be met in order for a banking entity to rely on the applicable exemption. These requirements are generally designed to ensure that the activities, revenues and other characteristics of the banking entity's trading activity are consistent with underwriting and market making-related activities, respectively, and not prohibited proprietary trading.
Section _.5 of the proposed rule implements the statutory exemption for risk-mitigating hedging. As with the underwriting and market-making exemptions, proposed § _.5 contains a number of requirements that must be met in order for a banking entity to rely on the exemption. These requirements are generally designed to ensure that the banking entity's trading activity is truly risk-mitigating hedging in purpose and effect.
Section _.6 of the proposed rule implements statutory exemptions for trading in certain government obligations, trading on behalf of customers, trading by a regulated insurance company, and trading by certain foreign banking entities outside the United States. Section _.6(a) of the proposed rule describes the government obligations in which a banking entity may trade notwithstanding the prohibition on proprietary trading, which include U.S. government and agency obligations, obligations and other instruments of certain government sponsored entities, and State and municipal obligations.
Section _.7 of the proposed rule requires certain banking entities with significant covered trading activities to comply with the reporting and recordkeeping requirements specified in Appendix A of the proposed rule. In addition, § _.7 requires that a banking entity comply with the recordkeeping requirements in § _.20 of the proposed rule, including, where applicable, the recordkeeping requirements in Appendix C of the proposed rule. Section _.7 of the proposed rule also requires a banking entity to comply with any other reporting or recordkeeping requirements that an Agency may impose to evaluate the banking entity's compliance with the proposed rule.
The quantitative measurements that must be furnished under the proposed rule are generally designed to reflect, and provide meaningful information regarding, certain characteristics of trading activities that appear to be particularly useful to help differentiate permitted market making-related activities from prohibited proprietary trading and to identify whether certain trading activities result in a material exposure to high-risk assets or high-risk trading strategies. In addition, proposed Appendix B contains a detailed commentary regarding identification of permitted market making-related activities and distinguishing such activities from trading activities that constitute prohibited proprietary trading.
As described in Part II.B.5 of the Supplementary Information below, the Agencies expect to utilize the conformance period provided in section 13(c)(2) of the BHC Act to further refine and finalize the reporting requirements, reflecting the substantial public comment, practical experience, and revision that will likely be required to ensure appropriate, effective use of reported quantitative data in practice.
Section _.8 of the proposed rule prohibits a banking entity from relying on any exemption to the prohibition on proprietary trading if the permitted activity would involve or result in a material conflict of interest, result in a material exposure to high-risk assets or high-risk trading strategies, or pose a threat to the safety and soundness of the banking entity or to the financial stability of the United States.
Subpart C of the proposed rule implements the statutory prohibition on, as principal, directly or indirectly, acquiring and retaining an ownership
The definition of “ownership interest” provides further guidance regarding the types of interests that would be considered to be an ownership interest in a covered fund.
Section _.10 of the proposed rule also defines a number of other relevant terms, including the terms “prime brokerage transaction,” “sponsor,” and “trustee.”
Section _.11 of the proposed rule implements the exemption for organizing and offering a covered fund provided for under section 13(d)(1)(G) of the BHC Act. Section _.11(a) of the proposed rule outlines the conditions that must be met in order for a banking entity to organize and offer a covered fund under this authority. These requirements are contained in the statute and are intended to allow a banking entity to engage in certain traditional asset management and advisory businesses in compliance with section 13 of the BHC Act.
Section _.12 of the proposed rule permits a banking entity to acquire and retain, as an investment in a covered fund, an ownership interest in a covered fund that the banking entity organizes and offers under § _.11.
Section _.13 of the proposed rule implements the statutory exemptions described in sections 13(d)(1)(C), (E), and (I) of the BHC Act that permit a banking entity: (i) To acquire and retain an ownership interest in, or act as sponsor to, one or more SBICs, a public welfare investment, or certain qualified rehabilitation expenditures; (ii) to acquire and retain an ownership interest in a covered fund as a risk-mitigating hedging activity; and (iii) in the case of a non-U.S. banking entity, to acquire and retain an ownership interest in, or act as sponsor to, a foreign covered fund.
Section _.13(b) of the proposed rule permits a banking entity to use an ownership interest in a covered fund to hedge, but only with respect to individual or aggregated obligations or liabilities of a banking entity that arise from: (i) The banking entity acting as intermediary on behalf of a customer that is not itself a banking entity to facilitate the customer's exposure to the profits and losses of the covered fund (similar to acting as a “riskless principal”); or (ii) a compensation arrangement with an employee of the banking entity that directly provides investment advisory or other services to that fund.
Section _.13(c) of the proposed rule implements section 13(d)(1)(I) of the BHC Act and permits certain foreign banking entities to acquire or retain an ownership interest in, or to act as sponsor to, a covered fund so long as such activity occurs solely outside of the United States and the entity meets the requirements of sections 4(c)(9) or 4(c)(13) of the BHC Act. This statutory exemption limits the extraterritorial application of the statutory restrictions on covered fund activities and investments to foreign firms that, in the course of operating outside of the United States, engage in activities permitted under relevant foreign law outside of the United States, while preserving national treatment and competitive equality among U.S. and foreign firms within the United States.
Section _.14 of the proposed rule implements section 13(d)(1)(J) of the BHC Act
Section _.15 of the proposed rule, which implements section 13(e)(1) of the BHC Act,
Section _.16 of the proposed rule implements section 13(f) of the BHC Act and generally prohibits a banking entity from entering into certain transactions with a covered fund that would be a covered transaction as defined in section 23A of the FR Act.
Section _.17 of the proposed rule prohibits a banking entity from relying on any exemption to the prohibition on acquiring and retaining an ownership interest in, acting as sponsor to, or having certain relationships with, a covered fund, if the permitted activity or investment would involve or result in a material conflict of interest, result in a material exposure to high-risk assets or high-risk trading strategies, or pose a threat to the safety and soundness of the banking entity or to the financial stability of the United States.
Subpart D of the proposed rule requires a banking entity engaged in covered trading activities or covered fund activities to develop and implement a program reasonably designed to ensure and monitor compliance with the prohibitions and restrictions on covered trading activities and covered fund activities and investments set forth in section 13 of the BHC Act and the proposed rule.
• Internal written policies and procedures reasonably designed to document, describe, and monitor the covered trading activities and covered fund activities and investments of the banking entity to ensure that such activities comply with section 13 of the BHC Act and the proposed rule;
• A system of internal controls reasonably designed to monitor and identify potential areas of noncompliance with section 13 of the BHC Act and the proposed rule in the banking entity's covered trading and covered fund activities and to prevent the occurrence of activities that are prohibited by section 13 of the BHC Act and the proposed rule;
• A management framework that clearly delineates responsibility and accountability for compliance with section 13 of the BHC Act and the proposed rule;
• Independent testing for the effectiveness of the compliance program, conducted by qualified banking entity personnel or a qualified outside party;
• Training for trading personnel and managers, as well as other appropriate personnel, to effectively implement and enforce the compliance program; and
• Making and keeping records sufficient to demonstrate compliance with section 13 of the BHC Act and the proposed rule, which a banking entity must promptly provide to the relevant Agency upon request and retain for a period of no less than 5 years.
For a banking entity with significant covered trading activities or covered fund activities and investments, the compliance program must also meet a number of minimum standards that are specified in Appendix C of the proposed rule.
Subpart E of the Board's proposed rule incorporates, with minor technical and conforming edits, the final rule which the Board, after soliciting and considering public comment, issued regarding the conformance periods for entities engaged in prohibited proprietary trading or covered fund activities and investments.
In formulating the proposed rule, the Agencies have carefully considered and taken into account the potential impact of the proposed rule on small banking entities and banking entities that engage in little or no covered trading activities or covered fund activities and investments, including the burden and cost that might be associated with such banking entities' compliance with the proposed rule. In particular, the Agencies have proposed to reduce the effect of the proposed rule on such banking entities by limiting the application of certain requirements, such as the reporting and recordkeeping requirements of § _.7 and Appendix A of the proposed rule and the compliance program requirements contained in subpart D and Appendix C of the proposed rule, to those banking entities that engage in little or no covered trading activities or covered fund activities and investments. The Agencies have also requested comment (i) throughout this Supplementary Information on a number of questions related to the costs and burdens associated with particular aspects of the proposal, as well as (ii) in Part VII.B of this Supplementary Information on any significant alternatives that would minimize the impact of the proposal on small banking entities.
Many issuers of asset-backed securities may be included within the definition of covered fund since they would be an investment company but for the exclusions contained in section 3(c)(1) or 3(c)(7) of the Investment Company Act.
In recognition of these concerns, the Agencies have requested comment throughout this Supplementary Information on the potential effects of section 13 of the BHC Act and the proposed rule on the securitization industry and issuers of asset-backed securities.
Section _.1 of the proposed rule describes the authority under which each Agency is issuing the proposed rule, the purpose of the proposed rule, and the banking entities to which each Agency's rule applies. In addition, § _.1(d) of the proposed rule implements section 13(g)(1) of the BHC Act, which provides that the prohibitions and restrictions of section 13 apply to the activities of a banking entity regardless of whether such activities are authorized for a banking entity under other applicable provisions of law.
Section 13(c)(1) of the BHC Act provides that section 13 shall take effect on the earlier of (i) 12 months after the date of issuance of final rules implementing that section, or (ii) 2 years after the date of enactment of section 13, which is July 21, 2012.
The Agencies note that the proposed effective date will impact not only the date on which the proposed rule's prohibitions and restrictions on proprietary trading and covered fund activities and investments go into effect (subject to the conformance period or extended transition period provided by section 13(c) of the BHC Act),
The Agencies expect that a banking entity may need a period of time to prepare for effectiveness of the proposed rule and, in particular, to implement both the compliance program and the reporting and recordkeeping requirements provided under the proposed rule. Accordingly, in order to help assess the effects and impact of the proposed effective date and any alternative compliance dates, the Agencies request comment on the following questions:
Section _.2 of the proposed rule defines a variety of terms used throughout the proposed rule, including “banking entity,” which defines the scope of entities to which the proposed rule applies. Consistent with the statutory definition of that term, § _.2(e) of the proposed rule provides that a “banking entity” includes: (i) Any insured depository institution; (ii) any company that controls an insured depository institution; (iii) any company that is treated as a bank holding company for purposes of section 8 of the International Banking Act of 1978 (12 U.S.C. 3106); and (iv) any affiliate or subsidiary of any of the foregoing.
An entity such as a mutual fund would generally not be a subsidiary or affiliate of a banking entity under this definition if the banking entity only provides advisory or administrative services to, has certain limited investments in, or organizes, sponsors, and manages a mutual fund (which includes a registered investment company) in accordance with BHC Act rules.
Section _.2(j) of the proposed rule defines the term “covered banking entity,” which is used in each Agency's proposed rule to describe the specific types of banking entities to which that Agency's rule applies. In addition, a number of other definitions contained in § _.2 are discussed in further detail below in connection with the separate sections of the proposed rule in which they are used.
The proposed rule also defines the terms “buy and purchase” and “sell and sale,” which are used throughout the proposed rule to describe the scope of transactions that are subject to subparts B and C of the proposed rule. These definitions are substantially similar to the definitions of the same terms under the Exchange Act, except that the proposed definitions provide additional clarity regarding the types of transactions that would be considered the purchase or sale of a commodity future or derivative or ownership interest in a covered fund.
The Agencies request comment on the proposed rule's definition of “banking entity.” In particular, the Agencies request comment on the following questions:
Section _.3 of the proposed rule describes the scope of the prohibition on proprietary trading and defines a
Section _.3(a) of the proposed rule implements section 13(a)(1)(A) of the BHC Act and prohibits a banking entity from engaging in proprietary trading unless otherwise permitted under §§ _.4 through _.6 of the proposed rule. Section _.3(b)(1) of the proposed rule defines proprietary trading in accordance with section 13(h)(4) of the BHC Act.
Section 13(h)(6) of the BHC Act defines the term “trading account” as “any account used for acquiring or taking positions in securities [or other enumerated instruments] principally for the purpose of selling in the near-term (or otherwise with the intent to resell in order to profit from short-term price movements),” as well as any such other accounts that the Agencies by rule determine.
In implementing the statutory definition of trading account, the proposed rule generally restates the statutory definition, with the addition of certain details intended to provide banking entities with greater clarity regarding the scope of positions that fall within the definition of trading account.
The Agencies have drawn on existing rules, in particular the Market Risk Capital Rules and various securities and commodities laws, in identifying trading accounts and defining related terms in the proposal.
The first prong of the proposed trading account definition refers to positions that a banking entity acquires or takes principally for short-term purposes—that is, for one of the following enumerated purposes described in §§ _.3(b)(2)(i)(A)(
• Short-term resale;
• Benefitting from actual or expected short-term price movements;
• Realizing short-term arbitrage profits; or
• Hedging one or more such positions.
This prong reflects the statutory definition's reference to positions acquired or taken “principally for the purpose of selling in the near-term (or otherwise with the intent to resell in order to profit from short-term price movements).”
Section _.3(b)(2)(i)(A)(
Section _.3(b)(2)(i)(A)(
Section _.3(b)(2)(i)(A)(
Section _.3(b)(2)(i)(A)(
The first prong of the proposed trading account definition, which references positions acquired principally for short-term trading purposes, is, like the statutory definition it implements, substantially similar to a key portion of the definition of a “covered position” under the Market Risk Capital Rules.
The Market Risk Capital Rules define a covered position to include all positions in a bank's “trading account,” as that term is defined, in part, in the Report of Condition and Income that banks are required to file periodically with respect to their financial condition (“Call Report”). Under the Market Risk Capital Rules, a covered position is one that is subject to a risk-based capital charge that is based, at least in part, on the banking organization's internal risk management models for purposes of calculating the banking organization's risk-based capital requirement.
In providing guidance regarding the application of “trading account,” the Call Report also states that trading account positions include any position that is classified as “trading securities” under relevant U.S. Generally Accepted Accounting Principles (“GAAP”) standards for accounting.
Although neither the Market Risk Capital Rules, the Call Report, nor relevant accounting standards provide a precise definition of what constitutes “near-term” or “short-term” for purposes of evaluating whether a position is of the type held in a trading account or is a trading security, guidance provided under relevant accounting standards notes that “near-term” for purposes of classifying trading activities is “generally measured in hours and days rather than months or years.”
In order to better reinforce the general consistency between the proposal's approach to defining a trading account and the “trading account” concept embedded in the Market Risk Capital Rules, the second prong of the proposed definition of trading account, contained in § _.3(b)(2)(i)(B) of the proposed rule, provides that a trading account includes any account used to acquire or take one or more covered financial positions, other than positions that are foreign exchange derivatives, commodity derivatives, or contracts of sale of a commodity for future delivery (unless the position is otherwise held with short-term intent), that are also market risk capital rule covered positions, if the banking entity, or any affiliate of the banking entity that is a bank holding company, calculates risk-based capital ratios under the Market Risk Capital Rules.
The Agencies emphasize that this second prong of the trading account definition is being proposed in contemplation of the proposed revisions to the Market Risk Capital Rules and, in particular, the proposed definition of “covered position” under those proposed revisions. To the extent that those proposed revisions with respect to the definition of “covered position” are not adopted, or adopted in a form other than as proposed, the Agencies would expect to take that into account in determining whether or how to include the proposed second prong of the trading account definition for purposes of the final rule to implement section 13 of the BHC Act.
The third prong of the proposed definition of trading account is contained in § _.3(b)(2)(i)(C) of the
The Agencies have proposed this third prong of the trading account definition because all assets or other positions held by firms that register or file notice as securities or derivatives dealers as part of their dealing activity are generally held for sale to customers upon request or otherwise support the firm's trading activities (e.g., by hedging its dealing positions), and so would appear to involve the requisite short-term intent and be captured within the statutory definition of trading account. To the extent that a covered financial position is acquired or taken by such a banking entity outside the scope of the dealing activities that require the banking entity to be registered, or to file notice, as a dealer, swap dealer, or security-based swap dealer, that position may still cause the relevant account to be a trading account under the proposed rule if the account holding such a position otherwise meets the terms of the first or second prong of the trading account definition (i.e., positions acquired or taken for short-term trading purposes or certain Market Risk Capital Rules positions).
In order to provide greater clarity and guidance on the application of the trading account definition, and in particular for those banking entities with no experience in evaluating short-term trading intent or that are not subject to the Market Risk Capital Rules, the proposed rule also includes a rebuttable presumption regarding certain positions that, by reason of their holding period, are presumed to be trading account positions. In particular, § _.3(b)(2)(ii) of the proposed rule provides that an account would be presumed to be a trading account if it is used to acquire or take a covered financial position, other than dealing positions or certain Market Risk Capital Rules covered positions that are automatically considered part of the trading account, that the banking entity holds for a period of sixty days or less. However, the presumption does not apply if the banking entity can demonstrate, based on all the facts and circumstances, that the covered financial position, either individually or as a category, was not acquired or taken principally for the purpose of short-term resale, benefitting from short-term price movements, realizing short-term arbitrage profits, or hedging another trading account position.
However, the Agencies recognize that, for a variety of reasons, a banking entity may acquire a covered financial position for purposes other than short-term trading but nonetheless dispose of that position within the sixty-day period covered by the presumption. Accordingly, § _.3(b)(2)(ii) is only a
It is important to note that these presumptions are designed to help determine whether a transaction is within the definition of “proprietary trading,” not whether a transaction is permissible under section 13 of the BHC Act. A transaction may fall within the definition of “proprietary trading” and yet be permissible if it meets one of the exemptions provided in the proposed rule, such as the exemption for market making-related activities.
The Agencies request comment on the proposed rule's approach to defining trading account. In particular, the Agencies request comment on the following questions:
Section _.3(b)(2)(iii)(A) of the proposed rule's definition of trading account provides that an account will not be a trading account to the extent that such account is used to acquire or take one or more covered financial positions that arise under a repurchase or reverse repurchase agreement pursuant to which the banking entity has simultaneously agreed, in writing at the start of the transaction, to both purchase and sell a stated asset, at stated prices, and on stated dates or on demand with the same counterparty.
Section _.3(b)(2)(iii)(B) of the proposed rule's definition of trading account provides that an account will not be a trading account to the extent that such account is used to acquire or take one or more covered financial positions that arise under a transaction in which the banking entity lends or borrows a security temporarily to or from another party pursuant to a written securities lending agreement under which the lender retains the economic interests of an owner of such security, and has the right to terminate the transaction and to recall the loaned security on terms agreed to by the parties.
Section __.3(b)(2)(iii)(C) of the proposed definition of trading account provides that an account will not be a trading account to the extent that such account is used to acquire or take a position for the purpose of
This proposed clarifying exclusion is intended to make clear that, where the purpose for which a banking acquires or takes a position is to ensure that it has sufficient liquid assets to meet its short-term cash demands, and the related position is held as part of the banking entity's liquidity management process, that transaction falls outside of the types of transactions described in the proposed rule's definition of trading account. Maintaining liquidity management positions is a critical aspect of the safe and sound operation of certain banking entities, and does not involve the requisite short-term trading intent that forms the basis of the statutory definition of “trading account.” In the context of
However, the Agencies are concerned with the potential for abuse of this clarifying exclusion—specifically, that a banking entity might attempt to improperly mischaracterize positions acquired or taken for prohibited proprietary trading purposes as positions acquired or taken for liquidity management purposes. To address this, the proposed rule requires that the transaction be conducted in accordance with a documented liquidity management plan that meets five criteria. First, the plan would be required to specifically contemplate and authorize any particular instrument used for liquidity management purposes, its profile with respect to market, credit and other risks, and the liquidity circumstances in which the position may or must be used. Second, the plan would have to require that any transaction contemplated and authorized by the plan be principally for the purpose of managing the liquidity of the banking entity, and not for the purpose of short-term resale, benefitting from actual or expected short-term price movements, realizing short-term arbitrage profits, or hedging a position acquired or taken for such short-term purposes. Third, the plan would have to require that any positions acquired or taken for liquidity management purposes be highly liquid and limited to financial instruments the market, credit and other risks of which are not expected to give rise to appreciable profits or losses as a result of short-term price movements.
Section _.3(b)(2)(iii)(D) of the proposed rule's definition of trading account provides that an account will not be a trading account to the extent that such account is used to acquire or take one or more covered financial positions that are acquired or taken by a banking entity that is a derivatives clearing organization registered under section 5b of the Commodity Exchange Act (7 U.S.C. 7a-1) or a clearing agency registered with the SEC under section 17A of the Exchange Act (15 U.S.C. 78q-1) in connection with clearing derivatives or securities transactions.
The Agencies request comment regarding the proposed clarifying exclusions and whether any other types of activity or transactions should be excluded from the proposed definition of trading account for clarity. In particular, the Agencies request comment on the following questions:
Section _.3(b)(3)(i) of the proposed rule defines a covered financial position as any long, short, synthetic or other position
To provide additional clarity, § __.3(b)(3)(ii) of the proposed rule provides that, consistent with the statute, the term covered financial position does not include any position that is itself a loan, a commodity, or foreign exchange or currency.
The proposal also defines a number of terms used in the proposed definition of covered financial position. The term “security” is defined by reference to that same term under the Exchange Act.
The proposed rule also defines the term “derivative.”
To provide additional clarity, the proposed definition of derivative also clarifies two types of transactions that are outside the scope of the definition. First, the proposed definition of derivative would not include any consumer, commercial, or other agreement, contract, or transaction that the CFTC and SEC have further defined by joint regulation, interpretation, guidance, or other action as not within the definition of swap, as that term is defined in the Commodity Exchange Act, or security-based swap, as that term is defined in the Exchange Act. The SEC and CFTC have, in proposing rules further defining the terms “swap” and “security-based swap,” proposed to not include a variety of agreements, contracts, and transactions within those definitions by joint regulation or interpretation, and the Agencies have proposed to expressly reflect such exclusions in the proposed rule's definition in order to avoid the potential application of its restrictions to transactions that are not commonly thought to be derivatives.
The proposed rule defines a “loan” as any loan, lease, extension of credit, or secured or unsecured receivable.
The Agencies request comment on the proposed rule's definition of terms used in the definition of covered financial position. In particular, the Agencies request comment on the following questions:
Section _.3(d) of the proposed rule defines a variety of other terms used throughout subpart B of the proposed rule. These definitions are discussed in further detail below in the relevant summary of the separate sections of the proposed rule in which they are used.
The Agencies request comment on the proposed rule's definition of other terms used in subpart B of the proposed rule. In particular, the Agencies request comment on the following questions:
Section _.4 of the proposed rule implements section 13(d)(1)(B) of the BHC Act, which permits banking entities to engage in certain underwriting and market making-related activities, notwithstanding the prohibition on proprietary trading.
Section _.4(a) of the proposed rule permits a banking entity to purchase or sell a covered financial position in connection with the banking entity's underwriting activities to the extent that such activities are designed not to exceed the reasonably expected near-term demands of clients, customers, or counterparties (the “underwriting exemption”). In order to rely on this exemption, a banking entity's underwriting activities must meet all seven of the criteria listed in § _.4(a)(2). These seven criteria are intended to ensure that any banking entity relying on the underwriting exemption is engaged in
First, the banking entity must have established the internal compliance program required by subpart D of the proposed rule, as further described below in Part III.D of this
Second, the covered financial position that is being purchased or sold must be a security. This requirement reflects the common usage and understanding of the term “underwriting.”
Third, the transaction must be effected solely in connection with a distribution of securities for which the banking entity is acting as an underwriter. This prong is intended to give effect to the essential element of the underwriting exemption—i.e., that the transaction be in connection with underwriting activity. For these purposes, the proposed rule defines both (i) a distribution of securities and (ii) an underwriter. The definitions of these terms are generally identical to the
With respect to the definition of distribution, the Agencies note that Regulation M defines a distribution of securities as “an offering of securities, whether or not subject to registration under the Securities Act that are distinguished from ordinary trading transactions by the magnitude of the offering and the presence of special selling efforts.”
The definition of “underwriter” in the proposed rule is generally similar to that under the SEC's Regulation M, except that the proposed rule's definition would also include, within that definition, a person who has an agreement with another underwriter to engage in a distribution of securities for or on behalf of an issuer or selling security holder.
• Assisting an issuer in capital raising;
• Performing due diligence;
• Advising the issuer on market conditions and assisting in the preparation of a registration statement or other offering documents;
• Purchasing securities from an issuer, a selling security holder, or an underwriter for resale to the public;
• Participating in or organizing a syndicate of investment banks;
• Marketing securities; and
• Transacting to provide a post-issuance secondary market and to facilitate price discovery.
The Agencies note that the precise activities performed by an underwriter may vary depending on the liquidity of the securities being underwritten and the type of distribution being conducted. For example, each factor need not be present in a private placement.
There may be circumstances in which an underwriter would hold securities that it could not sell in the distribution for investment purposes. If the acquisition of such unsold securities were in connection with the underwriting pursuant to the permitted underwriting activities exemption, the underwriter would also be able to dispose of such securities at a later time.
Fourth, to the extent that the transaction involves a security for which a person must generally be a registered securities dealer, municipal securities dealer or government securities dealer in order to underwrite the security, the banking entity must have the appropriate dealer registration (or in the case of a financial institution that is a government securities dealer, has filed notice of that status as required by section 15C(a)(1)(B) of the Exchange Act) or otherwise be exempt from registration or excluded from regulation as a dealer.
Fifth, the underwriting activities of the banking entity with respect to the covered financial position must be designed not to exceed the reasonably expected near-term demands of clients, customers and counterparties.
Sixth, the underwriting activities of the banking entity must be designed to generate revenues primarily from fees, commissions, underwriting spreads or other income, and not from appreciation in the value of covered financial positions it holds related to such activities or the hedging of such covered financial position.
Seventh, the compensation arrangements of persons performing underwriting activities at the banking entity must be designed not to encourage proprietary risk-taking. Activities for which a banking entity has established a compensation incentive structure that rewards speculation in, and appreciation of, the market value of securities underwritten, rather than success in bringing securities to market for a client, are inconsistent with permitted underwriting activities under the proposed rule. Although a banking entity relying on the underwriting exemption may appropriately take into account revenues resulting from movements in the price of securities that the banking entity underwrites to the extent that such revenues reflect the effectiveness with which personnel have managed underwriting risk, the banking entity should provide compensation incentives that primarily reward client revenues and effective client service, not proprietary risk-taking.
The Agencies request comment on the proposed rule's implementation of the underwriting exemption. In particular, the Agencies request comment on the following questions:
Section _.4(b) of the proposed rule permits a banking entity to purchase or sell a covered financial position in connection with the banking entity's market making-related activities (the “market-making exemption”).
As the Council study noted, implementing the statutory exception for permitted market making-related activities requires a regulatory regime that differentiates permitted market making-related activity, and in particular the taking of principal positions in the course of making a market in particular financial instruments, from prohibited proprietary trading. Although the purpose and function of these two activities are markedly different—market making-related activities provide intermediation and liquidity services to customers, while proprietary trading involves the generation of profit through speculative risk-taking—clearly distinguishing these activities may be difficult in practice. Market making-related activities, like prohibited proprietary trading, sometimes require the taking of positions as principal, and the amount of principal risk that must be assumed by a market maker varies considerably by asset class and differing market conditions.
In order to address these complexities, the Agencies have proposed a multi-faceted approach that draws on several key elements. First, similar to the underwriting exemption, the proposed rule includes a number of criteria that a banking entity's activities must meet in order to rely on the exemption for market making-related activities. These criteria are intended to ensure that the banking entity is engaged in
The proposal's multi-faceted approach is intended, through the incorporation of multiple regulatory and supervisory tools, to strike an appropriate balance in implementing the market-making exemption in a way that articulates the scope of permitted activities and meaningfully addresses the potential for misuse of the exemption, while not unduly constraining the important liquidity and intermediation services that market makers provide to their customers and to the capital markets at large.
The Agencies request comment on the proposed rule's approach to implementing the exemption for permitted market making-related activities. In particular, the Agencies request comment on the following questions:
As part of the proposal's multi-faceted approach to implementing the exemption for permitted market making-related activities, § _.4(b)(2) of the proposed rule specifies seven criteria that a banking entity's market making-related activities must meet in order to rely on the exemption, each of which are described in detail below. These criteria are designed to ensure that any banking entity relying on the exemption is engaged in
Section _.4(b)(2)(i) of the proposed rule requires a banking entity to establish a comprehensive compliance program to monitor and control its market making-related activities. Subpart D of the proposed rule further describes the appropriate elements of an effective compliance program. This criterion is intended to ensure that any banking entity relying on the market-making exemption has reasonably designed written policies and procedures, internal controls, and independent testing in place to support its compliance with the terms of the exemption.
Section _.4(b)(2)(ii) of the proposed rule articulates the core element of the statutory exemption, which is that the activity must be market making-related. In order to give effect to this requirement, § __.4(b)(2)(ii) of the proposed rule requires the trading desk or other organizational unit that purchases or sells a particular covered financial position to hold itself out as being willing to buy and sell, or otherwise enter into long and short positions in, the covered financial position for its own account on a regular or continuous basis. Notably, this criterion requires that a banking entity relying on the exemption with respect to a particular transaction must actually make a market in the covered financial position involved; simply because a banking entity makes a market in one type of covered financial position does not permit it to rely on the market-making exemption for another type of covered financial position.
The language used in § _.4(b)(2)(ii) of the proposed rule to describe
In assessing whether a particular trading desk or other organizational unit holds itself out as being willing to buy and sell, or otherwise enter into long and short positions in, a covered financial position for its own account on a regular or continuous basis in liquid markets, the Agencies expect to take an approach similar to that used by the SEC in the context of assessing whether a person is engaging in
• Making continuous, two sided quotes and holding oneself out as willing to buy and sell on a continuous basis;
• A pattern of trading that includes both purchases and sales in roughly comparable amounts to provide liquidity;
• Making continuous quotations that are at or near the market on both sides; and
• Providing widely accessible and broadly disseminated quotes.
In less liquid markets, such as over-the-counter markets for debt and equity securities or derivatives, the appropriate indicia of market making-related activities will vary, but should generally include:
• Holding oneself out as willing and available to provide liquidity by providing quotes on a regular (but not necessarily continuous) basis;
• With respect to securities, regularly purchasing covered financial positions from, or selling the positions to, clients, customers, or counterparties in the secondary market; and
• Transaction volumes and risk proportionate to historical customer liquidity and investments needs.
The Agencies would apply these indicia when evaluating when a banking entity is eligible for the market making-related activities exemption, but also recognize that these indicia cannot be applied at all times and under all circumstances because some may be inapplicable to the specific asset class or market in which the market making activity is conducted.
The
Under § _.4(b)(2)(iii) of the proposed rule, the market making-related activities of the trading desk or other organization unit that conducts a transaction in reliance on the market-making exemption must be designed not to exceed the reasonably expected near-term demands of clients, customers, and counterparties. This criterion implements the language in section 13(d)(1)(B) of the BHC Act and is intended to prevent a trading desk relying on the market-making exemption from taking a speculative proprietary position unrelated to customer needs as part of its purported market making-related activities. As described in further detail in Parts III.B.5 and III.D of the Supplementary Information, the proposed rule also includes a programmatic compliance requirement and requires reporting of quantitative measurements for certain banking entities, both of which are designed, in part, to meaningfully circumscribe the principal positions taken as part of market making-related activities to those which are necessary to meet the reasonably expected near-term demands of clients, customers, and counterparties. The Agencies expect that the programmatic compliance requirement and required reporting of quantitative measurements will play an important role in assessing a banking entity's compliance with § _.4(b)(2)(iii)'s requirement. In addition, as described in Part II.B.5 of the Supplementary Information, Appendix B of the proposed rule provides additional, detailed commentary regarding how the Agencies expect a firm relying on the market-making exemption to manage principal positions and how the Agencies propose to assess whether such positions are consistent with market making-related activities under the proposed rule.
In order for a banking entity's expectations regarding near-term customer demand to be considered reasonable, such expectations should be based on more than a simple expectation of future price appreciation and the generic increase in marketplace demand that such price appreciation reflects. Rather, a banking entity's expectation should generally be based on the unique customer base of the banking entity's specific market-making business lines and the near-term demands of those customers based on particular factors beyond a general expectation of price appreciation. To the extent that a trading desk or other organizational unit of a banking entity is engaged wholly or principally in trading that is not in response to, or driven by, customer demands, the Agencies would not expect those activities to qualify under § _.4(b) of the proposed rule, regardless of whether those activities promote price transparency or liquidity. For example, a trading desk or other organizational unit of a banking entity that is engaged wholly or principally in arbitrage trading with non-customers would not meet the terms of the proposed rule's market making exemption. In the case of a market maker engaging in market making in a security that is executed on an organized trading facility or exchange, that market maker's activities are generally consistent with reasonably expected near-term customer demand when such activities involve passively providing liquidity by submitting resting orders that interact with the orders of others in a non-directional or market-neutral trading strategy and the market maker is registered, if the exchange or organized trading facility
Under § _.4(b)(2)(iv) of the proposed rule, a banking entity relying on the market-making exemption with respect to trading in securities or certain derivatives must be appropriately registered as a dealer, or exempt from registration or excluded from regulation as a dealer, under applicable securities or commodities laws. With respect to a market-making transaction in one or more covered financial positions that are securities, other than exempted securities, security-based swaps, commercial paper, bankers acceptances or commercial bills, for which a person must be a registered securities dealer, municipal securities dealer or government securities dealer in order to deal in the security, the banking entity must have the appropriate dealer registration (or in the case of a financial institution that is a government securities dealer, has filed notice of that status as required by section 15C(a)(1)(B) of the Exchange Act) or otherwise be exempt from registration or excluded from regulation as a dealer.
Under § _.4(b)(2)(v) of the proposed rule, the market making-related activities of the banking entity must be designed to generate revenues primarily from fees, commissions, bid/ask spreads or other income not attributable to appreciation in the value of covered financial positions it holds in trading accounts or the hedging of such positions. This criterion is intended to ensure that activities conducted in reliance on the market-making exemption demonstrate patterns of revenue generation and profitability consistent with, and related to, the intermediation and liquidity services a market maker provides to its customers, rather than changes in the market value of the positions or risks held in inventory. Similar to the requirement that a firm relying on the market-making exemption design its activities not to exceed reasonably expected near-term client, customer, or counterparty demands, the Agencies expect that the programmatic compliance requirement and required reporting of quantitative measurements will play an important role in assessing a banking entity's compliance with § _.4(b)(2)(v)'s requirement. In addition, as described in Part III.B.5 of this Supplementary Information, Appendix B of the proposed rule provides additional, detailed commentary regarding how the Agencies propose to assess whether the types of revenues generated by a banking entity relying on the market-making exemption are consistent with market making-related activities.
Under § _.4(b)(2)(vii) of the proposed rule, the compensation arrangements of persons performing market making-related activities at the banking entity must be designed not to encourage or reward proprietary risk-taking. Activities for which a banking entity has established a compensation incentive structure that rewards speculation in, and appreciation of, the market value of a covered financial position held in inventory, rather than success in providing effective and timely intermediation and liquidity services to customers, are inconsistent with permitted market making-related activities. Although a banking entity relying on the market-making exemption may appropriately take into account revenues resulting from movements in the price of principal positions to the extent that such revenues reflect the effectiveness with which personnel have managed principal risk retained, a banking entity relying on the market-making exemption should provide compensation incentives that primarily reward customer revenues and effective customer service, not proprietary risk-taking. In addition, as described in Part III.B.5 of this Supplementary Information, Appendix B of the proposed rule provides further commentary regarding how the Agencies propose to assess whether the compensation incentives provided to trading personnel performing trading activities in reliance on the market-making exemption are consistent with market making-related activities.
Under § _.4(b)(2)(vi) of the proposed rule, the market making-related activities of the trading desk or other organizational unit that conducts the purchase or sale are required to be consistent with the commentary provided in Appendix B, which provides guidance that the Agencies propose to apply to help distinguish permitted market making-related activities from prohibited proprietary trading. Appendix B's proposed commentary, which is described in detail below in Part III.B.5 of this Supplementary Information, discusses various factors by which the Agencies propose to distinguish prohibited proprietary trading from permitted market making-related activities (e.g., how and to what extent a market maker hedges the risk of its market-making transactions, including (i) further detail related directly to other criteria in § _.4(b)(2) (e.g., the types of revenues generated by market makers), and (ii) expectations regarding other factors not expressly included in § _.4(b)(2)).
Section _.4(b)(3) of the proposed rule provides that certain hedging transactions related to market-making positions and holdings will also be deemed to be made in connection with a banking entity's market making-related activities for purposes of the market-making exemption. In particular, § _.4(b)(3) provides that the purchase or sale of a covered financial position for hedging purposes will qualify for the market-making exemption if it meets two requirements. First, the purchase or sale must be conducted in order to reduce the specific risks to the banking entity in connection with and related to individual or aggregated positions, contracts, or other holdings acquired pursuant to the market-making exemption. Where the purpose of a transaction is to hedge a market making-related position, it would appear to be market making-related activity of the type described in section 13(d)(1)(B) of the BHC Act. Second, the hedging transaction must also meet the criteria specified in the general exemption for risk-mitigating hedging activity for purposes of the proprietary trading prohibition, which is contained in §§ _.5(b) and (c) of the proposed rule and described in detail in Part III.B.3 of this Supplementary Information. Those criteria are intended to clearly define the scope of appropriate risk-mitigating hedging activities, to foreclose reliance on the exemption for prohibited proprietary trading that is conducted in the context of, or mischaracterized as, hedging activity, and to require documentation regarding the hedging purpose of certain transactions that are established at a level of organization that is different than the level of organization establishing or responsible for the underlying risk or risks that are being hedged, which in the context of the market making-related activity would generally be the trading desk.
The Agencies request comment on the proposed criteria that must be met in order to rely on the market-making exemption. In particular, the Agencies request comment on the following questions (as well as related questions in Part III.B.5 of this Supplementary Information):
Section _.5 of the proposed rule permits a banking entity to purchase or sell a covered financial position if the transaction is made in connection with, and related to, individual or aggregated positions, contracts, or other holdings of a banking entity and is designed to reduce the specific risks to the banking entity in connection with and related to such positions, contracts, or other holdings (the “hedging exemption”). This section of the proposed rule implements, in relevant part, section 13(d)(1)(C) of the BHC Act, which provides an exemption from the prohibition on proprietary trading for certain risk-mitigating hedging activities.
Like market making-related activities, risk-mitigating hedging activities present certain implementation challenges because of the potential that prohibited proprietary trading could be conducted in the context of, or mischaracterized as, a hedging transaction. This is because it may often be difficult to identify in retrospect whether a banking entity engaged in a particular transaction to manage or eliminate risks arising from related positions, on the one hand, or to profit from price movements related to the hedge position itself, on the other. The intent with which a purported hedge position is acquired may often be difficult to discern in practice.
In light of these complexities, the Agencies have again proposed a multi-faceted approach to implementation. As with the underwriting and market-making exemptions, the Agencies have proposed a set of criteria that must be met in order for a banking entity to rely on the hedging exemption. The proposed criteria are intended to define the scope of permitted risk-mitigating hedging activities and to foreclose reliance on the exemption for prohibited proprietary trading that is conducted in the context of, or mischaracterized as, permitted hedging activity. This includes implementation of the programmatic compliance regime required under subpart D of the proposed rule and, in particular, requires that a banking entity with significant trading activities implement robust, detailed hedging policies and procedures and related internal controls that are designed to prevent prohibited proprietary trading in the context of permitted hedging activity.
Section _.5(b) of the proposed rule describes the seven criteria that a banking entity must meet in order to rely on the hedging exemption. First, § _.5(b)(1) of the proposed rule requires the banking entity to have established an internal compliance program, consistent with the requirements of subpart D, that is designed to ensure the banking entity's compliance with the requirements of this paragraph, including reasonably-designed written policies and procedures, internal controls, and independent testing. This criterion is intended to ensure that any banking entity relying on the exemption has appropriate internal control processes in place to support its compliance with the terms of the exemption.
Second, § _.5(b)(2)(i) of the proposed rule requires that a transaction for which a banking entity is relying on the hedging exemption have been made in accordance with written policies, procedures and internal controls established by the banking entity pursuant to subpart D. This criterion would preclude reliance on the hedging exemption if the transaction was inconsistent with a banking entity's own hedging policies and procedures, as such inconsistency would appear to be indicative of prohibited proprietary trading.
Third, § _.5(b)(2)(ii) of the proposed rule requires that the transaction hedge or otherwise mitigate one or more specific risks, including market risk, counterparty or other credit risk, currency or foreign exchange risk, interest rate risk, basis risk, or similar risks, arising in connection with and related to individual or aggregated positions, contracts, or other holdings of a banking entity. This criterion implements the essential element of the hedging exemption—i.e., that the transaction be risk-mitigating. Notably, and consistent with the statutory reference to mitigating risks of
In addition, this criterion would include a series of hedging transactions designed to hedge movements in the price of a portfolio of positions. For example, a banking entity may need to engage in dynamic hedging, which involves rebalancing its current hedge position(s) based on a change in the portfolio resulting from permissible activities or from a change in the price, or other characteristic, of the individual or aggregated positions, contracts, or other holdings. The Agencies recognize that, in such dynamic hedging, material changes in risk may require a corresponding modification to the banking entity's current hedge positions.
The Agencies also expect that a banking entity relying on the exemption would be able to demonstrate that the banking entity is already exposed to the specific risks being hedged; generally, the purported hedging of risks to which the banking entity is not actually exposed would not meet the terms of the exemption. However, the hedging exemption would be available in certain cases where the hedge is established slightly before the banking entity becomes exposed to the underlying risk if such anticipatory hedging activity: (i) Is consistent with appropriate risk management practices; (ii) otherwise meets the terms of the hedging exemption; and (iii) does not involve the potential for speculative profit. For example, if a banking entity was contractually obligated, or otherwise highly likely, to become exposed to a particular risk and there was a sound risk management rationale for hedging that risk slightly in advance of actual exposure, the hedging transaction would generally be consistent with the requirement described in § _.5(b)(2)(ii) of the proposed rule.
Fourth, § _.5(b)(2)(iii) of the proposed rule requires that the transaction be reasonably correlated, based upon the facts and circumstances of the underlying and hedging positions and the risks and liquidity of those positions, to the risk or risks the transaction is intended to hedge or otherwise mitigate. A transaction that is only tangentially related to the risks that it purportedly mitigates would appear to be indicative of prohibited proprietary trading. Importantly, the Agencies have not proposed that a transaction relying on the hedging exemption be
Fifth, § _.5(b)(2)(iv) of the proposed rule requires that the hedging transaction not give rise, at the
Sixth, § _.5(b)(2)(v) of the proposed rule requires that any transaction conducted in reliance on the hedging exemption be subject to continuing review, monitoring and management after the hedge position is established. Such review, monitoring, and management must: (i) Be consistent with the banking entity's written hedging policies and procedures; (ii) maintain a reasonable level of correlation, based upon the facts and circumstances of the underlying and hedging positions and the risks and liquidity of those positions, to the risk or risks the purchase or sale is intended to hedge or otherwise mitigate; and (iii) mitigate any significant exposure arising out of the hedge after inception. In accordance with a banking entity's written internal hedging policies, procedures, and internal controls, a banking entity should actively review and manage its hedging positions and the risks that may arise out of those positions over time. A banking entity's internal hedging policies should be designed to ensure that hedges remain effective as correlations or other factors change. In particular, a risk-mitigating hedge position typically should be unwound as exposure to the underlying risk is reduced or increased as underlying risk increases, as selective hedging activity would appear to be indicative of prohibited proprietary trading.
Seventh, § _.5(b)(2)(vi) of the proposed rule requires that the compensation arrangements of persons performing the risk-mitigating hedging activities are designed not to reward proprietary risk-taking. Hedging activities for which a banking entity has established a compensation incentive structure that rewards speculation in, and appreciation of, the market value of a covered financial position, rather than success in reducing risk, are inconsistent with permitted risk-mitigating hedging activities.
Section _.5(c) of the proposed rule imposes a documentation requirement on certain types of hedging transactions. Specifically, for any transaction that a banking entity conducts in reliance on the hedging exemption that involves a hedge established at a level of organization that is different than the level of organization establishing the positions, contracts, or other holdings the risks of which the hedging transaction is designed to reduce, the banking entity must, at a minimum, document the risk-mitigating purpose of the transaction and identify the risks of the individual or aggregated positions, contracts, or other holdings of a banking entity that the transaction is designed to reduce.
The Agencies request comment on the proposed implementation of the risk-mitigating hedging exemption with respect to proprietary trading. In particular, the Agencies request comment on the following questions:
Section _.6 of the proposed rule permits a banking entity to engage in certain other trading activities described in section 13(d)(1) of the BHC Act. These permitted activities include trading in certain government obligations, trading on behalf of customers, trading by insurance companies, and trading outside of the United States by certain foreign banking entities. Section _.6 of the proposed rule does not contain
The Agencies request comment on the proposed rule's approach to implementing the exemptions contained in section 13(d)(1) of the BHC Act to the proposed rule's proprietary trading provisions. In particular, the Agencies
Section _.6(a) of the proposed rule, which implements section 13(d)(1)(A) of the BHC Act,
The Agencies request comment on the proposed rule's approach to implementing the government obligation exemption. In particular, the Agencies request comment on the following questions:
Section 13(d)(1)(D) of the BHC Act permits a banking entity to purchase or sell a covered financial position on behalf of customers, notwithstanding the prohibition on proprietary trading. Section _.6(b) of the proposed rule implements this section. Because the statute does not specifically define when a transaction would be conducted “on behalf of customers,” the proposed rule identifies three categories of transactions that, while they may involve a banking entity acting as principal for certain purposes, appear to be on behalf of customers within the purpose and meaning of the statute. As proposed, only transactions meeting the terms of these three categories would be considered on behalf of customers for purposes of the exemption.
Section _.6(b)(i) of the proposed rule provides that a purchase or sale of a covered financial position is on behalf of customers if the transaction (i) is conducted by a banking entity acting as investment adviser, commodity trading advisor, trustee, or in a similar fiduciary capacity for a customer and for the account of that customer, and (ii) involves solely covered financial positions of which the banking entity's customer, and not the banking entity or any subsidiary or affiliate of the banking entity, is beneficial owner (including as a result of having long or short exposure under the relevant covered financial position). This category is intended to capture a wide range of trading activity conducted in the context of customer-driven investment or commodity advisory, trust, or fiduciary services, so long as that activity is structured in a way that the customer, and not the banking entity providing those services, benefits from any gains and suffers from any losses on such covered financial positions.
Section _.6(b)(ii) of the proposed rule provides that a transaction is on behalf of customers if the banking entity is acting as riskless principal. These type of transactions are similarly customer-driven and do not expose the banking entity to gains or losses on the value of the traded positions, notwithstanding the fact that the banking entity technically acts as principal. The Agencies note that the proposed language describing riskless principal transactions generally mirrors that used in the Board's Regulation Y, OCC interpretive letters, and the SEC's Rule 3a5-1 under the Exchange Act.
Section _.6(b)(iii) of the proposed rule addresses trading for the separate account of insurance policyholders by a banking entity that is an insurance company. In particular, this part of the proposed rule provides that a purchase or sale of a covered financial position is on behalf of customers if:
• The banking entity is an insurance company engaging in the transaction for a separate account;
• The banking entity is directly engaged in the business of insurance and subject to regulation by a State insurance regulator or foreign insurance regulator;
• The banking entity purchases or sells the covered financial position solely for a separate account established by the insurance company in connection with one or more insurance policies issued by that insurance company;
• All profits and losses arising from the purchase or sale of the covered financial position are allocated to the separate account and inure to the benefit or detriment of the owners of the insurance policies supported by the separate account, and not the banking entity; and
• The purchase or sale is conducted in compliance with, and subject to, the insurance company investment and other laws, regulations, and written guidance of the State or jurisdiction in which such insurance company is domiciled.
This category is included within the exemption for transactions on behalf of customers because such insurance-related transactions are generally customer-driven and do not expose the banking entity to gains or losses on the value of separate account assets, even though the banking entity may be treated as the owner of those assets for certain purposes. However, to limit the potential for abuse of the exemption, the proposed rule also includes related requirements designed to ensure that the separate account trading activity is subject to appropriate regulation and supervision under insurance laws and not structured so as to allow gains or losses from trading activity to inure to the benefit or detriment of the banking entity.
The Agencies request comment on the proposed rule's approach to implementing the exemption for trading on behalf of customers. In particular, the Agencies request comment on the following questions:
Section _.6(c) of the proposed rule implements section 13(d)(1)(F) of the BHC Act,
• The insurance company must directly engage in the business of insurance and be subject to regulation by a State insurance regulator or foreign insurance regulator;
• The insurance company or its affiliate must purchase or sell the covered financial position solely for the general account of the insurance company;
• The purchase or sale must be conducted in compliance with, and subject to, the insurance company investment laws, regulations, and written guidance of the State or jurisdiction in which such insurance company is domiciled; and
• The appropriate Federal banking agencies, after consultation with the Council and the relevant insurance commissioners of the States, must not have jointly determined, after notice and comment, that a particular law, regulation, or written guidance described above is insufficient to protect the safety and soundness of the banking entity or of the financial stability of the United States.
The Agencies request comment on the proposed rule's approach to implementing the exemption for general account trading by insurance companies. In particular, the Agencies request comment on the following questions:
Section _.6(d) of the proposed rule implements section 13(d)(1)(H) of the BHC Act,
Section _.6(d)(1)(i) of the proposed rule provides that, in order to be eligible for the foreign trading exemption, the banking entity must not be directly or indirectly controlled by a banking entity that is organized under the laws of the United States or of one or more States. This requirement limits the scope of the exemption to banking entities that are organized under foreign law and controlled only by entities organized under foreign law. Consistent with the statutory language, a banking entity organized under the laws of the United States or any State and the subsidiaries and branches of such banking entity (wherever organized or licensed) may not rely on the exemption.
Section _.6(d)(1)(ii) of the proposed rule incorporates the statutory requirement that the banking entity must also conduct the transaction pursuant to sections 4(c)(9) or 4(c)(13) of the BHC Act. Section _.6(d)(2) clarifies when a banking entity would meet that requirement, the criteria for which vary depending on whether or not the banking entity is a foreign banking organization.
Section 4(c)(9) of the BHC Act provides that the restrictions on interests in nonbanking organizations contained in that statute do not apply to the ownership of shares held or activities conducted by any company organized under the laws of a foreign country the greater part of whose business is conducted outside the United States, if the Board by regulation or order determines that, under the circumstances and subject to the conditions set forth in the regulation or order, the exemption would not be substantially at variance with the purposes of the BHC Act and would be in the public interest.
Section 13 of the BHC Act also applies to foreign companies that control a U.S. insured depository institution but are not currently subject to the BHC Act generally or to the Board's Regulation K—for example, because the foreign company controls a savings association or an FDIC-insured industrial loan company. Accordingly, the proposed rule also clarifies when this type of foreign banking entity would be considered to have conducted a transaction “pursuant to section 4(c)(9)” for purposes of the foreign trading exemption.
The proposed rule also clarifies when a transaction will be considered to have occurred solely outside of the United States for purposes of the exemption. In interpreting this aspect of the statutory language, the proposal focuses on the extent to which material elements of the transaction occur within, or are conducted by personnel within, the United States. This focus seeks to avoid extraterritorial application of the prohibition of proprietary trading outside the United States while preserving competitive parity within U.S. markets. The proposed rule does not evaluate solely whether the risk of the transaction or management or decision-making with respect to the transaction rests outside the United States, as such an approach would appear to permit foreign banking entities to structure transactions so as to be “outside of the United States” for risk and booking purposes while engaging in transactions within U.S. markets that are prohibited for U.S. banking entities.
In particular, § _.6(d)(3) of the proposed rule provides that a transaction will be considered to have occurred solely outside of the United States only if four conditions are met:
• The transaction is conducted by a banking entity that is not organized under the laws of the United States or of one or more States;
• No party to the transaction is a resident of the United States;
• No personnel of the banking entity that is directly involved in the transaction is physically located in the United States;
• The transaction is executed wholly outside the United States.
A resident of the United States is defined in § _.2(t) of the proposed rule, and includes: (i) Any natural person resident in the United States; (ii) any partnership, corporation or other business entity organized or incorporated under the laws of the United States or any State; (iii) any estate of which any executor or administrator is a resident of the United States; (iv) any trust of which any trustee, beneficiary or, if the trust is revocable, settlor is a resident of the United States; (v) any agency or branch of a foreign entity located in the United States; (vi) any discretionary or non-discretionary account or similar account (other than an estate or trust) held by a dealer or fiduciary for the benefit or account of a resident of the United States; (vii) any discretionary account or similar account (other than an estate or trust) held by a dealer or fiduciary organized or incorporated in the United States, or (if an individual) a resident of the United States; or (viii) any partnership or corporation organized or incorporated under the laws of any foreign jurisdiction formed by or for a resident of the United States principally for the purpose of engaging in one or more transactions described in § _.6(d)(1) or § _.13(c)(1) of the proposed rule.
The Agencies request comment on the proposed rule's approach to implementing the foreign trading exemption. In particular, the Agencies request comment on the following questions:
Section 13(d)(1)(J) of the BHC Act permits the Agencies to grant, by rule, other exemptions from the prohibition on proprietary trading if the Agencies determine that the exemption would promote and protect the safety and soundness of the banking entity and the financial stability of the United States.
Section _.7 of the proposed rule, which implements in part section 13(e)(1) of the BHC Act,
A banking entity must comply with proposed Appendix A's reporting and recordkeeping requirements only if it has, together with its affiliates and subsidiaries, trading assets and liabilities the average gross sum of which (on a worldwide consolidated basis) is, as measured as of the last day of each of the four prior calendar quarters, equal to or greater than $1 billion.
The reporting and recordkeeping requirements of § _.7 and Appendix A of the proposed rule are an important part of the proposed rule's multi-faceted approach to implementing the prohibition on proprietary trading. These requirements are intended, in particular, to address some of the difficulties associated with (i) identifying permitted market making-related activities and distinguishing such activities from prohibited proprietary trading and (ii) identifying certain trading activities resulting in material exposure to high-risk assets or high-risk trading strategies. To do so, the proposed rule requires certain
However, the Agencies recognize that no single quantitative measurement or combination of measurements can accurately identify prohibited proprietary trading without further analysis of the context, facts, and circumstances of the trading activity. In addition, certain quantitative measurements may be useful for assessing one type of trading activity, but not helpful in assessing another type of trading activity. As a result, the Agencies propose to use a variety of quantitative measurements to help identify transactions or activities that warrant more in-depth analysis or review.
To be effective, this approach requires identification of useful quantitative measurements as well as judgment regarding the type of measurement results that suggest a further review of the trading unit's activity is warranted. The Agencies intend to take a heuristic approach to implementation in this area that recognizes that quantitative measurements can only be usefully identified and employed after a process of substantial public comment, practical experience, and revision. In particular, the Agencies note that, although a variety of quantitative measurements have traditionally been used by market participants and others to manage the risks associated with trading activities, these quantitative tools have not been developed, nor have they previously been utilized, for the explicit purpose of identifying trading activity that warrants additional scrutiny in differentiating prohibited proprietary trading from permitted market making-related activities. Additional study and analysis will be required before quantitative measurements may be effectively designed and employed for that purpose.
Consistent with this heuristic approach, the proposed rule includes a large number of potential quantitative measurements on which public comment is sought, many of which overlap to some degree in terms of their informational value. Not all of these quantitative measurements may ultimately be adopted, depending on their relative strengths, weaknesses, costs, and benefits. The Agencies note that some of the proposed quantitative measurements may not be relevant to all types of trading activities or may provide only limited benefits, relative to cost, when applied to certain types of trading activities. In addition, certain quantitative measurements may be difficult or impracticable to calculate for a specific covered trading activity due to differences between asset classes, market structure, or other factors. The Agencies have therefore requested comment on a large number of issues related to the relevance, practicability, costs, and benefits of the quantitative measurements proposed. The Agencies also seek comment on whether the quantitative measurements described in the proposal may be appropriate to use in assessing compliance with section 13 of the BHC Act.
In addition to the proposed quantitative measurements, a banking entity may itself develop and implement other quantitative measurements in order to effectively monitor its covered trading activities for compliance with section 13 of the BHC Act and the proposed rule and to establish, maintain, and enforce an effective compliance program, as required by § _.20 of the proposed rule and Appendix C. The Agencies note that the proposed quantitative measurements in Appendix A are intended to assist banking entities and Agencies in monitoring compliance with the proprietary trading restrictions and, thus, are related to the compliance program requirements in § _.20 of the proposed rule and proposed Appendix C. Nevertheless, implementation of the proposed quantitative measurements under Appendix A would not necessarily provide all the data necessary for the banking entity to establish an effective compliance program, and a banking entity may need to develop and implement additional quantitative measurements. The Agencies recognize that appropriate and effective quantitative measurements may differ based on the profile of the banking entity's businesses in general and, more specifically, of the particular trading unit, including types of instruments traded, trading activities and strategies, and history and experience (e.g., whether the trading desk is an established, successful market maker or a new entrant to a competitive market). In all cases, banking entities must ensure that they have robust measures in place to identify and monitor the risks taken in their trading activities, to ensure the activities are within risk tolerances established by the banking entity, and to monitor for compliance with the proprietary trading restrictions in the proposed rule.
To the extent that data regarding measurements, as set forth in the proposed rule, are collected, the Agencies propose to utilize the automatic two-year conformance period provided in section 13 of the BHC Act to carefully review that data, further study the design and utility of these measurements, and if necessary, propose changes to the reporting requirements as the Agencies believe are needed to ensure that these measurements are as effective as possible.
In addition, the Agencies request comment on the use of numerical thresholds for certain quantitative
The Agencies request comment on the proposed approach to implementing reporting requirements for proprietary trading. In particular, the Agencies request comment on the following questions:
Section I of proposed Appendix A describes the purpose of the appendix, which is to specify reporting requirements that are intended to assist banking entities that are engaged in significant trading activities and the Agencies in identifying trading activities that warrant further review or examination to verify compliance with the proprietary trading restrictions, including whether an otherwise-permitted activity under §§ _.4 through _.6(a) of the proposed rule is consistent with the requirement that such activity not result, directly or indirectly, in a material exposure by the banking entity to high-risk assets and high-risk trading strategies. In particular, section I provides that the purpose of the appendix is to assist the relevant Agency and banking entities in:
• Better understanding and evaluating the scope, type, and profile of the banking entity's covered trading activities;
• Monitoring the banking entity's covered trading activities;
• Identifying covered trading activities that warrant further review or examination by the banking entity to verify compliance with the proprietary trading restrictions;
• Evaluating whether the trading activities of trading units engaged in market making-related activities under § _.4(b) of the proposed rule are consistent with the requirements governing permitted market making-related activities;
• Evaluating whether the trading activities of trading units that are engaged in permitted trading activity under §§ _.4, _.5, or _.6(a) of the proposed rule (e.g., permitted underwriting, market making-related activity, risk-mitigating hedging, or trading in certain government obligations) are consistent with the requirement that such activity not result, directly or indirectly, in a material exposure by the banking entity to high-risk assets and high-risk trading strategies;
• Identifying the profile of particular trading activities of the banking entity, and the individual trading units of the banking entity, to help establish the appropriate frequency and scope of examination by the relevant Agency of such activities; and
• Assessing and addressing the risks associated with the banking entity's trading activities.
The types of trading and market making-related activities in which banking entities engage is often highly
Section II of proposed Appendix A defines relevant terms used in the appendix. These include certain definitions that clarify how and when certain calculations must be made, as well as a definition of “trading unit” that governs the level of organization at which a banking entity must calculate quantitative measurements. The proposed definition of “trading unit” covers multiple organizational levels of a banking entity, including:
• Each discrete unit engaged in the coordinated implementation of a revenue generation strategy that participates in the execution of any covered trading activity;
• Each organizational unit used to structure and control the aggregate risk-taking activities and employees of one or more trading units described above;
• All trading operations, collectively; and
• Any other unit of organization specified by the relevant Agency with respect to a particular banking entity.
The definition of “trading unit” is intended to capture multiple layers of a banking entity's organization structure, including individual trading desks, intermediate divisions that oversee a variety of trading desks, and all trading operations in the aggregate. As described below, under the proposal, the quantitative measurements specified in section IV of proposed Appendix A must be calculated and reported for each such “trading unit.” Accordingly, the definition of trading unit is purposefully broad and captures multiple levels of organization so as to ensure that quantitative measurements provide meaningful information, at both a granular and aggregate level, to help banking entities and the Agencies evaluate the quantitative profile of trading operations in a variety of contexts.
The Agencies expect that the scope and nature of trading units to which the quantitative measurements are applied would have an important impact on the informational content and utility of the resulting measurements. Applying a quantitative measurement to a trading unit at a level that aggregates a variety of distinct trading activities may obscure or “smooth” differences between distinct lines of business, asset categories and risk management processes in a way that renders the measurement relatively uninformative, because it does not adequately reflect the specific characteristics of the trading activities being conducted. Similarly, applying a quantitative measurement to a trading unit at a highly granular level could, if it captured only a narrow portion of activity that is conducted as part of a broader business strategy, introduce meaningless “noise” into the measure or result in a measurement that is idiosyncratic in nature. This highly granular application could render the measurement relatively uninformative because it would not accurately reflect the entirety of the trading activities being conducted. In order to address the potential weaknesses of applying the quantitative measurements at an aggregate and a granular level, respectively, the proposal requires reporting at both levels. The informational inputs required to calculate any particular quantitative measurement at either level are the same. Consequently, it is expected that, depending on the nature of the systems of a particular institution, there may be little, if any, incremental burden associated with calculating and reporting quantitative measurements at multiple levels.
The Agencies request comment on the proposed reporting requirements in Appendix A. In particular, the Agencies request comment on the following questions:
Part III of proposed Appendix A defines the scope of the reporting requirements. The proposed rule adopts a tiered approach that requires banking entities with the most extensive trading activities to report the largest number of quantitative measurements, while
For any banking entity that has, together with its affiliates and subsidiaries, trading assets and liabilities the average gross sum of which (on a worldwide consolidated basis), as measured as of the last day of each of the four prior calendar quarters, equals or exceeds $5 billion, the proposal would require the banking entity to furnish quantitative measurements for all trading units of the banking entity engaged in trading activity subject to §§ _.4, _.5, or _.6(a) of the proposed rule (i.e., permitted underwriting and market making-related activity, risk-mitigated hedging, and trading in certain government obligations). The scope of data to be furnished depends on the activity in which the trading unit is engaged. First, for the trading units of such a banking entity that are engaged in market making-related activity pursuant to § _.4(b) of the proposed rule, proposed Appendix A requires that a banking entity furnish seventeen quantitative measurements.
For any banking entity that has, together with its affiliates and subsidiaries, trading assets and liabilities the average gross sum of which (on a worldwide consolidated basis), as measured as of the last day of each of the four prior calendar quarters, equals or exceeds $1 billion but is less than $5 billion, the proposal would require quantitative measurements to be furnished for trading units that are engaged in market making-related activity subject to § _.4(b) of the proposed rule. Trading units of such banking entities that are engaged in market making-related activities must report eight quantitative measurements that are designed to help evaluate the extent to which the quantitative profile of a trading unit's activities is consistent with permissible market making-related activities.
Section III.B of proposed Appendix A specifies the frequency of required calculation and reporting of quantitative measurements. Under the proposed rule, each required quantitative measurement must be calculated for each trading day. Required quantitative measurements must be reported to the relevant Agency on a monthly basis, within 30 days of the end of the relevant calendar month, or on such other reporting schedule as the relevant Agency may require. Section III.C of proposed Appendix A requires a banking entity to create and retain records documenting the preparation and content of any quantitative measurement furnished by the banking entity, as well as such information as is necessary to permit the relevant Agency to verify the accuracy of such measurements, for a period of 5 years. This would include records for each trade and position.
Section IV of proposed Appendix A describes, in detail, the individual quantitative measurements that must be furnished. These measurements are grouped into the following five broad categories, each of which is described in more detail below:
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The Agencies have proposed these quantitative measurements because, taken together, these measurements appear useful for understanding the context in which trading activities occur and identifying activities that may warrant additional scrutiny to determine whether these activities involve prohibited proprietary trading because the trading activity either is inconsistent with permitted market making-related activities or presents a material exposure to high-risk assets or high-risk trading strategies. As described below, different quantitative measurements are proposed to identify different aspects and characteristics of trading activity for the purpose of helping to identify prohibited proprietary trading, and the Agencies expect that the quantitative measurements will be most useful for this purpose when implemented and reviewed collectively, rather than in isolation. The Agencies believe that, in the aggregate, many banking entities already collect and review many of these measurements as part of their risk management activities, and expect that many of the quantitative measurements proposed would be readily computed and monitored at the multiple levels of organization that are included in proposed Appendix A's definition of “trading unit,” to which they would apply.
The first set of quantitative measurements relates to risk management, and includes VaR, Stress VaR, VaR Exceedance, Risk Factor Sensitivities, and Risk and Position Limits. These measurements are widely used by banking entities to measure and manage trading risks and activities. In the case of VaR, Stress VaR, VaR Exceedance, and Risk Factor Sensitivities, these measures provide internal, model-based assessments of overall risk, stated in terms of large but plausible losses that may occur or changes in revenue that would be expected to result from movements in underlying risk factors. In the case of Risk and Position Limits, the measure provides an explicit assessment of management's expectation of how much risk is required to perform permitted market-making and hedging activities. With the exception of Stress VaR, each of these measurements are routinely used to manage and control risk taking activities, and are also used by some banking entities for purposes of calculating regulatory capital and allocating capital internally. In the context of permitted market making-related activities, these risk management measures are useful in assessing whether the actual risk taken is consistent with the level of principal risk that a banking entity must retain in order to service the near-term demands of customers. Significant, abrupt or inconsistent changes to key risk management measures, such as VaR, that are inconsistent with prior experience, the experience of similarly situated trading units and management's stated expectations for such measures may indicate impermissible proprietary trading. In addition, indicators of unanticipated or unusual levels of risk taken, such as a significant number of VaR Exceedance or breaches of internal Risk and Position Limits, may suggest behavior that is inconsistent with appropriate levels of risk and may warrant further scrutiny.
The second set of quantitative measurements relates to the source of revenues, and includes Comprehensive Profit and Loss, Portfolio Profit and Loss, Fee Income, Spread Profit and Loss, and Comprehensive Profit and Loss Attribution. These measurements are intended to capture the extent, scope, and type of profits and losses generated by trading activities and provide important context for understanding how revenue is generated by trading activities. Because permitted market making-related activities seek to generate profits by providing customers with intermediation and related services while maintaining, and to the extent practicable minimizing, the risks associated with any asset or risk inventory required to meet customer demands, these revenue measurements would appear to provide helpful information to banking entities and the Agencies regarding whether actual revenues are consistent with these expectations. The Agencies note that although banking entities already routinely calculate and analyze the extent and source of revenues derived from their trading activities, calculating the proposed source of revenue measurements according to the specifications described in proposed Appendix A may require banking entities to implement new processes to calculate and furnish the required data.
The third set of measurements relates to realized risks and revenue relative to realized risks, and includes Volatility of Profit and Loss, Comprehensive Profit and Loss to Volatility Ratio and Portfolio Profit and Loss to Volatility Ratio, Unprofitable Trading Days based on Comprehensive Profit and Loss and Unprofitable Trading Days based on
The fourth set of quantitative measurements relates to customer-facing activity measurements, and includes Inventory Risk Turnover, Inventory Aging, and Customer-facing Trade Ratio. These measurements are intended to provide banking entities and Agencies with meaningful information regarding the extent to which trading activities are directed at servicing the demands of customers. Quantitative measurements such as Inventory Risk Turnover and Inventory Aging assess the extent to which size and volume of trading activity is aimed at servicing customer needs, while the Customer-facing Trade Ratio provides directionally useful information regarding the extent to which trading transactions are conducted with customers. The Agencies expect that these measurements will be useful in assessing whether permitted market making-related activities are focused on servicing customer demands. Although the Agencies understand that banking entities typically measure inventory aging and turnover in the context of cash instruments (e.g., equity and debt securities), they note that applying these measurements, as well as the Customer-facing Trade Ratio generally, would require banking entities to implement new processes to calculate and furnish the related data.
The fifth set of quantitative measurements relates to the payment of fees, commissions, and spreads, and includes the Pay-to-Receive Spread Ratio. This measurement is intended to measure the extent to which trading activities generate
For each individual quantitative measurement, proposed Appendix A describes the measurement, provides general guidance regarding how the measurement should be calculated (where needed) and specifies the period over which each calculation should be made. The proposed quantitative measurements attempt to incorporate, wherever possible, measurements already used by banking entities to manage risks associated with their trading activities. Of the measurements proposed, the Agencies expect that a large majority of measurements proposed are either (i) already routinely calculated by banking entities or (ii) based solely on underlying data that are already routinely calculated by banking entities. However, calculating these measurements according to the specifications described in proposed Appendix A and at the various levels of organization mandated may require banking entities to implement new processes to calculate and furnish the required data.
The extent of the burden associated with calculating and reporting quantitative measurements will likely vary depending on the particular measurements and differences in the sophistication of management information systems at different banking entities. As noted, the proposal tailors these data collections to the size and type of activity conducted by each banking entity in an effort to minimize the burden in particular on firms that engage in few or no trading activities subject to the proposed rule.
The Agencies have also attempted to provide, to the extent possible, a standardized description and general method of calculating each quantitative measurement that, while taking into account the potential variation among trading practices and asset classes, would facilitate reporting of sufficiently uniform information across different banking entities so as to permit horizontal reviews and comparisons of the quantitative profile of trading units across firms.
The Agencies request comment on the proposed quantitative measurements. In particular, the Agencies request comment on the following questions:
• Is the use of the quantitative measurement to help distinguish between permitted and prohibited trading activities effective? If not, what alternative would be more effective? Does the quantitative measurement provide any additional information of value relative to other quantitative measurements proposed?
• Is the use of the quantitative measurement to help determine whether an otherwise-permitted trading activity is consistent with the requirement that such activity must not result, directly or indirectly, in a material exposure by the banking entity to high-risk assets and high-risk trading strategies effective? If not, what alternative would be more effective?
• What factors should be considered in order to further refine the proposed quantitative measurement to better distinguish prohibited proprietary trading from permitted trading activity? For example, should the timing of a calculation be considered significant in certain contexts (e.g., should specific quantitative measurements be calculated during the middle of a trading day instead of at the end of the day)?
• If the quantitative measurement is proposed to be applied to a trading unit that is engaged in activity pursuant to §§ _.4(a), _.5, or _.6(a) of the proposed rule, is the quantitative measurement calculable in relation to such activity? Is the quantitative measurement useful for determining whether underwriting, risk-mitigating hedging, or trading in certain government obligations is resulting, directly or indirectly, in a material exposure by the banking entity to high-risk assets or high-risk trading strategies?
• Is the description of the quantitative measurement sufficiently clear? What alternative would be more appropriate or clearer? Is the description of the quantitative measurement appropriate, or is it overly broad or narrow? If it is overly broad, what additional clarification is needed? Should the Agencies provide this additional clarification in the appendix's description of the quantitative measurement? If the description is overly narrow, how should it be modified to appropriately describe the quantitative measurement, and why?
• Is the general calculation guidance effective and sufficiently clear? If not, what alternative would be more effective or clearer? Is more or less specific calculation guidance necessary? If so, what level of specificity is needed to calculate the quantitative measurement? What are the different calculation options and methodologies that could be used to reach the desired level of specificity? What are the costs and benefits of these different options? If the proposed calculation guidance is not sufficiently specific, how should the calculation guidance be modified to reach the appropriate level of specificity? For example, rather than provide this level of specificity in proposed Appendix A, should the Agencies instead make each banking entity responsible for determining the best method of calculating the quantitative measurement at this level of specificity, based on the banking entity's business and profile, which would then be subject to supervision, review, or examination by the relevant Agency? If the proposed calculation guidance is overly specific, why is it too specific and how should the guidance be modified to reach the appropriate level of specificity?
• Is the general calculation guidance for the measurement consistent with how banking entities currently calculate the quantitative measurement, if they do so? If not, how does the proposed guidance differ from methodology currently used by banking entities? What is the purpose of the current calculation methodology used by banking entities?
• What operational or logistical challenges might be associated with performing the calculation of the quantitative measurement and obtaining any necessary informational inputs?
• Is the quantitative measurement not calculable for any specific type of trading unit? If so, what type of trading unit, and why is the quantitative measurement not calculable for that type of trading unit? Is there an alternative quantitative measurement that would reflect the same trading activity but not pose the same calculation difficulty? Are there particular challenges to documenting that a specific quantitative measurement is not calculable?
• Is the quantitative measurement substantially likely to frequently produce false negatives or false positives that suggest that prohibited proprietary trading is occurring when it is not, or vice versa? If so, why? If so, what alternative quantitative measurement would better help identify prohibited proprietary trading?
• Should the quantitative measurement better account for distinctions among trading activities, trading strategies, and asset classes? If so, how? For example, should the quantitative measurements better account for distinctions between trading activities in cash and derivatives markets? If so, how? Are there any other distinctions for which the quantitative measurements may need to account? If so, what distinctions, and why?
• Does the quantitative measurement provide useful information as applied to all types of trading activities, or only a certain subset of trading activities? If it only provides useful information for a subset of trading activities, how should this issue be addressed? How beneficial is the information that the quantitative measurement provides for this subset of trading activities? Do any of the other quantitative measurements provide the
• Does the quantitative measurement provide useful information as applied to all asset classes, or only a certain subset of asset classes? If it only provides useful information for a subset of asset classes, how should this issue be addressed? How beneficial is the information the quantitative measurement provides for this subset of asset classes? Do any of the other quantitative measurements provide the same level of beneficial information for this subset of asset classes? Should the quantitative measurement be required to be reported for all asset classes, only a relevant subset of asset classes, or not at all?
• Is the calculation period effective and sufficiently clear? If not, what alternative would be more effective or clearer?
• How burdensome and costly would it be to calculate the measurement at the specified calculation frequency and calculation period? Are there any difficulties or costs associated with calculating the measurement for particular trading units? How significant are those potential costs relative to the potential benefits of the measurement in monitoring for impermissible proprietary trading? Are there potential modifications that could be made to the measurement that would reduce the burden or cost? If so, what are those modifications? Please quantify your answers, to the extent feasible.
Proposed Appendix B provides commentary that is intended to assist a banking entity in distinguishing permitted market making-related activities from trading activities that, even if conducted in the context of a banking entity's market making operations, would constitute prohibited proprietary trading. As noted in Part I of proposed Appendix B, the commentary applies to all banking entities that are engaged in market making-related activities in reliance on § _.4(b) of the proposed rule. Part II of proposed Appendix B clarifies that all defined terms used in Appendix B have the meaning given those terms in §§ _.2 and _.3 of the proposed rule and Appendix A.
The commentary regarding identification of permitted market making-related activities, which is contained in Part III of proposed Appendix B, includes three principal components. The first component provides an overview of market making-related activities and describes, in detail, typical practices in which market makers engage and typical characteristics of market making-related activities, articulating the general framework within which the Agencies view market making-related activities.
• Trading activity in which a trading unit retains risk in excess of the size and type required to provide intermediation services to customers;
• Trading activity in which a trading unit primarily generates revenues from price movements of retained principal positions and risks, rather than customer revenues;
• Trading activity in which a trading unit: (i) Generates only very small or very large amounts of revenue per unit of risk taken; (ii) does not demonstrate consistent profitability; or (iii) demonstrates high earnings volatility;
• Trading activity in which a trading unit either (i) does not transact through a trading system that interacts with orders of others or primarily with customers of the banking entity's market making desk to provide liquidity services, or (ii) holds principal positions in excess of reasonably expected near term customer demands;
• Trading activity in which a trading unit routinely pays rather than earns fees, commissions, or spreads; and
• The use of compensation incentives for employees of a particular trading activity that primarily reward proprietary risk-taking.
The proposed commentary makes clear that the enumerated factors are subject to certain facts and circumstances that may explain why a trading activity may meet one or more factors but does not involve prohibited proprietary trading, and provides a range of examples of such explanatory facts and circumstances.
In addition, for each of these six factors, the proposed rule provides general guidance as to (i) the types of facts and circumstances on which the relevant Agency may base any determination that a banking entity's trading activity met the relevant factor and (ii) which quantitative measurements, if furnished by a banking entity pursuant to Appendix A, the relevant Agency would use to help assess the extent to which a banking entity's activities met the relevant factor.
The Agencies request comment on the proposed commentary regarding identification of permitted market making-related activities. In particular, the Agencies request comment on the following questions:
As noted above, the Agencies are currently requesting comment on whether to incorporate, as part of the proposed rule, numerical thresholds for certain quantitative measurements, and if so, how to do so. For example, the proposed rule could include one or more numerical thresholds that, if met by a banking entity, would require the banking entity to review its trading
The primary purpose of using some form of threshold would be to provide banking entities with a clear standard regarding trading activity that presented a quantitative profile sufficiently questionable to warrant further review and explanation to the relevant Agency. Such clarity would appear to provide significant benefits both to banking entities in conducting their trading activities in conformance with the proposed rule and to Agencies in monitoring trading activities and obtaining additional, more detailed information in circumstances warranting closer scrutiny. In addition to the benefits of transparency, thresholds would also encourage consistent review by banking entities and the Agencies of transactions, both within a banking entity and across all banking entities. The purpose of such thresholds would not be to serve as bounds of permitted conduct or as a comprehensive, dispositive tool for determining whether prohibited proprietary trading has occurred.
Numerical thresholds have not been included in the proposed rule because the Agencies believe that public comment and further review is warranted before numerical thresholds and specific numerical amounts may be proposed. Instead, the Agencies request comment on whether such thresholds would be desirable and, if so, what particular form such thresholds should take and what specific numerical thresholds would be appropriate. To facilitate the comment process, this request for comment includes a number of illustrative examples of numerical thresholds on which specific comment is sought.
In particular, the Agencies request comment on the following questions:
• “If a trading unit reports an increase in VaR, Stress VaR, or Risk Factor Sensitivities greater than [_] over a period of [_] months, or such other threshold as [Agency] may require, the banking entity must (i) promptly review and investigate the trading unit's activities to verify whether the trading unit is operating in compliance with the proprietary trading restrictions and (ii) report to [Agency] a summary of such review, including any explanatory circumstances.”
• “If a trading unit reports an average Comprehensive Profit and Loss that is less than [_] times greater than the Portfolio Profit and Loss, exclusive of Spread Profit and Loss, for [_] consecutive months, or such other threshold as [Agency] may require, the banking entity must (i) promptly review and investigate the trading unit's activities to verify whether the trading unit is operating in compliance with the proprietary trading restrictions and (ii) report to [Agency] a summary of such review, including any explanatory circumstances.”
• “If a trading unit reports a Comprehensive Profit and Loss to Volatility Ratio that is less than [_] times greater than that trading desk's Portfolio Profit and Loss to Volatility Ratio over a period of [_] months, or such other threshold as [Agency] may require, the banking entity must (i) promptly review and investigate the trading unit's activities to verify whether the trading unit is operating in compliance with the proprietary trading restrictions and (ii) report to [Agency] a summary of such review, including any explanatory circumstances.”
• “If a trading unit reports a number of Unprofitable Trading Days Based on Portfolio Profit and Loss that is less than [_] greater than the number of Unprofitable Trading Days Based on Comprehensive Profit and Loss for [_] consecutive months, or such other threshold as [Agency] may require, the banking entity must (i) promptly review and investigate the trading unit's activities to verify whether the trading unit is operating in compliance with the proprietary trading restrictions and (ii) report to [Agency] a summary of such review, including any explanatory circumstances.”
• “If a trading unit reports a Pay-to-Receive Spread Ratio that is less than [_] over a period of [_] months, or such other threshold as [Agency] may require, the banking entity must (i) promptly review and investigate the trading unit's activities to verify whether the trading unit is operating in compliance with the proprietary trading restrictions and (ii) report to [Agency] a summary of such review, including any explanatory circumstances.”
Section _.8 of the proposed rule implements section 13(d)(2) of the BHC Act, which places certain limitations on the permitted trading activities (e.g., permitted market making-related activities, risk-mitigating hedging, etc.) in which a banking entity may engage.
• Involve or result in a material conflict of interest between the banking entity and its clients, customers, or counterparties;
• Result, directly or indirectly, in a material exposure by the banking entity to a high-risk asset or a high-risk trading strategy; or
• Pose a threat to the safety and soundness of the banking entity or U.S. financial stability.
The proposed rule further defines “material conflict of interest,” “high-risk asset,” and “high-risk trading strategy” for these purposes.
Section _.8(b) of the proposed rule defines the scope of material conflicts of interest which, if arising in connection with a permitted trading activity, are prohibited under the proposal.
To address these types of material conflicts of interest, § _.8(b) of the proposed rule specifies that a material conflict of interest between a banking entity and its clients, customers, or counterparties exists if the banking entity engages in any transaction, class of transactions, or activity that would involve or result in the banking entity's interests being materially adverse to the interests of its client, customer, or counterparty with respect to such transaction, class of transactions, or activity, unless the banking entity has appropriately addressed and mitigated the conflict of interest, where possible, and subject to specific requirements provided in the proposal, through either (i) timely and effective disclosure, or (ii) informational barriers.
However, while these conflicts may be material for purposes of the proposed rule, the mere fact that the buyer and seller are on opposite sides of a transaction and have differing economic interests would not be deemed a “material” conflict of interest with respect to transactions related to
Section _.8(b)(1) of the proposed rule describes the two requirements that must be met in cases where a banking entity addresses and mitigates a material conflict of interest through timely and effective disclosure. First, § _.8(b)(1)(i) of the proposed rule requires that the banking entity,
The Agencies note that, in order to provide the requisite opportunity for the client, customer or counterparty to negate or substantially mitigate the disadvantage created by the conflict, the disclosure would need to be provided sufficiently close in time to the client's, customer's, or counterparty's decision to engage in the transaction or activity to give the client, customer, or counterparty an opportunity to meaningfully evaluate and, if necessary, take steps that would negate or substantially mitigate the conflict. Disclosure provided far in advance of the individual, class, or type of transaction, such that the client, customer, or counterparty is unlikely to take that disclosure into account when evaluating a transaction, would not suffice. Conversely, disclosure provided without a sufficient period of time for the client, customer, or counterparty to evaluate and act on the information it receives, or disclosure provided after the fact, would also not suffice under the proposal. The Agencies note that the proposed definition would not prevent or require disclosure with respect to transactions or activities that align the interests of the banking entity with its clients, customers, or counterparties or that otherwise do not involve “material” conflicts of interest as discussed above.
The proposed disclosure standard reflects the fact that some types of conflicts may be appropriately resolved through the disclosure of clear and meaningful information to the client, customer, or counterparty that provides such party with an informed opportunity to consider and negate or substantially mitigate the conflict.
Section _.8(b)(2) of the proposed rule describes the requirements that must be met in cases where a banking entity uses information barriers that are reasonably designed to prevent a material conflict of interest from having a materially adverse effect on a client, customer or counterparty. Information barriers can be used to restrict the dissemination of information within a complex organization and to prevent material conflicts by limiting knowledge and coordination of specific business activities among units of the entity. Examples of information barriers include, but are not limited to, restrictions on information sharing, limits on types of trading, and greater separation between various functions of the firm. Information barriers may also require that banking entity units or affiliates have no common officers or employees. Such information barriers have been recognized in Federal securities laws and rules as a means to address or mitigate potential conflicts of interest or other inappropriate activities.
In order to address and mitigate a conflict of interest through the use of the information barriers pursuant to § _.8(b)(2) of the proposed rule, a banking entity would be required to establish, maintain, and enforce information barriers that are memorialized in written policies and procedures, including physical separation of personnel, functions, or limitations on types of activity, that are reasonably designed, taking into consideration the nature of the banking entity's business, to prevent the conflict of interest from involving or resulting in a materially adverse effect on a client, customer or counterparty.
The Agencies note that the proposed definition of material conflict of interest does not address instances in which a banking entity has made a material misrepresentation to its client, customer, or counterparty in connection with a transaction, class of transactions, or activity, as such transactions or activity appears to involve fraud rather than a conflict of interest. However, the Agencies note that such misrepresentations are generally illegal under a variety of Federal and State regulatory schemes (e.g., the Federal securities laws). In addition, the Agencies note that any activity involving a material misrepresentation to, or other fraudulent conduct with respect to, a client, customer, or counterparty would not be permitted under the proposed rule in the first instance. For example, a trading activity involving a material misrepresentation to a client, customer, or counterparty would fail, on its face, to satisfy the proposed terms of the underwriting or market-making exemption.
Section _.8(c) of the proposed rule defines “high-risk asset” and “high-risk trading strategy” for proposes of § _.8's proposed limitations on permitted trading activities. Section _.8(c)(1) defines a “high-risk asset” as an asset or group of assets that would, if held by the banking entity, significantly increase the likelihood that the banking entity would incur a substantial financial loss or would fail. Section _.8(c)(2) defines a “high-risk trading strategy” as a trading strategy that would, if engaged in by the banking entity, significantly increase the likelihood that the banking entity would incur a substantial financial loss or would fail.
The Agencies request comment on the proposed limitations on permitted trading activities. In particular, the
As noted above, except as otherwise permitted, section 13(a)(1)(B) of the BHC Act prohibits a banking entity from acquiring or retaining any ownership in, or acting as sponsor to, a covered fund.
Section _.10 of the proposed rule defines the scope of the prohibition on acquisition or retention of ownership interests in, and certain relationships with, a covered fund, as well as defines a number of key terms related to such prohibition.
Section _.10(a) of the proposed rule implements section 13(a)(1)(B) of the BHC Act and prohibits a banking entity from, as principal, directly or indirectly, acquiring or retaining an equity, partnership, or other ownership interest in, or acting as sponsor to, a covered fund, unless otherwise permitted under subpart C of the proposed rule.
The Agencies note that the general prohibition in § _.10(a) of the proposed rule applies solely to a banking entity's acquisition or retention of an ownership interest in or acting as sponsor to a covered fund “as principal, directly or indirectly.”
Among other things, § _.10(b) of the proposed rule defines the term “covered fund.”
Section 13(h)(2) of the BHC Act defines the terms “hedge fund” and “private equity fund” to mean “any issuer that would be an investment company, as defined in the [Investment Company Act], but for section 3(c)(1) or 3(c)(7) of that Act,” or such similar funds as the Agencies may by rule determine.
Sections 3(c)(1) and 3(c)(7) of the Investment Company Act are exclusions from the definition of “investment company” in that Act and are commonly relied on by a wide variety of entities that would otherwise be covered by the broad definition of “investment company” contained in that Act. As a result, the statutory definition in section 13(h)(2) of the BHC Act could potentially include within its scope many entities and corporate structures that would not usually be thought of as a “hedge fund” or “private equity fund.” For instance, joint ventures, acquisition vehicles, certain wholly-owned subsidiaries, and other widely-utilized corporate structures typically rely on the exclusion contained in section 3(c)(1) or 3(c)(7) of the Investment Company Act. These types of entities are generally not used to engage in investment or trading activities. Additionally, as noted in Part II.G of this Supplementary Information, certain securitization vehicles may be included in this definition.
The proposed rule follows the scope of the statutory definition by covering an issuer only if it would be an investment company, as defined in the Investment Company Act,
The proposed rule defines “ownership interest” in order to make clear the scope of section 13(a)(1)(B) of the BHC Act and § _.10(a)'s prohibition on a banking entity acquiring or retaining any equity, partnership, or other ownership interest in a covered fund. The definition of ownership interest includes a description of what interests constitute an ownership interest, as well as an exclusion from the definition of ownership interest for carried interest.
Many banking entities that serve as investment adviser or commodity trading advisor to a covered fund are compensated for services they provide to the fund through receipt of so-called “carried interest.” In recognition of the manner in which such compensation is traditionally provided, the proposed rule also clarifies that an ownership interest with respect to a covered fund does not include an interest held by a banking entity (or an affiliate, subsidiary or employee thereof) in a covered fund for which the banking entity (or an affiliate, subsidiary or employee thereof) serves as investment manager, investment adviser or commodity trading advisor, so long as: (i) The sole purpose and effect of the interest is to allow the banking entity (or the affiliate, subsidiary or employee thereof) to share in the profits of the covered fund as performance compensation for services provided to the covered fund by the banking entity (or the affiliate, subsidiary or employee thereof), provided that the banking entity (or the affiliate, subsidiary or employee thereof) may be obligated under the terms of such interest to return profits previously received; (ii) all such profit, once allocated, is distributed to the banking entity (or the affiliate, subsidiary or
Section 13(f)(3) of the BHC Act permits a banking entity to enter into a prime brokerage transaction with a covered fund in which a covered fund managed, organized, or sponsored by such banking entity (or an affiliate or subsidiary thereof) has taken an ownership interest.
The proposed rule defines “sponsor” in the same manner as section 13(h)(5) of the BHC Act.
The definition of “sponsor” contained in section 13(h)(5) of the BHC Act focuses on the ability to control the decision-making and operational functions of the fund. In keeping with this focus, the proposed rule defines the term “trustee” (which is a part of the definition of “sponsor”) to exclude trustee that does not exercise investment discretion with respect to a covered fund, including a directed trustee, as that term is used in section 403(a)(1) of the Employee's Retirement Income Security Act (29 U.S.C. 1103(a)(1)). The proposed rule provides that a “trustee” includes any banking entity that directs a directed trustee, or any person who possesses authority and discretion to manage and control the assets of the covered fund.
The Agencies request comment on the proposed rule's approach to defining the terms covered fund, ownership interest, and other related terms. In particular, the Agencies request comment on the following questions:
Section _.11 of the proposed rule implements section 13(d)(1)(G) of the BHC Act and permits a banking entity to organize and offer a covered fund, including acting as sponsor of the fund, if certain criteria are met.
Section _.11 of the proposed rule provides for and describes the conditions that must be met in order to enable a banking entity to qualify for the exemption to organize and offer a covered fund.
Section _.11(a) of the proposed rule requires that, in order to qualify for the exemption related to organizing and offering a covered fund, a banking entity provide
Section 13(d)(1)(G)(ii) of the BHC Act requires that a banking entity organize and offer a covered fund “only in connection with” the provision of qualified services to persons that are customers of such services of the banking entity.
Section 13(d)(1)(G)(ii) of the BHC Act does not explicitly require that the customer relationship be pre-existing. Accordingly, the proposed rule provides that it may be established through or in connection with the banking entity's organization and offering of a covered fund, so long as that fund is a manifestation of the provision by the banking entity of
Banking entities commonly organize and offer funds to customers of the banking entity's trust, fiduciary, and investment advisory or commodity trading advisory services as a way of ensuring the efficient and consistent provision of these services. For example, a person often obtains the investment advisory services of the banking entity by acquiring an interest in a fund organized and offered by the banking entity. This is distinguished from a fund organized and offered by a banking entity for the purpose of itself investing as principal, indirectly through its investment in the fund, in assets held by the fund. Under the proposed rule, a banking entity could, consistent with past practice, provide a covered fund to persons that are customers of such services for purposes of the exemption so long as the fund is organized and offered as a means of providing
The Agencies note that a banking entity could, through organizing and offering a covered fund pursuant to the authority contained in § _.11 of the proposed rule that itself makes investments or engages in trading activity, seek to evade the restrictions contained in section 13 of the BHC Act and the proposed rule. In order to address these concerns, the proposed rule provides that a banking entity relying on the authority contained in § _.11 must organize and offer a covered fund pursuant to a credible plan or similar documentation outlining how the banking entity intends to provide advisory or similar services to its customers through organizing and offering such fund.
Section 13(d)(1)(G)(iii) of the BHC Act limits the ability of a banking entity that organizes and offers a covered fund to acquire or retain an ownership interest in that covered fund.
Section _.11(d) of the proposed rule requires that the banking entity comply with the limitations on certain relationships with covered funds.
Section _.11(e) of the proposed rule prohibits the banking entity from, directly or indirectly, guaranteeing, assuming or otherwise insuring the obligations or performance of the covered fund or any covered fund in which such covered fund invests.
Section _.11(f) of the proposed rule prohibits the covered fund from sharing the same name or a variation of the same name with the banking entity, for corporate, marketing, promotional, or other purposes.
Section _.11(g) of the proposed rule implements section 13(d)(1)(G)(vii) of the BHC Act. The provision prohibits any director or employee of the banking entity from acquiring or retaining an ownership interest in the covered fund, except for any director or employee of the banking entity who is directly engaged in providing investment advisory or other services to the covered fund.
The Agencies recognize that director or employee investments in a covered fund may provide an opportunity for a banking entity to evade the limitations regarding the amount or value of ownership interests a banking entity may acquire or retain in a covered fund or funds contained in section 13(d)(4) of the BHC Act and § _.12 of the proposed rule. In order to address this concern, the proposed rule would generally attribute an ownership interest in a covered fund acquired or retained by a director or employee to such person's employing banking entity, if the banking entity either extends credit for the purpose of allowing the director or employee to acquire such ownership interest, guarantees the director or employee's purchase, or guarantees the director or employee against loss on the investment.
Section _.11(h) of the proposed rule requires that, in connection with organizing and offering a covered fund, the banking entity (i) clearly and conspicuously disclose, in writing, to prospective and actual investors in the covered fund (such as through disclosure in the covered fund's offering documents) that “any losses in [such covered fund] will be borne solely by investors in [the covered fund] and not by [the banking entity and its affiliates or subsidiaries]; therefore, [the banking entity's and its affiliates' or subsidiaries'] losses in [such covered fund] will be limited to losses attributable to the ownership interests in the covered fund held by [the banking entity and its affiliates or subsidiaries] in their capacity as investors in [the covered fund],” and (ii) comply with any additional rules of the appropriate Agency as provided in section 13(b)(2) of the BHC Act designed to ensure that losses in any such covered fund are borne solely by the investors in the covered fund and not by the banking entity.
The Agencies request comment on the proposed rule's approach with respect to implementing the exemption permitting banking entities to organize and offer a covered fund. In particular, the Agencies request comment on the following questions:
Section _.12 of the proposed rule describes the limited circumstances under which a banking entity may acquire or retain, as an investment, an ownership interest in a covered fund that the banking entity or one of its subsidiaries or affiliates organizes and offers. This section implements section 13(d)(4) of the BHC Act and related provisions, and describes the statutory limits on both (i) the amount and value of an investment by a banking entity in a covered fund, and (ii) the aggregate value of all investments in all covered funds made by the banking entity.
As described below, a banking entity that makes or retains an investment in a covered fund under § _.12 of the proposed rule is generally subject to three principal limitations related to such investment. First, the banking entity's investment in a covered fund may not represent more than 3 percent of the total outstanding ownership interests of such fund (after the expiration of any seeding period provided under the rule). Second, the banking entity's investment in a covered fund may not result in more than 3 percent of the losses of the covered fund being allocable to the banking entity's investment. Third, a banking entity may invest no more than 3 percent of its tier 1 capital in covered funds.
Section 13(d)(4) of the BHC Act permits a banking entity to acquire and retain an ownership interest in a covered fund that the banking entity organizes and offers pursuant to section 13(d)(1)(G), for the purposes of (i) establishing the covered fund and providing the fund with sufficient initial equity for investment to permit the fund to attract unaffiliated investors, or (ii) making a
Consistent with this statutory provision, the proposed rule requires a banking entity to (i) actively seek unaffiliated investors to ensure that the banking entity's investment conforms with the limits of § _.12, and (ii) reduce through redemption, sale, dilution, or other methods the aggregate amount and value of all ownership interests of the banking entity in a single fund held under § _.12 to an amount that does not exceed 3 percent of the total outstanding ownership interests of the fund not later than 1 year after the date of establishment of the fund (or such longer period as may be provided by the Board pursuant to § _.12(e) of the proposed rule) (the “per-fund limitation”). Additionally, § _.12 of the proposed rule implements the statutory requirement that the aggregate value of all ownership interests of the banking entity in all covered funds held as an investment not exceed 3 percent of the tier 1 capital of the banking entity (the “aggregate funds limitation”).
Section _.12(b) of the proposed rule describes the limitations and restrictions on a banking entity's ability to make or retain an investment in a single covered fund. This section implements the requirements of section 13(d)(4) of the BHC Act.
Section _.12 of the proposed rule describes the manner in which the limitations on the amount and value of ownership interests in a covered fund must be calculated, in recognition of the fact that a covered fund may have multiple classes of ownership interests which possess different characteristics
In order to ensure that a banking entity calculates its investment in a covered fund accurately and does not evade the per-fund investment limitation, the proposed rule requires that the banking entity must calculate its investment in the same manner and according to the same standards utilized by the covered fund for determining the aggregate value of the fund's assets and ownership interests in the covered fund.
Under the proposed rule, the amount and value of a banking entity's investment in any single covered fund is (i) the total amount or value held by the banking entity directly and through any entity that is controlled, directly or indirectly, by the banking entity,
Additionally, the proposed rule provides that, to the extent that a banking entity is contractually obligated to directly invest in, or is found to be acting in concert through knowing participation in a joint activity or parallel action toward a common goal of investing in, one or more investments with a covered fund that is organized and offered by the banking entity (whether or not pursuant to an express agreement), such investment shall be included in the calculation of a banking entity's per-fund limitation.
Section _.12(b)(3) of the proposed rule provides that the amount and value of a banking entity's investment in a covered fund may at no time exceed the 3 percent limits contained in § _.12(b) of the proposed rule after the conclusion of any conformance period, if applicable.
In addition to a limit on investments in a single covered fund, section 13(d)(4) of the BHC Act requires the banking entity to comply with the aggregate funds limitation on investments in all covered funds.
Tier 1 capital is a banking law concept that, in the United States, is
However, not all entities subject to section 13 of the BHC Act calculate and report tier 1 capital. In order to provide a measure of equality related to the aggregate funds limitation contained in section 13(d)(4)(B)(ii)(II) of the BHC Act and § _.12(c) of the proposed rule, the proposed rule clarifies how the aggregate funds limitation shall be calculated for entities that are not required to calculate and report tier 1 capital in order to determine compliance with regulatory capital standards. Under the proposed rule, with respect to any banking entity that is not affiliated with a reporting banking entity and not itself required to report capital in accordance with the risk-based capital rules of a Federal banking agency, the banking entity's tier 1 capital for purposes of the aggregate funds limitation shall be the total amount of shareholders' equity of the top-tier entity within such organization as of the last day of the most recent calendar quarter that has ended, as determined under applicable accounting standards.
Section 12(d) of the proposed rule also implements the provision contained in section 13(d)(4)(b)(iii) of the BHC Act regarding the deduction of a banking entity's aggregate investment in a covered fund held under section 13(d)(4) of that Act from the assets and tangible equity of the banking entity. The statute also provides that the amount of the deduction must increase commensurate with the leverage of the underlying fund.
Section _.12(d) of the proposal requires a banking entity to deduct the aggregate value of its investments in covered funds from tier 1 capital. Since § _.12 of the proposed rule implements the authorities contained in section 13(d)(4) of the BHC Act related to an investment in a fund organized and offered by the banking entity (or an affiliate or subsidiary thereof), the deduction contained in § _.12(d) applies only to those ownership interests held as an investment by a banking entity pursuant to § _.12 of the proposed rule.
Section 13(d)(4)(C) of the BHC Act permits the Board, upon application by a banking entity, to extend for up to 2 additional years the period of time within which a banking entity must reduce its attributable ownership interests in a covered fund to no more than 3 percent of such fund's total ownership interests.
Section _.12(e) of the proposed rule requires any banking entity that seeks an extension of this conformance period to submit a written request to the Board. Under the proposal, any such request must: (i) Be submitted in writing to the Board at least 90 days prior to the expiration of the applicable time period; (ii) provide the reasons why the banking entity believes the extension should be granted; and (iii) provide a detailed explanation of the banking entity's plan for reducing or conforming its investment(s).
In addition, the proposed rule provides that any extension request by a banking entity must address each of the following matters (to the extent they are relevant): (i) Whether the investment would—(A) involve or result in material conflicts of interest between the banking entity and its clients, customers or counterparties; (B) result, directly or indirectly, in a material exposure by the banking entity to high-risk assets or high-risk trading strategies; (C) pose a threat to the safety and soundness of the banking entity; or (D) pose a threat to the financial stability of the United States; (ii) market conditions; (iii) the contractual terms governing the banking entity's interest in the covered fund; (iv) the date on which the covered fund is expected to have attracted sufficient investments from investors unaffiliated with the banking entity to enable the banking entity to comply with the limitations in section 12(a)(2)(i)(B) of the proposed rule; (v) the total exposure of the banking entity to the investment and the risks that disposing of, or maintaining, the investment in the covered fund may pose to the banking entity or the financial stability of the United States; (vi) the cost to the banking entity of divesting or disposing of the investment within the applicable period; (vii) whether the divestiture or conformance of the investment would involve or result in a material conflict of interest between the banking entity and unaffiliated clients, customers or counterparties to which it owes a duty; (viii) the banking entity's prior efforts to divest or sell interests in the covered fund, including activities related to the marketing of interests in such covered fund; and (ix) any other factor that the Board believes appropriate.
Section _.12(e) of the proposed rule also would allow the Board to impose conditions on any extension granted under the proposed rule if the Board determines conditions are necessary or appropriate to protect the safety and soundness of banking entities or the financial stability of the United States, address material conflicts of interest or other unsound practices, or otherwise further the purposes of section 13 of the BHC Act and the proposed rule.
The Agencies request comment on the proposed rule's approach to implementing the exemption which allows a banking entity to make or retain a permitted investment in a covered fund that it organizes and offers. In particular, the Agencies request comment on the following questions:
Question
Section 13 of the proposed rule implements the statutory exemptions described in sections 13(d)(1)(C), (E), and (I) of the BHC Act that permit a
Section _.13(a) of the proposed rule implements sections 13(d)(1)(E) and (J) of the BHC Act
In addition to the acquisition or retention of an ownership interest, permitting a banking entity to act as sponsor to these types of public interest investments will provide valuable expertise and services to these types of entities, as well as help enable banking entities to provide valuable funding and assistance to small business and low- and moderate-income communities. Therefore, the Agencies believe this exemption would be consistent with the safe and sound operation of banking entities, and would also promote the financial stability of the United States.
The Agencies request comment on the proposed rule's approach to implementing the exemption for permitted investments in and relationships with SBICs and certain related funds. In particular, the Agencies request comment on the following questions:
Section _.13(b) of the proposed rule permits a banking entity to acquire and retain an ownership interest in a covered fund if the transaction is made in connection with, and related to, certain individual or aggregated positions, contracts, or other holdings of the banking entity and is designed to reduce the specific risks to the banking entity in connection with and related to such positions, contracts, or other holdings. This section of the proposed rule implements, in relevant part, section 13(d)(1)(C) of the BHC Act, which provides an exemption from the prohibition on acquiring or retaining an ownership interest in a covered fund for certain risk-mitigating hedging activities.
Interests by a banking entity in a covered fund may not typically be used as hedges for specific positions, contracts, or other holdings of a banking entity. However, two situations where a banking entity may potentially acquire or retain an ownership interest in a covered fund as a hedge are (i) when acting as intermediary on behalf of a customer that is not itself a banking entity to facilitate the exposure by the customer to the profits and losses of the covered fund (similar to acting as a “riskless principal”),
As noted above in the discussion of § _.5 of the proposed rule, risk-mitigating hedging activities present certain implementation challenges because of the potential that prohibited activities or investments could be conducted in the context of, or mischaracterized as, hedging transactions. In light of these complexities, the Agencies have proposed a multi-faceted approach to implementation, which is discussed in detail above in reference to § _.5 of the proposed rule.
Section _.13(b) of the proposed rule describes the criteria that a banking entity must meet in order to rely on the hedging exemption with respect to ownership interests of a covered fund. The majority of these requirements are substantially similar to those discussed in detail above in connection with the risk-mitigating hedging exemption contained in § _.5 of the proposed rule, and include the requirements that: (i) The hedge is made in connection with and related to individual or aggregated obligations or liabilities of the banking entity that are: (A) taken by the banking entity when acting as intermediary on behalf of a customer that is not itself a banking entity to facilitate the exposure by the customer to the profits and losses of the covered fund, or (B) directly connected to a compensation arrangement with an employee that directly provides investment advisory or other services to the covered fund; (ii) the banking entity has established the internal compliance program required by subpart D designed to ensure the banking entity's compliance with the requirements of this paragraph, including reasonably designed written policies and procedures regarding the instruments, techniques and strategies that may be used for hedging, internal controls and monitoring procedures, and independent testing; (iii) the transaction is designed to reduce the specific risks to the banking entity in connection with and related to such obligations or liabilities; (iv) the acquisition or retention of an ownership interest in a covered fund: (A) Is made in accordance with the written policies, procedures and internal controls established by the banking entity pursuant to subpart D; (B) hedges or otherwise mitigates an exposure to a covered fund through a substantially similar offsetting exposure to the same covered fund and in the same amount of ownership interest in that covered fund that arises out of a transaction conducted solely to accommodate a specific customer request with respect to, or directly connected to its compensation arrangement with an employee that directly provides investment advisory or other services to, that covered fund; (C) does not give rise, at the inception of the hedge, to significant exposures that were not already present in individual or aggregated positions, contracts, or other holdings of a banking entity and are not hedged contemporaneously; and (D) is subject to continuing review, monitoring and management by the banking entity that: (1) Is consistent with its written hedging policies and procedures; (2) maintains a substantially similar offsetting exposure to the same amount and type of ownership interest, based upon the facts and circumstances of the underlying and hedging positions and the risks and liquidity of those positions, to the risk or risks the purchase or sale is intended to hedge or otherwise mitigate; and (3) mitigates any significant exposure arising out of the hedge after inception; and (v) the compensation arrangements of persons performing the risk-mitigating hedging activities are designed not to reward proprietary risk-taking.
These requirements, while substantially similar to those contained in § _.5 above, are different in several material aspects. First, § _.13(b)(1)(i) of the proposed rule provides that any banking entity relying on this exemption may only hedge or otherwise mitigate one or more specific risks arising in connection with and related to the two situations enumerated in that section. These are risks taken by the banking entity when acting as intermediary on behalf of a customer that is not itself a banking entity to facilitate the exposure by the customer to the profits and losses of the covered fund, or directly connected to its compensation arrangement with an employee that directly provides investment advisory or other services to the covered fund.
In addition to those questions raised in connection with the proposed implementation of the risk-mitigating hedging exemption under § _.5 of the proposed rule, the Agencies request comment on the proposed implementation of that same exemption with respect to covered fund activities. In particular, the Agencies request comment on the following questions:
Section _.13(c) of the proposed rule, which implements section 13(d)(1)(I) of the BHC Act,
Section _.13(c)(1)(i) of the proposed rule incorporates the statutory requirement that the banking entity not be, directly or indirectly, controlled by a banking entity that is organized under the laws of the United States or of one or more States. Consistent with the statutory language, banking entities organized under the laws of the United States or of one or more States, or the subsidiaries or branches thereof (wherever organized or licensed), may not rely on the exemption. Similarly, the U.S. subsidiaries or U.S. branches of foreign banking entities would not qualify for the exemption.
Section _.13(c)(2) clarifies when a banking entity would be considered to have met the statutory requirement that the banking entity conduct the activity pursuant to paragraphs 4(c)(9) or 4(c)(13) of the BHC Act
The proposed rule makes clear that a banking entity will qualify for the foreign fund exemption if the entity is a foreign banking organization subject to subpart B of the Board's Regulation K and the transaction occurs solely outside the United States. Section 13 of the BHC Act also applies to foreign companies that are banking entities covered by Section 13 but are not currently subject either to the BHC Act generally or the Board's Regulation K, for example, because the foreign company controls a savings association or an FDIC-insured industrial loan company but not a bank or branch in the United States. Accordingly, the proposed rule clarifies when such a foreign banking entity would be considered to have conducted a transaction or activity “pursuant to section 4(c)(9)” for purposes of the exemption at § _.13(c) of the proposed rule.
Section _.13(c) of the proposed rule also clarifies when a transaction or activity will be considered to have occurred solely outside of the Unites States for purposes of the exemption. In interpreting this aspect of the statutory language, the proposal focuses on the extent to which material elements of the transaction occur within, or are effected by personnel within, the United States. This aspect of the proposal reflects the apparent intent of the foreign funds exemption to avoid extraterritorial application of the restrictions on covered funds activities and investments outside the United States while preserving competitive parity within U.S. market. The proposed rule does not evaluate solely whether the risk of the transaction or activity, or management or decision-making with respect to such transaction or activity, rests outside the United States. Rather, the proposal also provides that foreign banking entities may not structure a transaction or activity so as to be “outside of the United States” for risk and booking purposes while simultaneously engaging in transactions within U.S. markets that are prohibited for U.S. banking entities.
In particular, § _.13(c)(3) of the proposed rule provides that a transaction or activity will be considered to have occurred solely outside of the United States only if all of the following three conditions are satisfied:
• The transaction or activity is conducted by a banking entity that is not organized under the laws of the United States or of one or more States;
• No subsidiary, affiliate, or employee of the banking entity that is involved in the offer or sale of an ownership interest in the covered fund is incorporated or physically located in the United States; and
• No ownership interest in such covered fund is offered for sale or sold to a resident of the United States.
These three criteria reflect statutory constraints and are intended to ensure that a transaction or activity conducted in reliance on the exemption does not involve either investors that are residents of the United States or a relevant U.S. employee of the banking entity, as such involvement would appear to constitute a sufficient locus of activity in the U.S. marketplace so as to preclude the availability of the exemption.
A resident of the United States is defined in § _.2(t) of the proposed rule, and is described in detail in Part III.B.4.d of this Supplementary Information. The proposed rule applies this definition in the context of the foreign covered funds exemption because it would appear to appropriately capture the scope of counterparties (including investors that are residents of the United States) or relevant U.S. personnel of the banking entity, that, if involved in the transaction or activity, would preclude such transaction or activity from being considered to have occurred solely outside the United States. Under the proposed rule, an employee or entity engaged in the offer or sale of an ownership interest (or booking such transaction) must be outside of the United States; however, an employee or entity with no customer relationship and involved solely in providing administrative services or so-called “back office” functions to the fund as incident to the activity permitted under § _.13(c) of the proposed rule (such as clearing and settlement or maintaining and preserving records of the fund with respect to a transaction where no ownership interest is offered for sale or sold to a resident of the United States) would not be subject to this requirement.
The Agencies request comment on the proposed rule's approach to implementing the foreign covered funds activity and investment exemption. In particular, the Agencies request comment on the following questions:
Section _.13(d) of the proposed rule permits a banking entity to acquire and retain an ownership interest in a covered fund that is an issuer of asset-backed securities, the assets or holdings of which are solely comprised of: (i) Loans; (ii) contractual rights or assets directly arising from those loans supporting the asset-backed securities; and (iii) interest rate or foreign exchange derivatives that (A) materially relate to the terms of such loans or contractual rights or assets and (B) are used for hedging purposes with respect to the securitization structure.
The Agencies note that the phrase “materially relate to terms of such loans” is intended to quantitatively limit the derivatives permitted in a “securitization of loans” under § _.13(d) of the proposed rule to include only those derivatives where the notional amount of the derivative is tied to the outstanding principal balance of the loans supporting the asset-backed securities of such issuer, either individually or in the aggregate. Additionally, such derivatives must be used solely to hedge risks that result from a mismatch between the loans and the related asset-backed securities (e.g., fixed rate loans with floating rate asset-backed securities, loans tied to the Prime Rate with LIBOR asset-backed securities, or Euro-denominated loans with Dollar-denominated asset-backed securities). Therefore, § _.13(d)(3) of the proposed rule would not allow the use of a credit default swap by an issuer of asset-backed securities.
The Agencies request comment on the proposed rule's approach to implementing the rule of construction related to the sale and securitization of loans. In particular, the Agencies request comment on the following questions:
Section _.14 of the proposed rule, which implements section 13(d)(1)(J) of the BHC Act,
The Agencies have proposed to permit three activities at this time under this authority. These activities involve acquiring or retaining an ownership interest in and sponsoring of (i) certain BOLI separate accounts; (ii) certain entities that, although within the definition of covered fund are, in fact, common corporate organizational vehicles; and (iii) a covered fund in the ordinary course of collecting a debt previously contracted in good faith or pursuant to and in compliance with the conformance or extended transition period provided for under the Board's rules issued under section 13(c)(6) of the BHC Act.
Banking entities have for many years invested in life insurance policies that cover key employees, in accordance with supervisory policies established by the Federal banking agencies.
However, when made in the normal course, these investments do not involve the speculative risks intended to be addressed by section 13 of the BHC Act. Moreover, applying the prohibitions in section 13 to these investments would eliminate an investment that helps banking entities to reduce their costs of providing employee benefits as well as other costs.
Section _.14(a)(1) of the proposed rule permits a banking entity to acquire and retain these BOLI investments, as well as act as sponsor to a BOLI separate account.
The Agencies have structured this exemption in the proposed rule so as to allow a banking entity to continue to manage and structure its risks and obligations related to its employee compensation or benefit plan obligations in a manner that promotes and protects the safety and soundness of banking entities, which on an industry-wide level has the concomitant effect of promoting and protecting the financial stability of the United States.
As noted above, the definition of “covered fund” as contained in § _.10(b)(1) of the proposed rule potentially includes within its scope many entities and corporate structures that would not usually be thought of as a “hedge fund” or “private equity fund.” Additionally, the Dodd-Frank Act contains other provisions that permit or require a banking entity to acquire or retain an ownership interest in or act as sponsor to a covered fund in a manner not specifically described under section 13 of the BHC Act.
Section _.14(a)(2) of the proposed rule permits a banking entity to own certain specified entities that are often part of corporate structures and that, by themselves and without other extenuating circumstances or factors, do not raise the type of concerns which section 13 of the BHC Act was intended to address but which nevertheless may be captured by the definition of “hedge fund” or “private equity fund” in section 13(h)(2) of the BHC Act. Specifically, § _.14(a)(2) of the proposed rule permits a banking entity to acquire or retain an ownership interest in or act as sponsor to (i) a joint venture between the banking entity and any other person, provided that the joint venture is an operating company and does not engage in any activity or any investment not permitted under the proposed rule; (ii) an acquisition vehicle, provided that the sole purpose and effect of such entity is to effectuate a transaction involving the acquisition or merger of one entity with or into the banking entity or one of its affiliates; and (iii) a wholly-owned subsidiary of the banking entity that is (A) engaged principally in providing
The Agencies note that these types of entities may meet the definition of covered fund contained in § _.10(b)(1) of the proposed rule (and as contained in section 13(h)(2) of the BHC Act), to the extent these entities rely solely on section 3(c)(1) or 3(c)(7) of the Investment Company Act. However, these types of entities do not engage in the type and scope of activities to which Congress intended section 13 of the BHC Act to apply.
Section _.14(a)(2) of the proposed rule also permits a banking entity to comply with section 15G of the Exchange Act (15 U.S.C. 78o-11), added by section 941 of the Dodd-Frank Act, which requires a banking entity to maintain a certain minimum interest in certain sponsored or originated asset-backed securities.
Section 14(a)(2) of the proposed rule permits a banking entity to acquire and retain an ownership interest in a covered fund that is an issuer of asset-backed securities described in § 13(d) of the proposed rule, the assets or holdings of which are solely comprised of: (i) Loans; (ii) contractual rights or assets directly arising from those loans supporting the asset-backed securities; and (iii) interest rate or foreign exchange derivatives that (A) materially relate to the terms of such loans or contractual rights or assets and (B) are used for hedging purposes with respect to the securitization structure. This exemption augments the authority regarding the sale and securitization of loans available under § _.13(d) of the proposed rule (which partially implements the rule of construction under section 13(g)(2) of the BHC Act) and permits a banking entity to engage in the purchase, and not only the sale and securitization, of loans through authorizing the acquisition or retention of an ownership interest in such securitization vehicles that the banking entity does not organize and offer, or for which it does not act as sponsor, provided that the assets or holdings of such vehicles are solely comprised of the instruments or obligations referenced above.
Permitting banking entities to acquire or retain an ownership interest in these loan securitizations will provide a deeper and richer pool of potential participants and a more liquid market for the sale of such securitizations, which in turn should result in increased availability of funds to individuals and small businesses, as well as provide greater efficiency and diversification of risk. The Agencies believe this exemption would promote and protect the safety and soundness of a banking entity, and would also promote and protect the financial stability of the United States.
Section _.14(b) of the proposed rule permits a banking entity to acquire or retain an ownership interest in or act as sponsor to a covered fund in those instances where the ownership interest is acquired or retained by a banking entity (i) in the ordinary course of collecting a debt previously contracted in good faith, if the banking entity divests the ownership interest within applicable time periods provided for by the applicable Agency, or (ii) pursuant to and in compliance with the Conformance or Extended Transition Period authorities provided for under the proposed rule.
Allowing banking entities to rely on these authorities for acquiring or retaining an ownership interest in or acting as sponsor to a covered fund will enable banking entities to manage their risks and structure their business in a manner consistent with their chosen corporate form and in a manner that otherwise complies with applicable laws. Thus, permitting such activities would promote and protect the safety and soundness of a banking entity, and would also promote and protect the financial stability of the United States.
The Agencies request comment on the proposed rule's approach to implementing the exemption related to activities specifically determined to be permissible under section 13(d)(1)(J) of the BHC Act. In particular, the Agencies request comment on the following questions:
Section _.15 of the proposed rule, which implements section 13(e)(1) of the BHC Act,
Section 13(f) of the BHC Act generally prohibits a banking entity from entering into certain transactions with a covered fund that would be a covered transaction as defined in section 23A of the FR Act.
Section 13(f)(1) of the BHC Act generally prohibits a banking entity that, directly or indirectly, serves as investment manager, investment adviser, commodity trading adviser, or sponsor to a covered fund (or that organizes and offers a covered fund pursuant to section 13(d)(1)(G) of the BHC Act) from engaging in any transaction with the covered fund, or with any covered fund that is controlled by such fund, if the transaction would be a “covered transaction” as defined in section 23A of the FR Act, as if the banking entity and any affiliate thereof were a member bank and the covered fund were an affiliate thereof.
Consistent with the requirements of section 13(f)(1) of the BHC Act, § _.16(a)(1) of the proposed rule is more restrictive than section 23A of the FR Act because § _.16(a)(1) generally prohibits a banking entity and any of its affiliates from entering into any such transaction, while section 23A permits covered transactions with affiliates so long as the transactions meet specified quantitative and qualitative requirements.
Section 13(f) of the BHC Act applies to covered transactions as defined in section 23A of the FR Act without incorporating any of the provisions in section 23A that provide exemptions from the prohibitions in that section for certain types of covered transactions.
While section 13(f)(1) of the BHC Act operates as a general prohibition on a banking entity's ability to enter into a transaction with a related covered fund that would be a covered transaction as defined under section 23A of the FR Act, other specific portions of the statute expressly provide for, or make reference to, a banking entity's ability to engage in certain transactions or relationships with such funds.
Section_.16(a)(2) of the proposed rule clarifies that a banking entity may acquire or retain an ownership interest in a covered fund in accordance with the requirements of subpart C of the proposed rule.
Section _.16(a)(2)(ii) of the proposed rule implements section 13(f)(3)(A) of the BHC Act, which provides that a banking entity may enter into any prime brokerage transaction with a covered fund in which a covered fund managed, sponsored, or advised by such banking entity has taken an ownership interest, so long as certain enumerated conditions are satisfied.
Section _.16(b) of the proposed rule implements sections 13(f)(2) and 13(f)(3)(B) of the BHC Act and applies section 23B of the FR Act
Section _.16(b) applies this requirement to transactions between a banking entity that serves as investment manager, investment adviser, commodity trading adviser, or sponsor to a covered fund and that fund and any other fund controlled by that fund. It also applies this condition to a permissible prime brokerage transaction in which a banking entity may engage pursuant to § _.16(a)(2)(ii) of the proposed rule.
The Agencies request comment on the proposed rule's approach to implementing the limitations on certain relationships with covered funds and, in particular, the manner in which the Agencies have proposed to apply a banking entity's ability to make explicitly permitted investments for these purposes, as described above. In particular, the Agencies request comment on the following questions:
Section _.17 of the proposed rule implements section 13(d)(2) of the BHC Act, which places certain limitations on the permitted covered fund activities and investments in which a banking entity may engage. Consistent with the statute and § _.8 of the proposed rule, § _.17 provides that no transaction, class of transactions, or activity is permissible under §§ _.11 through _.16 of the proposed rule if the transaction, class of transactions, or activity would:
• Involve or result in a material conflict of interest between the banking entity and its clients, customers, or counterparties;
• Result, directly or indirectly, in a material exposure by the banking entity to a high-risk asset or a high-risk trading strategy; or
• Pose a threat to the safety and soundness of the banking entity or the financial stability of the United States.
The Agencies request comment on the proposed limitations on permitted covered fund activities and investments, including with respect to the questions in Part III.B.6 of the Supplemental Information as they pertain to covered fund activities and investments in particular.
Subpart D of the proposed rule, which implements section 13(e)(1) of the BHC Act,
The proposed rule adopts a tiered approach to implementing the compliance program mandate, requiring a banking entity engaged in covered trading activities or covered fund activities and investments to establish a compliance program that contains specific elements and, if the banking entity's activities are significant, meet a number of minimum standards. If a banking entity does not engage in covered trading activities and covered fund activities and investments, it must ensure that its existing compliance policies and procedures include measures that are designed to prevent the banking entity from becoming engaged in such activities and making such investments and must develop and provide for the required compliance program under proposed § _.20(a) of the proposed rule prior to engaging in such activities or making such investments, but is not otherwise required to meet the requirements of subpart D of the proposed rule.
Section _.20(a) of the proposed rule contains the core requirement that each banking entity engaged in covered trading activities or covered fund activities and investments must establish, maintain and enforce a program reasonably designed to ensure and monitor compliance with the prohibitions and restrictions on proprietary trading activities and covered fund activities and investments set forth in section 13 of the BHC Act and the proposed rule and that such program must be suitable for the size, scope, and complexity of activities and business structure of the banking entity. Section _.20(b) of the proposed rule specifies the following six elements that each compliance program established under subpart D must provide for, at a minimum:
• Internal written policies and procedures reasonably designed to document, describe, and monitor the covered trading activities and covered fund activities and investments of the banking entity to ensure that such activities and investments comply with section 13 of the BHC Act and the proposed rule;
• A system of internal controls reasonably designed to monitor and identify potential areas of noncompliance with section 13 of the BHC Act and the proposed rule in the banking entity's covered trading activities and covered fund activities and investments and to prevent the occurrence of activities that are prohibited by section 13 of the BHC Act and the proposed rule;
• A management framework that clearly delineates responsibility and accountability for compliance with section 13 of the BHC Act and the proposed rule;
• Independent testing for the effectiveness of the compliance program, conducted by qualified banking entity personnel or a qualified outside party;
• Training for trading personnel and managers, as well as other appropriate personnel, to effectively implement and enforce the compliance program; and
• Making and keeping records sufficient to demonstrate compliance with section 13 of the BHC Act and the proposed rule, which a banking entity must promptly provide to the relevant supervisory Agency upon request and retain for a period of no less than 5 years.
In addition, for a banking entity with significant covered trading activities or covered fund activities and investments, § _.20(c) requires the compliance program established under subpart D to meet a number of minimum standards, which are specified in Appendix C of the proposed rule. In particular, a banking entity must comply with the minimum standards specified in Appendix C of the proposed rule if:
• With respect to its covered trading activities, it engages in any covered trading activities and has, together with its affiliates and subsidiaries, trading assets and liabilities the average gross sum of which (on a worldwide consolidated basis), as measured as of the last day of each of the four prior calendar quarters, (i) is equal to or greater than $1 billion or (ii) equals 10 percent or more of its total assets; and
• With respect to its covered fund activities and investments, it engages in any covered fund activities and investments and either (i) has, together with its affiliates and subsidiaries, aggregate investments in one or more covered funds the average value of which is, as measured as of the last day of each of the four prior calendar quarters, equal to or greater than $1 billion or (ii) sponsors or advises, together with its affiliates and subsidiaries, one or more covered funds the average total assets of which are, as measured as of the last day of each of the four prior calendar quarters, equal to or greater than $1 billion.
The application of detailed minimum standards to these types of banking entities is intended to reflect the heightened compliance risks of large covered trading and large covered fund activities and investments and provide guidance to such banking entities regarding the minimum compliance measures that would be required under the proposed rule.
If a banking entity does not meet the thresholds specified in § _.20(c)(2), it need not comply with each of the minimum standards specified in Appendix C. However, the proposed rule would require such a banking entity to establish a compliance program that effectively implements the six elements specified in § _.20(b). Banking entities engaged in a relatively small amount of covered fund activities are encouraged to look to the minimum standards of Appendix C for guidance. Generally, the Agencies would expect that the closer a banking entity is to the thresholds specified in § _.20(c)(2), the more its compliance program should generally include the specific requirements described in Appendix C. Within the bounds of subpart D and Appendix C, a banking entity has discretion to structure and manage its program for compliance with section 13 of the BHC Act and the proposed rule in a manner that best reflects the unique organization and operation of the banking entity and its affiliates and subsidiaries, and is suitable taking account of the size, scope, and complexity of activities in which the banking entity and its affiliates and subsidiaries engage.
As described above, § _.20(d) of the proposed rule clarifies that, if a banking entity does not engage in covered trading activities and/or covered fund activities or investments, it will have satisfied the requirements of this section if its existing compliance policies and procedures include measures that are designed to prevent the banking entity from becoming engaged in such activities or making such investments and which require the banking entity to develop and provide for the compliance program required under paragraph (a) of this section prior to engaging in such activities or making such investments.
Appendix C of the proposed rule specifies a variety of minimum standards applicable to the compliance program of a banking entity with significant covered trading activities or covered fund activities and investments.
• Is designed to clearly document, describe, and monitor the covered trading activities and covered fund activities or investments and the risks of the banking entity related to such activities or investments, identify potential areas of noncompliance, and prevent activities or investments prohibited by, or that do not comply with, section 13 of the BHC Act and the proposed rule;
• Specifically addresses the varying nature of activities or investments conducted by different units of the banking entity's organization, including the size, scope, complexity, and risks of the individual activity or investment;
• Subjects the effectiveness of the compliance program to independent review and testing;
• Makes senior management and intermediate managers accountable for the effective implementation of the compliance program, and ensures that the board of directors or chief executive officer (“CEO”) review the effectiveness of the compliance program; and
• Facilitate supervision of the banking entity's covered trading activities and covered fund activities or investments by the Agencies.
A banking entity's compliance program should not be developed through a generic, one-size-fits-all approach, but rather should carefully take into account and reflect the unique manner in which a banking entity operates, as well as the particular compliance risks and challenges that its businesses present. In light of the complexities presented in differentiating prohibited proprietary trading from permitted market making-related activities in particular, the Agencies expect that such a dynamic, carefully-tailored approach to internal compliance will play an important role in ensuring that banking entities comply with section 13's prohibitions and restrictions. In addition, although this statement of purpose appears within the text of proposed Appendix C, the Agencies note the statement equally describes the general purpose of any compliance program required under subpart D of the proposed rule, regardless of whether proposed Appendix C specifically applies.
Section I.B of proposed Appendix C provides for several definitions used throughout the appendix, including the definition of “trading unit” and “asset management unit” to which the minimum standards apply. The term “trading unit” is defined in the same way as in Appendix A, as described in Part II.B.5 of the Supplementary Information, and is intended to identify multiple layers of a banking entity's organizational structure because any effective compliance program will need to manage, limit and monitor covered trading activity at each such level of organization in order to effectively support compliance with the prohibition on proprietary trading. The term “asset management unit” is defined as any unit of organization of a banking entity that makes an investment in, acts as sponsor to, or has relationships with, a covered fund that the banking entity sponsors, organizes and offers, or in which a covered fund
Section I.C of proposed Appendix C incorporates by reference the six elements that must be included in the compliance program under § _.20 of the proposed rule, and section I.D describes the structure of a compliance program meeting the minimum standards. In particular, section I.D permits a banking entity to establish a compliance program on an enterprise-wide basis to satisfy the requirements of § _.20 of the proposed rule and the appendix, which program could cover the banking entity and all of its affiliates and subsidiaries collectively. In order to do so, the program must (i) be clearly applicable, both by its terms and in operation, to all such affiliates and subsidiaries, (ii) specifically address the requirements set forth in proposed Appendix C, (iii) take into account and address the consolidated organization's business structure, size, and complexity, as well as the particular activities, risks, and applicable legal requirements of each subsidiary and affiliate, and (iv) be determined through periodic independent testing to be effective for the banking entity and its affiliates and subsidiaries. In addition, the enterprise-wide program would be subject to supervisory review and examination by any Agency vested with rulewriting authority under section 13 of the BHC Act with respect to the compliance program and the activities of any banking entity for which the Agency has such authority. Further, such Agency would have access to all records related to the enterprise-wide compliance program pertaining to any banking entity that is supervised by the Agency vested with such rulewriting authority.
Section II of proposed Appendix C articulates minimum standards for the first element of the compliance program, internal policies and procedures, for both covered trading activities and covered fund activities and investments. With respect to covered trading activities, the proposal would require that internal policies and procedures: (i) Specify how the banking entity identifies its trading accounts; (ii) identify the trading activity in which the banking entity is engaged and how that activity is organized; (iii) thoroughly articulate the mission, strategy, risks, and compliance controls for each trading unit; (iv) include for each trader a mandate that describes the scope of his or her trading activity; (v) clearly articulate and document a comprehensive description of the risks associated with the trading unit's activities; (vi) document a comprehensive explanation of how the mission and strategy of the trading unit, and its related risk levels, comply with the proposed rule; and (vii) require the banking entity to promptly address and remedy any violation of section 13 of the BHC Act and the proposed rule. These internal policies and procedures would require banking entities to have the data and standards to prevent prohibited proprietary trading and to identify abnormalities and discrepancies that may be indicative of prohibited proprietary trading. The internal policies and procedures should also provide the Agencies with a clear, comprehensive picture of a banking entity's covered trading activities that can be effectively reviewed. With respect to covered fund activities and investments, the proposal would require that internal policies and procedures describe all covered fund activities in which the banking entity engages and the procedures used by the banking entity to ensure that it complies with the restrictions of section 13 of the BHC Act and the proposed rule.
The Agencies expect that these internal policies and procedures will be regularly reviewed and updated to reflect changes in business practices, strategies, or laws and regulations, though frequent, unexplained changes to policies and procedures or other aspects of the compliance program—particularly changes to reduce their stringency—would warrant additional scrutiny from banking entity management, independent testing personnel, and Agency supervisors or examiners.
Section III of proposed Appendix C articulates minimum standards for the second element of the compliance program, internal controls. With respect to covered trading activities, the proposal would require internal controls that: (i) Are reasonably designed to ensure that the covered trading activity is conducted in conformance with a trading unit's authorized risks, instruments and products, as documented in the banking entity's written policies and procedures; (ii) establish and enforce risk limits for each trading unit; and (iii) perform robust analysis and quantitative measurement of covered trading activity for conformance with section 13 of the BHC Act and the proposed rule. In particular, the banking entity must perform analysis and quantitative measurement that is reasonably designed to: (i) Ensure that the activity of each trading unit is appropriate to the mission, strategy, and risk of each trading unit, as documented in the banking entity's internal written policies and procedures; (ii) monitor and assist in the identification of potential and actual prohibited trading activity; and (iii) prevent the occurrence of prohibited proprietary trading. This analysis and measurement should incorporate the quantitative measurements calculated and reported under Appendix A of the proposed rule, but should also include other analysis and measurements developed by the banking entity that are specifically tailored to the business, risks, practices, and strategies of its trading units. The Agencies expect that the thoughtful use of these types of quantitative tools to monitor the extent to which the activities of a trading unit are consistent with its stated mission, strategy, and risk profile may help identify, for both banking entities and Agencies, abnormalities or discrepancies in permitted trading activity that may be indicative of prohibited proprietary trading. In addition, these internal controls must provide for regular monitoring of the effectiveness of the banking entity's compliance program and require the banking entity to take prompt action to address and remedy any deficiencies identified and to provide timely notification to the relevant Agency of any investigation and remedial action taken.
With respect to covered fund activities and investments, the internal controls required under section III of proposed Appendix C generally focus on ensuring that a banking entity has effective controls in place to monitor its investments in, and relationships with, covered funds to ensure its compliance with the covered fund activity and investments restrictions, including controls that relate to implementing remedies in the event of a violation of the requirements of section 13 of the BHC Act and the proposed rule.
Section IV of proposed Appendix C articulates minimum standards for the third element of the compliance program, responsibility and accountability. These standards focus on four key constituencies—the board of directors, the CEO, senior management, and managers at each trading unit and asset management unit level. Section IV makes clear that the board of directors, or similar corporate body, and the CEO are responsible for creating an appropriate “tone at the top” by setting an appropriate culture of compliance and establishing clear policies regarding the management of covered trading activities and covered fund activities
Section V of proposed Appendix C articulates minimum standards for the fourth element of the compliance program, independent testing. A banking entity subject to the appendix must ensure that its independent testing is conducted by a qualified independent party, such as the banking entity's internal audit department, outside auditors, consultants or other qualified independent parties. The independent testing must examine both the banking entity's compliance program and its actual compliance with the proposed rule. Such testing must include not only the general adequacy and effectiveness of the compliance program and compliance efforts, but also the effectiveness of each element of the compliance program and the banking entity's compliance with each provision of the proposed rule. This requirement is intended to ensure that a banking entity continually reviews and assesses, in an objective manner, the strength of its compliance efforts and promptly identifies and remedies any weaknesses or matters requiring attention within the compliance framework.
Section VI of proposed Appendix C articulates minimum standards for the fifth element of the compliance program, training. It proposes to require that a banking entity provide adequate training to its trading personnel and managers, as well as other appropriate personnel, in order to effectively implement and enforce the compliance program. In particular, personnel engaged in covered trading activities or covered fund activities and investments should be educated with respect to applicable prohibitions and restrictions, exemptions, and compliance program elements to an extent sufficient to permit them to make informed, day-to-day decisions that support the banking entity's compliance with the proposed rule and section 13 of the BHC Act. In particular, any personnel with discretionary authority to trade, in any amount, should be appropriately trained regarding the differentiation of prohibited proprietary trading and permitted trading activities and given detailed guidance regarding what types of trading activities are prohibited. Similarly, personnel providing investment management or advisory services, or acting as general partner, managing member, or trustee of a covered fund, should be appropriately trained regarding what covered fund activities and investments are permitted and prohibited.
Section VII of proposed Appendix C articulates minimum standards for the sixth element of the compliance program, recordkeeping. Generally, a banking entity must create records sufficient to demonstrate compliance and support the operation and effectiveness of its compliance program (i.e., records demonstrating the banking entity's compliance with the requirements of section 13 of the BHC Act and the proposed rule, any scrutiny or investigation by compliance personnel or risk managers, and any remedies taken in the event of a violation or non-compliance), and retain these records for no less than five years in a form that allows the banking entity to promptly produce these records to any relevant Agency upon request. Records created and retained under the compliance program shall include trading records of the trading units, including trades and positions of each such unit.
The Agencies request comment on the compliance program requirement contained in § _.20 of the proposed rule and the minimum standards specified in proposed Appendix C. In particular, the Agencies request comment on the following questions:
Section _.21 of the proposed rule implements section 13(e)(2) of the BHC Act, which requires the termination of activities or investments that violate or function as an evasion of section 13 of the Act.
Section 13(c)(6) of the BHC Act required the Board, acting alone, to adopt rules implementing those provisions of section 13 of the BHC Act that provide a banking entity or a nonbank financial company supervised by the Board a period of time
As part of the current proposal, the Board is proposing to relocate the Board's Conformance Rule, which was added as §§ 225.180-182 of the Board's Regulation Y, to subpart E of the Board's proposed rule.
In connection with incorporating provisions of the existing Board's Conformance Rule into the current proposal, the Board notes that the conformance period and extended transition period provided by section 13(c) of the BHC Act and the Board's Conformance Rule do
With respect to proprietary trading, the Board expects that each banking entity will identify those trading units of the banking entity that are engaged in prohibited proprietary trading as of or after the effective date of section 13 of the BHC Act and the type of proprietary trading in which they are engaged. A banking entity is expected to bring the prohibited proprietary trading activity of a trading unit into compliance with the requirements of the proposed rule as soon as practicable within the conformance period. A trading unit may not expand its activity to include prohibited proprietary trading after the effective date of the proposed rule. Similarly, a trading unit that is not identified as engaging in proprietary trading as of the effective date may not begin engaging in such activity after the effective date.
With respect to a covered fund activity or investment, the conformance period (or, in the case of an illiquid fund for which a banking entity has received Board approval, the extended transition period) generally permits a banking entity to retain an existing investment in a covered fund, make additional capital contributions to a covered fund if contractually obligated to do so, or continue certain existing relationships with a covered fund.
In light of the interplay between the Board's Conformance Rule and the current proposed rule, the Board is requesting comment on whether any of the conformance provisions should be revised. In particular, the Board requests comment on the following question:
The Agencies are interested in receiving comments on all aspects of the proposed rule.
Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, sec. 722, 113 Stat. 1338, 1471 (Nov. 12, 1999), requires the OCC, Board and FDIC to use plain language in all proposed and final rules published after January 1, 2000. The OCC, Board and FDIC invite public comments on how to make this proposal easier to understand. For example:
• Have we organized the material to suit your needs? If not, how could this material be better organized?
• Are the requirements in the proposed regulation clearly stated? If not, how could the regulation be more clearly stated?
• Does the proposed regulation contain language or jargon that is not clear? If so, which language requires clarification?
• Would a different format (grouping and order of sections, use of headings, paragraphing) make the regulation easier to understand? If so, what changes to the format would make the regulation easier to understand?
• What else could we do to make the regulation easier to understand?
Section 13 of the BHC Act imposes on all banking entities prohibitions and restrictions on proprietary trading and certain interests in, and relationships with, a covered fund,
The Agencies recognize that there are economic impacts that may arise from the proposed rule and its implementation of section 13 of the BHC Act and invite comment on the manner in which the proposed rule implements section 13 of the BHC Act, including commenters' views on the potential economic impacts discussed in this Part of the Supplemental Information. In addition, the Agencies seek comment on whether the proposed rule represents a balanced and effective approach to implementing section 13 of the BHC Act or whether alternative approaches to implementing section 13 of the BHC Act exist that would provide greater benefits or involve fewer costs, consistent with the statutory purpose. We also request comment on the potential competitive effects of the manner in which the proposed rule implements the statute.
In addition to the questions posed throughout Part II of the Supplemental Information with respect to the potential costs and benefits of particular aspects of the statute and proposed rule, in order to assist in the analysis of the economic impacts associated with the final rule and any alternatives the Agencies may evaluate, the Agencies encourage commenters to provide quantitative information about the rule's impact on banking entities, their clients, customers, and counterparties, specific markets or asset classes, and any other entities potentially affected by the proposed rule with respect to:
1. The direct and indirect costs and benefits of compliance with section 13 of the BHC Act, as proposed to be implemented;
2. The effect of section 13 of the BHC Act, as proposed to be implemented, on competition; and
3. Any other economic impacts of the proposal.
In addition, to assist with potential estimates of the proposed rule's quantitative impacts, we request specific comment on: (i) The extent to which banking entities currently engage in proprietary trading activity or covered funds activities or investments that are prohibited or restricted by the statute, or have otherwise divested or conformed such activities; and (ii) the potential costs and benefits or other quantitative impacts of various aspects of the proposed rule, such as the compliance program requirement, the required reporting of quantitative measurements, and the conditions and requirements for relying on the proposed exemptions.
To further facilitate public comment on the economic effects of the manner in which the proposed rule implements the statute, the Agencies have identified below a number of significant aspects of the proposed rule and potential economic impacts that may result from section 13 of the BHC Act's requirements, as proposed to be implemented. We seek commenters' views on the likelihood of the potential economic impacts identified in this Part and whether there are additional costs, benefits, or other impacts that may arise from the proposed rule. To the extent that such costs, benefits, or other impacts are quantifiable, commenters are encouraged to identify, discuss, analyze, and supply relevant data, information, or statistics related to such costs, benefits, and other impacts and the quantification of such costs, benefits, and other impacts. In addition, commenters are asked to identify or estimate start-up, or non-recurring, costs separately from costs or effects they believe would be ongoing.
Section _.3 of the proposed rule, which implements the statutory definition of “trading account,” provides a multi-pronged definition of that term that is intended to ensure that banking entities do not engage in “hidden” proprietary trading by characterizing trading activity as being conducted outside a trading account. In addition to positions taken principally for the purpose of short-term resale, benefitting from short-term price movements, realizing short-term arbitrage profits, or hedging another trading account position, the proposed definition also includes: (i) With respect to a banking entity subject to the Federal banking agencies' Market Risk Capital Rules, all positions in financial instruments subject to the prohibition on proprietary trading that are treated as “covered positions” under those capital rules, other than certain foreign exchange and commodities positions; and (ii) all positions acquired or taken by certain registered securities and derivatives dealers (or, in the case of financial institutions that are government securities dealers, that have filed notice with an appropriate regulatory agency) in connection with their activities that require such registration or notice. Although these prongs of the definition are proposed to prevent evasion of the statutory requirements, we seek comment on the extent to which either of these two prongs may create a competitive disadvantage for certain banking entities vis-à-vis competitors that are either not subject to section 13 of the BHC Act and/or competitors subject to different prongs of the proposed definition.
Section 13(d)(1)(B) of the BHC Act provides an exemption from the prohibition on proprietary trading for purchases and sales in connection with underwriting activities, to the extent
The Agencies have proposed to use, wherever practicable, common terms from existing laws and regulations in the context of underwriting to facilitate market participants' understanding and use of the exemption and to promote consistency across laws and regulations. Specifically, the proposed definitions of “distribution” and “underwriter” established in the proposed rule largely mirror the definitions provided for these terms in the SEC's Regulation M. Because the proposed rule uses a modified version of the Regulation M definition of “underwriter” to include selling group members, the proposed definition would permit the current market practice of members of the underwriting syndicate entering into an agreement with other selling group members to collectively distribute the securities, rather than requiring all members of a distribution to join the underwriting syndicate.
In addition, the definition of “distribution” from Regulation M that the Agencies have proposed in § _.4(a) of the proposed rule is intended to ensure that the underwriting exemption does not unduly constrain banking entities from providing underwriting services, while at the same time preventing banking entities from relying on the underwriting exemption to evade the proposed rule and the statutory prohibition on proprietary trading. The Agencies anticipate that the proposed approach to implementing the underwriting exemption should permit legitimate forms of underwriting in which market participants currently engage and, thus, should not unduly burden capital formation. In addition, the proposed rule would permit underwriters to continue to employ existing practices to stabilize a distribution of securities, which stabilization promotes confidence among issuers, selling security holders, and investors and further supports capital formation.
Under the proposed rule, the underwriting activities of a banking entity must be designed to generate revenues primarily from fees, commissions, underwriting spreads or other income, not from appreciation in value of covered financial positions that the banking entity holds related to such activities or the hedging of such covered financial positions. This proposed requirement should promote investor confidence by ensuring that the activities conducted in reliance on the underwriting exemption are designed to benefit the interests of clients seeking to bring their securities to market, not the interests of the underwriters themselves. The proposed requirement should also help prevent evasion of the statutory prohibition on proprietary trading, as trading activity designed to generate revenues from appreciation in the value of positions held by the banking entity would be indicative of prohibited proprietary trading, not underwriting activity. We seek comment on whether this approach of identifying underwriting activity by reference to revenue source could also make underwriting less profitable to the extent that it precludes or discourages certain types of profitability for
In addition to commenters' views on the potential economic impacts identified above, we request comment on whether the proposed rule may cause some banking entities to choose to decrease the supply of underwriting services in response to potential costs of the proposed rule and whether this result would adversely affect competition among underwriters or have a harmful impact on capital formation. In addition, if banking entities were to pass the increased costs of complying with the proposed exemption on to issuers, selling security holders, or their customers, we seek comment on whether the effect would be to increase the cost of raising capital and whether this would harm capital formation to the extent that such cost increases were sufficient to preclude issuers from accessing the capital markets. As described above, the Agencies have designed the proposal to balance such potential costs with provisions intended to permit banking entities' legitimate underwriting activities to continue as provided by the statute, while also establishing sufficient requirements to prevent evasion of the statutory goals through misuse of the underwriting exemption.
Section 13(d)(1)(B) of the BHC Act provides an exemption from the prohibition on proprietary trading for purchases and sales in connection with market making-related activities, to the extent that such activities are designed not to exceed the reasonably expected near term demands of clients, customers, or counterparties. In setting forth the requirements for eligibility for this exemption in § _.4(b) of the proposed rule, the Agencies have endeavored to establish a regime that clearly sets forth the requirements for relying on the exemption for market making-related activity established in the statute to facilitate banking entities' compliance with the statutory requirements. In considering potential requirements for the market-making exemption, and assessing the potential economic impacts of each such requirement, the Agencies tried to strike an appropriate balance between considerations related to: (i) The potential for evasion of the statutory prohibition on proprietary trading through misuse of the exemption for market making-related activity; (ii) the potential difficulties related to distinguishing market making-related activity from prohibited proprietary trading; and (iii) potential costs that may arise from constraints on legitimate market making-related activities.
The Agencies have proposed to use, where practicable, terms and concepts used in current laws and regulations in the context of market making to promote clarity and consistency. Recognizing that there are differences in market making activities between different types of asset classes (e.g., liquid and illiquid instruments) and market structures (e.g., organized trading facilities and the over-the-counter markets), the Agencies have proposed to implement the market-making exemption in a manner that accounts for these distinctions and permits market making activities in different asset classes and market structures. Permitting legitimate market making in its different forms should promote market liquidity and efficiency by allowing banking entities to continue to provide customer intermediation and liquidity services in both liquid and illiquid instruments. The Agencies also recognize, however, that market making-related activities in the over-the-counter markets or activities involving less liquid instruments are sometimes less transparent than similar activities on
In addition, the proposed exemption permits anticipatory market making, block positioning, and hedging of market making positions under certain circumstances, which should further facilitate customer intermediation and market liquidity and efficiency. However, certain conditions are placed on such market making-related activities in the proposal in an effort to ensure that such activities are, in fact, market making-related activities, and are not hidden proprietary trading activities subject to the statutory prohibition.
The proposal requires that the market making-related activities be designed to generate revenues primarily from fees, commissions, bid/ask spreads or other income not attributable to appreciation in the value of covered financial positions a banking entity holds in trading accounts or the hedging of such positions. This proposed requirement should promote investor confidence by helping to ensure that market making serves customer needs. The proposed requirement should also help prevent evasion of the statutory prohibition on proprietary trading, as trading activity designed to generate revenues from appreciation in the value of positions held by the banking entity would be indicative of prohibited proprietary trading, not market making-related activity. The Agencies request comment on whether this approach of identifying market making activity by reference to a market making trading unit's revenue source would also make market making activity less profitable and whether it would preclude or discourage certain types of profitability for
Section 13(d)(1)(C) provides an exemption from the prohibition on proprietary trading for risk-mitigating hedging activities in connection with and related to individual or aggregated positions, contracts, or other holdings of a banking entity that are designed to reduce the specific risks to the banking entity in connection with and related to such positions, contracts, or other holdings. The proposed exemption requires that the hedging transaction be reasonably correlated to these risks that the transaction is intended to hedge or otherwise mitigate. This proposed requirement is intended to address the potential for misuse of the exemption where a transaction is not closely tied to risk mitigation, while also providing some flexibility in the degree of correlation that is required in order to promote consistency with the statutory goals and requirements.
In addition, the proposed exemption requires that the hedging transaction: (i) Not give rise, at the inception of the hedge, to significant exposures that are not themselves hedged in a contemporaneous transaction; and (ii) be subject to continuing review, monitoring, and management. Together, these proposed requirements are designed to ensure that a banking entity does not use the hedging exemption to conduct prohibited proprietary trading in the guise of hedging activity and to prevent evasion of the proprietary trading prohibition contained in section 13 of the BHC Act and the proposed rule. These proposed requirements are intended to ensure that an exempt hedging transaction will mitigate, not amplify, risk. Moreover, such requirements should further the goals of compliance with the statutory requirements and reducing banking entities' risks.
We seek comment on whether the proposed requirements for relying on the hedging exemption are more restrictive than necessary to implement the statutory language and purpose, and to prevent evasion of the statutory provisions, and whether a banking entity's hedging activities could be unduly constrained by the proposed rule. Further, commenters should address the extent to which a banking entity may be unable or unwilling to execute certain hedges and whether, as a result, a banking entity could be limited in its means to reduce its risk. In addition, would banking entities be dissuaded from engaging in other permitted activities or activities outside the scope of the statute (e.g., long-term investments) if the requirements of the proposed hedging exemption unduly limits or prevents them from mitigating the risks associated with such activities? We request comment on whether a reduction in efficiency could result from a reduced ability of covered banking entities to transfer risks to those more willing to bear them. Commenters should also address whether the proposed rule would reduce a banking entity's willingness to engage in permitted risk-mitigating hedging activities in order to avoid costs related to ensuring compliance with the exemption's requirements and whether this would increase the banking entity's risk exposure. In order to balance the potential for such effects with the statutory purpose, the proposed rule attempts to implement the risk-mitigating hedging exemption in a manner that recognizes that the precise nature and execution of risk mitigation through hedging transactions can and will vary depending on the relevant market, asset, and facts and circumstances, while also establishing requirements designed to ensure that transactions relying on the hedging exemption are, in fact, hedges and not hidden proprietary trading prohibited by the statute.
The proposed exemption would require documentation with respect to hedges established at a different level of organization than that responsible for the underlying positions or risks that are being hedged. This proposed documentation requirement is intended to facilitate review by banking entities and Agency supervisors and examiners in assessing whether the hedge position was established to hedge or otherwise mitigate another unit's risks. Without such documentation, there could be an increased risk of evasion of the statute's prohibition on proprietary trading, as it would be difficult to assess whether a purported hedging transaction was established to mitigate another level of organization's risk or solely to profit from price appreciation of the position established by the purported hedge. We seek comment on the costs of the proposed documentation requirement for certain hedging transactions, such as the costs related to systems changes and maintenance, employee resources and time, and recordkeeping.
The proposed rule would require that the compensation arrangements of persons performing underwriting, market making-related, and risk-mitigating hedging activities be designed not to reward proprietary risk-taking. These proposed requirements are intended to reduce incentives for personnel of the banking entity to violate the statutory prohibition on proprietary trading and expose the banking entity to risks arising from prohibited proprietary trading. We request comment on whether the proposed rule's requirements regarding compensation arrangements would reduce the banking entity's ability to attract talented and experienced trading personnel or would harm the banking entity's ability to compete with entities that are not subject to section 13 of the BHC Act and the proposed rule. In order to balance the potential for such effects with the statutory goals, the proposed rule does not expressly prescribe how a banking entity must compensate its personnel or prohibit all types of compensation incentives related to non-client income, but instead proposes an approach that leaves banking entities with a degree of flexibility to compensate their personnel as they deem appropriate.
Section _.6(b) of the proposed rule implements section 13(d)(1)(D) of the BHC Act, which permits a banking entity, notwithstanding the prohibition on proprietary trading, to purchase or sell a covered financial position on behalf of customers. Because the statute does not define when a transaction would be conducted on behalf of customers, the proposed rule identifies three categories of transactions that would qualify under this exemption. By providing that only transactions meeting the terms of the three categories would be considered to be on behalf of customers for purposes of the exemption, the proposed rule addresses the potential for evasion of the statutory prohibition. At the same time, the proposed rule also would not permit banking entities to rely on the exemption with respect to other, unanticipated transactions that banking entities may undertake on behalf of customers. The Agencies seek comment on whether banking entities currently engage in principal transactions on behalf of customers that are not covered by the proposed exemption or other permitted activities and whether the lack of an exemption in the proposed rule for such activities would impact beneficial customer facilitation, market liquidity, efficiency, or capital formation.
Section _.6(d) of the proposed rule implements section 13(d)(1)(H) of the BHC Act, which permits certain foreign banking entities to engage in proprietary trading that occurs “solely outside of the United States.” The proposed exemption provides a number of specific criteria for determining when trading will be considered to have occurred solely outside of the United States to help prevent evasion of the statutory restriction. The proposed exemption also provides a definition of “resident of the United States” that is similar to the SEC's definition of “U.S. person” in Regulation S, which should promote consistency and understanding among market participants that have experience with the concept from the SEC's Regulation S. In addition, the proposed exemption clarifies when a foreign banking entity will be considered to engage in such trading pursuant to sections 4(c)(9) and 4(c)(13) of the BHC Act, as required by the statute, including with respect to a foreign banking entity that is not a “foreign banking organization” under the Board's Regulation K. This implementation of section 13(d)(1)(H) of the BHC Act would permit certain foreign banking entities that are not “qualifying foreign banking organizations” under the Board's Regulation K to also rely on the exemption, notwithstanding the fact such foreign banking entities are not currently subject to the BHC Act generally or the Board's Regulation K. As a result, such foreign banking entities should encounter fewer costs related to complying with the proprietary trading prohibitions than if they were unable to rely on the exemption in section 13(d)(1)(H) of the BHC Act.
Despite the reference to section 4(c)(13) of the BHC Act, the statute provides that the exemption for trading outside of the United States is only available to banking entities that are not directly or indirectly controlled by U.S. banking entities (i.e., not any U.S. banking entities or their foreign subsidiaries and affiliates). Under the statute, the prohibition on proprietary trading applies to the consolidated, worldwide operations of U.S. firms. As required by statute, the proposal prohibits U.S. banking entities from engaging in proprietary trading unless the requirements of one or more relevant exemptions (other than the exemption for trading by foreign banking entities) are satisfied. As a result, the statute creates a competitive difference between the foreign activities of U.S. banking entities, which must monitor and limit their foreign activities in accordance with the requirements of section 13 of the BHC Act, relative to the foreign activities of foreign-based banking entities, which may not be subject to restrictions similar to those in section 13 of BHC Act. The Agencies seek commenters' views on whether the proposed rule's implementation of section 13(d)(1)(H) of the BHC Act imposes additional competitive differences, beyond those recognized above, and the potential economic impact of such competitive differences.
Section _.7 of the proposed rule, which implements in part section 13(e)(1) of the BHC Act,
The various quantitative measurements that would be required to be reported focus on assessing banking entities' risk management, sources of revenue, revenues in relation to risk, customer servicing, and fee generation. Aberrant patterns among the measurements with respect to these areas would warrant further review to determine whether trading activities have occurred that are proprietary in nature and whether such activities may be exposing banking entities to disproportionate risk. For example, quantitative measurements should provide banking entities with a useful starting point for assessing whether their trading activities are consistent with the proposed rule and whether traders are exposing the entity to disproportionate risks. In addition, proposed Appendix A applies a standardized description and general method of calculating each quantitative measurement that, while taking into account the potential variation among trading practices and asset classes, is intended to facilitate reporting of sufficiently uniform information across different banking entities so as to permit horizontal reviews and comparisons of the quantitative profile of trading units across firms. This proposed approach, which recognizes that quantitative measurements must be applied with respect to differences within a banking entity's structure, business lines, and trading desks, should facilitate efficient application within firms and efficient examination across firms. The proposed use of a suite of quantitative measurements for these purposes may also limit erroneous indications of potential violations or erroneous indications of compliance (i.e., false positives and false negatives), thus allowing banking entities and examiners and supervisors to focus upon the measurements that may be most relevant in identifying prohibited conduct. The uniformity of the proposed measurements across different types of banking entities is also intended to ensure that banking entities are calculating comparable measurements consistently and that comparable measurements are being evaluated consistently by Agencies. The Agencies expect that as the implementation of quantitative measurements and the internal compliance and external oversight processes become more efficient over time, banking entities will find compliance efforts less burdensome.
The Agencies seek comment on the extent to which banking entities will incur costs associated with implementing, monitoring, and attributing financial and personnel resources for purposes of complying with the requirements of proposed Appendix A. Specifically, please discuss the extent to which banking entities are unlikely to currently calculate certain quantitative measurements in the manner required under the proposal (e.g., Spread Profit and Loss or Customer-facing Trade Ratio) and whether this may result in significant start-up costs associated with developing these measurements. Under the proposal, banking entities would also need to dedicate personnel and supervisory staff to review for potential aberrant patterns of activity that warrant further review, as well as maintain appropriate records of that review. In order to limit these calculation and surveillance costs to the greatest extent practicable, the Agencies have proposed measurements that, in many cases, are already calculated by many banking entities to measure and manage trading risks and activities. The costs to banking entities associated with calculating the proposed quantitative metrics should also be mitigated by the tiered application of Appendix A, which would require banking entities with the most extensive trading activities to report the largest number of quantitative measurements, while imposing fewer or no reporting requirements on banking entities with smaller trading activities. By limiting the application of aspects of Appendix A to firms with greater than $1 billion in trading assets and liabilities, and all aspects of the appendix only to entities with greater than $5 billion in trading assets and liabilities, the costs imposed should be proportional to the market reach and complexity of a banking entity's trading activities.
Subpart C implements the statutory provisions of section 13(a)(1)(B) of the BHC Act, which prohibit banking entities from acquiring or retaining any equity, partnership, or other ownership interest in, or sponsoring, a covered fund, and other provisions of section 13 of the BHC Act which provide exemptions from, or otherwise relate to, that prohibition. In implementing the covered funds provisions of section 13 of the BHC Act, the Agencies have proposed to define and interpret several terms used in implementing these provisions and the goals of section 13. We seek comment on whether the proposed rule represents a balanced and effective approach to implementing the covered fund provisions of the statute.
For banking entities that invest in, sponsor or have relationships with one or more covered funds, the economic impact of complying with the statute and the implementing rule will vary, depending on the size, scope and complexity of their respective business, operations and relationships with clients, customers and counterparties. Moreover, the types of covered funds advised or sponsored by an adviser, the types of business and other relationships that an adviser may conduct with such funds and the adviser's other business activities, including relationships with other third party advised covered funds, will affect whether a covered fund activity would be subject to the statutory prohibition, eligible for a particular exemption or subject to particular internal control requirements as specified by the proposed rule.
For example, with respect to a banking entity that does not “sponsor,”
In contrast, a banking entity that seeks to invest in a covered fund could only do so in reliance on an exemption specified in the statute or the proposed rule, such as the exemption for organizing and offering certain covered funds provided in section 13(d)(1)(G), as implemented in § _.11 of the proposed rule. Similarly, a banking entity that seeks to enter into “prime brokerage transactions” with a covered fund could only do so by meeting certain requirements under the proposed rule. Accordingly, the economic impact of the proposed rule will depend on whether an adviser's activities fall within the scope of the terms as proposed such that the banking entity would be subject to the limitations on covered fund activities. To the extent that these terms or exemptions would result in more, or fewer, activities being captured by the proposed rule, what are the attendant costs and benefits that a covered banking may incur? We request commenters provide empirical data where possible.
Definition of Covered Fund. The proposed rule's definition of “covered fund” includes hedge funds and private equity funds as defined by statute, but also identifies two types of similar funds—commodity pools and certain non-U.S. funds—that are subject to the covered fund restrictions and prohibitions of section 13 of the BHC Act, as implemented by the proposed rule. The Agencies have proposed to include these funds since they are generally managed and structured similar to a covered fund, but are not generally subject to the Federal securities laws due to the instruments in which they invest or the fact that they are not organized in the United States or one or more States. We request comment on whether applying the definition of covered fund in this way as proposed would increase the number of investment vehicles or similar entities that would be subject to the limitations under the proposed rule. Would this approach increase compliance costs for banking entities that sponsor, invest in, or have certain relationships with these types of funds?
The proposed rule also excludes certain types of investments in covered funds, pursuant to section 13(d)(1)(J) of the BHC Act, which authorizes the Agencies to exclude from the general covered fund activity prohibition those activities that would promote the safety and soundness of a banking entity. Section _.14 of the proposed rule would exclude from the prohibition, among other things, a banking entity's investments in covered funds related to bank owned life insurance, certain joint ventures and interests in securitization vehicles retained in compliance with the minimum credit risk retention requirements of section 15G of the Exchange Act. We request comment on the potential economic impact of the proposal to exclude these types of investments from the general prohibition. For banking entities whose only covered fund activities are those described in § _.14, what economic impact would be attributed to complying with this provision of the proposed rule? Would these costs and benefits differ from those of banking entities that conduct covered fund activities as well as engage in activities described in § _.14? As described in the Supplementary Information, a banking entity that generally does not engage in any prohibited activities is only required to adopt and implement a compliance program reasonably designed to ensure that the entity does not engage in prohibited activities. To what extent will the proposed provisions in § _.14 increase or mitigate any costs, benefits or other impacts associated with the foregoing minimum internal controls requirement?
Definition of Sponsor. Under the proposed rule, the term “sponsor” is defined by incorporating the definition set forth in section 13(h)(5) of the BHC Act, but the Agencies have proposed to clarify that the term trustee, as used in the definition of sponsor, does not include a trustee that does not provide discretionary investment services to a covered fund. This exception distinguishes a trustee providing non-discretionary advisory services from trustees providing services similar to those associated with entities serving as general partner, managing member, commodity pool operator or investment adviser of a covered fund. We request comment on the economic impact associated with the proposed definition of “sponsor.” Will the economic impact differ depending on the scope of a banking entity's covered fund activities? For example, a banking entity whose only relationship with a covered fund involves the provision of non-discretionary investment services would not be a sponsor under the proposed rule. We request comment on whether such a banking entity would benefit from this exception. We also request comment on whether a covered fund's investors and counterparties would bear any costs associated with a banking entity's modification of its business practices or its relationship to the covered fund.
Other Definitions. The covered fund provisions also define, among other things, “director” and “prime brokerage transaction.” What are the costs, benefits or other impacts associated with the way the proposed rule defines these terms? For example, would the proposed definition of “prime brokerage transaction” enable a banking entity to provide services to a covered fund that would not ordinarily be understood to be prime brokerage as long as it met certain conditions? What costs, or benefits, for banking entities, clients, customers or counterparties may be associated with this approach to defining prime brokerage transaction?
In implementing the covered funds provisions of section 13 of the BHC Act, the Agencies also have interpreted or defined terms contained in the three principal exemptions related to covered fund activities by a banking entity: (i) The exemption for organizing and offering covered funds; (ii) the
In implementing this statutory exemption, the Agencies have defined or clarified several key terms or requirements, including (i) the definition of ownership interest and (ii) the method for calculating the 3% ownership interest limit. The proposed definition of ownership interest is designed to describe the typical types of relationships through which an investor has exposure to the profits and losses of a covered fund. Consistent with this approach, carried interest is not included within the proposed definition of ownership interest. As discussed in the Supplementary Information above, carried interest generally entitles service providers, such as banking entities that provide advisory services, to receive compensation for such services determined as a share of a covered fund's profits. As a result, the proposed rule does not treat carried interest as an ownership interest, which could have costs and benefits. To help discern these costs and benefits, we request comment on whether this is consistent with how providers of advisory services view the receipt of such “carried interest” (i.e., as compensation for services rather than as an “ownership interest” equivalent to an investor's interest that shares in a fund's profits and losses). The proposed definition of carried interest has limitations designed to prevent a banking entity from circumscribing the proposed rule's limitations on ownership. For instance, among other things, the proposed definition requires that the “sole purpose and effect of the interest is to allow banking entity * * * to share in the profits of the covered fund.”
As required by statute, a banking entity that seeks to invest in a covered fund under the exemption for organizing and offering covered funds could not, after the expiration of an initial one-year period (plus any applicable extensions), hold more than 3% of the total outstanding ownership interests of such fund. The proposed rule would require that a banking entity calculate the per-fund limit whenever the covered fund calculates its value or permits investor investments or redemptions, but in no case less frequently than quarterly. We request comment on whether this approach will limit any additional burden associated with calculating the per-fund limit for banking entities that invest in covered funds that determine their value on at least a quarterly basis. We also request comment on whether such banking entities will incur any additional significant costs in determining their compliance with the 3% ownership limitation.
We request comment on whether the proposed requirements will have benefits of furthering the goals of compliance with the statute and reducing banking entities' risks. We also request comment on whether the proposed requirements are more restrictive than necessary to implement the statute and whether they could unnecessarily limit a banking entity's hedging activities and ability to reduce risk. Commenters should also address whether the proposed requirements will dissuade banking entities from engaging in other permitted activities (e.g., organizing and offering covered funds) or those activities outside the scope of the statute to the extent that the exemption prevents them from mitigating the risks associated with such activities. We request comment on whether a reduction in efficiency could result from a reduced ability of covered banking entities to transfer risks to those more willing to bear them. Commentators should also address whether the proposed rule could reduce
Despite the reference to section 4(c)(13) of the BHC Act, the statute provides that the exemption for covered fund activities outside of the United States is only available to banking entities that are not directly or indirectly controlled by U.S. banking entities (i.e., not any U.S. banking entities or their foreign subsidiaries and affiliates). Under the statute, the prohibition and restrictions on covered fund activities apply to the consolidated, worldwide operations of U.S. firms. As required by statute, the proposal prohibits U.S. banking entities from investing in or sponsoring covered funds unless the requirements of one or more relevant exemptions (other than the exemption for trading by foreign banking entities) are satisfied. As a result, the statute creates a competitive difference between the foreign activities of U.S. banking entities, which must monitor and limit their foreign activities in accordance with the requirements of section 13 of the BHC Act, relative to the foreign activities of foreign-based banking entities, which may not be subject to restrictions similar to those in section 13 of BHC Act. The Agencies seek commenters' views on whether the proposed rule's implementation of section 13(d)(1)(I) of the BHC Act imposes additional competitive differences, beyond those discussed above, and the potential economic impact of such competitive differences.
The Agencies recognize that by defining “covered fund” and “banking entity” broadly, securitization vehicles may be affected by the restrictions and requirements of the proposed rule, and this may give rise to various economic effects. The Agencies preliminarily believe that the proposed rule should mitigate the impact of securitization market participants and investors in some non-loan asset classes (including, for example, banking entities that are participants in a securitization that may acquire or retain ownership interests in a securitization vehicle that falls within the definition of covered fund) by excluding loan securitizations from the restrictions on sponsoring or acquiring and retaining ownership interests in covered funds.
Costs may be incurred to establish internal compliance programs to track compliance for any securitization vehicle that falls within the definition of banking entity. These costs may be minimized for future securitization vehicles, however, because such securitizations may be able both to incorporate any internal compliance program requirements into their documentation prior to execution, and to minimize (or eliminate) any activities that may trigger greater compliance costs. The proposed rule should further minimize the costs of the internal compliance programs by (i) allowing for enterprise-wide compliance programs and minimal requirements for banking entities that do not engage in covered trading activities and/or covered fund activities or investments (each as described below), and (ii) allowing for reduced compliance program requirements by establishing financial thresholds for “significant” covered trading activities or covered fund activities or investments (as described below).
There could be initial costs both for banking entities that have an ownership interest in a securitization vehicle and for other securitization participants to determine if a particular vehicle falls within the definition of covered fund. Additional costs could be incurred to the extent that banking entities divest their ownership interests in any securitization vehicle that is a covered fund and is not otherwise eligible for one of the exceptions allowed under the proposed rule. This divestment could result in selling pressure that may have a negative impact on the market prices for the vehicles that fall within the definition of covered fund, which in turn could impact all investors in those securitization vehicles. Additionally, under the proposed rule banking entities would no longer be allowed to acquire and retain such ownership interests, which may result in fewer potential investors and reduced liquidity in the market for ownership interests in these covered funds.
For example, the proposed rule could lead to significant potential market impacts if, with respect to an issuance of asset-backed securities secured by assets which are not loans, the market requires credit risk retention in excess of the minimum requirements to be adopted pursuant to Section 941 of the Dodd-Frank Act (i.e., the market believes that 5% credit risk retention is insufficient to address potential misalignment of incentives in a particular transaction). In such circumstances, the proposed rule could reduce potential investors' demand for such securitizations and could make such securitizations more expensive.
Section 13(d)(2)(A)(i) of the BHC Act provides that an otherwise-permitted activity would not qualify for a statutory exemption if it would involve or result in a material conflict of interest. The proposed rule's definition of material conflict of interest, as discussed in more detail in Part II of the
In addition, section 13(d)(2)(A)(ii) of the BHC Act provides that an otherwise-permitted activity would not qualify for a statutory exemption if it would result, directly or indirectly, in a material exposure by the banking entity to high-risk assets or high-risk trading strategies. This statutory limitation, as implemented in the proposed rule, would prevent a banking entity from engaging in certain high-risk activity. The Agencies request comment on whether the proposed definitions of high-risk asset and high-risk trading strategy would potentially reduce liquidity or create a reduction in efficiency for assets or markets related to that high-risk activity.
Under § _.20 of the proposed rule, all covered banking entities that are engaged in covered trading activities or covered fund activities or investments would be required to have a compliance program that provides for the following six elements, at a minimum: (i) Internal written policies and procedures; (ii) internal controls; (iii) a management framework; (iv) independent testing; (v) training; and (vi) recordkeeping. For those banking entities with significant covered trading activities or covered fund activities or investments under § _.20(c) of the proposed rule, additional standards in proposed Appendix C must be met with respect to these six elements.
Beyond the benefits recognized above, the individual elements of the proposed compliance program should also provide certain benefits. For example, the proposed management framework requirement is designed to give management a greater incentive to comply with the proposed rule and to ascertain that the employees they are responsible for overseeing are also complying with the proposed rule. Further, by establishing a management framework for compliance, the banking entity would be required to set a strong compliance tone at the top of the banking entity's organization and signal to its employees that management is serious about compliance, which should foster a strong culture of compliance throughout the banking entity. Similarly, the proposed independent testing requirement would provide a third-party assessment of a banking entity's compliance with the proposed rule, which should provide assurances to the banking entity, its clients, customers, and counterparties, and current or prospective investors that the banking entity is in compliance with the proposed rule. In addition, the proposed training requirement should help the various employees of a banking entity that have responsibilities and obligations under the proposed rule (e.g., complying with the requirements for permitted market making-related activity) understand such responsibilities and obligations and facilitate the banking entity's compliance with the proposed rule. This proposed requirement may also promote market confidence by assuring that trading personnel, and other appropriate personnel of the banking entity, are familiar with their regulatory responsibilities and are complying with the applicable laws and regulations in their interactions with clients, customers, and counterparties.
Because the six elements would be required to be established by all banking entities, other than those that are not engaged in covered trading activities or covered fund activities or investments, the proposed compliance program requirement should promote consistency across banking entities. However, the proposed elements are also intended to give a banking entity a degree of flexibility in establishing and maintaining its compliance program in order to address the varying nature of activities or investments conducted by different units of the banking entity's organization, including the size, scope, complexity, and risks of the activity or investment.
We seek comment on whether developing and providing for the continued administration of a compliance program under § _.20 of the proposed rule is likely to impose material costs on banking entities. Costs related to the proposed compliance program requirement are likely to be higher for those banking entities that are engaged in significant covered trading or covered fund activities or investments and, as a result, are required to comply with the more detailed, specific requirements of proposed Appendix C. Potential costs related to implementation of a compliance program under the proposal include those associated with: Hiring additional personnel or other personnel modifications, new or additional systems (including computer hardware or software), developing exception reports, and consultation with outside experts (e.g., attorneys, accountants). The proposed compliance program requirement would also impose ongoing costs related to maintenance and enforcement of the compliance program
The tiered approach with which the proposal applies the proposed compliance program requirement to banking entities of varying size should reduce the costs associated with developing and providing for the continued administration of a compliance program. In setting forth the proposed compliance program requirement in § _.20 of the proposed rule and Appendix C, the Agencies have taken into consideration the size, scope, and complexity of a banking entity's covered trading activities and covered fund activities and investments in developing requirements targeted to the compliance risks of large and small banking entities. Specifically, banking entities that do not meet the thresholds established in § _.20(c) of the proposed rule would not be required to comply with the more detailed and burdensome requirements set forth in Appendix C. In addition, banking entities that do not engage in covered trading activities and covered fund activities and investments would not be required to establish a compliance program under the proposed rule, and therefore should incur only minimal costs associated with adding measures to their existing compliance policies and procedures to prevent the banking entity from becoming engaged in such activities or making such investments. Together, these provisions have been proposed in order to permit a banking entity to tailor its compliance program to its activities and investments and, where possible, leverage its existing compliance structures, all of which should minimize the incremental costs associated with establishing a compliance program under the proposed rule. However, banking entities that are engaged in significant covered trading and covered fund activities and investments and thereby present a heightened compliance risk due to the size and nature of their activities and investments would be required to comply with the additional standards set forth in proposed Appendix C.
Costs associated with the requirements of proposed Appendix C should also be reduced by aspects of the proposed rule that would permit a banking entity to establish an enterprise-wide compliance program under certain circumstances. An enterprise-wide compliance program would generally permit one compliance program to be established for a banking entity and all of its affiliates and subsidiaries collectively, rather than each legal entity being required to establish its own separate compliance program. The Agencies expect that an enterprise-wide compliance program should promote efficiencies and economies of scale, and reduce costs, associated with establishing separate compliance programs.
In addition to the requests for comment discussed above, we seek commenters' views on the following additional questions related to the potential economic impacts of the proposed framework for implementing section 13 of the BHC Act:
In accordance with section 3512 of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521) (“PRA”), the Agencies may not conduct or sponsor, and a respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (“OMB”) control number. The OCC, FDIC, and Board will obtain OMB control numbers. The information collection requirements contained in this joint notice of proposed rulemaking, to the extent they apply to insured financial institutions that are not under a holding company, have been submitted by the OCC and FDIC to OMB for review and approval under section 3506 of the PRA and section 1320.11 of OMB's implementing regulations (5 CFR 1320). The Board reviewed the proposed rule under the authority delegated to the Board by OMB. The Board will submit to OMB once the final rule is published and the submission will include burden for Federal Reserve-supervised institutions, as well as burden for OCC-, FDIC-, SEC-, and CFTC-supervised institutions under a holding company. The OCC and the FDIC will take burden for banking entities that are not under a holding company. The CFTC has stated that it will be publishing a separate proposed rulemaking in the near future. The burden estimates for CFTC-supervised institutions, published in this proposed rule, are based on the requirements set forth below and the assumption that the CFTC's proposed rulemaking would contain substantively similar requirements.
The proposed rule contains requirements subject to the PRA. The reporting requirements are found in sections _.7(a) and _.12(d); the recordkeeping requirements are found in sections _.3(b)(2)(iii)(C), _.5(c), _.7(a), _.11(b), _.13(b)(3), _.20(b), _.20(c), and _.20(d); and the disclosure requirement is found in section _.11(h)(1). The recordkeeping and disclosure burden for the following sections is accounted for in the _.20(b) burden: _.4(a)(2)(i), _.4(b)(2)(i), _.5(b)(1), _.5(b)(2)(i), _.5(b)(2)(v), _.13(b)(2)(i), _.13(b)(2)(ii)(A), _.13(b)(2)(ii)(D), _.15(a)(1), and _.17(b)(1). These information collection requirements would implement section 619 of the Dodd-Frank Act, as mentioned in the Abstract below. The respondent/recordkeepers are for-profit financial institutions, including small businesses. A covered entity must retain these records for a period that is no less than 5 years in a form that allows it to promptly produce such records to [Agency] on request.
Comments are invited on:
(a) Whether the collections of information are necessary for the proper performance of the Agencies' functions, including whether the information has practical utility;
(b) The accuracy of the estimates of the burden of the information collections, including the validity of the methodology and assumptions used;
(c) Ways to enhance the quality, utility, and clarity of the information to be collected;
(d) Ways to minimize the burden of the information collections on respondents, including through the use of automated collection techniques or other forms of information technology; and
(e) Estimates of capital or start up costs and costs of operation, maintenance, and purchase of services to provide information.
All comments will become a matter of public record. Comments on aspects of this notice that may affect reporting, recordkeeping, or disclosure requirements and burden estimates should be sent to the addresses listed in the
• OCC-supervised institutions,
• FDIC-supervised institutions,
• Banking entities for which the CFTC is the primary financial regulatory agency, as defined in section 2(12)(C) of the Dodd-Frank Act, and
• Banking entities for which the SEC is the primary financial regulatory agency, as defined in section 2(12)(B) of the Dodd-Frank Act.
Section _.3(b)(2)(iii)(C) would require a covered banking entity to establish a documented liquidity management plan in order to rely on an exclusion from the definition of “trading account” for certain positions taken for the bona fide purpose of liquidity management.
Section _.5(c) would require that, with respect to any purchase, sale, or series of purchases or sales conducted by a covered banking entity pursuant to section _.5 for risk-mitigating hedging purposes that is established at a level of organization that is different than the level of organization establishing the positions, contracts, or other holdings the risks of which the purchase, sale, or series of purchases or sales are designed to reduce, the covered banking entity document, at the time the purchase, sale, or series of purchases or sales are conducted:
(1) The risk-mitigating purpose of the purchase, sale, or series of purchases or sales;
(2) The risks of the individual or aggregated positions, contracts, or other holdings of a covered banking entity that the purchase, sale, or series of purchases or sales are designed to reduce; and
(3) The level of organization that is establishing the hedge.
Section _.7(a) would require a covered banking entity engaged in any proprietary trading activity pursuant to sections _.4 through _.6 to comply with the reporting and recordkeeping requirements described in Appendix A if the covered banking entity has, together with its affiliates and subsidiaries, trading assets and liabilities the average gross sum of which (on a worldwide consolidated basis) is, as measured as of the last day of each of the four prior calendar quarters, equal to or greater than $1 billion, as well as such other reporting and recordkeeping requirements as a relevant Agency may impose to evaluate the covered banking entity's compliance with this subpart.
Section _.11(b) would require that, with respect to any covered fund that is organized and offered by a covered banking entity in connection with the provision of
Section _.11(h)(1) would require that, with respect to any covered fund that is organized and offered by a covered banking entity in connection with the provision of
Section _.12(d) would extend the time to divest an ownership interest in a covered fund. Upon receipt of an application from a covered banking entity, the Board may extend the period of time to meet the requirements under paragraphs (a)(2)(i)(A) and (B) of that section for up to 2 additional years, if the Board finds that an extension would be consistent with safety and soundness and not detrimental to the public interest. An application for extension must:
(1) Be submitted to the Board at least 90 days prior to the expiration of the applicable time period;
(2) Provide the reasons for application, including information that addresses the factors in paragraph (e)(2) of that section; and
(3) Explain the covered banking entity's plan for reducing the permitted investment in a covered fund through redemption, sale, dilution or other methods as required in paragraph (a)(2)(i) of that section.
Section _.13(b)(3) would require that, with respect to any acquisition or retention of an ownership interest in a covered fund by a covered banking entity pursuant to § _.13(b), the covered banking entity must document, at the time the transaction is conducted:
(1) The risk-mitigating purpose of the acquisition or retention of an ownership interest in a covered fund;
(2) The risks of the individual or aggregated obligation or liability of a covered banking entity that the acquisition or retention of an ownership interest in a covered fund is designed to reduce; and
(3) The level of organization that is establishing the hedge.
Section _.20(b) would require a compliance program with respect to covered fund activities and investments that shall, at a minimum, include:
(1) Internal written policies and procedures reasonably designed to document, describe, and monitor the covered trading and covered fund activities and investments of the covered banking entity to ensure that such activities and investments are compliant with section 13 of the BHC Act and this part;
(2) A system of internal controls reasonably designed to monitor and identify potential areas of noncompliance with section 13 of the BHC Act and this part in the covered banking entity's covered trading and covered fund activities and investments and to prevent the occurrence of activities or investments that are prohibited by section 13 of the BHC Act and this part;
(3) A management framework that clearly delineates responsibility and accountability for compliance with section 13 of the BHC Act and this part;
(4) Independent testing for the effectiveness of the compliance program conducted by qualified personnel of the covered banking entity or by a qualified outside party;
(5) Training for trading personnel and managers, as well as other appropriate personnel, to effectively implement and enforce the compliance program; and
(6) Maintenance of records sufficient to demonstrate compliance with section 13 of the BHC Act and this part, which a covered banking entity must promptly provide to the Agency upon request and retain for a period of no less than 5 years.
Section _.20(c) would require the compliance program of a covered banking entity to also comply with the requirements and other standards contained in Appendix C if the covered banking entity: (i) Engages in proprietary trading and has, together
Section _.20(d) would require a covered banking entity that does not engage in activities or investments prohibited or restricted in subpart B or subpart C of the proposed rule, in order to be deemed to have satisfied the requirements of § _.20, to ensure that its existing compliance policies and procedures include measures that are designed to prevent the covered banking entity from becoming engaged in such activities or making such investments and which require the covered banking entity to develop and provide for establishment of the compliance program required under § _.20(a) of the proposed rule prior to engaging in such activities or making such investments.
In determining the method for estimating the paperwork burden the Agencies made the assumption that affiliated entities under a holding company would act in concert with one another to take advantage of efficiencies that may exist. The Agencies invite comment on whether it is reasonable to assume that affiliated entities would act jointly to implement a firm-wide program or whether they would act independently to implement programs tailored to each entity. In addition, the Agencies invite comment as to the accuracy of our estimates of the burdens concerning the proposed collections of information and whether all banking entities subject to the rule are appropriately accounted for by the Agencies.
Section _.3(b)(2)(iii)(C) recordkeeping—1 hour (Initial setup 3 hours).
Section _.5(c) recordkeeping—6 hours for entities with $1 billion or more in trading assets/liabilities, 35 hours for entities with $5 billion or more in trading assets/liabilities.
Section _.7(a) reporting—2 hours for entities with $1 billion or more in trading assets/liabilities, 2 hours for entities with $5 billion or more in trading assets/liabilities (Initial setup 6 hours for entities with $1 billion or more in trading assets/liabilities, 6 hours for entities with $5 billion or more in trading assets/liabilities).
Section _.7(a) recordkeeping—350 hours for entities with $1 billion or more in trading assets/liabilities, 440 hours for entities with $5 billion or more in trading assets/liabilities.
Section _.11(b) recordkeeping—10 hours.
Section _.11(h)(1) disclosure—0.10 hours.
Section _.12(d) reporting—20 hours (Initial setup 50 hours).
Section _.13(b)(3) recordkeeping—10 hours.
Section _.20(b) recordkeeping—265 hours (Initial setup 795 hours).
Section _.20(c) recordkeeping—1,200 hours (Initial setup 3,600 hours).
Section _.20(d) recordkeeping—8 hours.
The Regulatory Flexibility Act (“RFA”), 5 U.S.C. 601
First, while the proposed rule will affect all banking organizations, including those that have been defined to be “small businesses” under the RFA, only certain limited requirements would be imposed on entities that engage in little or no covered trading activities or covered fund activities and investments. Significantly, the reporting and recordkeeping requirements of § _.7 and Appendix A of the proposed rule apply only to banking entities with average trading assets and liabilities on a consolidated, worldwide basis equal to or greater than $1 billion for the preceding year. This is a threshold that a small banking entity typically would not meet.
Second, the scope and size of the compliance program requirements set forth in subpart D and Appendix C of the proposed rule would vary based on the size and activities of each covered banking entity. Only banking entities with average trading assets and liabilities on a worldwide consolidated basis equal to or greater than $1 billion or 10 percent or more of their total assets, or that have aggregate investments in, or sponsor or advise, covered funds with aggregate total assets of more than $1 billion must establish, maintain and enforce a full compliance program under the proposed rule. Banking entities that engage in trading activities or covered fund activities and investments under these thresholds must adopt, at a minimum, only the six core compliance requirements set forth in § _.20 of the proposed rule. Banking entities that do not engage in any covered trading or fund activities, typical of small banking entities, must ensure only that their compliance programs include measures designed to
OCC, FDIC, and SEC: For the reasons stated above, the head of the OCC, FDIC, and the SEC certifies, for the covered banking entities subject to each such Agency's jurisdiction, that the proposed rule would not result in a significant economic impact on a substantial number of small entities. The OCC, FDIC, and SEC encourage written comments regarding this certification, and request that commenters describe the nature of any impact on small entities and provide empirical data to illustrate and support the extent of the impact.
Board: For the reasons stated above, the proposed rules would not appear to have a significant economic impact on small entities subject to the Board's jurisdiction. The Board welcomes written comments regarding this initial regulatory flexibility analysis, and requests that commenters describe the nature of any impact on small entities and provide empirical data to illustrate and support the extent of the impact. A final regulatory flexibility analysis will be conducted after consideration of comment received during the public comment period.
Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 104-4 (2 U.S.C. 1532) (“Unfunded Mandates Act”), requires that an agency prepare a budgetary impact statement before promulgating any rule likely to result in a Federal mandate that may result in the expenditure by state, local, and tribal governments, in the aggregate, or by the private sector of $100 million or more, as adjusted by inflation, in any one year. If a budgetary impact statement is required, Section 205 of the Unfunded Mandates Act also requires an agency to identify and consider a reasonable number of regulatory alternatives before promulgating a rule.
The OCC has completed an assessment whether any mandates imposed by the proposed rule may result in expenditures of $100 million or more annually, as adjusted by inflation, by state, local, and tribal governments, or by the private sector as required by the Unfunded Mandates Act. The OCC focused its analysis on the impact of the various compliance, recordkeeping, reporting, disclosure, and training requirements in the proposed rule and, as provided for under section 201 of the Unfunded Mandates Act (2 U.S.C. 1531), excluded the cost of requirements specifically set forth in the statute. Overall, the OCC determined that this proposed rule will not result in expenditures by state, local, and tribal governments, or by the private sector, of $100 million or more in any one year. Accordingly, this proposal is not subject to Section 202 of the Unfunded Mandates Act.
The OCC also will need to prepare an impact statement for the final rule, for purposes of the Unfunded Mandates Act and the Congressional Review Act, Public Law 104-121 (5 U.S.C. 801-808). Comments provided on the costs and benefits of the proposed rule, in response to the analysis and questions posed in the Supplemental Information Part VII.D, will help to inform this assessment.
Under the Small Business Regulatory Enforcement Fairness Act of 1996,
• An annual effect on the U.S. economy of $100 million or more;
• A major increase in costs or prices for consumers or individual industries; or
• Significant adverse effects on competition, investment, or innovation.
The SEC requests comment on whether its proposed rule would be a “major” rule for purposes of the Small Business Regulatory Enforcement Fairness Act. In addition, the SEC solicits comment and empirical data on:
• The potential effect on the U.S. economy on an annual basis;
• Any potential increase in costs or prices for consumer or individual industries; and
• Any potential effect on competition, investment, or innovation.
Section _.1 of the proposed rule implementing section 13 of the BHC Act cites section 13 of the BHC Act, pursuant to which the SEC is adopting the entirety of the proposed rule with respect to “covered banking entities,” as that term is defined in the SEC's proposed rule.
The proprietary trading and covered fund activity prohibition set forth in section 13 of the BHC Act, as proposed to be implemented in § _.3(a) and § _.10(a) of the proposed rule, would apply to any “covered banking entity.”
As discussed in Part I of the Supplementary Information, the authority for adopting regulations to implement section 13 of the BHC Act is divided between the Agencies in the manner provided in section 13(b)(2).
The SEC recognizes that some entities that would be included in the SEC's proposed definition of “covered banking entity” generally do not engage in covered trading activities and covered fund activities and investments. The SEC notes that, to the extent the covered banking entity does not engage in activities and investments covered by section 13 of the BHC Act and the proposed rule, the proposal is reasonably designed to reduce and alleviate any burdens on such a covered banking entity, while also preventing evasion of the proposed rule. Specifically, a covered banking entity that does not engage in activities and investments prohibited or restricted by section 13 of the BHC Act and the proposed rule would only be required to include measures in its existing compliance policies and procedures that are reasonably designed to prevent the covered banking entity from becoming engaged in such activities and making such investments under the proposed rule.
The SEC requests comment on the proposed definition of “covered banking entity.” In particular, the SEC requests comment on the following questions:
Section 3(f) of the Exchange Act requires the SEC, whenever it engages in rulemaking and is required to consider or determine whether an action is necessary or appropriate in the public interest, to consider, in addition to the protection of investors, whether the action would promote efficiency, competition, and capital formation.
As discussed above in Part III.B.5 of the Supplementary Information, § _.7(a) of the proposed rule and proposed Appendix A require covered banking entities that meet, together with their affiliates and subsidiaries, the $1 billion gross trading assets and liabilities threshold to: (i) Calculate and report certain quantitative measurements, and (ii) create and retain records related to such quantitative measurements. Further, under § _.7(a) of the proposed rule and proposed Appendix A, a larger number of
The reporting and recordkeeping requirements in § _.7(a) and Appendix A of the proposed rule are likely to impose certain costs on covered banking entities that meet the $1 billion gross trading assets and liabilities threshold, including costs associated with implementing, monitoring, and attributing financial and personnel resources for purposes of complying with the reporting and recordkeeping requirements. Moreover, such costs will likely be greater for covered banking entities that meet the $5 billion threshold. Incurring these costs may marginally reduce the ability of covered banking entities that are registered broker-dealers and security-based swap dealers to compete with their non-banking entity counterparts or with banking entities that do not meet the $1 billion threshold. Further, as a result of these costs, the proposal may impose additional competitive burdens on registered broker-dealers and security-based swap dealers that, together with their affiliates and subsidiaries, meet the $5 billion threshold, and may affect their ability to compete with: (i) Banking entities with $1 to $5 billion gross trading assets and liabilities; (ii) banking entities below the $1 billion threshold; and (iii) non-banking entities. In addition, registered broker-dealers and security-based swap dealers that are covered banking entities meeting the $1 billion threshold may need to redirect resources from other functions of the broker-dealer or security-based swap dealer in order to comply with the reporting and recordkeeping requirements. Reallocating available resources within the registered broker-dealer or security-based swap dealer may reduce efficiency within the covered banking entity and may have a marginal negative impact on the extent to which the registered broker-dealer or security-based swap dealer continues to perform certain functions, which may include those that serve customers or provide other market benefits. If this were to occur, registered broker-dealers and security-based swap dealers that are covered banking entities meeting the $5 billion threshold may face greater efficiency effects because they will likely need to devote more time and resources to the enhanced reporting and recordkeeping requirements set forth in the proposal for such covered banking entities. The increased cost of doing business that may result from the proposed reporting and recordkeeping requirements could also cause a registered broker-dealer or security-based swap dealer that is a covered banking entity to pass some of the costs along to customers and clients of their services, such as market making or underwriting. On the other hand, the reporting and recordkeeping requirements in § _.7(a) and Appendix A could have positive efficiency effects because these measures generally may improve compliance within covered banking entities and thereby reduce the potential consequences associated with noncompliance.
The reporting and recordkeeping requirements may create an incentive for covered banking entities that are registered broker-dealers and security-based swap dealers to reduce their average gross sum of trading assets and liabilities, together with their affiliates and subsidiaries, below the $5 billion threshold or $1 billion in order to avoid the costs of complying with some or all of the requirements in § _.7(a) of the proposed rule and Appendix A. To the extent the proposed rule creates such an incentive, a covered banking entity that is a registered broker-dealer or security-based swap dealer may reduce the amount of its trading activities to be below the applicable threshold. If a registered broker-dealer or security-based swap dealer that is a covered banking entity decreased the extent to which it engaged in trading activities, the resulting effects could be decreased competitiveness of the registered broker-dealer or security-based swap dealer in the broader market and reduced market efficiency and liquidity. Whether there will be a competitive impact will depend on the way in which a registered broker-dealer or security-based swap dealer that is a covered banking entity chooses to reduce its trading activities. For example, if the reporting and recordkeeping requirement lead a covered banking entity to minimize its trading in a particular product, this may lead to a decreased competitiveness in the trading of that particular product. The reporting and recordkeeping requirements, however, could enhance efficiency by improving covered banking entities' compliance and thereby reduce the potential consequences associated with noncompliance.
Further, a majority of the quantitative measurements in proposed Appendix A would only be required to be calculated and reported for trading units engaged in market making-related activity under § _.4(b) of the proposed rule. To the extent that the costs associated with the requirements in Appendix A create a disincentive for covered banking entities that are registered broker-dealers or security-based swap dealers to engage in the full range of market making-related activity that is permitted under the rule, such covered banking entities may reduce the size or scope of their market making activities. If this were to occur to a significant extent, the overall reduction in market making activities would likely have a negative impact on market efficiency and liquidity and, as a related matter, capital formation by causing certain banking entities to provide fewer market making-related services. This potential reduction in market making on the part of certain registered broker-dealers or security-based swap dealers that are covered banking entities may cause some demand for market making-related services to migrate to smaller banking entities not meeting the $1 billion threshold and non-banking entities. At the same time, the quantitative measurements required under Appendix A could have positive efficiency effects by generally improving compliance and thereby reduce the potential consequences associated with noncompliance.
The documentation requirements of § _.5(c) of the proposed rule, which provides that risk-mitigating hedging transactions must be documented in a specified manner if the hedging transaction is established at a level of organization that is different than the level of organization establishing or responsible for the position, contract, or other holding that is being hedged, may have a negative impact on efficiency by reducing the speed with which a covered banking entity could execute a hedge at a different level within the entity. To the extent that the proposed documentation requirement makes it more costly or difficult for a covered banking entity that is a registered broker-dealer or security-based swap dealer to establish hedges at a different level within the entity, this requirement may result in increased risks or reduced profitability of the broker-dealer or security-based swap dealer, which could negatively affect the competitiveness of the broker-dealer or security-based swap dealer. Further, greater difficulties or increased costs, such as those related to potential
As discussed above in Part III.D of the Supplemental Information, § _.20 of the proposed rule requires all covered banking entities to develop and provide for the continued administration of a program reasonably designed to ensure and monitor compliance with the prohibitions and restrictions of section 13 of the BHC Act and the proposed rule, unless such covered banking entity does not engage in activities or investments prohibited or restricted by subpart B or subpart C of the proposed rule.
The SEC recognizes that the compliance program requirements in the proposal are likely to impose certain costs, including implementation and ongoing maintenance costs associated with hiring additional personnel or other personnel modifications, new or additional systems (including computer hardware or software), ongoing system maintenance, developing exception reports, surveillance (e.g., reviewing and monitoring exception reports), consultation with outside experts (e.g., attorneys, accountants), recordkeeping, independent testing, and training. These costs may increase competitive burdens on registered broker-dealers and security-based swap dealers that are covered banking entities. For example, the increased compliance costs related to implementation and ongoing maintenance of the six elements of the compliance program (i.e., written policies and procedures, internal controls, a management framework, independent testing, training, and recordkeeping), as part of the overall cost of doing business, may make it more difficult for covered banking entities that are registered broker-dealers and security-based swap dealers to compete with non-banking entity broker-dealers and security-based swap dealers. Further, there may be additional competitive burdens for covered banking entities that are registered broker-dealers and security-based swap dealers that, together with their affiliates and subsidiaries, meet the thresholds in § _.20(c), which determines the covered banking entities that must comply with the minimum standards in proposed Appendix C, as there are likely to be increased compliance costs related to the more specific requirements for the compliance program requirements set forth in Appendix C. Since the thresholds in § _.20(c) are based on the size of the registered broker-dealer or security-based swap dealer, together with its affiliates and subsidiaries, and the size of their collective covered trading activities and covered fund activities and investments, the demand for these trading activities may migrate to smaller banking entities or non-banking entities.
In addition, the costs associated with implementation and ongoing maintenance of the compliance program requirements in § _.20 of the proposed rule and Appendix C, where applicable, could cause the covered banking entity to redirect resources from other business activities that are generally beneficial to market efficiency, such as market making and other customer-related services. This potential reallocation of resources could have a marginal negative effect on competition, efficiency, and capital formation. For example, the independent testing requirement in the proposal may necessitate that additional resources be provided to the internal audit department of the covered banking entity that is a registered broker-dealer or security-based swap dealer, if such testing is conducted by a qualified internal tester. Alternatively, if an outside party is used to conduct the independent testing, the covered banking entity would incur costs associated with paying the qualified outside party for its services, which would reduce the resources available for other activities of the covered banking entity.
Further, §§ _.4(a), _.4(b), and _.5 of the proposed rule, which permit underwriting, market making-related, and risk-mitigating hedging activities, require a covered banking entity to establish the compliance program required in the proposed rule in order to rely on the exemptions. To the extent that the burdens associated with the compliance program requirements in the proposed rule create an incentive for registered broker-dealers and security-based swap dealers that are covered banking entities to forgo these permitted activities, rather than incur the costs related to establishing and maintaining a compliance program, there would likely be a negative impact on efficiency, competition, and capital formation as a result of reduced market making and underwriting services available to customers and clients of such services.
The SEC requests comment on the competitive or anticompetitive effects of the elements of the proposed rule that are proposed under Exchange Act authority with respect to covered banking entities that are registered broker-dealers and security-based swap dealers. The SEC also seeks comment on the efficiency and capital formation effects of these components of the proposal, if adopted. The SEC encourages commenters to identify, discuss, analyze, and supply relevant data, information, or statistics regarding any such effects.
As discussed above, under the proposed rule, a covered banking entity as defined in § _.2(j) would generally be subject to the substantive requirements contained in the SEC's rule. These substantive requirements implement the provisions on proprietary trading and covered fund activities under section 13 of the BHC Act. Thus for example, a covered banking entity that is a registered dealer would be required to comply with subparts A through D of the SEC's proposed rule, including Appendices A, B and C, where applicable. With respect to covered fund activities, investments or relationships set forth in subpart C and § _.20 of subpart D (“covered fund restrictions”), however, the SEC's proposed rule would require that a covered banking entity that is a covered banking entity because it is an investment adviser for which the SEC is the primary financial regulatory agency under section 2(12)(B)(iii) of the Dodd-Frank Act (a “registered adviser”) comply with the covered fund restrictions issued by the appropriate Federal banking agency that regulates the banking entity specified in § _.2(e)(1), (2) and (3) with which the registered adviser is affiliated.
The covered fund restrictions of section 13 of the BHC Act and the proposed implementing rules make reference to or incorporate a number of banking law and supervision concepts that traditionally appear in Federal banking law and are interpreted and applied by the Federal banking agencies. For example, as discussed in greater detail in the Supplementary Information, the limitations on ownership interests in a covered fund set forth in the statute and the proposed rule generally reference the tier 1 capital of the affiliated insured depository institution or the affiliated holding company. Similarly, capital deductions under the proposed rule refer to the tier 1 capital of the affiliated insured depository institution or the affiliated holding company. In addition, the covered fund restrictions of the statute and the proposed rule incorporate by reference sections 23A and 23B of the FR Act and are administered by the Federal banking agencies. These sections of the FR Act restrict and limit transactions between certain banking organizations and their affiliates, some of which are based on a percentage of bank capital. Further, other covered fund restrictions, including for example exemptions for investments involving the public welfare and bank-owned life insurance and the extension of time to divest of investments after the seeding period, reference other banking laws or regulations that are administered by the Federal banking agencies.
In light of these considerations, the SEC's proposed rule would require a registered adviser to comply with the covered fund restrictions contained in subpart C and § ._20 of subpart D of rules implementing section 13 of the BHC that are issued by the appropriate Federal banking agency that regulates the banking entity with which the registered adviser is affiliated. Under the proposed approach, a registered adviser complying with the SEC's rule would do so by complying with the rule issued by the appropriate Federal banking agency, including any related interpretations or guidance regarding such requirements. Similarly, under the proposed approach, the foregoing determinations regarding capital or other banking law requirements that may be applicable to a registered adviser would be made by the appropriate Federal banking agency that regulates the banking entity with which the registered adviser is affiliated. This approach would mitigate the burdens of complying with the covered fund restrictions for registered advisers and would avoid creating incentives for covered fund activities to be moved from a registered adviser to a bank.
The SEC's proposed rule specifies that a registered adviser must comply with the covered fund restrictions contained in subpart C and § _.20 of subpart D that are issued by the appropriate Federal banking agency that regulates the banking entity with which the registered adviser is affiliated. Subpart C, which uses terms defined in subpart A, specifies the covered fund restrictions. Subpart D § _.20 requires the establishment of a compliance program when engaging in covered fund activities. A registered adviser complying with subpart C and § _.20 of subpart D, as issued by the appropriate Federal banking agency, would also rely on interpretative guidance issued by the appropriate Federal banking agency with respect to those subparts of the proposed rule. Because § _.20 of subpart D relates to both the prohibitions and restrictions on proprietary trading activity as well as the prohibitions and restrictions on covered fund activities and investments, a registered adviser would be required to comply with the relevant covered fund provisions issued by the appropriate Federal banking agency. A registered adviser, however, would be subject to the provisions set forth in subpart D of the SEC's proposed rule, including § _.20, that relate to covered trading activities.
Nothing set forth in the discussion above, or in § _.10(a)(2) of the SEC's proposed rule, however, is intended, or shall be deemed, to limit the SEC's authority under any other provision of law, including pursuant to section 13 of the BHC Act.
The SEC request comment on its proposed approach to implementing section 13 of the BHC Act as it applies to registered advisers with respect to the covered fund restrictions. In particular, the SEC requests comment on the following:
The text of the proposed common rules appears below:
Unless otherwise specified, for purposes of this part:
(a)
(b)
(c)
(d)
(e)
(1) Any insured depository institution;
(2) Any company that controls an insured depository institution;
(3) Any company that is treated as a bank holding company for purposes of section 8 of the International Banking Act of 1978 (12 U.S.C. 3106); and
(4) Any affiliate or subsidiary of any entity described in paragraphs (e)(1), (2), or (3) of this section, other than an affiliate or subsidiary that is:
(i) A covered fund that is organized, offered and held by a banking entity pursuant to § _.11 and in accordance with the provisions of subpart C of this part, including the provisions governing relationships between a covered fund and a banking entity; or
(ii) An entity that is controlled by a covered fund described in paragraph (e)(4)(i) of this section.
(f)
(g)
(h)
(i)
(j) [Reserved]
(k)
(l) (i)
(A) Any swap, as that term is defined in section 1a(47) of the Commodity Exchange Act (7 U.S.C. 1a(47)), or security-based swap, as that term is defined in section 3(a)(68) of the Exchange Act (15 U.S.C. 78c(a)(68)), and as those terms are further jointly defined by the CFTC and SEC by joint regulation, interpretation, guidance, or other action, in consultation with the Board pursuant to section 712(d) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (15 U.S.C. 8302(d));
(B) Any purchase or sale of a nonfinancial commodity for deferred shipment or delivery that is intended to be physically settled;
(C) Any foreign exchange forward (as that term is defined in section 1a(24) of the Commodity Exchange Act (7 U.S.C. 1a(24)) or foreign exchange swap (as that term is defined in section 1a(25) of the Commodity Exchange Act (7 U.S.C. 1a(25));
(D) Any agreement, contract, or transaction in foreign currency described in section 2(c)(2)(C)(i) of the Commodity Exchange Act (7 U.S.C. 2(c)(2)(C)(i));
(E) Any agreement, contract, or transactions in a commodity other than foreign currency described in section 2(c)(2)(D)(i) of the Commodity Exchange Act (7 U.S.C. 2(c)(2)(D)(i)); and
(F) Any transaction authorized under section 19 of the Commodity Exchange Act (7 U.S.C. 23(a) or (b));
(ii) A derivative does not include:
(A) Any consumer, commercial, or other agreement, contract, or transaction that the CFTC and SEC have further defined by joint regulation, interpretation, guidance, or other action as not within the definition of swap, as that term is defined in section 1a(47) of the Commodity Exchange Act (7 U.S.C. 1a(47)), or security-based swap, as that term is defined in section 3(a)(68) of the Exchange Act (15 U.S.C. 78c(a)(68));
(B) Any identified banking product, as defined in section 402(b) of the Legal Certainty for Bank Products Act of 2000 (7 U.S.C. 27(b)), that is subject to section 403(a) of that Act (7 U.S.C. 27a(a)).
(m)
(n)
(o)
(p)
(q)
(r)
(s)
(t)
(1) Any natural person resident in the United States;
(2) Any partnership, corporation or other business entity organized or incorporated under the laws of the United States or any State;
(3) Any estate of which any executor or administrator is a resident of the United States;
(4) Any trust of which any trustee, beneficiary or, if the trust is revocable, any settlor is a resident of the United States;
(5) Any agency or branch of a foreign entity located in the United States;
(6) Any discretionary or non-discretionary account or similar account (other than an estate or trust) held by a dealer or fiduciary for the benefit or account of a resident of the United States;
(7) Any discretionary account or similar account (other than an estate or trust) held by a dealer or fiduciary organized or incorporated in the United States, or (if an individual) a resident of the United States; or
(8) Any person organized or incorporated under the laws of any foreign jurisdiction formed by or for a resident of the United States principally for the purpose of engaging in one or more transactions described in § _.6(d)(1) or § _.13(c)(1).
(u)
(v)
(w)
(x)
(y)
(z)
(aa)
(bb)
(a)
(b)
(1)
(2)
(i)
(A) Acquire or take one or more covered financial positions principally for the purpose of:
(B) Acquire or take one or more covered financial positions, other than positions that are foreign exchange derivatives, commodity derivatives, or contracts of sale of a commodity for future delivery, that are market risk capital rule covered positions, if the covered banking entity, or any affiliate of the covered banking entity that is a bank holding company, calculates risk-based capital ratios under the market risk capital rule as defined in paragraph (c)(8) of this section; or
(C) Acquire or take one or more covered financial position for any purpose, if the covered banking entity is:
(ii)
(iii) An account shall not be deemed a trading account for purposes of paragraph (b)(2)(i) of this section to the extent that such account is used to acquire or take a position in one or more covered financial positions:
(A) That arise under a repurchase or reverse repurchase agreement pursuant to which the covered banking entity has simultaneously agreed, in writing, to both purchase and sell a stated asset, at stated prices, and on stated dates or on demand with the same counterparty;
(B) That arise under a transaction in which the covered banking entity lends or borrows a security temporarily to or from another party pursuant to a written securities lending agreement under which the lender retains the economic interests of an owner of such security, and has the right to terminate the transaction and to recall the loaned security on terms agreed by the parties;
(C) For the
(D) That are acquired or taken by a covered banking entity that is a derivatives clearing organization registered under section 5b of the Commodity Exchange Act (7 U.S.C. 7a-1) or a clearing agency registered with the SEC under section 17A of the Exchange Act (15 U.S.C. 78q-1) in connection with clearing derivatives or securities transactions.
(3)
(i)
(A) A security, including an option on a security;
(B) A derivative, including an option on a derivative; or
(C) A contract of sale of a commodity for future delivery, or option on a contract of sale of a commodity for future delivery.
(ii) A covered financial position does not include any position that is:
(A) A loan;
(B) A commodity; or
(C) Foreign exchange or currency.
(c)
(1)
(2)
(3)
(4)
(6)
(7)
(i) In the case of a covered banking entity that is a bank holding company or insured depository institution, the market risk capital rule that is applicable to the covered banking entity; and
(ii) In the case of a covered banking entity that is affiliated with a bank holding company, other than a covered banking entity to which a market risk capital rule is applicable, the market risk capital rule that is applicable to the affiliated bank holding company.
(8)
(9)
(10)
(11)
(12)
(a)
(1)
(2)
(i) The covered banking entity has established the internal compliance program required by subpart D of this part that is designed to ensure the covered banking entity's compliance with the requirements of paragraph (a)(2) of this section, including reasonably designed written policies and procedures, internal controls, and independent testing;
(ii) The covered financial position is a security;
(iii) The purchase or sale is effected solely in connection with a distribution of securities for which the covered banking entity is acting as underwriter;
(iv) The covered banking entity is:
(A) With respect to a purchase or sale effected in connection with a distribution of one or more covered financial positions that are securities, other than exempted securities, security-based swaps, commercial paper, bankers' acceptances, or commercial bills:
(B) With respect to a purchase or sale effected as part of a distribution of one or more covered financial positions that are municipal securities, a municipal securities dealer that is registered under section 15B of the Exchange Act (15 U.S.C. 78
(C) With respect to a purchase or sale effected as part of a distribution of one or more covered financial positions that are government securities, a government securities dealer that is registered, or that has filed notice, under section 15C of the Exchange Act (15 U.S.C. 78
(v) The underwriting activities of the covered banking entity with respect to the covered financial position are designed not to exceed the reasonably expected near term demands of clients, customers, or counterparties;
(vi) The underwriting activities of the covered banking entity are designed to generate revenues primarily from fees, commissions, underwriting spreads or other income not attributable to:
(A) Appreciation in the value of covered financial positions related to such activities; or
(B) The hedging of covered financial positions related to such activities; and
(vii) The compensation arrangements of persons performing underwriting activities are designed not to reward proprietary risk-taking.
(3)
(4)
(i) A person who has agreed with an issuer of securities or selling security holder:
(A) To purchase securities for distribution;
(B) To engage in a distribution of securities for or on behalf of such issuer or selling security holder; or
(C) To manage a distribution of securities for or on behalf of such issuer or selling security holder; and
(ii) A person who has an agreement with another person described in paragraph (a)(4)(i) of this section to engage in a distribution of such securities for or on behalf of the issuer or selling security holder.
(b)
(1)
(2)
(i) The covered banking entity has established the internal compliance program required by subpart D that is designed to ensure the covered banking entity's compliance with the requirements of paragraph (b)(2) of this section, including reasonably designed written policies and procedures, internal controls, and independent testing;
(ii) The trading desk or other organizational unit that conducts the purchase or sale holds itself out as being willing to buy and sell, including through entering into long and short positions in, the covered financial position for its own account on a regular or continuous basis;
(iii) The market making-related activities of the trading desk or other organizational unit that conducts the purchase or sale are, with respect to the covered financial position, designed not to exceed the reasonably expected near term demands of clients, customers, or counterparties;
(iv) The covered banking entity is:
(A) With respect to a purchase or sale of one or more covered financial positions that are securities, other than exempted securities, security-based swaps, commercial paper, bankers' acceptances, or commercial bills:
(B) With respect to a purchase or sale of one or more covered financial positions that are swaps:
(C) With respect to a purchase or sale of one or more covered financial positions that are security-based swaps:
(D) With respect to a purchase or sale of one or more covered financial positions that are municipal securities, a municipal securities dealer that is registered under section 15B of the Exchange Act (15 U.S.C. 78
(E) With respect to a purchase or sale of one or more covered financial positions that are government securities, a government securities dealer that is registered, or that has filed notice, under section 15C of the Exchange Act (15 U.S.C. 78
(v) The market making-related activities of the trading desk or other organizational unit that conducts the purchase or sale are designed to generate revenues primarily from fees, commissions, bid/ask spreads or other income not attributable to:
(A) Appreciation in the value of covered financial positions it holds in trading accounts; or
(B) The hedging of covered financial positions it holds in trading accounts;
(vi) The market making-related activities of the trading desk or other organizational unit that conducts the purchase or sale are consistent with the
(vii) The compensation arrangements of persons performing the market making-related activities are designed not to reward proprietary risk-taking.
(3)
(i) The covered financial position is purchased or sold to reduce the specific risks to the covered banking entity in connection with and related to individual or aggregated positions, contracts, or other holdings acquired pursuant to paragraph (b) of this section; and
(ii) The purchase or sale meets all of the requirements described in § _.5(b) and, if applicable, § _.5(c).
(a)
(b)
(1) The covered banking entity has established the internal compliance program required by subpart D designed to ensure the covered banking entity's compliance with the requirements of paragraph (b) of this section, including reasonably designed written policies and procedures regarding the instruments, techniques and strategies that may be used for hedging, internal controls and monitoring procedures, and independent testing;
(2) The purchase or sale:
(i) Is made in accordance with the written policies, procedures and internal controls established by the covered banking entity pursuant to subpart D of this part;
(ii) Hedges or otherwise mitigates one or more specific risks, including market risk, counterparty or other credit risk, currency or foreign exchange risk, interest rate risk, basis risk, or similar risks, arising in connection with and related to individual or aggregated positions, contracts, or other holdings of a covered banking entity;
(iii) Is reasonably correlated, based upon the facts and circumstances of the underlying and hedging positions and the risks and liquidity of those positions, to the risk or risks the purchase or sale is intended to hedge or otherwise mitigate;
(iv) Does not give rise, at the inception of the hedge, to significant exposures that were not already present in the individual or aggregated positions, contracts, or other holdings of a covered banking entity and that are not hedged contemporaneously;
(v) Is subject to continuing review, monitoring and management by the covered banking entity that:
(A) Is consistent with the written hedging policies and procedures required under paragraph (b)(1) of this section; and
(B) Maintains a reasonable level of correlation, based upon the facts and circumstances of the underlying and hedging positions and the risks and liquidity of those positions, to the risk or risks the purchase or sale is intended to hedge or otherwise mitigate; and
(C) Mitigates any significant exposure arising out of the hedge after inception; and
(vi) The compensation arrangements of persons performing the risk-mitigating hedging activities are designed not to reward proprietary risk-taking.
(c)
(1) The risk-mitigating purpose of the purchase, sale, or series of purchases or sales;
(2) The risks of the individual or aggregated positions, contracts, or other holdings of a covered banking entity that the purchase, sale, or series of purchases or sales are designed to reduce; and
(3) The level of organization that is establishing the hedge.
(a)
(1) The prohibition on proprietary trading contained in § _.3(a) does not apply to the purchase or sale by a covered banking entity of a covered financial position that is:
(i) An obligation of the United States or any agency thereof;
(ii) An obligation, participation, or other instrument of or issued by the Government National Mortgage Association, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, a Federal Home Loan Bank, the Federal Agricultural Mortgage Corporation or a Farm Credit System institution chartered under and subject to the provisions of the Farm Credit Act of 1971 (12 U.S.C. 2001
(iii) An obligation of any State or any political subdivision thereof.
(2) An obligation or other instrument described in paragraphs (a)(1)(i), (ii) or (iii) of this section shall include both general obligations and limited obligations, such as revenue bonds.
(b)
(2) For purposes of paragraph (b)(1) of this section, a purchase or sale of a covered financial position by a covered banking entity shall be considered to be on behalf of customers if:
(i) The purchase or sale:
(A) Is conducted by a covered banking entity acting as investment adviser, commodity trading advisor, trustee, or in a similar fiduciary capacity for a customer;
(B) Is conducted for the account of the customer; and
(C) Involves solely covered financial positions of which the customer, and not the covered banking entity or any subsidiary or affiliate of the covered banking entity, is beneficial owner (including as a result of having long or short exposure under the relevant covered financial position);
(ii) The covered banking entity is acting as riskless principal in a transaction in which the covered banking entity, after receiving an order to purchase (or sell) a covered financial
(iii) The covered banking entity is an insurance company that purchases or sells a covered financial position for a separate account, if:
(A) The insurance company is directly engaged in the business of insurance and subject to regulation by a State insurance regulator or foreign insurance regulator;
(B) The insurance company purchases or sells the covered financial position solely for a separate account established by the insurance company in connection with one or more insurance policies issued by that insurance company;
(C) All profits and losses arising from the purchase or sale of a covered financial position are allocated to the separate account and inure to the benefit or detriment of the owners of the insurance policies supported by the separate account, and not the insurance company; and
(D) The purchase or sale is conducted in compliance with, and subject to, the insurance company investment and other laws, regulations, and written guidance of the State or jurisdiction in which such insurance company is domiciled.
(c)
(1) The insurance company is directly engaged in the business of insurance and subject to regulation by a State insurance regulator or foreign insurance regulator;
(2) The insurance company or its affiliate purchases or sells the covered financial position solely for the general account of the insurance company;
(3) The purchase or sale is conducted in compliance with, and subject to, the insurance company investment laws, regulations, and written guidance of the State or jurisdiction in which such insurance company is domiciled; and
(4) The appropriate Federal banking agencies, after consultation with the Financial Stability Oversight Council and the relevant insurance commissioners of the States, have not jointly determined, after notice and comment, that a particular law, regulation, or written guidance described in paragraph (c)(3) of this section is insufficient to protect the safety and soundness of the covered banking entity, or of the financial stability of the United States.
(d)
(1) The prohibition on proprietary trading contained in § _.3(a) does not apply to the purchase or sale of a covered financial position by a covered banking entity if:
(i) The covered banking entity is not directly or indirectly controlled by a banking entity that is organized under the laws of the United States or of one or more States;
(ii) The purchase or sale is conducted pursuant to paragraph (9) or (13) of section 4(c) of the BHC Act; and
(iii) The purchase or sale occurs solely outside of the United States.
(2) A purchase or sale shall be deemed to be conducted pursuant to paragraph (9) or (13) of section 4(c) of the BHC Act only if:
(i) With respect to a covered banking entity that is a foreign banking organization, the banking entity is a qualifying foreign banking organization and is conducting the purchase or sale in compliance with subpart B of the Board's Regulation K (12 CFR 211.20 through 211.30); or
(ii) With respect to a covered banking entity that is not a foreign banking organization, the covered banking entity meets at least two of the following requirements:
(A) Total assets of the covered banking entity held outside of the United States exceed total assets of the covered banking entity held in the United States;
(B) Total revenues derived from the business of the covered banking entity outside of the United States exceed total revenues derived from the business of the covered banking entity in the United States; or
(C) Total net income derived from the business of the covered banking entity outside of the United States exceeds total net income derived from the business of the covered banking entity in the United States.
(3) A purchase or sale shall be deemed to have occurred solely outside of the United States only if:
(i) The covered banking entity conducting the purchase or sale is not organized under the laws of the United States or of one or more States;
(ii) No party to the purchase or sale is a resident of the United States;
(iii) No personnel of the covered banking entity who is directly involved in the purchase or sale is physically located in the United States; and
(iv) The purchase or sale is executed wholly outside of the United States.
A covered banking entity engaged in any proprietary trading activity permitted under §§ _.4 through _.6 shall comply with:
(a) The reporting and recordkeeping requirements described in Appendix A to this part, if the covered banking entity has, together with its affiliates and subsidiaries, trading assets and liabilities the average gross sum of which (on a worldwide consolidated basis) is, as measured as of the last day of each of the four prior calendar quarters, equal to or greater than $1 billion;
(b) The recordkeeping requirements required under § _.20 and appendix C to this part, as applicable; and
(c) Such other reporting and recordkeeping requirements as [Agency] may impose to evaluate the covered banking entity's compliance with this subpart.
(a) No transaction, class of transactions, or activity may be deemed permissible under §§ _.4 through _.6 if the transaction, class of transactions, or activity would:
(1) Involve or result in a material conflict of interest between the covered banking entity and its clients, customers, or counterparties;
(2) Result, directly or indirectly, in a material exposure by the covered banking entity to a high-risk asset or a high-risk trading strategy; or
(3) Pose a threat to the safety and soundness of the covered banking entity or to the financial stability of the United States.
(b)
(1)
(i) Makes clear, timely, and effective disclosure of the conflict of interest,
(ii) Makes such disclosure explicitly and effectively, and in a manner that provides the client, customer, or counterparty the opportunity to negate, or substantially mitigate, any materially adverse effect on the client, customer, or counterparty created by the conflict of interest; or
(2)
(c)
(1)
(2)
(a)
(b)
(1)
(i) An issuer that would be an investment company, as defined in the Investment Company Act of 1940 (15 U.S.C. 80a-1
(ii) A commodity pool, as defined in section 1a(10) of the Commodity Exchange Act (7 U.S.C. 1a(10));
(iii) Any issuer, as defined in section 2(a)(22) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(22)), that is organized or offered outside of the United States that would be a covered fund as defined in paragraphs (b)(1)(i), (ii), or (iv) of this section, were it organized or offered under the laws, or offered to one or more residents, of the United States or of one or more States; and
(iv) Any such similar fund as the appropriate Federal banking agencies, the SEC, and the CFTC may determine, by rule, as provided in section 13(b)(2) of the BHC Act.
(2)
(3)
(i)
(ii)
(A)
(
(
(
(
(4)
(5)
(i) To serve as a general partner, managing member, trustee, or commodity pool operator of a covered fund;
(ii) In any manner to select or to control (or to have employees, officers, or directors, or agents who constitute) a majority of the directors, trustees, or management of a covered fund; or
(iii) To share with a covered fund, for corporate, marketing, promotional, or other purposes, the same name or a variation of the same name.
(6)
(ii) Any covered banking entity that directs a person identified in paragraph (b)(6)(i) of this section, or that possesses authority and discretion to manage and control the assets of a covered fund for which such person identified in paragraph (b)(6)(i) of this section serves as trustee, shall be considered a trustee of such covered fund.
Section _.10(a) does not prohibit a covered banking entity from, directly or indirectly, organizing and offering a covered fund, including serving as a general partner, managing member, trustee, or commodity pool operator of the covered fund and in any manner
(a) The covered banking entity provides
(b) The covered fund is organized and offered only in connection with the provision of
(c) The covered banking entity does not acquire or retain an ownership interest in the covered fund except as permitted under this subpart;
(d) The covered banking entity complies with the restrictions under § _.16 of this subpart;
(e) The covered banking entity does not, directly or indirectly, guarantee, assume, or otherwise insure the obligations or performance of the covered fund or of any covered fund in which such covered fund invests;
(f) The covered fund, for corporate, marketing, promotional, or other purposes:
(1) Does not share the same name or a variation of the same name with the covered banking entity (or an affiliate or subsidiary thereof); and
(2) Does not use the word “bank” in its name;
(g) No director or employee of the covered banking entity takes or retains an ownership interest in the covered fund, except for any director or employee of the covered banking entity who is directly engaged in providing investment advisory or other services to the covered fund; and
(h) The covered banking entity:
(1) Clearly and conspicuously discloses, in writing, to any prospective and actual investor in the covered fund (such as through disclosure in the covered fund's offering documents):
(i) That “any losses in [such covered fund] will be borne solely by investors in [the covered fund] and not by [the covered banking entity and its affiliates or subsidiaries]; therefore, [the covered banking entity's and its affiliates' or subsidiaries'] losses in [such covered fund] will be limited to losses attributable to the ownership interests in the covered fund held by the [covered banking entity and its affiliates or subsidiaries] in their capacity as investors in the [covered fund]”;
(ii) That such investor should read the fund offering documents before investing in the covered fund;
(iii) That the “ownership interests in the covered fund are not insured by the FDIC, and are not deposits, obligations of, or endorsed or guaranteed in any way, by any banking entity” (unless that happens to be the case);
(iv) The role of the covered banking entity and its affiliates, subsidiaries and employees in sponsoring or providing any services to the covered fund; and
(2) Complies with any additional rules of the appropriate Federal banking agencies, the SEC, or the CFTC, as provided in section 13(b)(2) of the BHC Act, designed to ensure that losses in such covered fund are borne solely by investors in the covered fund and not by the covered banking entity and its affiliates or subsidiaries.
(a)
(i)
(ii)
(2)
(i) With respect to an investment in any covered fund pursuant to paragraph (a)(1)(i) of this section, the covered banking entity:
(A) Must actively seek unaffiliated investors to reduce through redemption, sale, dilution, or other methods the aggregate amount of all ownership interests of the covered banking entity in any covered fund under § _.12 to the amount permitted in paragraph (a)(2)(i)(B) of this section; and
(B) May not exceed 3 percent of the total amount or value of outstanding ownership interests of the fund not later than 1 year after the date of establishment of the fund (or such longer period as may be provided by the Board pursuant to paragraph (e) of this section); and
(ii) The aggregate value of all ownership interests of the covered banking entity in all covered funds under § _.12 may not exceed 3 percent of the tier 1 capital of the covered banking entity, as provided under paragraph (c) of this section.
(b)
(1)
(i)
(ii)
(2)
(i) The aggregate amount of all ownership interests of the covered banking entity shall be the greater of (without regard to committed funds not yet called for investment):
(A) The value of any investment or capital contribution made with respect to all ownership interests held under § _.12 by the covered banking entity in the covered fund, divided by the value of all investments or capital contributions, respectively, made by all persons in that covered fund; or
(B) The total number of ownership interests held under § _.12 by the covered banking entity in a covered fund divided by the total number of ownership interests held by all persons in that covered fund.
(ii)
(3)
(4)
(c)
(2)
(i)
(ii) If a covered banking entity is not required to calculate and report tier 1 capital, the covered banking entity's tier 1 capital shall be determined to be equal to:
(A) In the case of a covered banking entity that is controlled, directly or indirectly, by a depository institution that calculates and reports tier 1 capital, the amount of tier 1 capital reported by such controlling depository institution pursuant to paragraph (c)(2)(i) of this section;
(B) In the case of a covered banking entity that is not controlled, directly or indirectly, by a depository institution that calculates and reports tier 1 capital:
(
(
(3) A covered banking entity's aggregate permitted investment in all covered funds shall be calculated as of the last day of each calendar quarter.
(d)
(e)
(i) Be submitted to the Board at least 90 days prior to the expiration of the applicable time period;
(ii) Provide the reasons for application, including information that addresses the factors in paragraph (e)(2) of this section; and
(iii) Explain the covered banking entity's plan for reducing the permitted investment in a covered fund through redemption, sale, dilution or other methods as required in paragraph (a)(2)(i) of this section.
(2)
(i) Whether the investment would:
(A) Involve or result in material conflicts of interest between the covered banking entity and its clients, customers or counterparties;
(B) Result, directly or indirectly, in a material exposure by the covered banking entity to high-risk assets or high-risk trading strategies;
(C) Pose a threat to the safety and soundness of the covered banking entity; or
(D) Pose a threat to the financial stability of the United States;
(ii) Market conditions;
(iii) The contractual terms governing the covered banking entity's interest in the covered fund;
(iv) The date on which the covered fund is expected to have attracted sufficient investments from investors unaffiliated with the covered banking entity to enable the covered banking entity to comply with the limitations in paragraph (a)(2)(i) of this section;
(v) The total exposure of the covered banking entity to the investment and the risks that disposing of, or maintaining, the investment in the covered fund may pose to the covered banking entity and the financial stability of the United States;
(vi) The cost to the covered banking entity of divesting or disposing of the investment within the applicable period;
(vii) Whether the divestiture or conformance of the investment would involve or result in a material conflict of interest between the covered banking entity and unaffiliated clients, customers or counterparties to which it owes a duty;
(viii) The covered banking entity's prior efforts to reduce through redemption, sale, dilution, or other methods its ownership interests in the covered fund, including activities related to the marketing of interests in such covered fund; and
(ix) Any other factor that the Board believes appropriate.
(3)
(4)
(ii)
(a)
(1) In one or more small business investment companies, as defined in section 102 of the Small Business Investment Act of 1958 (15 U.S.C. 662);
(2) That is designed primarily to promote the public welfare, of the type permitted under paragraph (11) of section 5136 of the Revised Statutes of the United States (12 U.S.C. 24), including the welfare of low- and moderate-income communities or families (such as providing housing, services, or jobs); or
(3) That is a qualified rehabilitation expenditure with respect to a qualified rehabilitation building or certified historic structure, as such terms are defined in section 47 of the Internal Revenue Code of 1986 or a similar State historic tax credit program.
(b)
(1) The prohibition contained in § _.10(a) does not apply with respect to an ownership interest in a covered fund by a covered banking entity, provided that the acquisition or retention of the ownership interest is:
(i) Made in connection with and related to individual or aggregated obligations or liabilities of the covered banking entity that are:
(A) Taken by the covered banking entity when acting as intermediary on behalf of a customer that is not itself a banking entity to facilitate the exposure by the customer to the profits and losses of the covered fund, or
(B) Directly connected to a compensation arrangement with an employee that directly provides investment advisory or other services to the covered fund; and
(ii) Designed to reduce the specific risks to the covered banking entity in connection with and related to such obligations or liabilities.
(2)
(i) The covered banking entity has established the internal compliance program required by subpart D designed to ensure the covered banking entity's compliance with the requirements of this paragraph (b)(2) of this section including reasonably designed written policies and procedures regarding the instruments, techniques and strategies that may be used for hedging, internal controls and monitoring procedures, and independent testing;
(ii) The acquisition or retention of an ownership interest in a covered fund:
(A) Is made in accordance with the written policies, procedures and internal controls established by the covered banking entity pursuant to subpart D;
(B) Hedges or otherwise mitigates an exposure to a covered fund through an offsetting exposure to the same covered fund and in the same amount of ownership interest in that covered fund that:
(
(
(C) Does not give rise, at the inception of the hedge, to significant exposures that were not already present in individual or aggregated positions, contracts, or other holdings of a covered banking entity and that are not hedged contemporaneously; and
(D) Is subject to continuing review, monitoring and management by the covered banking entity that:
(
(
(
(iii) The compensation arrangements of persons performing the risk-mitigating hedging activities are designed not to reward proprietary risk-taking.
(3)
(i) The risk-mitigating purpose of the acquisition or retention of an ownership interest in a covered fund;
(ii) The risks of the individual or aggregated obligation or liability of a covered banking entity that the acquisition or retention of an ownership interest in a covered fund is designed to reduce; and
(iii) The level of organization that is establishing the hedge.
(c)
(1) The prohibition contained in § _.10(a) does not apply to the acquisition or retention of any ownership interest in, or the sponsorship of, a covered fund by a covered banking entity if:
(i) The covered banking entity is not directly or indirectly controlled by a banking entity that is organized under the laws of the United States or of one or more States;
(ii) The activity is conducted pursuant to paragraph (9) or (13) of section 4(c) of the BHC Act;
(iii) No ownership interest in such covered fund is offered for sale or sold to a resident of the United States; and
(iv) The activity occurs solely outside of the United States.
(2) An activity shall be considered to be conducted pursuant to paragraph (9) or (13) of section 4(c) of the BHC Act only if:
(i) With respect to a covered banking entity that is a foreign banking organization, the covered banking entity is a qualifying foreign banking organization and is conducting the activity in compliance with subpart B of the Board's Regulation K (12 CFR 211.20
(ii) With respect to a covered banking entity that is not a foreign banking organization, the covered banking entity
(A) Total assets of the covered banking entity held outside of the United States exceed total assets of the covered banking entity held in the United States;
(B) Total revenues derived from the business of the covered banking entity outside of the United States exceed total revenues derived from the business of the covered banking entity in the United States; or
(C) Total net income derived from the business of the covered banking entity outside of the United States exceeds total net income derived from the business of the covered banking entity in the United States.
(3) An activity shall be considered to have occurred solely outside of the United States only if:
(i) The covered banking entity engaging in the activity is not organized under the laws of the United States or of one or more States;
(ii) No subsidiary, affiliate, or employee of the covered banking entity that is involved in the offer or sale of an ownership interest in the covered fund is incorporated or physically located in the United States or in one or more States; and
(iii) No ownership interest in such covered fund is offered for sale or sold to a resident of the United States.
(d)
(1) Loans;
(2) Contractual rights or assets directly arising from those loans supporting the asset-backed securities; and
(3) Interest rate or foreign exchange derivatives that:
(i) Materially relate to the terms of such loans or contractual rights or assets; and
(ii) Are used for hedging purposes with respect to the securitization structure.
(a) The prohibition contained in § _.10(a) does not apply to the acquisition or retention by a covered banking entity of any ownership interest in or acting as sponsor to:
(1)
(i) Does not control the investment decisions regarding the underlying assets or holdings of the separate account; and
(ii) Holds its ownership interest in the separate account in compliance with applicable supervisory guidance regarding bank owned life insurance.
(2)
(i) A joint venture between the covered banking entity or one of its affiliates and any other person, provided that the joint venture:
(A) Is an operating company; and
(B) Does not engage in any activity or make any investment that is prohibited under this part;
(ii) An acquisition vehicle, provided that the sole purpose and effect of such entity is to effectuate a transaction involving the acquisition or merger of one entity with or into the covered banking entity or one of its affiliates;
(iii) An issuer of an asset-backed security, but only with respect to that amount or value of economic interest in a portion of the credit risk for an asset-backed security that is retained by a covered banking entity that is a “securitizer” or “originator” in compliance with the minimum requirements of section 15G of the Exchange Act (15 U.S.C. 78
(iv) A wholly-owned subsidiary of the covered banking entity that is:
(A) Engaged principally in performing
(B) Carried on the balance sheet of the covered banking entity; and
(v) A covered fund that is an issuer of asset-backed securities described in § _.13(d), the assets or holdings of which are solely comprised of:
(A) Loans;
(B) Contractual rights or assets directly arising from those loans supporting the asset-backed securities; and
(C) Interest rate or foreign exchange derivatives that:
(
(
(b) The prohibition contained in § _.10(a) does not apply to the acquisition or retention by a covered banking entity of any ownership interest in, or acting as sponsor to, a covered fund, but only if such ownership interest is acquired or retained by a covered banking entity (or an affiliate or subsidiary thereof):
(1) In the ordinary course of collecting a debt previously contracted in good faith, if the covered banking entity divests the ownership interest within applicable time periods provided for by [Agency]; or
(2) Pursuant to and in compliance with the conformance or extended transition period authorities provided for in subpart E of the Board's rules implementing section 13 of the BHC Act (12 CFR 248.30 through 248.35).
A covered banking entity engaged in any covered fund activity or making or holding any investment permitted under this subpart shall comply with:
(a) The internal controls, reporting, and recordkeeping requirements required under § _.20 and appendix C to this part, as applicable; and
(b) Such other reporting and recordkeeping requirements as [Agency] may deem necessary to appropriately evaluate the covered banking entity's compliance with this subpart.
(a)
(1) Except as provided for in paragraph (a)(2) of this section, no covered banking entity that serves, directly or indirectly, as the investment manager, investment adviser, commodity trading advisor, or sponsor to a covered fund, or that organizes and offers a covered fund pursuant to § _.11, and no affiliate of such entity, may enter into a transaction with the covered fund, or with any other covered fund that is controlled by such covered fund, that would be a covered transaction as defined in section 23A of the Federal Reserve Act (12 U.S.C. 371c), as if such covered banking entity and the affiliate thereof were a member bank and the covered fund were an affiliate thereof.
(2) Notwithstanding paragraph (a)(1) of this section, a covered banking entity may:
(i) Acquire and retain any ownership interest in a covered fund in accordance with the requirements of this subpart; and
(ii) Enter into any prime brokerage transaction with any covered fund in which a covered fund managed,
(A) The covered banking entity is in compliance with each of the limitations set forth in § _.11 with respect to a covered fund organized and offered by such covered banking entity (or an affiliate or subsidiary thereof);
(B) The chief executive officer (or equivalent officer) of the top-tier affiliate of the covered banking entity certifies in writing annually (with a duty to update the certification if the information in the certification materially changes) that the covered banking entity does not, directly or indirectly, guarantee, assume, or otherwise insure the obligations or performance of the covered fund or of any covered fund in which such covered fund invests; and
(C) The Board has not determined that such transaction is inconsistent with the safe and sound operation and condition of the covered banking entity.
(b)
(c)
(a) No transaction, class of transactions, or activity may be deemed permissible under §§ _.11 through _.14 and § _.16 if the transaction, class of transactions, or activity would:
(1) Involve or result in a material conflict of interest between the covered banking entity and its clients, customers, or counterparties;
(2) Result, directly or indirectly, in a material exposure by the covered banking entity to a high-risk asset or a high-risk trading strategy; or
(3) Pose a threat to the safety and soundness of the covered banking entity or the financial stability of the United States.
(b)
(1)
(i) Makes clear, timely, and effective disclosure of the conflict of interest, together with other necessary information, in reasonable detail and in a manner sufficient to permit a reasonable client, customer, or counterparty to meaningfully understand the conflict of interest; and
(ii) Makes such disclosure explicitly and effectively, and in a manner that provides the client, customer, or counterparty the opportunity to negate, or substantially mitigate, any materially adverse effect on the client, customer, or counterparty created by the conflict of interest; or
(2)
(c)
(1)
(2)
(a)
(b)
(1) Internal written policies and procedures reasonably designed to document, describe, and monitor trading activities subject to subpart B of this part and activities and investments with respect to a covered fund subject to subpart C of this part (including those permitted under §§ _.4 through _.6 or §§ _.11 through _.16) to ensure that such activities and investments comply with section 13 of the BHC Act and this part;
(2) A system of internal controls reasonably designed to monitor and identify potential areas of noncompliance with section 13 of the BHC Act and this part in the covered banking entity's trading activities subject to subpart B of this part and activities and investments with respect to a covered fund subject to subpart C of this part (including those permitted under §§ _.4 through _.6 or §§ _.11 through _.16) and to prevent the occurrence of activities or investments that are prohibited by section 13 of the BHC Act and this part;
(3) A management framework that clearly delineates responsibility and accountability for compliance with section 13 of the BHC Act and this part;
(4) Independent testing for the effectiveness of the compliance program
(5) Training for trading personnel and managers, as well as other appropriate personnel, to effectively implement and enforce the compliance program; and
(6) Making and keeping records sufficient to demonstrate compliance with section 13 of the BHC Act and this part, which a covered banking entity must promptly provide to [Agency] upon request and retain for a period of no less than 5 years.
(c)
(2) A covered banking entity is subject to paragraph (c)(1) of this section if:
(i) The covered banking entity engages in proprietary trading and has, together with its affiliates and subsidiaries, trading assets and liabilities the average gross sum of which (on a worldwide consolidated basis), as measured as of the last day of each of the four prior calendar quarters:
(A) Is equal to or greater than $1 billion; or
(B) Equals 10 percent or more of its total assets;
(ii) The covered banking entity invests in, or has relationships with, a covered fund and:
(A) The covered banking entity has, together with its affiliates and subsidiaries, aggregate investments in one or more covered funds, the average value of which is, as measured as of the last day of each of the four prior calendar quarters, equal to or greater than $1 billion; or
(B) Sponsors or advises, together with its affiliates and subsidiaries, one or more covered funds, the average total assets of which are, as measured as of the last day of each of the four prior calendar quarters, equal to or greater than $1 billion; or
(iii) [The Agency] deems it appropriate.
(d)
(a) Any covered banking entity that engages in an activity or makes an investment in violation of section 13 of the BHC Act or this part or in a manner that functions as an evasion of the requirements of section 13 of the BHC Act or this part, including through an abuse of any activity or investment permitted under subparts B or C, or otherwise violates the restrictions and requirements of section 13 of the BHC Act or this part, shall terminate the activity and, as relevant, dispose of the investment.
(b) After due notice and an opportunity for hearing, if [Agency] finds reasonable cause to believe any covered banking entity has engaged in an activity or made an investment described in paragraph (a), the [Agency] may, by order, direct the banking entity to restrict, limit, or terminate the activity and, as relevant, dispose of the investment.
(c) [Reserved]
This appendix sets forth reporting and recordkeeping requirements that certain covered banking entities must satisfy in connection with the restrictions on proprietary trading set forth in subpart B of this part (“proprietary trading restrictions”). Pursuant to § _.7, this appendix generally applies to a covered banking entity that has, together with its affiliates and subsidiaries, trading assets and liabilities the average gross sum of which (on a worldwide consolidated basis) is, as measured as of the last day of each of the four prior calendar quarters, equal to or greater than $1 billion. These entities are required to furnish periodic reports to [Agency] regarding a variety of quantitative measurements of their covered trading activities, which vary depending on the scope and size of covered trading activities, and create and maintain records documenting the preparation and content of these reports. The requirements of this appendix should be incorporated into the covered banking entity's internal compliance program under § _.20 and appendix C to this part.
The purpose of this appendix is to assist covered banking entities and [Agency] in:
(i) Better understanding and evaluating the scope, type, and profile of the covered banking entity's trading activities;
(ii) Monitoring the covered banking entity's trading activities;
(iii) Identifying trading activities that warrant further review or examination by the covered banking entity to verify compliance with the proprietary trading restrictions;
(iv) Evaluating whether the trading activities of trading units engaged in market making-related activities subject to § _.4(b) are consistent with the requirements governing permitted market making-related activities;
(v) Evaluating whether the covered trading activities of trading units that are engaged in permitted trading activity subject to §§ _.4, _.5, or _.6(a) (i.e., underwriting and market making-related related activity, risk-mitigating hedging, or trading in certain government obligations) are consistent with the requirement that such activity not result, directly or indirectly, in a material exposure to high-risk assets or high-risk trading strategies;
(vi) Identifying the profile of particular trading activities of the covered banking entity, and the individual trading units of the banking entity, to help establish the appropriate frequency and scope of examination by [Agency] of such activities; and
(vii) Assessing and addressing the risks associated with the covered banking entity's covered trading activities.
The quantitative measurements that must be furnished pursuant to this appendix are
In addition to the quantitative measurements required in this appendix, a covered banking entity may need to develop and implement other quantitative measurements in order to effectively monitor its covered trading activities for compliance with section 13 of the BHC Act and this part and to have an effective compliance program, as required by § _.20 and appendix C to this part. The effectiveness of particular quantitative measurements may differ based on the profile of the banking entity's businesses in general and, more specifically, of the particular trading unit, including types of instruments traded, trading activities and strategies, and history and experience (e.g., whether the trading desk is an established, successful market maker or a new entrant to a competitive market). In all cases, covered banking entities must ensure that they have robust measures in place to identify and monitor the risks taken in their trading activities, to ensure that the activities are within risk tolerances established by the covered banking entity, and to monitor and examine for compliance with the proprietary trading restrictions in this part.
On an ongoing basis, covered banking entities should carefully monitor, review, and evaluate all furnished quantitative measurements, as well as any others that they choose to utilize in order to maintain compliance with section 13 of the BHC Act and this part. All measurement results that indicate a heightened risk of impermissible proprietary trading, including with respect to otherwise-permitted activities under §§ _.4 through _.6 that result in a material exposure to high-risk assets or high-risk trading strategies, should be escalated within the banking entity for review, further analysis, explanation to [Agency], and
The terms used in this appendix have the same meanings as set forth in §§ _.2 and _.3. In addition, for purposes of this appendix, the following definitions apply:
(i) Each discrete unit that is engaged in the coordinated implementation of a revenue-generation strategy and that participates in the execution of any covered trading activity;
(ii) Each organizational unit that is used to structure and control the aggregate risk-taking activities and employees of one or more trading units described in paragraph (i);
(iii) All trading operations, collectively; and
(iv) Any other unit of organization specified by [Agency] with respect to a particular banking entity.
(i) With respect to any covered banking entity that is engaged in any covered trading activity, and has trading assets and liabilities the average gross sum of which (on a worldwide consolidated basis) is, as measured as of the last day of each of the four prior calendar quarters, equal to or greater than $5 billion:
(a) Each trading unit of the covered banking entity that is engaged in market making-related activities subject to § _.4(b) must furnish the following quantitative measurements, calculated in accordance with this appendix:
• Value-at-Risk and Stress VaR;
• VaR Exceedance;
• Risk Factor Sensitivities;
• Risk and Position Limits;
• Comprehensive Profit and Loss;
• Portfolio Profit and Loss;
• Fee Income and Expense;
• Spread Profit and Loss;
• Comprehensive Profit and Loss Attribution;
• Pay-to-Receive Spread Ratio;
• Unprofitable Trading Days Based on Comprehensive Profit and Loss and Unprofitable Trading Days Based on Portfolio Profit and Loss;
• Skewness of Portfolio Profit and Loss and Kurtosis of Portfolio Profit and Loss;
• Volatility of Comprehensive Profit and Loss and Volatility of Portfolio Profit and Loss;
• Comprehensive Profit and Loss to Volatility Ratio and Portfolio Profit and Loss to Volatility Ratio;
• Inventory Risk Turnover;
• Inventory Aging; and
• Customer-facing Trade Ratio; and
(b) Each trading unit of the covered banking entity that is engaged in permitted trading activity subject to §§ _.4(a), _.5, or _.6(a) must furnish the following quantitative measurements, calculated in accordance with this appendix:
• Value-at-Risk and Stress VaR;
• Risk Factor Sensitivities;
• Risk and Position Limits;
• Comprehensive Profit and Loss; and
• Comprehensive Profit and Loss Attribution; and
(ii) With respect to any covered banking entity that is engaged in any covered trading activity, and has trading assets and liabilities the average gross sum of which (on a worldwide consolidated basis) is, as measured as of the last day of each of the four prior calendar quarters, equal to or greater than $1 billion and less than $5 billion, each trading unit of the covered banking entity that is engaged in market making-related activities under § _.4(b) must furnish the following quantitative measurement, calculated in accordance with this appendix:
• Comprehensive Profit and Loss;
• Portfolio Profit and Loss;
• Fee Income and Expense;
• Spread Profit and Loss;
• Value-at-Risk;
• Comprehensive Profit and Loss Attribution;
• Volatility of Comprehensive Profit and Loss and Volatility of Portfolio Profit and Loss; and
• Comprehensive Profit and Loss to Volatility Ratio and Portfolio Profit and Loss to Volatility Ratio.
A covered banking entity must calculate any applicable quantitative measurement for each trading day. A covered banking entity must report each applicable quantitative measurement to [Agency] on a monthly basis, or on any other reporting schedule requested by [Agency]. All quantitative measurements for any calendar month must be reported to [Agency] no later than 30 days after the end of that calendar month or on any other time basis requested by [Agency].
A covered banking entity must, for any quantitative measurement furnished to [Agency] pursuant to this appendix and § _.7, create and maintain records documenting the preparation and content of these reports, as well as such information as is necessary to permit [Agency] to verify the accuracy of such reports, for a period of 5 years.
Trading units should take into account any relevant factors in calculating Risk Factor Sensitivities, including, for example, the following with respect to particular asset classes:
•
•
•
•
•
•
•
The methods used by a covered banking entity to calculate sensitivities to a common factor shared by multiple trading units, such as an equity price factor, should be applied consistently across its trading units so that the sensitivities can be compared from one trading unit to another.
For some asset classes in which a trading unit is engaged in market making-related activities, bid-ask or similar spreads are widely disseminated, constantly updated, and readily available, or otherwise reasonably ascertainable. For purposes of calculating the Spread Profit and Loss attributable to a transaction in such asset classes, the trading unit should utilize the prevailing bid-ask or similar spread on the relevant position at the time the purchase or sale is completed.
For other asset classes in which a trading unit is engaged in market making-related activities, bid-ask or similar spreads may not
(i) End of Day Spread Proxy: A proxy based on the bid-ask or similar spread that is used to estimate, or is otherwise implied by, the market price at which the trading entity marks (or in the case of a sale, would have marked) the position for accounting purposes at the close of business on the day it executes the purchase or sale (“End of Day Spread Proxy”);
(ii) Historical Data Spread Proxy: A proxy based on historical bid-ask or similar spread data in similar market conditions (“Historical Data Spread Proxy”); or
(iii) Any other proxy that the banking entity can demonstrate accurately reflects prevailing bid-ask or similar spreads for transactions in the specific asset class.
A covered banking entity selecting any of these alternatives should be able to demonstrate that the alternative it has chosen most accurately reflects prevailing bid-ask or similar spreads for the relevant asset class. If a covered banking entity chooses to calculate Spread Profit and Loss for a particular trading unit using the End of Day Spread Proxy, then the banking entity should separately identify the portion of Spread Profit and Loss that is attributable to positions acquired and disposed of on the same trading day. If a banking entity chooses to calculate Spread Profit and Loss for a particular trading unit using the Historical Data Spread Proxy, the covered banking entity should be able to demonstrate that the Historical Data Proxy is appropriate and continually monitor market conditions and adjust, as necessary, the Historical Data Proxy to reflect any changes.
This appendix provides commentary describing the features of permitted market making-related activities and distinctions between permitted market making-related activities and prohibited proprietary trading. The appendix applies to all covered banking entities that are engaged in market making-related activities in reliance on § _.4(b). The following commentary must be incorporated into the covered banking entity's internal compliance program under § _.20, as applicable.
The terms used in this appendix have the same meanings as those set forth in §§ _.2 and _.3 and Appendix A.
Section 13 of the BHC Act and § _.3 prohibit any covered banking entity from engaging in proprietary trading, which is generally defined as engaging as principal for the trading account of the covered banking entity in any transaction to purchase or sell a covered financial position. However, section 13(d)(1)(B) of the BHC Act and § _.4(b) permit a covered banking entity to engage in proprietary trading that would otherwise be prohibited if the activity is conducted in connection with the covered banking entity's market making-related activities, to the extent that such activities are designed not to exceed the reasonably expected near term demands of clients, customers, and counterparties. This commentary is intended to assist covered banking entities in identifying permitted market making-related activities and distinguishing such activities from trading activities that, even if conducted in the context of the covered banking entity's market making operations, would constitute prohibited proprietary trading.
In the context of trading activities in which a covered banking entity acts as principal, market making-related activities generally involve the covered banking entity either (i) in the case of market making in a security that is executed on an organized trading facility or exchange, passively providing liquidity by submitting resting orders that interact with the orders of others on an organized trading facility or exchange and acting as a registered market maker, where such exchange or organized trading facility provides the ability to register as a market maker,
The primary purpose of market making-related activities is to intermediate between buyers and sellers of similar positions, for which service market makers are compensated, resulting in more liquid markets and less volatile prices. The purpose of such activities is
The profitability of market making-related activities relies on forms of revenue that reflect the value of the intermediation services that are provided to the market maker's customers. These revenues typically take the form of explicit fees and commissions or, in markets where no such fees or commission are charged, a bid-ask or similar spread that is generated by charging higher prices to buyers than is paid to sellers of comparable instruments. In the case of a derivative contract, these revenues reflect the difference between the cost of entering into the derivative contract and the cost of hedging incremental, residual risks arising from the contract. These types of “customer revenues” provide the primary source of a market maker's profitability. Typically, a market maker holds at least some risk with respect to price movements of retained principal positions and risks. As a result, the market maker also incurs losses or generates profits as price movements actually occur, but such losses or profits are incidental to customer revenues and significantly limited by the banking entity's hedging activities. Customer revenues, not revenues from price movements, predominate. The appropriate proportion of “customer revenues” to profits
Because a market maker's business model entails managing and limiting the extent to which it is exposed to movements in the prices of retained principal positions and risks while generating customer revenues that are earned, regardless of movements in the price of retained principal positions and risks, a market maker typically generates significant revenue relative to the risks that it retains. Accordingly, a market maker will typically demonstrate consistent profitability and low earnings volatility under normal market conditions. The appropriate extent to which a market maker will demonstrate consistent profitability and low earnings volatility varies depending on the type of positions involved, the liquidity of the positions, the price transparency of the positions, and the volatility of the positions' prices. As a general matter, consistent profitability will decrease and earnings volatility will increase as the liquidity of the positions decrease, the volatility of the positions' prices increase, and the prices for the positions are less transparent.
As the primary purpose of market making-related activities is to provide intermediation services to its customers, market makers focus their activities on servicing customer demands and typically only engage in transactions with non-customers to the extent that these transactions directly facilitate or support customer transactions. In particular, a market maker generally only transacts with non-customers to the extent necessary to hedge or otherwise manage the risks of its market making-related activities, including managing its risk with respect to movements of the price of retained principal positions and risks, to acquire positions in amounts consistent with reasonably expected near term demand of its customers, or to sell positions acquired from its customers. The appropriate proportion of a market maker's transactions that are with customers versus non-customers varies depending on the type of positions involved and the extent to which the positions are typically hedged in non-customer transactions. In the case of a derivatives market maker that engages in dynamic hedging, the number of non-customer transactions significantly outweighs the number of customer transactions, as the derivatives market maker must constantly enter into transactions to appropriately manage its retained principal positions and risks as market prices for the positions and risks move and additional transactions with customers change the risk profile of the market maker's retained principal positions.
Because a market maker generates revenues primarily by transacting with, and providing intermediation services to, customers, a market maker typically engages in transactions that earn fees, commissions, or spreads as payment for its services. Transactions in which the market maker pays fees, commissions, or spreads—i.e., where it pays another market maker for providing it with liquidity services—are much less frequent, although in some cases obtaining liquidity services from another market maker and paying fees, commissions, or spreads may be necessary to prudently manage its risk with respect to price movements of retained principal positions and risks. The appropriate proportion of a market maker's transactions that earn, rather than pay, fees, commissions or spreads varies depending on the type of positions involved, the liquidity of the positions, and the extent to which market trends increase the volatility of its risk with respect to price movements of retained principal positions and risks. As a general matter, the proportion of a market maker's transactions that earn rather than pay fees, commissions or spreads decreases as the liquidity of the positions decreases, and the extent to which the price volatility of retained principal positions and risks increases.
Finally, because the primary purpose of market making-related activities is to provide intermediation services to its customers, a market maker does not provide compensation incentives to its personnel that primarily reward proprietary risk-taking. Although a market maker may take into account revenues resulting from movements in the price of retained principal positions and risks to the extent that such revenues reflect the effectiveness with which personnel have effectively managed the risk of movements in the price of retained principal positions and risks, a market maker that provides compensation incentives relating to revenues generally does so through incentives that primarily reward customer revenues and effective customer service.
Like permitted market making-related activities, prohibited proprietary trading involves the taking of principal positions by a covered banking entity. Unlike permitted market making-related activities, the purpose of prohibited proprietary trading is to generate profits as a result of, or otherwise benefit from, changes in the price of positions and risks taken. Whereas a market maker attempts to eliminate some or all of the price risks inherent in its retained principal positions and risks by hedging or otherwise managing those risks in a reasonable period of time after positions are acquired or risks arise, a proprietary trader seeks to capitalize on those risks, and generally only hedges or manages a portion of those risks when doing so would improve the potential profitability of the risk it retains. A proprietary trader does not have “customers” because a proprietary trader simply seeks to obtain the best price and execution in purchasing or selling its proprietary positions. A proprietary trader generates few if any fees, commissions, or spreads from its trading activities because it is not providing an intermediation service to any customer or other third party. Instead, a proprietary trader is likely to pay fees, commissions, or spreads to other market makers when obtaining their liquidity services is beneficial to execution of its trading strategy. Because a proprietary trader seeks to generate profits from changes in the price of positions taken, a proprietary trader typically provides compensation incentives to its personnel that primarily reward successful proprietary risk taking.
Because both permitted market making-related activities and prohibited proprietary trading involve the taking of principal positions, certain challenges arise in distinguishing permitted market making-related activities and prohibited proprietary trading, particularly in cases where both of these activities occur in the context of a market making operation. Particularly during periods of significant market disruption, it may be difficult to distinguish between retained principal positions and risks that appropriately support market making-related activities and positions taken, or positions or risks not hedged, for proprietary purposes.
In connection with these challenges, [Agency] will apply the following factors in distinguishing permitted market making-related activities from trading activities that, even if conducted in the context of the covered banking entity's market making operations, would constitute prohibited proprietary trading. The particular types of trading activity described in this appendix may involve the aggregate trading activities of a single trading unit, a significant number or series of transactions occurring at one or more trading units, or a single significant transaction, among other potential scenarios. In addition to meeting the terms of this appendix, any transaction or activity for which a covered banking entity intends to rely on the market making exemption in § _.4(b) must also satisfy all the requirements specified in § _.4(b), as well as the other applicable requirements and conditions of this part.
Absent explanatory facts and circumstances, particular trading activity in which a trading unit retains risk in excess of the size and type required to provide intermediation services to customers will be considered to be prohibited proprietary trading, and not permitted market making-related activity.
[The Agency] will base a determination of whether a trading unit retains risk in excess of the size and type required for these purposes on all available facts and circumstances, including a comparison of retained principal risk to: The amount of risk that is generally required to execute a particular market making function; hedging options that are available in the market and permissible under the covered banking entity's hedging policy at the time the particular trading activity occurred; the trading unit's prior levels of retained risk and its hedging practices with respect to similar
To help assess the extent to which a trading unit's risks are potentially being retained in excess of amounts required to provide intermediation services to customers, [Agency] will utilize the VaR and Stress VaR, VaR Exceedance, and Risk Factor Sensitivities quantitative measurements, as applicable, among other risk measurements described in appendix A to this part and any other relevant factor. This assessment will focus primarily on the risk measurements relative to: The risk required for conducting market making-related activities, and any significant changes in the risk over time and across similarly situated trading units and banking entities.
Explanatory facts and circumstances might include, among other things, market-wide changes in risk, changes in the specific composition of market making-related activities, temporary market disruptions, or other market changes that result in previously used hedging or other risk management techniques no longer being possible or cost-effective.
Absent explanatory facts and circumstances, particular trading activity in which a trading unit primarily generates revenues from price movements of retained principal positions and risks, rather than customer revenues, will be considered to be prohibited proprietary trading, and not permitted market making-related activity.
[The Agency] will base a determination of whether a trading activity primarily generates revenues from price movements of retained principal positions and risks, rather than customer revenues, on all available facts and circumstances, including: an evaluation of the revenues derived from price movements of retained principal positions and risks relative to its customer revenues; and a comparison of these revenue figures to the trading unit's prior revenues with respect to similar positions, and the revenues of other covered banking entities' trading units with respect to similar positions.
To help assess the extent to which a trading unit's revenues are potentially derived from movements in the price of retained principal positions and risks, [Agency] will utilize the Comprehensive Profit and Loss, Portfolio Profit and Loss, Fee Income and Expense, and Spread Profit and Loss quantitative measurements, as applicable, both individually and in combination with one another (e.g., by comparing the ratio of Spread Profit and Loss to Portfolio Profit and Loss), and any other relevant factor.
Explanatory facts and circumstances might include, among other things: general upward or downward price trends in the broader markets in which the trading unit is making a market, provided revenues from price movements in retained principal positions and risks are consistent; sudden market disruptions or other changes causing significant, unanticipated alterations in the price of retained principal positions and risks; sudden and/or temporary changes in the market (e.g., narrowing of bid/ask spreads) that cause significant, unanticipated reductions in customer revenues; or efforts to expand or contract a trading unit's market share.
Absent explanatory facts and circumstances, particular trading activity will be considered to be prohibited proprietary trading, and not permitted market making-related activity, if the trading unit: generates only very small or very large amounts of revenue per unit of risk taken; does not demonstrate consistent profitability; or demonstrates high earnings volatility.
[The Agency] will base such a determination on all available facts and circumstances, including: an evaluation of the amount of revenue per unit of risk taken, earnings volatility, profitability, exposure to risks, and overall level of risk taking for the particular trading activities; and a comparison of these figures to the trading unit's prior results with respect to similar positions, and the results of other covered banking entities' trading units with respect to similar positions.
To help assess the riskiness of revenues and the amount of revenue per unit of risk taken, [Agency] will utilize the Volatility of Comprehensive Profit and Loss and Volatility of Portfolio Profit and Loss, Comprehensive Profit and Loss to Volatility Ratio and Portfolio Profit and Loss to Volatility Ratio, and Comprehensive Profit and Loss Attribution quantitative measurements, as applicable, and any other relevant factor.
To help assess the extent to which a trading unit demonstrates consistent profitability, [Agency] will utilize the Unprofitable Trading Days Based on Comprehensive Profit and Loss and Unprofitable Trading Days Based on Portfolio Profit and Loss quantitative measurements, as applicable, and any other relevant factor.
To help assess the extent to which a trading unit is exposed to outsized risk, [Agency] will utilize the Skewness of Portfolio Profit and Loss and Kurtosis of Profit and Loss quantitative measurements, as applicable, and any other relevant factor.
Explanatory facts and circumstances might include, among other things: market disruptions or other changes causing significant, unanticipated increases in a trading unit's risk with respect to movements in the price of retained principal positions and risks; market disruptions or other changes causing significant, unanticipated increases in the volatility of positions in which the trading unit makes a market; sudden and/or temporary changes in the market (e.g., narrowing of bid-ask spreads) that cause significant, unanticipated reductions in customer revenues and decrease overall profitability; or efforts to expand or contract a trading unit's market share.
Absent explanatory facts and circumstances, particular trading activity will be considered to be prohibited proprietary trading, and not permitted market making-related activity, if the trading unit: does not transact through a trading system that interacts with orders of others or primarily with customers of the banking entity's market making desk to provide liquidity services; or retains principal positions and risks in excess of reasonably expected near term customer demands.
[The Agency] will base such a determination on all available facts and circumstances, including, among other things: An evaluation of the extent to which a trading unit's transactions are with customers versus non-customers and the frequency with which the trading unit's retained principal positions and risks turn over; and a comparison of these figures to the trading unit's prior results with respect to similar positions and market situations, and the results of other covered banking entities' trading units with respect to similar positions.
To help assess the extent to which a trading unit's transactions are with customers versus non-customers, [Agency] will utilize the Customer-Facing Trade Ratio quantitative measurement, as applicable, and any other relevant factor. To help assess the frequency with which the trading unit's retained principal positions and risks turn over, [Agency] will utilize the Inventory Risk Turnover and Inventory Aging quantitative measurements, as applicable, and any other relevant factor.
With respect to a particular trading activity in which a trading unit either does not transact through a trading system that interacts with orders of others or primarily with customers of the banking entity's market making desk to provide liquidity services, explanatory facts and circumstances might include, among other things: sudden market disruptions or other changes causing significant increases in a trading unit's hedging transactions with non-customers; or substantial intermediary trading required to satisfy customer demands and hedging management. With respect to particular trading activity in which a trading unit retains principal positions and risks in excess of reasonably expected near term customer demands, explanatory facts and circumstances might include, among other things: sudden market disruptions or other changes causing a significant reduction in actual customer demand relative to expected customer demand; documented and reasonable expectations for temporary increases in customer demand in the near term; and sudden market disruptions or other changes causing a significant reduction in the value of retained principal positions and risks, such that it would be imprudent for the trading unit to dispose of the positions in the near term.
Absent explanatory facts and circumstances, particular trading activity in which a trading unit routinely pays rather than earns fees, commissions, or spreads will be considered to be prohibited proprietary trading, and not permitted market making-related activity.
[The Agency] will base such a determination on all available facts and circumstances, including, among other things: An evaluation of the frequency with which the trading unit pay fees,
To help assess the extent to which a trading unit is paying versus earning fees, commissions, and spreads, [Agency] will utilize the Pay-to-Receive Spread Ratio quantitative measurement, as applicable, and any other relevant factor.
Explanatory facts and circumstances might include, among other things, sudden market disruptions or other changes causing significant, increases in a trading unit's hedging transactions with non-customers for which it must pay fees, commissions, or spreads, sudden, unanticipated customer demand for liquidity that requires the trading unit itself to pay fees, commissions, or spreads to other market makers for liquidity services to obtain the inventory needed to meet that customer demand, or significant, unanticipated reductions in fees, commissions, or spreads earned by the trading unit. Explanatory facts and circumstances might also include a trading unit's efforts to expand or contract its market share.
Absent explanatory facts and circumstances, the trading activity of a trading unit that provides compensation incentives to employees that primarily reward proprietary risk taking will be considered to be prohibited proprietary trading, and not permitted market making-related activity.
[The Agency] will base such a determination on all available facts and circumstances, including, among other things, an evaluation of: the extent to which compensation incentives are provided to trading unit personnel that reward revenues from movements in the price of retained principal positions and risks; the extent to which compensation incentives are provided to trading unit personnel that reward customer revenues; and the compensation incentives provided by other covered banking entities to similarly-situated personnel.
This appendix sets forth the minimum standards with respect to the establishment, maintenance, and enforcement by banking entities of internal compliance programs for ensuring and monitoring compliance with the prohibitions and restrictions on proprietary trading and covered fund activities or investments set forth in section 13 of the BHC Act and this part.
This appendix requires that banking entities establish, maintain, and enforce an effective compliance program, consisting of written policies and procedures, internal controls, a management framework, independent testing, training, and recordkeeping, that:
• Is reasonably designed to clearly document, describe, and monitor the covered trading and covered fund activities or investments and the risks of the covered banking entity related to such activities or investments, identify potential areas of noncompliance, and prevent activities or investments prohibited by, or that do not comply with, section 13 of the BHC Act and this part;
• Specifically addresses the varying nature of activities or investments conducted by different units of the covered banking entity's organization, including the size, scope, complexity, and risks of the individual activities or investments;
• Subjects the effectiveness of the compliance program to independent review and testing;
• Makes senior management and intermediate managers accountable for the effective implementation of the compliance program, and ensures that the board of directors and CEO review the effectiveness of the compliance program; and
• Facilitates supervision and examination of the covered banking entity's covered trading and covered fund activities or investments by the Agencies.
The terms used in this Appendix have the same meanings as set forth in §§ _.2, _.3, and _.10. In addition, for purposes of this appendix, the following definitions apply:
(i) Each discrete unit that is engaged in the coordinated implementation of a revenue-generation strategy and that participates in the execution of any covered trading activity;
(ii) Each organizational unit that is used to structure and control the aggregate risk-taking activities and employees of one or more trading units described in paragraph (i);
(iii) All trading operations, collectively; and
(iv) Any other unit of organization specified by [Agency] with respect to a particular banking entity.
Section _.20 requires that covered banking entities establish, maintain, and enforce a compliance program reasonably designed to ensure and monitor compliance with the prohibitions and restrictions on proprietary trading and covered fund activities or investments that effectively implements, at a minimum, the six elements required under paragraph (b) of § _.20.
Each covered banking entity subject to § _.20(c) must be governed by a compliance program meeting the requirements of this appendix. A covered banking entity may establish a compliance program on an enterprise-wide basis to satisfy the requirements of § _.20 and this appendix with respect to the covered banking entity and all of its affiliates and subsidiaries collectively, provided that: the program is clearly applicable, both by its terms and in operation, to all such affiliates and subsidiaries; the program specifically addresses the requirements set forth in this appendix; the program takes into account and addresses the consolidated organization's business structure, size, and complexity, as well as the particular activities, risks, and applicable legal requirements of each subsidiary and affiliate; and the program is determined through periodic independent testing to be effective for the covered banking entity and all of its subsidiaries and affiliates. An enterprise-wide program established pursuant to this Appendix will be subject to supervisory review and examination by any Agency vested with rulewriting authority under section 13 of the BHC Act with respect to the compliance program and the activities or investments of any banking entity for which the Agency has such authority. Further, such Agency will have access to all records related to the enterprise-wide compliance program pertaining to any banking entity that is supervised by the Agency vested with such rulewriting authority.
This appendix applies only to covered banking entities described in § _.20(c)(2). In addition, [Agency] may require any covered banking entity to comply with all or portions of this appendix if [Agency] deems it appropriate for purposes the covered banking entity's compliance with this part.
Nothing in this appendix limits the authority of [Agency] under any other provision of law or regulation to take supervisory, examination, or enforcement action, including action to address unsafe or unsound practices or conditions, deficient capital levels, or violations of law.
A covered banking entity must establish, maintain, and enforce written policies and procedures reasonably designed to document, describe, and monitor the covered banking entity's covered trading activities and the risks taken in these activities, as follows:
• How revenues are intended to be generated by the trading unit;
• The activities that the trading unit is authorized to conduct, including (i) authorized instruments and products and (ii) authorized hedging strategies and instruments;
• The expected holding period of, and the market risk associated with, covered financial positions in its trading account;
• The types of clients, customers, and counterparties with whom trading is conducted by the trading unit;
• How the trading unit, if engaged in market making-related activity under § _.4(b) of this part, identifies its customers for purposes of computing the Customer-Facing Trade Ratio, if applicable, including documentation explaining when, how, and why a broker-dealer, swap dealer, security-based swap dealer, any other entity engaged in market making-related activities, or any affiliate thereof is considered to be a customer of the trading unit for those purposes; and
• The compensation structure of the employees associated with the trading unit.
• Clearly inform each trader of the prohibitions and requirements set forth in section 13 of the BHC Act and this part and his or her responsibilities for compliance with such requirements;
• Set forth appropriate parameters for each trader engaged in covered trading activities, including:
○ The conditions for relying on the applicable exemptions in §§ _.4 through _.6;
○ The financial contracts, products, and underlying assets that the trader is permitted to trade pursuant to the covered banking entity's internal controls;
○ The risk limits of the trader's trading unit, and the types and levels of risk that may be taken; and
○ The applicable trading unit's hedging policy.
• A description of the supervisory and risk management structure governing the trading units, including a description of processes for initial and senior-level review of new products and new strategies;
• A description of the types of risks that may be taken to implement the mission and strategy of the trading unit, including an enumeration of material risks resulting from the activities in which the trading unit is engaged (including but not limited to all significant price risks, such as basis, volatility and correlation risks, as well as any significant counterparty credit risk associated with the trading activity);
• An articulation of the amount of risk allocated by the covered banking entity to such trading unit to implement the documented mission and strategy of the trading unit;
• An explanation of how the risks allocated to such trading unit will be measured; and
• An explanation of why the allocated risk levels are appropriate to the mission and strategy of the trading unit.
• The manner in which the covered banking entity will determine that the risks generated by each trading unit have been properly and effectively hedged;
• The instruments, techniques and strategies the covered entity will use to hedge the risk of the positions or portfolios;
• The level of the organization at which hedging activity and management will occur;
• The manner in which hedging strategies will be monitored;
• The risk management processes used to control unhedged or residual risks; and
• The independent testing of hedging techniques and strategies.
• Identify which portions of the risk-taking activity of the trading unit would or would not constitute covered trading activity;
• Identify activities of the trading unit that will be conducted in reliance on exemptions contained in §§ _.4 through _.6, including an explanation of:
o How and where the activity occurs; and
o Which exemption is being relied on and how the activity meets the specific requirements for reliance on the applicable exemption.
• Describe how the covered banking entity monitors for and prohibits potential or actual material exposure to high-risk assets or high-risk trading strategies presented by each trading unit, which must take into account potential or actual exposure to:
○ Assets whose values cannot be externally priced or, where valuation is reliant on pricing models, whose model inputs cannot be externally validated;
○ Assets whose changes in values cannot be adequately mitigated by effective hedging;
○ New products with rapid growth, including those that do not have a market history;
○ Assets or strategies that include significant embedded leverage;
○ Assets or strategies that have demonstrated significant historical volatility;
○ Assets or strategies for which the application of capital and liquidity standards would not adequately account for the risk; and
○ Assets or strategies that result in large and significant concentrations to sectors, risk factors, or counterparties;
• Explain how each trading unit will comply with the reporting and recordkeeping requirements of § _.7 and Appendix A ;
• Describe how the covered banking entity monitors for and prohibits potential or actual material conflicts of interest between the covered banking entity and its clients, customers, or counterparties present in each trading unit; and
• Describe how the covered banking entity monitors for and prohibits potential or actual transactions or activities that may threaten the safety and soundness of the covered banking entity.
With respect to any trading unit that is either used by the covered banking entity to structure and control the aggregate risk-taking activities and employees of one or more other trading units, or comprised of the entire trading operation of the covered banking entity, the description of missions and strategies, description of risks and risk management processes, and explanation of compliance for such trading units may incorporate by reference the policies and procedures of the underlying trading units that the trading unit oversees and manages in the aggregate.
A covered banking entity must establish, maintain, and enforce written policies and procedures that are reasonably designed to document, describe, and monitor the covered banking entity's covered fund activities or investments and the risks taken in these activities or investments, as follows.
• The activities that the asset management unit is authorized to conduct, including the nature of any trust, fiduciary, investment advisory, or commodity trading advisory services offered to customers of the covered banking entity;
• The types of customers to whom the asset management unit provides such services and to whom ownership interests in covered funds are sold;
• The extent of any co-investment activities of the covered banking entity (including its directors or employees) in covered funds offered to such customers; and
• How the asset management unit complies with the requirements of subpart C of this part.
• The asset management unit's practices with respect to seed capital investments in covered funds, including how the asset management unit reduces its investments in covered funds to amounts that are permitted
• The asset management unit's practices with respect to co-investments in covered funds, including certain parallel investments as identified in § _.12;
• How the asset management unit complies with the requirements of § _.12 with respect to individual and aggregate investments in covered funds;
• With respect to other permitted covered fund activities or investment, how the asset management unit complies with the requirements of §§ _.13 and _.14;
• How the asset management unit complies with the limitations on relationships with a covered fund under § _.16;
• How the covered banking entity monitors for and prohibits potential or actual material conflicts of interest between the covered banking entity and its clients, customers, or counterparties related to the asset management unit;
• How the covered banking entity monitors for and prohibits potential or actual transactions or activities that may threaten the safety and soundness of the covered banking entity related to the asset management unit; and
• How the covered banking entity monitors for and prohibits potential or actual material exposure to high-risk assets or high-risk trading strategies presented by each asset management unit.
A covered banking entity must establish, maintain, and enforce written internal controls that are reasonably designed to ensure that the trading activity of each trading unit is appropriate and consistent with the description of mission, strategy, and risk mitigation for each trading unit contained in its written policies and procedures. These written internal controls must also be reasonably designed and established to effectively monitor and identify for further analysis any covered trading activity that may indicate potential violations of section 13 of the BHC Act and this part and to prevent actual violations of section 13 of the BHC Act and this part. Further, the internal controls must describe procedures for remedying violations of section 13 of the BHC Act and this part. The written internal controls must include, at a minimum, the following.
• The types and levels of risks that may be taken by each trading unit, consistent with the covered banking entity's written policies and procedures;
• The type of hedging instruments used, hedging strategies employed, and the amount of risk effectively hedged, consistent with the covered banking entity's written policies and procedures; and
• The financial contracts, products and underlying assets that the trading unit may trade, consistent with covered banking entity's written policies and procedures.
• Internal controls and written policies and procedures reasonably designed to ensure the accuracy and integrity of quantitative measurements;
• Ongoing, timely monitoring and review of calculated quantitative measurements;
• Heightened review of a quantitative measurement when such quantitative measurement raises any question regarding compliance with section 13 of the BHC Act and this part, which shall include in-depth analysis, appropriate escalation procedures, and documentation related to the review, including the establishment of numerical thresholds for each trading unit for purposes of triggering such heightened review; and
• Immediate review and compliance investigation of the trading unit's activities, escalation to senior management with oversight responsibilities for the applicable trading unit, timely notification to [Agency], appropriate remedial action (e.g., divesting of impermissible positions, cessation of impermissible activity, disciplinary actions), and documentation of the investigation findings and remedial action taken when the quantitative measurement, considered together with the facts and circumstances, suggests a reasonable likelihood that the trading unit has violated any part of section 13 of the BHC Act and this part.
A covered banking entity must establish, maintain, and enforce internal controls that are reasonably designed to ensure that the covered fund activities or investments of its asset management units are appropriate and consistent with the description of the asset management unit's mission, strategy, and risk management process contained in the covered banking entity's written policies and procedures. The internal controls must, at a minimum, be designed to ensure that the covered banking entity complies with the requirements of § _.11 for any covered fund in which it invests, acts as sponsor, or organizes and offers, as well as the following:
• Monitoring the amount and timing of seed capital investments for compliance with the limitations (including but not limited to the redemption, sale or disposition requirements of § _.12);
• Calculating the individual and aggregate levels of ownership interests in covered funds required by § _.12;
• Describing procedures for remedying violations of section 13 of the BHC Act and this part;
• Attributing the appropriate instruments to the individual and aggregate ownership interest calculations above; and
• Making the appropriate required disclosures, in writing, to prospective and actual investors in any covered fund organized and offered or sponsored by the covered banking entity, as provided under § _.11(h).
A covered banking entity must establish, maintain, and enforce a management framework to manage its business and employees with a view to preventing violations of section 13 of the BHC Act and this part. A covered banking entity must have an appropriate management framework reasonably designed to ensure that: appropriate personnel are made responsible and accountable for the effective implementation and enforcement of the compliance program; a clear reporting line with a chain of responsibility is delineated; and the board of directors, or similar corporate body, and CEO reviews and approves the compliance program. This management framework must include, at a minimum:
• The designation of at least one person with authority to carry out the management responsibilities of the covered banking entity for each trading unit;
• Written procedures addressing the management of the activities of the covered banking entity that are reasonably designed to achieve compliance with section 13 of the BHC Act and this part, including:
○ Procedures for the review by a manager of activities of the trading unit and the quantitative measurements pursuant to appendix A and any other quantitative measurements developed and tailored to the particular risks, practices, and strategies of the covered banking entity's trading units;
○ A description of the management system, including the titles, qualifications, and locations of managers and the specific responsibilities of each person with respect to the covered banking entity's trading units; and
○ Procedures for determining compensation arrangements for traders engaged in underwriting or market making-related activities under § _.4 or risk-mitigating hedging activities under § _.5 so that such compensation arrangements are designed not to reward proprietary risk taking.
A covered banking entity must ensure that independent testing is conducted by a qualified independent party, such as the covered banking entity's internal audit department, outside auditors, consultants, or other qualified independent parties, regarding the effectiveness of the covered banking entity's compliance program established pursuant to this appendix and § _.20 and the covered banking entity's compliance with this part. A banking entity must take appropriate action to remedy any concerns identified by the independent testing (e.g., remedying deficiencies in its written policies and procedures and internal controls, etc.).
The required independent testing must occur with a frequency appropriate to the size, scope, and risk profile of the covered banking entity's covered trading and covered fund activities or investments, which shall be no less than once every twelve months. This independent testing must include an evaluation of:
• The overall adequacy and effectiveness of the covered banking entity's compliance program, including an analysis of the extent to which the program contains all the required elements of this appendix;
• The effectiveness of the covered banking entity's written policies and procedures;
• The effectiveness of the covered banking entity's internal controls, including an analysis and documentation of instances in which such internal controls have been breached, and how such breaches were addressed and resolved; and
• The effectiveness of the covered banking entity's management procedures.
Covered banking entities must provide adequate training to trading personnel and managers of the covered banking entity, as well as other appropriate personnel, as determined by the covered banking entity, in order to effectively implement and enforce the compliance program. This training should occur with a frequency appropriate to the size and the risk profile of the covered banking entity's covered trading activities and covered fund activities or investments. The training may be conducted by internal personnel or independent parties deemed appropriate by the covered banking entity based on its size and risk profile.
Covered banking entities must create and retain records sufficient to demonstrate compliance and support the operations and effectiveness of the compliance program. A covered banking entity must retain these records for a period that is no less than 5 years in a form that allows it to promptly produce such records to [Agency] on request.
The proposed adoption of the common rules by the agencies, as modified by agency-specific text, is set forth below:
Banks, Banking, Compensation, Credit, Derivatives, Government securities, Insurance, Investments, National banks, Penalties, Reporting and recordkeeping requirements, Risk, Risk retention, Securities, Trusts and trustees.
For the reasons stated in the Common Preamble, the Office of the Comptroller of the Currency proposes to amend chapter I of Title 12, Code of Federal Regulations as follows:
1. The authority citation for part 44 is added to read as follows:
7 U.S.C. 27
2. Part 44 is added as set forth at the end of the Common Preamble.
3. Part 44 is amended by
a. Removing “[Agency]” wherever it appears and adding in its place “the OCC”; and
b. Removing “[The Agency]” wherever it appears and adding in its place “The OCC”.
4. Section 44.1 is added to read as follows:
(a)
(b)
(c)
(d)
(e)
5. Paragraph (j) of § 44.2 is added to read as follows:
(j) Covered banking entity means any banking entity that is:
(1) A national bank;
(2) A Federal branch or agency of a foreign bank;
(3) A Federal savings association or a Federal savings bank; and
(4) Any subsidiary of a company described in paragraph (j)(1) through (3) of this section, other than a subsidiary for which the CFTC or SEC is the primary financial regulatory agency as defined in section 2(12) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5301(12)).
Administrative practice and procedure, Banks and banking, Capital, Compensation, Conflict of interests, Credit, Derivatives, Foreign banking, Government securities, Holding companies, Insurance, Insurance companies, Investments, Penalties, Reporting and recordkeeping requirements, Risk, Risk retention, Securities, Trusts and trustees.
For the reasons set forth in the Supplementary Information, the Board of Governors of the Federal Reserve System proposes to add the text of the common rule as set forth at the end of the Supplementary Information as Part 248 to 12 CFR Chapter II as follows:
6. The authority citation for part 248 is added to read as follows:
12 U.S.C. 1851, 12 U.S.C. 221
7. Part 248 is added as set forth at the end of the Common Preamble.
8. Part 248 is amended by:
A. Removing “[Agency]” wherever it appears and adding in its place “the Board”; and
B. Removing “[The Agency]” wherever it appears and adding in its place “The Board”.
9. Section 248.1 is added to read as follows:
(a)
(b)
(c)
(d)
10. In § 248.2, paragraph (c) is revised, and paragraph (j) is added to read as follows:
(c) Nothing in this part limits in any way the authority of the Board, under the BHC Act (including section 8 of such Act) and other provisions of law, to impose penalties for violation by any company or individual.
(j)
(1) A state member bank (as defined in 12 CFR 208.2(g));
(2) A bank holding company;
(3) A savings and loan holding company (as defined in 12 U.S.C. 1467a);
(4) A foreign banking organization (as defined in 12 CFR 211.21(o));
(5) Any company that controls an insured depository institution; and
(6) Any subsidiary of a company described in paragraph (j)(1) through (5) of this section, other than a subsidiary for which the OCC, FDIC, CFTC, or SEC is the primary financial regulatory agency (as defined in section 2(12) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5301(12)).
11-12. Add subpart E to read as follows:
For purposes of this subpart:
(a)
(1) As of May 1, 2010:
(i) Was principally invested in illiquid assets; or
(ii) Was invested in, and contractually committed to principally invest in, illiquid assets; and
(2) Makes all investments pursuant to, and consistent with, an investment strategy to principally invest in illiquid assets.
(b)
(1) Is not a liquid asset;
(2) Because of statutory or regulatory restrictions applicable to the covered fund or asset, cannot be offered, sold, or otherwise transferred by covered fund to a person that is unaffiliated with the relevant banking entity; or
(3) Because of contractual restrictions applicable to the covered fund or asset, cannot be offered, sold, or otherwise transferred by the covered fund for a period of 3 years or more to a person that is unaffiliated with the relevant banking entity.
(c)
(1) Cash or cash equivalents;
(2) An asset that is traded on a recognized, established exchange, trading facility or other market on which there exist independent,
(3) An asset for which there are
(4) An asset the price of which is quoted routinely in a widely disseminated publication that is readily available to the general public or through an electronic service that provides indicative data from real-time financial networks;
(5) An asset with an initial term of one year or less and the payments on which at maturity may be settled, closed-out, or paid in cash or one or more other liquid assets described in paragraphs (c)(1), (2), (3), or (4) of this section; and
(6) Any other asset that the Board determines, based on all the facts and circumstances, is a liquid asset.
(d)
(1) Is
(i) Illiquid assets; or
(ii) Risk-mitigating hedges entered into in connection with and related to individual or aggregated positions in, or holdings of, illiquid assets;
(2) Is
(3) Has an
(i) Markets or holds itself out to investors as intending to principally invest in assets described in paragraph (d)(1) of this section; or
(ii) Has a documented investment policy of principally investing in assets described in paragraph (d)(1) of this section.
(a)
(2)
(i) The conformance date determined in accordance with paragraph (a)(1) of this section; or
(ii) 2 years after the date on which the company becomes a banking entity or a subsidiary or affiliate of a banking entity.
(3)
(b)
(i) The fund is an illiquid fund; and
(ii) The acquisition or retention of such interest, or provision of additional capital, is necessary to fulfill a contractual obligation of the banking entity that was in effect on May 1, 2010.
(2)
(i) May not exceed 5 years beyond any conformance period granted under paragraph (a)(3) of this section; and
(ii) Shall terminate automatically on the date during any such extension on which the banking entity is no longer under a contractual obligation described in paragraph (b)(1)(ii) of this section.
(3)
(i) A banking entity has a contractual obligation to take or retain an ownership interest in an illiquid fund if the banking entity is prohibited from redeeming all of its ownership interests in the fund, and from selling or otherwise transferring all such ownership interests to a person that is not an affiliate of the banking entity—
(A) Under the terms of the banking entity's ownership interest in the fund or the banking entity's other contractual arrangements with the fund or unaffiliated investors in the fund; or
(B) If the banking entity is the sponsor of the fund, under the terms of a written representation made by the banking entity in the fund's offering materials distributed to potential investors;
(ii) A banking entity has a contractual obligation to provide additional capital to an illiquid fund if the banking entity is required to provide additional capital to such fund—
(A) Under the terms of its ownership interest in the fund or the banking entity's other contractual arrangements with the fund or unaffiliated investors in the fund; or
(B) If the banking entity is the sponsor of the fund, under the terms of a written representation made by the banking entity in the fund's offering materials distributed to potential investors; and
(iii) A banking entity shall be considered to have a contractual obligation for purposes of paragraph (b)(3)(i) or (ii) of this section only if:
(A) The obligation may not be terminated by the banking entity or any of its subsidiaries or affiliates under the terms of its agreement with the fund; and
(B) In the case of an obligation that may be terminated with the consent of other persons, the banking entity and its subsidiaries and affiliates have used their reasonable best efforts to obtain such consent and such consent has been denied.
(c)
(1) Submit a request in writing to the Board at least 180 days prior to the expiration of the applicable time period;
(2) Provide the reasons why the banking entity believes the extension should be granted, including information that addresses the factors in paragraph (d)(1) of this section; and
(3) Provide a detailed explanation of the banking entity's plan for divesting or conforming the activity or investment(s).
(d)
(1)
(i) Whether the activity or investment:
(A) Involves or results in material conflicts of interest between the banking entity and its clients, customers or counterparties;
(B) Would result, directly or indirectly, in a material exposure by the banking entity to high-risk assets or high-risk trading strategies;
(C) Would pose a threat to the safety and soundness of the banking entity; or
(D) Would pose a threat to the financial stability of the United States;
(ii) Market conditions;
(iii) The nature of the activity or investment;
(iv) The date that the banking entity's contractual obligation to make or retain an investment in the fund was incurred and when it expires;
(v) The contractual terms governing the banking entity's interest in the fund;
(vi) The degree of control held by the banking entity over investment decisions of the fund;
(vii) The types of assets held by the fund, including whether any assets that were illiquid when first acquired by the fund have become liquid assets, such as, for example, because any statutory, regulatory, or contractual restrictions on the offer, sale, or transfer of such assets have expired;
(viii) The date on which the fund is expected to wind up its activities and liquidate, or its investments may be redeemed or sold;
(ix) The total exposure of the banking entity to the activity or investment and the risks that disposing of, or maintaining, the investment or activity may pose to the banking entity or the financial stability of the United States;
(x) The cost to the banking entity of divesting or disposing of the activity or investment within the applicable period;
(xi) Whether the divestiture or conformance of the activity or investment would involve or result in a material conflict of interest between the banking entity and unaffiliated clients, customers or counterparties to which it owes a duty;
(xii) The banking entity's prior efforts to divest or conform the activity or investment(s), including, with respect to an illiquid fund, the extent to which the banking entity has made efforts to terminate or obtain a waiver of its contractual obligation to take or retain an equity, partnership, or other ownership interest in, or provide additional capital to, the illiquid fund; and
(xiii) Any other factor that the Board believes appropriate.
(2)
(3)
(e)
(1)
(2)
(a)
(b)
(c)
(1) Submit a request in writing to the Board at least 180 days prior to the expiration of the applicable time period;
(2) Provide the reasons why the nonbank financial company supervised by the Board believes the extension should be granted; and
(3) Provide a detailed explanation of the company's plan for conforming the activity or investment(s) to any applicable requirements established under section 13(a)(2) or (f)(4) of the Bank Holding Company Act (12 U.S.C. 1851(a)(2) and (f)(4)).
(d)
(1)
(2)
(e)
Banks, banking, Capital, Compensation, Conflict of interests, Credit, Derivatives, Government securities, Insurance, Insurance companies, Investments, Penalties, Reporting and recordkeeping requirements, Risk, Risk retention, Securities, State nonmember banks, State savings associations, Trusts and trustees.
For the reasons set forth in the Supplementary Information, the Federal Deposit Insurance Corporation proposes to add the text of the common rule as set forth at the end of the Supplementary Information as Part 351 to chapter III of Title 12, Code of Federal Regulations, modified as follows:
13. The authority citation for part 351 is added to read as follows:
12 U.S.C. 1851; 12 U.S.C. 1801
14. Part 351 is added as set forth at the end of the Common Preamble.
15. Part 351 is amended by:
a. Removing “[Agency]” wherever it appears and adding in its place “the FDIC”; and
b. Removing “[The Agency]” wherever it appears and adding in its place “The FDIC”.
16. Section 351.1 is added to read as follows:
(a)
(b)
(c)
(d)
17. Paragraph (j) of § 351.2 is added to read as follows:
(j)
Banks, Brokers, Dealers, Investment advisers, Recordkeeping, Reporting, Securities.
For the reasons set forth in the Supplementary Information, the Securities and Exchange Commission proposes to add the text of the common rule as set forth at the end of the Supplementary Information as Part 255 to chapter II of Title 17, Code of Federal Regulations, modified as follows:
18. The authority for part 255 is added to read as follows:
12 U.S.C. 1851, 15 U.S.C. 78
19. Part 255 is added as set forth at the end of the Common Preamble.
20. Part 255 is amended by:
a. Removing “[Agency]” wherever it appears and adding in its place “SEC”; and
b. Removing “[The Agency]” wherever it appears and adding in its place “The SEC.”
21. Section 255.1 is added to read as follows:
(a)
(b)
(c)
(d)
22. Paragraph (j) of § 255.2 is added to read as follows:
(j)
23. Section 225.10(a) is revised to read as follows:
(a)(1)
(2)
Nothing set forth in paragraph (a)(2) of this section shall limit the SEC's authority under any other provision of law, including pursuant to section 13 of the Bank Holding Company Act.
By order of the Board of Governors of the Federal Reserve System, October 11, 2011.
By order of the Board of Directors.
By the Securities and Exchange Commission.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; proposed incidental harassment authorization; request for comments.
NMFS received an application from Shell Offshore Inc. (Shell) for an Incidental Harassment Authorization (IHA) to take marine mammals, by harassment, incidental to offshore exploration drilling on Outer Continental Shelf (OCS) leases in the Beaufort Sea, Alaska. Pursuant to the Marine Mammal Protection Act (MMPA), NMFS is requesting comments on its proposal to issue an IHA to Shell to take, by Level B harassment only, eight species of marine mammals during the specified activity.
Comments and information must be received no later than December 7, 2011.
Comments on the application should be addressed to Michael Payne, Chief, Permits and Conservation Division, Office of Protected Resources, National Marine Fisheries Service, 1315 East-West Highway, Silver Spring, MD 20910. The mailbox address for providing email comments is
Instructions: All comments received are a part of the public record and will generally be posted to
A copy of the application, which contains several attachments, including Shell's marine mammal mitigation and monitoring plan and Plan of Cooperation, used in this document may be obtained by writing to the address specified above, telephoning the contact listed below (see
Candace Nachman, Office of Protected Resources, NMFS, (301) 427-8401.
Sections 101(a)(5)(A) and (D) of the MMPA (16 U.S.C. 1361
Authorization for incidental takings shall be granted if NMFS finds that the taking will have a negligible impact on the 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. 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.”
Section 101(a)(5)(D) of the MMPA established an expedited process by which citizens of the U.S. can apply for an authorization to incidentally take small numbers of marine mammals by harassment. Section 101(a)(5)(D) establishes a 45-day time limit for NMFS review of an application followed by a 30-day public notice and comment period on any proposed authorizations for the incidental harassment of marine mammals. Within 45 days of the close of the comment period, NMFS must either issue or deny the authorization.
Except with respect to certain activities not pertinent here, the MMPA defines “harassment” as:
Any act of pursuit, torment, or annoyance which (i) has the potential to injure a marine mammal or marine mammal stock in the wild [“Level A harassment”]; or (ii) has the potential to disturb a marine mammal or marine mammal stock in the wild by causing disruption of behavioral patterns, including, but not limited to, migration, breathing, nursing, breeding, feeding, or sheltering [“Level B harassment”].
NMFS received an application on May 10, 2011, from Shell for the taking, by harassment, of marine mammals incidental to offshore exploration drilling on OCS leases in the Beaufort Sea, Alaska. NMFS reviewed Shell's application and identified a number of issues requiring further clarification. After addressing comments from NMFS, Shell modified its application and submitted a revised application on September 2, 2011. NMFS carefully evaluated Shell's application, including their analyses, and determined that the application is complete. The September 2, 2011, application is the one available for public comment (see
Shell plans to drill two exploration wells at two drill sites in Camden Bay, Beaufort Sea, Alaska, during the 2012 Arctic open-water season (July through October). Impacts to marine mammals may occur from noise produced by the drillship, zero-offset vertical seismic profile (ZVSP) surveys, and supporting vessels (including icebreakers) and aircraft. Shell has requested an authorization to take 11 marine mammal species by Level B harassment. However, some of these species are not expected to be found in the activity area. Therefore, NMFS is proposing to authorize take of eight marine mammal species, by Level B harassment, incidental to Shell's offshore exploration drilling program in Camden Bay. These species include: Beluga whale (
Shell plans to conduct an offshore exploration drilling program on U.S. Department of the Interior, Bureau of Ocean Energy Management (BOEM, formerly the Minerals Management Service) Alaska OCS leases located north of Point Thomson near Camden Bay in the Beaufort Sea, Alaska, during the 2012 open-water season. During the 2012 drilling program, Shell plans to complete two exploration wells at two
Shell plans to drill the Torpedo prospect well (Torpedo “H” or “J”) first, followed by the Sivulliq well (Sivulliq “N” or “G”), unless adverse surface conditions or other factors dictate a reversal of drilling sequence. In that case, Shell will mobilize to the Sivulliq prospect and drill there first. Because this is an Arctic program, weather and ice conditions will dictate actual operations. The Torpedo H and J drill sites are located 20.8 and 23.1 mi (33.5 and 37.2 km) from shore in water 120 and 124 ft (36.6 and 37.8 m) deep, respectively. The Sivulliq G and N drill sites are located 16.6 and 16.2 mi (26.7 and 26.1 km) from shore in water 110 and 107 ft (33.5 and 32.6 m) deep, respectively.
Shell plans to use one of two drilling vessels for its proposed 2012 Camden Bay exploratory drilling program: The
The
The
The
During the 2012 drilling season, the
The
The exploration drilling operations will require the transfer of supplies between either the Deadhorse/West Dock shorebase or Dutch Harbor and the drillship (either the
An AW139 or Sikorsky S-92 helicopter based in Deadhorse will be used for flights between the shorebase and drill sites. It is expected that on average, up to two flights per day (approximately 12 flights per week) will be necessary to transport supplies and rotate crews. A Sikorsky S-92 based in Barrow will be used for search and rescue operations. Marine mammal monitoring flights will utilize a de Havilland Twin Otter aircraft. The de Havilland Twin Otter is expected to fly daily. Table 1-1c in Shell's application presents the aircraft planned to support the exploration drilling program.
At the end of each drill hole, Shell may conduct a geophysical survey referred to as ZVSP at each drill site where a well is drilled in 2012. During ZVSP surveys, an airgun array is deployed at a location near or adjacent to the drilling vessel, while receivers are placed (temporarily anchored) in the wellbore. The sound source (airgun array) is fired repeatedly, and the reflected sonic waves are recorded by receivers (geophones) located in the wellbore. The geophones, typically in a string, are then raised up to the next interval in the wellbore, and the process is repeated until the entire wellbore has been surveyed. The purpose of the ZVSP is to gather geophysical information at various depths, which can then be used to tie-in or ground-truth geophysical information from the previous seismic surveys with geological data collected within the wellbore.
Shell intends to conduct a particular form of vertical seismic profile known as a ZVSP, in which the sound source is maintained at a constant location near the wellbore (see Figure 1-2 in Shell's application). A typical sound source that would be used by Shell in 2012 is the ITAGA eight-airgun array, which consists of four 150 in
A ZVSP survey is normally conducted at each well after total depth is reached but may be conducted at a shallower depth. For each survey, Shell plans to deploy the airgun array over the side of the
Shell recognizes that the drilling program is located in an area that is characterized by active sea ice movement, ice scouring, and storm surges. In anticipation of potential ice hazards that may be encountered, Shell has developed and will implement an Ice Management Plan (IMP; see Attachment B in Shell's IHA application) to ensure real-time ice and weather forecasting is conducted in order to identify conditions that might put operations at risk and will modify its activities accordingly. The IMP also contains ice threat classification levels depending on the time available to suspend drilling operations, secure the well, and escape from advancing hazardous ice. Real-time ice and weather forecasting will be available to operations personnel for planning purposes and to alert the fleet of impending hazardous ice and weather conditions. Ice and weather forecasting is provided by SIWAC. The center is continuously manned by experienced personnel, who rely on a number of data sources for ice forecasting and tracking, including:
• Radarsat and Envisat data—satellites with Synthetic Aperture Radar, providing all-weather imagery of ice conditions with very high resolution;
• Moderate Resolution Imaging Spectroradiometer—a satellite providing lower resolution visual and near infrared imagery;
• Aerial reconnaissance—provided by specially deployed fixed wing or rotary wing aircraft for confirmation of ice conditions and position;
• Reports from ice specialists on the ice management and anchor handling vessels and from the ice observer on the drillship;
• Incidental ice data provided by commercial ships transiting the area; and
• Information from NOAA ice centers and the University of Colorado.
Drift ice will be actively managed by ice management vessels, consisting of an ice management vessel and an anchor handling vessel. Ice management for safe operation of Shell's planned exploration drilling program will occur far out in the OCS, remote from the vicinities of any routine marine vessel traffic in the Beaufort Sea causing no threat to public safety or services that occurs near to shore. Shell vessels will also communicate movements and activities through the 2012 North Slope Communications Centers. Management of ice by ice management vessels will occur during a drilling season predominated by open water and thus is not expected to contribute to ice hazards, such as ridging, override, or pileup in an offshore or nearshore environment.
The ice-management/anchor handling vessels would manage the ice by deflecting any ice floes that could affect the
It is anticipated that the ice management vessels will be managing ice for 38% of the time when within 25 mi (40 km) of the
During Camden Bay exploration drilling operations, Shell has indicated that they do not intend to conduct any icebreaking activities; rather, Shell would deploy its support vessels to manage ice as described here. As detailed in Shell's IMP (see Attachment B of Shell's IHA application), actual breaking of ice would occur only in the unlikely event that ice conditions in the immediate vicinity of operations create a safety hazard for the drilling vessel. In such a circumstance, operations personnel will follow the guidelines established in the IMP to evaluate ice conditions and make the formal designation of a hazardous, ice alert condition, which would trigger the procedures that govern any actual icebreaking operations. Historical data relative to ice conditions in the Beaufort Sea in the vicinity of Shell's planned operations, and during the timeframe for those operations, establish that there is a very low probability (
Shell's base plan is for the
Shell will cease drilling on or before October 31, after which the
Activities associated with the 2012 Camden Bay, Beaufort Sea, exploration drilling program include operation of the drillship (either the
Potential impacts to marine mammals could occur from the noise produced by the drillship and its support vessels (including the icebreakers), aircraft, and the airgun array during ZVSP surveys. The drillship produces continuous noise into the marine environment. NMFS currently uses a threshold of 120 dB re 1 µPa (rms) for the onset of Level B harassment from continuous sound sources. This 120 dB threshold is also applicable for the icebreakers when actively managing or breaking ice. The drilling vessel to be used will be either the
Exploratory drilling will be conducted from the
Most drilling sounds generated from vessel-based operations occur at relatively low frequencies below 600 Hz although tones up to 1,850 Hz were recorded by Greene (1987a) during drilling operations in the Beaufort Sea. At a range of 558 ft (170 m) the 20-1000 Hz band level was 122-125 dB for the drillship
Sound measurements from the
In addition to the drillship, various types of vessels will be used in support of the operations, including ice management vessels, anchor handlers, offshore supply vessels, barges and tugs, and OSR vessels. Sounds from boats and vessels have been reported extensively (Greene and Moore, 1995; Blackwell and Greene, 2002, 2005, 2006). Numerous measurements of underwater vessel sound have been performed in support of recent industry activity in the Chukchi and Beaufort Seas. Results of these measurements were reported in various 90-day and comprehensive reports since 2007 (
The primary sources of sounds from all vessel classes are propeller cavitation, propeller singing, and propulsion or other machinery. Propeller cavitation is usually the dominant noise source for vessels (Ross, 1976). Propeller cavitation and singing are produced outside the hull, whereas propulsion or other machinery noise originates inside the hull. There are additional sounds produced by vessel activity, such as pumps, generators, flow noise from water passing over the hull, and bubbles breaking in the wake. Icebreakers contribute greater sound levels during icebreaking activities than ships of similar size during normal operation in open water (Richardson
Measurements of the icebreaking supply ship
Sound levels during ice management activities would not be as intense as during icebreaking, and the resulting effects to marine species would be less significant in comparison. During ice management, the vessel's propeller is rotating at approximately 15-20 percent of the vessel's propeller rotation capacity. Instead of actually breaking ice, during ice management, the vessel redirects and repositions the ice by pushing it away from the direction of the drillship at slow speeds so that the ice floe does not slip past the vessel bow. Basically, ice management occurs at slower speed, lower power, and slower propeller rotation speed (
Helicopters may be used for personnel and equipment transport to and from the drillship. Under calm conditions, rotor and engine sounds are coupled into the water within a 26° cone beneath the aircraft. Some of the sound will transmit beyond the immediate area, and some sound will enter the water outside the 26° area when the sea surface is rough. However, scattering and absorption will limit lateral propagation in the shallow water.
Dominant tones in noise spectra from helicopters are generally below 500 Hz (Greene and Moore, 1995). Harmonics of the main rotor and tail rotor usually dominate the sound from helicopters; however, many additional tones associated with the engines and other rotating parts are sometimes present.
Because of doppler shift effects, the frequencies of tones received at a stationary site diminish when an aircraft passes overhead. The apparent frequency is increased while the aircraft approaches and is reduced while it moves away.
Aircraft flyovers are not heard underwater for very long, especially when compared to how long they are heard in air as the aircraft approaches an observer. Helicopters flying to and from the drillship will generally maintain straight-line routes at altitudes of at least 1,500 ft (457 m) above sea level, thereby limiting the received levels at and below the surface. Aircraft travel would be controlled by Federal Aviation Administration approved flight paths.
A typical eight airgun array (4 x 40 in
Airguns function by venting high-pressure air into the water. The pressure signature of an individual airgun consists of a sharp rise and then fall in pressure, followed by several positive and negative pressure excursions caused by oscillation of the resulting air bubble. The sizes, arrangement, and firing times of the individual airguns in an array are designed and synchronized to suppress the pressure oscillations subsequent to the first cycle. Typical high-energy airgun arrays emit most energy at 10-120 Hz. However, the pulses contain significant energy up to 500-1,000 Hz and some energy at higher frequencies (Goold and Fish, 1998; Potter
Although there will be several support vessels in the drilling operations area, NMFS considers the possibility of collisions with marine mammals highly unlikely. Once on location, the majority of the support vessels will remain in the area of the drillship throughout the 2012 drilling season and will not be making trips between the shorebase and the offshore vessels. When not needed for ice management/icebreaking operations, the icebreaker and anchor handler will remain approximately 25 mi (40 km) upwind and upcurrent of the drillship. Any ice management/icebreaking activity would be expected to occur at a distance of 0.6-12 mi (1-19 km) upwind and upcurrent of the drillship. As the crew change/resupply activities are considered part of normal vessel traffic and are not anticipated to impact marine mammals in a manner that would rise to the level of taking, those activities are not considered further in this document.
The Beaufort Sea supports a diverse assemblage of marine mammals, including: bowhead, gray, beluga, killer (
Of these species, eight are expected to occur in the area of Shell's proposed operations. These species include: The bowhead, gray, and beluga whales, harbor porpoise, and the ringed, spotted, bearded, and ribbon seals. The marine mammal species that is likely to be encountered most widely (in space and time) throughout the period of the proposed drilling program is the ringed seal. Bowhead whales are also anticipated to occur in the proposed project area more frequently than the other cetacean species; however, their occurrence is not expected until later in the season. Even though harbor porpoise and ribbon seals are not typically sighted in Camden Bay, there have been recent sightings in the Beaufort Sea near the Prudhoe Bay area, so their occurrence could not be completely ruled out. Point Barrow, Alaska, is the approximate northeastern extent of the harbor porpoise's regular range (Suydam and George, 1992), though there are extralimital records east to the mouth of the Mackenzie River in the Northwest Territories, Canada, and recent sightings in the Beaufort Sea in the vicinity of Prudhoe Bay during surveys in 2007 and 2008 (Christie
Other cetacean species that have been observed in the Beaufort Sea but are uncommon or rarely identified in the project area include narwhal and killer, minke, and humpback whales. These species could occur in the project area, but each of these species is uncommon or rare in the area and relatively few encounters with these species are expected during the exploration drilling program. The narwhal occurs in Canadian waters and occasionally in the Beaufort Sea, but it is rare there and is not expected to be encountered. There are scattered records of narwhal in Alaskan waters, including reports by subsistence hunters, where the species is considered extralimital (Reeves
Shell's application contains information on the status, distribution, seasonal distribution, abundance, and life history of each of the species under NMFS jurisdiction mentioned in this document. When reviewing the application, NMFS determined that the species descriptions provided by Shell correctly characterized the status, distribution, seasonal distribution, and abundance of each species. Please refer to the application for that information (see
When considering the influence of various kinds of sound on the marine environment, it is necessary to understand that different kinds of marine life are sensitive to different frequencies of sound. Based on available behavioral data, audiograms have been derived using auditory evoked potentials, anatomical modeling, and other data, Southall
• Low frequency cetaceans (13 species of mysticetes): Functional hearing is estimated to occur between approximately 7 Hz and 22 kHz (however, a study by Au
• Mid-frequency cetaceans (32 species of dolphins, six species of larger toothed whales, and 19 species of beaked and bottlenose whales): Functional hearing is estimated to occur between approximately 150 Hz and 160 kHz;
• High frequency cetaceans (eight species of true porpoises, six species of river dolphins, Kogia, the franciscana, and four species of cephalorhynchids): Functional hearing is estimated to occur between approximately 200 Hz and 180 kHz; and
• Pinnipeds in Water: Functional hearing is estimated to occur between approximately 75 Hz and 75 kHz, with the greatest sensitivity between approximately 700 Hz and 20 kHz.
As mentioned previously in this document, six marine mammal species (three cetacean and three pinniped species) are likely to occur in the proposed exploratory drilling area. Of the three cetacean species likely to occur in Shell's proposed project area, two are classified as low frequency cetaceans (
Underwater audiograms have been obtained using behavioral methods for four species of phocinid seals: The ringed, harbor, harp, and northern elephant seals (reviewed in Richardson
Pinniped call characteristics are relevant when assessing potential masking effects of man-made sounds. In addition, for those species whose hearing has not been tested, call characteristics are useful in assessing the frequency range within which hearing is likely to be most sensitive. The three species of seals present in the study area, all of which are in the phocid seal group, are all most vocal during the spring mating season and much less so during late summer. In each species, the calls are at frequencies from several hundred to several thousand hertz—above the frequency range of the dominant noise components from most of the proposed oil exploration activities.
Cetacean hearing has been studied in relatively few species and individuals. The auditory sensitivity of bowhead, gray, and other baleen whales has not been measured, but relevant anatomical and behavioral evidence is available. These whales appear to be specialized for low frequency hearing, with some directional hearing ability (reviewed in Richardson
The beluga whale is one of the better-studied species in terms of its hearing ability. As mentioned earlier, the auditory bandwidth in mid-frequency odontocetes is believed to range from 150 Hz to 160 kHz (Southall
Call characteristics of cetaceans provide some limited information on their hearing abilities, although the auditory range often extends beyond the range of frequencies contained in the calls. Also, understanding the frequencies at which different marine mammal species communicate is relevant for the assessment of potential impacts from manmade sounds. A summary of the call characteristics for bowhead, gray, and beluga whales is provided next.
Most bowhead calls are tonal, frequency-modulated sounds at frequencies of 50-400 Hz. These calls overlap broadly in frequency with the underwater sounds emitted by many of the activities to be performed during Shell's proposed exploration drilling program (Richardson
Beluga calls include trills, whistles, clicks, bangs, chirps and other sounds (Schevill and Lawrence, 1949; Ouellet, 1979; Sjare and Smith, 1986a). Beluga whistles have dominant frequencies in the 2-6 kHz range (Sjare and Smith, 1986a). This is above the frequency range of most of the sound energy produced by the proposed exploratory drilling activities and associated vessels. Other beluga call types reported by Sjare and Smith (1986a,b) included sounds at mean frequencies ranging upward from 1 kHz.
The beluga also has a very well developed high frequency echolocation system, as reviewed by Au (1993). Echolocation signals have peak frequencies from 40-120 kHz and broadband source levels of up to 219 dB re 1 μPa-m (zero-peak). Echolocation calls are far above the frequency range of the sounds produced by the devices proposed for use during Shell's Camden Bay exploratory drilling program. Therefore, those industrial sounds are
The likely or possible impacts of the proposed exploratory drilling program in Camden Bay on marine mammals could involve both non-acoustic and acoustic effects. Potential non-acoustic effects could result from the physical presence of the equipment and personnel. Petroleum development and associated activities introduce sound into the marine environment. Impacts to marine mammals are expected to primarily be acoustic in nature. Potential acoustic effects on marine mammals relate to sound produced by drilling activity, vessels, and aircraft, as well as the ZVSP airgun array. The potential effects of sound from the proposed exploratory drilling program might include one or more of the following: Tolerance; masking of natural sounds; behavioral disturbance; non-auditory physical effects; and, at least in theory, temporary or permanent hearing impairment (Richardson
(1) The noise may be too weak to be heard at the location of the animal (
(2) The noise may be audible but not strong enough to elicit any overt behavioral response;
(3) The noise may elicit reactions of variable conspicuousness and variable relevance to the well being of the marine mammal; these can range from temporary alert responses to active avoidance reactions such as vacating an area at least until the noise event ceases but potentially for longer periods of time;
(4) Upon repeated exposure, a marine mammal may exhibit diminishing responsiveness (habituation), or disturbance effects may persist; the latter is most likely with sounds that are highly variable in characteristics, infrequent, and unpredictable in occurrence, and associated with situations that a marine mammal perceives as a threat;
(5) Any anthropogenic noise that is strong enough to be heard has the potential to reduce (mask) the ability of a marine mammal to hear natural sounds at similar frequencies, including calls from conspecifics, and underwater environmental sounds such as surf noise;
(6) If mammals remain in an area because it is important for feeding, breeding, or some other biologically important purpose even though there is chronic exposure to noise, it is possible that there could be noise-induced physiological stress; this might in turn have negative effects on the well-being or reproduction of the animals involved; and
(7) Very strong sounds have the potential to cause a temporary or permanent reduction in hearing sensitivity. In terrestrial mammals, and presumably marine mammals, received sound levels must far exceed the animal's hearing threshold for there to be any temporary threshold shift (TTS) in its hearing ability. For transient sounds, the sound level necessary to cause TTS is inversely related to the duration of the sound. Received sound levels must be even higher for there to be risk of permanent hearing impairment. In addition, intense acoustic or explosive events may cause trauma to tissues associated with organs vital for hearing, sound production, respiration and other functions. This trauma may include minor to severe hemorrhage.
Numerous studies have shown that underwater sounds from industry activities are often readily detectable by marine mammals in the water at distances of many kilometers. Numerous studies have also shown that marine mammals at distances more than a few kilometers away often show no apparent response to industry activities of various types (Miller
Masking is the obscuring of sounds of interest by other sounds, often at similar frequencies. Marine mammals are highly dependent on sound, and their ability to recognize sound signals amid other noise is important in communication, predator and prey detection, and, in the case of toothed whales, echolocation. Even in the absence of manmade sounds, the sea is usually noisy. Background ambient noise often interferes with or masks the ability of an animal to detect a sound signal even when that signal is above its absolute hearing threshold. Natural ambient noise includes contributions from wind, waves, precipitation, other animals, and (at frequencies above 30 kHz) thermal noise resulting from molecular agitation (Richardson
Although some degree of masking is inevitable when high levels of manmade broadband sounds are introduced into the sea, marine mammals have evolved systems and behavior that function to reduce the impacts of masking. Structured signals, such as the echolocation click sequences of small toothed whales, may be readily detected even in the presence of strong background noise because their frequency content and temporal features usually differ strongly from those of the background noise (Au and Moore, 1988, 1990). The components of background noise that are similar in frequency to the sound signal in question primarily
Redundancy and context can also facilitate detection of weak signals. These phenomena may help marine mammals detect weak sounds in the presence of natural or manmade noise. Most masking studies in marine mammals present the test signal and the masking noise from the same direction. The sound localization abilities of marine mammals suggest that, if signal and noise come from different directions, masking would not be as severe as the usual types of masking studies might suggest (Richardson
These data demonstrating adaptations for reduced masking pertain mainly to the very high frequency echolocation signals of toothed whales. There is less information about the existence of corresponding mechanisms at moderate or low frequencies or in other types of marine mammals. For example, Zaitseva
Masking effects of underwater sounds from Shell's proposed activities on marine mammal calls and other natural sounds are expected to be limited. For example, beluga whales primarily use high-frequency sounds to communicate and locate prey; therefore, masking by low-frequency sounds associated with drilling activities is not expected to occur (Gales, 1982, as cited in Shell, 2009). If the distance between communicating whales does not exceed their distance from the drilling activity, the likelihood of potential impacts from masking would be low (Gales, 1982, as cited in Shell, 2009). At distances greater than 660-1,300 ft (200-400 m), recorded sounds from drilling activities did not affect behavior of beluga whales, even though the sound energy level and frequency were such that it could be heard several kilometers away (Richardson
There is evidence of other marine mammal species continuing to call in the presence of industrial activity. Annual acoustical monitoring near BP's Northstar production facility during the fall bowhead migration westward through the Beaufort Sea has recorded thousands of calls each year (for examples, see Richardson
Although some masking by marine mammal species in the area may occur, the extent of the masking interference will depend on the spatial relationship of the animal and Shell's activity. Almost all energy in the sounds emitted by drilling and other operational activities is at low frequencies, predominantly below 250 Hz with another peak centered around 1,000 Hz. Most energy in the sounds from the vessels and aircraft to be used during this project is below 1 kHz (Moore
Behavioral responses to sound are highly variable and context-specific.
Exposure of marine mammals to sound sources can result in (but is not limited to) no response or any of the following observable responses: Increased alertness; orientation or attraction to a sound source; vocal modifications; cessation of feeding; cessation of social interaction; alteration of movement or diving behavior; avoidance; habitat abandonment (temporary or permanent); and, in severe cases, panic, flight, stampede, or stranding, potentially resulting in death (Southall
Detailed studies regarding responses to anthropogenic sound have been conducted on humpback, gray, and bowhead whales and ringed seals. Less detailed data are available for some other species of baleen whales, sperm whales, small toothed whales, and sea otters. The following sub-sections provide examples of behavioral responses that provide an idea of the variability in behavioral responses that would be expected given the different sensitivities of marine mammal species to sound.
Some bowheads appeared to divert from their migratory path after exposure to projected icebreaker sounds. Other bowheads however, tolerated projected icebreaker sound at levels 20 dB and more above ambient sound levels. The source level of the projected sound however, was much less than that of an actual icebreaker, and reaction distances to actual icebreaking may be much greater than those reported here for projected sounds.
Brewer
Richardson
Patenaude
During their study, Patenaude
Richardson
Southall
Baker
Malme
Richardson
McCauley
Palka and Hammond (2001) analyzed line transect census data in which the orientation and distance off transect line were reported for large numbers of minke whales. The authors developed a method to account for effects of animal movement in response to sighting platforms. Minor changes in locomotion speed, direction, and/or diving profile were reported at ranges from 1,847 to 2,352 ft (563 to 717 m) at received levels of 110 to 120 dB.
Biassoni
Frankel and Clark (1998) conducted playback experiments with wintering humpback whales using a single speaker producing a low-frequency “M-sequence” (sine wave with multiple-phase reversals) signal in the 60 to 90 Hz band with output of 172 dB at 1 m. For 11 playbacks, exposures were between 120 and 130 dB re 1 µPa (rms) and included sufficient information regarding individual responses. During eight of the trials, there were no measurable differences in tracks or bearings relative to control conditions, whereas on three occasions, whales either moved slightly away from (n = 1) or towards (n = 2) the playback speaker during exposure. The presence of the source vessel itself had a greater effect than did the M-sequence playback.
Finally, Nowacek
At least six of 17 groups of beluga whales appeared to alter their migration path in response to underwater playbacks of icebreaker sound (Richardson
Patenaude
In reviewing responses of cetaceans with best hearing in mid-frequency ranges, which includes toothed whales, Southall
LGL and Greeneridge (1986) and Finley
The 1982 season observations by LGL and Greeneridge (1986) involved a single passage of an icebreaker with both ice-based and aerial measurements on June 28, 1982. Four groups of narwhals (n = 9 to 10, 7, 7, and 6) responded when the ship was 4 mi (6.4 km) away (received levels of approximately 100 dB in the 150- to 1,150-Hz band). At a later point, observers sighted belugas moving away from the source at more than 12.4 mi (20 km; received levels of approximately 90 dB in the 150- to 1,150-Hz band). The total number of animals observed fleeing was about 300, suggesting approximately 100 independent groups (of three individuals each). No whales were sighted the following day, but some were sighted on June 30, with ship noise audible at spectrum levels of approximately 55 dB/Hz (up to 4 kHz).
Observations during 1983 (LGL and Greeneridge, 1986) involved two icebreaking ships with aerial survey and ice-based observations during seven sampling periods. Narwhals and belugas generally reacted at received levels ranging from 101 to 121 dB in the 20- to 1,000-Hz band and at a distance of up to 40.4 mi (65 km). Large numbers (100s) of beluga whales moved out of the area at higher received levels. As noise levels from icebreaking operations diminished, a total of 45 narwhals returned to the area and engaged in diving and foraging behavior. During the final sampling period, following an 8-h quiet interval, no reactions were seen from 28 narwhals and 17 belugas (at received levels ranging up to 115 dB).
The final season (1984) reported in LGL and Greeneridge (1986) involved aerial surveys before, during, and after the passage of two icebreaking ships. During operations, no belugas and few narwhals were observed in an area approximately 16.8 mi (27 km) ahead of the vessels, and all whales sighted over 12.4-50 mi (20-80 km) from the ships were swimming strongly away. Additional observations confirmed the spatial extent of avoidance reactions to this sound source in this context.
Buckstaff (2004) reported elevated dolphin whistle rates with received levels from oncoming vessels in the 110 to 120 dB range in Sarasota Bay, Florida. These hearing thresholds were apparently lower than those reported by a researcher listening with towed hydrophones. Morisaka
Morton and Symonds (2002) used census data on killer whales in British Columbia to evaluate avoidance of non-pulse acoustic harassment devices (AHDs). Avoidance ranges were about 2.5 mi (4 km). Also, there was a dramatic reduction in the number of days “resident” killer whales were sighted during AHD-active periods compared to pre- and post-exposure periods and a nearby control site.
Monteiro-Neto
Awbrey and Stewart (1983) played back semi-submersible drillship sounds (source level: 163 dB) to belugas in Alaska. They reported avoidance reactions at 984 and 4,921 ft (300 and 1,500 m) and approach by groups at a distance of 2.2 mi (3.5 km; received levels were approximately 110 to 145 dB over these ranges assuming a 15 log R transmission loss). Similarly, Richardson
Two studies deal with issues related to changes in marine mammal vocal behavior as a function of variable background noise levels. Foote
Several researchers conducting laboratory experiments on hearing and the effects of non-pulse sounds on hearing in mid-frequency cetaceans
Blackwell
Southall
Jacobs and Terhune (2002) observed harbor seal reactions to AHDs (source level in this study was 172 dB) deployed around aquaculture sites. Seals were generally unresponsive to sounds from the AHDs. During two specific events, individuals came within 141 and 144 ft (43 and 44 m) of active AHDs and failed to demonstrate any measurable behavioral response; estimated received levels based on the measures given were approximately 120 to 130 dB.
Costa
Kastelein
Potential effects to pinnipeds from aircraft activity could involve both acoustic and non-acoustic effects. It is uncertain if the seals react to the sound of the helicopter or to its physical presence flying overhead. Typical reactions of hauled out pinnipeds to aircraft that have been observed include looking up at the aircraft, moving on the ice or land, entering a breathing hole or crack in the ice, or entering the water. Ice seals hauled out on the ice have been observed diving into the water when approached by a low-flying aircraft or helicopter (Burns and Harbo, 1972, cited in Richardson
Blackwell
Born
Spotted seals hauled out on land in summer are unusually sensitive to aircraft overflights compared to other species. They often rush into the water when an aircraft flies by at altitudes up to 984-2,461 ft (300-750 m). They occasionally react to aircraft flying as high as 4,495 ft (1,370 m) and at lateral distances as far as 1.2 mi (2 km) or more (Frost and Lowry, 1990; Rugh
Temporary or permanent hearing impairment is a possibility when marine mammals are exposed to very strong sounds. Non-auditory physiological effects might also occur in marine mammals exposed to strong underwater sound. Possible types of non-auditory physiological effects or injuries that theoretically might occur in mammals close to a strong sound source include stress, neurological effects, bubble formation, and other types of organ or tissue damage. It is possible that some marine mammal species (
Numerous studies have shown that pulsed sounds from airguns are often readily detectable in the water at distances of many kilometers. Weir (2008) observed marine mammal responses to seismic pulses from a 24 airgun array firing a total volume of either 5,085 in
As stated earlier in this document, masking is the obscuring of sounds of interest by other sounds, often at similar frequencies. For full details about masking, see the previous subsection in this document (“
There is evidence of some marine mammal species continuing to call in the presence of industrial activity. McDonald
There is little concern regarding masking due to the brief duration of these pulses and relatively longer silence between airgun shots (9-12 seconds) near the sound source. However, at long distances (over tens of kilometers away) in deep water, due to multipath propagation and reverberation, the durations of airgun pulses can be “stretched” to seconds with long decays (Madsen
As was described in more detail in the previous sub-section (“
Results of studies of gray, bowhead, and humpback whales have determined that received levels of pulses in the 160-170 dB re 1 µPa rms range seem to cause obvious avoidance behavior in a substantial fraction of the animals exposed. In many areas, seismic pulses from large arrays of airguns diminish to those levels at distances ranging from 2.8-9 mi (4.5-14.5 km) from the source. For the much smaller airgun array used during the ZVSP survey (total discharge volume of 760 in
Malme
Seismic operators and marine mammal observers sometimes see dolphins and other small toothed whales near operating airgun arrays, but, in general, there seems to be a tendency for most delphinids to show some limited avoidance of seismic vessels operating large airgun systems. However, some dolphins seem to be attracted to the seismic vessel and floats, and some ride the bow wave of the seismic vessel even when large arrays of airguns are firing. Nonetheless, there have been indications that small toothed whales sometimes move away or maintain a somewhat greater distance from the vessel when a large array of airguns is operating than when it is silent (
Captive bottlenose dolphins and (of more relevance in this project) beluga whales exhibit changes in behavior when exposed to strong pulsed sounds similar in duration to those typically used in seismic surveys (Finneran
Reactions of toothed whales to large arrays of airguns are variable and, at least for delphinids, seem to be confined to a smaller radius than has been observed for mysticetes. However, based on the limited existing evidence, belugas should not be grouped with delphinids in the “less responsive” category.
Marine mammal hearing plays a critical role in communication with conspecifics and in interpretation of environmental cues for purposes such as predator avoidance and prey capture. Depending on the degree (elevation of threshold in dB), duration (
Researchers have derived TTS information for odontocetes from studies on the bottlenose dolphin and beluga. For the one harbor porpoise tested, the received level of airgun sound that elicited onset of TTS was lower (Lucke
For baleen whales, there are no data, direct or indirect, on levels or properties of sound that are required to induce TTS. The frequencies to which baleen whales are most sensitive are assumed to be lower than those to which odontocetes are most sensitive, and natural background noise levels at those low frequencies tend to be higher. As a result, auditory thresholds of baleen whales within their frequency band of best hearing are believed to be higher (less sensitive) than are those of odontocetes at their best frequencies (Clark and Ellison, 2004), meaning that baleen whales require sounds to be louder (
In pinnipeds, TTS thresholds associated with exposure to brief pulses (single or multiple) of underwater sound have not been measured. However, systematic TTS studies on captive pinnipeds have been conducted (Bowles
NMFS has established acoustic thresholds that identify the received sound levels above which hearing impairment or other injury could potentially occur, which are 180 and 190 dB re 1 μPa (rms) for cetaceans and pinnipeds, respectively (NMFS 1995, 2000). The established 180- and 190-dB re 1 μPa (rms) criteria are the received levels above which, in the view of a panel of bioacoustics specialists convened by NMFS before additional TTS measurements for marine mammals became available, one could not be certain that there would be no injurious effects, auditory or otherwise, to marine mammals. TTS is considered by NMFS to be a type of Level B (non-injurious) harassment. The 180- and 190-dB levels are shutdown criteria applicable to cetaceans and pinnipeds, respectively, as specified by NMFS (2000) and are used to establish exclusion zones (EZs), as appropriate. Additionally, based on the summary provided here and the fact that modeling indicates the back-propagated source level for the
There is no specific evidence that exposure to underwater industrial sound associated with oil exploration can cause PTS in any marine mammal (see Southall
It is highly unlikely that marine mammals could receive sounds strong enough (and over a sufficient duration) to cause PTS during the proposed exploratory drilling program. As mentioned previously in this document, the source levels of the drillship are not considered strong enough to cause even slight TTS. Given the higher level of sound necessary to cause PTS, it is even less likely that PTS could occur. In fact, based on the modeled source levels for the drillship, the levels immediately adjacent to the drillship may not be sufficient to induce PTS, even if the animals remain in the immediate vicinity of the activity. The modeled source levels from the
Classic stress responses begin when an animal's central nervous system perceives a potential threat to its homeostasis. That perception triggers stress responses regardless of whether a stimulus actually threatens the animal; the mere perception of a threat is sufficient to trigger a stress response (Moberg, 2000; Sapolsky
In the case of many stressors, an animal's first and most economical (in terms of biotic costs) response is behavioral avoidance of the potential stressor or avoidance of continued exposure to a stressor. An animal's second line of defense to stressors involves the sympathetic part of the autonomic nervous system and the classical “fight or flight” response, which includes the cardiovascular system, the gastrointestinal system, the exocrine glands, and the adrenal medulla to produce changes in heart rate, blood pressure, and gastrointestinal activity that humans commonly associate with “stress.” These responses have a relatively short duration and may or may not have significant long-term effects on an animal's welfare.
An animal's third line of defense to stressors involves its neuroendocrine or sympathetic nervous systems; the system that has received the most study has been the hypothalmus-pituitary-adrenal system (also known as the HPA axis in mammals or the hypothalamus-pituitary-interrenal axis in fish and some reptiles). Unlike stress responses associated with the autonomic nervous system, virtually all neuroendocrine functions that are affected by stress—including immune competence, reproduction, metabolism, and behavior—are regulated by pituitary hormones. Stress-induced changes in the secretion of pituitary hormones have been implicated in failed reproduction (Moberg, 1987; Rivier, 1995), altered metabolism (Elasser
The primary distinction between stress (which is adaptive and does not normally place an animal at risk) and distress is the biotic cost of the response. During a stress response, an animal uses glycogen stores that can be quickly replenished once the stress is alleviated. In such circumstances, the cost of the stress response would not pose a risk to the animal's welfare. However, when an animal does not have sufficient energy reserves to satisfy the energetic costs of a stress response, energy resources must be diverted from other biotic functions, which impair those functions that experience the diversion. For example, when mounting a stress response diverts energy away from growth in young animals, those animals may experience stunted growth. When mounting a stress response diverts energy from a fetus, an animal's reproductive success and fitness will suffer. In these cases, the animals will have entered a pre-pathological or pathological state which is called “distress” (sensu Seyle, 1950) or “allostatic loading” (sensu McEwen and Wingfield, 2003). This pathological state will last until the animal replenishes its biotic reserves sufficient to restore normal function. Note that these examples involved a long-term (days or weeks) stress response exposure to stimuli.
Relationships between these physiological mechanisms, animal behavior, and the costs of stress responses have also been documented fairly well through controlled experiment; because this physiology exists in every vertebrate that has been studied, it is not surprising that stress responses and their costs have been documented in both laboratory and free-living animals (for examples see, Holberton
For example, Jansen (1998) reported on the relationship between acoustic exposures and physiological responses that are indicative of stress responses in humans (
Hearing is one of the primary senses marine mammals use to gather information about their environment and communicate with conspecifics. Although empirical information on the relationship between sensory impairment (TTS, PTS, and acoustic masking) on marine mammals remains limited, it seems reasonable to assume that reducing an animal's ability to gather information about its environment and to communicate with other members of its species would be stressful for animals that use hearing as their primary sensory mechanism. Therefore, we assume that acoustic exposures sufficient to trigger onset PTS or TTS would be accompanied by physiological stress responses because terrestrial animals exhibit those responses under similar conditions (NRC, 2003). More importantly, marine mammals might experience stress responses at received levels lower than those necessary to trigger onset TTS. Based on empirical studies of the time required to recover from stress responses (Moberg, 2000), NMFS also assumes that stress responses could persist beyond the time interval required for animals to recover from TTS and might result in pathological and pre-pathological states that would be as significant as behavioral responses to TTS. However, as stated previously in this document, the source levels of the drillships are not loud enough to induce PTS or likely even TTS.
Resonance effects (Gentry, 2002) and direct noise-induced bubble formations (Crum
In general, very little is known about the potential for strong, anthropogenic underwater sounds to cause non-auditory physical effects in marine mammals. Such effects, if they occur at all, would presumably be limited to short distances and to activities that extend over a prolonged period. The available data do not allow identification of a specific exposure level above which non-auditory effects
Marine mammals close to underwater detonations of high explosives can be killed or severely injured, and the auditory organs are especially susceptible to injury (Ketten
Specific sound-related processes that lead to strandings and mortality are not well documented, but may include:
(1) Swimming in avoidance of a sound into shallow water;
(2) A change in behavior (such as a change in diving behavior) that might contribute to tissue damage, gas bubble formation, hypoxia, cardiac arrhythmia, hypertensive hemorrhage or other forms of trauma;
(3) A physiological change, such as a vestibular response leading to a behavioral change or stress-induced hemorrhagic diathesis, leading in turn to tissue damage; and
(4) Tissue damage directly from sound exposure, such as through acoustically-mediated bubble formation and growth or acoustic resonance of tissues.
Some of these mechanisms are unlikely to apply in the case of impulse sounds. However, there are indications that gas-bubble disease (analogous to “the bends”), induced in supersaturated tissue by a behavioral response to acoustic exposure, could be a pathologic mechanism for the strandings and mortality of some deep-diving cetaceans exposed to sonar. However, the evidence for this remains circumstantial and is associated with exposure to naval mid-frequency sonar, not seismic surveys or exploratory drilling programs (Cox
Both seismic pulses and continuous drillship sounds are quite different from mid-frequency sonar signals, and some mechanisms by which sonar sounds have been hypothesized to affect beaked whales are unlikely to apply to airgun pulses or drillships. Sounds produced by airgun arrays are broadband impulses with most of the energy below 1 kHz, and the low-energy continuous sounds produced by drillships have most of the energy between 20 and 1,000 Hz. Additionally, the non-impulsive, continuous sounds produced by the drillship proposed to be used by Shell do not have rapid rise times. Rise time is the fluctuation in sound levels of the source. The type of sound that would be produced during the proposed drilling program will be constant and will not exhibit any sudden fluctuations or changes. Typical military mid-frequency sonar emits non-impulse sounds at frequencies of 2-10 kHz, generally with a relatively narrow bandwidth at any one time. A further difference between them is that naval exercises can involve sound sources on more than one vessel. Thus, it is not appropriate to assume that there is a direct connection between the effects of military sonar and oil and gas industry operations on marine mammals. However, evidence that sonar signals can, in special circumstances, lead (at least indirectly) to physical damage and mortality (
There is no conclusive evidence of cetacean strandings or deaths at sea as a result of exposure to seismic surveys, but a few cases of strandings in the general area where a seismic survey was ongoing have led to speculation concerning a possible link between seismic surveys and strandings. Suggestions that there was a link between seismic surveys and strandings of humpback whales in Brazil (Engel
As noted above, the specified activity involves the drilling of exploratory wells and associated activities in the Beaufort Sea during the 2012 open-water season. The impacts to marine mammals that are reasonably expected to occur will be acoustic in nature. In response to previous IHA applications submitted by Shell, various entities have asserted that NMFS cannot authorize the take of marine mammals incidental to exploratory drilling under an IHA. Instead, they contend that incidental take can be allowed only with a letter of authorization (LOA) issued under five-year regulations because of the potential that an oil spill will cause serious injury or mortality.
There are two avenues for authorizing incidental take of marine mammals under the MMPA. NMFS may, depending on the nature of the anticipated take, authorize the take of marine mammals incidental to a specified activity through regulations and LOAs or annual IHAs.
NMFS' determination of whether the type of incidental take authorization requested is appropriate occurs shortly after the applicant submits an application for an incidental take authorization. The agency evaluates the proposed action and all information contained in the application to determine whether it is adequate and complete and whether the type of taking requested is appropriate.
NMFS evaluated Shell's incidental take application for its proposed 2012 drilling activities in light of the foregoing criteria and has concluded that Shell's request for an IHA is warranted. Shell submitted information with its IHA Application indicating that an oil spill (large or very large oil spill) is highly unlikely and thus not reasonably expected to occur during the course of exploration drilling or ZVSP surveys.
The likelihood of a large or very large (
Shell has implemented several design standards and practices to reduce the already low probability of an oil spill occurring as part of its operations. The wells proposed to be drilled in the Arctic are exploratory and will not be converted to production wells; thus, production casing will not be installed, and the well will be permanently plugged and abandoned once exploration drilling is complete. Shell has also developed and will implement the following plans and protocols: Shell's Critical Operations Curtailment Plan; IMP; Well Control Plan; and Fuel Transfer Plan. Many of these safety measures are required by the Department of the Interior's interim final rule implementing certain measures to improve the safety of oil and gas exploration and development on the Outer Continental Shelf in light of the Deepwater Horizon event (see 75 FR 63346, October 14, 2010). Operationally, Shell has committed to the following to help prevent an oil spill from occurring in the Beaufort Sea:
• Shell's Blow Out Preventer (BOP) was inspected and tested by an independent third party specialist;
• Further inspection and testing of the BOP have been performed to ensure the reliability of the BOP and that all functions will be performed as necessary, including shearing the drill pipe;
• Subsea BOP hydrostatic tests will be increased from once every 14 days to once every 7 days;
• A second set of blind/shear rams will be installed in the BOP stack;
• Full string casings will typically not be installed through high pressure zones;
• Liners will be installed and cemented, which allows for installation of a liner top packer;
• Testing of liners prior to installing a tieback string of casing back to the wellhead;
• Utilizing a two-barrier policy; and
• Testing of all casing hangers to ensure that they have two independent, validated barriers at all times.
NMFS has considered Shell's proposed action and has concluded that there is no reasonable likelihood of serious injury or mortality from the 2012 Camden Bay exploration drilling program. NMFS has consistently interpreted the term “potential,” as used in 50 CFR 216.107(a), to only include impacts that have more than a discountable probability of occurring, that is, impacts must be reasonably expected to occur. Hence, NMFS has regularly issued IHAs in cases where it found that the potential for serious injury or mortality was “highly unlikely” (
Interpreting “potential” to include impacts with any probability of occurring (
Despite concluding that the risk of serious injury or mortality from an oil spill in this case is extremely remote, NMFS has nonetheless evaluated the potential effects of an oil spill on marine mammals. While an oil spill is not a component of Shell's specified activity, potential impacts on marine mammals from an oil spill are discussed in more detail below and will be addressed further in the Environmental Assessment.
The specific effects an oil spill would have on bowhead, gray, or beluga whales or harbor porpoise are not well known. While mortality is unlikely, exposure to spilled oil could lead to skin irritation, baleen fouling (which might reduce feeding efficiency), respiratory distress from inhalation of hydrocarbon vapors, consumption of some contaminated prey items, and temporary displacement from contaminated feeding areas. Geraci and St. Aubin (1990) summarize effects of oil on marine mammals, and Bratton
In the case of an oil spill occurring during migration periods, disturbance of the migrating cetaceans from cleanup activities may have more of an impact than the oil itself. Human activity associated with cleanup efforts could deflect whales away from the path of the oil. However, noise created from cleanup activities likely will be short term and localized. In fact, whale avoidance of clean-up activities may benefit whales by displacing them from the oil spill area.
There is no direct evidence that oil spills, including the much studied Santa Barbara Channel and Exxon Valdez spills, have caused any deaths of cetaceans (Geraci, 1990; Brownell, 1971; Harvey and Dahlheim, 1994). It is suspected that some individually identified killer whales that disappeared from Prince William Sound during the time of the Exxon Valdez spill were casualties of that spill. However, no clear cause and effect relationship between the spill and the disappearance could be established (Dahlheim and Matkin, 1994). The AT-1 pod of transient killer whales that sometimes inhabits Prince William Sound has continued to decline after the Exxon Valdez oil spill (EVOS). Matkin
Migrating gray whales were apparently not greatly affected by the Santa Barbara spill of 1969. There appeared to be no relationship between the spill and mortality of marine mammals. The higher than usual counts of dead marine mammals recorded after the spill represented increased survey effort and therefore cannot be conclusively linked to the spill itself (Brownell, 1971; Geraci, 1990). The conclusion was that whales were either able to detect the oil and avoid it or were unaffected by it (Geraci, 1990).
Whales rely on a layer of blubber for insulation, so oil would have little if any effect on thermoregulation by whales. Effects of oiling on cetacean skin appear to be minor and of little significance to the animal's health (Geraci, 1990). Histological data and ultrastructural studies by Geraci and St. Aubin (1990) showed that exposures of skin to crude oil for up to 45 minutes in four species of toothed whales had no effect. They switched to gasoline and applied the sponge up to 75 minutes. This produced transient damage to epidermal cells in whales. Subtle changes were evident only at the cell level. In each case, the skin damage healed within a week. They concluded that a cetacean's skin is an effective barrier to the noxious substances in petroleum. These substances normally damage skin by getting between cells and dissolving protective lipids. In cetacean skin, however, tight intercellular bridges, vital surface cells, and the extraordinary thickness of the epidermis impeded the damage. The authors could not detect a change in lipid concentration between and within cells after exposing skin from a white-sided dolphin to gasoline for 16 hours in vitro.
Bratton
Whales could ingest oil if their food is contaminated, or oil could also be absorbed through the respiratory tract. Some of the ingested oil is voided in vomit or feces but some is absorbed and could cause toxic effects (Geraci, 1990). When returned to clean water, contaminated animals can depurate this internal oil (Engelhardt, 1978, 1982). Oil ingestion can decrease food assimilation of prey eaten (St. Aubin, 1988). Cetaceans may swallow some oil-contaminated prey, but it likely would be only a small part of their food. It is not known if whales would leave a feeding area where prey was abundant following a spill. Some zooplankton eaten by bowheads and gray whales consume oil particles and bioaccumulation can result. Tissue studies by Geraci and St. Aubin (1990) revealed low levels of naphthalene in the livers and blubber of baleen whales. This result suggests that prey have low concentrations in their tissues, or that
Baleen itself is not damaged by exposure to oil and is resistant to effects of oil (St. Aubin
Some cetaceans can detect oil and sometimes avoid it, but others enter and swim through slicks without apparent effects (Geraci, 1990; Harvey and Dahlheim, 1994). Bottlenose dolphins apparently could detect and avoid slicks and mousse but did not avoid light sheens on the surface (Smultea and Wursig, 1995). After the Regal Sword spill in 1979, various species of baleen and toothed whales were observed swimming and feeding in areas containing spilled oil southeast of Cape Cod, MA (Goodale
Effects of oil on whales in open water are likely to be minimal, but there could be effects on whales where both the oil and the whales are at least partly confined in leads or at ice edges (Geraci, 1990). In spring, bowhead and beluga whales migrate through leads in the ice. At this time, the migration can be concentrated in narrow corridors defined by the leads, thereby creating a greater risk to animals caught in the spring lead system should oil enter the leads. This situation would only occur if there were an oil spill late in the season and Shell could not complete cleanup efforts prior to ice covering the area. The oil would likely then be trapped in the ice until it began to thaw in the spring.
In fall, the migration route of bowheads can be close to shore (Blackwell
Bowhead and beluga whales overwinter in the Bering Sea (mainly from November to March). In the summer, the majority of the bowhead whales are found in the Canadian Beaufort Sea, although some have recently been observed in the U.S. Beaufort and Chukchi Seas during the summer months (June to August). Data from the Barrow-based boat surveys in 2009 (George and Sheffield, 2009) showed that bowheads were observed almost continuously in the waters near Barrow, including feeding groups in the Chukchi Sea at the beginning of July. The majority of belugas in the Beaufort stock migrate into the Beaufort Sea in April or May, although some whales may pass Point Barrow as early as late March and as late as July (Braham
Ringed, bearded, and spotted seals are present in open-water areas during summer and early autumn. Externally oiled phocid seals often survive and become clean, but heavily oiled seal pups and adults may die, depending on the extent of oiling and characteristics of the oil. Prolonged exposure could occur if fuel or crude oil was spilled in or reached nearshore waters, was spilled in a lead used by seals, or was spilled under the ice when seals have limited mobility (NMFS, 2000). Adult seals may suffer some temporary adverse effects, such as eye and skin irritation, with possible infection (MMS, 1996). Such effects may increase stress, which could contribute to the death of some individuals. Ringed seals may ingest oil-contaminated foods, but there is little evidence that oiled seals will ingest enough oil to cause lethal internal effects. There is a likelihood that newborn seal pups, if contacted by oil, would die from oiling through loss of insulation and resulting hypothermia. These potential effects are addressed in more detail in subsequent paragraphs.
Reports of the effects of oil spills have shown that some mortality of seals may have occurred as a result of oil fouling; however, large scale mortality had not been observed prior to the EVOS (St. Aubin, 1990). Effects of oil on marine mammals were not well studied at most spills because of lack of baseline data and/or the brevity of the post-spill surveys. The largest documented impact of a spill, prior to EVOS, was on young seals in January in the Gulf of St. Lawrence (St. Aubin, 1990). Brownell and Le Boeuf (1971) found no marked effects of oil from the Santa Barbara oil spill on California sea lions or on the mortality rates of newborn pups.
Intensive and long-term studies were conducted after the EVOS in Alaska. There may have been a long-term decline of 36% in numbers of molting harbor seals at oiled haul-out sites in Prince William Sound following EVOS (Frost
Adult seals rely on a layer of blubber for insulation, and oiling of the external surface does not appear to have adverse thermoregulatory effects (Kooyman
Newborn seal pups rely on their fur for insulation. Newborn ringed seal pups in lairs on the ice could be contaminated through contact with oiled mothers. There is the potential that newborn ringed seal pups that were contaminated with oil could die from hypothermia.
Marine mammals can ingest oil if their food is contaminated. Oil can also be absorbed through the respiratory tract (Geraci and Smith, 1976; Engelhardt
Although seals may have the capability to detect and avoid oil, they apparently do so only to a limited extent (St. Aubin, 1990). Seals may abandon the area of an oil spill because of human disturbance associated with cleanup efforts, but they are most likely to remain in the area of the spill. One notable behavioral reaction to oiling is that oiled seals are reluctant to enter the water, even when intense cleanup activities are conducted nearby (St. Aubin, 1990; Frost
Seals that are under natural stress, such as lack of food or a heavy infestation by parasites, could potentially die because of the additional stress of oiling (Geraci and Smith, 1976; St. Aubin, 1990; Spraker
In general, seals do not exhibit large behavioral or physiological reactions to limited surface oiling or incidental exposure to contaminated food or vapors (St. Aubin, 1990; Williams
The potential effects to marine mammals described in this section of the document do not take into consideration the proposed monitoring and mitigation measures described later in this document (see the “Proposed Mitigation” and “Proposed Monitoring and Reporting” sections).
The primary potential impacts to marine mammals and other marine species are associated with elevated sound levels produced by the exploratory drilling program (
All eight of the marine mammal species that may occur in the proposed project area prey on either marine fish or invertebrates. The ringed seal feeds on fish and a variety of benthic species, including crabs and shrimp. Bearded seals feed mainly on benthic organisms, primarily crabs, shrimp, and clams. Spotted seals feed on pelagic and demersal fish, as well as shrimp and cephalopods. They are known to feed on a variety of fish including herring, capelin, sand lance, Arctic cod, saffron cod, and sculpins. Ribbon seals feed primarily on pelagic fish and invertebrates, such as shrimp, crabs, squid, octopus, cod, sculpin, pollack, and capelin. Juveniles feed mostly on krill and shrimp.
Bowhead whales feed in the eastern Beaufort Sea during summer and early autumn but continue feeding to varying degrees while on their migration through the central and western Beaufort Sea in the late summer and fall (Richardson and Thomson [eds.], 2002). Aerial surveys in recent years have sighted bowhead whales feeding in Camden Bay on their westward migration through the Beaufort Sea. When feeding in relatively shallow areas, bowheads feed throughout the water column. However, feeding is concentrated at depths where zooplankton is concentrated (Wursig
Beluga whales feed on a variety of fish, shrimp, squid and octopus (Burns and Seaman, 1985). Very few beluga whales occur near Northstar; their main migration route is much further offshore. Like several of the other species in the area, harbor porpoise feed on demersal and benthic species, mainly schooling fish and cephalopods. Harbor porpoise are also not commonly found in Camden Bay.
Gray whales are primarily bottom feeders, and benthic amphipods and isopods form the majority of their summer diet, at least in the main summering areas west of Alaska (Oliver
Two kinds of fish inhabit marine waters in the study area: (1) True marine fish that spend all of their lives in salt water, and (2) anadromous species that reproduce in fresh water and spend parts of their life cycles in salt water.
Most arctic marine fish species are small, benthic forms that do not feed high in the water column. The majority of these species are circumpolar and are found in habitats ranging from deep offshore water to water as shallow as 16.4-33 ft (5-10 m; Fechhelm
Anadromous Dolly Varden char and some species of whitefish winter in rivers and lakes, migrate to the sea in spring and summer, and return to fresh water in autumn. Anadromous fish form the basis of subsistence, commercial, and small regional sport fisheries. Dolly Varden char migrate to the sea from May through mid-June (Johnson, 1980) and spend about 1.5-2.5 months there (Craig, 1989). They return to rivers beginning in late July or early August with the peak return migration occurring between mid-August and early September (Johnson, 1980). At sea, most anadromous corregonids (whitefish) remain in nearshore waters within several kilometers of shore (Craig, 1984, 1989). They are often termed “amphidromous” fish in that they make repeated annual migrations into marine waters to feed, returning each fall to overwinter in fresh water.
Benthic organisms are defined as bottom dwelling creatures. Infaunal organisms are benthic organisms that live within the substrate and are often sedentary or sessile (bivalves, polychaetes). Epibenthic organisms live on or near the bottom surface sediments and are mobile (amphipods, isopods, mysids, and some polychaetes). Epifauna, which live attached to hard substrates, are rare in the Beaufort Sea because hard substrates are scarce there. A small community of epifauna, the Boulder Patch, occurs in Stefansson Sound.
Many of the nearshore benthic marine invertebrates of the Arctic are circumpolar and are found over a wide range of water depths (Carey
Nearshore benthic fauna have been studied in lagoons west of Camden Bay and near the mouth of the Colville River (Kinney
There is a possibility of some seafloor disturbance or temporary increased turbidity in the seabed sediments during anchoring and excavation of the mudline cellars (MLCs). The amount and duration of disturbed or turbid conditions will depend on sediment material and consolidation of specific activity.
The
For the
Once the drillship ends operation, the anchors will be retrieved. Over time, the anchor scars will be filled through natural movement of sediment. The duration of the scars depends upon the energy of the system, water depth, ice scour, and sediment type. Anchor scars were visible under low energy conditions in the North Sea for 5-10 years after retrieval. Scars typically do
Excavation of each MLC by the
Vessel mooring and MLC construction would result in increased suspended sediment in the water column that could result in lethal effects on some zooplankton (food source for baleen whales). However, compared to the overall population of zooplankton and the localized nature of effects, any mortality that may occur would not be considered significant. Due to fast regeneration periods of zooplankton, populations are expected to recover quickly.
Impacts on fish resulting from suspended sediments would be dependent upon the life stage of the fish (
Suspended sediments, resulting from vessel mooring and MLC excavation, are not expected to result in permanent damage to habitats used by the marine mammal species in the proposed project area or on the food sources that they utilize. Rather, NMFS considers that such impacts will be temporary in nature and concentrated in the areas directly surrounding vessel mooring and MLC excavation activities—areas which are very small relative to the overall Beaufort Sea region.
With regard to fish as a prey source for odontocetes and seals, fish are known to hear and react to sounds and to use sound to communicate (Tavolga
Fishes produce sounds that are associated with behaviors that include territoriality, mate search, courtship, and aggression. It has also been speculated that sound production may provide the means for long distance communication and communication under poor underwater visibility conditions (Zelick
Since objects in the water scatter sound, fish are able to detect these objects through monitoring the ambient noise. Therefore, fish are probably able to detect prey, predators,conspecifics, and physical features by listening to environmental sounds (Hawkins, 1981). There are two sensory systems that enable fish to monitor the vibration-based information of their surroundings. The two sensory systems, the inner ear and the lateral line, constitute the acoustico-lateralis system.
Although the hearing sensitivities of very few fish species have been studied to date, it is becoming obvious that the intra- and inter-specific variability is considerable (Coombs, 1981). Nedwell
Literature relating to the impacts of sound on marine fish species can be divided into the following categories: (1) Pathological effects; (2) physiological effects; and (3) behavioral effects. Pathological effects include lethal and sub-lethal physical damage to fish; physiological effects include primary and secondary stress responses; and behavioral effects include changes in exhibited behaviors of fish. Behavioral changes might be a direct reaction to a detected sound or a result of the anthropogenic sound masking natural sounds that the fish normally detect and to which they respond. The three types of effects are often interrelated in complex ways. For example, some physiological and behavioral effects could potentially lead to the ultimate pathological effect of mortality. Hastings and Popper (2005) reviewed what is known about the effects of sound on fishes and identified studies needed to address areas of uncertainty relative to measurement of sound and the responses of fishes. Popper
Potential effects of exposure to continuous sound on marine fish include TTS, physical damage to the ear region, physiological stress responses, and behavioral responses such as startle
The level of sound at which a fish will react or alter its behavior is usually well above the detection level. Fish have been found to react to sounds when the sound level increased to about 20 dB above the detection level of 120 dB (Ona, 1988); however, the response threshold can depend on the time of year and the fish's physiological condition (Engas
Investigations of fish behavior in relation to vessel noise (Olsen
Sound will also occur in the marine environment from the various support vessels. Reported source levels for vessels during ice management have ranged from 175 dB to 185 dB (Brewer
Shell also proposes to conduct seismic surveys with an airgun array for a short period of time during the drilling season (a total of approximately 20-28 hours over the course of the entire proposed drilling program). Airguns produce impulsive sounds as opposed to continuous sounds at the source. Short, sharp sounds can cause overt or subtle changes in fish behavior. Chapman and Hawkins (1969) tested the reactions of whiting (hake) in the field to an airgun. When the airgun was fired, the fish dove from 82 to 180 ft (25 to 55 m) depth and formed a compact layer. The whiting dove when received sound levels were higher than 178 dB re 1 µPa (Pearson
Pearson
• Startle responses at received levels of 200-205 dB re 1 µPa and above for two sensitive species, but not for two other species exposed to levels up to 207 dB;
• Alarm responses at 177-180 dB for the two sensitive species, and at 186 to 199 dB for other species;
• An overall threshold for the above behavioral response at about 180 dB;
• An extrapolated threshold of about 161 dB for subtle changes in the behavior of rockfish; and
• A return to pre-exposure behaviors within the 20-60 minute exposure period.
In summary, fish often react to sounds, especially strong and/or intermittent sounds of low frequency. Sound pulses at received levels of 160 dB re 1 µPa may cause subtle changes in behavior. Pulses at levels of 180 dB may cause noticeable changes in behavior (Chapman and Hawkins, 1969; Pearson
Based on a sound level of approximately 140 dB, there may be some avoidance by fish of the area near the drillship while drilling, around ice management vessels in transit and during ice management, and around other support and supply vessels when underway. Any reactions by fish to these sounds will last only minutes (Mitson and Knudsen, 2003; Ona
Some of the fish species found in the Arctic are prey sources for odontocetes and pinnipeds. A reaction by fish to sounds produced by Shell's proposed operations would only be relevant to marine mammals if it caused concentrations of fish to vacate the area. Pressure changes of sufficient magnitude to cause that type of reaction would probably occur only very close to the sound source, if any would occur at all due to the low energy sounds produced by the majority of equipment proposed for use. Impacts on fish behavior are predicted to be inconsequential. Thus, feeding odontocetes and pinnipeds would not be adversely affected by this minimal loss or scattering, if any, of reduced prey abundance.
Some mysticetes, including bowhead whales, feed on concentrations of zooplankton. Some feeding bowhead whales may occur in the Alaskan Beaufort Sea in July and August, and others feed intermittently during their westward migration in September and October (Richardson and Thomson [eds.], 2002; Lowry
Aerial surveys in recent years have sighted bowhead whales feeding in Camden Bay on their westward migration through the Beaufort Sea. Individuals feeding in the Camden Bay area at the beginning of the migration (
Discharging drill cuttings or other liquid waste streams generated by the drilling vessel could potentially affect marine mammal habitat. Toxins could persist in the water column, which could have an impact on marine mammal prey species. However, despite a considerable amount of investment in research of exposures of marine mammals to organochlorines or other toxins, there have been no marine mammal deaths in the wild that can be conclusively linked to the direct exposure to such substances (O'Shea, 1999).
For the Camden Bay proposed exploration drilling program, Shell has committed to not discharge various waste streams during routine drilling operations. Shell has agreed to not discharge any of the following liquid waste streams that are generated by the drilling vessel: treated sanitary waste (black water); domestic waste (gray water); bilge water; or ballast water. Shell will not discharge drilling mud or cuttings that are generated below the depth at which the 20-in. (51-cm) diameter casing is set in each well. The mud and cuttings collected will be transferred to an OSV then to the deck or waste barge. Either barge will hold collected mud, cuttings, and wastewater for transport and disposal at an approved and licensed onshore facility.
Shell proposes that cuttings generated while drilling the MLC, the 36- and 26-in. (91- and 66-cm) hole sections (all drilled with seawater and viscous sweeps only) plus cement discharged while cementing the 30- and 20-in. (76- and 51-cm) casing strings will be discharged on the surface of the seafloor under provisions of an approved National Pollutant Discharge Elimination System (NPDES) General Permit (GP) administered by the U.S. Environmental Protection Agency (EPA). The most recent NPDES GP expired on June 26, 2011. The EPA is currently processing two separate requests for NPDES exploration GPs in the Beaufort and Chukchi seas.
The NPDES GP establishes discharge limits for drilling fluids (at the end of a discharge pipe) to a minimum 96-hr LC
Modeling of similar discharges offshore of Sakhalin Island predicted a 1,000-fold dilution within 10 minutes and 330 ft (100 m) of the discharge. In a field study (O'Reilly
Based on the fact that Shell plans to store the drilling muds and other liquid waste streams and transport them to a site onshore, no impacts to marine mammal habitat or marine mammal prey species are anticipated from such an activity.
The
Arctic cod and other fishes are a principal food item for beluga whales and seals in the Beaufort Sea. Anadromous fish are more sensitive to oil when in the marine environment than when in the fresh water environment (Moles
Effects of oil on zooplankton as food for bowhead whales were discussed by Richardson ([ed.] 1987). Zooplankton populations in the open sea are unlikely to be depleted by the effects of an oil spill. Oil concentrations in water under a slick are low and unlikely to have anything but very minor effects on zooplankton. Zooplankton populations in near surface waters could be depleted; however, concentrations of zooplankton in near-surface waters generally are low compared to those in deeper water (Bradstreet
Some bowheads feed in shallow nearshore waters (Bradstreet
Effects of oil spills on zooplankton as food for seals would be similar to those described above for bowhead whales. During the ice-free period, effects on seal feeding would be minor.
Bearded seals consume benthic animals. Wave action in nearshore waters could cause oil to reach the bottom through adherence to suspended sediments (Sanders
Depending on the timing of a spill, planktonic larval forms of organisms in arctic kelp communities such as annelids, mollusks, and crustaceans may be affected by floating oil. The contact may occur anywhere near the surface of the water column (MMS, 1996). Due to their wide distribution, large numbers, and rapid rate of regeneration, the recovery of marine invertebrate populations is expected to occur soon after the surface oil passes. Spill response activities are not likely to disturb the prey items of whales or seals sufficiently to cause more than minor effects. Spill response activities could cause marine mammals to avoid the disturbed habitat that is being cleaned. However, by causing avoidance, animals would avoid impacts from the oil itself. Additionally, the likelihood of an oil spill is expected to be very low, as discussed earlier in this document.
Ice management activities include the physical pushing or moving of ice to create more open-water in the proposed drilling area and to prevent ice floes from striking the drillship. Icebreaking activities include the physical breaking of ice. Shell does not intend to conduct icebreaking activities. However, should there be a need for icebreaking, it would only be performed in order to safely move the drillship and other vessels off location and to end operations for the season. Ringed, bearded, spotted, and ribbon seals (along with the walrus) are dependent on sea ice for at least part of their life history. Sea ice is important for life functions such as resting, breeding, and molting. These species are dependent on two different types of ice: pack ice and landfast ice. Should ice management/icebreaking activities be necessary during the proposed drilling program, Shell would only manage pack ice in either early to mid-July or mid- to late October. Landfast ice would not be present during Shell's proposed operations.
The ringed seal is the most common pinniped species in the proposed project area. While ringed seals use ice year-round, they do not construct lairs for pupping until late winter/early spring on the landfast ice. Therefore, since Shell plans to conclude drilling on October 31, Shell's activities would not impact ringed seal lairs or habitat needed for breeding and pupping in the Camden Bay area. Ringed seals can be found on the pack ice surface in the late spring and early summer in the Beaufort Sea, the latter part of which may overlap with the start of Shell's proposed drilling activities. If an ice floe is pushed into one that contains hauled out seals, the animals may become startled and enter the water when the two ice floes collide. Bearded seals breed in the Bering and Chukchi Seas, as the Beaufort Sea provides less suitable habitat for the species. Spotted seals are even less common in the Camden Bay area. This species does not breed in the Beaufort Sea. Additionally, ribbon seals are not known to breed in the Beaufort Sea. Therefore, ice used by bearded, spotted, and ribbon seals needed for life functions such as breeding and molting would not be impacted as a result of Shell's drilling program since these life functions do not occur in the proposed project area. For ringed seals, ice management/icebreaking would occur during a time when life functions such as breeding, pupping, and molting do not occur in the proposed activity area. Additionally, these life functions normally occur on landfast ice, which will not be impacted by Shell's activity.
In order to issue an incidental take authorization (ITA) under Sections 101(a)(5)(A) and (D) of the MMPA, NMFS must, where applicable, set forth the permissible methods of taking pursuant to such activity, and other means of effecting the least practicable 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 (where relevant). This section summarizes the contents of Shell's Marine Mammal Monitoring and Mitigation Plan (4MP). Later in this document in the “Proposed Incidental Harassment Authorization” section, NMFS lays out the proposed conditions
Shell submitted a 4MP as part of its application (Attachment C; see
• Timing and locating drilling and support activities to avoid interference with the annual fall bowhead whale hunts from Kaktovik, Nuiqsut (Cross Island), and Barrow;
• Identifying transit routes and timing to avoid other subsistence use areas and communicating with coastal communities before operating in or passing through these areas; and
• Conducting pre-season sound propagation modeling to establish the appropriate exclusion and behavioral radii.
Shell indicates that the potential disturbance of marine mammals during operations will be minimized further through the implementation of several ship-based mitigation measures, which include establishing and monitoring safety and disturbance zones and shutting down activities for a portion of the open-water season.
Exclusion radii for marine mammals around sound sources are customarily defined as the distances within which received sound levels are greater than or equal to 180 dB re 1 μPa (rms) for cetaceans and greater than or equal to 190 dB re 1 μPa (rms) for pinnipeds. These exclusion criteria are based on an assumption that sounds at lower received levels will not injure these animals or impair their hearing abilities, but that higher received levels might have such effects. It should be understood that marine mammals inside these exclusion zones will not necessarily be injured, as the received sound thresholds which determine these zones were established prior to the current understanding that significantly higher levels of sound would be required before injury could occur (see Southall
Shell proposes to monitor the various radii in order to implement any mitigation measures that may be necessary. Initial radii for the sound levels produced by the
Based on the best available scientific literature, the source levels noted earlier in this document and in Shell's 4MP for the drillships are not high enough to cause a temporary reduction in hearing sensitivity or permanent hearing damage to marine mammals. Consequently, Shell believes that mitigation as described for seismic activities including ramp ups, power downs, and shutdowns should not be necessary for drilling activities. NMFS has also determined that these types of mitigation measures, traditionally required for seismic survey operations, are not practical or necessary for this proposed drilling activity. Seismic airgun arrays can be turned on slowly (
A ramp up of an airgun array provides a gradual increase in sound levels and involves a step-wise increase in the number and total volume of airguns firing until the full volume is achieved. The purpose of a ramp up (or “soft start”) is to “warn” cetaceans and pinnipeds in the vicinity of the airguns and to provide the time for them to leave the area and thus avoid any potential injury or impairment of their hearing abilities.
During the proposed ZVSP surveys, Shell will ramp up the airgun arrays slowly. Full ramp ups (
A power down is the immediate reduction in the number of operating energy sources from all firing to some smaller number. A shutdown is the immediate cessation of firing of all energy sources. The arrays will be
Additional mitigation measures proposed by Shell include: (1) Reducing speed and/or changing course if a marine mammal is sighted from a vessel in transit (NMFS has proposed a specific distance in the next subsection); (2) resuming full activity (
Shell has also proposed additional mitigation measures to ensure no unmitigable adverse impact on the availability of affected species or stocks for taking for subsistence uses. Those measures are described in the “Impact on Availability of Affected Species or Stock for Taking for Subsistence Uses” section found later in this document.
In addition to the mitigation measures proposed in Shell's IHA application, NMFS proposes the following measures (which apply to vessel operations) be included in the IHA, if issued, in order to ensure the least practicable impact on the affected species or stocks. NMFS proposes to require Shell to avoid multiple changes in direction or speed when within 300 yards (274 m) of whales. Additionally, NMFS proposes to require Shell to reduce speed in inclement weather.
In accordance with BOEM regulations, Shell has developed an Oil Discharge Prevention and Contingency Plan (ODPCP) for its Camden Bay exploration drilling program. A copy of this document can be found on the Internet at:
NMFS has carefully evaluated Shell'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 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:
• The manner in which, and the degree to which, the successful implementation of the measure is expected to minimize adverse impacts to marine mammals;
• The proven or likely efficacy of the specific measure to minimize adverse impacts as planned; and
• The practicability of the measure for applicant implementation.
Proposed measures to ensure availability of such species or stock for taking for certain subsistence uses is discussed later in this document (see “Impact on Availability of Affected Species or Stock for Taking for Subsistence Uses” section).
In order to issue an ITA for an activity, Section 101(a)(5)(D) of the MMPA states that NMFS must, where applicable, 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 in the proposed action area.
The monitoring plan proposed by Shell can be found in the 4MP (Attachment C of Shell's application; see
Vessel-based monitoring for marine mammals will be done by trained PSOs throughout the period of drilling operations on all vessels. PSOs will monitor the occurrence and behavior of marine mammals near the drillship during all daylight periods during operation and during most daylight periods when drilling operations are not occurring. PSO duties will include watching for and identifying marine mammals, recording their numbers, distances, and reactions to the drilling operations. A sufficient number of PSOs will be required onboard each vessel to meet the following criteria: (1) 100% monitoring coverage during all periods of drilling operations in daylight; (2) maximum of 4 consecutive hours on watch per PSO; and (3) maximum of 12 hours of watch time per day per PSO. Shell anticipates that there will be provision for crew rotation at least every 3-6 weeks to avoid observer fatigue.
Biologist-observers will have previous marine mammal observation experience, and field crew leaders will be highly experienced with previous vessel-based marine mammal monitoring projects. Resumes for those individuals will be provided to NMFS so that NMFS can review and accept their qualifications. Inupiat observers will be experienced in the region, familiar with the marine mammals of the area, and complete a NMFS approved observer training course designed to familiarize individuals with monitoring and data collection procedures. A handbook, adapted for the specifics of the planned Shell drilling program, will be prepared and distributed beforehand to all PSOs.
PSOs will watch for marine mammals from the best available vantage point on the drillship and support vessels. PSOs will scan systematically with the unaided eye and 7 × 50 reticle binoculars, supplemented with 20 × 60 image-stabilized Zeiss Binoculars or Fujinon 25 × 150 “Big-eye” binoculars and night-vision equipment when needed. Personnel on the bridge will assist the PSOs in watching for marine mammals. New or inexperienced PSOs will be paired with an experienced PSO or experienced field biologist so that the
Information to be recorded by PSOs will include the same types of information that were recorded during recent monitoring programs associated with industry activity in the Arctic (
Distances to nearby marine mammals will be estimated with binoculars (Fujinon 7 × 50 binoculars) containing a reticle to measure the vertical angle of the line of sight to the animal relative to the horizon. PSOs may use a laser rangefinder to test and improve their abilities for visually estimating distances to objects in the water. However, previous experience showed that a Class 1 eye-safe device was not able to measure distances to seals more than about 230 ft (70 m) away. The device was very useful in improving the distance estimation abilities of the observers at distances up to about 1968 ft (600 m)—the maximum range at which the device could measure distances to highly reflective objects such as other vessels. Humans observing objects of more-or-less known size via a standard observation protocol, in this case from a standard height above water, quickly become able to estimate distances within about ±20% when given immediate feedback about actual distances during training.
Shell proposes to conduct an aerial survey program in support of the drilling program in the Beaufort Sea during the summer and fall of 2012. Shell's objectives for this program include:
(A) To advise operating vessels as to the presence of marine mammals (primarily cetaceans) in the general area of operation;
(B) To collect and report data on the distribution, numbers, movement and behavior of marine mammals near the drilling operations with special emphasis on migrating bowhead whales;
(C) To support regulatory reporting related to the estimation of impacts of drilling operations on marine mammals;
(D) To investigate potential deflection of bowhead whales during migration by documenting how far east of drilling operations a deflection may occur and where whales return to normal migration patterns west of the operations; and
(E) To monitor the accessibility of bowhead whales to Inupiat hunters.
Aerial survey flights will begin 5 to 7 days before operations at the exploration well sites get underway. Surveys will be flown daily throughout drilling operations, weather and flight conditions permitting, and continue for 5 to 7 days after all activities at the site have ended.
The aerial survey procedures will be generally consistent with those used during earlier industry studies (Davis
For marine mammal monitoring flights, aircraft will be flown at approximately 120 knots (138 mph) ground speed and usually at an altitude of 1,000 ft (305 m). Surveys in the Beaufort Sea are directed at bowhead whales, and an altitude of 900-1,000 ft (274-305 m) is the lowest survey altitude that can normally be flown without concern about potential aircraft disturbance. Aerial surveys at an altitude of 1,000 ft (305 m) do not provide much information about seals but are suitable for both bowhead and beluga whales. The need for a 900-1000+ (374-305 m) ft cloud ceiling will limit the dates and times when surveys can be flown.
Two primary observers will be seated at bubble windows on either side of the aircraft, and a third observer will observe part time and record data the rest of the time. All observers need bubble windows to facilitate downward viewing. For each marine mammal sighting, the observer will dictate the species, number, size/age/sex class when determinable, activity, heading, swimming speed category (if traveling), sighting cue, ice conditions (type and percentage), and inclinometer reading to the marine mammal into a digital recorder. The inclinometer reading will be taken when the animal's location is 90° to the side of the aircraft track, allowing calculation of lateral distance from the aircraft trackline.
Transect information, sighting data and environmental data will be entered into a GPS-linked computer by the third observer and simultaneously recorded on digital voice recorders for backup and validation. At the start of each transect, the observer recording data will record the transect start time and position, ceiling height (ft), cloud cover (in 10ths), wind speed (knots), wind direction (°T) and outside air temperature (°C). In addition, each observer will record the time, visibility (subjectively classified as excellent, good, moderately impaired, seriously impaired or impossible), sea state (Beaufort wind force), ice cover (in 10ths) and sun glare (none, moderate, severe) at the start and end of each transect, and at 2 min intervals along the transect. The data logger will automatically record time and aircraft position (latitude and longitude) for sightings and transect waypoints, and at pre-selected intervals along the transects. Ice observations during aerial surveys will be recorded and satellite imagery may be used, where available, during post-season analysis to determine ice conditions adjacent to the survey area. These are standard practices for surveys of this type and are necessary in order to interpret factors responsible for variations in sighting rates.
During the late summer and fall, the bowhead whale is the primary species of concern, but belugas and gray whales are also present. To address concerns regarding deflection of bowheads at greater distances, the survey pattern around drilling operations has been designed to document whale distribution from about 25 mi (40 km) east of the drilling operations to about 37 mi (60 km) west of operations (see Figure 1 of Shell's 4MP).
Bowhead whale movements during the late summer/autumn are generally from east to west, and transects should be designed to intercept rather than parallel whale movements. The transect lines in the grid will be oriented north-south, equally spaced at 5 mi (8 km) and randomly shifted in the east-west direction for each survey by no more than the transect spacing. The survey grid will total about 808 mi (1,300 km) in length, requiring approximately 6 hours to survey at a speed of 120 knots (138 mph), plus ferry time. Exact lengths and durations will vary somewhat depending on the position of the drilling operation and thus of the grid, the sequence in which lines are flown (often affected by weather), and the number of refueling/rest stops.
Weather permitting, transects making up the grid in the Beaufort Sea will be flown in sequence from west to east. This decreases difficulties associated
Shell's 4MP provides an explanation about the importance of statistical power in the sampling design and how the aerial survey data will be analyzed. Please refer to the 4MP for that information (see
Shell will conduct SSV tests to establish the isopleths for the applicable exclusion radii, mostly to be employed during the ZVSP surveys. In addition, Shell proposes to use acoustic recorders to study bowhead deflections.
(1) To quantify the absolute sound levels produced by drilling and to monitor their variations with time, distance, and direction from the drilling vessel;
(2) to measure the sound levels produced by vessels operating in support of exploration drilling operations. These vessels will include crew change vessels, tugs, icebreakers, and OSRVs; and
(3) to measure the sound levels produced by an end-of-hole ZVSP survey, using a stationary sound source.
The
As an alternative to the cabled hydrophone system (and possible inclusion of separate bottom-founded hydrophones), the second (or alternative) monitoring method would involve a radio buoy approach deploying four sparbuoys 4-5 mi (6-8 km) from the
Sound level monitoring with either method will occur on a continuous basis throughout all exploration drilling activities. Both types of systems will be set to record digital acoustic data at a sample rate of 32 kHz, providing useful acoustic bandwidth to at least 15 kHz. These systems are capable of measuring absolute broadband sound levels between 90 and 180 dB re 1 µPa. The long duration recordings will capture many different operations performed from the drillship. Retrieval of these systems will occur following completion of the exploration drilling activities.
These recorders will provide a capability to examine sound levels produced by different drilling activities and practices. This system will not have the capability to locate calling marine mammals and will indicate only relative proximity. The system will be evaluated during operations for its potential to improve PSO observations through notification of PSOs on vessel and aircraft of high levels of call detections and their general locations.
The deployment of drilling sound monitoring equipment will occur as soon as possible once the drillship is on site. Activity logs of exploration drilling operations and nearby vessel activities will be maintained to correlate with these acoustic measurements. This equipment will also be used to take measurements of the support vessels and airguns. Additional details can be found in Shell's 4MP.
Shell plans to deploy arrays of acoustic recorders in the Beaufort Sea in 2012, similar to that which was done in 2007 through 2010 using Directional Autonomous Seafloor Acoustic Recorders (DASARs). These directional acoustic systems permit localization of bowhead whale and other marine mammal vocalizations. The purpose of the array will be to further understand, define, and document sound characteristics and propagation resulting from vessel-based drilling operations that may have the potential to cause deflections of bowhead whales from their migratory pathway. Of particular interest will be the east-west extent of deflection, if any (
In previous work around seismic and drillship operations in the Alaskan Beaufort Sea, the primary method for studying this question has been aerial surveys. Acoustic localization methods will provide supplementary information for addressing the whale deflection question. Compared to aerial surveys, acoustic methods have the advantage of providing a vastly larger number of whale detections, and can operate day or night, independent of visibility, and to some degree independent of ice conditions and sea state—all of which prevent or impair aerial surveys. However, acoustic methods depend on the animals to call, and to some extent, assume that calling rate is unaffected by exposure to industrial noise. Bowheads call frequently in fall, but there is some evidence that their calling rate may be reduced upon exposure to industrial sounds, complicating interpretation. The combined use of acoustic and aerial survey methods will provide a suite of information that should be useful in assessing the potential effects of drilling operations on migrating bowhead whales.
Using passive acoustics with directional autonomous recorders, the locations of calling whales will be observed for a 6- to 10-week continuous monitoring period at five coastal sites (subject to favorable ice and weather conditions). Essential to achieving this objective is the continuous measurement of sound levels near the drillship.
Shell plans to conduct the whale migration monitoring using the passive acoustics techniques developed and used successfully since 2001 for monitoring the migration past Northstar production island northwest of Prudhoe Bay and from Kaktovik to Harrison Bay during the 2007 through 2011 migrations. Those techniques involve using DASARs to measure the arrival angles of bowhead calls at known locations, then triangulating to locate the calling whale.
In attempting to assess the responses of bowhead whales to the planned industrial operations, it will be essential to monitor whale locations at sites both near and far from industry activities. Shell plans to monitor at five sites along the Alaskan Beaufort coast as shown in
The proposed geometry of DASARs at each site is comprised of seven DASARs oriented in a north-south pattern so that five equilateral triangles with 4.3-mi (7-km) element spacing is achieved. DASARs will be installed at planned locations using a GPS. However, each DASAR's orientation once it settles on the bottom is unknown and must be determined to know how to reference the call angles measured to the whales. Also, the internal clocks used to sample the acoustic data typically drift slightly, but linearly, by an amount up to a few seconds after 6 weeks of autonomous operation. Knowing the time differences within a second or two between DASARs is essential for identifying identical whale calls received on two or more DASARs. Bowhead migration begins in late August with the whales moving westward from their feeding sites in the Canadian Beaufort Sea. It continues through September and well into October. However, because of the drilling schedule, Shell will attempt to install the 21 DASARs at three sites (3, 4 and 5) in early August. The remaining 14 DASARs will be installed at sites 1 and 2 in late August. Thus, Shell proposes to be monitoring for whale calls from before August 15 until sometime before October 15.
At the end of the season, the fourth DASAR in each array will be refurbished, recalibrated, and redeployed to collect data through the winter. The other DASARs in the arrays will be recovered. The redeployed DASARs will be programmed to record 35 min every 3 hours with a disk capacity of 10 months at that recording rate. This should be ample space to allow over-wintering from approximately mid-October 2012, through mid-July 2013.
Additional details on methodology and data analysis for the three types of monitoring described here (
The MMPA requires that monitoring plans be independently peer reviewed “where the proposed activity may affect the availability of a species or stock for taking for subsistence uses” (16 U.S.C. 1371(a)(5)(D)(ii)(III)). Regarding this requirement, NMFS' implementing regulations state, “Upon receipt of a complete monitoring plan, and at its discretion, [NMFS] will either submit the plan to members of a peer review panel for review or within 60 days of receipt of the proposed monitoring plan, schedule a workshop to review the plan” (50 CFR 216.108(d)).
NMFS has established an independent peer review panel to review Shell's 4MP for Exploration Drilling of Selected Lease Areas in the Alaskan Beaufort Sea in 2012. The panel is scheduled to meet in early January 2012, and will provide comments to NMFS shortly after they meet. After completion of the peer review, NMFS will consider all recommendations made by the panel, incorporate appropriate changes into the monitoring requirements of the IHA (if issued), and publish the panel's findings and recommendations in the final IHA notice of issuance or denial document.
A report on the preliminary results of the acoustic verification measurements, including as a minimum the measured 190-, 180-, 160-, and 120-dB (rms) radii of the drillship, support vessels, and airgun array will be submitted within 120 hr after collection and analysis of those measurements at the start of the field season or in the case of the airgun once that part of the program is implemented. This report will specify the distances of the exclusion zones that were adopted for the exploratory drilling program. Prior to completion of these measurements, Shell will use the radii outlined in their application and elsewhere in this document.
The results of Shell's 2012 Camden Bay exploratory drilling monitoring program (
Analysis of all acoustic data will be prioritized to address the primary questions, which are to: (a) Determine when, where, and what species of animals are acoustically detected on each DASAR; (b) analyze data as a whole to determine offshore bowhead distributions as a function of time; (c) quantify spatial and temporal variability in the ambient noise; and (d) measure received levels of drillship activities. The bowhead detection data will be used to develop spatial and temporal animal distributions. Statistical analyses will be used to test for changes in animal detections and distributions as a function of different variables (
The initial technical report is due to NMFS within 90 days of the completion of Shell's Beaufort Sea exploratory drilling program. The “90-day” report will be subject to review and comment by NMFS. Any recommendations made by NMFS must be addressed in the final report prior to acceptance by NMFS.
Following the 2012 drilling season, a comprehensive report describing the vessel-based, aerial, and acoustic monitoring programs will be prepared. The comprehensive report will describe the methods, results, conclusions and limitations of each of the individual data sets in detail. The report will also integrate (to the extent possible) the studies into a broad based assessment of
Shell will be required to notify NMFS' Office of Protected Resources and NMFS' Stranding Network of any sighting of an injured or dead marine mammal. Based on different circumstances, Shell may or may not be required to stop operations upon such a sighting. Shell will provide NMFS with the species or description of the animal(s), the condition of the animal(s) (including carcass condition if the animal is dead), location, time of first discovery, observed behaviors (if alive), and photo or video (if available). The specific language for what Shell must do upon sighting a dead or injured marine mammal can be found in the “Proposed Incidental Harassment Authorization” section of this document.
Except with respect to certain activities not pertinent here, the MMPA defines “harassment” as: any act of pursuit, torment, or annoyance which (i) Has the potential to injure a marine mammal or marine mammal stock in the wild [Level A harassment]; or (ii) has the potential to disturb a marine mammal or marine mammal stock in the wild by causing disruption of behavioral patterns, including, but not limited to, migration, breathing, nursing, breeding, feeding, or sheltering [Level B harassment]. Only take by Level B behavioral harassment is anticipated as a result of the proposed drilling program. Noise propagation from the drillship, associated support vessels (including during icebreaking if needed), and the airgun array are expected to harass, through behavioral disturbance, affected marine mammals species or stocks. Additional disturbance to marine mammals may result from aircraft overflights and visual disturbance of the drillship or support vessels. However, based on the flight paths and altitude, impacts from aircraft operations are anticipated to be localized and minimal in nature.
The full suite of potential impacts to marine mammals from various industrial activities was described in detail in the “Potential Effects of the Specified Activity on Marine Mammals” section found earlier in this document. The potential effects of sound from the proposed exploratory drilling program might include one or more of the following: tolerance; masking of natural sounds; behavioral disturbance; non-auditory physical effects; and, at least in theory, temporary or permanent hearing impairment (Richardson
For continuous sounds, such as those produced by drilling operations and during icebreaking activities, NMFS uses a received level of 120-dB (rms) to indicate the onset of Level B harassment. For impulsive sounds, such as those produced by the airgun array during the ZVSP surveys, NMFS uses a received level of 160-dB (rms) to indicate the onset of Level B harassment. Shell provided calculations for the 120-dB isopleths produced by both the
Shell has requested authorization to take bowhead, gray, and beluga whales, harbor porpoise, and ringed, spotted, bearded, and ribbon seals incidental to exploration drilling, ice management/icebreaking, and ZVSP activities. Additionally, Shell provided exposure estimates and requested takes of narwhal. However, as stated previously in this document, sightings of this species are rare, and the likelihood of occurrence of narwhals in the proposed drilling area is minimal. Therefore, NMFS has not proposed to authorize take for narwhals.
“Take by Harassment” is described in this section and was calculated in Shell's application by multiplying the expected densities of marine mammals that may occur near the exploratory drilling operations by the area of water likely to be exposed to continuous, non-pulse sounds ≥120 dB re 1 μPa (rms) during drillship operations or icebreaking activities and impulse sounds ≥160 dB re 1 μPa (rms) created by seismic airguns during ZVSP activities. The single exception to this method is for the estimation of exposures of bowhead whales during the fall migration where more detailed data were available, allowing an alternate approach, described below, to be used. NMFS evaluated and critiqued the methods provided in Shell's application and determined that they were appropriate. This section describes the estimated densities of marine mammals that may occur in the project area. The area of water that may be ensonified to the above sound levels is described further in the “
Marine mammal densities near the operation are likely to vary by season and habitat. However, sufficient published data allowing the estimation of separate densities during summer (July and August) and fall (September and October) are only available for beluga and bowhead whales. As noted above, exposures of bowhead whales during the fall are not calculated using densities (see below). Therefore, summer and fall densities have been estimated for beluga whales, and a summer density has been estimated for bowhead whales. Densities of all other species have been estimated to represent the duration of both seasons.
Marine mammal densities are also likely to vary by habitat type. In the Alaskan Beaufort Sea, where the
In addition to water depth, densities of marine mammals are likely to vary with the presence or absence of sea ice (see later for descriptions by species). At times during either summer or fall, pack-ice may be present in some of the area around the drilling operation. However, the retreat of sea ice in the Alaskan Beaufort Sea has been substantial in recent years, so Shell has assumed that only 33% of the area exposed to sounds ≥120 dB or ≥160 dB by the proposed activities will be in ice margin habitat. Therefore, ice-margin densities of marine mammals in both seasons have been multiplied by 33% of the area exposed to sounds by the drilling vessel and ZVSP activities, while open-water (nearshore) densities have been multiplied by the remaining 67% of the area.
To provide some allowance for the uncertainties, “maximum estimates” as well as “average estimates” of the numbers of marine mammals potentially affected have been derived. For a few marine mammal species, several density estimates were available, and in those cases the mean and maximum estimates were determined from the survey data. In other cases, no applicable estimate (or perhaps a single estimate) was available, so correction factors were used to arrive at “average” and “maximum” estimates. These are described in detail in the following subsections. NMFS has determined that the average density data of marine mammal populations will be used to calculate estimated take numbers because these numbers are based on surveys and monitoring of marine mammals in the vicinity of the proposed project area. Table 6-12 in Shell's application indicates that the “average estimate” for gray whales, harbor porpoise, and ribbon seal is zero. Therefore, to account for the fact that these species listed as being potentially taken by harassment in this document may occur in Shell's proposed drilling sites during active operations, NMFS either used the “maximum estimates” or made an estimate based on typical group size for a particular species.
Detectability bias, quantified in part by
As noted above, the densities of beluga and bowhead whales present in the Beaufort Sea are expected to vary by season and location. During the early and mid-summer, most belugas and bowheads are found in the Canadian Beaufort Sea and Amundsen Gulf or adjacent areas. Low numbers are found in the eastern Alaskan Beaufort Sea. Belugas begin to move across the Alaskan Beaufort Sea in August, and bowheads do so toward the end of August.
During the fall, most bowhead whales will be migrating west past the exploration drilling program, so it is less accurate to assume that the number of individuals present in the area from one day to the next will be static. However, feeding, resting, and milling behaviors are not entirely uncommon at this time and location. In order to incorporate the movement of whales past the planned operations, and because the necessary data are available, Shell developed an alternate method of calculating the number of individual bowheads exposed to sounds produced by the exploration drilling program from the method used to calculate the number of exposures for bowheads in summer and the other marine mammal species for the entire season. The method is founded on estimates of the proportion of the population that would pass within the
Based on data in Richardson and Thomson (2002), the number of whales expected to pass each day after conclusion of the bowhead subsistence hunts (assumed to be September 15 for purposes of these calculations) was estimated as a proportion of the estimated 2012 bowhead whale population. The number of whales passing each day was based on the 10-day moving average presented by Richardson and Thomson (2002; Appendix 9.1). Richardson and Thomson (2002) also calculated the proportion of animals within water depth bins (<66 ft [20 m], 66-131 ft [20-40 m], 131-656 ft [40-200 m], >656 ft [200 m]). Using this information, Shell multiplied the total number of whales expected to pass the exploration drilling program each day by the proportion of whales that would be in each depth category to estimate how many individuals would be within each depth bin on a given day. The proportion of each depth bin falling within the ≥120 dB zone was then multiplied by the number of whales within the respective bins to estimate the total number of individuals that would be exposed on each day of exploration drilling or program activity, if they showed no avoidance of the operations. Based on the fact that most bowhead whales will be engaged in the fall migration at this time, NMFS determined that this method was appropriate for estimating the number of individual bowhead whales that may be exposed to drilling sounds after September 15.
Exploration drilling will be suspended on August 25 prior to the start of the bowhead subsistence hunts at Kaktovik and Nuiqsut (Cross Island) and will be resumed when the hunts are concluded. After the completion of the subsistence hunts (for purposes of these calculations this was assumed to be September 15), exploration drilling activity would resume and continue as late as October 31. Therefore, the daily calculations described above were repeated for all days from September 15 to October 31, and the results were summed to estimate the total number of bowhead whales that might be exposed to either continuous sounds ≥120 dB rms from exploration drilling or icebreaking activities and impulsive sounds ≥160 dB rms from ZVSP surveys during the migration period in the Beaufort Sea.
The 2012 bowhead whale population size would be approximately 15,232 individuals based on a 2001 population of 10,545 (Zeh and Punt, 2005) and a continued annual growth rate of 3.4% (Allen and Angliss, 2011). The estimated population size of 15,232 was therefore used by Shell as the foundation of the calculations of exposures during the migration period. The estimate of the proportion of the population passing the exploration drilling operation on each day is based on a 10-day moving average, and the calculations have been made over a substantial length of time, so it would take significant variation in the timing
Extensive surveys of ringed and bearded seals have been conducted in the Beaufort Sea, but most surveys have been conducted over the landfast ice, and few seal surveys have occurred in open-water or in the pack ice. Kingsley (1986) conducted ringed seal surveys of the offshore pack ice in the central and eastern Beaufort Sea during late spring (late June). These surveys provide the most relevant information on densities of ringed seals in the ice margin zone of the Beaufort Sea. The density estimate in Kingsley (1986) was used as the average density of ringed seals that may be encountered in the ice margin (Table 6-2 in Shell's application and Table 3 here). The average ringed seal density in the nearshore zone of the Alaskan Beaufort Sea was estimated from results of ship-based surveys at times without seismic operations reported by Moulton and Lawson (2002; Table 6-2 in Shell's application and Table 3 here).
Densities of bearded seals were estimated by multiplying the ringed seal densities by 0.051 based on the proportion of bearded seals to ringed seals reported in Stirling
Shell proposes that exploration drilling in Camden Bay would be conducted from either the
Sounds from the
Sounds from the
The acoustic propagation model used to estimate the sound propagation from both vessels in Camden Bay is JASCO's Marine Operations Noise Model (MONM). MONM computes received sound levels in rms units when source levels are specified also in those units. MONM treats sound propagation in range-varying acoustic environments through a wide-angled parabolic equation solution to the acoustic wave equation. The specific parabolic equation code in MONM is based on the Naval Research Laboratory's Range-dependent Acoustic Model. This code has been extensively benchmarked for accuracy and is widely employed in the underwater acoustics community (Collins, 1993).
For analysis of the potential effects on migrating bowhead whales Shell calculated the total distance perpendicular to the east-west migration corridor ensonified to ≥120 dB rms in order to determine the number of migrating whales passing the activities that might be exposed to that sound level. For the
The two drill sites on the Torpedo prospect (designated as H and J) are not as close together as the Sivulliq sites, but their position relative to the 131 ft (40 m) and 656 ft (200 m) bathymetric contours are similar. For simplicity, Shell provided and used only the slightly greater estimates resulting from
As described in the “
Measurements of the icebreaking supply ship
If ice is present, ice management/icebreaking activities may be necessary in early July and towards the end of operations in late October, but it is not expected to be needed throughout the proposed exploration drilling season. Icebreaking activities would likely occur in a 40° arc up to 3.1 mi (5 km) upwind of the
Shell proposes to use the ITAGA eight-airgun array for the ZVSP surveys in 2012, which consists of four 150-in
For analysis of potential effects on migrating bowhead whales, the ≥120 dB distance for exploration drilling activities was used on all days during the bowhead migration as described previously. This is a precautionary approach in the case of the
Shell intends to conduct sound propagation measurements on the
Although a marine mammal may be exposed to drilling or icebreaking sounds ≥120 dB (rms) or airgun sounds ≥160 dB (rms), this does not mean that it will
Numbers of marine mammals that might be present and potentially disturbed (
The number of different individuals of each species potentially exposed to received levels of continuous sound ≥120 dB re 1 μPa (rms) or to pulsed sounds ≥160 dB re 1 μPa (rms) within each season and habitat zone was estimated by multiplying:
• The anticipated area to be ensonified to the specified level in the time period and habitat zone to which a density applies, by
• The expected species density.
The estimate for bowhead whales during the migration period was calculated differently as described previously. The numbers of exposures were then summed for each species across the seasons and habitat zones.
At times during either summer (July-August) or fall (September-October), pack-ice may be present in some of the area around the exploration drilling operation. However, the retreat of sea ice in the Alaskan Beaufort Sea has been substantial in recent years, so Shell assumed that only 33% of the area exposed to sounds ≥120 dB or ≥160 dB by the exploration drilling program and ZVSP activities will be in ice-margin habitat. Therefore, ice-margin densities of marine mammals in both seasons have been multiplied by 33% of the area exposed to sounds by the drilling and ZVSP activities, while open-water (nearshore) densities have been multiplied by the remaining 67% of the area. Since any icebreaking activities would only occur in ice-margin habitat, the entire area exposed to sounds ≥120 dB from icebreaking was multiplied by the ice-margin densities.
Cetacean species potentially exposed to exploration drilling or icebreaking sounds with continuous received levels ≥120 dB rms or airgun sounds ≥160 dB rms may include both mysticetes (bowhead and gray whales) and odontocetes (beluga whale). Separate estimates for beluga and bowhead whales are provided based on whether the
If the
Few other cetaceans are likely to be present in the area of the planned operations and the very small estimated densities for those species were not large enough for the calculations to result in estimates >1% from the
The ringed seal is the most widespread and abundant pinniped in ice-covered arctic waters, and there appears to be a great deal of year-to-year variation in abundance and distribution of these marine mammals. As a result of their high abundance, ringed seals account for a large number of marine mammals expected to be encountered during the exploration drilling program and hence exposed to sounds with received levels ≥120 dB or ≥160 dB rms. If the
Two additional seal species are expected to be encountered with lower frequency than ringed seals. Estimates based on average densities of bearded seals and spotted seals are 41 and 6, respectively, during summer and fall if the exploration drilling program is conducted by the
As stated previously, NMFS' practice has been to apply the 120 dB re 1 µPa (rms) received level threshold for underwater continuous sound levels and the 160 dB re 1 µPa (rms) received level threshold for underwater impulsive sound levels to determine whether take by Level B harassment occurs. However, not all animals react to sounds at these low levels, and many
Although the 120-dB isopleth for the drillships may seem fairly expansive (
For impulsive sounds, such as those produced by the airguns, studies reveal that baleen whales show avoidance responses, which would reduce the likelihood of them being exposed to higher received sound levels. The 180-dB zone (0.77 mi [1.24 km]) is one-third the size of the 160-dB zone (2.28 mi [3.67 km], which is the modeled distance before the 1.5 inflation factor is included). In the limited studies that have been conducted on pinniped responses to pulsed sound sources, they seem to be more tolerant and do not exhibit strong behavioral reactions (see Southall
NMFS is proposing to authorize the average take estimates provided in Table 6-12 of Shell's application and Table 13 here for bowhead whales and bearded, ringed, and spotted seals. The only exceptions to this are for the gray whale, harbor porpoise, and ribbon seal since the average estimate is zero for those species and for the beluga whale to account for group size. Therefore, for the 2012 Beaufort Sea drilling season, NMFS proposes to authorize the take of 38 beluga whales, 5,608 bowhead whales, 15 gray whales, 15 harbor porpoise, 55 bearded seals, 1,069 ringed seals, 7 spotted seals, and 5 ribbon seals. For beluga and gray whales and harbor porpoise, this represents 0.1% of the Beaufort Sea population of approximately 39,258 beluga whales (Allen and Angliss, 2011), 0.08% of the Eastern North Pacific stock of approximately 18,017 gray whales (Allen and Angliss, 2011), and 0.03% of the Bering Sea stock of approximately 48,215 harbor porpoise (Allen and Angliss, 2011). This also represents 36.8% of the Bering-Chukchi-Beaufort bowhead population of 15,232 individuals assuming 3.4% annual population growth from the 2001 estimate of 10,545 animals (Zeh and Punt, 2005). The take estimates presented for bearded, ringed, and spotted seals represent 0.02%, 0.4%, and 0.01% of the Bering-Chukchi-Beaufort populations for each species, respectively. The take estimate for ribbon seals represents 0.01% of the Alaska stock of this species. These proposed take numbers are based on Shell utilizing the
With the exception of the subsistence mitigation measure of shutting down during the Nuiqsut and Kaktovik fall bowhead whale hunts, these take estimates do not take into account any of the mitigation measures described previously in this document. Additionally, if the fall bowhead hunts end after September 15, and Shell still concludes activities on October 31, then fewer animals will be exposed to drilling sounds, especially bowhead whales, as more of them will have migrated past the area in which they would be exposed to continuous sound levels of 120 dB or greater or impulsive sound levels of 160 dB or greater prior to Shell resuming active operations. These take numbers also do not consider how many of the exposed animals may actually respond or react to the proposed exploration drilling program. Instead, the take estimates are based on the presence of animals, regardless of whether or not they react or respond to the activities.
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 a variety of factors, including but not limited to: (1) The number of anticipated mortalities; (2) the number and nature of anticipated injuries; (3) the number, nature, intensity, and duration of Level B harassment; and (4) the context in which the takes occur.
No injuries or mortalities are anticipated to occur as a result of Shell's proposed Camden Bay exploratory drilling program, and none are proposed to be authorized. Injury, serious injury, or mortality could occur if there were a large or very large oil spill. However, as discussed previously in this document, the likelihood of a spill is extremely remote. Shell has implemented many design and operational standards to mitigate the potential for an oil spill of any size. NMFS does not propose to authorize take from an oil spill, as it is not part of the specified activity. Additionally, animals in the area are not expected to incur hearing impairment (
Some studies have shown that bowhead whales will continue to feed in areas of seismic operations (
Some bowhead whales have been observed feeding in the Camden Bay area in recent years, even though oil and gas activities have been occurring in the general region. There has also been recent evidence that some bowhead whales continued feeding in close proximity to seismic sources (
Shell's proposed exploration drilling program is not expected to negatively affect the bowhead whale westward migration through the U.S. Beaufort Sea. The migration typically starts around the last week of August or first week of September. Shell has agreed to cease operations on August 25 for the fall bowhead whale hunts at Kaktovik and Cross Island (for the village of Nuiqsut). Operations will not resume until both communities have announced the close of the fall hunt, which typically occurs around September 15 each year. Therefore, whales that migrate through the area the first few weeks of the migration period will not be exposed to any acoustic or non-acoustic stimuli from Shell's proposed operations. Only the last 6 weeks of Shell's operations would occur during the migratory period. Cow/calf pairs typically migrate through the area later in the season (
Beluga whales are more likely to occur in the project area after the recommencement of activities in September than in July or August. Should any belugas occur in the area of active drilling, it is not expected that they would remain in the area for a prolonged period of time, as their westward migration usually occurs further offshore (more than 37 mi [60 km]) and in deeper waters (more than 656 ft [200 m]) than that planned for the location of Shell's Camden Bay well sites. Gray whales do not occur frequently in the Camden Bay area of the Beaufort Sea. Additionally, there are no known feeding grounds for gray whales in the Camden Bay area. The most northern feeding sites known for this species are located in the Chukchi Sea near Hanna Shoal and Point Barrow. Based on these factors, exposures of gray whales to industrial sound are not expected to last for prolonged periods (
Some individual pinnipeds may be exposed to drilling sounds more than once during the timeframe of the project. This may be especially true for ringed seals, which occur in the Beaufort Sea year-round and are the most frequently encountered pinniped species in the area. However, as stated previously in this document, pinnipeds appear to be more tolerant of anthropogenic sound, especially at lower received levels, than other marine mammals, such as mysticetes.
Ringed seals construct lairs for pupping in the Beaufort Sea. However, this species typically does not construct lairs until late winter/early spring on the landfast ice. Because Shell will cease operations by October 31, they will not be in the area during the ringed seal pupping season. Bearded seals breed in the Bering and Chukchi Seas, as the Beaufort Sea provides less suitable habitat for the species. Spotted and ribbon seals are even less common in the Camden Bay area. These species do not breed in the Beaufort Sea. Shell's proposed exploration drilling program is not anticipated to impact breeding or pupping for any of the ice seal species.
Of the eight marine mammal species likely to occur in the proposed drilling area, only the bowhead whale is listed as endangered under the ESA. The species is also designated as “depleted” under the MMPA. Despite these designations, the Bering-Chukchi-Beaufort stock of bowheads has been increasing at a rate of 3.4% annually for nearly a decade (Allen and Angliss, 2011), even in the face of ongoing industrial activity. Additionally, during the 2001 census, 121 calves were counted, which was the highest yet recorded. The calf count provides corroborating evidence for a healthy and increasing population (Allen and Angliss, 2011). Certain stocks or populations of gray and beluga whales and spotted seals are listed as endangered or are proposed for listing under the ESA; however, none of those stocks or populations occur in the proposed activity area. On December 10, 2010, NMFS published a notice of proposed threatened status for subspecies of the ringed seal (75 FR 77476) and a notice of proposed threatened and not warranted status for subspecies and distinct population segments of the bearded seal (75 FR 77496) in the
Potential impacts to marine mammal habitat were discussed previously in this document (see the “Anticipated Effects on Habitat” section). Although some disturbance is possible to food sources of marine mammals, any impacts to affected marine mammal stocks or species are anticipated to be minor. Based on the vast size of the Arctic Ocean where feeding by marine mammals occurs versus the localized area of the drilling program, any missed feeding opportunities in the direct project area would be of little consequence, as marine mammals would have access to other feeding grounds.
If the
The estimated take numbers are likely somewhat of an overestimate for several reasons. First, these take numbers were calculated using a 50% inflation factor of the 120-dB and 160-dB radii, which is a conservative approach recommended by some acousticians when modeling a new sound source in a new location. SSV tests could reveal that the Level B harassment zone is either smaller or larger than that used to estimate take. If the SSV tests reveal that the Level B harassment zones are slightly larger than those modeled, the 50% inflation factor should cover the discrepancy, however, based on recent SSV tests of seismic airguns (which showed that the measured 160-dB isopleths was in the area of the modeled value), the 50% correction factor likely results in an overestimate of takes. Additionally, the mitigation and monitoring measures (described previously in this document) proposed for inclusion in the IHA (if issued) are expected to reduce even further any potential disturbance to marine mammals. Last, some marine mammal individuals, including mysticetes, have been shown to avoid the ensonified area around airguns at certain distances (Richardson
The take estimates for the
The disturbance and potential displacement of marine mammals by sounds from drilling activities are the principal concerns related to subsistence use of the area. Subsistence remains the basis for Alaska Native culture and community. Marine mammals are legally hunted in Alaskan waters by coastal Alaska Natives. In rural Alaska, subsistence activities are often central to many aspects of human existence, including patterns of family life, artistic expression, and community religious and celebratory activities. Additionally, the animals taken for subsistence provide a significant portion of the food that will last the community throughout the year. The main species that are hunted include bowhead and beluga whales, ringed, spotted, and bearded seals, walruses, and polar bears. (As mentioned previously in this document, both the walrus and the polar bear are under the USFWS' jurisdiction.) The importance of each of these species varies among the communities and is largely based on availability.
The subsistence communities in the Beaufort Sea that have the potential to be impacted by Shell's Camden Bay drilling program include Kaktovik, Nuiqsut, and Barrow. Kaktovik is a coastal community 60 mi (96.6 km) east of the project area. Nuiqsut is 118 mi (190 km) west of the project area and about 20 mi (32 km) inland from the coast along the Colville River. Cross Island, from which Nuiqsut hunters base their bowhead whaling activities, is 47 mi (75.6 km) southwest of the project area. Barrow, the community farthest from the project area, lies 298 mi (479.6 km) west of Shell's Camden Bay drill sites.
Of the three communities, Barrow is the only one that currently participates in a spring bowhead whale hunt. However, this hunt is not anticipated to be affected by Shell's activities, as the spring hunt occurs in late April to early May, and Shell's Camden Bay drilling program will not begin until July 10, at the earliest.
All three communities participate in a fall bowhead hunt. In autumn, westward-migrating bowhead whales typically reach the Kaktovik and Cross Island (Nuiqsut hunters) areas by early September, at which points the hunts begin (Kaleak, 1996; Long, 1996; Galginaitis and Koski, 2002; Galginaitis and Funk, 2004, 2005; Koski
Westbound bowheads typically reach the Barrow area in mid-September and are in that area until late October (Brower, 1996). However, over the years, local residents report having seen a small number of bowhead whales feeding off Barrow or in the pack ice off Barrow during the summer. Recently, autumn bowhead whaling near Barrow has normally begun in mid-September to early October, but in earlier years it began as early as August if whales were observed and ice conditions were favorable (USDI/BLM, 2005). The recent decision to delay harvesting whales until mid-to-late September has been made to prevent spoilage, which might occur if whales were harvested earlier in the season when the temperatures tend to be warmer. Whaling near Barrow can continue into October, depending on the quota and conditions.
Shell anticipates arriving on location in Camden Bay around July 10 and continuing operations until August 25. Shell has stated that it will suspend all operations on August 25 for the Nuiqsut (Cross Island) and Kaktovik subsistence bowhead whale hunts. The drillship and support vessels will leave the Camden Bay project area, will move to a location at or north of 71.25° N. latitude and at or west of 146.4° W. longitude, and will return to resume activities after the Nuiqsut (Cross
Beluga whales are not a prevailing subsistence resource in the communities of Kaktovik and Nuiqsut. Kaktovik hunters may harvest one beluga whale in conjunction with the bowhead hunt; however, it appears that most households obtain beluga through exchanges with other communities. Although Nuiqsut hunters have not hunted belugas for many years while on Cross Island for the fall hunt, this does not mean that they may not return to this practice in the future. Data presented by Braund and Kruse (2009) indicate that only 1% of Barrow's total harvest between 1962 and 1982 was of beluga whales and that it did not account for any of the harvested animals between 1987 and 1989.
There has been minimal harvest of beluga whales in Beaufort Sea villages in recent years. Additionally, if belugas are harvested, it is usually in conjunction with the fall bowhead harvest. Shell will not be operating during the Kaktovik and Nuiqsut fall bowhead harvests.
Ringed seals are available to subsistence users in the Beaufort Sea year-round, but they are primarily hunted in the winter or spring due to the rich availability of other mammals in the summer. Bearded seals are primarily hunted during July in the Beaufort Sea; however, in 2007, bearded seals were harvested in the months of August and September at the mouth of the Colville River Delta. An annual bearded seal harvest occurs in the vicinity of Thetis Island (which is a considerable distance from Shell's proposed Camden Bay drill sites) in July through August. Approximately 20 bearded seals are harvested annually through this hunt. Spotted seals are harvested by some of the villages in the summer months. Nuiqsut hunters typically hunt spotted seals in the nearshore waters off the Colville River delta, which is more than 100 mi (161 km) from Shell's proposed drill sites.
Although there is the potential for some of the Beaufort villages to hunt ice seals during the summer and fall months while Shell is conducting exploratory drilling operations, the primary sealing months occur outside of Shell's operating time frame. Additionally, some of the more established seal hunts that do occur in the Beaufort Sea, such as the Colville delta area hunts, are located a significant distance (in some instances 100 mi [161 km] or more) from the proposed project area.
NMFS has defined “unmitigable adverse impact” in 50 CFR 216.103 as an impact resulting from the specified activity that is likely to reduce the availability of the species to a level insufficient for a harvest to meet subsistence needs by causing the marine mammals to abandon or avoid hunting areas; directly displacing subsistence users; or placing physical barriers between the marine mammals and the subsistence hunters; and that cannot be sufficiently mitigated by other measures to increase the availability of marine mammals to allow subsistence needs to be met.
Noise and general activity during Shell's proposed drilling program have the potential to impact marine mammals hunted by Native Alaskans. In the case of cetaceans, the most common reaction to anthropogenic sounds (as noted previously in this document) is avoidance of the ensonified area. In the case of bowhead whales, this often means that the animals divert from their normal migratory path by several kilometers. Helicopter activity also has the potential to disturb cetaceans and pinnipeds by causing them to vacate the area. Additionally, general vessel presence in the vicinity of traditional hunting areas could negatively impact a hunt. Native knowledge indicates that bowhead whales become increasingly “skittish” in the presence of seismic noise. Whales are more wary around the hunters and tend to expose a much smaller portion of their back when surfacing (which makes harvesting more difficult). Additionally, natives report that bowheads exhibit angry behaviors in the presence of seismic, such as tail-slapping, which translate to danger for nearby subsistence harvesters.
In the case of subsistence hunts for bowhead whales in the Beaufort Sea, there could be an adverse impact on the hunt if the whales were deflected seaward (further from shore) in traditional hunting areas. The impact would be that whaling crews would have to travel greater distances to intercept westward migrating whales, thereby creating a safety hazard for whaling crews and/or limiting chances of successfully striking and landing bowheads.
Regulations at 50 CFR 216.104(a)(12) require IHA applicants for activities that take place in Arctic waters to provide a POC or information that identifies what measures have been taken and/or will be taken to minimize adverse effects on the availability of marine mammals for subsistence purposes. Shell has developed a Draft POC for its 2012 Camden Bay, Beaufort Sea, Alaska, exploration drilling program to minimize any adverse impacts on the availability of marine mammals for subsistence uses. A copy of the Draft POC was provided to NMFS with the IHA Application as Attachment D (see
Beginning in early January 2009 and continuing into 2011, Shell held one-on-one meetings with representatives from the North Slope Borough (NSB) and Northwest Arctic Borough (NWAB), subsistence-user group leadership, and Village Whaling Captain Association representatives. Shell's primary purpose in holding individual meetings was to inform and prepare key leaders, prior to the public meetings, so that they would be prepared to give appropriate feedback on planned activities.
Shell presented the proposed project to the NWAB Assembly on January 27, 2009, to the NSB Assembly on February 2, 2009, and to the NSB and NWAB Planning Commissions in a joint meeting on March 25, 2009. Meetings were also scheduled with representatives from the Alaska Eskimo Whaling Commission (AEWC), and presentations on proposed activities were given to the Inupiat Community of the Arctic Slope, and the Native Village of Barrow. On December 8, 2009, Shell held consultation meetings with
The following mitigation measures, plans and programs, are integral to the POC and were developed during consultation with potentially affected subsistence groups and communities. These measures, plans, and programs will be implemented by Shell during its 2012 exploration drilling operations in both the Beaufort and Chukchi Seas to monitor and mitigate potential impacts to subsistence users and resources. The mitigation measures Shell has adopted and will implement during its 2012 Camden Bay exploration drilling operations are listed and discussed below. The most recent version of Shell's planned mitigation measures was presented to community leaders and subsistence user groups starting in January of 2009 and has evolved since in response to information learned during the consultation process.
To minimize any cultural or resource impacts to subsistence whaling activities from its exploration operations, Shell will suspend drilling activities on August 25, 2012, prior to the start of the Kaktovik and Cross Island bowhead whale hunting season. The drillship and associated vessels will remain outside of the Camden Bay area during the hunt. Shell will resume drilling operations after the conclusion of the hunt and, depending on ice and weather conditions, continue its exploration activities through October 31, 2012. In addition to the adoption of this project timing restriction, Shell will implement the following additional measures to ensure coordination of its activities with local subsistence users to minimize further the risk of impacting marine mammals and interfering with the subsistence hunts for marine mammals:
(1) The drillship and support vessels will transit through the Chukchi Sea along a route that lies offshore of the polynya zone. In the event the transit outside of the polynya zone results in Shell having to break ice (as opposed to managing ice by pushing it out of the way), the drillship and support vessels will enter into the polynya zone far enough so that ice breaking is not necessary. If it is necessary to move into the polynya zone, Shell will notify the local communities of the change in the transit route through the Com Centers;
(2) Shell has developed a Communication Plan and will implement the plan before initiating exploration drilling operations to coordinate activities with local subsistence users as well as Village Whaling Associations in order to minimize the risk of interfering with subsistence hunting activities and keep current as to the timing and status of the bowhead whale migration, as well as the timing and status of other subsistence hunts. The Communication Plan includes procedures for coordination with Com and Call Centers to be located in coastal villages along the Chukchi and Beaufort Seas during Shell's proposed activities in 2012;
(3) Shell will employ local Subsistence Advisors from the Beaufort and Chukchi Sea villages to provide consultation and guidance regarding the whale migration and subsistence hunt. There will be a total of nine subsistence advisor-liaison positions (one per village), to work approximately 8-hours per day and 40-hour weeks through Shell's 2012 exploration project. The subsistence advisor will use local knowledge (Traditional Knowledge) to gather data on subsistence lifestyle within the community and advise on ways to minimize and mitigate potential impacts to subsistence resources during the drilling season. Responsibilities include reporting any subsistence concerns or conflicts; coordinating with subsistence users; reporting subsistence-related comments, concerns, and information; and advising how to avoid subsistence conflicts. A subsistence advisor handbook will be developed prior to the operational season to specify position work tasks in more detail;
(4) Shell will implement flight restrictions prohibiting aircraft from flying within 1,000 ft (305 m) of marine mammals or below 1,500 ft (457 m) altitude (except during takeoffs and landings or in emergency situations) while over land or sea;
(5) The drilling support fleet will avoid known fragile ecosystems, including the Ledyard Bay Critical Habitat Unit and will include coordination through the Com Centers;
(6) All vessels will maintain cruising speed not to exceed 9 knots while transiting the Beaufort Sea;
(7) Collect all drilling mud and cuttings with adhered mud from all well sections below the 26-inch (20-inch casing) section, as well as treated sanitary waste water, domestic wastes, bilge water, and ballast water and transport them outside the Arctic for proper disposal in an Environmental Protection Agency licensed treatment/disposal site. These waste streams shall not be discharged into the ocean;
(8) Drilling mud shall be cooled to mitigate any potential permafrost thawing or thermal dissociation of any methane hydrates encountered during exploration drilling if such materials are present at the drill site; and
(9) Drilling mud shall be recycled to the extent practicable based on operational considerations (
The POC also contains measures regarding ice management procedures, critical operations procedures, the blowout prevention program, and oil spill response. Some of the oil spill response measures to reduce impacts to subsistence hunts include: Having the primary OSRV on standby at all times so that it is available within 1 hour if needed; the remainder of the OSR fleet will be available within 72 hours if needed and will be capable of collecting oil on the water up to the calculated Worst Case Discharge; oil spill containment equipment will be available in the unlikely event of a blowout; capping stack equipment will be stored aboard one of the ice management vessels and will be available for immediate deployment in the unlikely event of a blowout; and pre-booming will be required for all fuel transfers between vessels.
Shell has adopted a spatial and temporal strategy for its Camden Bay operations that should minimize impacts to subsistence hunters. First, Shell's activities will not commence until after the spring hunts have occurred. Additionally, Shell will traverse the Chukchi Sea far offshore, so as to not interfere with July hunts in the Chukchi Sea and will communicate with the Com Centers to notify local communities of any changes in the transit route. Once Shell is on location in Camden Bay, Beaufort Sea, whaling will not commence until late August/early September. Shell has agreed to cease operations on August 25 to allow the villages of Kaktovik and Nuiqsut to prepare for the fall bowhead hunts, will
Kaktovik is located 60 mi (96.6 km) east of the project area. Therefore, westward migrating whales would reach Kaktovik before reaching the area of Shell's activities or any of the ensonified zones. Although Cross Island and Barrow are west of Shell's drill sites, sound generating activities from Shell's drilling program will have ceased prior to the whales passing through the area. Additionally, Barrow lies 298 mi (479.6 km) west of Shell's Camden Bay drill sites, so whalers in that area would not be displaced by any of Shell's activities.
Adverse impacts are not anticipated on sealing activities since the majority of hunts for seals occur in the winter and spring, when Shell will not be operating. Sealing activities in the Colville River delta area occur more than 100 mi (161 km) from Shell's Camden Bay drill sites.
Shell will also support the village Com Centers in the Arctic communities and employ local SAs from the Beaufort and Chukchi Sea villages to provide consultation and guidance regarding the whale migration and subsistence hunt. The SAs will provide advice to Shell on ways to minimize and mitigate potential impacts to subsistence resources during the drilling season.
In the unlikely event of a major oil spill in the Beaufort Sea, there could be major impacts on the availability of marine mammals for subsistence uses. As discussed earlier in this document, the probability of a major oil spill occurring over the life of the project is low (Bercha, 2008). Additionally, Shell developed an ODPCP, which is currently under review by the Department of the Interior and several Federal agencies and the public. Shell has also incorporated several mitigation measures into its operational design to reduce further the risk of an oil spill. Copies of Shell's 2012 Camden Bay Exploration Plan and ODPCP can be found on the Internet at:
This section contains a draft of the IHA itself. The wording contained in this section is proposed for inclusion in the IHA (if issued).
(1) This Authorization is valid from July 10, 2012, through October 31, 2012.
(2) This Authorization is valid only for activities associated with Shell's 2012 Camden Bay exploration drilling program. The specific areas where Shell's exploration drilling program will be conducted are within Shell lease holdings in the Outer Continental Shelf Lease Sale 195 and 202 areas in the Beaufort Sea.
(3)(a) The incidental taking of marine mammals, by Level B harassment only, is limited to the following species: Bowhead whale; gray whale; beluga whale; harbor porpoise; ringed seal; bearded seal; spotted seal; and ribbon seal.
(3)(b) The taking by injury (Level A harassment), serious injury, or death of any of the species listed in Condition 3(a) or the taking of any kind of any other species of marine mammal is prohibited and may result in the modification, suspension or revocation of this Authorization.
(4) The authorization for taking by harassment is limited to the following acoustic sources (or sources with comparable frequency and intensity) and from the following activities:
(a) 8-airgun array with a total discharge volume of 760 in
(b) continuous drillship sounds during active drilling operations; and
(c) vessel sounds generated during active ice management or icebreaking.
(5) The taking of any marine mammal in a manner prohibited under this Authorization must be reported immediately to the Chief, Permits and Conservation Division, Office of Protected Resources, NMFS or his designee.
(6) The holder of this Authorization must notify the Chief of the Permits and Conservation Division, Office of Protected Resources, at least 48 hours prior to the start of exploration drilling activities (unless constrained by the date of issuance of this Authorization in which case notification shall be made as soon as possible).
(7) General Mitigation and Monitoring Requirements: The Holder of this Authorization is required to implement the following mitigation and monitoring requirements when conducting the specified activities to achieve the least practicable impact on affected marine mammal species or stocks:
(a) All vessels shall reduce speed to at least 9 knots when within 300 yards (274 m) of whales. The reduction in speed will vary based on the situation but must be sufficient to avoid interfering with the whales. Those vessels capable of steering around such groups should do so. Vessels may not be operated in such a way as to separate members of a group of whales from other members of the group;
(b) Avoid multiple changes in direction and speed when within 300 yards (274 m) of whales;
(c) When weather conditions require, such as when visibility drops, support vessels must reduce speed and change direction, as necessary (and as operationally practicable), to avoid the likelihood of injury to whales;
(d) All vessels shall maintain cruising speed not to exceed 9 knots while transiting the Beaufort Sea in order to reduce the risk of ship-whale collisions;
(e) Aircraft shall not fly within 1,000 ft (305 m) of marine mammals or below 1,500 ft (457 m) altitude (except during takeoffs, landings, or in emergency situations) while over land or sea;
(f) Utilize two, NMFS-qualified, vessel-based Protected Species Observers (PSOs) (except during meal times and restroom breaks, when at least one PSO shall be on watch) to visually watch for and monitor marine mammals near the drillship or support vessel during active drilling or airgun operations (from nautical twilight-dawn to nautical twilight-dusk) and before and during start-ups of airguns day or night. The vessels' crew shall also assist in detecting marine mammals, when practicable. PSOs shall have access to reticle binoculars (7x50 Fujinon), big-eye binoculars (25x150), and night vision devices. PSO shifts shall last no longer than 4 hours at a time and shall not be on watch more than 12 hours in a 24-hour period. PSOs shall also make observations during daytime periods when active operations are not being conducted for comparison of animal abundance and behavior, when feasible;
(g) When a mammal sighting is made, the following information about the sighting will be recorded:
(i) Species, group size, age/size/sex categories (if determinable), behavior when first sighted and after initial sighting, heading (if consistent), bearing and distance from the MMO, apparent reaction to activities (
(ii) Time, location, speed, activity of the vessel, sea state, ice cover, visibility, and sun glare; and
(iii) The positions of other vessel(s) in the vicinity of the MMO location.
(iv) The ship's position, speed of support vessels, and water temperature, water depth, sea state, ice cover, visibility, and sun glare will also be recorded at the start and end of each observation watch, every 30 minutes
(h) PSO teams shall consist of Inupiat observers and experienced field biologists. An experienced field crew leader will supervise the PSO team onboard the survey vessel. New observers shall be paired with experienced observers to avoid situations where lack of experience impairs the quality of observations;
(i) PSOs will complete a two- or three-day training session on marine mammal monitoring, to be conducted shortly before the anticipated start of the 2012 open-water season. The training session(s) will be conducted by qualified marine mammalogists with extensive crew-leader experience during previous vessel-based monitoring programs. A marine mammal observers' handbook, adapted for the specifics of the planned program will be reviewed as part of the training;
(j) If there are Alaska Native PSOs, the PSO training that is conducted prior to the start of the survey activities shall be conducted with both Alaska Native PSOs and biologist PSOs being trained at the same time in the same room. There shall not be separate training courses for the different PSOs; and
(k) PSOs shall be trained using visual aids (
(8) ZVSP Mitigation and Monitoring Measures: The Holder of this Authorization is required to implement the following mitigation and monitoring requirements when conducting the specified activities to achieve the least practicable impact on affected marine mammal species or stocks:
(a) PSOs shall conduct monitoring while the airgun array is being deployed or recovered from the water;
(b) PSOs shall visually observe the entire extent of the exclusion zone (EZ) (180 dB re 1 μPa [rms] for cetaceans and 190 dB re 1 μPa [rms] for pinnipeds) using NMFS-qualified PSOs, for at least 30 minutes (min) prior to starting the airgun array (day or night). If the PSO finds a marine mammal within the EZ, Shell must delay the seismic survey until the marine mammal(s) has left the area. If the PSO sees a marine mammal that surfaces then dives below the surface, the PSO shall continue the watch for 30 min. If the PSO sees no marine mammals during that time, they should assume that the animal has moved beyond the EZ. If for any reason the entire radius cannot be seen for the entire 30 min period (
(c) Establish and monitor a 180 dB re 1 μPa (rms) and a 190 dB re 1 μPa (rms) EZ for marine mammals before the 8-airgun array (760 in
(d) Implement a “ramp-up” procedure when starting up at the beginning of seismic operations, which means start the smallest gun first and add airguns in a sequence such that the source level of the array shall increase in steps not exceeding approximately 6 dB per 5-min period. During ramp-up, the PSOs shall monitor the EZ, and if marine mammals are sighted, a power-down, or shut-down shall be implemented as though the full array were operational. Therefore, initiation of ramp-up procedures from shut-down requires that the PSOs be able to view the full EZ;
(e) Power-down or shutdown the airgun(s) if a marine mammal is detected within, approaches, or enters the relevant EZ. A shutdown means all operating airguns are shutdown (
(f) Following a power-down, if the marine mammal approaches the smaller designated EZ, the airguns must then be completely shutdown. Airgun activity shall not resume until the PSO has visually observed the marine mammal(s) exiting the EZ and is not likely to return, or has not been seen within the EZ for 15 min for species with shorter dive durations (small odontocetes and pinnipeds) or 30 min for species with longer dive durations (mysticetes);
(g) Following a power-down or shut-down and subsequent animal departure, airgun operations may resume following ramp-up procedures described in Condition 8(d) above;
(h) ZVSP surveys may continue into night and low-light hours if such segment(s) of the survey is initiated when the entire relevant EZs are visible and can be effectively monitored; and
(i) No initiation of airgun array operations is permitted from a shutdown position at night or during low-light hours (such as in dense fog or heavy rain) when the entire relevant EZ cannot be effectively monitored by the PSO(s) on duty.
(9) Subsistence Mitigation Measures: To ensure no unmitigable adverse impact on subsistence uses of marine mammals, the Holder of this Authorization shall:
(a) Traverse north through the Bering Strait through the Chukchi Sea along a route that lies offshore of the polynya zone. In the event the transit outside of the polynya zone results in Shell having to break ice, the drilling vessel and support vessels will enter into the polynya zone far enough so that icebreaking is not necessary. If it is necessary to move into the polynya zone, Shell shall notify the local communities of the change in transit route through the Communication and Call Centers (Com Centers). As soon as the fleet transits past the ice, it will exit the polynya zone and continue a path in the open sea toward the Camden Bay drill sites;
(b) Implement the Communication Plan before initiating exploration drilling operations to coordinate activities with local subsistence users and Village Whaling Associations in order to minimize the risk of interfering with subsistence hunting activities;
(c) Participate in the Com Center Program. The Com Centers shall operate 24 hours/day during the 2012 bowhead whale hunt;
(d) Employ local Subsistence Advisors (SAs) from the Beaufort and Chukchi Sea villages to provide consultation and guidance regarding the whale migration and subsistence hunt;
(e) Not operate aircraft below 1,500 ft (457 m) unless engaged in marine mammal monitoring, approaching, landing or taking off, or unless engaged in providing assistance to a whaler or in poor weather (low ceilings) or any other emergency situations;
(f) Collect all drilling mud and cuttings with adhered mud from all well sections below the 26-inch (20-inch casing) section, as well as treated sanitary waste water, domestic wastes, bilge water, and ballast water and transport them outside the Arctic for proper disposal in an Environmental Protection Agency licensed treatment/disposal site. These waste streams shall not be discharged into the ocean;
(g) Cool all drilling mud to mitigate any potential permafrost thawing or thermal dissociation of any methane
(h) Recycle all drilling mud to the extent practicable based on operational considerations (
(i) Suspended all drilling activities on August 25 for the Kaktovik and Nuiqsut (Cross Island) fall bowhead whale hunts. The drilling vessel and support fleet shall leave the Camden Bay project area and move to an area north of latitude 71°25′ N and west of longitude 146°4′ W. Shell shall not return to the area to resume drilling operations until the close of the Kaktovik and Nuiqsut fall bowhead whale hunts.
(a)
(b)
(c) Acoustic Monitoring:
(i)
(ii)
(11)
(a) Within 5 days of completing the sound source verification tests for the drillship, support vessels, and the airguns, the Holder shall submit a preliminary report of the results to NMFS. The report should report down to the 120-dB radius in 10-dB increments;
(b) Submit a draft report on all activities and monitoring results to the Office of Protected Resources, NMFS, within 90 days of the completion of the exploration drilling program. This report must contain and summarize the following information:
(i) Summaries of monitoring effort (
(ii) analyses of the effects of various factors influencing detectability of marine mammals (
(iii) species composition, occurrence, and distribution of marine mammal sightings, including date, water depth, numbers, age/size/gender categories (if determinable), group sizes, and ice cover;
(iv) sighting rates of marine mammals during periods with and without exploration drilling activities (and other variables that could affect detectability), such as: (A) Initial sighting distances versus drilling state; (B) closest point of approach versus drilling state; (C) observed behaviors and types of movements versus drilling state; (D) numbers of sightings/individuals seen versus drilling state; (E) distribution around the survey vessel versus drilling state; and (F) estimates of take by harassment;
(v) Reported results from all hypothesis tests should include estimates of the associated statistical power when practicable;
(vi) Estimate and report uncertainty in all take estimates. Uncertainty could be expressed by the presentation of confidence limits, a minimum-maximum, posterior probability distribution,
(vii) The report should clearly compare authorized takes to the level of actual estimated takes.
(viii) If, after the independent monitoring plan peer review changes are made to the monitoring program, those changes must be detailed in the report.
(c) The draft report will be subject to review and comment by NMFS. Any recommendations made by NMFS must be addressed in the final report prior to acceptance by NMFS. The draft report will be considered the final report for this activity under this Authorization if NMFS has not provided comments and recommendations within 90 days of receipt of the draft report.
(d) A draft comprehensive report describing the aerial, acoustic, and vessel-based monitoring programs will be prepared and submitted within 240 days of the date of this Authorization. The comprehensive report will describe the methods, results, conclusions and limitations of each of the individual data sets in detail. The report will also integrate (to the extent possible) the studies into a broad based assessment of all industry activities and their impacts on marine mammals in the Arctic Ocean during 2012.
(e) The draft comprehensive report will be subject to review and comment by NMFS, the AEWC, and the NSB Department of Wildlife Management. The draft comprehensive report will be accepted by NMFS as the final comprehensive report upon incorporation of comments and recommendations.
(12)(a) In the unanticipated event that the drilling program operation clearly causes the take of a marine mammal in a manner prohibited by this Authorization, such as an injury (Level A harassment), serious injury or mortality (
Activities shall not resume until NMFS is able to review the circumstances of the prohibited take. NMFS shall work with Shell to determine what is necessary to minimize the likelihood of further prohibited take and ensure MMPA compliance. Shell may not resume their activities until notified by NMFS via letter, email, or telephone.
(b) In the event that Shell discovers an injured or dead marine mammal, and the lead PSO determines that the cause of the injury or death is unknown and the death is relatively recent (
(c) In the event that Shell discovers an injured or dead marine mammal, and the lead PSO determines that the injury or death is not associated with or related to the activities authorized in Condition 2 of this Authorization (
(13) Activities related to the monitoring described in this Authorization do not require a separate scientific research permit issued under section 104 of the Marine Mammal Protection Act.
(14) The Plan of Cooperation outlining the steps that will be taken to cooperate and communicate with the native communities to ensure the availability of marine mammals for subsistence uses must be implemented.
(15) Shell is required to comply with the Terms and Conditions of the Incidental Take Statement (ITS) corresponding to NMFS's Biological Opinion issued to NMFS's Office of Protected Resources.
(16) A copy of this Authorization and the ITS must be in the possession of all contractors and PSOs operating under the authority of this Incidental Harassment Authorization.
(17) Penalties and Permit Sanctions: Any person who violates any provision of this Incidental Harassment Authorization is subject to civil and criminal penalties, permit sanctions, and forfeiture as authorized under the MMPA.
(18) This Authorization may be modified, suspended or withdrawn if the Holder fails to abide by the conditions prescribed herein or if the authorized taking is having more than a negligible impact on the species or stock of affected marine mammals, or if there is an unmitigable adverse impact on the availability of such species or stocks for subsistence uses.
There is one marine mammal species listed as endangered under the ESA with confirmed or possible occurrence in the proposed project area: the bowhead whale. NMFS' Permits and Conservation Division will initiate consultation with NMFS' Endangered Species Division under section 7 of the ESA on the issuance of an IHA to Shell under section 101(a)(5)(D) of the MMPA for this activity. Consultation will be concluded prior to a determination on the issuance of an IHA.
NMFS is currently preparing an Environmental Assessment (EA), pursuant to NEPA, to determine whether the issuance of an IHA to Shell for its 2012 drilling activities may have a significant impact on the human environment. NMFS expects to release a draft of the EA for public comment, and will inform the public, through the
As noted above, NMFS requests comment on our analysis, the draft authorization, and any other aspect of the Notice of Proposed IHA for Shell's 2012 Beaufort Sea exploratory drilling program. Please include, with your comments, any supporting data or literature citations to help inform our final decision on Shell's request for an MMPA authorization.
Office of the Secretary, HUD.
Notice of delegation of authority.
Through this notice, the Secretary delegates all authority under the Chief Human Capital Officers Act of 2002 to the Chief Human Capital Officer. The Chief Human Capital Officer reports to the Chief Operating Officer, as described in the
Lynette Warren, Office of the Chief Human Capital Officer, Policy Development and Advisory Services, Department of Housing and Urban Development, 451 Seventh Street SW., Room 2182, Washington, DC 20410; telephone number (202) 402-4169 (this is not a toll-free number). Persons with hearing or speech impairments may call HUD's toll-free Federal Relay Service at (800) 877-8339.
The Chief Human Capital Officers Act of 2002 was enacted as part of the Homeland Security Act of 2002 (Pub. L. 107-296, section 1301
1. The CHCO is hereby delegated all authority and assigned all responsibility for human capital management within HUD, including, without limitation, the following:
(a) Managing and administering all aspects of the Department's programs including, but not limited to: Position classification, position management, pay administration, benefits and retirement counseling, employee assistance, and employee health and wellness, which may include reasonable accommodation, personnel actions processing, buyouts, furloughs, maintenance of official personnel records, personnel security, and other like or related policies and programs related to Human Resources management and administration;
(b) Handling the full range of Executive Personnel Programs and operations and providing services for employees in the Senior Executive Service, at the Executive Level, in the Senior Level system, and Schedule C appointees, experts, and consultants;
(c) Managing the Department's performance management programs, overseeing the execution of the annual performance appraisal cycle, overseeing and executing the Incentive Awards Program, providing training to managers and employees, and performing related customer advisory services and outreach support;
(d) Developing and implementing departmental policy guidance for human capital management and programs, administering leadership and employee development programs, administering general and managerial skills training for Headquarters and field employees, and conducting workforce analysis and succession planning;
(e) Directing the development of integrated systems and managing the Office of the Chief Human Capital Officer's human resource information technology inventory and strategies;
(f) Under 5 U.S.C. 7114(c), approve all federal labor management agreements, including employee negotiated agreements, renegotiations, supplements, and other related agreements;
(g) Approve personnel actions involving positions at the GS-15 level and below or equivalent in the competitive and excepted service;
(h) Approve personnel actions involving positions above the GS-15 or equivalent level not requiring Executive Resources Board approval;
(i) Approve personnel actions relating to the appointment of experts and consultants pursuant to 42 U.S.C. 3535(e);
(j) Approve developmental or training assignments external to HUD of one year or less;
(k) Administer the oath of office under 5 U.S.C. 2903 and execute appointment affidavits for all HUD appointments where such oaths and affidavits are required;
(l) Exercise the functions granted regarding giving preferences to employees who have had a prohibited personnel action taken against them under 5 U.S.C. 3352. This authority may not be redelegated further;
(m) Waive the biweekly limitation on General Schedule premium pay for emergency situations or work that is critical to the mission of HUD under 5 U.S.C. 5547(b);
(n) Approve performance-based cash awards up to $10,000 under 5 U.S.C. 4505a and 5 CFR part 451;
(o) Approve dual compensation waivers pursuant to section 1122 of the National Defense Authorization Act for Fiscal Year 2010 (5 U.S.C. 8344);
(p) Approve temporary assignments outside of the Department to other federal agencies or allowable organizations; and
(q) Approve waivers of overpayment and salary offset as designated by the Secretary or Deputy Secretary.
2. In addition to the human capital authorities described above, the Chief Human Capital Officer is hereby delegated authority to carry out the following responsibilities:
(a) Provide for the maintenance and safety of all facilities within the Department (Headquarters and field), including, but not limited to:
(i) Real and personal property management;
(ii) Fleet management;
(iii) Operations;
(iv) Energy and environmental management;
(v) Telecommunications management;
(vi) Safety and health program management;
(vii) Records and directives management;
(viii) Mail distribution and management,
(ix) Printing and graphic arts services;
(x) Physical security and investigations services;
(b) Developing and issuing departmental policy for facilities services;
(c) Managing the Salaries and Expenses budget functions and providing oversight of Office of the Chief Human Capital Officer contracts;
(d) Developing and administering the Department's Transit Subsidy program and Purchase Charge Card Program;
(e) Serving as the central control and coordination point for the management of correspondence to and from the Secretary and the Deputy Secretary, correspondence received in Headquarters from Congress and elected officials, and other correspondence, as appropriate; and
(f) Processing Freedom of Information Act requests.
3. The CHCO has full authority to waive any requirements in any policy and/or program developed, administered, and/or managed by the OCHCO.
The CHCO will perform such additional duties as may be assigned to the CHCO by applicable law or regulation.
The Chief Human Capital Officer may redelegate this authority.
The authority delegated in this document does not include the authority to sue or be sued or to issue or waive regulations.
This Redelegation supersedes any previous delegation of authority to the Assistant Secretary for Administration or the Chief Human Capital Officer.
Section 7(d) of the Department of Housing and Urban Development Act (42 U.S.C. 3535(d).
Office of the Chief Human Capital Officer, HUD.
Notice of order of succession.
In this notice, the Chief Human Capital Officer for the Department of Housing and Urban Development designates the Order of Succession for the Office of the Chief Human Capital Officer.
Lynette Warren, Office of the Chief Human Capital Officer, Department of Housing and Urban Development, 451 7th Street SW., Room 2182, Washington DC 20410; telephone number (202) 402-4169 (this is not a toll-free number). Persons with hearing or speech impairments may call HUD's toll-free Federal Relay Service at (800) 877-8339.
The Chief Human Capital Officer for the Department of Housing and Urban Development is issuing this Order of Succession of officials authorized to perform the functions and duties of the Office of the Chief Human Capital Officer when, by reason of absence, disability, or vacancy in office, the Chief Human Capital Officer is not available to exercise the powers or perform the duties of the office. This Order of Succession is subject to the provisions of the Federal Vacancies Reform Act of 1998 (5 U.S.C. 3345-3349d).
Accordingly, the Chief Human Capital Officer designates the following Order of Succession:
Subject to the provisions of the Federal Vacancies Reform Act of 1998, during any period when, by reason of absence, disability, or vacancy in office, the Chief Human Capital Officer for the Department of Housing and Urban Development is not available to exercise the powers or perform the duties of the Chief Human Capital Officer, the following officials within the Office of the Chief Human Capital Officer are hereby designated to exercise the powers and perform the duties of the office:
1. Deputy Chief Human Capital Officer;
2. Director, Office of Human Capital Services;
3. Director, Office of Support Services; and
4. Director, Office of Human Capital Field Support.
These officials shall perform the functions and duties of the office in the order specified herein, and no official shall serve unless all the other officials, whose position titles precede his/hers in this order, are unable to act by reason of absence, disability, or vacancy in office.
Section 7(d), Department of Housing and Urban Development Act, 42 U.S.C. 3535(d).
Food and Drug Administration, HHS.
Proposed rule.
The Food and Drug Administration (FDA) is proposing to classify in vitro diagnostic devices for
Submit either electronic or written comments by February 6, 2012. See section IV of this document for the proposed effective date of a final rule based on this proposed rule.
You may submit comments, identified with the FDA docket number found in brackets in the heading of this document, by any of the following methods:
Submit electronic comments in the following way:
• Federal eRulemaking Portal:
Submit written submissions in the following ways:
• FAX: (301) 827-6870.
• Mail/Hand delivery/Courier (For paper, disk, or CD-ROM submissions): Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852.
Beena Puri, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, rm. 5553, Silver Spring, MD 20993-0002, (301) 796-6202.
The Federal Food, Drug, and Cosmetic Act (the FD&C Act) (21 U.S.C. 301
Under section 513 of the FD&C Act, FDA refers to devices that were in commercial distribution before May 28, 1976 (the date of enactment of the 1976 amendments), as “preamendments devices.” FDA classifies a device after it: (1) Receives a recommendation from a device classification panel (an FDA advisory committee); (2) publishes the panel's recommendation for comment, along with a proposed regulation classifying the device; and (3) publishes a final regulation classifying the device type (see section 513(d) of the FD&C Act). FDA has classified most preamendments devices under these procedures.
FDA refers to devices that were not in commercial distribution before May 28, 1976, as “postamendments devices.” These devices are classified automatically by statute (section 513(f) of the FD&C Act) into class III without any FDA rulemaking process. Those devices remain in class III and require premarket approval, unless and until: (1) FDA reclassifies the device into class I or II; (2) FDA issues an order classifying the device into class I or II in accordance with section 513(f)(2) of the FD&C Act, as amended by the FDAMA; or (3) FDA issues an order finding the device to be substantially equivalent, under section 513(i) of the FD&C Act, to a predicate device that does not require premarket approval. The Agency determines whether new devices are substantially equivalent to previously offered devices by means of premarket notification procedures in section 510(k) of the FD&C Act (21 U.S.C. 360(k)) and 21 CFR part 807 of the regulations.
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 until FDA promulgates a final regulation under section 515(b) of the FD&C Act (21 U.S.C. 360e(b)) requiring premarket approval.
Consistent with the FD&C Act and the regulations, FDA consulted with the panel, regarding the classification of this device.
After the enactment of the Medical Device Amendments of 1976, FDA undertook to identify and classify all preamendments devices, in accordance with section 513(b) of the FD&C Act. However, in vitro diagnostic devices for
Consistent with the FD&C Act and the regulations, FDA held a panel meeting on March 7, 2002, regarding the classification of the preamendments in vitro diagnostic devices for
At a public meeting held on March 7, 2002, the panel recommended that in vitro diagnostic devices for
FDA is proposing the following identification based on the panel's recommendation and the available information. An in vitro diagnostic device for
The panel recommended that in vitro diagnostic devices for
The panel considered information from the literature presented by FDA (Refs. 2 to 7), information presented at the meeting by representatives from the United States Army Medical Research Institute for Infectious Diseases who shared the historical perspective on their institution's use of devices for the detection of
Evidence presented to the panel addressed how the preamendments devices of this type work and some of their limitations. Bacteriophage tests are used for differentiating
The panel discussed considerations about use of these devices, including the training, experience, and facilities necessary for safe handling of test materials and specimens, and for appropriate test execution and interpretation of test results. They also discussed the desirability of coordination by public health Agencies, including the Centers for Disease Control and Prevention, to ensure that appropriate performance standards and use guidelines are developed for these tests and to encourage that test results be reported to public health authorities.
The panel recommended that in vitro diagnostic devices for
Based on the panel's discussion and recommendations, and FDA's experience with these devices, we believe the following are risks to health associated with the use of the device type.
Failure of in vitro diagnostic devices for
A false-positive result may lead to a medical decision causing a patient to undergo unnecessary or ineffective treatment, as well as inaccurate epidemiological information on the presence of plague disease in a community. A false-negative result may lead to delayed recognition by the physician of the presence or progression of disease and inaccurate epidemiological information to control and prevent additional infections. A false-negative result could potentially delay diagnosis and treatment of infection caused by
Additionally, exposure to organisms potentially present in test specimens and those used as control materials poses a risk of infection of
Based on the panel's discussion and recommendations, FDA believes that, in addition to general controls, the proposed special controls discussed in this document are adequate to address the risks to health.
FDA believes that the draft guidance document entitled “Class II Special Controls Guidance Document: In Vitro Diagnostic Devices for
In addition, FDA proposes as a special control that distribution of these devices be limited to laboratories with experienced personnel who have training in principles and use of microbiological culture identification methods and infectious disease diagnostics, and with appropriate biosafety equipment and containment. As noted, the panel was concerned about improper use of these devices and recommended that these devices be used only by personnel sufficiently skilled to maximize their performance and to appropriately interpret and make use of test results. FDA believes that this proposed distribution limitation will appropriately help assure the safe and effective use of these devices and that it is consistent with the intent of the panel in its discussion of limitations on the use of the devices and on monitoring of test results.
FDA agrees with the panel's recommendation that in vitro diagnostic devices for
FDA proposes that any final regulation based on this proposal become effective 30 days after its date of publication in the
The Agency has determined that under 21 CFR 25.34(b) this classification 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 proposed 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 Orders 12866 and 13563 direct 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 proposed rule is not a significant regulatory action as defined by the Executive Order 12866.
The Regulatory Flexibility Act requires Agencies to analyze regulatory options that would minimize any significant impact of a rule on small entities. Because this proposed rule would create no new burdens, the Agency proposes to certify 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 $136 million, using the most current (2010) Implicit Price Deflator for the Gross Domestic Product. FDA does not expect this proposed rule to result in any 1-year expenditure that would meet or exceed this amount.
In vitro diagnostic devices used to identify and differentiate among
Market failure can occur when market participants lack important information or when they possess incorrect information. Because this device lacks a
Plague has been endemic in the continental United States since at least 1900. The United States averaged 18 cases of plague per year in the 1980s and 9 cases per year since 1990. In 2006, a total of 13 human plague cases were reported among residents of four states. This is the largest number of cases reported in a single year in the United States since 1994. Two of the 13 cases were fatal.
Those infected with plague are likely to survive if they are treated with antibiotics soon after the symptoms appear. Treatment generally consists of taking antibiotics for at least 7 days. Without treatment, mortality is 60 percent for bubonic plague and 100 percent for pneumonic and septicemic plague. The primary public health issue associated with plague, however, would be its potential use in warfare or in an act of terrorism, where hundreds or thousands of individuals could be infected. Effective treatment would require rapid diagnosis, the timely administration of antibiotics, and public health measures to minimize the risk of further infection.
In the event of a potential massive plague outbreak, one would want to be able to test for
The Microbiology Devices Panel met March 7, 2002, to recommend a classification for in vitro diagnostic products for the identification of
In vitro diagnostic devices for
Through this proposal, FDA intends to follow the recommendations of the 2002 Microbiology Devices Panel. This proposed rule would place devices used for the in vitro identification of
In addition to the general controls, FDA would require special controls in the form of a guidance document that would include recommendations for the types of information that should be included in premarket submissions and restrictions on device distribution. The guidance document would include a section on performance characteristics, describing studies to demonstrate appropriate device performance, and a section on labeling that would include device intended use, instructions for use of the device, precautions, and the interpretation and reporting of test results. The special controls would also include the restricted distribution of these devices. Under these special controls, the device would be limited to laboratories with experienced personnel who have training in principles and use of microbiological culture identification methods and infectious disease diagnostics, and with appropriate biosafety equipment and containment. These specific special controls are needed because of the public health issues associated with
Erroneous test results when testing for
FDA intends to address risks to public health not adequately controlled by general controls through special controls. The device description section of the special controls guidance
This proposed rule would not create any additional burdens or directly result in significant benefits. Both current practice and this proposed rule are applications of the recommendations of the 2002 Microbiology Devices Advisory Panel. The requirements associated with class II and the chosen special controls do not change the requirements FDA imposes on manufactures. Indirectly, however, the classification of this device and publication of the special controls would benefit both manufacturers and FDA. Manufacturers would benefit from published regulatory requirements in that they would know the burdens associated with entering this market before starting the premarket notification process, and they would submit premarket notification submissions containing the appropriate information. Improved knowledge of the submission requirements would reduce the need for consultation with FDA during the clearance process to facilitate FDA review and accelerate product availability. Classification of this device and publication of the requirements would also reduce FDA resources consumed in these consultations and improve premarket review consistency.
The Regulatory Flexibility Act requires Agencies to analyze regulatory options that would minimize any significant impact of a rule on small entities. Because this proposed rule would impose no new burdens, the Agency proposes to certify that this proposed rule would not have a significant economic impact on a substantial number of small entities.
FDA has analyzed this proposed 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 from or in addition to” certain federal requirements applicable to devices. 21 U.S.C. 360k; See
FDA tentatively concludes that this proposed rule contains no collection of information. Therefore, clearance by the Office of Management and Budget under the Paperwork Reduction Act of 1995 is not required. FDA also concludes that the special controls guidance document identified by this rule refers to previously approved collections of information found in FDA regulations. Elsewhere in this issue of the
Interested persons may submit to the Division of Dockets Management (see
The following references have been placed on display in the Division of Dockets Management (see
Biologics, Laboratories, Medical devices.
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:
1. The authority citation for 21 CFR part 866 continues to read as follows:
21 U.S.C. 351, 360, 360c, 360e, 360j, 371.
2. Section 866.3945 is added to subpart D to read as follows:
(a)
(b)
(1) “Class II Special Controls Guidance Document: In Vitro Diagnostic Devices for
(2) Distribution is limited to laboratories with experienced personnel who have training in principles and use of microbiological culture identification methods and infectious disease diagnostics, and with appropriate biosafety equipment and containment.
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is announcing the availability of a draft guidance entitled “Class II Special Controls Guidance Document: In Vitro Diagnostic Devices for
Although you can comment on any guidance at any time (see 21 CFR 10.115 (g)(5)), to ensure that the Agency considers your comment on this draft guidance before it begins work on the final version of the guidance, submit either electronic or written comments on the draft guidance by February 6, 2012.
Submit written requests for single copies of the draft guidance document entitled “Class II Special Controls Guidance Document: In Vitro Diagnostic Devices for
Submit electronic comments on the draft guidance to
Beena Puri, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave. Bldg. 66, Rm. 5553, Silver Spring, MD 20993-0002, (301) 796-6202.
Elsewhere in this issue of the
This draft guidance document identifies the proposed classification regulation, the product code, identifies issues of safety and effectiveness that require special controls, and proposes distribution limitations. FDA believes that the special controls described in the draft guidance when combined with the general controls will be sufficient to provide reasonable assurance of the safety and effectiveness of these devices.
This draft guidance is being issued consistent with FDA's good guidance practices regulation (21 CFR 10.115). The draft guidance, when finalized will represent the Agency's current thinking on in vitro diagnostic devices for
Persons interested in obtaining a copy of the draft guidance may do so by using the Internet. A search capability for all CDRH guidance documents is available at
This draft guidance refers to previously approved collections of information found in FDA regulations. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (the PRA) (44 U.S.C. 3501-3520). The collections of information in 21 CFR part 807, subpart E have been approved under OMB control number 0910-0120, and the collections of information in 21 CFR part 801 and 21 CFR 809.10 have been approved under OMB control number 0910-0485.
The labeling requirement listed in sections 5 and 8; Intended Use, is not subject to review under the PRA because it is a public disclosure of information originally supplied by the Federal Government to the recipient for the purpose of disclosure to the public (5 CFR 1320.3(c)(2) and 21 CFR 1040.10(g)).
Interested persons may submit to the Division of Dockets Management (see
Office of the Secretary, HUD.
Final rule.
On July 5, 2011, HUD published a proposed rule to revise and update HUD's regulations governing the procedures for the collection of claims by HUD. The rule proposed to revise HUD's debt collection regulations to implement the Debt Collection Improvement Act of 1996 and the revised Federal Claims Collection Standards. The DCIA and FCCS generally apply to the collection of nontax debt owed to the Federal Government and require referral of all eligible delinquent nontax debt to the Department of the Treasury for collection by centralized offset and to a designated debt collection center for debt servicing when a debt becomes 180 days delinquent. The rule also proposed to update and make technical corrections to HUD's salary offset provisions to conform to the changes made to HUD's debt collection regulations. HUD is adopting the proposed rule without change. HUD did not receive any public comments on the proposed rule.
Scott Moore, Financial Operations Analyst, Financial Policy and Procedures Division, Office of the Chief Financial Officer, Department of Housing and Urban Development, 451 7th Street SW., Room 3210, Washington, DC 20410; telephone number (202) 402-2277 (this is not a toll-free number). Persons with hearing or speech impairments may access this number via TTY by calling the toll-free Federal Relay Service at 1-(800) 877-8339.
The Debt Collection Improvement Act of 1996 (DCIA), Public Law 104-134, 110 Stat. 1321, 1358 (approved April 26, 1996) (codified in scattered sections of 31 U.S.C. ch. 37), consolidated within the Department of the Treasury responsibility for the collection of most delinquent nontax debts owed to the Federal Government. The DCIA is implemented through the Treasury's regulations promulgated at 31 CFR part 285 and the revised Federal Claims Collection Standards (FCCS), issued jointly by the Secretary of the Treasury and the Attorney General, which are codified at 31 CFR parts 900 through 904.
The DCIA and FCCS establish a framework for improved Federal Governmentwide debt collection by centralizing the management of debts that are over 180 days delinquent within the Department of the Treasury and by providing Federal agencies with more effective debt collection tools, including recovery through centralized administrative offsets and administrative wage garnishments.
On July 5, 2011, at 76 FR 39222, HUD published a proposed rule regarding the Treasury Offset Program (TOP), which is a centralized debt collection program that matches information about delinquent debts with information about payments being disbursed by Federal and state disbursing officials, including the Department of the Treasury, the Department of Defense, and U.S. Postal Service payment files. When a match between an eligible payment and an eligible debt occurs, the payment is offset and applied to the debt, up to the amount of the debt or up to the maximum amount allowed by law. As part of this streamlining effort, this rule eliminates provisions in HUD regulations that no longer conform to the DCIA and FCCS, or that simply repeat requirements under the DCIA and FCCS.
For further information on specific changes that HUD proposed to make to its regulations governing the procedures for the collection of claims by HUD please see the preamble to HUD's July 5, 2011, proposed rule (76 FR 39222).
This final rule follows publication of the July 5, 2011, proposed rule. The comment period for the proposed rule closed on September 6, 2011. HUD did not receive any public comments on the proposed rule, and HUD is adopting as final the July 5, 2011, proposed rule without change.
This rule does not direct, provide for assistance or loan and mortgage insurance for, or otherwise govern or regulate, real property acquisition, disposition, leasing, rehabilitation, alteration, demolition, or new construction; or establish, revise, or provide for standards for construction or construction materials, manufactured housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this rule is categorically excluded from environmental review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321).
The Regulatory Flexibility Act (RFA) (5 U.S.C. 601
Executive Order 13132 (entitled “Federalism”) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial direct compliance costs on state and local governments and is not required by statute, or the rule preempts state law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. This rule does not have federalism implications and does not impose substantial direct compliance costs on state and local governments nor preempts state law within the meaning of the Executive Order.
Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) (UMRA) establishes requirements for Federal agencies to assess the effects of their regulatory actions on state, local, and tribal governments and the private sector. This rule will not impose any Federal mandates on any state, local, or tribal governments or the private sector within the meaning of UMRA.
Administrative practice and procedure, Claims, Government employees, Income taxes, Wages.
Accordingly, for the reasons described in the preamble, this rule amends 24 CFR part 17 as follows.
5 U.S.C. 5514; 31 U.S.C. 3701, 3711, 3716-3720E; and 42 U.S.C. 3535(d).
(a)
(b)
(i) Debts incurred by contractors under contracts for supplies and services awarded by HUD under the authority of subpart 32.6 of the Federal Acquisition Regulation (FAR);
(ii) Debts arising out of the business operations of the Government National Mortgage Association; and
(iii) Debts arising under Title I or section 204(g) of Title II of the National Housing Act (12 U.S.C. 1701
(2) This subpart is not applicable to tax debts or to any debt for which there is an indication of fraud or misrepresentation, unless the debt is returned by the Department of Justice to HUD for handling.
(c)
As used in this subpart:
HUD will make written demand upon the debtor pursuant to the requirements of 31 CFR 901.2 and send written notice of intent to offset to the debtor pursuant to the requirements of 31 CFR 901.3 and 31 CFR part 285, subpart A. The Secretary shall mail the demand and notice of intent to offset to the debtor, at the most current address that is available to the Secretary. HUD may refer the debt to the Treasury for collection and shall request that the amount of the debt be offset against any amount payable by the Treasury as a Federal payment, at any time after 60 days from the date such notice is sent to the debtor.
(a)
(b)
(a)
(b)
(c)
(1) An applicable statute authorizes or requires the Department to consider a waiver of the indebtedness and the waiver determination turns on credibility or veracity; or
(2) The question of indebtedness cannot be resolved by review of the documentary evidence.
(d)
The debtor shall file a request for a hearing with the OA at the address specified in the notice or at such other address as the OA may direct in writing to the debtor.
(a)
(b)
(c)
(a)
(b)
If the debtor timely submits evidence in accordance with § 17.69(b), the referral to the Treasury in § 17.65 shall be stayed until the date of the issuance of a written decision by an administrative judge of the OA that determines that a debt or part of a debt is past due and legally enforceable.
(a)
(1) Refer such contractor, grantee, or other participant to the Office of General Counsel for investigation of the matter and possible suspension or debarment pursuant to 2 CFR part 2424, 2 CFR 180.800, and 48 CFR subpart 9.4 of the Federal Acquisition Regulation (FAR); and
(2) In the case of matters involving fraud or suspected fraud, refer such contractor, grantee, or other participant to the Office of Inspector General for investigation. However, the failure to pay HUD within a reasonable time after demand is not a prerequisite for referral for fraud or suspected fraud.
(b)
(c)
(a)
(b)
(a) The provisions set forth in §§ 17.83 through 17.113 are the Department's procedures for the collection of delinquent nontax debts by salary offset of a Federal employee's pay to satisfy certain debts owed the government, including centralized salary offsets in accordance with 31 CFR part 285.
(b)(1) This section and §§ 17.85 through 17.99 apply to collections by the Secretary through salary offset from current employees of the Department and other agencies who owe debts to the Department; and
(2) This section, § 17.85, and §§ 17.101 through 17.113 apply to HUD's offset of pay to current employees of the Department and of other agencies who owe debts to HUD or other agencies under noncentralized salary offset procedures, in accordance with 5 CFR 550.1109.
(c) These regulations do not apply to debts or claims arising under the Internal Revenue Code of 1954 (26 U.S.C. 1-9602), the Social Security Act (42 U.S.C. 301-1397f), the tariff laws of the United States, or to any case where collection of a debt by salary offset is explicitly provided for or prohibited by another statute.
(d) These regulations identify the types of salary offset available to the Department, as well as certain rights provided to the employee, which include a written notice before deductions begin, the opportunity to petition for a hearing, receiving a written decision if a hearing is granted, and the opportunity to propose a repayment agreement in lieu of offset. These employee rights do not apply to any adjustment to pay arising out of an employee's election of coverage or a change in coverage under a Federal benefits program requiring periodic deductions from pay, if the amount to be recovered was accumulated over four pay periods or less.
(e) Nothing in these regulations precludes the compromise, suspension, or termination of collection actions where appropriate under the Department's regulations contained elsewhere in this subpart (see 24 CFR 17.61 through 17.79).
(f) As used in the salary offset provisions at §§ 17.83 through 17.113:
(i) An Executive department, military department, Government corporation, or independent establishment as defined in 5 U.S.C. 101, 102, 103, or 104, respectively;
(ii) The United States Postal Service; or
(iii) The Postal Regulatory Commission.
(i) Amounts owed by the individual to the United States;
(ii) Amounts withheld for Federal employment taxes;
(iii) Amounts properly withheld for Federal, state, or local income tax purposes, if the withholding of the amount is authorized or required by law and if amounts withheld are not greater than would be the case if the individual claimed all dependents to which he or she were entitled. The withholding of additional amounts under 26 U.S.C. 3402(i) may be permitted only when the individual presents evidence of tax obligation that supports the additional withholding;
(iv) Amounts deducted as health insurance premiums, including, but not limited to, amounts deducted from civil service annuities for Medicare where such deductions are requested by the Health Care Financing Administration;
(v) Amounts deducted as normal retirement contributions, not including amounts deducted for supplementary coverage. Amounts withheld as Survivor Benefit Plan or Retired Serviceman's Family Protection Plan payments are considered to be normal retirement contributions. Amounts voluntarily contributed toward additional civil service annuity benefits are considered to be supplementary;
(vi) Amounts deducted as normal life insurance premiums from salary or other remuneration for employment, not including amounts deducted for supplementary coverage. Both Servicemembers' Group Life Insurance and “Basic Life” Federal Employees' Group Life Insurance premiums are considered to be normal life insurance premiums; all optional Federal Employees' Group Life Insurance premiums and life insurance premiums paid for by allotment, such as National Service Life Insurance, are considered to be supplementary;
(vii) Amounts withheld from benefits payable under title II of the Social Security Act where the withholding is required by law;
(viii) Amounts mandatorily withheld for the U.S. Soldiers' and Airmen's Home; and
(ix) Fines and forfeitures ordered by a court-martial or by a commanding officer.
(a)
(b)
In determining that an employee is indebted to HUD, the Secretary will review the debt to make sure that it is valid and past due.
Except as provided in § 17.83(d), deductions will not be made unless the Secretary first provides the employee with a minimum of 30 calendar days written notice. This Notice of Intent to Offset Salary (Notice of Intent) will state:
(a) That the Secretary has reviewed the records relating to the claim and has determined that a debt is owed, the amount of the debt, and the facts giving rise to the debt;
(b) The Secretary's intention to collect the debt by means of deduction from the employee's current disposable pay account until the debt and all accumulated interest are paid in full;
(c) The amount, frequency, approximate beginning date, and duration of the intended deductions;
(d) An explanation of the Department's requirements concerning interest, penalties, and administrative costs, including a statement that such assessments must be made unless excused in accordance with the Federal Claims Collection Standards as provided in 31 CFR 901.9 (although this information may alternatively be provided in the demand notice pursuant to 24 CFR 17.65);
(e) The employee's right to inspect and copy Department records relating to the debt or, if the employee or his or her representative cannot personally inspect the records, to request and receive a copy of such records;
(f) The employee's right to enter into a written agreement with the Secretary for a repayment schedule differing from that proposed by the Secretary, so long as the terms of the repayment schedule proposed by the employee are agreeable to the Secretary;
(g) The right to a hearing, conducted in accordance with subpart A of part 26 of this chapter by an administrative law judge of the Department or a hearing official of another agency, on the Secretary's determination of the debt, the amount of the debt, or percentage of disposable pay to be deducted each pay period, so long as a petition is filed by the employee as prescribed by the Secretary;
(h) That the timely filing of a petition for hearing will stay the collection proceedings (See § 17.91);
(i) That a final decision on the hearing will be issued at the earliest practical date, but not later than 60 calendar days after the filing of the petition requesting the hearing, unless the employee requests and the hearing officer grants a delay in the proceedings;
(j) That any knowingly false or frivolous statements, representations, or evidence may subject the employee to:
(1) Disciplinary procedures appropriate under 5 U.S.C. Ch. 75, 5 CFR part 752, or any other applicable statutes or regulations;
(2) Penalties under the False Claims Act, 31 U.S.C. 3729-3731, or any other applicable statutory authority; or
(3) Criminal penalties under 18 U.S.C. 286, 287, 1001, and 1002 or any other applicable statutory authority.
(k) Any other rights and remedies available to the employee under statutes or regulations governing the program for which the collection is being made;
(l) Unless there are applicable contractual or statutory provisions to the contrary, that amounts paid on or deducted for the debt which are later waived or found not owed to the United States will be promptly refunded to the employee; and
(m) The method and time period for requesting a hearing, including the address of the Office of Appeals to which the request must be sent.
(a) Except as provided in paragraph (d) of this section, an employee must file a petition for a hearing that is received by the Office of Appeals not later than 20 calendar days from the date of the Department's notice described in § 17.89 if an employee wants a hearing concerning—
(1) The existence or amount of the debt; or
(2) The Secretary's proposed offset schedule.
(b) The petition must be signed by the employee, must include a copy of HUD's Notice of Intent to Offset Salary, and should admit or deny the existence of or the amount of the debt, or any part of the debt, briefly setting forth any basis for a denial. If the employee objects to the percentage of disposable pay to be deducted from each check, the petition should state the objection and the reasons for it. The petition should identify and explain with reasonable specificity and brevity the facts, evidence, and witnesses that the employee believes support his or her position.
(c) Upon receipt of the petition, the Office of Appeals will send the employee a copy of the Salary Offset Hearing Procedures Manual of the Department of Housing and Urban Development.
(d) If the employee files a petition for hearing later than the 20 calendar days as described in paragraph (a) of this section, the hearing officer may accept the request if the employee can show that the delay was because of circumstances beyond his or her control or because of failure to receive notice of the filing deadline (unless the employee has actual notice of the filing deadline).
An employee waives the right to a hearing, and will have his or her disposable pay offset in accordance with the Secretary's offset schedule, if the employee:
(a) Fails to file a petition for a hearing as prescribed in § 17.91; or
(b) Is scheduled to appear and fails to appear at the hearing.
Written decisions provided after a request for a hearing will include:
(a) A statement of the facts presented to support the nature and origin of the alleged debt;
(b) The hearing officer's analysis, findings, and conclusions, in light of the hearing, concerning the employee's or the Department's grounds;
(c) The amount and validity of the alleged debt; and
(d) The repayment schedule, if applicable.
(a)
(b)
(a)
(b)
(a) Deductions to liquidate an employee's debt will be by the method and in the amount stated in the Secretary's Notice of Intent to collect from the employee's current pay.
(b) If the employee filed a petition for hearing with the Secretary before the expiration of the period provided for in § 17.91, then deductions will begin after:
(1) The hearing officer has provided the employee with a hearing; and
(2) The hearing officer has issued a final written decision in favor of the Secretary.
(c) If an employee retires or resigns before collection of the amount of the indebtedness is completed, the remaining indebtedness will be collected according to the procedures for the collection of claims under §§ 17.61 through 17.79.
A debt will be collected in a lump sum or in installments. Collection will be by lump-sum collection unless the debt is for other than travel advances and training expenses, and the employee is financially unable to pay in one lump sum, or the amount of the debt exceeds 15 percent of disposable pay. In these cases, deduction will be by installments.
(a)
(b)
(c)
Interest will be charged in accordance with the Federal Claims Collection Standards as provided in 31 CFR 901.9.
So long as there are no statutory or contractual provisions to the contrary, no employee involuntary payment (of all or a portion of a debt) collected under these regulations will be interpreted as a waiver of any rights that the employee may have under 5 U.S.C. 5514 or any other provision of contract or law.
The Department will refund promptly to the appropriate individual amounts offset under these regulations when:
(a) A debt is waived or otherwise found not owing the United States (unless expressly prohibited by statute or regulation); or
(b) The Department is directed by an administrative or judicial order to refund amounts deducted from the employee's current pay.
The employee shall file a request for a hearing with the Clerk, OA, 409 3rd Street SW., 2nd Floor, Washington, DC 20024, on official work days between the hours of 8:45 a.m. and 5:15 p.m. (or such other address as HUD may provide by notice from time to time). All other correspondence shall be submitted to the Departmental Claims Officer, Office of the Chief Financial Officer, Department of Housing and Urban Development, 451 Seventh Street SW., Washington, DC 20410 (or such other officer or address as HUD may provide by notice from time to time). Documents may be filed by personal delivery or mail.
Environmental Protection Agency (EPA).
Final rule.
The EPA is making a finding that the coal-fired Portland Generating Station (Portland), owned and operated by GenOn REMA LLC (GenOn), in Upper Mount Bethel Township, Northampton County, Pennsylvania, is emitting air pollutants in violation of the interstate transport provisions of the Clean Air Act (CAA or Act). Specifically, the EPA finds that emissions of sulfur dioxide (SO
This final rule is effective on January 6, 2012.
The EPA has established a docket for this action under Docket ID No. EPA-HQ-OAR-2011-0081. All documents in the docket are listed on the
Mr. Todd Hawes (919) 541-5591,
Section 126(b) of the CAA provides, among other things, that any state or political subdivision may petition the Administrator of the EPA to find that any major source or group of stationary sources in upwind states emits or would emit any air pollutant in violation of the prohibition of section 110(a)(2)(D)(i),
The following is a summary of the significant changes made since proposal. Each of these changes is discussed later in this notice, and, where noted, additional information is provided in other supporting documentation in the docket for this rulemaking. The first change is that the final compliance remedy now includes a heat input-based SO
Second, the interim emission rate limits, proposed as 2,910 lb/hr for unit 1 and 4,450 lb/hr for unit 2, and having a compliance date of no later than 1 year from the effective date of this rule, are now expressed as a single limit for units 1 and 2 combined, and may not exceed 6,253 lb/hr. The 1-year compliance timeframe remains unchanged. This change to the limit is partly in response to comments (including those from GenOn) in support of greater operational flexibility, and acknowledges that the interim limit need not be unit specific. It is also based on the availability of lower sulfur coal than the coal Portland is currently using. Additional details are provided in section VI.C.
Third, in response to comments that the proposed deadlines for submitting a modeling protocol and modeling analysis were too short, the deadline for submitting the modeling protocol is changed to six months after the effective date of this rule, and the requirement to submit a modeling analysis is changed to 12 months after the effective date of this rule. This will allow Portland more time for planning its modeling analysis but does not change the compliance time frames for meeting the emission limits.
Additionally, in response to comments suggesting the plant needed more than 90 days to determine a method of compliance, the final rule gives Portland 12 months from the effective date to indicate how it intends to achieve full compliance. The EPA agrees that the plant may need 12 months to identify the specific engineering and technology decisions to determine how to reach compliance within 3 years. Accordingly, we are eliminating the proposed requirement for Portland to notify the EPA, within 90 days from the effective date of this rule, whether the plant will continue to operate and comply with the emission limits and compliance schedules, or cease operations. The modeling protocol and the initial semi-annual progress report, due 6 months after the effective date of this rule, will appropriately inform Portland's plans for continuing operation. Finally, the EPA is not requiring separate compliance schedules and analyses should Portland decide to permanently cease operation of unit 1 and unit 2 as a means of compliance. The final and interim emission limits and compliance schedules are appropriate regardless of how Portland ultimately decides to meet them. Thus, we decided it was not necessary, as proposed, to include a separate schedule specifically for a compliance approach based on shutting down.
The statutory authority for this action is provided by the CAA, as amended, 42 U.S.C. 7401
Section 110(a)(2)(D) of the CAA, often referred to as the “good neighbor” or “interstate transport” provision of the Act, addresses interstate transport of air pollution. Under section 110(a)(2)(D)(i), emissions in one state that contribute significantly to nonattainment in, or interfere with maintenance of a NAAQS
Several commenters asserted that the EPA cannot, or should not, make such a section 126 finding at this time, but can only make such a finding after the state has submitted what is usually referred to as its “interstate transport” or section 110(a)(2)(D) State Implementation Plan (SIP). For the recently promulgated 1-hour SO
The EPA has consistently interpreted the language in section 126 as referring to a functional prohibition on emissions. This interpretation is supported by the plain language of the statute, the statutory structure, and the legislative history. Further, the EPA notes that the statute does not exempt, for any period of time, violations of the prohibition from scrutiny under section 126. For these reasons, the EPA believes its interpretation is compelled by the statutory language. Nonetheless, to the extent that the statutory language is ambiguous, the EPA's reasonable interpretation of this language is to be accorded deference.
The EPA interprets the language in section 126 as referring to the actual functional prohibition of section 110(a)(2)(D)(i) that bars impermissible interstate transport. The EPA does not agree with the position taken by some commenters that the language refers only to an emissions limitation contained in a state's section 110(a)(2)(D) SIP. Further, there is nothing in the statute to support the argument that the prohibition on emissions does not arise until after the SIP submission deadline, or that a violation of the functional prohibition cannot occur before that deadline. Where the EPA finds such a violation exists, it must, under section 126, issue emission limits and compliance schedules to permit continued operation of the source.
The EPA's interpretation of section 126 acknowledges that Congress created two independent statutory tools—section 110(a)(2)(D)(i) and section 126—to address the problem of interstate pollution transport. The purpose of each provision is to control upwind emissions that contribute significantly to downwind states' nonattainment or maintenance problems. The two provisions differ in that one relies on state regulation and the other relies on federal regulation. Congress provided both provisions without indicating any preference for one over the other, suggesting it viewed either approach as a legitimate means to produce the desired result. Instead, the statutory language creates two independent tools to address the problem. Section 110(a)(2)(D)(i) establishes an obligation for all states to address emissions within the state significantly contributing to downwind air quality problems or interfering with certain regulatory provisions in downwind states. Section 126 establishes a procedure for a state, or political subdivision, to petition the EPA to take federal action to address transported emissions from an identified source or group of sources in another state. The two provisions are independent, and nothing in the statute suggests that one is intended to limit the other.
In general, statutes are to be interpreted in a way that gives meaning to each section. The EPA's interpretation of section 126 is consistent with this general rule in that it gives section 126 a purpose independent of the other remedies available under the CAA. In contrast, if section 126 were interpreted as referring only to a prohibition contained in a SIP, the section would not have any practical utility in the statutory scheme. The EPA's interpretation of the relationship between sections 126 and 110 is supported by the legislative history of the amendments to the CAA which added section 126. In adopting the section 126 remedies, Congress explained that the petition process was intended to provide an avenue for relief separate from the 110(a)(2)(D) SIP procedure and that it was intended to expedite, not delay, resolution of interstate pollution conflicts.
The EPA's interpretation of the “prohibition” referred to in section 126 is also consistent with the language of section 110(a)(2)(D)(ii), which requires states to include in their SIPs provisions necessary to ensure compliance with sections 126 and 115 of the CAA, which relate to interstate transport and international transport of pollution, respectively. States are required to submit to the EPA such SIPs no later than 3 years after promulgation of a new or revised NAAQS. 42 U.S.C. 7410(a)(1). Thus, pursuant to section 110(a)(2)(D)(ii), any emission limits and compliance schedules issued by the Administrator under section 126 prior to that deadline must be incorporated into the section 110(a)(2)(D) SIP submission for the state in which a source subject to such limits is located. Accordingly, the statute anticipates that the Administrator may address a section 126 petition prior to the deadline for the initial submission of a section 110(a)(2)(D) SIP.
If Congress had intended to limit the EPA's authority to act on section 126 petitions until after the deadline for states to submit 110(a)(2)(D) SIPs, it could have included such a restriction. However, the plain language of the statute does not clearly require this interpretation. Rather, the statute requires the EPA to address a section 126 petition within 60 days after receipt.
The EPA's interpretation of sections 110 and 126 in this context is also reasonable as it is consistent with the EPA's interpretation of these sections in two rulemakings issued in May 1999 and January 2000 which concluded that each section of the Act provides an alternative avenue for relief. Findings of Significant Contribution and Rulemaking on Section 126 Petitions for Purposes of Reducing Interstate Ozone Transport, 64 FR 28250 (May 25, 1999); Findings of Significant Contribution and Rulemaking on Section 126 Petitions for Purposes of Reducing Interstate Ozone Transport, 65 FR 2674 (Jan. 18, 2000). NJDEP has, in this case, sought relief via section 126 from the interstate transport of pollution that is significantly
The commenters primarily argue that this interpretation is compelled because a section 126 petition may only be filed to complain of a violation of a section 110(a)(2)(D) SIP where a state has failed to adequately enforce its own plan. Accordingly, the commenters argue that there is no prohibition of transport emissions absent an approved SIP. The operative language in section 126 is that a petition may be granted where there is “a violation of the prohibition of” section 110(a)(2)(D)(i). The commenters argue that “prohibition” referred to in section 126 is not on the act of emitting or contributing to transboundary nonattainment. Rather, the commenters assert, the prohibition is against emitting at levels that violate the limits imposed by the SIP regulations promulgated in response to the requirements of the CAA.
Some of these commenters also suggest that a section 126 petition would be justified where a state fails to meet its SIP revision obligations under section 110(a)(2)(D). These commenters therefore argue that a section 126 petition may not be filed until the state fails to meet its deadline to file a SIP addressing its transport obligations with respect to the new or revised NAAQS.
Moreover, the plain language of the statute does not clearly define “prohibition” to mean a SIP provision that sets emissions limits to address transboundary air pollution. Rather, the EPA believes that the better interpretation, in light of the structure of the CAA and its legislative history, is that the “prohibition” referred to in section 126 is the actual, functional prohibition on transboundary air pollution contained in section 110(a)(2)(D)(i).
The commenters' interpretation of the “prohibition” referred to in section 126 would render the relief provided by a section 126 petition process essentially meaningless. If a source is emitting in violation of an emission limitation in a SIP, there is no question that the source is in violation of the SIP. The language in section 126 stating that “it shall be a violation of * * * the applicable implementation plan” for a source to emit in violation of the prohibition of section 110(a)(2)(D) serves no legal purpose where the source is already directly violating a SIP requirement. By contrast, under the EPA's interpretation, section 126 deems a source's emissions to be a violation of the applicable SIP (as well as of section 126) whenever the emissions significantly contribute to nonattainment downwind or interferes with maintenance of any NAAQS. This interpretation gives legal effect to the language in section 126 and is consistent with Congress' purpose of providing a tool for downwind states and the EPA to use to impel upwind sources to reduce transported emissions even where a SIP may not yet directly regulate such emissions.
Moreover, the EPA's interpretation of section 126 gives it a purpose independent of the other remedies available under the CAA. Under section 113, upon finding that any person is in violation of any requirement of an approved SIP, the EPA has the authority to enforce the requirement by issuing an order to comply, issuing an administrative penalty order, or bringing a civil action. In addition, any person (which includes states) may bring a citizen suit against any person in violation of any requirement of an approved SIP, independent of the EPA action. Section 304(a), (f);
The EPA's interpretation of the relationship between sections 126 and 110 is expressly supported by the legislative history of the CAA. In adopting the section 126 remedies, Congress explained that the petition process was intended to provide an avenue for relief separate from the section 110(a)(2)(D) SIP procedure:
This petition process is intended to expedite, not delay, resolution of interstate pollution conflicts. Thus, it should not be viewed as an administrative remedy which must be exhausted prior to bringing suit under section 304 of the act. Rather, the committee intends to create a second and entirely alternative method and basis for preventing and abating interstate pollution. The existing provision prohibiting any stationary source from causing or contributing to air pollution which interferes with timely attainment or maintenance or [sic] a national ambient air standard (or a prevention of significant deteriorating [sic] or visibility protection plan) in another state is retained. A new provision prohibiting any source from emitting any pollutant after the Administrator has made the requisite finding and granted the petition is an independent basis for controlling interstate air pollution.
Moreover, Congress recognized in adopting all of the interstate transport provisions in the CAA that the interstate pollution problem stems from inadequate limits on transported emissions, and not inadequate compliance with adequate SIP requirements. This characterization of the problem is supported by the numerous descriptions of the interstate pollution problem in the 1977 legislative histories, all of which explicitly or implicitly refer to the lack of upwind limitations and none of which mentions sources' violation of upwind SIP limits.
The interpretation that the EPA adopts here is also consistent with its historical interpretation of section 126. The EPA previously interpreted this section in two rulemakings issued in 1999 and 2000, wherein commenters challenged the EPA's authority, in light of a pending SIP call, to grant a number of section 126 petitions that sought to mitigate the transport of nitrogen oxides (NO
Both rulemakings were challenged in the DC Circuit in
1. The requirement that source operate no more than 3 years after finding of contribution to downwind nonattainment;
2. The fact that “relief does not depend upon any action by the upwind states, as is necessary for a SIP revision”; and
3. The fact that relief under section 126 is independent of the discretionary policy preferences of the EPA, as the agency is required to act upon a petition within 60 days.
Thus, the EPA believes that the commenters' interpretation of section 126 is unreasonable and inconsistent with the legislative history, the EPA's past interpretations, and court rulings upholding those interpretations. In particular, the commenters' interpretation would render the relief provided by the section 126 petition process duplicative and unnecessary. The EPA's interpretation, on the other hand, gives legal effect to the language in section 126 and is consistent with Congress' purpose of providing an independent tool for a downwind states and the EPA to use to impel upwind sources to reduce transported emissions. The EPA believes this matter is clearly resolved by reference to the terms of the provision itself, so that under the first step of the
Such a potential future effect on the regulatory environment cannot override the obligation that the EPA act on state petitions under section 126. We do not believe it would be reasonable to conclude that the EPA can take no action under an independent mandate of the statute to respond to petitions submitted by downwind states facing their own time constraints and pressures to meet air quality standards, just to preserve the relative attractiveness of a variety of options for control of SO
The court in
Finally, as explained in detail above, Congress intended sections 110 and 126 to operate as independent and alternate means to address transboundary pollution, and indicated no preference for one means of compelling compliance over the other. Thus, the EPA's action on this section 126 petition does not prioritize the control of interstate pollution over a state's control of intrastate pollution. Rather, it gives legal effect to section 126, consistent with the structure of the CAA and the legislative history, by providing a tool for downwind states to use to impel upwind sources to reduce transported emissions.
NJDEP's section 126 petition contained dispersion modeling results, based on both the CALPUFF
The EPA also modeled the emissions from Portland using the AERMOD dispersion model and determined that the modeled concentrations from Portland, when combined with the relatively low background concentrations, cause violations of the 1-hour SO
Model selection was one of the key issues that the EPA addressed in support of this rule given the critical role played by dispersion modeling both in relation to a finding under a section 126 petition that a source significantly contributes to nonattainment and/or interferes with maintenance of the 1-hour SO
The NJDEP acknowledged that AERMOD is the preferred model under the EPA's “Guideline on Air Quality Models,” published as Appendix W to 40 Code of Federal Regulations (CFR) Part 51, for near-field applications such as this, but suggested that the use of CALPUFF may be appropriate under the alternative model provisions in Section 3.2.2b of Appendix W. Section 3.2 of Appendix W lists three separate conditions under which an alternative model may be approved for use:
(1) If a demonstration can be made that the model produces concentration estimates equivalent to the estimates obtained using a preferred model;
(2) If a statistical performance evaluation has been conducted using measured air quality data and the results of that evaluation indicate the alternative model performs better for the given application than a comparable model in Appendix A of Appendix W; or
(3) If the preferred model is less appropriate for the specific application, or there is no preferred model.
The NJDEP modeling documentation suggested that NJDEP's use of the CALPUFF model in support of this petition was based on condition (2) of Section 3.2.2b, claiming to have shown that CALPUFF “performed better and produced predictions of greater accuracy than AERMOD” for this application. NJDEP also claimed that the use of CALPUFF is more appropriate for this specific application due to the complex winds addressed in Section 7.2.8 of Appendix W and is therefore justified under condition (3) of Section 3.2.2b.
The section 126 petition referenced a CALPUFF model validation study based on the Martin's Creek field study database, submitted by NJDEP with an earlier section 126 petition, as demonstrating that “CALPUFF performed better and produced predictions of greater accuracy than AERMOD” for this application.
At proposal, the EPA included a detailed assessment of the NJDEP CALPUFF validation study as Appendix A of the proposed rule Air Quality Modeling TSD, and concluded that NJDEP had not adequately justified the use of CALPUFF in this application under either conditions (2) or (3) of Section 3.2.2b of Appendix W. The EPA further asserted that AERMOD is the most appropriate model for this application. Our assessment of the CALPUFF validation study identified several aspects of NJDEP's validation methodology that deviated from the EPA's Protocol for Determining the Best Performing Model,
Another key component of the dispersion modeling analysis is the meteorological data. The EPA based the AERMOD modeling in support of the proposed rule on 1 year of Portland site-specific meteorological data available for July 1993 through June 1994. The site-specific meteorological data were collected from a 100-meter instrumented tower and Sound Detection and Ranging instrument (SODAR), located about 2.2 kilometers west of Portland. Based on a review of the data, we determined that the Portland meteorological data from 1993-94 meet the basic criteria for representativeness under Section 8.3.3 of Appendix W, and therefore can be considered as site-specific data for purposes of modeling impacts from the elevated stacks for Portland units 1 and 2. The 1993-94 data also meet the minimum criterion for the length of meteorological data record of at least 1 year of site-specific meteorological data recommended in Section 8.3.1.2 of Appendix W. However, the difference of about 100 meters in the base elevation for the meteorological tower versus the stack base elevation raised concerns regarding how the meteorological data were input to the AERMOD model in the NJDEP modeling analysis given that the stack heights for units 1 and 2 are about 122 meters and that plume heights of concern for units 1 and 2 are about 200 to 400 meters above stack base.
The AERMOD modeling submitted by NJDEP used the measurement heights above local ground at the tower location for the meteorological data input to the model, effectively assuming that the measured profiles of wind, temperature and turbulence are “terrain-following.” Without adjusting for the difference in base elevation of about 100 meters between the meteorological data and the stacks, wind speeds are likely to be biased high and the wind directions may not be representative of plume heights relative to stack base. A review of the raw meteorological data files for Portland also revealed the fact that σ
In the EPA AERMOD modeling analysis, thousands of receptors were placed in New Jersey to determine the area of maximum concentration from Portland's emissions in order to quantify Portland's significant contribution to nonattainment in New Jersey. A design value concentration was calculated for each receptor for comparison to the NAAQS. The design value concentration is equal to the 99th percentile (4th-highest) of the annual distribution of daily maximum 1-hour SO
The EPA proposed to define Portland's significant contribution to nonattainment and interference with maintenance as those emissions that must be eliminated to bring the downwind receptors in New Jersey affected by Portland into modeled attainment in the analysis year. While this approach would not be appropriate in every circumstance, the EPA believes it is appropriate where, as here, the source's emissions are sufficient on their own to cause downwind NAAQS violations and background levels of the relevant pollutant are relatively low. The EPA therefore developed a
To quantify the emissions that constitute Portland's significant contribution, the EPA identified the level of emissions that need to be reduced to ensure that no modeled concentration within the affected area (in New Jersey) exceeds the level of the NAAQS (
The EPA also analyzed the modeling results to determine the appropriate emissions reductions that were needed to eliminate “interfere with maintenance.” In addition to nonattainment receptors, the EPA also attempted to identify receptors that are modeled to be attainment but due to variability in meteorology or emissions might be at risk for nonattainment. Due to the high modeled concentrations from Portland's emissions, all of the downwind modeled receptors in the final modeled receptor grid in New Jersey are modeled to be nonattainment. In this application, it was not necessary to expand the modeling grid to identify additional nonattainment or “maintenance only” receptors because the modeling domain was focused on the receptors with the maximum impact from Portland. Therefore, the EPA did not identify any “maintenance only” receptors.
In the proposal, the EPA considered whether Portland should be required to make additional reductions, above and beyond those required to eliminate its significant contribution to nonattainment, to ensure that it does not interfere with maintenance of the 1-hour SO
1. There is only 1 year of site-specific meteorology available, such that we were not able to explicitly examine the impact of year-to-year variability of meteorology on downwind modeled concentrations.
2. The remedy modeling used maximum allowable emissions from Portland. Since these are the highest emissions that are allowed to be emitted by the facility, higher concentrations could not be expected to occur in New Jersey due to the variability of emission from Portland.
3. In the modeling analysis, we used background concentrations that varied by season and hour of day based on the 3-year average of the 99th percentile of the distribution of hourly SO
It was therefore reasonable to conclude, under the circumstances, that any remedy that eliminates the significant contribution to nonattainment from Portland also eliminates its interference with maintenance with respect to year-to-year variability in emissions and meteorology. The EPA therefore proposed to find that compliance by Portland with the proposed emission limits will bring it into compliance with the prohibition on emissions that significantly contribute to nonattainment of the 1-hour SO
We received many public comments related to the modeling that was used to support the finding that SO
Additional evidence supporting the EPA's determination that AERMOD is a more appropriate model for this application than CALPUFF was provided by an EPA analysis of high modeled SO
We also note that inclusion of the 30-meter turbulence data would have a negligible effect on the modeling results since the elevated plumes from Portland units 1 and 2 will be well above 30 meters such that transport and dispersion of the plumes will be determined by measurements at higher levels from the tower and SODAR. Therefore, the 30-meter turbulence data is only expected to influence the plumes in the rare cases where turbulence data were missing from the 100-meter level on the tower and from the SODAR. Due to the representativeness issues, we believe it would be inappropriate to rely on the 30-meter turbulence data in those cases.
Regarding the fact that the maximum 99th percentile 1-hour SO
Based on this review of comments submitted regarding the EPA adjustments to the Portland meteorological data and in light of additional evidence supporting the appropriateness of the adjustments based on model-to-monitor comparisons for the Columbia, New Jersey, ambient monitor, no changes relative to the proposal have been made to the meteorological data used in the EPA AERMOD modeling in support of this final action.
To further illustrate this point, the EPA performed an analysis of impacts from Portland based on 5 years of meteorological data from the Allentown National Weather Service (NWS) station for the period 2006 through 2010. This analysis shows that the range of variability between the individual year with the lowest modeled design value and the 5-year average modeled design value is about 6 percent. For comparison, using the same 5 years of meteorology data, the range of variability across the 5 years for a deterministic 1-hour standard was about 35 percent for the first highest 1-hour values and about 17 percent for the highest second-highest 1-hour values. More details regarding these analyses are provided in the final rule Modeling TSD.
We also note that variability in relation to interference with maintenance also encompasses variability in emissions. As noted above, the modeling conducted to determine the proposed remedy for Portland was based on maximum allowable emissions. Since these are the highest emissions that are allowed to be emitted by the facility, higher concentrations could not be expected to occur in New Jersey due to the variability of emissions from Portland. Furthermore, analysis of continuous emissions monitoring systems (CEMS) data for Portland indicates a much larger range of potential variability associated with emissions than was found for meteorological variability based on the analysis summarized above.
Regarding variability in relation to emissions from other sources of SO
Based on these considerations and supporting analyses using 5 years of NWS meteorological data, the EPA believes that the modeled design value based on the form of the 1-hour SO
There were no comments supporting emissions limits for the smaller sources (units 3, 4, 5, and an auxiliary boiler) in the final rule. In fact, in both the original section 126 petition modeling and additional modeling submitted as comments on the proposal, NJDEP only included emissions from Portland units 1 and 2. In the final rule, the EPA is setting emissions limits for units 1 and 2 only.
As noted above in the summary of the EPA modeling for the proposed rule, and explained in more detail in the proposed rule Air Quality Modeling TSD, the EPA used background concentrations that varied by season and hour-of-day based on the 3-year average of the 99th percentile of the distribution of hourly SO
As noted in the proposal, the Columbia air quality monitor in Warren County, New Jersey, is located approximately 1.2 miles (about 2 kilometers) northeast of Portland. The Columbia monitor has recorded concentrations over the 75 ppb 1-hour SO
The EPA also agrees that the modeling analysis submitted by NJDEP indicates good performance for AERMOD in representing the modeled concentrations at the Columbia monitor on the exceedance days in 2010. However, interpretation of the analysis is complicated by the fact that concurrent site-specific meteorology is not available during 2010 or 2011. The
The EPA continues to believe that the AERMOD modeling analysis provides a more appropriate technical basis for this petition than the modeling submitted based on the CALPUFF model, as explained in this notice and in more detail in the final rule Modeling TSD.
The EPA's review of the NJDEP AERMOD analysis supports a finding that SO
As part of the original petition, NJDEP also submitted a trajectory analysis of two particular episodes showing that elevated 1-hour SO
For the reasons discussed above, the EPA believes that the AERMOD analysis, submitted by NJDEP and modeled by the EPA, provides a reasonable basis for making a finding that emissions from Portland significantly contribute to nonattainment and interfere with maintenance in New Jersey and for quantifying the SO
In the proposed rule, the EPA conducted analyses to determine the emissions limits that would be necessary to permit Portland's continued operation under our section 126 finding. This section summarizes these analyses and discusses the comments and responses on the analyses, and our use of the analyses to establish the final remedy. It also discusses the selection of the appropriate time frame for the final remedy, as well as other issues that commenters raised concerning the final remedy. Continued operation of a major existing source subject to a section 126 finding is permitted only if the source complies with emission limits and compliance schedules established by the EPA to bring about compliance with the requirements in sections 110(a)(2)(D)(i) and 126 as expeditiously as practicable, but in no case later than 3 years after the effective date of the finding. Thus, to determine the appropriate remedy, the EPA must quantify the reductions necessary to eliminate Portland's significant contribution to nonattainment and interference with maintenance of the 1-hour SO
To calculate emissions reductions necessary to eliminate Portland's significant contribution to nonattainment and interference with maintenance of the 1-hour SO
The EPA AERMOD analysis used allowable SO
The location of maximum SO
In the proposed rule, the EPA calculated the emissions reduction needed to eliminate Portland's significant contribution to nonattainment based on the maximum modeled design value concentration in New Jersey. If the modeled concentration from Portland plus background is reduced to a level that is below the 1-hour SO
Based on the EPA modeling results, the EPA proposed that an 81 percent reduction in allowable SO
The EPA also evaluated the modeling results to determine if an emission limit could be set that combined the total emissions at units 1 and 2. In the proposal, the EPA determined that there are many different combinations of emissions limits for units 1 and 2 that could eliminate violations of the SO
In the final rule, the EPA will ensure that the NAAQS is protected (and therefore that significant contribution to nonattainment and interference with maintenance is eliminated) in two ways. First, in addition to the lb/hr emissions limit for each unit, we are finalizing a lb/mmBtu emissions limit to address modeled exceedances at reduced load. The lb/mmBtu limit is determined based on an equivalent lb/hr limit at 100 percent load for each unit. Meeting a lb/mmBtu will therefore have the effect of lowering the resulting lb/hr emissions rates at reduced loads. For example, emissions will be 25 percent lower than the lb/hr limit when operating at 75 percent load. This in turn will ensure that the NAAQS is protected at reduced loads. Modeling of emissions rates that are constrained by a lb/mmBtu limit shows that concentration impacts at reduced loads are always less than maximum concentrations at 100 percent load.
The second way that we are ensuring that the remedy will be protective of the
For this reason, based on the modeling analysis conducted by the EPA, we are not able to set a combined limit for the final remedy. (We discuss the separate question of a combined limit for the interim limit in section VII.) The final rule contains individual final limits that are specific to units 1 and 2. It is also clear from this simple analysis that any combined limit that would still be protective of the NAAQS across the full range of operating scenarios for units 1 and 2 and would necessarily be more restrictive than the 81 percent reduction on each of units 1 and 2. There are some combinations of emissions from units 1 and 2 which will be protective of the NAAQS and some that will not. The EPA is not able to model all possible combinations and then set a combined limit which is protective of the NAAQS in all cases. Should GenOn wish to have a higher limit at one of the units, in exchange for a lower limit at the other, or seek a combined limit that is protective of the NAAQS in all cases, there is an opportunity to petition the EPA for additional rulemaking to adopt alternative emissions limits, although we note that such rulemaking would require a notice and comment process. Further details are contained in section VII later.
The EPA modeled a scenario using allowable emissions from Portland with 1 year of site-specific meteorological data. The maximum modeled 1-hour SO
Therefore, we are finalizing an emissions limit based on an 81 percent reduction in allowable emissions at both units 1 and 2. This leads to a final SO
As discussed earlier in response to a comment, to account for operation at less than 100 percent load and/or changes in stack parameters, the EPA is also setting a lb/mmBtu emissions limit for units 1 and 2 in the final remedy. To determine the level, we calculated the lb/mmBtu value as the emissions rate that equates to the lb/hr limits for unit 1 and 2 when operating at full load. That is, for unit 1 the lb/mmBtu limit is calculated as the lb/hour limit of 1,105 lb/hour divided by the heat input capacity of 1,657.2 mmBtu/hr, which equates to 0.67 lb/mmBtu. For unit 2, the lb/hour limit of 1,691 lb/hour is divided by the heat input capacity
Compliance with the 0.67 lb/mmBtu limitation is determined on a 30 boiler operating day rolling average basis. A “rolling” average means that a new 30-day average can be determined on any day of operation. Similar to the proposed Mercury and Air Toxics Standards (MATS) rule, the EPA clarifies that only the hours on “boiler operating days” are included in the averaging, and the 30-day averaging “zero values” from non-operating days are not included. We use the same definition of “boiler operating day” as for the proposed MATS; that is, a 24-hour period between midnight and the following midnight during which any fuel is combusted in the units. The EPA recognizes that a 30-day averaging period for the lb/mmBtu limitation incorporates some variability, and that there will be hourly periods that exceed the 30-day average.
The EPA does not believe that these higher hourly values would lead to exceedances of the NAAQS for a number of reasons. First, at full or near-full load, compliance with the lb/hour limit will ensure emissions rates at or near 0.67 lb/mmBtu. Second, at significantly lower loads, Portland units 1 and 2 could emit at emissions rates somewhat greater than 0.67 lb/mmBtu and still meet the NAAQS. Accordingly, some variability within the 30-day averaging is accommodated, although the EPA expects the variability will be relatively small. For example, during 2010 the emission rate for Portland varied by only about 15 percent.
As a final check on the remedy, EPA ran AERMOD again with the above emissions limits on the Portland Plant's units 1 and 2 (and current allowable emissions from unit 5). At these emissions levels, all receptors in New Jersey had concentrations below the 1-hour SO
Section 126(c) initially makes it unlawful for any major existing source to operate more than 3 months after a section 126 finding has been made with respect to it; yet also gives the Administrator authority to permit continued operation under certain conditions. Specifically, the statute provides that the Administrator “may permit the continued operation” of such a source beyond the end of the 3 month period “if such source complies with such emission limitations and compliance schedules (including increments of progress) as may be provided by the Administrator to bring about compliance with the requirements contained in section 7410(a)(2)(D)(i) of this title or this section as expeditiously as practicable, but in no case later than 3 years after the date of such finding.” 72 U.S.C. 7426(c).
Section 126, however, does not give the Administrator unlimited discretion when establishing emission limitations and compliance schedules. Instead, the statute provides that the emission limitations and compliance schedules must bring about compliance with the requirements of section 110(a)(2)(D)(i) of the Act “as expeditiously as practicable” but in no case later than 3 years from the date of the finding. The use of the phrase “as expeditiously as practicable” allows for consideration of the time needed to implement a compliance option in setting a compliance schedule. However, the length of time needed to implement any given compliance option depends on the particular compliance option to be implemented. Furthermore, the EPA recognizes that in some instances a source may choose to cease operation as its method of compliance. In the proposed rule, the EPA requested comment on the meaning of as “expeditious as practicable” in this context.
The EPA proposed to allow continued operation of Portland beyond 3 months provided that the facility operates in compliance with final emission limits within 3 years and with interim emission limits and procedural increments of progress. In this section we discuss our response to comments on the appropriateness of a 3-year deadline for the final limits (
In the proposal, the EPA recognized both that the statute requires that any compliance schedule ensure compliance “as expeditiously as practicable” and also that, while the statute directs the EPA to establish emission limits and compliance schedules, it does not foreclose the EPA from allowing the source to select a compliance option. In the proposal, the EPA noted its desire to seek a balance between the statutory requirement of compliance “as expeditiously as practicable” and the goal of ensuring that the regulation does not unnecessarily limit the options available to the source to achieve compliance within the statutorily mandated time period. The EPA did not receive any comments specifically challenging the EPA's balanced approach to interpreting the statutory language. Accordingly, the EPA's final remedy in this rulemaking has been developed consistent with these goals.
The EPA also received a number of specific comments on technical feasibility issues and other issues
While the first option, switching to very lower sulfur coal such as Wyoming Powder River Basin (PRB) coal, may be a possibility for Portland, the EPA notes that the type of sub-bituminous coal that would be necessary to achieve the final remedy would have markedly different fuel and handling characteristics, necessitating changes not only in the coal handling and preparation operations but also to the boilers. Publications
The EPA believes the second option is available; that is, switching to somewhat lower-sulfur coal such as Central Appalachia coal (CAAP) to achieve some of the needed reductions, with the remainder of the reductions achieved through a reagent injection system achieving reductions of 50-60 percent. For the proposed rule, the EPA requested comment on its view that such a reagent injection system could be built within 1 year. The EPA agrees with comments that observed that, in virtually all cases where such reagent injection systems have been installed, the facility has also included a fabric filter for particulate controls. Accordingly, the EPA agrees with commenters that it would take longer than 1 year to accomplish any operational changes necessary to switch to somewhat lower sulfur coal, to install and operate the reagent injection system, and to install a fabric filter to replace or supplement the current particulate controls. Development of a system that adequately controls SO
The third option, under which Portland would install a dry or wet scrubber, likely would achieve a greater degree of control than necessary to meet the lb/hr and lb/mmBtu limits in this section 126 rule. The EPA recognizes that given investment decisions for the suite of regulations, including the Transport Rule, the present section 126 rule, and the upcoming MATS rule, Portland may choose to install these controls. If this option were selected, the EPA continues to conclude that these scrubber controls could be installed within 3 years. (Although such controls have been installed in 24-27 months, the EPA believes that it is reasonable to provide the full 3 years to permit Portland the time needed to evaluate its options.) We note, however, that in the Integrated Planning Model (IPM) which was used to evaluate the impacts of the Transport Rule, we did not forecast dry or wet scrubbing as the least-cost option for compliance for the Portland facility. Rather, the IPM predicted a switch to lower-sulfur bituminous coal in combination with reagent injection. IPM model results are available in the Transport Rule docket at EPA-HQ-OAR-2009-0491-4440 (
The EPA notes that, in contrast to when this rule was initially proposed, the final requirements of the Transport Rule are now known. Pennsylvania is one of the states whose facilities are subject to the Transport Rule which establishes an emissions budget for Pennsylvania, allocates allowances to facilities in Pennsylvania, including Portland, and allows Portland's owners to trade those allowances with other power plants through an allowance trading market. Portland allowances for 2012 and 2014 are listed in a technical support document to the final Transport Rule located at
At this time, the MATS rule is not final. The EPA has proposed the MATS rule and is under a consent decree deadline to complete that rule by December 16, 2011. The proposed MATS rule contained proposed requirements for hazardous air pollutants, including existing sources of acid gases (
Even if the schedules did not coincide so closely, the EPA does not believe it would be appropriate to defer action on NJDEP's section 126 petition to achieve such harmonization. The EPA is required by the CAA to take action on NJDEP's petition within 60 days (plus a 6 month administrative extension granted in this case), and this time period has already passed. We could not delay lawfully this rulemaking by any significant time period to coincide with the date for the final MATS rule. The EPA also notes that full harmonization is limited by statutory constraints. While there is some flexibility within section 112 of the CAA to provide for a 4-year compliance period under certain circumstances, this flexibility is not afforded under section 126. Under section 126, the EPA cannot alter the statutory requirement that the source eliminate its significant contribution to nonattainment and interference with maintenance within 3 years of the section 126(b) finding. Notwithstanding these constraints, as previously noted, our expectation is that requirements for MATS, like those of the Transport Rule, will be known in time to allow for consideration of integrated strategies for compliance with MATS, the Transport Rule, and the present section 126 action.
Based on the above considerations, we are retaining the 3-year compliance date for the final limit. Adopting a substantially shorter time frame than 3 years could not only restrict the options for Portland to achieve the necessary reductions, but could render each of them impracticable within that time frame. Because shorter time frames have the effect of narrowing the available options, we are retaining the 3-year compliance date for the final limit.
This section discusses issues concerning whether and how EPA should establish appropriate increments of progress toward the final remedy. The statute does not define “increments of progress.” The EPA has discretion to define appropriate increments of progress on a case-by-case basis. The increments of progress required in a particular case may vary depending on the facts of the petition but should provide incremental progress towards eventual compliance with the requirements of section 110(a)(2)(D)(i). Section VI.A discusses interim emission limits, and section VI.B discusses reporting milestones during the 3-year period for the final remedy.
As noted previously, section 126 allows the EPA to allow continued operation of a source beyond a 3-month time period if the source complies with “emissions limitations and compliance schedules (including increments of progress). In this section we discuss issues related to whether the increments of progress should include interim emissions limits and the final rule requirements for progress milestones and reports.
The EPA proposed interim emission limits for Portland units 1 and 2. Specifically, the EPA proposed to require Portland to meet an SO
Subsequent to the close of the comment period, GenOn submitted a report of the September 15, 2011, test burn referred to in its comments. For the final rule, the EPA took this test burn report into consideration. In the test burn, Portland blended its existing Northern Appalachia coal supply with varying amounts of low sulfur Central Appalachia coal from West Virginia. For each unit, the test burn assessed the impacts of varying blending cases on the unit's generator output, the reduction in SO
In its comments, and in the later test burn report, GenOn commented that, based on initial evaluations of the coals economically available to be used to meet the proposed interim emission limits, the use of lower sulfur coal is projected to cause significant production derates at Portland units 1 and 2. That is, GenOn asserted that the total megawatts (MW) of electricity output from the plant would decrease if GenOn were to use a lower sulfur coal blend sufficient to meet the interim limits.
• Had a mean SO
• Had a mean higher heating value of nearly 12,600 Btu/lb, which is likely well within 10 percent of the heating value currently used at Portland; and
• Amounted to about 130 million tons, including amounts that are about 50 times any possible maximum annual demand for low sulfur coal from Portland.
The EPA is aware that changes in the characteristics of the coal (moisture content, ash content, grindability,
The EPA has reviewed the information from GenOn on the possible equipment changes, and has also reviewed our previous determinations of the time needed to accomplish those changes. The EPA's engineering judgment is that these changes can be accomplished within 1 year.
Figure VI.C-1 shows the hourly SO
On the other hand, as discussed previously in section V.E, the EPA does agree with the commenter, and with others who made similar observations, that reagent injection may not be achievable within 1 year because Portland may need to upgrade its particulate matter collection equipment. Accordingly, we no longer believe that reagent injection alone serves as a technical basis for the interim emissions reduction requirements in the final rule. Nevertheless, after analyzing the comments regarding the feasibility of switching to cleaner coal and the necessary time frame for doing so, we do believe that this is an appropriate basis for the interim limit. Thus, the EPA has determined that it is feasible for Portland to achieve interim reductions within 1 year that would achieve significant progress toward the final remedy limits, would not interfere with Portland's progress toward meeting those final limits, and would result in important public health benefits in the interim.
The EPA notes that for the interim emissions reduction, unlike the 3-year limit, there is no explicit air quality goal defined by the Act. For the 3-year limit, it is essential that the limit ensure that Portland fully eliminates its significant
For the final rule, the EPA includes a combined interim limit of 6,253 lb/hour for the total SO
The basis for the final limit differs from the proposed rule. For the proposal, the EPA calculated the unit-by-unit proposed limits as 50 percent of the allowable emissions rate used for the EPA air quality modeling. We believe that for the final rule it is preferable to base these interim limits on coal characteristics of readily available coal supplies. For the final rule, the combined interim limit is based on the EPA's assessment that coal with sulfur content of 1.5 lb/mmBtu is readily available and its use at Portland is achievable within 1 year. Using this 1.5 lb/mmBtu value as the basis for the calculation of the combined interim limit, we calculated
We agree with the commenters who feel strongly that this interim limit is very important to include in the final rule, not only because it drives progress toward the final remedy, but also because of the air quality and public health benefits that will be realized in the interim. While the limit is not calculated based on specific air quality criteria, these readily available interim reductions will serve to markedly reduce the number of days with SO
In addition to the proposed 3-year and 1-year emissions limits, the EPA proposed a schedule of milestones that must be achieved to provide assurance that the source is on track to achieve full compliance as expeditiously as practicable and no later than the 3-year deadline.
Those proposed milestones were:
One commenter, GenOn, objected to both the 90-day compliance plan and the periodic status reports. The commenter believed that requiring a detailed plan 90 days after the final rule is unnecessarily restrictive, particularly given that GenOn will not have fully evaluated its compliance options under MATS. Similarly, GenOn believed that detailed status reports are not justified and will limit GenOn's flexibility to revise its compliance strategy in response to other state and federal regulations. Because the regulatory environment is fluid with further changes expected, GenOn expressed concerns that the compliance plan and status reports should not restrict GenOn's ability to revise its strategy for compliance with section 126 as circumstances change.
One commenter believed that the schedule for a required modeling protocol within 3 months was overly ambitious and suggested the owner and operator of Portland should have at least 6 months to submit a modeling protocol for Portland's SO
For the final rule, the EPA has amended the proposed requirement for GenOn to develop a compliance plan with an identified remedy with 90 days.
The EPA has also retained the requirements for 6 month status reports. We disagree with comments that these reports are not justified. The status reports required by this rule are warranted not only because section 126 requires “increments of progress,” but in addition the EPA believes these are necessary for the EPA and the states to monitor Portland's efforts to achieve compliance with the emission limits established in this rule. The status reports are not exhaustive, but will provide important information to the agency and to the public to monitor Portland's progress towards the ultimate goal of reducing its SO
We have also retained the requirement for the interim and final progress reports. For the final rule, we have extended the deadline for the final project report by two months to provide time for evaluation of CEMS data before submitting the report.
In the final rule, we have retained the requirement to submit a modeling protocol and modeling, but, after consideration of the timing concerns raised by commenters, we have amended the deadlines. For the final rule, the modeling protocol is required within 6 months of this rulemaking and the final modeling within 12 months. The revisions to the interim compliance schedule outlined in this section are all logical outgrowths of the compliance schedule originally proposed as they were made in response to consideration of the comments received in response to that proposal.
In this section, we discuss two additional overarching issues on which we sought comment in the proposal. First we discuss our decision regarding the proposed consideration of an alternative schedule based upon Portland's decision to meet its compliance obligations by electing to shut down unit 1 or unit 2, or both. We then discuss the potential for additional rulemaking to accommodate alternative remedies from those established in this rule.
In the preamble to the proposed rule, the EPA discussed why different remedies for meeting the requirements of section 126 may suggest different compliance schedules, 76 FR 19678. In particular, the EPA noted that if GenOn decided to cease operation of the Portland facility, it is possible that implementing such a remedy “as expeditiously as practicable” may have different considerations than if it decided to undertake a schedule of constructing and implementing control technologies. Consistent with this perceived possibility, the EPA requested comment in the proposal on how to interpret the phrase “as expeditiously as practicable” when the source owner and operator has elected to cease operation as its method of compliance with the emissions limit for a given unit and cessation cannot occur within 3 months of the EPA's finding. The EPA noted that if appropriate based upon comments, the EPA would consider including in the final rule an alternate compliance schedule for this possibility, and the EPA requested comment on relevant factors that should be considered were we to include such an alternate schedule.
The EPA has retained the approach in the proposed rule, and we have not included an alternative compliance schedule in the case that the selected remedy is to cease operation of unit 1 and/or unit 2. The EPA did not receive any information in comments that leads the EPA to conclude that a different schedule is necessary.
The EPA received comment from GenOn arguing that the unit-specific SO
The EPA understands the source's request for operational flexibility, and we considered the option suggested by GenOn. However, based on the modeling analysis conducted by the EPA, we are not able to set a combined
Nevertheless, we acknowledge the greater operating flexibility that an alternative set of emission limits might offer, and we note that in some cases an appropriately constrained combined limit may be possible to construct in a way that is protective of the NAAQS (
This action will grant the NJDEP petition and is making a CAA section 126 finding. This type of action is exempt from review under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011).
This action does not impose an information collection burden under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501
The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions.
For purposes of assessing the impacts of this rule on small entities, small entity is defined as: (1) A small business as defined by the Small Business Administration's (SBA) regulations at 13 CFR 121.201; (2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.
After considering the economic impacts of this final rule on small entities, I certify that this rule will not have a significant economic impact on a substantial number of small entities. This final rule will not impose any requirements on small entities because small entities are not subject to the requirements of this rule.
This rule does not contain a federal mandate that may result in expenditures of $100 million or more for state, local, and tribal governments, in the aggregate, or the private sector in any 1 year. The cost necessary to comply with the limits in this notice are not expected to exceed $100 million. Thus, this rule is not subject to the requirements of sections 202 or 205 of UMRA.
This rule is also not subject to the requirements of section 203 of UMRA because it contains no regulatory requirements that might significantly or uniquely affect small governments. The requirements for compliance in this rule will be borne by a single, privately owned source.
This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. The rule primarily affects the private industry, and does not impose significant economic cost on state or local governments or preempt state or local law. Thus, Executive Order 13132 does not apply to this action.
In the spirit of Executive Order 13132, and consistent with the EPA's policy to promote communications between the EPA and state and local governments, the EPA specifically solicited comment on the proposed action from state and local officials.
This action does not have tribal implications, as specified in Executive Order 13175 (65 FR 67249, November 9, 2000). It does not have a substantial direct effect on one or more Indian Tribes. Furthermore, this action does not affect the relationship between Indian Tribes and the federal government, or distribution of power and responsibilities between the federal government and Indian Tribes. Thus, Executive Order 13175 does not apply to this action.
The EPA interprets Executive Order 13045 (62 FR 19885, April 23, 1997) as applying only to those regulatory actions that concern health or safety risks, such that the analysis required under section 5-501 of the Executive Order has the potential to influence the regulation. This action is not subject to Executive Order 13045 because it does not involve decisions on environmental health or safety risks that may disproportionately affect children. The EPA believes that the emissions reductions in this rule will further improve air quality and will further improve children's health.
This action is not subject to Executive Order 13211 (66 FR 28355 (May 22, 2001)), because it is an exempted action under Executive Order 12866.
Executive Order 12898 (59 FR 7629, February 16, 1994) establishes Federal executive policy on environmental justice. Its main provision directs federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the U.S.
The EPA has determined that this final rule will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations because it increases the level of environmental protection for all affected populations without having any disproportionately high and adverse human health or environmental effects on any population, including any minority or low-income population.
The agency has also reviewed this rule to determine if there is existing disproportionately high and adverse human health or environmental effects on minority or low-income populations that could be mitigated by this rulemaking. An analysis of demographic data illustrates that the population residing near the source is represented by fewer minority and low-income residents than either the surrounding counties, the average demographic composition of the states of New Jersey and Pennsylvania, and national averages. In addition, this rule increases the level of environmental and public health protection for all affected populations since, when fully implemented, it will result in attainment of the health-based 1-hour SO
Section 12(d) of the National Technology Transfer Advancement Act of 1995 (NTTAA), Public Law No. 104-113, section 12(d) (15 U.S.C. 272 note) directs the EPA to use voluntary consensus standards (VCS) in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impracticable. VCS are technical standards (
This action does not involve technical standards. Therefore, the EPA did not consider the use of any VCS.
The Congressional Review Act, 5 U.S.C 801
Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the District of Columbia Circuit Court within 60 days from the date the final action is published in the
Thus, any petitions for review of this action related to the section 126 finding must be filed in the Court of Appeals for the District of Columbia Circuit within 60 days from the date final action is published in the
Approval and promulgation of implementation plans, Environmental protection, Administrative practice and procedures, Air pollution control, Incorporation by reference, Intergovernmental relations, and Reporting and recordkeeping requirements, Sulfur dioxide.
For the reasons set forth in the preamble part 52 of chapter I of title 40 of the Code of Federal regulations is amended as follows:
42 U.S.C. 7401
The EPA has made a finding pursuant to section 126 of the Clean Air Act (the Act) that emissions of sulfur dioxide (SO
(a) The owners and operators of Portland shall not, at any time later than one year after the effective date of the section 126 finding, emit SO
(b) The owners and operators of Portland shall not, at any time later than three years after the effective date of the section 126 finding, emit SO
(1) 1,105 lb/hr and 0.67 pounds per million British Thermal Unit (lb/mmBtu) for unit 1; and
(2) 1,691 lb/hr and 0.67 lb/mmBtu for unit 2.
(c) The owners and operators of Portland shall comply with the following requirements:
(1) Perform air modeling to demonstrate that, starting no later than three years after the effective date of the section 126 finding, emissions from Portland will not significantly contribute to nonattainment or interfere with maintenance of the 1-hour SO
(i) No later than six months after the effective date of the section 126 finding, submit to the EPA a modeling protocol that is consistent with the EPA's Guideline on Air Quality Models, as codified at 40 CFR Part 51, Appendix W, and that includes all units at the Portland Generating Station in the modeling.
(ii) Within 15 business days of receipt of a notice from the EPA of any deficiencies in the modeling protocol under paragraph (d)(1)(i) of this section, submit to the EPA a revised modeling protocol to correct any deficiencies identified in such notice.
(iii) No later than one year after the effective date of the section 126 finding, submit to the EPA a modeling analysis, performed in accordance with the modeling protocol under paragraphs (c)(1)(i) and (c)(1)(ii) of this section, for the compliance methods identified in the notice required by paragraph (c)(2) of this section.
(2) No later than one year after the effective date of the section 126 finding, submit to the EPA the compliance method selected by the owners and operators of Portland to achieve the emissions limits in paragraph (b) of this section.
(3) Starting six months after the effective date of the section 126 finding and continuing every six months until three years after the effective date of the section 126 finding, submit to the EPA progress reports on the implementation of the methods to achieve compliance with emissions limits in paragraphs (a) and (b) of this section, including status of design, technology selection, development of technical specifications, awarding of contracts, construction, shakedown, and compliance demonstrations as applicable. These reports shall include:
(i) An interim project report, no later than one year after the effective date of the section 126 finding, that demonstrates compliance with the emission limit in paragraph (a) of this section.
(ii) A final project report, submitted no later than 60 days after three years after the effective date of the section 126 finding, that demonstrates compliance with the emission limits in paragraph (b) of this section and that includes at least one month of SO
(4) The requirements in paragraphs (c)(1) and (c)(3) of this section shall not apply if the notice required by paragraph (c)(2) of this section indicates that the owners and operators of Portland have decided to completely and permanently cease operation of unit 1 and unit 2 as the method of compliance with paragraphs (a) and (b) and with section 126 of the Act.
(d) Compliance with the lb/mmBtu limitations in paragraph (b) of this section is determined on a 30 boiler operating day rolling average basis. Boiler operating day for the purposes of this paragraph means a 24-hour period between midnight and the following midnight during which any fuel is combusted in the units identified in paragraph (a) of this section.