The regulations in Title 9, Code of Federal Regulations (9 CFR), parts 101-118 (referred to below as the regulations) contain provisions implementing the Virus-Serum-Toxin Act (the Act), as amended (21 U.S.C. 151-159). These regulations are administered by the Animal and Plant Health Inspection Service (APHIS) of the U.S. Department of Agriculture (USDA). The Act prohibits the preparation, sale, and shipment of veterinary biological products in or from the United States unless such products have been prepared under and in compliance with USDA regulations at an establishment holding an unsuspended and unrevoked license issued by USDA.

In part 102 of the regulations, §§ 102.1 and 102.2 require that each establishment and every person preparing biological products subject to the Act must hold an unexpired, unsuspended, and unrevoked U.S. Veterinary Biologics Establishment License issued by the Administrator and a U.S. Veterinary Biological Product License for each product prepared in such establishment. Part 107 of the regulations contains exemptions from the requirement for preparation pursuant to unsuspended and unrevoked establishment and product licenses. One of those exemptions, found in § 107.1(a), allows for product to be prepared by a veterinary practitioner solely for administration to animals in the course of his or her State-licensed professional practice of veterinary medicine under a veterinarian-client-patient relationship. The regulations in § 107.1(a)(1) set forth the criteria that must be satisfied in order to establish the existence of a veterinarian-client-patient relationship.

Recently, it has come to APHIS' attention that some veterinary practitioners may be entering into contractual agreements whereby product would be prepared by a commercial laboratory/manufacturing facility (unlicensed vaccine manufacturing establishment) rather than by the practitioner at the facility he or she uses to conduct the day-to-day activities associated with his or her State licensed practice of veterinary medicine. Such arrangements in which an unlicensed establishment, acting as an agent for the practitioner, prepares the product and sells and ships/transports the product directly to the animal owner creates a situation in which product is prepared, sold, and shipped in violation of the Act. Specifically, the Act states that no person, firm, or corporation shall prepare, sell, barter, exchange, or ship any virus, serum, toxin, or analogous product manufactured within the United States and intended for the treatment of animals, unless and until the said virus, serum, toxin, or analogous product shall have been prepared, under and in compliance with regulations at an establishment holding an unsuspended and unrevoked license issued by the Secretary of Agriculture.

While part 107 of the regulations specifies the licensing exemption for product prepared by veterinary practitioners and sets forth the requirements for showing that a veterinarian-client-patient relationship exists, it appears that, given the instances described in the previous paragraph, some clarification is necessary with respect to the issue of the relationship between the veterinary practitioner and the facility where the product is prepared. The purpose of this provision is to allow a veterinarian to prepare veterinary biologics at the location where she or he operates a veterinary practice, which would not be licensed under the Act, and to transport it away from that facility when necessary, for administration to an animal or animals under a veterinarian-client-patient relationship without violating the Act.

However, no provision in the Act or the regulations would allow a veterinary practitioner to take advantage of the licensing exemption while at the same time consigning the actual preparation of the product to a commercial laboratory/manufacturing establishment which would then exchange or deliver the product to a third party. An arrangement such as this is contrary to the statutory requirement that prohibits a person, firm, or corporation from preparing, selling, bartering, exchanging, or shipping a veterinary biologic intended for use in the treatment of animals unless and until such product shall have been prepared in compliance with the regulations in a USDA licensed establishment (see 21 U.S.C. 151).

In order to ensure that product subject to the exemption for products prepared by veterinarians solely for administration to animals in the course of a State licensed professional practice of veterinary medicine under a veterinarian-client-patient relationship is prepared in accordance with the requirements of the Virus-Serum-Toxin Act, APHIS is proposing to amend its regulations by adding clarifying language to § 107.1 emphasizing the requirement that the exemption from preparation pursuant to unsuspended and unrevoked product and establishment licenses applies only to product prepared by the veterinary practitioner (or by a supervised veterinary assistant) at the facility such veterinarian uses in the day-to-day operation of his/her State-licensed professional practice of veterinary medicine.

The proposed amendment would clarify that the preparation of product prepared by a veterinarian solely for administration to animals in the course of a State-licensed professional practice of veterinary medicine under a veterinarian-client-patient relationship shall only be done at a facility routinely used in the day-to-day operation of a professional practice of veterinary medicine.

We also propose to make minor changes to § 107.1 to replace the term “establishments” with “facilities.” As discussed above, § 107.1 exempts product prepared by a veterinary practitioner from preparation pursuant to an unsuspended and unrevoked product and establishment license. However, § 107.1 refers to the sites of such production as “establishments,” which is confusing because that term is used elsewhere in the regulations to refer only to production sites that are not exempt from the license requirement. For example, the definitions in § 101.2 define establishment as “One or more premises designated on the establishment license.” Therefore, in § 107.1 where we refer to the exemption for the site of day-to-day operation of a veterinarian's State-licensed professional practice, we would use the term “facilities” rather than “establishments.”

This proposed rule has been determined to be not significant for the purposes of Executive Order 12866 and, therefore, has not been reviewed by the Office of Management and Budget.

This proposed rule would amend the regulations in § 107.1 to clarify that the preparation of biological products pursuant to the exemption in paragraph (a)(1) of that section must take place at the same facility that the veterinarian preparing the product utilizes in conducting the day-to-day activities associated with his/her State-licensed professional practice of veterinary medicine.

As noted previously in this proposed rule, no provision in the Act or the regulations allows a veterinary practitioner to take advantage of the licensing exemption while at the same time consigning the actual preparation of the product to a commercial laboratory or other manufacturing establishment which would then exchange or deliver the product to a third party. An arrangement such as this is contrary to the statutory requirement that prohibits a person, firm, or corporation from preparing, selling, bartering, exchanging, or shipping a veterinary biologic intended for use in the treatment of animals unless and until such product shall have been prepared in compliance with the regulations in a USDA licensed establishment.

Therefore, this proposed amendment to the regulations is simply a clarification of an existing and longstanding prohibition. The proposed amendment would not change the nature of the exemption, the number of veterinary practitioners who are eligible to take advantage of the exemption, or the criteria that must be satisfied in order to establish the existence of a veterinarian-client-patient relationship, nor would it add any reporting or recordkeeping burden. It is possible that there may be one or several veterinary practitioners that currently contract with an unlicensed commercial laboratory or manufacturing facility to produce veterinary biologics in violation of the Act. These entities could be affected if they become aware of the violation through publication of this proposed rule and discontinue the prohibited activity, but that effect could also occur at any time under the current regulations if APHIS receives specific evidence of such a violation and orders its cessation.

Under these circumstances, the Administrator of the Animal and Plant Health Inspection Service has determined that this action would not have a significant economic impact on a substantial number of small entities.

This program/activity is listed in the category of Federal Domestic Assistance under No. 10.025 and is subject to Executive Order 12372, which requires intergovernmental consultation with State and local officials. (See 7 CFR part 3015, subpart V.)

This proposed rule has been reviewed under Executive Order 12988, Civil Justice Reform. It is not intended to have retroactive effect. This rule would not preempt any State or local laws, regulations, or policies where they are necessary to address local disease conditions or eradication programs. However, where safety, efficacy, purity, and potency of biological products are concerned, it is the Agency's intent to occupy the field. Under the Act, Congress clearly intended that there be national uniformity in the regulation of these products, and APHIS will continue to take enforcement action as necessary against practitioners and production facilities with regard to veterinary biologics produced or distributed in contravention of the Act. There are no administrative proceedings which must be exhausted prior to a judicial challenge to the regulations under this rule.

This proposed rule contains no new information collection or recordkeeping requirements under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

Accordingly, we propose to amend 9 CFR part 107 as follows:

To determine eligibility for Federal small business assistance, SBA establishes small business size definitions (referred to as size standards) for private sector industries in the United States. SBA uses two primary measures of business size: Average annual receipts and average number of employees. SBA uses financial assets, electric output, and refining capacity to measure the size of a few specialized industries. In addition, SBA's Small Business Investment Company (SBIC), Certified Development Company (504), and 7(a) Loan Programs use either the industry based size standards or net worth and net income based alternative size standards to determine eligibility for those programs. At the beginning of the current comprehensive size standards review, there were 41 different size standards covering 1,141 NAICS industries and 18 sub-industry activities (“exceptions” in SBA's table of size standards). Thirty-one of these size levels were based on average annual receipts, seven were based on average number of employees, and three were based on other measures.

Over the years, SBA has received comments that its size standards have not kept up with changes in the economy, in particular the changes in the Federal contracting marketplace and industry structure. The last time SBA conducted a comprehensive review of all size standards was during the late 1970s and early 1980s. Since then, most reviews of size standards were limited to a few specific industries in response to requests from the public and Federal agencies. SBA also adjusts its monetary based size standards for inflation at least once every five years. SBA's latest inflation adjustment to size standards was published in the Federal Register on July 18, 2008 (73 FR 41237).

Given its importance in the Federal Procurement market, SBA has studied and reviewed the construction industry over time. In 1985, SBA adopted a new size standard for the Dredging sub-industry (an exception within NAICS industry 237990). The new size standard was based on a 1984 study of the industry structure, conducted in cooperation with the Corps of Engineers and members of the industry. The final rule was published in the Federal Register on November 8, 1985 (50 FR 46418). Finally, the industry's definitions under the NAICS changed significantly in 2002, requiring SBA to adjust its size standards (including those in NAICS Sector 23) accordingly (67 FR 52633).

Because of changes in the Federal marketplace and industry structure since the last comprehensive size standards review, SBA recognizes that current data may no longer support some of its existing size standards. Accordingly, in 2007, SBA began a comprehensive review of all size standards to determine if they are consistent with current data, and to adjust them when necessary. In addition, on September 27, 2010, the President of the United States signed the Small Business Jobs Act of 2010 (Jobs Act). The Jobs Act directs SBA to conduct a detailed review of all size standards and to make appropriate adjustments to reflect market conditions. Specifically, the Jobs Act requires SBA to conduct a detailed review of at least one-third of all size standards during every 18-month period from the date of its enactment. In addition, the Jobs Act requires that SBA conduct a review of all size standards not less frequently than once every five years thereafter. Reviewing existing small business size standards and making appropriate adjustments based on current data are also consistent with Executive Order 13563 on improving regulation and regulatory review.

Rather than review all size standards at one time, SBA is reviewing size standards on a Sector by Sector basis. A NAICS Sector generally includes 25 to 75 industries, except for NAICS Sector 31-33, Manufacturing, which has considerably more industries. Once SBA completes its review of size standards for industries in a NAICS Sector, it issues a proposed rule to revise size standards for those industries for which it believes currently available data and other relevant factors support doing so.

Below is a discussion of SBA's size standards methodology for establishing receipts based size standards that SBA applied to this proposed rule, including analyses of industry structure, Federal procurement trends and other factors for industries reviewed in this proposed rule, the impact of the proposed revisions to size standards on Federal small business assistance, and the evaluation of whether a revised size standard would exclude dominant firms from being considered small.

SBA has recently developed a “Size Standards Methodology” for developing, reviewing, and modifying size standards when necessary. SBA published the document on its Web site at www.sba.gov/size for public review and comments, and has included it as a supporting document in the electronic docket of this proposed rule at www.regulations.gov . SBA does not apply all features of its “Size Standards Methodology” to all industries because not all features are appropriate for every industry. For example, since all industries in NAICS Sector 23 have receipts based size standards the methodology described in this proposed rule applies only to establishing receipts based size standards. However, the methodology is available in its entirety for parties who have an interest in SBA's overall approach to establishing, evaluating, and modifying small business size standards. SBA always explains its analysis in individual proposed and final rules relating to size standards for specific industries.

SBA welcomes comments from the public on a number of issues concerning its “Size Standards Methodology,” such as whether there are other approaches to establishing and modifying size standards; whether there are alternative or additional factors that SBA should consider; whether SBA's approach to small business size standards makes sense in the current economic environment; whether SBA's use of anchor size standards is appropriate; whether there are gaps in SBA's methodology because the data it uses are not current or sufficiently comprehensive; and whether there are other data, facts, and/or issues that SBA should consider. Comments on SBA's size standards methodology should be submitted via: (1) The Federal eRulemaking Portal: www.regulations.gov, following the instructions for submitting comments; the docket number is SBA-2009-0008; or (2) Mail/Hand Delivery/Courier: Khem R. Sharma, Ph.D., Chief, Size Standards Division, 409 Third Street SW., Mail Code 6530, Washington, DC 20416. As it will do with comments to this and other proposed rules, SBA will post all comments on its methodology on www.regulations.gov . As of December 29, 2011, SBA has received 14 comments to its “Size Standards Methodology.” The comments are available to the public at www.regulations.gov . SBA continues to welcome comments on its methodology from interested parties. SBA will not accept comments to its “Size Standards Methodology” submitted by email.

Congress granted SBA's Administrator discretion to establish detailed small business size standards. 15 U.S.C. 632(a)(2). Specifically, Section 3(a)(3) of the Small Business Act (15 U.S.C. 632(a)(3)) requires that “* * * the [SBA] Administrator shall ensure that the size standard varies from industry to industry to the extent necessary to reflect the differing characteristics of the various industries and consider other factors deemed to be relevant by the Administrator.” Accordingly, the economic structure of an industry is the basis for developing and modifying small business size standards. SBA identifies the small business segment of an industry by examining data on the economic characteristics defining the industry structure (as described below). In addition, SBA considers current economic conditions, its mission and program objectives, the Administration's current policies, suggestions from industry groups and Federal agencies, and public comments on the proposed rule. SBA also examines whether a size standard based on industry and other relevant data successfully excludes businesses that are dominant in the industry.

This proposed rule includes information regarding the factors SBA evaluated and the criteria it used to propose adjustments to size standards in NAICS Sector 23. This proposed rule affords the public an opportunity to review and to comment on SBA's proposals to revise size standards in NAICS Sector 23, as well as on the data and methodology it used to evaluate and revise the size standards.

For the current comprehensive size standards review, SBA has established three “base” or “anchor” size standards—$7.0 million in average annual receipts for industries that have receipts based size standards, 500 employees for manufacturing and other industries that have employee based size standards (except for Wholesale Trade), and 100 employees for industries in the Wholesale Trade Sector. SBA established 500 employees as the anchor size standard for manufacturing industries at its inception in 1953. Shortly thereafter, SBA established $1 million in average annual receipts as the anchor size standard for nonmanufacturing industries. SBA has periodically increased the receipts based anchor size standard for inflation, and today it is $7 million. Since 1986, the size standard for all industries in the Wholesale Trade Sector for SBA financial assistance and for most Federal programs has been 100 employees. However, NAICS codes for the Wholesale Trade Sector and their 100 employee size standards do not apply to Federal procurement programs. Rather, for Federal procurement the size standard for all industries in Wholesale Trade (NAICS Sector 42) and for all industries in Retail Trade (NAICS Sector 44-45), is 500 employees under SBA's nonmanufacturer rule (13 CFR 121.406(b)).

These long-standing anchor size standards have stood the test of time and gained legitimacy through practice and general public acceptance. An anchor is neither a minimum nor a maximum size standard. It is a common size standard for a large number of industries that have similar economic characteristics and serves as a reference point in evaluating size standards for individual industries. SBA uses the anchor in lieu of trying to establish precise small business size standards for each industry. Otherwise, theoretically, the number of size standards might be as high as the number of industries for which SBA establishes size standards (1,141). Furthermore, the data SBA analyzes are static, while the U.S. economy is not. Hence, absolute precision is impossible. SBA presumes an anchor size standard is appropriate for a particular industry unless that industry displays economic characteristics that are considerably different from other industries with the same anchor size standard.

When evaluating a size standard, SBA compares the economic characteristics of the industry under review to the average characteristics of industries with one of the three anchor size standards (referred to as the “anchor comparison group”). This allows SBA to assess the industry structure and to determine whether the industry is appreciably different from the other industries in the anchor comparison group. If the characteristics of a specific industry under review are similar to the average characteristics of the anchor comparison group, the anchor size standard is generally appropriate for that industry. SBA may consider adopting a size standard below the anchor when: (1) All or most of the industry characteristics are significantly smaller than the average characteristics of the anchor comparison group; or (2) other industry considerations strongly suggest that the anchor size standard would be an unreasonably high size standard for the industry.

If the specific industry's characteristics are significantly higher than those of the anchor comparison group, then a size standard higher than the anchor size standard may be appropriate. The larger the differences are between the characteristics of the industry under review and those in the anchor comparison group, the larger will be the difference between the appropriate industry size standard and the anchor size standard. To determine a size standard above the anchor size standard, SBA analyzes the characteristics of a second comparison group. For industries with receipts based size standards, including those in NAICS Sector 23, SBA has developed a second comparison group consisting of industries that have the highest of receipts based size standards. To determine a size standard above the anchor size standard, SBA analyzes the characteristics of this second comparison group. The size standards for this group of industries range from $23 million to $35.5 million in average annual receipts; the weighted average size standard for the group is $29 million. SBA refers to this comparison group as the “higher level receipts based size standard group.”

The primary factors that SBA evaluates to examine industry structure include average firm size, startup costs and entry barriers, industry competition, and distribution of firms by size. SBA evaluates, as an additional primary factor, the impact that revised size standards might have on Federal contracting assistance to small businesses. These are, generally, the five most important factors SBA examines when establishing or revising a size standard for an industry. However, SBA will also consider and evaluate other information that it believes is relevant to a particular industry (such as technological changes, growth trends, SBA financial assistance, other program factors, etc. ). SBA also considers possible impacts of size standard revisions on eligibility for Federal small business assistance, current economic conditions, the Administration's policies, and suggestions from industry groups and Federal agencies. Public comments on a proposed rule also provide important additional information. SBA thoroughly reviews all public comments before making a final decision on its proposed size standards. Below are brief descriptions of each of the five primary factors that SBA has evaluated for each industry in NAICS Sector 23. A more detailed description of this analysis is provided in SBA's “Size Standards Methodology,” available at http://www.sba.gov/size .

1. Average firm size. SBA computes two measures of average firm size: Simple average and weighted average. For industries with receipts based size standards, the simple average is the total receipts of the industry divided by the total number of firms in the industry. The weighted average firm size is the sum of weighted simple averages in different receipts size classes, where weights are the shares of total industry receipts for respective size classes. The simple average weighs all firms within an industry equally regardless of their size. The weighted average overcomes that limitation by giving more weight to larger firms.

If the average firm size of an industry is significantly higher than the average firm size of industries in the anchor comparison industry group, this will generally support a size standard higher than the anchor size standard. Conversely, if the industry's average firm size is similar to or significantly lower than that of the anchor comparison industry group, it will be a basis to adopt the anchor size standard, or, in rare cases, a standard lower than the anchor.

2. Startup costs and entry barriers. Startup costs reflect a firm's initial size in an industry. New entrants to an industry must have sufficient capital and other assets to start and maintain a viable business. If new firms entering a particular industry have greater capital requirements than firms in industries in the anchor comparison group, this can be a basis for establishing a size standard higher than the anchor size standard. In lieu of actual startup cost data, SBA uses average assets as a proxy to measure the capital requirements for new entrants to an industry.

To calculate average assets, SBA begins with the sales to total assets ratio for an industry from the Risk Management Association's Annual Statement Studies. SBA then applies these ratios to the average receipts of firms in that industry. An industry with average assets that are significantly higher than those of the anchor comparison group is likely to have higher startup costs; this in turn will support a size standard higher than the anchor. Conversely, an industry with average assets that are similar to or lower than those of the anchor comparison group is likely to have lower startup costs; this will support the anchor standard or one lower than the anchor.

3. Industry competition. Industry competition is generally measured by the share of total industry receipts generated by the largest firms in an industry. SBA generally evaluates the share of industry receipts generated by the four largest firms in each industry. This is referred to as the “four-firm concentration ratio,” a commonly used economic measure of market competition. SBA compares the four-firm concentration ratio for an industry to the average four-firm concentration ratio for industries in the anchor comparison group. If a significant share of economic activity within the industry is concentrated among a few relatively large companies, all else being equal, SBA will establish a size standard higher than the anchor size standard. SBA does not consider the four-firm concentration ratio as an important factor in assessing a size standard if its share of economic activity within the industry is less than 40 percent. For an industry with a four-firm concentration ratio of 40 percent or more, SBA examines the average size of the four largest firms to determine a size standard.

4. Distribution of firms by size. SBA examines the shares of industry total receipts accounted for by firms of different receipts and employment size classes in an industry. This is an additional factor in assessing industry competition. If most of an industry's economic activity is attributable to smaller firms, this generally indicates that small businesses are competitive in that industry. This can support adopting the anchor size standard. If most of an industry's economic activity is attributable to larger firms, this indicates that small businesses are not competitive in that industry. This can support adopting a size standard above the anchor.

Concentration is a measure of inequality of distribution. To determine the degree of inequality of distribution in an industry, SBA computes the Gini coefficient, using the Lorenz curve. The Lorenz curve presents the cumulative percentages of units (firms) along the horizontal axis and the cumulative percentages of receipts (or other measures of size) along the vertical axis. (For further detail, please refer to SBA's “Size Standards Methodology” on its Web site at www.sba.gov/size .) Gini coefficient values vary from zero to one. If receipts are distributed equally among all the firms in an industry, the value of the Gini coefficient will equal zero. If an industry's total receipts are attributed to a single firm, the Gini coefficient will equal one.

SBA compares the Gini coefficient value for an industry with that for industries in the anchor comparison group. If the Gini coefficient value for an industry is higher than it is for industries in the anchor comparison industry group this may, all else being equal, warrant a size standard higher than the anchor. Conversely, if an industry's Gini coefficient is similar to or lower than that for the anchor group, the anchor standard, or in some cases a standard lower than the anchor, may be adopted.

5. Impact on Federal contracting and SBA loan programs. SBA examines the possible impact a size standard change may have on Federal small business assistance. This most often focuses on the share of Federal contracting dollars awarded to small businesses in the industry in question. In general, if the small business share of Federal contracting in an industry with significant Federal contracting is appreciably less than the small business share of the industry's total receipts, this could justify considering a size standard higher than the existing size standard. The disparity between the small business Federal market share and industry-wide small business share may be due to various factors, such as extensive administrative and compliance requirements associated with Federal contracts, the different skill set required for Federal contracts as compared to typical commercial contracting work, and the size of Federal contracts. These, as well as other factors, are likely to influence the type of firms within an industry that compete for Federal contracts. By comparing the small business Federal contracting share with the industry-wide small business share, SBA includes in its size standards analysis the latest Federal contracting trends. This analysis may support a size standard larger than the current size standard.

SBA considers Federal contracting trends in the size standards analysis only if: (1) The small business share of Federal contracting dollars is at least 10 percent lower than the small business share of total industry receipts; and (2) the amount of total Federal contracting averages $100 million or more during the latest three fiscal years. These thresholds reflect significant levels of contracting where a revision to a size standard may have an impact on contracting opportunities to small businesses.

Besides the impact on small business Federal contracting, SBA also evaluates the impact of a proposed size standard revision on SBA's loan programs. For this, SBA examines the data on volume and number of guaranteed loans within an industry and the size of firms obtaining those loans. This allows SBA to assess whether the existing or the proposed size standard for a particular industry may restrict the level of financial assistance to small firms. If current size standards have impeded financial assistance to small businesses, higher size standards may be supportable. However, if small businesses under current size standards have been receiving significant amounts of financial assistance through SBA's loan programs, or if the financial assistance has been provided mainly to businesses that are much smaller than the existing size standards, SBA does not consider this factor when determining the size standard.

SBA's primary source of industry data used in this proposed rule is a special tabulation of the 2007 Economic Census ( see www.census.gov/econ/census07/ ) prepared by the U.S. Bureau of the Census (Census Bureau) for SBA. The 2007 Economic Census data are the latest available. The special tabulation provides SBA with data on the number of firms, number of establishments, number of employees, annual payroll, and annual receipts of companies by Industry (6-digit level), Industry Group (4-digit level), Subsector (3-digit level), and Sector (2-digit level). These data are arrayed by various classes of firms' size based on the overall number of employees and receipts of the entire enterprise (all establishments and affiliated firms) from all industries. The special tabulation enables SBA to evaluate average firm size, the four-firm concentration ratio, and distribution of firms by various receipts, and employment size classes.

In some cases, where data were not available due to disclosure prohibitions in the Census Bureau's tabulation, SBA either estimated missing values using available relevant data or examined data at a higher level of industry aggregation, such as at the NAICS 2-digit (Sector), 3-digit (Subsector), or 4-digit (Industry Group) level. In some instances, SBA's analysis was based only on those factors for which data were available or estimates of missing values were possible.

To calculate average assets, SBA used sales to total assets ratios from the Risk Management Association's Annual Statement Studies, 2008-2010.

To evaluate Federal contracting trends, SBA examined data on Federal contract awards for fiscal years 2008-2010. The data are available from the U.S. General Service Administration's Federal Procurement Data System—Next Generation (FPDS-NG).

To assess the impact on financial assistance to small businesses, SBA examined data on its own guaranteed loan programs for fiscal years 2008-2010.

Data sources and estimation procedures SBA uses in its size standards analysis are documented in detail in SBA's “Size Standards Methodology” White Paper, which is available at www.sba.gov/size.

Section 3(a) of the Small Business Act (15 U.S.C. 632(a)) defines a small business concern as one that is: (1) Independently owned and operated; (2) not dominant in its field of operation; and (3) within a specific small business definition or size standard established by SBA Administrator. SBA considers as part of its evaluation whether a business concern at a proposed size standard would be dominant in its field of operation. For this, SBA generally examines the industry's market share of firms at the proposed standard. Market share and other factors may indicate whether a firm can exercise a major controlling influence on a national basis in an industry where a significant number of business concerns are engaged. If a contemplated size standard includes a dominant firm, SBA will consider a lower size standard to exclude the dominant firm from being defined as small.

To simplify receipts based size standards, SBA has proposed to select size standards from a limited number of levels. For many years, SBA has been concerned about the complexity of determining small business status caused by a large number of varying receipts based size standards ( see 69 FR 13130 (March 4, 2004) and 57 FR 62515 (December 31, 1992)). At the beginning of the current comprehensive size standards review, there were 31 different levels of receipts based size standards. They ranged from $0.75 million to $35.5 million, and many of them applied to one or only a few industries. SBA believes that such a large number of different small business size standards is unnecessary and difficult to justify analytically. To simplify managing and using size standards, SBA proposes that there be fewer size standard levels. This will produce more common size standards for businesses operating in related industries. This will also result in greater consistency among the size standards for industries that have similar economic characteristics.

All size standards in NAICS Sector 23 are based on average annual receipts. SBA proposes, therefore, to apply one of eight receipts based size standards to each industry in NAICS Sector 23. The eight “fixed” receipts based size standard levels are $5 million, $7 million, $10 million, $14 million, $19 million, $25.5 million, $30 million, and $35.5 million. SBA established these eight receipts based size standard based on the current minimum, the current maximum, and the most commonly used current receipts based size standards. At the start of the current comprehensive review, the most commonly used receipts based size standards clustered around the following—$2.5 million to $4.5 million, $7 million, $9 million to $10 million, $12.5 million to $14.0 million, $25 million to $25.5 million, and $33.5 million to $35.5 million. SBA selected $7 million as one of eight fixed levels of receipts based size standards because it is an anchor standard. The lowest or minimum receipts based size level will be $5 million. Other than the standards for agriculture and those based on commissions (such as real estate brokers and travel agents), $5 million includes those industries with the lowest receipts based standards, which ranged from $2 million to $4.5 million. Among the higher level size clusters, SBA has set four fixed levels: $10 million, $14 million, $25.5 million, and $35.5 million. Because of the large intervals between some of the fixed levels, SBA established two intermediate levels, namely $19 million between $14 million and $25.5 million, and $30 million between $25.5 million and $35.5 million. These two intermediate levels reflect roughly the same proportional differences as between the other two successive levels.

To simplify size standards further, SBA may propose a common size standard for closely related industries. Although the size standard analysis may support a separate size standard for each industry, SBA believes that establishing different size standards for closely related industries may not always be appropriate. For example, in cases where many of the same businesses operate in the same multiple industries, a common size standard for those industries might better reflect the Federal marketplace. This might also make size standards among related industries more consistent than separate size standards for each of those industries. This led SBA to establish a common size standard for the information technology (IT) services (NAICS 541511, NAICS 541112, NAICS 541513, NAICS 541519, and NAICS 811212), even though the industry data might support a distinct size standard for each industry (57 FR 27906 (June 23, 1992)). The SBA also, more recently, established common size standards for the industries in NAICS Industry Group 5411, Legal Services, and for the industries in NAICS Industry Group 5412, Accounting Services (77 FR 7490 (February 10, 2012)). In NAICS Sector 23, currently all industries in NAICS Subsector 236 (Construction of Buildings), and all industries in NAICS Industry Group 2371 (Utility System Construction) have common size standards. Similarly, all industries within NAICS Subsector 238 (Specialty Trade Contractors) also have a common size standard. In this proposed rule, SBA proposes to retain common size standards for all industries within NAICS Subsector 236 (Construction of Buildings), NAICS Industry Group 2371 (Utility System Construction), and NAICS Subsector 238 (Specialty Trade Contractors). Whenever SBA proposes a common size standard for closely related industries it will provide its justification.

SBA evaluated all 31 industries and one sub-industry in NAICS Sector 23, Construction, to assess the appropriateness of the current size standards. As described above, SBA compared data on the economic characteristics of each industry to the average characteristics of industries in two comparison groups. The first comparison group consists of all industries with $7 million size standards and is referred to as the “receipts based anchor comparison group.” Because the goal of SBA's review is to assess whether a specific industry's size standard should be the same as or different from the anchor size standard, this is the most logical group of industries to analyze. In addition, this group includes a sufficient number of firms to provide a meaningful assessment and comparison of industry characteristics.

If the characteristics of an industry are similar to the average characteristics of industries in the anchor comparison group, the anchor size standard is generally appropriate for that industry. If an industry's structure is significantly different from industries in the anchor group, a size standard lower or higher than the anchor size standard might be appropriate. The proposed new size standard is based on the difference between the characteristics of the anchor comparison group and a second industry comparison group. As described above, the second comparison group for receipts based standards consists of industries with the highest receipts based size standards, ranging from $23 million to $35.5 million. The average size standard for this group is $29 million. SBA refers to this group of industries as the “higher level receipts based size standard comparison group.” SBA determines differences in industry structure between an industry under review and the industries in the two comparison groups by comparing data on each of the industry factors, including average firm size, average assets size, the four-firm concentration ratio, and the Gini coefficient of distribution of firms by size. Table 1, Average Characteristics of Receipts Based Comparison Groups, shows the average firm size (both simple and weighted), average assets size, four-firm concentration ratio, average receipts of the four largest firms, and the Gini coefficient for both anchor level and higher level comparison groups for receipts based size standards.

For each industry factor in Table 1, SBA derives a separate size standard based on the differences between the values for an industry under review and the values for the two comparison groups. If the industry value for a particular factor is near the corresponding factor for the anchor comparison group, the $7 million anchor size standard is appropriate for that factor.

An industry factor significantly above or below the anchor comparison group will generally imply a size standard for that industry above or below the $7 million anchor. The new size standard in these cases is based on the proportional difference between the industry value and the values for the two comparison groups.

For example, if an industry's simple average receipts are $3.3 million, that can support a $19 million size standard. The $3.3 million level is 52.8 percent between $1.32 million for the anchor comparison group and $5.07 million for the higher level comparison group (($3.30 million−$1.32 million) ÷ ($5.07 million−$1.32 million) = 0.528 or 52.8%). This proportional difference is applied to the difference between the $7 million anchor size standard and average size standard of $29 million for the higher level size standard group and then added to $7.0 million to estimate a size standard of $18.61 million ([{$29.0 million−$7.0 million}* 0.528] + $7.0 million = $18.61 million). The final step is to round the estimated $18.61 million size standard to the nearest fixed size standard, which in this example is $19 million.

SBA applies the above calculation to derive a size standard for each industry factor. Detailed formulas involved in these calculations are presented in SBA's “Size Standards Methodology” which is available on its Web site at www.sba.gov/size. (However, it should be noted that figures in the “Size Standards Methodology” White Paper are based on 2002 Economic Census data and are different from those presented in this proposed rule. That is because when SBA prepared its “Size Standards Methodology,” the 2007 Economic Census data were not yet available). Table 2, Values of Industry Factors and Supported Size Standards, below, shows ranges of values for each industry factor and the levels of size standards supported by those values.

Besides industry structure, SBA also evaluates Federal contracting data to assess the success of small businesses in getting Federal contracts under the existing size standards. For industries where the small business share of total Federal contracting dollars is 10 to 30 percent lower than the small business share of total industry receipts, SBA has designated a size standard one level higher than their current size standard. For industries where the small business share of total Federal contracting dollars is more than 30 percent lower than the small business share of total industry receipts, SBA has designated a size standard two levels higher than the current size standard.

Because of the complex relationships among several variables affecting small business participation in the Federal marketplace, SBA has chosen not to designate a size standard for the Federal contracting factor alone that is more than two levels above the current size standard. SBA believes that a larger adjustment to size standards based on Federal contracting activity should be based on a more detailed analysis of the impact of any subsequent revision to the current size standard. In limited situations, however, SBA may conduct a more extensive examination of Federal contracting experience. This may support a different size standard than indicated by this general rule and take into consideration significant and unique aspects of small business competitiveness in the Federal contract market. SBA welcomes comments on its methodology for incorporating the Federal contracting factor in its size standard analysis and suggestions for alternative methods and other relevant information on small business experience in the Federal contract market that SBA should consider.

Twenty of the 31 industries in NAICS Sector 23 and the sub-industry category (“exception”) under NAICS 237990 (Other Heavy and Civil Engineering Construction),averaged $100 million or more annually in Federal contracting during fiscal years 2008-2010. The Federal contracting factor was significant ( i.e., the difference between the small business share of total industry receipts and small business share of Federal contracting dollars was 10 percentage points or more) in 9 of those 20 industries and a separate size standard was derived from that factor for each of them.

Table 3, Size Standards Supported by Each Factor for Each Industry (millions of dollars), shows the results of analyses of industry and Federal contracting factors for each industry covered by this proposed rule. Many NAICS industries in columns 2, 3, 4, 6, 7, and 8 show two numbers. The upper number is the value for the industry or federal contracting factor shown on the top of the column and the lower number is the size standard supported by that factor. For the four-firm concentration ratio, SBA estimates a size standard only if its value is 40 percent or more. If the four-firm concentration ratio for an industry is less than 40 percent, SBA does not estimate a size standard for that factor. If the four-firm concentration ratio is more than 40 percent, SBA indicates in column 6 the average size of the industry's four largest firms together with a size standard based on that average. Column 9 shows a calculated new size standard for each industry. This is the average of the size standards supported by each factor, rounded to the nearest fixed size level. Analytical details involved in the averaging procedure are described in SBA's “Size Standard Methodology.” For comparison with the new standards, the current size standards are in column 10 of Table 3, Size Standards Supported by Each Factor for Each Industry (millions of dollars).

When many of the same businesses operate in multiple industries, SBA believes that a common size standard can be appropriate for these industries even if the industry and relevant program data might suggest different size standards. For instance, in past rules, SBA has established a common size standard for Computer Systems Design and Related Services (NAICS 541511, NAICS 541112, NAICS 541513, NAICS 541519 (excluding the “exception” for Information Technology Value Added Resellers), and NAICS 811212. Another example is the common size standard for certain Architectural, Engineering (A&E) and Related Services. These include NAICS 541310, NAICS 541330 (excluding the “exceptions”), Map Drafting (an “exception” under NAICS 541340), NAICS 541360, and NAICS 541370 (64 FR 28275(May 25, 1999)). More recently, SBA established a common size standard for some of the industries in NAICS Sector 44-45, Retail Trade, as well ( see 75 FR 61597 (October 6, 2010)). The SBA also, more recently, established common size standards for the industries in NAICS Industry Group 5411, Legal Services, and for the industries in NAICS Industry Group 5412, Accounting Services (77 FR 7490 (February 10, 2012)). Similarly, SBA proposed common size standards for several other industries in NAICS Sector 48-49, Transportation and Warehousing ( see 76 FAR 27935 (May 13, 2011)), NAICS Sector 56, Administrative and Support, Waste Management and Remediation Services ( see 76 FR 63510 (October 12, 2011), and NAICS Sector 53, Real Estate and Rental and Leasing ( see 76 FR 70680 (November 15, 2011)).

For NAICS Sector 23, SBA derives, as an alternative to a separate size standard for each industry, common size standards for industries in two NAICS Subsectors and one NAICS Industry Group, as shown in Table 4, Subsectors and Industry for Common Sized Standards. SBA evaluated industry and Federal contracting factors and derived a common size standard for each Industry Group and Subsector using the same method as described above. The results are in Table 5, Size Standards Supported by Each Factor for NAICS Subsectors 236 and 238, and Industry Group 2371, which immediately follows Table 4, Subsectors and Industry Groups for Common Size Standards, below.

The Dredging and Surface Cleanup Activities (Dredging) size standard is a sub-industry category (or an “exception”) established by SBA within the 6-digit NAICS 237990 (Other Heavy and Civil Engineering Construction). Data from the Census Bureau's special tabulation are limited to the 6-digit NAICS industry level, and hence, do not provide separate data at the sub-industry level. As such, SBA relied upon data from other sources to evaluate the current $20 million size standard for Dredging. Firms engaged in the Dredging sub-industry were identified from contracting activity reported in FPDS-NG during fiscal years 2008-2010. Dredging contracts can be identified as those classified within NAICS 237990 and by four Product Service Codes (PSCs): Y216 (Construction of Dredging), Z216 (Maintenance, Repair or Alteration of Dredging), Y217 (Dredging, Incl. Dustpan and Sea-Going Hoppers), and Z217 (Dredging, Incl. Dustpan and Sea-Going Hoppers). SBA also looked at Dredging contracting data from the Corps of Engineers' Navigation Data Center ( www.ndc.iwr.usace.army.mil/dredge/dredge.htm ) for the same period. SBA obtained receipts and employment data from the Central Contractor Registration (CCR) for the identified Dredging firms to develop the size standards evaluation factors. Based on the analysis of the resultant data, a different size standard for Dredging than for other heavy construction activities in NAICS 237990 continues to be appropriate. Table 3, Size Standards Supported by Each Factor for Each Industry (millions of dollars), above, shows the results from the analysis of the Dredging sub-industry, which supported a $30 million size standard instead of the current $20 million.

Before deciding on an industry's size standard, SBA also considers the impact of new or revised size standards on SBA's loan programs. Accordingly, SBA examined its 7(a) and 504 Loan Program data for fiscal years 2008-2010 to assess whether the proposed size standards need further adjustments to ensure credit opportunities for small businesses through those programs. For the industries reviewed in this rule, the data show that it is mostly businesses much smaller than the current size standards that use SBA's 7(a) and 504 loans.

Furthermore, the Jobs Act established an alternative size standard for SBA's 7(a) and 504 Loan Programs. Specifically, an applicant exceeding an NAICS industry size standard may still be eligible if its maximum tangible net worth does not exceed $15 million and its average net income after Federal income taxes (excluding any carry-over losses) for the 2 full fiscal years before the date of the application is not more than $5 million.

Therefore, no size standard in NAICS Sector 23, Construction, needs an adjustment based on this factor.

Table 6, Summary of Size Standards Analysis, below, summarizes the results of SBA analyses of industry specific size standards from Table 3, Size Standards Supported by Each Factor for Each Industry (millions of dollars), above, and the results for common size standards from Table 5, Size Standards Supported by Each Factor for NAICS Subsectors 236 and 238, and Industry Group 2371, above. In terms of industry specific size standards, the results in Table 3, Size Standards Supported by Each Factor for Each Industry (millions of dollars), might support increases in size standards for five industries and one sub-industry, decreases for 22 industries and no changes for four industries. Based on common size standards for certain NAICS Industry Groups and Subsectors as explained earlier, the results in Table 5, Size Standards Supported by Each Factor for Subsectors 236 and 238 and Industry Group 2371, above, appear to support increases in size standards for one industry and one sub-industry, decreases for 28 industries and no changes for two industries.

However, SBA believes that lowering small business size standards is not in the best interest of small businesses in the current economic environment. The U.S. economy was in recession from December 2007 to June 2009, the longest and deepest of any recessions since World War II. The economy lost more than eight million non-farm jobs during 2008-2009. In response, Congress passed and the President signed into law the American Recovery and Reinvestment Act of 2009 (Recovery Act) to promote economic recovery and to preserve and create jobs. Although the recession officially ended in June 2009, the unemployment rate is still high at 8.2 percent in June 2012 and is forecast to remain around this level at least through the end of 2012. In June 2012, unemployment data by industry and class of workers showed that construction workers experience the worst unemployment rate of all industries at 12.8 percent.

Recently, Congress passed and the President signed the Jobs Act to promote small business job creation. The Jobs Act puts more capital into the hands of entrepreneurs and small business owners; strengthens small businesses' ability to compete for contracts; includes recommendations from the President's Task Force on Federal Contracting Opportunities for Small Business; creates a better playing field for small businesses; promotes small business exporting, building on the President's National Export Initiative; expands training and counseling; and provides $12 billion in tax relief to help small businesses invest in their firms and create jobs. A proposal to reduce size standards will have an immediate impact on jobs, and it would be contrary to the expressed will of the President and the Congress.

Lowering size standards would decrease the number of firms that participate in Federal financial and procurement assistance programs for small businesses. It would also affect small businesses that are now exempt from or receive some form of relief from myriad other Federal regulations that use SBA's size standards. That impact could take the form of increased fees, paperwork, or other compliance requirements for small businesses. Furthermore, size standards based solely on analytical results without any other considerations can cut off currently eligible small firms from those programs and benefits. In NAICS Sector 23, more than 7,000 businesses would lose their small business eligibility if size standards were lowered based solely on results from industry specific analysis. Similarly, more than 10,000 businesses would lose small business eligibility if size standards were lowered based solely on results from common size standards analysis. That would run counter to what SBA and the Federal government are doing to help small businesses. Reducing size eligibility for Federal procurement opportunities, especially under current economic conditions, would not preserve or create more jobs; rather, it would have the opposite effect. Therefore, in this proposed rule, SBA does not intend to reduce size standards for any industries. For industries where analyses might seem to support lowering size standards, SBA proposes to retain the current size standards.

Furthermore, as stated previously, the Small Business Act requires the Administrator to “* * * consider other factors deemed to be relevant * * *” to establishing small business size standards. The current economic conditions and the impact on job creation are quite relevant factors when establishing small business size standards. SBA nevertheless invites comments and suggestions on whether it should lower size standards as suggested by analyses of industry and program data or retain the current standards for those industries in view of current economic conditions.

Based on comparisons between industry specific size standards and common size standards within each Industry Group or Subsector, SBA finds that for several industries, as shown in Table 4, Subsectors and Industry Groups for Common Size Standards, above, common size standards are more appropriate for several reasons. First, analyzing industries at the more aggregated Industry Group or Subsector levels simplifies size standards analysis, and the results will be more consistent among related industries. Second, in NAICS Sector 23, industries within each Industry Group or Subsector currently have the same size standards and SBA believes it is better to keep the revised size standards also same unless industries are significantly different. Third, within each Industry Group or Subsector many of the same businesses tend to operate in the same multiple industries. SBA believes that common size standards reflect the Federal marketplace in those industries better than different size standards for each industry.

For industries where both industry specific size standards and common size standards have been calculated, for the above reasons, SBA proposes to apply common size standards. For industries and one sub-industry (Dredging) where SBA has not estimated common size standards it proposes to apply industry specific size standards. As discussed above, lowering small business size standards is inconsistent with what the Federal government is doing to stimulate the economy and would discourage job growth for which Congress established the Recovery Act and Jobs Act. In addition, it would be inconsistent with the Small Business Act requiring the Administrator to establish size standards based on industry analysis and other relevant factors such as current economic conditions. Thus, SBA proposes to increase size standards for one industry and one sub-industry in NAICS Sector 23 and retain the current size standards for all other industries in that Sector. The SBA's proposed increases are in Table 7, Summary of Proposed Size Standards Revisions, (below).

In addition, retaining current standards when the analytical results suggested lowering them is consistent with SBA's prior actions for NAICS Sector 44-45 (Retail Trade), NAICS Sector 72 (Accommodation and Food Services), and NAICS Sector 81 (Other Services) that the Agency proposed (74 FR 53924, 74 FR 53913, and 74 FR 53941, October 21, 2009) and adopted in its final rules (75 FR 61597, 75 FR 61604, and 75 FR 61591, October 6, 2010). It is also consistent with the Agency's recently issued proposed rule (76 FR 14323 (March 16, 2011)) and final rule (77 FR 7490 (February 10, 2012)) for NAICS Sector 54, Professional, Scientific and Technical Services, NAICS Sector 48-49, Transportation and Warehousing (76 FR 27935 (May 13, 2011)), NAICS Sector 51, Information (76 FR 63216 (October 12, 2011)), NAICS Sector 56, Administrative and Support, Waste Management and Remediation Services (76 FR 63510 (October 12, 2011)), NAICS Sector 61, Educational Services (76 FR 70667 (November 15, 2011)), and NAICS Sector 53, Real Estate and Rental and Leasing (76 FR 70680 (November 15, 2011)). In each of those final and proposed rules, SBA opted not to reduce small business size standards, for the same reasons it has provided above in this proposed rule.

SBA has determined that for the industries in NAICS Sector 23, Construction, for which it has proposed to increase size standards, no individual firm at or below the proposed size standard will be large enough to dominate its field of operation. At the proposed individual size standards, if adopted, the small business share of total industry receipts among those industries is, on average, 0.1 percent, varying from 0.01 percent to 0.3 percent. These market shares effectively preclude a firm at or below the proposed size standards from exerting control on any of the industries.

SBA invites public comments on this proposed rule, especially on the following issues:

1. To simplify size standards, SBA proposes eight fixed levels for receipts based size standards: $5 million, $7 million, $10 million, $14 million, $19 million, $25.5 million, $30 million, and $35.5 million. SBA invites comments on whether this is necessary and whether the proposed fixed size levels are appropriate. SBA welcomes suggestions on alternative approaches to simplifying small business size standards.

2. SBA seeks feedback on whether SBA's proposal to increase two size standards and retain the remaining 30 size standards in NAICS Sector 23 is appropriate given the economic characteristics of each industry reviewed in this proposed rule. SBA also seeks feedback and suggestions on alternative standards, if they would be more appropriate, including whether the number of employees is a more suitable measure of size for certain industries and what that employee level should be.

3. SBA proposes common size standards for industries within NAICS Subsectors 236 and 238, and NAICS Industry Group 2371 (Utility System Construction). SBA invites comments or suggestions along with supporting information with respect to the following:

a. Whether SBA should adopt common size standards for those industries or establish a separate size standard for each industry; and

b. Whether the proposed common size standards for those industries are at the correct levels or what would be more appropriate if what SBA has proposed are not appropriate.

4. SBA's proposed size standards are based on five primary factors—average firm size, average assets size (as a proxy of startup costs and entry barriers), four- firm concentration ratio, distribution of firms by size, and the total share and small business share of Federal contracting dollars of the evaluated industries. SBA welcomes comments on these factors and/or suggestions of other factors that it should consider when evaluating or revising size standards. SBA also seeks information on relevant data sources, other than what it uses, if available.

5. SBA gives equal weight to each of the five primary factors in all industries. SBA seeks feedback on whether it should continue giving equal weight to each factor or whether it should give more weight to one or more factors for certain industries. Recommendations to weigh some factors more than others should include suggested weights for each factor along with supporting information.

6. For NAICS 237210, Land Subdivision, based on its analysis of industry and program data alone, SBA proposes to increase the existing size standards by a large amount, while it proposes to retain the current size standards for most other industries in NAICS Sector 23. SBA seeks feedback on whether, as a policy, it should limit the increase to a size standard or establish minimum or maximum values for its size standards. SBA seeks suggestions on appropriate levels of changes to size standards and on their minimum or maximum levels.

7. In addition to comments on its proposal to increase the size standard for Dredging and Surface Cleanup Activities from current $20 million to $30 million, SBA also seeks comments regarding the requirement for a dredging concern to qualify as small on a Federal procurement that it must perform at least 40 percent of the volume dredged with its own equipment or equipment owned by another small dredging concern ( see Footnote 2 in 13 CFR 121.201). This requirement has been in SBA's small business size regulations since 1974 ( see 30 FR 24669, July 5, 1974 and 39 FR 31302, August 28, 1974). This proposed rule retains the requirement set forth in Footnote 2 in order to ensure that small Dredging firms perform a significant and meaningful portion of a Dredging project set aside for small business. However, SBA has heard from small dredging firms that believe they should be able to lease equipment from any size firm as long as employees from the small firm perform the work on the contract. SBA specifically request comments as to whether the footnote is necessary. Comments pertaining to this requirement should address: (1) Whether there continues to be a need to retain the current 40 percent equipment requirement; (2) whether the 40 percent equipment requirement should be revised, and if so, the rationale for an alternative percentage; and (3) whether a different and more verifiable requirement based on an alternative measure (such as value of contract or personnel involved) may achieve the same objective of ensuring that small businesses perform significant and meaningful work on Dredging contracts.

8. For analyzing the dredging size standard, a sub-industry (“exception”) within NAICS 237990, SBA used PSCs within NAICS 237990 to identify contracting activity reported in FPDS-NG, and firms in the dredging sub-industry during fiscal years 2008-2010. Using the receipts and employment data for those identified firms from CCR, SBA analyzed the industry factors for this sub-industry. SBA seeks suggestions or comments on the use of the data sources and the proposed size standard.

9. SBA is also interested in comments on the elimination of the sub-industry category for Dredging, and the application of the same size standard as for the rest of the NAICS 237990. Comments on applying the same NAICS 237990 size standard for Dredging should address the basis for why that industry size standard is more suitable than a specific dredging sub-industry size standard or why dredging firms should continue to be evaluated as a discrete sub-industry for SBA's size standards purposes.

10. For analytical simplicity and efficiency, in this proposed rule, SBA has refined its size standard methodology to obtain a single value as a proposed size standard instead of a range of values, as in its past size regulations. SBA welcomes any comments on this procedure and suggestions on alternative methods.

Public comments on the above issues are very valuable to SBA for validating its size standard methodology and its proposed size standards revisions in this proposed rule. This will help SBA to move forward with its review of size standards for other NAICS Sectors. Commenters addressing size standards for a specific industry or a group of industries should include relevant data and/or other information supporting their comments. If comments relate to using size standards for Federal procurement programs, SBA suggests that commenters provide information on the size of contracts in their industries, the size of businesses that can undertake the contracts, start-up costs, equipment and other asset requirements, the amount of subcontracting, other direct and indirect costs associated with the contracts, the use of mandatory sources of supply for products and services, and the degree to which contractors can mark up those costs.

The Office of Management and Budget (OMB) has determined that this proposed rule is a “significant” regulatory action for purposes of Executive Order 12866. Accordingly, the next section contains SBA's Regulatory Impact Analysis. This is not a “major” rule, however, under the Congressional Review Act, 5 U.S.C. 800.

SBA believes that proposed size standards revisions in NAICS Sector 23, Construction, will better reflect the economic characteristics of small businesses in this Sector and the Federal government marketplace. SBA's mission is to aid and assist small businesses through a variety of financial, procurement, business development, and advocacy programs. To determine the intended beneficiaries of these programs, SBA must establish distinct definitions of which businesses are deemed small businesses. The Small Business Act (15 U.S.C. 632(a)) delegates to SBA's Administrator the responsibility for establishing small business size definitions. The Act also requires that small business definitions vary to reflect industry differences. The recently enacted Jobs Act also requires SBA to review all size standards and make necessary adjustments to reflect market conditions. The supplementary information section of this proposed rule explains SBA's methodology for analyzing a size standard for a particular industry.

The most significant benefit to businesses obtaining small business status because of this rule is gaining eligibility for Federal small business assistance programs. These include SBA's financial assistance programs, economic injury disaster loans, and Federal procurement programs intended for small businesses. Federal procurement programs provide targeted opportunities for small businesses under SBA's business development programs, such as 8(a), Small Disadvantaged Businesses (SDB), small businesses located in Historically Underutilized Business Zones (HUBZone), women-owned small businesses (WOSB), and service-disabled veteran-owned small business concerns (SDVO SBC). Federal agencies may also use SBA's size standards for a variety of other regulatory and program purposes. These programs assist small businesses to become more knowledgeable, stable, and competitive. SBA estimates that in one industry and one sub-industry for which SBA has proposed to increase size standards more than 400 firms in NAICS 23, not small under the existing size standards, will become small under the proposed size standards and therefore become eligible for these programs. That is about 0.1 percent of all firms classified as small under the current size standards in NAICS Sector 23. If adopted as proposed, this will increase the small business share of total receipts in all industries within NAICS Sector 23 from about 49.7 percent to 50 percent. In addition, as stated above, there will be reduced fees, less paperwork, and fewer compliance requirements for more businesses.

Three groups will benefit from the proposed size standards revisions in this rule, if they are adopted as proposed: (1) Some businesses that are above the current size standards may gain small business status under the higher size standards, thereby enabling them to participate in Federal small business assistance programs; (2) growing small businesses that are close to exceeding the current size standards will be able to retain their small business status under the higher size standards, thereby enabling them to continue their participation in the programs; and (3) Federal agencies will have a larger pool of small businesses from which to draw for their small business procurement programs.

SBA estimates that firms gaining small business status under the proposed size standards could receive Federal contracts totaling $17 million to $20 million annually under SBA's small business, 8(a), SDB, HUBZone, WOSB, and SDVO SBC Programs, and other unrestricted procurements. The added competition for many of these procurements can also result in lower prices to the Government for procurements reserved for small businesses, but SBA cannot quantify this benefit.

Under SBA's 7(a) and 504 Loan Programs, based on the fiscal years 2008-2010 data, SBA estimates about up to five additional loans totaling about $0.5 million to $1 million in Federal loan guarantees could be made to these newly defined small businesses under the proposed standards. Increasing the size standards will likely result in more small business guaranteed loans to businesses in these industries, but it is be impractical to try to estimate exactly the number and total amount of loans. There are two reasons for this: (1) Under the Jobs Act, SBA can now guarantee substantially larger loans than in the past; and, (2) as described above, the Jobs Act established an alternative size standard ($15 million in tangible net worth and $5 million in net income after income taxes) for business concerns that do not meet the size standards for their industry. Therefore, SBA finds it difficult to quantify the actual impact of these proposed size standards on its 7(a) and 504 Loan Programs.

Newly defined small businesses will also benefit from SBA's Economic Injury Disaster Loan (EIDL) Program. Since this program is contingent on the occurrence and severity of a disaster, SBA cannot make a meaningful estimate of this impact.

To the extent that those 400 newly defined additional small firms could become active in Federal procurement programs, the proposed changes, if adopted, may entail some additional administrative costs to the government associated with there being more bidders on small business procurement opportunities. In addition, there will be more firms seeking SBA's guaranteed loans, more firms eligible for enrollment in the Central Contractor Registration (CCR)'s Dynamic Small Business Search database, and more firms seeking certification as 8(a) or HUBZone firms or qualifying for small business, WOSB, SDVO SBC, and SDB status. Among those newly defined small businesses seeking SBA assistance, there could be some additional costs associated with compliance and verification of small business status and protests of small business status. SBA believes that these added administrative costs will be minimal because mechanisms are already in place to handle these requirements.

Additionally, Federal government contracts may have higher costs. With a greater number of businesses defined as small, Federal agencies may choose to set aside more contracts for competition among small businesses rather than using full and open competition. The movement from unrestricted to small business set-aside contracting might result in competition among fewer total bidders, although there will be more small businesses eligible to submit offers. However, the additional costs associated with fewer bidders are expected to be minor since, by law, procurements may be set aside for small businesses or reserved for the 8(a), HUBZone, WOSB, or SDVO SBC Programs only if awards are expected to be made at fair and reasonable prices. In addition, there may be higher costs when more full and open contracts are awarded to HUBZone businesses that receive price evaluation preferences.

The proposed size standards revisions, if adopted, may have some distributional effects among large and small businesses. Although SBA cannot estimate with certainty the actual outcome of the gains and losses among small and large businesses, it can identify several probable impacts. There may be a transfer of some Federal contracts to small businesses from large businesses. Large businesses may have fewer Federal contract opportunities as Federal agencies decide to set aside more Federal contracts for small businesses. In addition, some Federal contracts may be awarded to HUBZone concerns instead of large businesses since these firms may be eligible for a price evaluation preference for contracts when they compete on a full and open basis.

Similarly, currently defined small businesses may obtain fewer Federal contracts due to the increased competition from more businesses defined as small. This transfer may be offset by a greater number of Federal procurements set aside for all small businesses. The number of newly defined and expanding small businesses that are willing and able to sell to the Federal Government will limit the potential transfer of contracts from large and currently defined small businesses. SBA cannot estimate the potential distributional impacts of these transfers with any degree of precision. The proposed revisions to the existing size standards for one industry and one-sub-industry in NAICS Sector 23, Construction, are consistent with SBA's statutory mandate to assist small business. This regulatory action promotes the Administration's objectives. One of SBA's goals in support of the Administration's objectives is to help individual small businesses succeed through fair and equitable access to capital and credit, Government contracts, and management and technical assistance. Reviewing and modifying size standards, when appropriate, ensures that intended beneficiaries have access to small business programs designed to assist them.

A description of the need for this regulatory action and benefits and costs associated with this action including possible distributional impacts that relate to Executive Order 13563 is included above in the Regulatory Impact Analysis under Executive Order 12866.

In an effort to engage interested parties in this action, SBA has presented its size standards methodology (discussed above under Supplementary Information) to various industry associations and trade groups. SBA also met with a number of industry groups to get their feedback on its methodology and other size standards issues. In addition, SBA presented its size standards methodology to businesses in 13 cities in the U.S. and sought their input as part of Jobs Act tours. The presentation also included information on the latest status of the comprehensive size standards review and on how interested parties can provide SBA with input and feedback on size standards review.

Additionally, SBA sent letters to the Directors of the Offices of Small and Disadvantaged Business Utilization (OSDBU) at several Federal agencies with considerable procurement responsibilities requesting their feedback on how the agencies use SBA's size standards and whether current size standards meet their programmatic needs (both procurement and non-procurement). SBA gave appropriate consideration to all input, suggestions, recommendations, and relevant information obtained from industry groups, individual businesses, and Federal agencies in preparing this proposed rule.

The review of size standards in NAICS Sector 23, Construction, is consistent with Executive Order 13563, Sec 6, calling for retrospective analyses of existing rules. The last comprehensive review of size standards occurred during the late 1970s and early 1980s. Since then, except for periodic adjustments for monetary based size standards, most reviews of size standards were limited to a few specific industries in response to requests from the public and Federal agencies. SBA recognizes that changes in industry structure and the Federal marketplace over time have rendered existing size standards for some industries no longer supportable by current data. Accordingly, in 2007, SBA began a comprehensive review of its size standards to ensure that existing size standards have supportable bases and to revise them when necessary. In addition, the Jobs Act requires SBA to conduct a detailed review of all size standards and to make appropriate adjustments to reflect market conditions. Specifically, the Jobs Act requires SBA to conduct a detailed review of at least one-third of all size standards during every 18 month period from the date of its enactment and do a complete review of all size standards not less frequently than once every 5 years thereafter.

This action meets applicable standards set forth in Sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. The action does not have retroactive or preemptive effect.

For purposes of Executive Order 13132, SBA has determined that this proposed rule 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, SBA has determined that this proposed rule has no federalism implications warranting preparation of a federalism assessment.

For the purpose of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA has determined that this rule will not impose any new reporting or record keeping requirements.

Under the Regulatory Flexibility Act (RFA), this proposed rule, if adopted, may have a significant impact on a substantial number of small businesses in NAICS Sector 23, Construction. As described above, this rule may affect small businesses seeking Federal contracts, loans under SBA's 7(a), 504 and Economic Injury Disaster Loan Programs, and assistance under other Federal small business programs.

Immediately below, SBA sets forth an initial regulatory flexibility analysis (IRFA) of this proposed rule addressing the following questions: (1) What are the need for and objective of the rule?; (2) What are SBA's description and estimate of the number of small businesses to which the rule will apply?; (3) What are the projected reporting, recordkeeping, and other compliance requirements of the rule?; (4) What are the relevant Federal rules that may duplicate, overlap, or conflict with the rule?; and (5) What alternatives will allow the Agency to accomplish its regulatory objectives while minimizing the impact on small businesses?

Changes in industry structure, technological changes, productivity growth, mergers and acquisitions, and updated industry definitions have changed the structure of many industries in NAICS Sector 23. Such changes can be sufficient to support revisions to current size standards for some industries. Based on the analysis of the latest data available, SBA believes that the revised standards in this proposed rule more appropriately reflect the size of businesses that need Federal assistance. The recently enacted Jobs Act also requires SBA to review all size standards and make necessary adjustments to reflect market conditions.

If the proposed rule is adopted in its present form, SBA estimates that more than 400 additional firms will become small because of increased size standards one industry and one sub-industry in NAICS Sector 23. That represents 0.1 percent of total firms that are small under current size standards in all industries within that Sector. This will result in an increase in the small business share of total industry receipts for the Sector from 49.7 percent under the current size standards to 50 percent under the proposed size standards. The proposed size standards, if adopted, will enable more small businesses to retain their small business status for a longer period. Many firms may have lost their eligibility and find it difficult to compete at current size standards with companies that are significantly larger than they are. SBA believes the competitive impact will be positive for existing small businesses and for those that exceed the size standards but are on the very low end of those that are not small. They might otherwise be called or referred to as mid-sized businesses, although SBA only defines what is small; other entities are other than small.

The proposed size standard changes impose no additional reporting or record keeping requirements on small businesses. However, qualifying for Federal procurement and a number of other programs requires that businesses register in the CCR database and certify in the Online Representations and Certifications Application (ORCA) that they are small at least once annually. Therefore, businesses opting to participate in those programs must comply with CCR and ORCA requirements. There are no costs associated with either CCR registration or ORCA certification. Changing size standards alters the access to SBA's programs that assist small businesses, but does not impose a regulatory burden because they neither regulate nor control business behavior.

Under § 3(a)(2)(C) of the Small Business Act, 15 U.S.C. 632(a)(2)(c), Federal agencies must use SBA's size standards to define a small business, unless specifically authorized by statute to do otherwise. In 1995, SBA published in the Federal Register a list of statutory and regulatory size standards that identified the application of SBA's size standards as well as other size standards used by Federal agencies (60 FR 57988 (November 24, 1995)). SBA is not aware of any Federal rule that would duplicate or conflict with establishing size standards.

However, the Small Business Act and SBA's regulations allow Federal agencies to develop different size standards if they believe that SBA's size standards are not appropriate for their programs, with the approval of SBA's Administrator (13 CFR 121.903). The Regulatory Flexibility Act authorizes an Agency to establish an alternative small business definition, after consultation with the Office of Advocacy of the U.S. Small Business Administration (5 U.S.C. 601(3)).

By law, SBA is required to develop numerical size standards for establishing eligibility for Federal small business assistance programs. Other than varying size standards by industry and changing the size measures, no practical alternative exists to the systems of numerical size standards.

For the reasons set forth in the preamble, SBA proposes to amend part 13 CFR part 121 as follows:

To determine eligibility for Federal small business assistance, SBA establishes small business definitions (referred to as size standards) for private sector industries in the United States. SBA uses two primary measures of business size—average annual receipts and average number of employees. SBA uses financial assets, electric output, and refining capacity to measure the size of a few specialized industries. In addition, SBA's Small Business Investment Company (SBIC), Certified Development Company (504) and 7(a) Loan Programs use either the industry based size standards or net worth and net income based alternative size standards to determine eligibility for those programs. At the start of the current comprehensive size standards review, there were 41 different size standards covering 1,141 NAICS industries and 18 sub-industry activities (“exceptions” in SBA's Table of size standards). Thirty-one of these size standards were based on average annual receipts, seven were based on average number of employees, and three were based on other measures.

Over the years, SBA has received comments that its size standards have not kept up with changes in the economy, in particular the changes in the Federal contracting marketplace and industry structure. The last time SBA conducted a comprehensive review of all size standards was during the late 1970s and early 1980s. Since then, most reviews of size standards were limited to a few specific industries in response to requests from the public and Federal agencies. SBA also makes periodic inflation adjustments to its monetary based size standards. The SBA's latest inflation adjustment to size standards was published in the Federal Register on July 18, 2008 (73 FR 41237).

Because of changes in the Federal marketplace and industry structure since the last overall review, SBA recognizes that current data may no longer support some of its existing size standards. Accordingly, in 2007, SBA began a comprehensive review of all size standards to determine if they are consistent with current data, and to adjust them when necessary. In addition, on September 27, 2010, the President of the United States signed the Small Business Jobs Act of 2010 (Jobs Act). The Jobs Act directs SBA to conduct a detailed review of all size standards and to make appropriate adjustments to reflect market conditions. Specifically, the Jobs Act requires SBA to review at least one-third of all size standards during every 18-month period from the date of its enactment and do a complete review of all size standards not less frequently than once every 5 years thereafter. Reviewing existing small business size standards and making appropriate adjustments based on current data are also consistent with Executive Order 13563 on improving regulation and regulatory review.

Rather than review all size standards at one time, SBA is reviewing a group of industries within an NAICS Sector. An NAICS Sector generally consists of 25 to 75 industries, except for the manufacturing sector, which has considerably more industries. Once SBA completes its review of size standards for industries in an NAICS Sector, it will issue a proposed rule to revise size standards for those industries for which currently available data and other relevant factors support doing so.

Below is a discussion of SBA's size standards methodology for establishing receipts based size standards, which SBA applied to this proposed rule, including analyses of industry structure, Federal procurement trends and other factors for industries reviewed in this proposed rule, the impact of the proposed revisions to size standards on Federal small business assistance, and the evaluation of whether a revised size standard would exclude dominant firms from being considered small.

SBA has recently developed a “Size Standards Methodology” for establishing, reviewing and modifying size standards when necessary. SBA has published this document on its Web site at www.sba.gov/size for public review and comments and also included it, as a supporting document, in the electronic docket of this proposed rule at www.regulations.gov . SBA does not apply every feature of its methodology to every size standard evaluation because not all features are appropriate for every industry. For example, since all industries in NAICS Sector 71 have receipts based size standards, the methodology described in this proposed rule applies to establishing receipts based standards. However, the methodology is made available in its entirety for parties who are interested in SBA's overall approach to establishing, evaluating, and modifying small business size standards. SBA always explains its analysis in individual proposed and final rules relating to size standards for specific industries.

SBA welcomes comments from the public on a number of issues concerning its “Size Standards Methodology,” such as suggestions on alternative approaches to establishing and modifying size standards; whether there are alternative or additional factors that SBA should consider; whether SBA's approach to small business size standards makes sense in the current economic environment; whether SBA's use of anchor size standards is appropriate in the current economy; whether there are gaps in SBA's methodology because of the lack of comprehensive data; and whether there are other facts or issues that SBA should consider. Comments on the SBA's methodology should be submitted via: (1) the Federal eRulemaking Portal: www.regulations.gov ; the docket number is SBA-2009-0008; follow the instructions for submitting comments; or (2) Mail/Hand Delivery/Courier: Khem R. Sharma, Ph.D., Chief, Size Standards Division, 409 Third Street SW., Mail Code 6530, Washington, DC 20416. As with comments received to this and other proposed rules, SBA will post all comments on its methodology on www.regulations.gov . As of July 18, 2012, SBA has received 13 comments to its “Size Standards Methodology.” The comments are available to the public at www.regulations.gov . SBA continues to welcome comments on its methodology from interested parties.

Congress granted discretion to SBA's Administrator to establish detailed small business size standards. 15 U.S.C. 632(a)(2). Section 3(a)(3) of the Small Business Act (15 U.S.C. 632(a)(3)) requires that “* * * the [SBA] Administrator shall ensure that the size standard varies from industry to industry to the extent necessary to reflect the differing characteristics of the various industries and consider other factors deemed to be relevant by the Administrator.” Accordingly, the economic structure of an industry serves as the underlying basis for developing and modifying small business size standards. SBA identifies the small business segment of an industry by examining data on the economic characteristics defining the industry structure itself (as described below). In addition to the analysis of an industry's structure, SBA also considers current economic conditions, together with its own mission, program objectives, and the Administration's current policies, suggestions from industry groups and Federal agencies, and public comments on the proposed rule, when it establishes small business size standards. SBA also examines whether a size standard based on industry and other relevant data successfully exclude businesses that are dominant in the industry.

This proposed rule includes information regarding the factors SBA evaluated and the criteria the Agency used to propose any adjustments to size standards in NAICS Sector 71. It also explains why SBA has proposed to adjust some size standards in NAICS Sector 71 but not others. This proposed rule affords the public an opportunity to review and comment on SBA's proposals to revise size standards in NAICS Sector 71 as well as on the data and methodology it uses to evaluate and revise a size standard.

For the current comprehensive size standards review, SBA has established three “base” or “anchor” size standards—$7.0 million in average annual receipts for industries that have receipts based size standards, 500 employees for manufacturing and other industries that have employee based size standards (except for Wholesale Trade), and 100 employees for industries in the Wholesale Trade Sector. SBA established 500 employees as the anchor size standard for manufacturing industries at its inception in 1953. Shortly thereafter, SBA established $1 million in average annual receipts as the anchor size standard for nonmanufacturing industries. SBA has periodically increased the receipts based anchor size standard for inflation, and it stands today at $7 million. Since 1986, SBA has set 100 employees as the size standard for all industries in the Wholesale Trade Sector for SBA's financial assistance programs. However, NAICS codes for Wholesale Trade Industries (NAICS Sector 42) and their 100 employee size standards for the Wholesale Trade Sector do not apply to Federal procurement programs. Rather, for Federal procurement purposes the size standard is 500 employees for all industries in Wholesale Trade (NAICS Sector 42), and for all industries in Retail Trade (NAICS Sector 44-45) under the SBA's nonmanufacturer rule (13 CFR 121.406(b)).

These long-standing anchor size standards have stood the test of time and gained legitimacy through practice and general public acceptance. An anchor size standard is neither a minimum nor a maximum. It is a common size standard for a large number of industries that have similar economic characteristics and serves as a reference point in evaluating size standards for individual industries. SBA uses the anchor in lieu of trying to establish precise small business size standards for each industry. Otherwise, theoretically, the number of size standards might be as high as the number of industries for which SBA establishes size standards (1,141). Furthermore, the data SBA analyzes are static, but the U.S. economy is not. Hence, absolute precision is impossible. Therefore, SBA presumes an anchor size standard is appropriate for a particular industry unless that industry displays economic characteristics that are considerably different from others with the same anchor size standard.

When evaluating a size standard, SBA compares the economic characteristics of the specific industry under review to the average characteristics of industries with one of the three anchor size standards (referred to as the “anchor comparison group”). This allows SBA to assess the industry structure and to determine whether the industry is appreciably different from the other industries in the anchor comparison group. If the characteristics of a specific industry under review are similar to the average characteristics of the anchor comparison group, the anchor size standard is considered appropriate for that industry. SBA may consider adopting a size standard below the anchor when: (1) All or most of the industry characteristics are significantly smaller than the average characteristics of the anchor comparison group; or (2) other industry considerations strongly suggest that the anchor size standard would be an unreasonably high size standard for the industry.

If the specific industry's characteristics are significantly higher than those of the anchor comparison group, a size standard higher than the anchor size standard may be appropriate. The larger the differences are between the characteristics of the industry under review and those of the anchor comparison group, the larger will be the difference between the appropriate industry size standard and the anchor size standard. To determine a size standard above the anchor size standard, SBA analyzes the characteristics of a second comparison group. For industries with receipts based size standards, including those in NAICS Sector 71 that are reviewed in this proposed rule, SBA has developed a second comparison group consisting of industries with the highest levels of receipts based size standards. To determine the level of a size standard above the anchor size standard, SBA analyzes the characteristics of this second comparison group. The size standards for this group of industries range from $23 million to $35.5 million in average annual receipts, with the weighted average size standard for the group being $29 million. SBA refers to this comparison group as the “higher level receipts based size standard group.”

The primary factors that SBA evaluates when analyzing the structural characteristics of an industry include average firm size, startup costs and entry barriers, industry competition, and distribution of firms by size. SBA also evaluates, as an additional primary factor, the possible impact that revising size standards might have on Federal contracting assistance to small businesses. These are, generally, the five most important factors SBA examines when establishing or revising a size standard for an industry. However, SBA will also consider and evaluate other information that it believes is relevant to a particular industry (such as technological changes, growth trends, SBA's financial assistance, other program factors, etc. ). SBA also considers possible impacts of size standard revisions on eligibility for Federal small business assistance, current economic conditions, the Administration's policies, and suggestions from industry groups and Federal agencies. Public comments on a proposed rule also provide important additional information. SBA thoroughly reviews all public comments before making a final decision on its proposed size standard. Below are brief descriptions of each of the five primary factors that SBA has evaluated in each industry in NAICS Sector 71 being reviewed in this proposed rule. A more detailed description of this analysis is provided in the SBA's “Size Standards Methodology,” available at http://www.sba.gov/size .

1. Average firm size. SBA computes two measures of average firm size: Simple average and weighted average. For industries with receipts based size standards, the simple average is the total receipts of the industry divided by the total number of firms in the industry. The weighted average firm size is the sum of weighted simple averages in different receipts size classes, where weights are the shares of total industry receipts for respective size classes. The simple average weighs all firms within an industry equally, regardless of their size. The weighted average overcomes that limitation by giving more weight to larger firms.

If the average firm size of an industry under review is significantly higher than the average firm size of industries in the anchor comparison industry group, this will generally support a size standard higher than the anchor size standard. Conversely, if the industry's average firm size is similar to or significantly lower than that of the anchor comparison industry group, it will be a basis to adopt the anchor size standard, or, in rare cases, a standard lower than the anchor.

2. Startup costs and entry barriers. Startup costs reflect a firm's initial size in an industry. New entrants to an industry must have sufficient capital and other assets to start and maintain a viable business. If new firms entering a particular industry have greater capital requirements than firms in industries in the anchor comparison group, this can be a basis for establishing a size standard higher than the anchor standard. In lieu of data on actual startup costs, SBA uses average assets as a proxy measure to assess the levels of capital requirements for new entrants to an industry.

To calculate average assets, SBA begins with the sales to total assets ratio for an industry from the Risk Management Association's Annual Statement Studies. The SBA then applies these ratios to the average receipts of firms in that industry. An industry with a significantly higher level of average assets than that of the anchor comparison group is likely to have higher startup costs; this in turn will support a size standard higher than the anchor. Conversely, if the industry has a significantly smaller average assets compared to the anchor comparison group, the anchor size standard, or, in rare cases, one lower than the anchor, may be appropriate.

3. Industry competition. Industry competition is generally measured by the share of total industry receipts generated by the largest firms in an industry. SBA generally evaluates the share of industry receipts generated by the four largest firms in each industry. This is referred to as the “four-firm concentration ratio,” a commonly used economic measure of market competition. SBA compares the four-firm concentration ratio for an industry under review to the average four-firm concentration ratio for industries in the anchor comparison group. If a significant share of economic activity within the industry is concentrated among a few relatively large companies, all else being equal, SBA will establish a size standard higher than the anchor size standard. SBA does not consider the four-firm concentration ratio as an important factor in assessing a size standard if its value for an industry under review is less than 40 percent. For industries in which the four-firm concentration ratio is 40 percent or more, SBA examines the average size of the four largest firms in determining a size standard.

4. Distribution of firms by size. SBA examines the shares of industry total receipts accounted for by firms of different receipts and employment size classes in an industry. This is an additional factor that SBA evaluates in assessing competition within an industry. If most of an industry's economic activity is attributable to smaller firms, this would indicate that small businesses are competitive in that industry. This supports adopting the anchor size standard. If most of an industry's economic activity is attributable to larger firms, this would indicate that small businesses are not competitive in that industry. This would support adopting a size standard above the anchor.

Concentration among firms is a measure of inequality of distribution. To evaluate the degree of inequality of distribution within an industry, SBA computes the Gini coefficient by constructing the Lorenz curve. The Lorenz curve presents the cumulative percentages of units (firms) along the horizontal axis and the cumulative percentages of receipts (or other measures of size) along the vertical axis. (For further detail, please refer to SBA's “Size Standards Methodology” on its Web site at www.sba.gov/size .) Gini coefficient values vary from zero to one. If an industry's total receipts reflect equal distribution among the industries, the Gini coefficient will equal zero. If a single firm accounts for an industry's total receipts, the Gini coefficient will equal one.

SBA compares the Gini coefficient value for an industry under review with that for industries in the anchor comparison group. If an industry shows a higher Gini coefficient value than industries in the anchor comparison industry group this may, all else being equal, warrant a higher size standard than the anchor. Conversely, if an industry shows a similar or lower Gini coefficient than industries in the anchor group, the anchor standard, or, in some cases, a standard lower than the anchor, may be adopted.

5. Impact on Federal contracting and SBA's loan programs. SBA examines the possible impact a size standard change may have on Federal small business assistance. This most often focuses on the share of Federal contracting dollars awarded to small businesses in the industry in question. In general, if the small business share of Federal contracting in an industry with significant Federal contracting is appreciably less than the small business share of the industry's total receipts, there is justification for considering a size standard higher than the existing size standard. The disparity between the small business Federal market share and industry-wide small business share may be due to various factors, such as extensive administrative and compliance requirements associated with Federal contracts, different skill sets required for Federal contracts as compared to typical commercial contracting work, and the size of Federal contracts. These, and other factors, will likely influence the type of firms that compete for Federal contracts. By comparing the Federal contracting small business share with the industry-wide small business share, SBA includes in its size standards analysis the latest Federal contracting trends. This analysis may support a size standard larger than the current size standard.

SBA considers Federal contracting trends in the size standards analysis only if: (1) The small business share of Federal contracting dollars is at least 10 percent lower than the small business share of total industry receipts; and (2) the amount of total Federal contracting averages $100 million or more during the latest three fiscal years. These thresholds reflect a significant level of contracting where a revision to a size standard may have an impact on contracting opportunities to small businesses.

Besides the impact on small business Federal contracting, SBA also evaluates the influence of a proposed size standard on SBA's loan programs. For this, SBA examines the volume and number of SBA's guaranteed loans within an industry and the size of firms obtaining those loans. This allows SBA to assess whether the existing or proposed size standard for a particular industry may restrict the level of financial assistance to small firms. If the analysis shows that current size standards have impeded financial assistance to small businesses, this can support higher size standards. However, if small businesses under current size standards have been receiving significant amounts of financial assistance through SBA's loan programs, or if the businesses receiving SBA's financial assistance are much smaller than the existing size standards, this factor may not be considered in determining the size standards.

The SBA's primary source of industry data used in this proposed rule is a special tabulation of the data from 2007 Economic Census (see www.census.gov/econ/census07/ ) prepared by the U.S. Bureau of the Census (Census Bureau) for the Agency. The special tabulation provides SBA with data on the number of firms, number of establishments, number of employees, annual payroll, and annual receipts of companies by NAICS Sector (2-digit level), Subsector (3-digit level), Industry Group (4-digit level), Industry (6-digit level). These data are arrayed by various classes of firms' size based on the overall number of employees and receipts of the entire enterprise (all establishments and affiliated firms) from all industries. The special tabulation enables SBA to evaluate average firm size, the four-firm concentration ratio, and distribution of firms by various receipts and employment size classes.

In some cases, where data were not available due to disclosure prohibitions in the Census Bureau's tabulation, SBA either estimated missing values using available relevant data or examined data at a higher level of industry aggregation, such as at the NAICS 2-digit (Sector), 3-digit (Subsector) or 4-digit (Industry Group) level. In some instances, SBA had to base its analysis only on those factors for which data were available or estimates of missing values were possible.

To calculate average assets, SBA used sales to total assets ratios from the Risk Management Association's Annual Statement Studies, 2008-2010.

To evaluate Federal contracting trends, SBA examined data on Federal contract awards for fiscal years 2008-2010. The data are available from the U.S. General Service Administration's Federal Procurement Data System—Next Generation (FPDS-NG).

To assess the impact on financial assistance to small businesses, SBA examined data on its own guaranteed loan programs for fiscal years 2008-2010.

Data sources and estimation procedures SBA uses in its size standards analysis are documented in detail in the SBA's “Size Standards Methodology” White Paper, which is available at www.sba.gov/size .

Section 3(a) of the Small Business Act (15 U.S.C. § 632(a)) defines a small business concern as one that is: (1) Independently owned and operated; (2) not dominant in its field of operation; and (3) within a specific small business definition or size standard established by the SBA's Administrator. SBA considers as part of its evaluation whether a business concern at a proposed size standard would be dominant in its field of operation. For this, SBA generally examines the industry's market share of firms at the proposed size standard. Market share and other factors may indicate whether a firm can exercise a major controlling influence on a national basis in an industry where a significant number of business concerns are engaged. If a contemplated size standard would include a dominant firm, SBA would consider a lower size standard to exclude the dominant firm from being defined as small.

To simplify size standards for the ongoing comprehensive review of receipts based size standards, SBA has proposed to select size standards from a limited number of levels. For many years, SBA has been concerned about the complexity of determining small business status caused by a large number of varying receipts based size standards ( see 69 FR 13130 (March 4, 2004) and 57 FR 62515 (December 31, 1992)). At the start of current comprehensive size standards review, there were 31 different levels of receipts based size standards. They ranged from $0.75 million to $35.5 million, and many of them applied to one or only a few industries. SBA believes that to have so many different size standards with small variations among them is unnecessary and difficult to justify analytically. To simplify managing and using size standards, SBA proposes that there be fewer size standard levels. This will produce more common size standards for businesses operating in related industries. This will also result in greater consistency among the size standards for industries that have similar economic characteristics.

SBA proposes, therefore, to apply one of eight receipts based size standards to each industry in NAICS Sector 71. The eight “fixed” receipts based size standard levels are $5 million, $7 million, $10 million, $14 million, $19 million, $25.5 million, $30 million, and $35.5 million. To establish these eight receipts based size standard levels, SBA considered the current minimum, the current maximum, and the most commonly used current receipts based size standards. At the start of the current comprehensive size standards review, the most commonly used receipts based size standards clustered around the following: $2.5 million to $4.5 million, $7 million, $9 million to $10 million, $12.5 million to $14.0 million, $25.0 million to $25.5 million, and $33.5 million to $35.5 million. SBA selected $7 million as one of eight fixed levels of receipts based size standards because it is also an anchor standard for receipts based standards. The lowest or minimum receipts based size level will be $5 million. Other than the size standards for agriculture and those based on commissions (such as real estate brokers and travel agents), $5 million include those industries with the lowest receipts based standards, which ranged from $2 million to $4.5 million. Among the higher level size clusters, SBA has set four fixed levels: $10 million, $14 million, $25.5 million, and $35.5 million. Because there are large intervals between some of the fixed levels, SBA also established two intermediate levels: Namely, $19 million between $14 million and $25.5 million, and $30 million between $25.5 million and $35.5 million. These two intermediate levels reflect roughly the same proportional differences as between the other two successive levels.

To simplify size standards further, SBA may propose a common size standard for closely related industries. Although the size standard analysis may support a separate size standard for each industry, SBA believes that establishing different size standards for closely related industries may not always be appropriate. For example, in cases where many of the same businesses operate in the same multiple industries, a common size standard for those industries might better reflect the Federal marketplace. This might also make size standards among related industries more consistent than separate size standards for each of those industries. All industries in NAICS Sector 71 currently have the common $7 million size standard. However, the latest industry data neither supported the current common $7 million nor a different common size standard for all industries within the Sector. Furthermore, the industry specific results showed too much variation to support common size standards for industries even at the 4-Digit NAICS Industry Group level.

SBA evaluated the structure of all 25 industries in NAICS Sector 71, Arts, Entertainment and Recreation, to assess the appropriateness of the current size standards. As described above, SBA compared data on the economic characteristics of each industry in NAICS Sector 71 to the average characteristics of industries in two comparison groups. The first comparison group consists of all industries with $7.0 million size standards and is referred to as the “receipts based anchor comparison group.” Because the goal of SBA's size standards review is to assess whether a specific industry's size standard should be the same as or different from the anchor size standard, this is the most logical group of industries to analyze. In addition, this group includes a sufficient number of firms to provide a meaningful assessment and comparison of industry characteristics.

If the characteristics of an industry under review are similar to the average characteristics of industries in the anchor comparison group, the anchor size standard is generally considered appropriate for that industry. If an industry's structure is significantly different from industries in the anchor group, a size standard lower or higher than the anchor size standard might be appropriate. The level of the new size standard is based on the difference between the characteristics of the anchor comparison group and a second industry comparison group. As described above, the second comparison group for receipts based size standards consists of industries with the highest receipts based size standards, ranging from $23 million to $35.5 million. The average size standard for this group is $29 million. SBA refers to this group of industries as the “higher level receipts based size standard comparison group.” SBA determines differences in industry structure between an industry under review and the industries in the two comparison groups by comparing data on each of the industry factors, including average firm size, average assets size, the four-firm concentration ratio, and the Gini coefficient of distribution of firms by size. Table 1, Average Characteristics of Receipts Based Comparison Groups, below, shows two measures of the average firm size (simple and weighted), the average assets size, the four-firm concentration ratio, the average receipts of the four largest firms, and the Gini coefficient for both anchor level and higher level comparison groups for receipts based size standards.

For each industry factor in Table 1, Average Characteristics of Receipts Based Comparison Groups, above, SBA derives a separate size standard based on the differences between the values for the industry under review and the values for the two comparison groups. If the industry value for a particular factor is near the corresponding factor for the anchor comparison group, SBA will consider the $7.0 million anchor size standard appropriate for that factor.

An industry factor with a value significantly above or below the anchor comparison group will generally warrant a size standard above or below the $7.0 million anchor. The new size standard in these cases is based on the proportional difference between the industry value and the values for the two comparison groups.

For example, if an industry's simple average receipts are $3.3 million, that would support a $19 million size standard. The $3.3 million level is 52.8 percent between the average firm size of $1.32 million for the anchor comparison group and $5.07 million for the higher level comparison group (($3.30 million−$1.32 million) ÷ ($5.07 million−$1.32 million) = 0.528 or 52.8%). This proportional difference is applied to the difference between the $7.0 million anchor size standard and average size standard of $29 million for the higher level size standard group and then added to $7.0 million to estimate a size standard of $18.616 million ([{$29.0 million−$7.0 million} * 0.528] + $7.0 million = $18.616 million). The final step is to round the estimated $18.616 million size standard to the nearest fixed size standard level, which in this example is $19 million.

SBA applies the above calculation to derive a size standard for each industry factor. Detailed formulas involved in these calculations are presented in the SBA's “Size Standards Methodology,” available on SBA's Web site at www.sba.gov/size. (However, note that figures in the “Size Standards Methodology” White Paper are based on 2002 Economic Census data and are different from those presented in this proposed rule. That is because when SBA prepared its “Size Standards Methodology,” the 2007 Economic Census data were not yet available.) Table 2, Values of Industry Factors and Support Size Standards, below, shows ranges of values for each industry factor and the levels of size standards supported by those values.

Besides industry structure, SBA also evaluates Federal contracting data to assess how successful small businesses are at obtaining Federal contracts under current size standards. For the current comprehensive size standards review, SBA has decided to designate a size standard at one level higher than the current size standard for industries where the small business share of total Federal contracting dollars is 10 to 30 percentage points lower than the small business share of total industry receipts and at two levels higher than the current size standard where the difference is more than 30 percentage points.

Because of the complex relationships among several variables affecting small business participation in the Federal marketplace, SBA has chosen not to designate a size standard for the Federal contracting factor alone that is higher than two levels above the current size standard. SBA believes that a larger adjustment to size standards based on Federal contracting activity should be based on a more detailed analysis of the impact of any subsequent revision to the current size standard. In limited situations, however, SBA may conduct a more extensive examination of Federal contracting experience. This may enable SBA to support a different size standard than indicated by this general rule and take into consideration significant and unique aspects of small business competitiveness in the Federal contract market. SBA welcomes comments on its methodology of incorporating the Federal contracting factor in the size standard analysis and suggestions for alternative methods and other relevant information on small business experience in the Federal contract market.

None of the 25 industries in NAICS Sector 71 averaged $100 million or more annually in Federal contracting during fiscal years 2008-2010, suggesting that Federal contracting activity is insignificant in that Sector. In fact, based on data for fiscal years 2008-2010, Federal contracting for the entire Sector was less than $90 million. Accordingly, the Federal contracting factor is not factored in to calculate the new size standards for all industries in NAICS Sector 71.

Table 3, Size Standards Supported by Each Factor for Each Industry (millions of dollars), below, shows the results of analyses of industry factors for each industry in NAICS Sector 71. Many of the NAICS industries in columns 2, 3, 4, 6, and 7 show two numbers. The upper number is the value for the industry factor shown on the top of the column and the lower number is the size standard supported by that factor. For the four-firm concentration ratio, SBA estimates a size standard if its value is 40 percent or more. If the four-firm concentration ratio for an industry is less than 40 percent, there is no estimated size standard for that factor. If the four-firm concentration ratio is more than 40 percent, SBA indicates in column 6 the average size of the industry's top four firms together with a size standard based on that average. As mentioned earlier, since the Federal contracting factor was significant in none of the industries in NAICS Sector 71, no size standard was estimated for that factor. Column 8 shows a calculated new size standard for each industry. This is the average of the size standards supported by each industry factor and rounded to the nearest fixed size level. Analytical details involved in the averaging procedure are described in the SBA's “Size Standard Methodology.” For comparison with the new standards, the current size standards are in column 9 of Table 3, Size Standards Supported by Each Factor for Each Industry (millions of dollars), below.

Comments Invited

We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2012-0732; Directorate Identifier 2012-CE-022-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD because of those comments.

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

On July 1, 2009, we issued AD 2009-14-13, Amendment 39-15963 (74 FR 34213, July 15, 2009). That AD required actions intended to address an unsafe condition on the products listed above.

Since we issued AD 2009-14-13, Amendment 39-15963 (74 FR 34213, July 15, 2009), Pilatus Aircraft Ltd. has issued revisions to the Limitations section of the airplane maintenance manual to include an inspection of the wing main spar fastener holes at rib 6 for cracks.

The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Community, has issued AD No. 2012-0099, dated June 8, 2012 (referred to after this as “the MCAI”), to correct an unsafe condition for the specified products. The MCAI states:

The mandatory instructions and airworthiness limitations applicable to the Structure and Components of the PC-12 are specified in the Aircraft Maintenance Manual (AMM) under Chapter 4. Prompted by a crack found on one wing of the aeroplane fleet leader, a more restrictive airworthiness limitation was introduced, in that manual, for the inspection of the main spar rib 6 strap fastener.

These documents include the maintenance instructions and/or airworthiness limitations developed by Pilatus Aircraft Ltd. and approved by EASA. Failure to comply with these instructions and limitations could potentially lead to unsafe condition.

For the reasons described above, this AD requires the implementation of more restrictive maintenance instructions and/or airworthiness limitations. You may obtain further information by examining the MCAI in the AD docket.

Pilatus Aircraft Ltd. has issued Structural and Component Limitations—Airworthiness Limitations, document 12 B 04 00 00 00A 000A A, dated January 27, 2012; and Structural, Component and Miscellaneous—Airworthiness Limitations, document 12 A 04 00 00 00A 000A A, dated January 27, 2012. 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 this State of Design Authority, they have notified us of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all information and determined the unsafe condition exists and is likely to exist or develop on other products of the same type design.

We estimate that this proposed AD would affect 678 products of U.S. registry. We also estimate that it would take about 3.5 work hours per product to comply with the basic requirements of this AD. The average labor rate is $85 per work hour. Required parts would cost about $300 per product. Based on these figures, we estimate the cost of this proposed AD on U.S. operators to be $405,105, or $597.50 per product.

In addition, we estimate that any necessary follow on actions would take about 6 work hours and require parts costing $4,000, for a cost of $4,510 per product. We have no way of determining the number of products that may need these actions. We also estimate that it would take about 12 work hours per product to comply with the addition of the wing inspection requirements of this proposed AD. The average labor rate is $85 per work hour.

Based on these figures, we estimate the cost of the proposed wing inspection on U.S. operators to be $691,560, or $1,020 per product.

In addition, we estimate that any necessary follow-on actions would take about 7 work-hours and require parts costing approximately $5,000, for a cost of $5,595 per product. We have no way of determining the number of products that may need these actions.

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.

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

Interested persons are invited to comment on this rule 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-2011-0341; Airspace Docket No. 12-AEA-4) and be submitted in triplicate to the Docket Management System (see ADDRESSES section for address and phone number). You may also submit comments through the Internet at http://www.regulations.gov .

Persons 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 Docket No. FAA-2012-0341; Airspace Docket No. 12-AEA-4.” The postcard will be date/time stamped and returned to the commenter.

All communications received before the specified closing date for comments will be considered before taking action on the proposed rule. The proposal contained in this notice may be changed in light of the comments received. 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 from and comments submitted through http://www.regulations.gov . Recently published rulemaking documents can also be accessed through the FAA's Web page at http://www.faa.gov/airports_airtraffic/air_traffic/publications/airspace_amendments/ .

You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office (see the ADDRESSES section for address and phone number) between 9:00 a.m. and 5:00 p.m., Monday through Friday, except Federal holidays. An informal docket may also be examined during normal business hours at the office of the Eastern Service Center, Federal Aviation Administration, room 210, 1701 Columbia Avenue, College Park, Georgia 30337.

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

The FAA is considering an amendment to Title 14, Code of Federal Regulations (14 CFR) part 71 to amend Class E airspace at Wilkes-Barre, PA providing the controlled airspace required to support the new RNAV GPS standard instrument approach procedures for Wilkes-Barre Wyoming Valley Airport. Controlled airspace extending upward from 700 feet above the surface would be created for the safety and management of IFR operations at the airport. Also, the heliport formerly known as Fire Station Helipad at Mercy Hospital would be changed to Hanover Township Fire Station #5 Heliport.

Class E airspace designations are published in Paragraph 6005 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 Class E airspace designation listed in this document will be published subsequently in the Order.

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. It, therefore, (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a Regulatory Evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this proposed rule, when promulgated, would not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the 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 proposed 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 airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This proposed regulation is within the scope of that authority as it would amend Class E airspace at Wilkes-Barre Wyoming Valley Airport, Wilkes-Barre, PA.

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.

In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:

In FR Doc. 2012-14263, appearing on page 35317 in the Federal Register of Wednesday, June 13, 2012 the following correction is made:

On page 35317, in the third column at the end of the document, Dennis M. Keefe is incorrectly listed as the “Acting Director” of the Office of Food Safety, Center for Food Safety and Applied Nutrition. His title is corrected to read “Director, Office of Food Additive Safety, Center for Food Safety and Applied Nutrition”.

ONRR formed the Committee on December 8, 2011, to develop specific recommendations regarding proposed revisions to the existing regulations for oil production from Indian leases, especially the major portion requirement. The Committee includes representatives of parties that the final rule will affect. It will act solely in an advisory capacity to ONRR and will neither exercise program management responsibility nor make decisions directly affecting the matters on which it provides advice.

Meetings are open to the public without advanced registration on a space-available basis. Minutes of this meeting will be available for public inspection and copying at our offices in Building 85 on the Denver Federal Center in Lakewood, Colorado, or are available at www.onrr.gov/Laws_R_D/IONR . ONRR conducts these meetings under the authority of the Federal Advisory Committee Act (Pub. L. 92-463, 5 U.S.C., Appendix 2, Section 1 et seq.).

On May 5, 2010, the President signed into law the Caregivers and Veterans Omnibus Health Services Act of 2010 (2010 Act), Public Law 111-163. Section 506(a) of the 2010 Act, codified at 38 U.S.C. 523 note, requires VA to establish a pilot program to assess the feasibility and advisability of using community-based organizations and local and State government entities to:

• Increase the coordination of community, local, State, and Federal providers of health care and benefits for veterans to assist veterans who are transitioning from military service to civilian life in such transition;

• Increase the availability of high quality medical and mental health services to veterans transitioning from military service to civilian life;

• Provide assistance to families of veterans who are transitioning from military service to civilian life to help such families adjust to such transition; and

• Provide outreach to veterans and their families to inform them about the availability of benefits and connect them with appropriate care and benefit programs.

In addition, section 506(c)(2) instructs VA to carry out the program in five locations to be selected by the Secretary of Veterans Affairs. In selecting locations, section 506 requires VA to consider sites in:

• Rural areas;

• Areas with populations that have a high proportion of minority group representation;

• Areas with populations that have a high proportion of individuals who have limited access to health care; and

• Areas that are not in close proximity to an active duty military installation.

This rulemaking proposes regulations to implement this statutory mandate by establishing a 2-year pilot program to be known as the “Rural Veterans Coordination Pilot” and by its acronym “RVCP.”

Under the RVCP, VA would award grants to eligible entities that propose to provide assistance to certain veterans and their families who are making the transition from military service to civilian life in rural or underserved communities; specifically, veterans covered under the pilot program are those who were discharged or released from service up to 2 years prior to the date funds are awarded to the grantee.

In section 506(g) of the 2010 Act, Congress required VA to report on the experience of the RVCP, including an assessment of its benefits to veterans and the advisability of continuing the pilot program. Because VA must make this report within 180 days following the completion of this pilot, VA proposes to offer grants that would be available for the 2-year period of the pilot and to require strict adherence to the reporting deadlines established.

Proposed § 64.0 would set forth the purpose of the RVCP and the scope of part 64. The purpose of the RVCP is to provide grants to community-based organizations and local and State government entities to be used to assist veterans who are transitioning from military service to civilian life in rural or underserved communities and the families of such veterans. Proposed part 64 would apply only to the RVCP.

Proposed § 64.2 would define terms applicable to § 64.0 through § 64.18 and to the NOFA that will be published in the Federal Register , as required by proposed § 64.8.

We propose to define “applicant” as an eligible entity that submits an application for a grant as announced in a NOFA. Any eligible entity would become an applicant by submitting an application.

“Community-based organization” would be defined as a group that represents a community or a significant segment of a community and that is engaged in meeting community needs. This definition would ensure that grant funds are used to reach smaller groups that are able to operate within communities and to reach veterans and/or their families in areas that are harder for VA to reach through existing means, which is the Congressional intent behind section 506.

An “eligible entity” would be defined as a community-based organization or a local or State government entity. These are the organizations and entities identified in section 506 of the 2010 Act as the possible recipients of grants under the RVCP. An eligible entity would be identified as the legal entity whose employer identification number is on the Application for Federal Assistance (SF 424), even if only a particular component of the entity is applying for the RVCP grant. This would help ensure the integrity of the program because it would enable VA to evaluate the applicant organization as part of the larger entity, and would help ensure a broader distribution of grant funds because VA would not award more than one grant to any one eligible entity.

A “grantee” would be defined as a recipient of an RVCP grant, in other words, an applicant that is awarded an RVCP grant.

We propose to define having “limited access to health care” as residing in an area identified by the Health Resources and Services Administration of the U.S. Department of Health and Human Services (HHS) as being a medically underserved area or having a medically underserved population. HHS defines medically underserved areas or populations as having “too few primary care providers, high infant mortality, high poverty and/or high elderly population.” Areas that meet these criteria can be found on HHS's list of medically underserved communities published on their interactive Web site at http://muafind.hrsa.gov. This definition would ensure that grant funds assist persons in the types of areas contemplated by section 506 of the 2010 Act, i.e., “areas with populations that have a high proportion of individuals who have limited access to health care.”

We propose to define “local government” as a county, municipality, city, town, township, or regional government or its components. This definition is consistent with the plain language of section 506.

For purposes of the RVCP, VA proposes to use the definition of “[m]inority group member” found at 38 U.S.C. 544(d). This definition includes individuals who are Asian American, Black, Hispanic, Native American (including American Indian, Alaskan Native, and Native Hawaiian), or Pacific-Islander American. There is no reason to interpret “minority group” as used in section 506 of the 2010 Act in a manner other than as used for other title 38 programs or activities.

A “Notice of Funds Availability,” or “NOFA,” would be defined as the notice published by VA in the Federal Register alerting eligible entities of the availability of RVCP grants and containing important information about the RVCP grant application process, in accordance with proposed § 64.8.

A “participant” would be defined as a veteran or a member of a veteran's family who receives services for which an RVCP grant is awarded.

To define “rural,” VA proposes to rely on information compiled and provided by the U.S. Census Bureau in identifying rural communities. The Census Bureau's classification of “rural” consists of all territory, population, and housing units located outside of urbanized areas and urban clusters. Interested parties are referred to the Census Bureau's Web site ( http://www.census.gov/geo/www/ua/ua_2k.html ) for additional information. Section 506 offers no specialized meaning of the term, and therefore, we believe it is rational to use the definition provided by the U.S. Census Bureau. This definition would ensure that grant funds assist persons in the types of areas contemplated by section 506(c)(2)(A) of the 2010 Act.

The “Rural Veterans Coordination Pilot,” or “RVCP,” refers to the pilot grant program authorized by section 506 of the 2010 Act.

We propose to define “State government” as any of the fifty States of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, or any agency or instrumentality of a State government. This definition is consistent with the plain language meaning of the term and its use in section 506 of the 2010 Act.

We propose to define “underserved communities” as those areas that have a high proportion of minority group representation, have a high proportion of individuals who have limited access to health care, or have no active duty military installation that is reasonably accessible to the community. Section 506 of the 2010 Act directs VA to consider making RVCP grants available in such communities. We propose to refer to these communities collectively as “underserved communities” because these areas have been identified as lacking in medical and other services that are available to individuals in other areas. Use of a single term to identify these areas would make reference to them in these regulations easier and more efficient.

Section 506(c)(2)(D) requires VA to consider “areas that are not in close proximity to an active duty military installation.” We interpret “close proximity” to mean something other than a mere distance. VA recognizes that the geography surrounding any given military installation will vary, and that geographical and transportation barriers may affect the time that it takes to reach a military installation which, by simple mileage count, may be in close proximity. For example, some rural areas are functionally more remote than others owing to issues such as geographic features (e.g., mountainous regions, lakes, major rivers) and seasonal restrictions (e.g., limited ferry service, closed roads or bridges, reduced flights). Therefore, we would refer in the definition of “underserved communities” to areas that “have no active duty military installation that is reasonably accessible to the community,” in order to emphasize that it is accessibility, not solely distance, that would be used to determine whether a particular location is appropriate for RVCP funding.

We propose to define a “veteran who is transitioning from military service to civilian life” as one who is leaving active military, naval, or air service in the Armed Forces to return to life as a civilian. To ensure that RVCP funds are used to assist veterans and their families who are actively transitioning, i.e., who are experiencing the acute effects of the change in lifestyle, we would limit the term to veterans who have been discharged or released from service not more than 2 years prior to the date on which an RVCP grant is awarded. In section 506, Congress directs VA to use this pilot to assess the feasibility and advisability of using these organizations and entities to assist in providing benefits and assistance to veterans and their families “who are transitioning from military service to civilian life.” We believe that the initial 2 years after discharge or release pose the greatest challenge to veterans and their families as they relocate and readjust to the civilian way of life.

We would use “VA” to refer to the U.S. Department of Veterans Affairs for purposes of ease and readability.

We propose to define a “veteran” as a person who served in the active military, naval, or air service and who was discharged or released under conditions other than dishonorable. This definition is consistent with 38 U.S.C. 101(2) and the use of the term in other VA benefit programs.

We propose to define the “veteran's family” as those individuals who reside with the veteran in the veteran's primary residence. These individuals may include a parent, a spouse, a child, a step-family member, an extended family member, and individuals who reside in the home with the transitioning veteran but are not a member of the family of the transitioning veteran. We believe this definition is representative of the family unit of many transitioning veterans today. We do not propose to provide services under this pilot program to family members who do not reside in the veteran's primary residence, such as separated or divorced spouses, surviving spouses, or children who primarily reside with the other parent, because these individuals are less likely to be experiencing the effects of transition or may have other resources available to assist them. Moreover, we note that this definition of family is consistent with the definition set out in section 101 of the 2010 Act governing assistance and support services for caregivers (see 38 U.S.C. 1720G(d)(3)).

Proposed § 64.4 would provide general information pertaining to RVCP grants. Section 506(c)(1) of the 2010 Act directs VA to carry out the RVCP in five locations. To meet this requirement, in § 64.4(a) and (b), we propose to award a total of five RVCP grants to eligible entities and to limit the awards to one grant per eligible entity and one grant for each pilot project location. For this purpose we hope to gather evidence on the effectiveness of community-based organizations and local and State government entities in various locations in increasing the availability and coordination of care and benefits available to transitioning veterans and their families at all levels (i.e., at the local, State, and Federal levels) and providing assistance and outreach services to these veterans and their families to help them transition successfully to civilian life.

In proposed § 64.4(c), we propose that each RVCP grant award would be for a maximum period of 2 years, which is the length of the RVCP under section 506 of the 2010 Act. To maximize the effectiveness of the pilot, we propose that the date on which the 2 years would begin would be the date on which the RVCP grants are awarded. No extensions or renewals would be available as the RVCP would end 2 years after the date the awards are granted.

In proposed § 64.4(d), we state that a grantee would not be required to provide matching funds as a condition of receiving an RVCP grant. Our goal with this pilot is, in part, to assess how eligible entities in target areas that currently lack the resources needed to assist transitioning veterans and their families might be able to provide them with needed assistance were additional resources available. Requiring matching funds could negate the ability of otherwise eligible entities to qualify for RVCP grants.

Proposed paragraph (e) would specify that no participant would be charged a fee for any services provided by a grantee under the RVCP grant and would not be required to participate in any other activities sponsored by a grantee as a condition of receiving assistance under the RVCP grant. Grantees would be expected to provide the services for which the RVCP grants are made to the participant without charge or condition.

In proposed § 64.6, we would define the permissible uses of RVCP grants. In general, as provided in section 506 of the 2010 Act, RVCP grants would be used to increase the coordination of health care and benefits for transitioning veterans, to increase the availability of high quality medical and mental health services to transitioning veterans, to provide assistance to families of transitioning veterans, and to provide outreach to veterans and their families. We would provide specific examples of each of these purposes in § 64.6(a). These examples are intended to be guidance to potential applicants and not an exclusive list. We propose to require that at least 90 percent of the RVCP grant be used for these purposes. The reason that we provide examples is to offer guidance; VA would encourage highly innovative RVCP grant projects and would allow use of grant funds to evaluate new strategies in each of these areas, and we reemphasize that we do not intend these examples to limit applicants' attempts to provide creative, innovative ways to reach the goals stated in paragraphs (a)(1) through (4).

Under proposed § 64.6(b), grantees would be required to limit the use of the RVCP funds for the indirect costs of doing business to no more than 10 percent of the RVCP grant awarded to the grantee. These costs would include those expenses of doing business that are not identified directly with the services provided using the RVCP grant but are necessary for the general operation of the grantee organization. We recognize that applicants would incur such costs to fulfill any proposal. Limiting the amount that would be used to cover these costs would ensure that RVCP grants are used primarily for the benefit of transitioning veterans and their families. We believe 10 percent of the total grant awarded is fair and reasonable because we anticipate that many of the entities who would apply for these grants are already actively working to assist veterans and their families in the target communities, but they may lack the funding necessary to be fully effective or to increase the reach of their services. In these cases, by allowing 10 percent to be used for indirect costs, we provide a mechanism for these entities to increase their services and recover any additional costs of recordkeeping and reporting necessitated by the terms of the grant award.

Proposed § 64.8 would describe the method VA would use to announce the availability of the five RVCP grants. VA proposes to publish a NOFA in the Federal Register when funds are available to award RVCP grants. The NOFA would direct eligible entities to the Grants.gov portal, which is used for Federal grant programs, and would indicate the forms available on that site that applicants would be required to use. The NOFA also would specify the date, time, and place for submitting completed RVCP grant applications, the estimated amount of funds that would be available for all RVCP grants, and the maximum amount available for an RVCP grant to a single entity. The NOFA would state the points required for each category listed in § 64.12 and the minimum number of total points necessary for an application to qualify for potential funding, and the dates by which scoring would be completed and applicants notified. VA would state in the NOFA the timeframes and manner in which payments would be made to successful applicants. The NOFA would include any additional information necessary to complete the application process for an RVCP grant. To ensure that applicants have all the resources necessary to them, VA would include information in the NOFA informing eligible entities how to contact VA for clarification or assistance.

RVCP grant application procedures are addressed in proposed § 64.10. As stated in proposed § 64.8, VA would provide relevant information about an available RVCP grant by publishing a NOFA in the Federal Register . Under proposed § 64.10(a), applications would be accepted only through the Grants.gov Web site. This is the easiest and most efficient way to process grant applications and should be familiar to many of the types of eligible entities likely to submit an application.

In proposed § 64.10(b), we propose to define the elements of a complete application. In general, a complete application requires the submission of information contained in this section, using the forms identified in the NOFA and available through Grants.gov.

Proposed § 64.10(b)(1) through (b)(5) would require submission of detailed information on the project that is being proposed. In particular, applicants would be required to describe the services to be provided, including which of the permissible uses in § 64.6(a) the proposed services are intended to address, the need for those services in the proposed project location, and why the location qualifies as rural or an underserved community. The applicants also would be required to provide certain information about their experience in providing the proposed services, and how they would monitor and evaluate their compliance. These elements are critical to VA's ability to determine whether the applicant is proposing a project that would assist veterans and their families as they transition from military service to civilian life, particularly those who are located in rural and underserved areas and most in need of this assistance.

In proposed § 64.10(b)(6), we would require documentation of the applicant's ability to administer the project, given the limitation on use of funds from the RVCP grant for indirect costs of doing business which, under proposed § 64.6(b), can be only up to 10 percent of the total grant amount. In light of this limitation, VA would require each applicant to provide documentation of its capacity to manage the project, including a plan to continuously assess participant need for the services proposed and the ability to respond to any changes by adjusting the services provided within the scope of the project. Applicants would also be required to allow coordination and customization of services to meet the identified need of the participants. Applicants must also clearly define how they plan to comply with the requirements of the RVCP, including the submission of timely reports. Requiring the applicants to submit this very detailed information would provide evidence not only of their ability to follow through on the proposed project, but also the extent to which they have considered all aspects of planning and providing the proposed services and the necessary data management to facilitate timely and accurate reports. In proposed § 64.10(b)(7), we would require that applicants disclose any assistance received from or any consultation with VA or Veterans Service Organizations (VSO) in the preparation of the RVCP grant application. Because successful applications for grants under the program would depend on the applicant having a working knowledge of VA health care and benefits and the means by which those benefits are delivered, we realize that applicants may need to work closely with numerous sources, including local VSOs, VA Regional Offices, and VA Medical Centers, as well as the RVCP office, in designing their proposals. Such interactions may help applicants to better understand the scope of VA benefits available to veterans and their families, to identify areas that need improvement in the locations they propose to serve, and to identify necessary procedures and documentation that would be required to assist transitioning veterans and their families access appropriate care and benefits. Notwithstanding the noted value of such contact, we would require that all direct communication with VA or VSOs in preparation of the application must be disclosed in the application packet to assist RVCP managers in identifying any potential conflict of interest on the part of application reviewers. These disclosures would also help reviewers assess the applicant's readiness and likelihood of project success.

The NOFA would also provide the Internet address of VA's RVCP technical assistance Web page and VA fully expects that applicants would take advantage of this assistance to design the strongest possible proposals to reasonably meet the expectations of the RVCP. We are not seeking disclosure of Web site access (either RVCP Web site or other VA developed public sites).

Paragraph (b)(8) would allow VA to specify additional requirements in the NOFA. This would help us tailor the NOFA as VA deems necessary.

In proposed § 64.12, we would establish general scoring criteria and the method for selection of grantees. Applications must be complete, as set forth in § 64.10(b), and received by the deadline stated in the NOFA. Scores for each application would be based on the criteria set forth in proposed paragraphs (a)(1) through (a)(6). These proposed categories are weighted according to their importance in ensuring the successful development and operation of a project that meets the intent of the RVCP. A maximum of 100 points would be possible and the decision of VA regarding scoring and selection would be final.

Applicants would be scored, under proposed § 64.12(a)(1), on experience in providing the services that are proposed in the application. An applicant may be awarded up to 10 points by providing sufficient information to assure VA of its established ability to provide the proposed services to the public and/or to veterans and their families. Although we are encouraging innovation, we believe that it is appropriate to offer points to applicants who have documented success and experience in the provision of the proposed services.

In proposed § 64.12(a)(2), VA proposes to award up to 10 points to applicants who clearly identify the need for the proposed project in the target location. Projects that provide thoroughly defined and researched plans which are innovative and avoid repetition of existing projects or ideas would be scored more favorably. The purpose of this criterion is to help ensure that grants are offered to applicants who understand the specific needs of their target location beyond the basic descriptions of the intended participants that may be described in the NOFA or in general materials describing the applicant's organization.

Proposed paragraph § 64.12(a)(3), in which applications may be awarded up to 40 points, would evaluate the applicant's concept and plan for successful implementation of the proposed project. The project description must provide realistic estimates of time, staffing, and material needs to provide the proposed services.

Applicants must design a project which focuses on one or more of the four permissible uses of the RVCP for transitioning veterans stated in § 64.6 (increasing the coordination of health care for veterans; increasing the availability of high quality medical and mental health services; providing assistance to transitioning families; and/or outreach to transitioning veterans and their families). Applicants are scored based on how effectively the proposed project would determine and address the local needs of transitioning veterans in the location to be served without duplicating effective programs already in place.

Under proposed § 64.12(a)(4), VA would evaluate and award up to 10 points for the applicant's plan of self-evaluation and monitoring during the grant period, as required in § 64.10(b)(5). Self-evaluation and monitoring would help VA ensure that the RVCP funds are being used appropriately and would also assist in our overall assessment of the pilot program required by section 506(g) of the 2010 Act.

In proposed § 64.12(a)(5), up to 10 points would be available for organizational financial fitness. This information is important to ensure that funds are not provided to an organization that is financially unstable or to an organization that has been unable to manage funds, including Federal funds, in the past. The limited duration and amounts of RVCP grants available for this pilot are not intended to help “grow” a local organization but rather to reward innovative projects submitted by local organizations that are already established, stable, and immediately ready to provide services to veterans and their families. At the same time, however, we believe that other application requirements, such as the complexity of the plan concept in paragraph (a)(3), would also provide information concerning the applicant's ability to complete the project and, therefore, we offer only ten points for this criterion.

Proposed paragraph § 64.12(a)(6) would provide up to 20 points for the proposed project location identified. VA would evaluate the applicant's proposed location and the documentation provided to ensure that the location is rural or underserved, as defined in § 64.2. VA is interested in identifying rural and underserved areas with an adequate population of transitioning veterans to allow a proposed grant project to demonstrate effectiveness in such an area.

In proposed § 64.12(b), we describe the selection process. Using the scoring criteria provided in § 64.12(a), VA would score all complete applications submitted by the deadline provided in the NOFA. All applications that receive at least the minimum total points and minimum points per category as stated in the NOFA would be ranked from highest to lowest based on total points received. VA would award one RVCP grant to the applicant with the highest total score. Each successive grant would be awarded to the application with the next highest total, provided the applicant is a unique eligible entity and the proposed project is in a different project location than all previously awarded RVCP grants. If the next highest ranked application was submitted by an entity that was already awarded an RVCP grant or proposes to deliver services in the same or overlapping location as a previously awarded grant, VA would pass over that application and evaluate the next highest ranking application until an application submitted by a unique entity and proposing to serve a different location is found. VA would repeat this until all five RVCP grants have been awarded.

Proposed § 64.14(a) would require VA to draft a grant agreement that would be executed by VA and the grantee.

Proposed paragraph (b) would set forth the elements of the agreement. Under paragraph (b)(1), the agreement would require the grantee to operate the project in accordance with the provisions of the RVCP, as set forth in this rulemaking, and in accordance with the terms of the grant agreement. Proposed paragraphs (b)(2)(i) and (b)(2)(ii) would recognize that VA grants awarded to local and State entities and to non-profit entities are also governed by 38 CFR parts 43 and 49, respectively, 2 CFR parts 25 and 170, and applicable Office of Management and Budget (OMB) regulations and circulars. Particularly, the determination of allowable costs which may be charged to or accounted as a part of a Federally funded project is controlled by OMB Circular A-122, Cost Principles for Non-Profit Organizations (codified at 2 CFR part 230), and by OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments. These common rules provide uniform guidance and government-wide terms and conditions for the management of awards and administration of Federal grants.

Proposed § 64.14(b)(3) would require the grantee to agree to comply with any additional recordkeeping requirements, including financial records and project monitoring as described in the NOFA, to meet the needs of the RVCP. Proposed § 64.14(b)(4) would require that grantees agree to timely provide any additional information as requested by VA; for instance, VA may require additional information to complete its congressional reporting requirements or to complete its assessment of the RVCP. Timely and accurate reporting by grant recipients is a critical tool by which VA would evaluate the RVCP and, as required by section 506(g) of the 2010 Act, report to Congress on the advisability and feasibility of continuing this program.

Proposed § 64.16 would establish grantee reporting requirements to obtain information necessary to analyze the performance of a grantee's project. Each report would include, as described in proposed § 64.16(a), a summary of the time and resources expended in outreach activities and the outreach methods used; the number and demographics of the participants served by the grantee; the types of assistance provided; a full accounting of the grant funds received during the quarter, detailing amounts expended and the balance remaining at each quarter's end; and results of the grantee's monitoring and any variations from the approved grant project. Reports would be required quarterly, no later than 15 calendar days following the close of each Federal fiscal quarter, including the final quarter for which funds are awarded, see proposed § 64.16(b). These reports would be used to verify that grant funds were used appropriately and to assess the overall impact of the RVCP program and the advisability of continuing the pilot program.

Proposed paragraph (c) would allow VA to request other information or documentation as necessary to fully assess the success of the project or the RVCP. VA would request information to determine whether grant funds were used appropriately or to gather additional information in the event any part of the required reports submitted by a grantee is inadequate.

Proposed § 64.18(a) would state that VA may terminate an RVCP grant and recover funds from any grantee that does not comply with the terms of the RVCP grant agreement. It would also state that VA would first notify the grantee in writing of VA's intention to recover the grant funds and afford an opportunity for the grantee to respond before making any final decision to recover the funds. The grantee would be given 30 days starting from the date of the notice to provide documentation of compliance with the RVCP grant agreement and avoid a recovery action by VA. Proposed paragraph (b) would specify that if VA makes a final decision that action would be taken to recover grant funds from a grantee, the grantee would be prohibited from receiving further grant funds from VA. These criteria would ensure appropriate use of RVCP funds, ensure the best use of RVCP funds available from VA and protect the RVCP from abuse.

The Code of Federal Regulations, as proposed to be revised by this proposed rulemaking, would represent the exclusive legal authority on this subject. No contrary rules or procedures would be authorized. All VA guidance would be read to conform with this proposed rulemaking if possible or, if not possible, such guidance would be superseded by this rulemaking.

Although this rule contains provisions constituting collections of information, at 38 CFR 64.10, under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521), no new or proposed revised collections of information are associated with this proposed rule. The information collection requirements for § 64.10 are currently approved by the Office of Management and Budget (OMB) and have been assigned OMB control numbers 4040-0003, 4040-0004, 4040-0006, 4040-0007, 4040-0008, 4040-0009, and 4040-0010. The reports required under § 64.16 would be collected only from the five award recipients and, therefore, do not constitute a collection of information as defined in section 3502(3)(A)(i) of the Paperwork Reduction Act of 1995.

Executive Orders 12866 and 13563 direct agencies to assess the 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 effects, and other advantages; distributive impacts; and equity). Executive Order 13563 (Improving Regulation and Regulatory Review) emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Executive Order 12866 (Regulatory Planning and Review) defines a “significant regulatory action,” which requires review by OMB, as “any regulatory action that is likely to result in a rule that may: (1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this Executive Order.”

The economic, interagency, budgetary, legal, and policy implications of this regulatory action have been examined and it has been determined not to be a significant regulatory action under Executive Order 12866.

The Secretary hereby certifies that this proposed rule would not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-612. There would be no negative economic impact on any of the eligible entities because the grantees would not be required to provide matching funds to obtain the maximum grant allowance. This pilot grant program would not impact a substantial number of small entities because only five non-renewable grants would be awarded. Therefore, pursuant to 5 U.S.C. 605(b), this proposed rule is exempt from the initial and final regulatory flexibility analysis requirements of sections 603 and 604.

The Unfunded Mandates Reform Act requires, at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before issuing any rule that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any given year. This proposed rule would have no such effect on State, local, and tribal governments, or on the private sector.

At this time there are no Catalog of Federal Domestic Assistance numbers and titles for the program affected by this regulation. Catalog of Federal Domestic Assistance numbers and titles will be obtained when the program is established on the Grants.gov Web site.

The Secretary of Veterans Affairs, or designee, approved this document and authorized the undersigned to sign and submit the document to the Office of the Federal Register for publication electronically as an official document of the Department of Veterans Affairs. John R. Gingrich, Chief of Staff, Department of Veterans Affairs, approved this document on July 2, 2012, for publication.

For the reasons stated in the preamble, VA proposes to amend 38 CFR chapter I by adding part 64 to read as follows:

Background

Section 4(b)(3)(B) of the Act (16 U.S.C. 1531 et seq. ) requires that, for any petition to revise the Federal Lists of Endangered and Threatened Wildlife and Plants that contains substantial scientific or commercial information indicating that listing a species may be warranted, we make a finding within 12 months of the date of receipt of the petition. In this finding, we will determine that the petitioned action is: (1) Not warranted, (2) warranted, or (3) warranted, but the immediate proposal of a regulation implementing the petitioned action is precluded by other pending proposals to determine whether species are endangered or threatened, and expeditious progress is being made to add or remove qualified species from the Federal Lists of Endangered and Threatened Wildlife and Plants. Section 4(b)(3)(C) of the Act requires that we treat a petition for which the requested action is found to be warranted but precluded as though resubmitted on the date of such finding, that is, requiring a subsequent finding to be made within 12 months. We must publish these 12-month findings in the Federal Register .

On February 2, 2010, we received a petition dated January 29, 2010, from WildEarth Guardians (referred to below as the petitioner). The petitioner requested that the Service list six species of sand dune beetles in Nevada as endangered or threatened, and designate critical habitat, under the Act. The six beetle species are Hardy's aegialian scarab ( Aegialia hardyi ), Sand Mountain serican scarab ( Serica psammobunus ), Crescent Dunes aegialian scarab ( A. crescenta ), Crescent Dunes serican scarab ( S. ammomenisco ), large aegialian scarab ( A. magnifica ), and Giuliani's dune scarab ( Pseudocotalpa giulianii ). Included in the petition was supporting information regarding the species' taxonomy and ecology, historical and current distribution, current status, and actual and potential causes of decline.

On March 12, 2010, we acknowledged receipt of the petition in a letter to the petitioner. We informed the petitioner that we reviewed the information presented in the petition and determined that issuing an emergency regulation temporarily listing the species under section 4(b)(7) of the Act was not necessary. We also stated that we anticipated making an initial finding in fiscal year 2010.

On August 4, 2011, we made our 90-day finding that the petition did not present substantial scientific or commercial information indicating that listing two of the six beetle species, the Hardy's aegialian scarab and Sand Mountain serican scarab, may be warranted (76 FR 47123, August 4, 2011). Therefore, no further action is required on the petition as it relates to these two species. However, we determined that the petition presented substantial scientific or commercial information indicating that listing of the other four beetle species, the Crescent Dunes aegialian scarab, Crescent Dunes serican scarab, large aegialian scarab, and Giuliani's dune scarab, may be warranted. At that time, we initiated a review of the status of these species to determine if listing these four beetle species is warranted.

This notice constitutes the status review on the Crescent Dunes aegialian scarab, Crescent Dunes serican scarab, large aegialian scarab, and Giuliani's dune scarab and the 12-month finding on the February 2, 2010, petition to list these species as endangered or threatened and to designate critical habitat under the Act.

On August 10, 1978, the Service proposed to list Giuliani's dune scarab as threatened, citing the effects of off-road vehicle (ORV) use (43 FR 35636). The Service stated that ORV activity compacts dead organic matter accumulated on dune slopes and prevents its buildup, thereby destroying the larval habitat of the beetle. The proposed rule also determined that there were no State and Federal laws protecting the species and its habitat. Included in the proposed rule was a proposal to designate critical habitat at Big Dune, Nye County, Nevada.

On October 1, 1980, the Service withdrew the proposal to list Giuliani's dune scarab (45 FR 65137). We took this action because, at that time, amendments to the Act mandated that we withdraw any proposed rules to list species that we had not finalized within 2 years of the proposal.

In 1984, 1989, and 1991, we published notices of review that identified Crescent Dunes aegialian scarab, large aegialian scarab, and Giuliani's dune scarab as candidates under consideration for addition to the List of Endangered and Threatened Wildlife (49 FR 21664, May 22, 1984; 54 FR 554, January 6, 1989; 56 FR 58804, November 21, 1991). In each notice of review, each beetle was identified as a category 2 candidate. Category 2 candidates were those for which the Service possessed information indicating that listing as endangered or threatened was possibly appropriate but for which conclusive data on biological vulnerability and threats were not currently available to support a proposed rule.

On February 28, 1996, the Service adopted a single category of candidate species and no longer considered category 2 species as candidates (61 FR 7595), thus removing the beetles from consideration. The decision to stop considering category 2 species as candidates was designed to reduce confusion about the status of these species and to clarify that we no longer regarded these species as candidates for listing.

As a whole, the invertebrates of Nevada are poorly studied, and there is limited life-history information for these sand dune beetle species (NDOW 2006, p. 12). However, the taxonomic information is available and was reviewed to reach the conclusion that each of these species is a valid taxon. All four of the beetle species are taxonomically categorized as follows: Kingdom Animalia, Phylum Mandibulata, Class Insecta, Order Coleoptera, Superfamily Scarabaeoidea, Family Scarabaeidae.

The Crescent Dunes aegialian scarab (Subfamily Aphodiinae, Tribe Aegialiini (Brown 1931, pp. 9, 11-12), Aegialia crescenta ) was first described in 1977 (Gordon and Cartwright 1977, pp. 45-47) and genetically analyzed in 1997 (Porter and Rust 1997, pp. 304, 306, 308). These beetles are 3.75 to 5.00 millimeters (mm) (about 0.19 inch (in)) long and 2.05 to 2.70 mm (less than 0.13 in) wide (Gordon and Cartwright 1977, p. 45). The adults are dark reddish brown with yellowish underside, legs, and mouthparts. Little is known about the larvae of the Crescent Dunes aegialian scarab.

The Crescent Dunes serican scarab (Subfamily Melolonthinae, Tribe Sericini (Hayes 1929, p. 26) , Serica ammomenisco ) (errantly spelled ammomensico in some texts) was first described in 1987 (Hardy and Andrews 1987, pp. 173-174). The name is derived from the Greek ammo (sand) and menisco (crescent) and refers to the only place they are known to occur, Crescent Dunes. These beetles are 6.5 to 8.2 mm (0.25 to 0.33 in) long and 3.4 mm (0.13 in) wide (Hardy and Andrews 1987, p. 173). The adults have a black head and thorax with dark brown legs; however, their color ranges from pale brown to brownish black (Hardy and Andrews 1987, p. 173). They are recognized by the band of pale hairs behind the top of the head (clypeus), their relatively light coloration, and the unique genitalia of the males (Hardy and Andrews 1987, p. 173). Little is known about larvae of the Crescent Dunes serican scarab.

The large aegialian scarab (Subfamily Aphodiinae, Tribe Aegialiini (Brown 1931, pp. 9, 11-12), Aegialia magnifica ) also was first described by Gordon and Cartwright in 1977 (pp. 43-45) and genetically analyzed in 1995 (Porter and Rust 1996, pp. 711, 716, 718; 1997, pp. 304, 306, 308). These beetles are 4.40 to 5.90 mm (about 0.25 in) long and 2.48 to 3.25 mm (less than 0.25 in) wide (Gordon and Cartwright 1977, p. 43). The adults are pale red with yellowish-red mouthparts and underside. They have a smooth upper back and do not have wings. Little is known about the larvae of the large aegialian scarab.

The Giuliani's dune scarab (Subfamily Rutelinae, Tribe Rutelini (Hayes 1929, p. 29) , Pseudocotalpa giulianii ) was first described by Hardy in 1974 (pp. 243-247). These beetles are 17 to 25 mm (0.75 to 1 in) long and 7 to 10 mm (0.25 to 0.50 in) wide (Hardy 1974 p. 244). The adults are light tan with a more yellowish head; the legs are darker tan with reddish brown feet (tarsi) and claws. Males and females are similar in appearance, but easily distinguished by the size of the claws at the end of their rear legs; female claws are equal whereas the outer claw of the male is twice as long as the inner (Rust 1985, p. 105). Larvae average 12 mm (0.47 in) in length and resemble a white grub (Rust 1985, p. 108).

These four beetle species are not vertebrates and therefore the Service's Distinct Vertebrate Population Segment policy (61 FR 4722, February 7, 1996) does not apply.

Many genera of Scarabaeidae in North American deserts, including these four dune beetle species, occur in vegetated, unstable, sandy areas around sand dunes. The dunes and surrounding unstable, sandy areas are created by sand that is carried by wind from dry lakebeds upwind of the dunes. These four beetle species burrow and live in loose sand, eat decomposed plant matter, and mate on live vegetation (Hardy 1971, pp. 240-241; 1976, pp. 301-302; Gordon and Cartwright 1977, p. 42; Hardy and Andrew 1987, p. 178; Rust 1982, pp. 3-4). The beetles need moist sand to protect them from temperature extremes (both hot and cold) and drying out (Porter and Rust 1996, p. 709; Service 2012a, p. 3).

The historical range of each of these four beetle species is unknown. It is also unknown whether the range of any of the four species has changed since they were first described in the 1970s and 1980s.

Based on surveys conducted in January 2012, the current known range of the Crescent Dunes aegialian scarab is limited to 6,594 ha (16,295 ac) of BLM-administered lands at two main sand dunes—Crescent Dunes and San Antonio Dunes, within a larger dune complex in Big Smoky Valley (Nachlinger et al. 2001, p. A10-82; Service 2012a, pp. 1, 5). Crescent Dunes is a 402-hectare (ha) (996-acre (ac)) complex of crescent-shaped sand dunes located about 19 kilometers (km) (12 miles (mi)) northwest of Tonopah, Nye County, Nevada (NRCS 1972, pp. 23, 55, Maps 15, 18, 21; 2006a, p. 1). Crescent Dunes is created by prevailing winds from the northwest, which are primarily associated with Pacific Ocean Cell winter storms (i.e., El Niño and La Niña) (Parsons 2010, p. 15). Studies indicate that the Crescent Dunes system has moved less than 76 meters (m) (250 feet (ft)) southeast since 1954 (Parsons 2010, pp. 18-19). San Antonio Dunes is a 751-ha (1,856-ac) complex of dunes located approximately 24 km (15 mi) north of Crescent Dunes at the northern edge of the San Antonio Mountains. It is likely that San Antonio Dunes is created by the same prevailing wind that has created Crescent Dunes.

Based on surveys conducted in January 2012, the current known range of the Crescent Dunes serican scarab is restricted to 5,843 ha (14,439 ac) of BLM-administered land at Crescent Dunes (at this time it is unknown if it occurs at the nearby San Antonio Dunes) (Hardy and Andrew 1987, p. 178; Gordon and Cartwright 1977, p. 45; Hardy and Andrews 1987, p. 173; Service 2012a, p. 1). The species' range estimates are larger than the areas of the dunes (as indicated above) because the beetles occur on the dune and in sandy areas surrounding the dune.

It is unknown if the Crescent Dunes aegialian scarab and the Crescent Dunes serican scarab also occur at sand dunes on BLM-administered lands near Millers, Nevada, and about 40 km (25 mi) southwest of the Crescent Dunes. These dunes are part of the same larger dune complex as Crescent Dunes within Big Smoky Valley (BLM and DOE 2010, pp. 11.7-60; Service 2012a, p. 1). Gordon and Cartwright reported a record for the Crescent Dunes aegialian scarab at Game Range Dunes in Clark County, Nevada (1988, p. 18). However, we have no other information confirming that the Crescent Dunes aegialian scarab occurs anywhere other than at Crescent Dunes and San Antonio Dunes. Presence of the Crescent Dunes aegialian scarab at Game Range Dunes is unlikely because these dunes are located approximately 200 km (125 mi) southeast of Crescent Dunes.

The current known range of the large aegialian scarab and Giuliani's dune scarab is restricted to two sand dune complexes on BLM-administered lands—Big Dune (also called Amargosa Dunes) and Lava Dune (Hardy 1974, pp. 243-247; Gordon and Cartwright 1977, pp. 43-45; Porter and Rust 1996, p. 718; Service 2011a, pp. 1-12; 2011b p. 1-7; 2012b pp. 1-4). Big Dune is a 305-ha (753-ac) complex star sand dune located 16.5 km (10 mi) west of Lathrop Wells, Nye County, Nevada (NRCS 1998, p. 35, Map 33). It is formed from prevailing winds from the northeast (PSI 2009, p. F-21); however, the wind directions at Big Dune vary seasonally and are also out of the southeast (BLM and DOE 2010, p. 11.1-209). Lava Dune is a 170-ha (420-ac) dune located 6 km (4.5 mi) east of Big Dune, which was formed from sand trapped at the base of an old volcanic cinder cone and lava flow (NRCS 2006b, p. 1).

Based on surveys conducted in February 2012, the estimated range of the large aegialian scarab is 490 ha (1,212 ac) of BLM-administered land at Big Dune and approximately 200 ha (494 ac) of BLM-administered land at Lava Dune (Service 2011a, pp. 3-4; 2012b, p. 3). The species' range estimate is larger than the areas of the dunes (as indicated above) because the beetle occurs on the dune and in sandy and vegetated areas surrounding the dune. The large aegialian scarab has a patchy distribution, but occurs underneath every species of live vegetation throughout the Big Dune area (Service 2012b p. 2).

Based on surveys conducted in April 2011, the estimated range of the Giuliani's dune scarab is 307 ha (759 ac) of BLM-administered land at Big Dune and 200 ha (494 ac) of BLM-administered land at Lava Dune (Service 2012b, p. 3). The species' range estimate is larger than the areas of the dunes (as indicated above) because the beetle occurs on the dune and in sandy areas surrounding the dune. The Giuliani's dune scarab has a clumped distribution and uses the north face of the dune more heavily than the south and west faces (BLM 2007, p. 4; Boyd 2010, pp. 2, 6-7). Three other dune complexes located near Big Dune and Lava Dune—the Skeleton Hills, Dumont Dunes, and Ibex Dune—have been surveyed for Giuliani's dune scarab, but none were found (Hardy and Andrews 1976, pp. 1-44; Rust 1982, p. 2).

Crescent Dunes Aegialian Scarab and Crescent Dunes Serican Scarab —Little is known about the population abundance or biology of the Crescent Dunes aegialian scarab and Crescent Dunes serican scarab. During a survey in January 2012, the Crescent Dunes aegialian scarab was observed beneath every species of live plant surrounding the dunes, such as Oryzopsis hymenoides (Indian ricegrass), Atriplex spp. (saltbush), and Salsola spp. (tumbleweed) (Service 2012a, p. 3). The sex ratio of Crescent Dunes aegialian scarab at Crescent Dunes was one male to one female (Service 2012a, p. 5). We reviewed other regional sand dune-obligate beetles as surrogates, but did not locate life-history information for the Crescent Dunes aegialian scarab and Crescent Dunes serican scarab (Gordon 1975, pp. 173-175; Gordon and Cartwright 1977, pp. 47-48; Andrews et al. 1979, p. 19; Rust 1986, pp. 47-51; Service 1992, pp. 1-5; Britten and Rust 1996, pp. 649-651; Van Dam and Van Dam 2006, pp. 31-35). However, it is likely the Crescent Dunes aegialian scarab has similar life history to the large aegialian scarab because they are taxonomically related and genetically similar (Porter and Rust 1997, pp. 304, 306, 308).

Large Aegialian Scarab —Both adult and larval large aegialian scarabs live beneath any species of live plant throughout the Big Dune area, such as Larrea tridentata (creosote bush) and Salsola spp. (Rust 1995, p. 7; Service 2012b, p. 2). They burrow into loose sand to access wet sand (Hardy and Andrew 1987, p. 175). The year-round wet sand is usually 0.5 to 1.0 m (1.6 to 3.3 ft) under the surface. They can be located from October to April by sifting moist sand 8 to 33 centimeters (cm) (3 to 13 in) deep beneath dune plants (Rust 1995, p. 6). Adult large aegialian scarabs are most active from mid-February to late April. Based on limited reported survey data, we were not able to estimate population abundance for this species. In the only reported survey, a combined total of 316 large aegialian scarabs were observed at Big Dune from March to April 2007 (Boyd 2010, pp. 5-6). Presence of large aegialian scarabs at Lava Dune was confirmed, but only limited sampling occurred on December 17, 2007 (Boyd 2010, pp. 9-10).

Giuliani's Dune Scarab —Adult Giuliani's dune scarabs live underneath vegetation closely surrounding the edge of the large dune, and most commonly occur under Petalonyx thurberi (sandpaper plant) (Rust 1995, p. 6; Boyd 2010, p. 10). They are only observed aboveground when they emerge for 3 weeks from late April to early May. They emerge for 5 to 30 minutes each evening to hover over and mate on shrub vegetation and the sand surface (Hardy 1971, pp. 240-241; 1976, pp. 301-302; Rust 1982, pp. 3, 5; Service 2011a, pp. 2-5). Aboveground mating activity is greatly reduced when it is cold and windy (Rust 1982, p. 4; 1985 p. 106; Boyd 2010, p. 4).

In trying to determine how long adult Giuliani's dune scarabs live, the Bureau of Land Management (BLM) marked approximately 160 beetles over a 3-week period in April 2011; only one adult beetle was recaptured 1 week after its original capture (Service 2011a, p. 4). The adults do not feed (Rust 1982, p. 9), and it is unknown how long they live once they change from a grub (larva) to an adult.

Hardy (1976, pp. 301-302) reported a sex ratio of Giuliani's dune scarabs at Big Dune of 1.3 males to 10 females, and Rust (1985, p. 108) reported a ratio of 2.5 males to 10 females. In contrast to these sex ratios, Boyd (2007, p. 3) reported that in a sample of 140 Giuliani's dune scarabs collected at Big Dune, 136 were male and 4 were female. Various factors influence the sex ratio of different samples, such as collection method and timing.

Attempts to quantify adult population structure of Giuliani's dune scarab, including population numbers, have failed (Rust 1985, pp. 106, 108; Murphy 2007, p. 1; Boyd 2010, pp. 3-4). In an unpublished report, Rust (1982, p. 5) estimated that the adult Giuliani's beetle population at Big Dune was between 1,000 and 5,000 individuals, but this estimate was not based on count data. In a survey conducted around the perimeter of Big Dune in 2007, adult Giuliani's dune scarabs were detected at seven of eight survey sites on April 24, and at four of four survey sites on May 1 (Boyd 2010, p. 2). Approximately 800 to 1,000 individual Giuliani's dune scarabs were detected on the April 24 survey and 140 individuals were collected on May 1 (Boyd 2010, pp. 2-3). Approximately 40 individuals were detected at Lava Dune on a May 3, 2007, survey; however, the sampling effort at Lava Dune was much lower than the sampling effort at Big Dune (Boyd 2010, p. 3).

Larval Giuliani's dune scarabs also live beneath plants surrounding the dune. We found no information on when the larvae emerge. Larvae are an average 12 mm (0.5 in) in length and take 2 or more years to fully develop (Rust 1982, p. 6). Only two Giuliani's dune scarab larvae have been recovered and both occurred beneath Petalonyx thurberi at a depth of 20 to 40 cm (8 to 16 in) (Rust 1982, p. 5; 1985, p. 108). Larvae feed on accumulated plant debris at the base of shrubs (Rust 1982, pp. 4-5; 1985, p. 108; 1995, p. 6; Boyd 2010, p. 10).

Eggs of Giuliani's dune scarab are oval and measure 3.0 to 3.5 mm (0.25 in) long by 2.5 to 3.0 mm (0.25 in) wide. Females examined in 1982 had an average of 4.2 eggs (Rust 1982, p. 5). We found no information on egg placement; however, it is thought that eggs are deposited in sand near shrub roots (Rust 1982, p. 5).

Section 4 of the Act (16 U.S.C. 1533) and implementing regulations (50 CFR 424) set forth procedures for adding species to, removing species from, or reclassifying species on the Federal Lists of Endangered and Threatened Wildlife and Plants. Under section 4(a)(1) of the Act, a species may be determined to be endangered or threatened based on any of the following five factors:

(A) The present or threatened destruction, modification, or curtailment of its habitat or range;

(B) Overutilization for commercial, recreational, scientific, or educational purposes;

(C) Disease or predation;

(D) The inadequacy of existing regulatory mechanisms; or

(E) Other natural or manmade factors affecting its continued existence.

In considering what factors might constitute threats to a species, we must look beyond the exposure of the species to a particular factor to evaluate whether the species may respond to that factor in a way that causes actual impacts to the species. If there is exposure to a factor and the species responds negatively, the factor may be a threat and, during the status review, we attempt to determine how significant a threat it is. If the threat is significant, it may drive or contribute to the risk of extinction of the species such that the species warrants listing as endangered or threatened as those terms are defined in the Act. This does not necessarily require empirical proof of a significant threat. The combination of exposure and some corroborating evidence of how the species is likely impacted could suffice. However, the mere identification of factors that could impact a species negatively is not sufficient to compel a finding that the species warrants listing. The information must include evidence sufficient to suggest that these factors are operative threats that act on the species to the point that the species meets the definition of endangered or threatened under the Act. A species may be endangered or threatened based on the intensity or severity of one operative threat alone or based on the synergistic effect of several operative threats acting in concert.

In making this finding, we have considered and evaluated the best available scientific and commercial information pertaining to the Crescent Dunes aegialian scarab, Crescent Dunes serican scarab, large aegialian scarab, and Giuliani's dune scarab. We examined the petition, information in our files, and other published and unpublished literature in relation to the five factors provided in section 4(a)(1) of the Act. Additionally, we solicited information from the public, but did not receive any response. We consulted with biologists from the BLM, the Service, and the Nevada Natural Heritage Program.

Below we summarize the information regarding the status and threats to the Crescent Dunes aegialian scarab, Crescent Dunes serican scarab, large aegialian scarab, and Giuliani's dune scarab in relation to the five factors in section 4(a)(1) of the Act.

In this section, we describe and evaluate various conditions in relation to the present or threatened destruction, modification, or curtailment of the habitats and ranges of the four beetle species. We identified the following activities as potentially impacting the species' habitats and ranges: Mining, solar development, off-road vehicle recreation, commercial filming, and livestock grazing.

Mining removes vegetation and soil and alters surface water flows and infiltration of water. Indirect effects of mining, such as establishment of new roads to access mines and increased human presence, cause increased vegetation impacts and beetle displacement. Destruction of vegetation around dunes, disturbance of dune sand, and disruption of reproductive behavior would reduce or eliminate sand dune beetle populations because the larvae of the beetle use decomposed organic matter as their primary food source and the adults mate on live vegetation.

There are three different types of mineral resources on BLM-administered lands: Locatable (such as iron and gold), leasable (typically oil and gas), and salable (common materials such as sand, gravel, clay, and lava rock) (BLM 2011, p. 10). Locatable minerals are “claimed,” while leasable and salable minerals are only offered by the BLM upon request.

A mining claim is an administrative action in which a claimant receives a possessory right to the subsurface mineral (BLM 2011a, p. 7). The BLM cannot deny a mining claim because the General Mining Law of 1872 (30 U.S.C. 22 et seq. ) gives a person a statutory right to the claim. However, a claim does not authorize surface disturbance. In order to extract the mineral, the claimant must file a plan of operation (BLM 2011a, p. 29). An approved plan of operation allows the claimant to obtain surface rights and begin mining operations (BLM 2011a, p. 33).

Once a request to develop (extract) any mineral resource, including locatable, leasable, and salable minerals, the BLM must go through several steps. First, an interdisciplinary team of professional resource specialists (e.g., hydrologists, biologists, geologists, and archeologists) reviews the plan of operation. These specialists are able to make recommendations on project design and implementation to reduce impacts to wildlife, plants, and other resources. Then, the BLM must solicit input from the public and other Federal agencies on the plan of operation, as required under the National Environmental Policy Act (NEPA) of 1969, as amended (42 U.S.C. 4321 et seq. ). Using this input, the BLM may further amend the project's design and implementation, or it may reject the plan of operation. If the BLM grants the permit for mineral development, it maintains discretion over how and when these operations proceed through the terms of the right-of-way (ROW) grant under Title V of the Federal Land Policy and Management Act of 1976 (43 U.S.C. 1701 et seq. ) and the regulations in parts 2800 and 3000 of title 43 of the Code of Federal Regulations (43 CFR 2800 and 43 CFR 3000).

BLM classifies each of the four dune beetles addressed in this finding as a sensitive species (BLM 2003, p. 6). BLM manages sensitive species in accordance with BLM Manual 6840 Release 6-125, revised on December 12, 2008 (BLM 2008b). BLM defines sensitive species as “species that require special management or considerations to avoid potential future listing” (BLM 2008b, Glossary, p. 5). The stated objective for sensitive species is to initiate proactive conservation measures that reduce or eliminate threats to minimize the likelihood of and need for listing under the Act (BLM 2008b, Section 6840.02). Conservation, as it applies to BLM sensitive species, is defined as “the use of programs, plans, and management practices to reduce or eliminate threats affecting the status of the species, or improve the condition of the species' habitat on BLM-administered lands” (BLM 2008b, Glossary, p. 2).

Locatables —The areas around Crescent Dunes and San Antonio Dunes have low potential for locatable minerals (BLM 1997, Map 32). Historically, there have been no locatable mining claims at Crescent Dunes and four claims at San Antonio Dunes. Currently, there are no locatable mining claims on Crescent Dunes or San Antonio Dunes. Although it is possible that mining claims may be filed in the future, the low potential for locatable minerals and low number of historical claims indicate that such future claims are unlikely. If development of any mining claims is requested, BLM must evaluate potential effects to these dune beetles and adhere to their sensitive species policy, and the Service would have the opportunity to provide recommendations to protect these beetles under the NEPA process.

The areas around Big Dune and Lava Dune have no potential for locatable minerals (Castor et al. 2006, pp. L2-L3). Prior to 2006, there were 23 mining claims at Big Dune and 26 claims at Lava Dune. All of these were removed after it was determined there was no potential for locatable minerals (Castor et al. 2006, pp. L2-L3).

Although there is no potential for locatable minerals at Lava Dune, currently there are 39 gold mining claims on Lava Dune that overlap 29 percent of the range of the large aegialian scarab and 40 percent of the range of the Giuliani's dune scarab (BLM serial Nos. NMC 916075 to 916093 and NMC 360591 to 360610, filed December 7, 2005). No plans of operation have been filed for any of the mining claims at Lava Dune (BLM 2011b, pp. 1-62). There is no time limit for the claimant to file a plan of operation, and a claim remains in effect as long as the claimant continues to pay the annual BLM maintenance fee.

No mining claims can be filed at Big Dune until the year 2029, because 777 ha (1,920 ac) of land has been closed to mining under Secretarial Order 7737 until that time (74 FR 56657; November 2, 2009). This area represents 71 percent of the range of the large aegialian scarab and 60 percent of the range for the Giuliani's dune scarab. It is possible that mining claims may be filed at Lava Dune; however, it is unlikely because the area has no potential for locatable minerals. If development of any mining claim is requested, BLM must evaluate potential effects to these dune beetles and adhere to their sensitive species policy, and the Service would have the opportunity to provide recommendations to protect these beetles under the NEPA process.

Leasables —The areas around Crescent Dunes and San Antonio Dunes (BLM 1997, Map 32), Big Dune, and Lava Dune (Castor et al. 2006, pp. L2-L3) have a low potential for leasable minerals. Historically, there have been no requests for leasable minerals on Crescent Dunes, Big Dune, and Lava Dune, and two requests on San Antonio Dunes. Currently, there are no leased minerals on Big Dune, Lava Dune, Crescent Dunes, or San Antonio Dunes. Although it is possible that requests for leasable minerals may be submitted in the future, the low potential for leasable minerals and low number of historical requests indicate that such future requests are unlikely. If any mineral leases are requested, BLM must evaluate potential effects to these dune beetles and adhere to their sensitive species policy, and the Service would have the opportunity to provide recommendations to protect these beetles under the NEPA process.

Salables —The area around Crescent Dunes is rich in sand. The area around San Antonio Dunes does not have much sand (Service 2012a). Historically, there has been only one request for development of salable minerals at Crescent Dunes and no requests at San Antonio Dunes. Currently, there are no requests for salable minerals at Crescent Dunes or San Antonio Dunes. Although it is possible that development of salable minerals may be requested at Crescent Dunes or San Antonio Dunes in the future, the historical lack of requests for salable minerals in the area indicate that such future requests are unlikely. If development of salable minerals is requested, BLM must evaluate potential effects to these dune beetles and adhere to their sensitive species policy, and the Service would have the opportunity to provide recommendations to protect these beetles under the NEPA process.

Big Dune is rich in sand, while Lava Dune is rich in sand and lava rock. Historically, there has been only one request for salable minerals at Big Dune and two requests at Lava Dune. Currently, there are no requests for salable mineral development on Big Dune.

There is one pending request to extract lava rock on 74 ha (182 ac) of BLM-administered land at Lava Dune (BLM serial no. NVN 074682). This area represents 11 percent of the range of the large aegialian scarab and 15 percent of the range of the Giuliani's dune scarab. The request and plan of operation for mining lava rock at Lava Dune were submitted on March 9, 2001, and have not been approved or denied. This request to extract lava rock on Lava Dune underwent internal interdisciplinary review in 2005. Although the Service did not provide comments on this proposal, we provided comments on an earlier mining request by the same claimant in the same area. In 1993, we stated, “implementation of the proposed action may result in severe impacts to the candidate species which occur on Big Dune and may threaten their population status” (BLM 2005, p. 1). The BLM only approved mining on the portions of Lava Dune that were not suitable habitat for the large aegialian scarab and Giuliani's dune scarab. In 2005, the BLM wildlife biologists recommended the 2001 request not be approved because the area is suitable habitat for the large aegialian scarab and Giuliani's dune scarab and because of our 1993 comments (BLM 2005, p. 1; 2006, p. 1; 2008, pp. 1-48). During recent discussions, the BLM informed us that the 2001 request is pending analysis under NEPA (BLM 2005, p. 1; 2006, p. 1; Service 2012b, p. 2). After the request has been announced to the public, and after the BLM has considered any public comments submitted on the request, the BLM may grant a ROW to the operator or deny the request. If approved, the BLM has discretion over how and when these operations proceed. Although this request was submitted 11 years ago, there is no time limit for BLM to act on the request under 43 CFR 2900.

In the future, it is possible that requests to develop salable minerals at Big Dune or Lava Dune may be filed because these areas are rich in sand and lava rock, although historically there have been few requests for development of salable minerals in these areas. If requests for development of salable minerals are received, the BLM must evaluate potential effects to these dune beetles and adhere to their sensitive species policy, and the Service would have the opportunity to provide recommendations to protect these beetles under the NEPA process.

There are no active mining operations at Big Dune, Crescent Dunes, or San Antonio Dunes. Although there is one active lava rock mining operation on Lava Dune (Cind-R-Lite 2011, p. 1), the mined area occurs on solid rocky ground of an old volcanic cinder cone (NRCS 2006b, p. 1) and is not suitable habitat for the large aegialian scarab or Giuliani's dune scarab (Service 2011b, p. 3).

Conclusion —We do not consider mining to be a current or future threat to the large aegialian scarab or Giuliani's dune scarab at Big Dune, the Crescent Dunes serican scarab or Crescent Dunes aegialian scarab at Crescent Dunes, or the Crescent Dunes aegialian scarab at San Antonio Dunes because of the low likelihood of mineral development at these areas (the areas are considered to have low mineral potential, there have been few historical requests for minerals in these areas, and there are no current mining applications at these dunes). In addition, before future mining requests could be developed, the BLM would have to evaluate potential effects to these dune beetles and adhere to their sensitive species policy, and the Service would be able to provide recommendations to protect these beetles under the NEPA process. We conclude that mining at Lava Dune does not constitute a current threat to the large aegialian scarab or Giuliani's dune scarab because the active lava rock mining operation is outside of the range of these two species of beetles, the BLM has not acted on the pending lava rock stockpiling application in 11 years, and no plans of development have been submitted for the gold mining claims. However, if approved, mining lava rock at Lava Dune would remove up to 15 percent of the total range for the Giuliani's dune scarab (Service 2011b, p. 4) and 7.5 percent of the total range for the large aegialian scarab (Service 2012b, pp. 2-3). We do not consider this to be a significant threat because there is no evidence to indicate that the remaining 85 percent of the Giuliani's dune scarab's range and remaining 92.5 percent of the large aegialian scarab's range would be insufficient to support the biological needs of these two beetle species.

Developing land for solar energy projects on or near the dunes may compact and remove both vegetation and sand, alter surface flows and infiltration of water, and affect temperature and wind patterns. Destruction of vegetation around dunes, disturbance of dune sand, and disruption of reproductive behavior would reduce or eliminate sand dune beetle populations because the larvae of the four beetle species use decomposed organic matter as their primary food source and the adults mate on live vegetation. In addition, sand transport processes and other ecological processes that create habitat for these four species of sand dune beetles may be altered by structures blocking the wind (BLM and DOE 2010, pp. 11.7-6, 11.7-8, 11.7-43, 11.7-68, 11.7-115, 11.7-128). Roads and increased human presence associated with solar development result in indirect effects to dune beetles (e.g., roads and increased human presence may result in increased illegal ORV use, which impacts beetle habitat).

There have been no ROW applications for solar development projects at Crescent Dunes or San Antonio Dunes, except for the solar project currently under construction about 1.6 km (1 mi) west of Crescent Dunes. The Crescent Dunes Solar Energy Project is 655 ha (1,619 ac) and is located within the range of the Crescent Dunes aegialian scarab and Crescent Dunes serican scarab (BLM case file no. NVN 086292; BLM 2010, pp. 1-2; 75 FR 81307, December 27, 2010; Service 2012a, pp. 1-8). Construction will remove approximately 607 ha (1,500 ac or 2.3 sq mi), which is 10 percent of the total range of the Crescent Dunes aegialian scarab and 11 percent of the total range of the Crescent Dunes serican scarab. It is unlikely that the Crescent Dunes Solar Energy Project will disrupt sand transport processes at Crescent Dunes because the facility will not block the prevailing winds.

In addition, the BLM has proposed to establish a utility-scale solar energy zone about 8.0 km (5 mi) southwest of Crescent Dunes (Millers Solar Energy Zone). A solar energy zone is a priority area within BLM-administered lands that is suited for utility-scale production of solar energy in accordance with the requirements of the Energy Policy Act of 2005 (42 U.S.C. 13201 et seq. ) (BLM and DOE 2010, p. 1-8). This proposed solar energy zone would not affect the beetles because it does not overlap the range of either species, and it is unlikely that solar developments within the solar energy zone would disrupt sand transport processes because of the distance from Crescent Dunes and facilities would not block the prevailing winds (Service 2012a, p. 2; Parsons 2010, p. 15).

In the future, it is possible that ROW applications for solar development may be filed at Crescent Dunes and San Antonio dunes; however, if applications for solar development are filed, the BLM must evaluate potential effects to these dune beetles and adhere to their sensitive species policy, and the Service would have the opportunity to provide recommendations to protect these beetles under the NEPA process.

Since 2007, there have been five ROW applications for solar development at Big Dune and none at Lava Dune; however, all the applications at Big Dune have been rescinded. It is possible that solar development projects near Big Dune or Lava Dune may be proposed in the future but at this time, the best available information does not indicate that solar development projects threaten the large aegialian scarab or Giuliani's dune scarab. If applications for solar development are filed, the BLM must evaluate potential effects to these dune beetles and adhere to their sensitive species policy, and the Service would have the opportunity to provide recommendations to protect these beetles under the NEPA process.

Conclusion —We do not consider solar energy development to threaten the Crescent Dunes aegialian scarab or Crescent Dunes serican scarab now or in the future. Although the Crescent Dunes Solar Energy Project will remove up to 10 percent of the total range of the Crescent Dunes aegialian scarab and 11 percent of the total range of the Crescent Dunes serican scarab, we do not consider the project a significant threat to these beetles because there is no evidence to indicate that the remaining 90 and 89 percent, respectively, of their ranges would be insufficient to support the biological needs of these species, and the project would not significantly alter sand transport processes. The proposed solar energy zone near Crescent Dunes does not overlap the range of either species and would not disrupt sand transport processes. There have been no ROW applications for solar development at San Antonio Dunes. We do not consider solar energy development to pose a threat to the large aegialian scarab or Giuliani's dune scarab now or in the future because there have been no ROW applications filed at Lava Dune, there are no current applications for solar development at Big Dune, and all previous applications at Big Dune have been rescinded. It is unknown how many, if any, future applications for solar development would occur in these areas. However, if there are any applications, the BLM must evaluate potential effects to these dune beetles and adhere to their sensitive species policy, and the Service would have the opportunity to provide recommendations to protect these beetles under the NEPA process.

Off-road vehicle (ORV) recreationalists currently use both Crescent Dunes and Big Dune for riding and camping. ORV use is prohibited on Lava Dune (BLM 1998, pp. 21, 23-24). Beetle habitat could be impacted by ORV activity that compacts and redistributes sand beneath plants, destroys live vegetation, and prevents the buildup of decomposed organic matter by uncovering dead sticks and leaves from beneath the vegetation. These habitat impacts could reduce or eliminate sand dune beetle populations because the adult and larvae of these four species of beetle only live under and mate on live vegetation and use decomposed organic matter as their primary food source.

Crescent Dunes —Crescent Dunes is located on BLM-administered lands managed by the Tonopah Field Office (formerly the Battle Mountain District Office, Tonopah Resource Area/Field Station prior to 2008). In 1997, the BLM designated 1,214 ha (3,000 ac) at Crescent Dunes, which includes all of Crescent Dune's 402 ha (996 ac), as a Special Recreation Management Area (SRMA) primarily for ORV use. To reduce potential impacts to dune beetles and their habitat, BLM prohibited ORV use on all vegetated sand areas within the Crescent Dunes SRMA (BLM 1997, p. 21). The Crescent Dunes SRMA encompasses 89 percent of the range for the Crescent Dunes aegialian scarab and 100 percent of the range for the Crescent Dunes serican scarab. The beetles live under live vegetation in loose, sandy areas. Illegal ORV riding over vegetation reduces beetle habitat. To estimate the historical loss of vegetation from ORV use immediately surrounding Crescent Dunes, we reviewed aerial photography of the dunes taken between the 1950s and 2010 (Army Map Service 1952; 1954; USGS 1970a; 1970b; Google Earth 1990, 1996, 1997, 2004, and 2010) and conducted a site visit in January 2012. The vegetation density and distribution at Crescent Dunes appears unchanged since the 1950s (Service 2011b, pp. 1-7), and we did not observe any current or historical evidence of illegal ORV use.

San Antonio Dunes —San Antonio Dunes is located on BLM-administered lands managed by the Tonopah Field Office. This area is open to unrestricted vehicle use (BLM 1997, pp. 20-21, Map 20). Although San Antonio Dunes is open to ORV use, these dunes likely receive relatively little use from ORV recreationalists. Because Crescent Dunes provides more open sand and is closer to Tonopah than San Antonio Dunes (approximately half the distance), San Antonio Dunes likely receives less ORV use than does Crescent Dunes. Additionally, we reviewed high-resolution aerial imagery (Google Earth 2012) and detected no evidence of ORV-user created roads, indicating that ORV use is not heavy at San Antonio Dunes.

Big Dune— Big Dune is located on BLM-administered lands managed by the Pahrump Field Office (formerly a portion of the Las Vegas Field Office prior to 2008) (BLM 1998, pp. 3-41). In 1998, the BLM designated 4,694 ha (11,600 ac) around Big Dune as an SRMA, which included all of Big Dune, which is 305 ha (753 ac) (BLM 1998, pp. 21, 23-24). Within the SRMA, BLM identified 777 ha (1,920 ac) of Big Dune as an Area of Critical Environmental Concern (ACEC) to support all species dependent upon dune habitat, with emphasis on the large aegialian scarab and Giuliani's dune scarab (BLM 1988, pp. 1-24; 1998, pp. 7, 11). To protect habitat for the large aegialian scarab and Giuliani's dune scarab and to reduce potential impacts to the dune beetles and their habitat, BLM closed an 81-ha (200-ac) area and a 9-ha (23-ac) area to ORV use and prohibited ORV use on all other vegetated areas within the Big Dune SRMA, including the Big Dune ACEC (BLM 1998, pp. 21, 23-24). The Big Dune SRMA and Big Dune ACEC encompass 100 percent of the range for the large aegialian scarab and Giuliani's dune scarab at Big Dune, while the closed portions encompass 18 percent of the range for the Giuliani's dune scarab and 7 percent of the range for the large aegialian scarab (Service 2011b, pp. 1-8; 2012b, pp. 1-8).

Illegal ORV riding over vegetation reduces beetle habitat. To estimate the historical loss of vegetation from ORV use immediately surrounding Big Dune, we reviewed aerial photography of the dunes and adjacent areas taken between the 1940s and 2010 (Army Map Service 1948; USGS 1970a; 1970b; Google Earth 1990, 1996, 1997, 2004, and 2010). ORV users have recreated on Big Dune for the past 60 years (Army Map Service 1948). Historical user-created road establishment has resulted in the loss of approximately 61.5 ha (152 ac) of the vegetation immediately surrounding Big Dune (Service 2011b, pp. 1-8). The density of vegetation around Big Dune has been reduced when compared to vegetation 3.25 km (2 mi) south of the dune (Service 2011b, pp. 1-8). Approximately 8,417 vehicles containing 21,042 visitors recreated at Big Dune in 2010 (BLM 2011c, p. 1). To estimate if there were any recent reductions of beetle habitat resulting from ORV use, we reviewed aerial imagery between 1990 and 2010 and conducted 3 site visits. We found the density of vegetation has decreased; however, the distribution of vegetation at Big Dune has changed little (Service 2011b, pp. 1-7), and we observed few current incidents of plants destroyed by illegal ORV activity (Service 2011a, pp. 2, 6; 2011b, pp. 1-7; 2012b, pp. 1-8). Given this information, it does not appear that the total amount of suitable habitat for the large aegialian scarab and Giuliani's dune scarab has been reduced between 1990 and 2010.

Lava Dune— Lava Dune is located on BLM-administered lands and private land. Approximately 90 percent of the dune complex is on lands administered by the BLM, while the remaining 10 percent is owned by a private mining company (Nye County parcel number 000-158-28). ORV use is prohibited on the portion of Lava Dune administered by the BLM (BLM 1998, pp. 21, 23-24). Because ORV riding is prohibited at Lava Dune, we did not review vegetation changes at Lava Dune from ORV use. We found no information on the frequency of illegal ORV use on the dune, although we observed a set of vehicle tracks on the dune in April 2011 (Service 2011a, pp. 3, 9).

Conclusion— We do not consider legal ORV activity to be a significant threat to any of the four beetle species. ORV activity is prohibited on Lava Dune and restricted to unvegetated slopes within the Big Dune SRMA and the Crescent Dunes SRMA. Each of the four sand dune beetle species considered in this finding is dependent on vegetation for suitable habitat, and unvegetated sand dune slopes are not considered suitable dune beetle habitat. We have no information on dispersal of any of the four dune beetle species or whether ORV activity on unvegetated slopes between patches of suitable habitat affects any of the four species. However, ORV use has not precluded dune beetle dispersal because even though ORV use has occurred at Crescent Dunes and Big Dune for over 60 years, Crescent Dunes serican scarab and Crescent Dunes aegialian scarab are widely distributed at Crescent Dunes, and large aegialian scarab and Giuliani's dune scarab are widely distributed at Big Dune. ORV activity is not restricted to unvegetated slopes at San Antonio Dunes, but because of their location, these dunes receive relatively little ORV recreational use. Ongoing illegal ORV activity results in some level of impacts to these four species of beetle; however, we do not consider illegal ORV activity to be a significant threat because current illegal ORV use is minimal, and future illegal ORV activity is expected to be minimal based on past use trends.

The area around Big Dune is popular for commercial filming and still photography. Since 1993, BLM has issued 19 special use permits for film production at Big Dune (BLM 2011d, pp. 1-15). Permit stipulations limit activities to 10 vehicles carrying 30 people and do not authorize new surface disturbance (BLM 1990, p. 2). No filming is allowed in the dune beetle exclosure areas (BLM 1990, p. 3). We conclude that commercial filming does not pose a significant threat to the survival of these four beetle species now or in the future.

There is no livestock grazing at Big Dune and Lava Dune. Crescent Dunes and San Antonio Dunes are located within an active BLM-designated grazing allotment. We found no information on the amount of or the timing of livestock use. However, the soil around these dune complexes has a low potential for forage (vegetation feed for livestock) (NRCS 1972, pp. 23, 81; NRCS 1998, p. 35). We conclude that livestock grazing is not a significant threat to these four beetle species.

Crescent Dunes aegialian scarab and Crescent Dunes serican scarab —The Crescent Dunes aegialian scarab occurs at Crescent and San Antonio Dunes, and the Crescent Dunes serican scarab occurs at Crescent Dunes. We do not consider ORV activity a significant threat to these beetles. BLM policy restricts ORV use to unvegetated areas at Crescent Dunes, and these two beetle species are known to occur only under or very close to vegetation. ORV use at San Antonio Dunes is minimal and does not appear to be impacting vegetation (beetle habitat). Current illegal ORV activity at Crescent Dunes is minimal and future illegal ORV activity is expected to be minimal based on past use trends. We do not consider mining a threat to the Crescent Dunes aegialian scarab and Crescent Dunes serican scarab because there are currently no mining applications at these dunes, and it is unlikely future mining applications would be filed because the mineral potential is low. Although the Crescent Dunes Solar Power Project would remove up to 11 percent of the range for these two beetles, there is no evidence indicating that the remaining portion of their ranges would be insufficient to support the biological needs of these two species. It is unknown how many, if any, future applications for solar development would occur in these areas. However, if there are any applications, the BLM must evaluate potential effects to these dune beetles and adhere to their sensitive species policy, and the Service would have the opportunity to provide recommendations to protect these beetles under the NEPA process. Based on our assessment of the best scientific and commercial data available concerning present threats to these two beetle species' habitat, we conclude that the present or threatened destruction, modification, or curtailment of their habitat or range is not a threat to the continued existence of these two beetle species.

Large aegialian scarab and Giuliani's dune scarab —The large aegialian scarab and Giuliani's dune scarab occur in two locations: Big Dune and Lava Dune. BLM policy prohibits ORV use at Lava Dune and restricts use to unvegetated areas at Big Dune and these two beetle species are known to occur only under or very close to vegetation. We do not consider illegal ORV activity to be a significant threat to these two beetle species because impacts to dune beetle habitat from current illegal ORV activity is minimal, and future impacts to dune beetle habitat from illegal ORV use is expected to be minimal based on past use trends. If approved, a pending mining application at Lava Dune would remove up to 15 percent of the range for the Giuliani's dune scarab and the large aegialian scarab. However, because this application has been pending for 11 years, we do not consider it an immediate threat. Furthermore, there is no evidence to suggest that the remaining portion of their ranges would be insufficient to support the biological needs of these beetle species. It is unknown how many, if any, future mining requests would occur at Lava Dune. Although there are no solar applications at Big Dune or Lava Dune, it is unknown how many, if any, future applications for solar development would occur in these areas. However, if there are any future mining requests or applications for solar development, the BLM must evaluate potential effects to these dune beetles and adhere to their sensitive species policy, and the Service would have the opportunity to provide recommendations to protect these beetles under the NEPA process. Based on our assessment of the best scientific and commercial data available concerning present threats to these two beetle species' habitat and their likely continuation in the future, we conclude that the present or threatened destruction, modification, or curtailment of their habitat or range is not a threat to the continued existence of these two beetle species.

There is no available information indicating that the Crescent Dunes aegialian scarab, Crescent Dunes serican scarab, large aegialian scarab, or Giuliani's dune scarab is collected for commercial, recreational, scientific, or educational purposes. Pyle et al. (1981, p. 241) note that invertebrates generally are not imperiled by overcollection, and that these particular beetle species are not showy and thus less likely to be collected. We conclude that overutilization is not a threat to the Crescent Dunes aegialian scarab, Crescent Dunes serican scarab, large aegialian scarab, or Giuliani's dune scarab now or in the future.

No information is available on the incidence of disease for any of the four beetle species. The only information available on predation is that nighthawks ( Chordeiles sp.) have been observed preying on adult Giuliani's dune scarabs at Big Dune (Boyd 2010, p. 4; Service 2011a, p. 5). The scarabs were above ground as part of their mating activity, which is thought to be limited to a brief period during evenings in April to May (see “Biology and Population Abundance” section above). Except for this brief period of aboveground mating activity by the Giuliani's dune scarab, the life cycle of this and the other three sand dune beetles occurs below ground. No information is available on predation of the beetles during belowground parts of their life cycle. We conclude that disease or predation is not a threat to any of the four beetle species.

Under this factor, we examine whether existing regulatory mechanisms are inadequate to address the threats to the four dune beetles discussed under the other factors. Section 4(b)(1)(A) of the Endangered Species Act requires the Service to take into account “those efforts, if any, being made by any State or foreign nation, or any political subdivision of a State or foreign nation, to protect such species * * *” We interpret this language to require the Service to consider relevant Federal, State, and Tribal laws and regulations when developing our threat analyses. Regulatory mechanisms, if they exist, may preclude the need for listing if we determine that such mechanisms adequately address the threats to the species such that listing is not warranted.

The Crescent Dunes aegialian scarab, Crescent Dunes serican scarab, large aegialian scarab, and Giuliani's dune scarab are not protected under Nevada State law because they are classified as insects and not wildlife (NRS 555.265). However, the range of each species occurs on Federal lands managed by the BLM, so protection and management of the habitat for each species is determined by Federal laws, regulations, and policies. Relevant Federal laws, regulations, and policies are summarized below.

Federal Land Policy and Management Act (43 U.S.C. 1701 et seq.) —This Act sets forth the BLM's multiple use mandate and requires that the BLM take any action necessary to prevent impacts greater than those that would normally be expected from an activity in compliance with current standards, in compliance with current regulations, and implemented using the best reasonably available technology (i.e., undue and unnecessary degradation). The Federal Land Policy and Management Act's implementing regulations, 43 CFR 2800 and 43 CFR 3000, control administration and authorization of ROWs and mineral management, respectively. These regulations require the BLM to reduce environmental impacts from these ROWs to environmental resources, including these four sand dune beetle species.

National Environmental Policy Act (NEPA) (42 U.S.C. 4321 et seq.) —The NEPA requires all Federal agencies to formally document, consider, and publicly disclose the environmental impacts of major Federal actions and management decisions significantly affecting the human environment. The NEPA documentation is provided in an environmental impact statement, an environmental assessment, or a categorical exclusion, and may be subject to administrative or judicial appeal. As part of BLM policy, for any mining and solar power plant applications to conduct operations in the Crescent Dunes, San Antonio Dunes, Lava Dune, or Big Dune, an analysis will be conducted to evaluate potential effects to these dune beetles and identify possible project alternatives. The Service would have the opportunity to comment on the project alternatives and provide conservation recommendations to protect these beetles. However, the BLM is not required to select an alternative having the least significant environmental impacts and may select an action that will adversely affect these beetles, provided that these effects are disclosed in their NEPA document.

BLM Policy —The BLM classifies all four beetle species as sensitive species (BLM 2003, p. 6). Under their 6840 manual, BLM is required to manage sensitive species and their habitats to minimize or eliminate threats affecting the species or improve the condition of the species' habitat in order to reduce the likelihood of listing under the Act (BLM 2008, pp. 3, 38). The BLM identified and implemented several management actions that conserve habitat for the Crescent Dunes aegialian scarab, Crescent Dunes serican scarab, aegialian scarab, and Giuliani's dune scarab (BLM 1994, pp. 1-427; BLM 1997, pp. 1-193).

The BLM's management action to conserve the Crescent Dunes aegialian scarab and Crescent Dunes serican scarab is the prohibition of ORV use on vegetated sand areas within the Crescent Dunes SRMA (BLM 1997, p. 21). The area is closed to high-speed race events (BLM 1997, p. 20, Map 30). The area is also designated as a ROW avoidance area; however, ROWs can be granted (e.g., solar power plants) if no feasible alternative can be found (BLM 1997, p. 19, Map 22). The area is closed to non-energy leasable minerals and subject to no-surface-occupancy restrictions for fluid leasable minerals (BLM 1997, p. 21, Map 34).

Management actions for the large aegialian scarab and Giuliani's dune scarab include: (1) Prohibition of ORV use on Lava Dune; (2) prohibition of ORV use in vegetated areas within the Big Dune SRMA, including the Big Dune ACEC; (3) maintenance of approximately 777 ha (1,920 ac) of sand dune habitat within the Big Dune ACEC in a natural condition; and (4) prohibition of ORV activity within 90 ha (223 ac) of beetle habitat (BLM 1998, pp. 11, 23). Within the Big Dune ACEC, lands are to be retained in Federal ownership; ROWs are not allowed; the area is closed to mining; mineral leasing is subject to no-surface-occupancy stipulations; temporary roads must be reclaimed; and competitive high-speed ORV events are prohibited (competitive non-speed events are allowed) (BLM 1998, p. 7). The stipulations protect the beetles from these threats at Big Dune except illegal ORV activity. Solar development is allowed at Lava Dune and outside the ACEC at Big Dune. Mineral development is allowed at Lava Dune.

Therefore, partly as a result of BLM management actions taken as a result of Federal laws, regulations, and policy, we determined under Factor A that mining, solar development, ORV use, commercial filming, and livestock grazing were not significant threats to the Crescent Dunes aegialian scarab, Crescent Dunes serican scarab, large aegialian scarab, or Giuliani's dune scarab. Although not protected by State law, we determined under Factor B that collection or any other form of overutilization was not a threat to any of the four beetle species. We also determined that disease or predation was not a threat to any of the four species under Factor C, nor was stochastic events or climate change under Factor E. We conclude that the the inadequacy of existing regulatory mechanisms are not a threat to the Crescent Dunes aegialian scarab, Crescent Dunes serican scarab, large aegialian scarab, and Giuliani's dune scarab.

The large aegialian scarab's and Giuliani's dune scarab's ranges are limited to Big Dune and Lava Dune; the Crescent Dunes aegialian scarab's range is limited to Crescent Dunes and San Antonio Dunes; and Crescent Dunes serican scarab's range is limited to Crescent Dunes. Extreme environmental disasters at these areas, such as earthquakes, hurricanes, tornadoes, severe floods, or severe and frequent winter storms, could impact these species through direct mortality or removal of vegetation. However, this area has one of the lowest frequencies of extreme environmental disasters in the United States (DOE 1986, pp. 3-22, 6-27, 6-32), and any extreme weather phenomena occurring in the desert are of such short duration that no significant effects are expected (DOE 1986, pp. 6-27, 6-32). We do not consider extreme environmental disasters a threat to these four beetle species.

Our analyses under the Act include consideration of ongoing and projected changes in climate. The terms “climate” and “climate change” are defined by the Intergovernmental Panel on Climate Change (IPCC). The term “climate” refers to the mean and variability of different types of weather conditions over time, with 30 years being a typical period for such measurements, although shorter or longer periods also may be used (IPCC 2007a, p. 78). The term “climate change” thus refers to a change in the mean or variability of one or more measures of climate (e.g., temperature or precipitation) that persists for an extended period, typically decades or longer, whether the change is due to natural variability, human activity, or both (IPCC 2007a, p. 78).

Scientific measurements spanning several decades demonstrate that changes in climate are occurring, and that the rate of change has been faster since the 1950s. Examples include warming of the global climate system, and substantial increases in precipitation in some regions of the world and decreases in other regions. (For these and other examples, see IPCC 2007a, p. 30; Solomon et al. 2007, pp. 35-54, 82-85.) Results of scientific analyses presented by the IPCC show that most of the observed increase in global average temperature since the mid-20th century cannot be explained by natural variability in climate, and is “very likely” (defined by the IPCC as 90 percent or higher probability) due to the observed increase in greenhouse gas (GHG) concentrations in the atmosphere as a result of human activities, particularly carbon dioxide emissions from use of fossil fuels (IPCC 2007a, pp. 5-6 and figures SPM.3 and SPM.4; Solomon et al. 2007, pp. 21-35). Further confirmation of the role of GHGs comes from analyses by Huber and Knutti (2011, p. 4), who concluded it is extremely likely that approximately 75 percent of global warming since 1950 has been caused by human activities.

Scientists use a variety of climate models, which include consideration of natural processes and variability, as well as various scenarios of potential levels and timing of GHG emissions, to evaluate the causes of changes already observed and to project future changes in temperature and other climate conditions (e.g., Meehl et al. 2007, entire; Ganguly et al. 2009, pp. 11555, 15558; Prinn et al. 2011, pp. 527, 529). All combinations of models and emissions scenarios yield very similar projections of increases in the most common measure of climate change, average global surface temperature (commonly known as global warming), until about 2030. Although projections of the magnitude and rate of warming differ after about 2030, the overall trajectory of all the projections is one of increased global warming through the end of this century, even for the projections based on scenarios that assume that GHG emissions will stabilize or decline. Thus, there is strong scientific support for projections that warming will continue through the 21st century, and that the magnitude and rate of change will be influenced substantially by the extent of GHG emissions (IPCC 2007a, pp. 44-45; Meehl et al. 2007, pp. 760-764, 797-811; Ganguly et al. 2009, pp. 15555-15558; Prinn et al. 2011, pp. 527, 529). (See IPCC 2007b, p. 8, for a summary of other global projections of climate-related changes, such as frequency of heat waves and changes in precipitation. Also see IPCC 2011(entire) for a summary of observations and projections of extreme climate events.)

Various changes in climate may have direct or indirect effects on species. These effects may be positive, neutral, or negative, and they may change over time, depending on the species and other relevant considerations, such as interactions of climate with other variables (e.g., habitat fragmentation) (IPCC 2007, pp. 8-14, 18-19). Identifying likely effects often involves aspects of climate change vulnerability analysis. Vulnerability refers to the degree to which a species (or system) is susceptible to, and unable to cope with, adverse effects of climate change, including climate variability and extremes. Vulnerability is a function of the type, magnitude, and rate of climate change and variation to which a species is exposed, its sensitivity, and its adaptive capacity (IPCC 2007a, p. 89; see also Glick et al. 2011, pp. 19-22). There is no single method for conducting such analyses that applies to all situations (Glick et al. 2011, p. 3). We use our expert judgment and appropriate analytical approaches to weigh relevant information, including uncertainty, in our consideration of various aspects of climate change.

As is the case with all threats that we assess, even if we conclude that a species is currently affected or is likely to be affected in a negative way by one or more climate-related impacts, it does not necessarily follow that the species meets the definition of an “endangered species” or a “threatened species” under the Act. If a species is listed as endangered or threatened, knowledge regarding the vulnerability of the species to, and known or anticipated impacts from, climate-associated changes in environmental conditions can be used to help devise appropriate strategies for its recovery.

Global climate projections are informative, and, in some cases, the only or the best scientific information available for us to use. However, projected changes in climate and related impacts can vary substantially across and within different regions of the world (e.g., IPCC 2007a, pp. 8-12). Therefore, we use “downscaled” projections when they are available and have been developed through appropriate scientific procedures, because such projections provide higher resolution information that is more relevant to spatial scales used for analyses of a given species (see Glick et al. 2011, pp. 58-61, for a discussion of downscaling).

We used the web-based tool Climate Wizard to evaluate (1) changes in temperature and precipitation across Nevada during the past 50 years, and (2) projected changes in temperature and precipitation at Crescent Dunes and Big Dune by the 2050s based on 16 general circulation climate models. Across Nevada, temperature has increased by an average of 0.016 degree Celsius (0.029 degree Fahrenheit) per year for a total increase of 0.81 degree Celsius (1.45 degree Fahrenheit) over the past 50 years ( http://www.climatewizard.org/, accessed April 30, 2012). Precipitation has increased by an average of 0.342 percent per year across Nevada, for a total increase of 17.1 percent over the past 50 years.

For projected changes in temperature and precipitation based on general circulation models, we used Climate Wizard's default setting for emission scenario (the A2 high scenario). At Crescent Dunes, projected increases in temperature by the 2050s range from 1.47 to 3.61 degrees Celsius (2.64 to 6.49 degrees Fahrenheit) across the 16 models, with an average (median) value of 2.88 degrees Celsius (5.18 degrees Fahrenheit) ( http://www.climatewizard.org/, accessed May 4, 2012). Projected change in precipitation by the 2050s at Crescent Dunes range from a decrease of 30.51 percent to an increase of 19.73 percent across the 16 models, with a median value of 1.73 percent decrease.

At Big Dune, projected increases in temperature by the 2050s range from 1.52 to 3.49 degrees Celsius (2.74 to 6.28 degrees Fahrenheit) across the 16 models, with a median value of 2.82 degrees Celsius (5.07 degrees Fahrenheit) ( http://www.climatewizard.org/, accessed May 4, 2012). Projected change in precipitation by the 2050s at Big Dune range from a decrease of 27.90 percent to an increase of 39.79 percent across the 16 models, with a median value of 2.36 percent decrease.

The climate in southwestern North America has been becoming increasingly arid during the past century and is projected to continue to become more arid during the 21st century (Seager et al. 2007, entire). Seager et al. (2007) modeled aridity as a function of precipitation minus evaporation, and evaporation rates increase as temperature increases. Their study area included the southern two-thirds of Nevada, an area that encompasses the range of each of the four beetle species addressed in this finding. The most severe multiyear droughts that have impacted western North America in the recorded past have been attributed to variations in surface sea temperatures in the tropics, particularly persistent La Nina-like events (USGS 2004, entire; Seager et al. 2007, p. 1183). Based on their model results, Seager et al. (2007, p. 1184) conclude that droughts in the North American Southwest during this century will become more severe than historical droughts because La Nina conditions will be overlaid on a base condition that is drier than any experienced in recent history.

Climate change will thus clearly affect habitat conditions for the Crescent Dunes aegialian scarab, Crescent Dunes serican scarab, large aegialian scarab, and Giuliani's dune scarab. Increases in atmospheric carbon dioxide, air temperature, and evapotranspiration rates will affect vegetation, and each of the four beetle species is dependent on vegetation for its habitat. However, it is difficult to project how climate change will affect overall vegetation structure and composition because certain plant species may increase in response to these changes, while other plant species may decrease. For example, plant species adapted to desert-like conditions may gain a competitive advantage and increase in cover or density. Also, little is known about the biology of any of the four sand dune beetle species, so it is difficult to know how any potential changes in plant species composition would affect dune beetle habitat suitability. While climate change will undoubtedly affect habitat conditions for the Crescent Dunes aegialian scarab, Crescent Dunes serican scarab, large aegialian scarab, and Giuliani's dune scarab, there is currently insufficient specific information to conclude that climate change is a significant threat to any of these four beetle species.

We have evaluated individual current and future potential threats to the Crescent Dunes aegialian scarab, Crescent Dunes serican scarab, large aegialian scarab, and Giuliani's dune scarab. These species face potential threats from mining, solar development, ORV use, commercial filming, livestock grazing, stochastic events, and climate change. In considering whether the threats to a species may be so great as to warrant listing under the Act, we must look beyond the possible impacts of potential threats in isolation and consider the potential cumulative impacts of all of the threats facing a species.

In making this finding, we considered whether there may be cumulative effects to any of the four dune beetle species from the combined impacts of existing threats such that even if each threat individually does not result in population-level impacts, that cumulatively the effects may be significant. We considered whether the combined effects of mining and solar development may result in a significant impact to any of the four beetle species because mining and solar development each has the potential to result in some level of habitat loss. However, we conclude that synergistic effects between mining and solar development are unlikely to result in a significant overall population impact to any of the four beetle species because the proposed mining and solar development projects occur in different areas and their effects would not overlap. The proposed lava rock mining operation would impact the large aegialian scarab and Giuliani's dune scarab if approved, whereas the Crescent Dunes Solar Energy Project, which is currently being constructed, will impact the Crescent Dunes aegialian scarab and Crescent Dunes serican scarab. ORV use potentially impacts each of the four beetle species, but as a result of BLM policies and management that reduce impacts from ORV use, we conclude that ORV use impacts combined with potential impacts from mining, solar development, commercial filming, and livestock grazing would not be of sufficient severity and scope to result in a significant impact to any of the four dune beetle species. BLM policies and management include prohibition of ORV use anywhere at Lava Dune and within an 81-ha (200-ac) area and a 9-ha (23-ac) area at Big Dune, and restriction of ORV use to unvegetated areas at the rest of Big Dune and all of Crescent Dunes (each of the dune beetle species is known to occur only under or in close proximity to vegetation). Based on its location and lack of evidence of ORV use detected from high-resolution aerial imagery, we believe ORV use at San Antonio Dunes is minimal and thus is unlikely causing a population-level impact to the Crescent Dunes aegialian scarab. As discussed under Factor A, illegal ORV use impacts beetles and their habitat, but we conclude, based on the most current available information, illegal ORV use does not occur with sufficient frequency and geographic scope to cause population-level impacts to any of the four beetle species. It is unknown how many, if any, future requests for mining and solar development would occur in these areas. However, if there are any requests, BLM must evaluate potential effects to these dune beetles and adhere to their sensitive species policy, and the Service would have the opportunity to provide recommendations to protect these beetles under the NEPA process.

Synergistic interactions are possible between effects of climate change and effects of other threats such as mining, solar development, ORV use, and livestock grazing. Increases in carbon dioxide, temperature, and evapotranspiration will affect vegetation, and each of the four dune beetle species is closely associated with the presence of vegetation. However, as noted above in the Climate Change section, uncertainty about how different plant species will respond under climate change, combined with uncertainty about how changes in plant species composition would affect suitability of dune beetle habitat, make projecting possible synergistic effects of climate change on the dune beetle species too speculative at this time. At this point in time, given the complex and uncertain nature of effects associated with climate change and the lack of information on the biology on each of these four dune beetle species, we can only conclude that additional information would be needed to determine whether synergistic interactions between climate change and other threats will impact the Crescent Dunes aegialian scarab, Crescent Dunes serican scarab, large aegialian scarab, or Giuliani's dune scarab.

As required by the Act, we considered the five factors in assessing whether the Crescent Dunes aegialian scarab, Crescent Dunes serican scarab, large aegialian scarab, and Giuliani's dune scarab are endangered or threatened throughout all of their ranges. We examined the best scientific and commercial information available regarding the past, present, and future threats faced by these four beetle species.

To ensure that this finding is based on the latest scientific and commercial information on the species, their habitat, and threats occurring, or likely to occur, we examined the petition, information in our files, and other published and unpublished literature. We solicited information from the public, but did not receive any response. We consulted with species and habitat specialists from the BLM, the Service, and NNHP.

We evaluated whether the Crescent Dunes aegialian scarab, Crescent Dunes serican scarab, large aegialian scarab, and Giuliani's dune scarab were affected by mining, solar development, and ORV use; however, these impacts are either limited in scope or significant uncertainty exists about if or how they may impact these species. The inadequacy of existing regulatory mechanisms to prevent any of the above factors is not a threat because BLM, by following their policy and through NEPA, has been successful in minimizing manmade impacts to these four beetle species. The best available information does not indicate that overutilization, predation, disease, stochastic events, or climate change is a threat to the continued existence of any of these four beetle species now or in the foreseeable future. There is also no evidence to indicate that synergistic or cumulative effects between the factors would result in significant threats to any of these four beetle species.

Based on our review of the best available scientific and commercial information, the effects of these impacts on the four beetle species do not indicate that the Crescent Dunes aegialian scarab, Crescent Dunes serican scarab, large aegialian scarab, or Giuliani's dune scarab is in danger of extinction (endangered) or likely to become endangered within the foreseeable future (threatened), throughout all of its range. Therefore, we find that listing any of these four beetle species as an endangered or threatened species throughout its range is not warranted at this time.

Having determined that the Crescent Dunes aegialian scarab, the Crescent Dunes serican scarab, the large aegialian scarab, and the Giuliani's dune scarab are not endangered or threatened throughout their ranges, we must next consider whether there are any significant portions of their ranges where any of the species is in danger of extinction or is likely to become endangered in the foreseeable future. The Act defines “endangered species” as any species which is “in danger of extinction throughout all or a significant portion of its range,” and “threatened species” as any species which is “likely to become an endangered species within the foreseeable future throughout all or a significant portion of its range.” The definition of “species” is also relevant to this discussion. The Act defines “species” as follows: “The term `species' includes any subspecies of fish or wildlife or plants, and any distinct population segment [DPS] of any species of vertebrate fish or wildlife which interbreeds when mature.” The phrase “significant portion of its range” (SPR) is not defined by the statute, and we have never addressed in our regulations: (1) The consequences of a determination that a species is either endangered or likely to become so throughout a significant portion of its range, but not throughout all of its range; or (2) what qualifies a portion of a range as “significant.”

Two recent district court decisions have addressed whether the SPR language allows the Service to list or protect less than all members of a defined “species”: Defenders of Wildlife v. Salazar, 729 F. Supp. 2d 1207 (D. Mont. 2010), concerning the Service's delisting of the Northern Rocky Mountain gray wolf (74 FR 15123, April 2, 2009); and WildEarth Guardians v. Salazar, 2010 U.S. Dist. LEXIS 105253 (D. Ariz. September 30, 2010), concerning the Service's 2008 finding on a petition to list the Gunnison's prairie dog (73 FR 6660, February 5, 2008). The Service had asserted in both of these determinations that it had authority, in effect, to protect only some members of a “species,” as defined by the Act (i.e., species, subspecies, or DPS), under the Act. Both courts ruled that the determinations were arbitrary and capricious on the grounds that this approach violated the plain and unambiguous language of the Act. The courts concluded that reading the SPR language to allow protecting only a portion of a species' range is inconsistent with the Act's definition of “species.” The courts concluded that once a determination is made that a species (i.e., species, subspecies, or DPS) meets the definition of “endangered species” or “threatened species,” it must be placed on the list in its entirety and the Act's protections applied consistently to all members of that species (subject to modification of protections through special rules under sections 4(d) and 10(j) of the Act).

Consistent with that interpretation, and for the purposes of this finding, we interpret the phrase “significant portion of its range” in the Act's definitions of “endangered species” and “threatened species” to provide an independent basis for listing; thus there are two situations (or factual bases) under which a species would qualify for listing: A species may be endangered or threatened throughout all of its range; or a species may be endangered or threatened in only a significant portion of its range. If a species is in danger of extinction throughout an SPR, it, the species, is an “endangered species.” The same analysis applies to “threatened species.” Based on this interpretation and supported by existing case law, the consequence of finding that a species is endangered or threatened in only a significant portion of its range is that the entire species will be listed as endangered or threatened, respectively, and the Act's protections will be applied across the species' entire range.

We conclude, for the purposes of this finding, that interpreting the SPR phrase as providing an independent basis for listing is the best interpretation of the Act because it is consistent with the purposes and the plain meaning of the key definitions of the Act; it does not conflict with established past agency practice (i.e., prior to the 2007 Solicitor's Opinion), as no consistent, long-term agency practice has been established; and it is consistent with the judicial opinions that have most closely examined this issue. Having concluded that the phrase “significant portion of its range” provides an independent basis for listing and protecting the entire species, we next turn to the meaning of “significant” to determine the threshold for when such an independent basis for listing exists.

Although there are potentially many ways to determine whether a portion of a species' range is “significant,” we conclude, for the purposes of this finding, that the significance of the portion of the range should be determined based on its biological contribution to the conservation of the species. For this reason, we describe the threshold for “significant” in terms of an increase in the risk of extinction for the species. We conclude that a biologically based definition of “significant” best conforms to the purposes of the Act, is consistent with judicial interpretations, and best ensures species' conservation. Thus, for the purposes of this finding, and as explained further below, a portion of the range of a species is “significant” if its contribution to the viability of the species is so important that without that portion, the species would be in danger of extinction.

We evaluate biological significance based on the principles of conservation biology using the concepts of redundancy, resiliency, and representation. Resiliency describes the characteristics of a species and its habitat that allow it to recover from periodic disturbance. Redundancy (having multiple populations distributed across the landscape) may be needed to provide a margin of safety for the species to withstand catastrophic events. Representation (the range of variation found in a species) ensures that the species' adaptive capabilities are conserved. Redundancy, resiliency, and representation are not independent of each other, and some characteristic of a species or area may contribute to all three. For example, distribution across a wide variety of habitat types is an indicator of representation, but it may also indicate a broad geographic distribution contributing to redundancy (decreasing the chance that any one event affects the entire species), and the likelihood that some habitat types are less susceptible to certain threats, contributing to resiliency (the ability of the species to recover from disturbance). None of these concepts is intended to be mutually exclusive, and a portion of a species' range may be determined to be “significant” due to its contributions under any one or more of these concepts.

For the purposes of this finding, we determine if a portion's biological contribution is so important that the portion qualifies as “significant” by asking whether without that portion, the representation, redundancy, or resiliency of the species would be so impaired that the species would have an increased vulnerability to threats to the point that the overall species would be in danger of extinction (i.e., would be “endangered”). Conversely, we would not consider the portion of the range at issue to be “significant” if there is sufficient resiliency, redundancy, and representation elsewhere in the species' range that the species would not be in danger of extinction throughout its range if the population in that portion of the range in question became extirpated (extinct locally).

We recognize that this definition of “significant” (a portion of the range of a species is “significant” if its contribution to the viability of the species is so important that without that portion, the species would be in danger of extinction) establishes a threshold that is relatively high. On the one hand, given that the consequences of finding a species to be endangered or threatened in an SPR would be listing the species throughout its entire range, it is important to use a threshold for “significant” that is robust. It would not be meaningful or appropriate to establish a very low threshold whereby a portion of the range can be considered “significant” even if only a negligible increase in extinction risk would result from its loss. Because nearly any portion of a species' range can be said to contribute some increment to a species' viability, use of such a low threshold would require us to impose restrictions and expend conservation resources disproportionately to conservation benefit: Listing would be rangewide, even if only a portion of the range of minor conservation importance to the species is imperiled. On the other hand, it would be inappropriate to establish a threshold for “significant” that is too high. This would be the case if the standard were, for example, that a portion of the range can be considered “significant” only if threats in that portion result in the entire species' being currently endangered or threatened. Such a high bar would not give the SPR phrase independent meaning, as the Ninth Circuit held in Defenders of Wildlife v. Norton, 258 F.3d 1136 (9th Cir. 2001).

The definition of “significant” used in this finding carefully balances these concerns. By setting a relatively high threshold, we minimize the degree to which restrictions will be imposed or resources expended that do not contribute substantially to species conservation. But we have not set the threshold so high that the phrase “in a significant portion of its range” loses independent meaning. Specifically, we have not set the threshold as high as it was under the interpretation presented by the Service in the Defenders litigation. Under that interpretation, the portion of the range would have to be so important that current imperilment there would mean that the species would be currently imperiled everywhere. Under the definition of “significant” used in this finding, the portion of the range need not rise to such an exceptionally high level of biological significance. (We recognize that if the species is imperiled in a portion that rises to that level of biological significance, then we should conclude that the species is in fact imperiled throughout all of its range, and that we would not need to rely on the SPR language for such a listing.) Rather, under this interpretation, we ask whether the species would be endangered everywhere without that portion, i.e., if that portion were completely extirpated. In other words, the portion of the range need not be so important that even the species being in danger of extinction in that portion would be sufficient to cause the species in the remainder of the range to be endangered; rather, the complete extirpation (in a hypothetical future) of the species in that portion would be required to cause the species in the remainder of the range to be endangered.

The range of a species can theoretically be divided into portions in an infinite number of ways. However, there is no purpose to analyzing portions of the range that have no reasonable potential to be significant or to analyzing portions of the range in which there is no reasonable potential for the species to be endangered or threatened. To identify only those portions that warrant further consideration, we determine whether there is substantial information indicating that: (1) The portions may be “significant,” and (2) the species may be in danger of extinction there or likely to become so within the foreseeable future. Depending on the biology of the species, its range, and the threats it faces, it might be more efficient for us to address the significance question first or the status question first. Thus, if we determine that a portion of the range is not “significant,” we do not need to determine whether the species is endangered or threatened there; if we determine that the species is not endangered or threatened in a portion of its range, we do not need to determine if that portion is “significant.” In practice, a key part of the determination that a species is in danger of extinction in a significant portion of its range is whether the threats are geographically concentrated in some way. If the threats to the species are essentially uniform throughout its range, no portion is likely to warrant further consideration. Moreover, if any concentration of threats to the species occurs only in portions of the species' range that clearly would not meet the biologically based definition of “significant,” such portions will not warrant further consideration.

We evaluated the current range of the four beetles to determine if there is any apparent geographic concentration of potential threats for any of the species. The ranges for each of the beetles are relatively small and limited to the local dune system where they are found. We examined potential threats from mining, solar development projects, ORV use, commercial filming, livestock grazing, overutilization, disease or predation, the inadequacy of existing regulatory mechanisms, stochastic events, and climate change. We found no concentration of threats that suggests that any of these four species of dune beetles may be in danger of extinction in a portion of its range. We found no portions of their ranges where potential threats are significantly concentrated or substantially greater than in other portions of their ranges. Therefore, we find that factors affecting each species are essentially uniform throughout their ranges, indicating no portion of the range of any of the four species warrants further consideration of possible endangered or threatened status under the Act. There is no available information indicating that there has been a range contraction for any of the four species, and therefore we find that lost historical range does not constitute a significant portion of the range for the Crescent Dunes aegialian scarab, the Crescent Dunes serican scarab, the large aegialian scarab, or the Giuliani's dune scarab.

We request that you submit any new information concerning the status of, or threats to, the Crescent Dunes aegialian scarab, Crescent Dunes serican scarab, large aegialian scarab, and Giuliani's dune scarab to our Nevada Fish and Wildlife Office (see ADDRESSES section) whenever it becomes available. New information will help us monitor these four beetle species and encourage their conservation. If an emergency situation develops for any of these four beetle species, we will act to provide immediate protection.

A complete list of references cited is available on the Internet at http://www.regulations.gov and upon request from the Nevada Fish and Wildlife Office (see ADDRESSES section).

The primary authors of this notice are the staff members of the Nevada Fish and Wildlife Office.

The authority for this action is section 4 of the Endangered Species Act of 1973, as amended (16 U.S.C. 1531 et seq. ).

NMFS and the Council manage the Gulf reef fish fishery under the FMP. The Council prepared the FMP and NMFS implements the FMP under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magunson-Stevens Act) by regulations at 50 CFR part 622.

This rule would implement Amendment 34 to the FMP, which addresses administrative issues relative to earned income requirements for the renewal of commercial Gulf reef fish permits and to the maximum crew size for dual-permitted vessels while commercially fishing. Due to recent changes in the commercial sector of the Gulf reef fish fishery the income qualification requirements and the crew size limit regulations may no longer effectively serve their original purposes.

If implemented, this rule would eliminate the income qualification requirements for renewal of commercial Gulf reef fish permits and increase the maximum crew size from three to four for dual-permitted vessels.

Under the current regulations, an applicant renewing a commercial vessel permit for Gulf reef fish must attest that greater than 50 percent of his/her earned income is derived from commercial fishing (i.e. harvest and first sale of fish) or charter fishing during either of the 2 calendar years preceding the application. Applicants must complete the Income Qualification Affidavit section on the Federal Permit Application for Vessels Fishing in the EEZ (Federal Permit Application) as proof of meeting permit income qualification requirements for commercial Gulf reef fish vessel permits.

This rule proposes to eliminate the income requirement because it is no longer applicable to current commercial fishing practices. The income requirement is not compatible with recent regulatory changes in the Gulf reef fish fishery, such as the implementation of individual fishing quota (IFQ) programs for red snapper and grouper/tilefish species, which account for the majority of Gulf reef fish landings. Regardless of the proportion of a fisherman's income derived from commercial or charter fishing, participation in these IFQ fisheries is restricted to those who possess quota shares or who sell annual allocation. Removing the income requirement will also provide more flexibility to fishermen and allow them to earn income in other occupations. This added flexibility would allow some fishermen to renew their permits even if they did not have the opportunity to earn enough income from fishing. In addition, this income requirement is relatively easy to meet or circumvent, and validation of this income requirement has been difficult. Finally, the elimination of income requirements would also decrease the administrative burden to NMFS and the applicant by simplifying the permit renewal process.

The final rule for Amendment 1 to the FMP (55 FR 2078, January 22, 1990) established the commercial vessel permit for Gulf reef fish and the three-person crew size for dual-permitted vessels when fishing commercially. In 2006, Amendment 18A to the FMP modified the crew size rule to add the Coast Guard certificate of inspection (COI) provision that allowed vessels with a COI to carry a minimum crew size specified by the COI if it was greater than three. Amendment 18A was intended to resolve conflict between the Council's maximum crew size rule and the Coast Guard's minimum crew size requirements for vessels with a COI, which was at least four.

Historically, limiting the crew size on a dual-permitted vessel when fishing commercially may have served to prevent a vessel from taking out a number of passengers under the pretense of making a charter trip, but subsequently selling the catch. Under current commercial fishing practices, limiting the crew size of a vessel to prevent selling catch caught on a charter trip is no longer a primary concern. IFQ programs now regulate commercially harvested red snapper, grouper, and tilefish species, which constitute the majority of the commercial reef fish landings. In addition, all commercial Gulf reef fish vessels are required to be equipped with vessel monitoring systems. The strict reporting requirements of these management measures make it clear when a vessel is operating as a commercial vessel. The amount of IFQ shares owned by a permit holder limits the amount of fish harvested by a vessel regardless of the crew size. In addition, due to the costs involved with carrying extra crew, there would be little incentive to exceed the necessary crew size.

Currently, 154 vessels possess both a charter vessel/headboat permit and a commercial vessel permit for Gulf reef fish. These vessel are considered to be dual-permitted vessels. Unless the vessel has a COI, dual-permitted vessels are limited to a three-person maximum crew size. The current crew restriction limits are of particular concern for vessels conducting commercial spearfishing operations. These activities would be considered commercial diving operations under the Occupational Safety and Health Administration (OSHA) regulations. The OSHA regulations for SCUBA diving operations (29 CFR 1910.424(c)) require that: (1) A standby diver is available while the SCUBA diver is in the water and (2) the SCUBA diver must be either line-tended or accompanied by another diver with continuous visual contact. The OSHA regulations aim to establish safe operating procedures for conducting commercial SCUBA diving; however, the three-person crew limit for dual-permitted vessels impairs the crew's ability to comply with OSHA and decreases the safety at sea, which violates National Standard 10 of the Magnuson-Stevens Act (16 U.S.C. 1851(a)(10)). Based on OSHA regulations, if two divers are underwater spearfishing, the third crewmember at the surface would need to handle the vessel and be the standby diver. If it is necessary to have two crew members at the surface, only one diver could be underwater and would need to be line-tended. Spearfishing while being line-tended could cause additional safety issues.

In addition, the Coast Guard Diving Policies and Procedures Manual (2009) states that “[a] minimum of four personnel consisting of a diving supervisor, diver, diver tender and a standby diver are required to conduct SCUBA operations.” While this is not a regulation applicable to commercial spearfishing vessels, it provides guidance to increase safety of the diving personnel.

This rule proposes to increase the crew size from three to four for dual-permitted vessels to improve the safety at sea issues while commercially spearfishing, which would comply with National Standard 10 of the Magnuson-Stevens Act. In addition, it allows commercial spearfishing vessels to comply with the OSHA diving regulations and the U.S. Coast Guard guidance for conducting diving operations.

Pursuant to section 304(b)(1)(A) of the Magnuson-Stevens Act, the AA has determined that this proposed rule is consistent with Amendment 34, the Magnuson-Stevens Act and other applicable law, subject to further consideration after public comment.

This proposed rule has been determined to be not significant for purposes of Executive Order 12866.

The Chief Counsel for Regulation of the Department of Commerce certified to the Chief Counsel for Advocacy of the Small Business Administration that this proposed rule, if adopted, would not have a significant economic impact on a substantial number of small entities. The factual basis for this determination is as follows:

The purpose of this proposed rule is to eliminate existing income qualification requirements that may no longer be applicable to the current commercial fishing environment and to improve vessel safety in the Gulf reef fish fishery. The Magnuson-Stevens Act provides the statutory basis for this proposed rule.

This rule, if implemented, would be expected to directly affect 920 vessels that possess a commercial reef fish permit. Among these entities, 154 vessels also possess a reef fish for-hire permit. These vessels would be affected by both actions in this proposed rule. The average commercial vessel in the reef fish fishery is estimated to earn approximately $48,000 (2010 dollars).

The for-hire fleet is comprised of charterboats, which charge a fee on a vessel basis, and headboats, which charge a fee on an individual angler (head) basis. The average charterboat is estimated to earn approximately $89,000 (2010 dollars) in annual revenue, while the average headboat is estimated to earn approximately $469,000 (2010 dollars). The average revenue profile of dual-permitted vessels is not available.

There have been no other small entities identified that would be expected to be directly affected by this proposed rule.

The Small Business Administration has established size criteria for all major industry sectors in the U.S. including fish harvesters. A business involved in fish harvesting 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 has combined annual receipts not in excess of $4.0 million (NAICS code 114111, finfish fishing) for all its affiliated operations worldwide. The revenue threshold for a business involved in the for-hire fishing industry is $7.0 million (NAICS code 713990, recreational industries). Based on the average revenue estimates provided above, all commercial and for-hire vessels expected to be directly affected by this proposed rule are determined for the purpose of this analysis to be small business entities.

Neither action in this proposed rule would be expected to result in any reduction in profits for any small entities. The two proposed actions would either eliminate or lessen a current restriction. The proposed elimination of an income requirement for the Gulf commercial reef fish permit is expected to provide the opportunity for fishermen to increase income from non-fishing occupations without jeopardizing their ability to renew their commercial reef fish permit. This would also eliminate the pressure to continue to fish to maintain fishing income to satisfy a permit requirement when personal, economic, or other factors may suggest fishing should not occur. Finally, this rule would reduce the reporting and recordkeeping burdens currently imposed on applicants. In particular, applicants would no longer be required to complete the Income Qualification Affidavit section on the Federal Permit Application for Vessels Fishing in the EEZ (Federal Permit Application) as proof of meeting permit income qualification requirements for commercial Gulf reef fish vessel permits. As a result, although the effects are not quantifiable with available data, this proposed action would be expected to increase the economic benefits to small entities.

The proposed increase in the maximum crew size from three to four persons for dual-permitted vessels would allow increased flexibility for affected vessels to carry the number of crew best suited to the needs or conditions of the trip. As a result, although the effects are again unquantifiable with available data, increased economic benefits would be expected to accrue to fishermen as a result of this increased flexibility. Therefore, the economic effects on small entities of this proposed rule, if implemented, are expected to be positive and not constitute a significant economic impact on a substantial number of small entities.

Because this proposed rule, if implemented, would not be expected to have a significant economic impact on any small entities, an initial regulatory flexibility analysis is not required and none has been prepared.

Notwithstanding any other provision of law, no person is required to respond to, nor shall a person be subject to a penalty for failure to comply with, a collection-of-information subject to the requirements of the Paperwork Reduction Act (PRA), unless that collection-of-information displays a currently valid Office of Management and Budget (OMB) control number.

This proposed rule contains collection-of-information requirements subject to the PRA. NMFS estimates the removal of the income qualification requirements for commercial Gulf reef fish permit holders will result in a net decrease in the time to complete the Federal Permit Application (for all applicants), however, the current burden estimate (20 minutes per applicant) to complete the application form would not decrease because the time to complete the Income Qualification Affidavit is minimal compared to the time to complete the entire application.

These requirements have been submitted to OMB for approval. NMFS seeks public comment regarding: Whether this proposed collection-of-information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; the accuracy of the burden estimate; ways to enhance the quality, utility, and clarity of the information to be collected; and ways to minimize the burden of the collection-of-information, including through the use of automated collection techniques or other forms of information technology. Send comments regarding the burden estimate or any other aspect of the collection-of-information requirement, including suggestions for reducing the burden, to NMFS and to OMB (see ADDRESSES ).

For the reasons set out in the preamble, 50 CFR part 622 is proposed to be amended as follows: