On May 15, 2012, the U.S. Office of Personnel Management (OPM) issued an interim rule (77 FR 28471) to abolish the Montgomery, Pennsylvania, nonappropriated fund (NAF) Federal Wage System (FWS) wage area and redefine Chester, Montgomery, and Philadelphia Counties, PA, to the Burlington, NJ, NAF wage area and Luzerne County, PA, to the Morris, NJ, NAF wage area. Bucks County, PA, will no longer be defined to an NAF wage area. The Federal Prevailing Rate Advisory Committee, the national labor-management committee responsible for advising OPM on matters concerning the pay of FWS employees, reviewed and recommended these changes by consensus. The interim rule had a 30-day comment period, during which OPM received no comments.

I certify that these regulations will not have a significant economic impact on a substantial number of small entities because they will affect only Federal agencies and employees.

Accordingly, under the authority of 5 U.S.C. 5343, the interim rule published on May 15, 2012, amending 5 CFR part 532 (77 FR 28471) is adopted as final with no changes.

Title II of the Dodd-Frank Act provides for the appointment of the FDIC as receiver of a covered financial company that poses a systemic risk to the nation's economic stability and outlines the process for the orderly resolution of a covered financial company following the FDIC's appointment as receiver. Section 209, codified at 12 U.S.C. 5389, authorizes the FDIC, in consultation with the Financial Stability Oversight Council (“FSOC”), to prescribe rules and regulations as the FDIC considers necessary or appropriate with respect to the rights, interests and priorities of creditors, counterparties, security entitlement holders or other persons with respect to any covered financial company and other matters necessary or appropriate to the implementation of the orderly liquidation authority established under Title II of the Act. Pursuant to the authority granted by section 209, the FDIC is issuing the Final Rule.

Fundamental to the orderly liquidation of a covered financial company is the ability to continue key operations, transactions and services that will maximize the value of the firm's assets and operations and avoid a disorderly collapse in the marketplace. To facilitate this continuity of operations, the Dodd-Frank Act provides several tools to preserve the value of the covered financial company's assets and business lines, including the powers granted in section 210(c)(16), codified at 12 U.S.C. 5390(c)(16) (“section 210(c)(16)” or the “Statute”). Specifically, section 210(c)(16) provides that the Corporation, as receiver for a covered financial company, has the power “to enforce contracts of subsidiaries or affiliates of the covered financial company, the obligations under which are guaranteed or otherwise supported by or linked to the covered financial company, notwithstanding any contractual right to cause the termination, liquidation, or acceleration of such contracts based solely on the insolvency, financial condition, or receivership of the covered financial company, if (i) such guaranty or other support and all related assets and liabilities are transferred to and assumed by a bridge financial company or a third party * * * or (ii) the Corporation, as receiver, otherwise provides adequate protection with respect to such obligations.”

The conditions contained in (i) and (ii) of the quoted statute assure counterparties that any contractual right to guaranties or other support, including claims on collateral or other related assets, would be protected. Thus, section 210(c)(16) requires, as a condition to the authority to enforce subsidiary or affiliate contracts that are “linked to” the financial condition of the covered financial company through a default provision, that the Corporation as receiver transfer any guaranty or other support provided by the specified covered financial company for the contractual obligations together with all related collateral to a bridge financial company or other qualified transferee within one business day after its appointment as receiver. In the alternative, if the receiver does not transfer the support and the related assets and liabilities, the receiver must provide “adequate protection” with respect to any support or collateral not transferred in order to preserve its right to enforce the contract of the subsidiary or affiliate.

In providing the orderly liquidation authority of Title II, the Dodd-Frank Act provides certain particular authorities with respect to subsidiaries and affiliates of the covered financial company. For instance, section 210(a)(1)(E) of the Dodd-Frank Act provides an expedited procedure to allow the Corporation to appoint itself as the receiver of certain subsidiaries of a covered financial company if the Corporation and the Secretary of the Treasury jointly determine that such subsidiary is in default or in danger of default and that such action would mitigate serious adverse effects on the financial stability of the United States and would facilitate the orderly liquidation of the covered financial company. That section further provides that upon such an appointment, the subsidiary would be treated as a covered financial company and the Corporation would be able to exercise the full range of special powers available to the receiver.

In certain cases, however, the receiver for the covered financial company may find that the best course of action to maximize the value of the covered financial company and to mitigate systemic risk would be to avoid actions that place subsidiaries in danger of default or that necessitate complex interlocking receiverships. The affiliated legal entities that collectively comprise a complex financial institution typically share and provide intra-group funding, guaranties, administrative support, human resources and other operational and business functions. Some of these operations and activities may be critical to the day-to-day functions and overall operations of the group. In addition, certain significant subsidiaries of a covered financial company may be essential to core business lines or may conduct critical operations that, if discontinued, may threaten the stability of the financial markets. In these circumstances, orderly liquidation of a covered financial company may best be accomplished by establishing a single receivership of the parent holding company and transferring valuable operations and assets to a solvent bridge financial company, including the stock or other equity interests of some or all of the company's various subsidiaries. Accordingly, the Dodd-Frank Act provides the FDIC with the tools and flexibility to act effectively as receiver for the covered financial company at the holding company or parent level without placing solvent subsidiaries into receivership. This approach may be the best means of preserving value, minimizing the shock to the financial system, providing additional flexibility to mitigate cross-border resolution issues for global systemically-important financial companies and allowing for a more expeditious resolution of a covered financial company.

Where such an approach is adopted, the powers granted to the receiver under section 210(c)(16) are essential to preservation of going-concern value of the subsidiaries for the benefit of the parent in receivership. Absent this statutory provision, counterparties to contracts of subsidiaries and affiliates could exercise contractual rights to terminate their agreements based upon the insolvency of the specified covered financial company. As a result, otherwise viable affiliates of the covered financial company could become insolvent, thereby inciting the collapse of interrelated companies and potentially amplifying ripple effects throughout the economy.

As described in more detail below, the Final Rule clarifies the scope of the authority granted in section 210(c)(16) as well as conditions and requirements applicable to the receiver. The Final Rule makes clear that the effect of this enforcement authority is that no party may exercise any remedy under a contract simply as a result of the appointment of the receiver and the exercise of its orderly liquidation authorities as long as the receiver complies with the statutory requirements. The Final Rule addresses requirements for notice to affected counterparties and defines key terms. It also clarifies the term “adequate protection” in a manner consistent with its interpretation under the Bankruptcy Code.

On March 27, 2012, the FDIC published a notice of proposed rulemaking (“NPR”) relating to the enforcement of subsidiary and affiliate contracts by the Corporation as receiver of a covered financial company under section 210(c)(16) (77 FR 18127, March 27, 2012). The NPR, which included proposed rules (the “Proposed Rule”), requested comments on all aspects of the Proposed Rule and included specific questions as to several aspects of the Proposed Rule. The comment period ended on May 29, 2012. The FDIC considered all of the comments received in response to the NPR.

In accordance with section 209 of the Act, the FDIC reviewed otherwise applicable insolvency law, including the Bankruptcy Code, and has harmonized the Final Rule with such laws where possible. Such harmonization includes the formulation of the definition of adequate protection, which is generally consistent with Bankruptcy Code precedent. Also consistent with Section 209 of the Act, the FDIC consulted with the FSOC in preparing the Final Rule.

The FDIC received six comments in response to the Proposed Rule. Two letters were from individuals and fully supported the Proposed Rule. The other four letters, of which two were submitted by insurance industry trade groups, one by an insurance underwriter and one jointly on behalf of three financial industry associations, proposed that various changes should be made to the Proposed Rule. The FDIC also held a follow-up teleconference at the request of one of the authors of the financial industry association letter.

One of the areas of concern to commenters related to how the rule would be applied. The letter from the financial industry associations expressed concern that by defining “specified financial condition clause” to include provisions permitting a counterparty to exercise remedies based directly or indirectly upon a change in the financial condition or the insolvency of the covered financial company, the Proposed Rule could be construed to prohibit the exercise of remedies by reason of an actual default by a subsidiary or affiliate of the covered financial company. One example cited in the letter was a payment default by a subsidiary which relied on its parent for funds with which to make contractual payments to its counterparties. The letter stated that if the subsidiary were to default on a payment obligation because the parent covered financial company was no longer capable of providing it with necessary funds, it could be argued that the default arose as a result of a change in the financial condition or the insolvency of the covered financial company.

This outcome is not intended by the Proposed Rule, and language has been added to the preamble to further clarify this point. Although the Final Rule prohibits the exercise of remedies based upon specified types of actions or circumstances relating to a covered financial company or one of its direct or indirect transferees, the Final Rule does not prohibit a termination or exercise of other remedies based upon a default under a contractual provision that relates solely to a breach or default by the subsidiary or affiliate. Thus, the rule would not affect a counterparty's rights if the subsidiary or affiliate fails to make a payment due a counterparty. Of course, if the subsidiary or affiliate were to be in default under its contract because the subsidiary or affiliate did not comply with a proscribed remedy for an asserted violation of an unenforceable specified financial condition clause, the Final Rule does not permit the counterparty to take action on the basis of that default. Thus, for example, if a contract of a subsidiary required that the subsidiary deliver additional collateral on account of the changed financial condition of the covered financial company, the counterparty's right to exercise that remedy would be prohibited by the Final Rule and, accordingly, the counterparty would not be permitted to terminate or accelerate the contract based on the non-delivery by the subsidiary of the additional collateral.

The letter from the financial industry associations also requested that the Proposed Rule be revised to clarify that the contractual rights of a counterparty to demand performance from a subsidiary or affiliate of the covered financial company at any time and for any reason cannot be interfered with under section 210(c)(16), without inquiry “whether demand is made as a result of the CFC's default.” The FDIC agrees that the rule is only intended to restrict the ability of a counterparty to take action based on the insolvency, financial condition or receivership of the covered financial company. Thus, if contractual terms provide a counterparty with a right to require margin or repayment in full or other performance on demand, without any linkage to the covered financial company, the enforceability of the provision is not limited by the Final Rule. On the other hand, if a right to demand margin is premised on the existence of a condition that is financial in nature, such as the counterparty deeming itself insecure, and if the counterparty's demand is based upon the financial condition of the covered financial company, such demand would not be permitted by the Final Rule.

The financial industry association letter objected to the provisions of the Proposed Rule that would prevent a margin call against a subsidiary or affiliate of a covered financial company based on a change in the rating of the covered financial company following the appointment of the receiver. The letter argued that prohibiting such margin calls “goes beyond the statutory scope of section 210(c)(16), which only permits the FDIC to override contractual provisions to `terminate, liquidate or accelerate.' ” This argument seems to be a very narrow reading of the scope of section 210(c)(16). As discussed in more detail under III. The Final Rule—Section-by-section analysis below, a broader reading of the section is necessary to implement the intended effect of the Statute to limit the impact of changes in the financial condition of the covered financial company on contractual relationships of counterparties. Allowing unlimited margin calls would impede the orderly resolution of the covered financial company and may well have the same practical effect as the termination of the applicable subsidiary or affiliate contract.

This letter also objected that under the Proposed Rule it appeared that margin levels would be frozen based on the rating of the covered financial company immediately before the receiver was appointed. The letter suggested that rights to margin under contracts supported by the covered financial company be based on the rating of the bridge financial company or other qualified transferee to which the support is transferred and that rights to margin on a contract of a subsidiary that is linked but not supported be based on the rating of the entity to which the direct or indirect ownership interests in such subsidiary have been transferred. This would not be consistent with section 210(c)(16), which refers to actions based on the financial condition of the covered financial company. This statutory framework is conducive to the creation of a period of stability following the appointment of a receiver to allow for the orderly resolution of a covered financial company. Moreover, it is not unlikely that ratings are uncertain in times of economic uncertainty; it is also likely that a bridge financial company would be unrated. The protection provided by section 210(c)(16) is particularly important with respect to remedies, such as margin calls, that if permitted to be asserted against a subsidiary or affiliate could impede the ability of the receiver to accomplish an orderly liquidation in a manner that minimizes the impact on the U.S. economy.

Although the counterparty's ability to call for additional margin would be suspended until the end of the orderly liquidation process to the extent that margin levels were based on the financial condition of the covered financial company, it should be noted that the Final Rule would not interfere with the operation of other contractual provisions that would result in changes in the level of collateral during the orderly liquidation process.

The financial industry association letter also asserted that section 210(c)(16) requires that adequate protection be provided for counterparties to contracts that are linked to, but not supported or guaranteed by, the covered financial company. The FDIC does not find this position supported in the express language of the statute. The portion of section 210(c)(16) in question states that the FDIC as receiver shall have the power to enforce subsidiary or affiliate contracts, the obligations under which are guaranteed or otherwise supported or linked to the covered financial company, if “(i) such guaranty or other support and all related assets and liabilities are transferred to and assumed by a bridge financial company or a third party * * * or (ii) the Corporation, as receiver, otherwise provides adequate protection with respect to such obligations.” Since the initial clause refers only to guaranty and support, the most straightforward reading is that each of the two clauses refers only to guaranties and other support and not to mere linkages that are not supported. The clause clearly intends to provide two alternatives for the circumstances that are intended to be covered—(i) the transfer of the guaranty or other support or (ii) the granting of adequate protection. Clause (i) is clearly directed only at guaranties and other support. If clause (ii) were construed to apply to other linked contracts, clause (ii) would be the only option for such contracts and would not work consistently with clause (i).

Moreover, the interpretation suggested by the commenter might serve to create a windfall for counterparties of subsidiaries or affiliates by requiring the creation of support when none originally existed. If, prior to the failure of the covered financial company, a linked contract were not supported by a guaranty or collateral provided by the covered financial company, the concept of adequate protection would not suggest a requirement for the creation of such support after the failure.

One of the letters from the insurance industry commenters also addressed linked-but-not supported contracts and objected to the Proposed Rule treating such contracts as covered by the Proposed Rule. The text of section 210(c)(16) specifically refers to a category of agreements that are “linked” to the covered financial company, in addition to agreements which are guaranteed or otherwise supported by the covered financial company. Accordingly, it is quite clear that contracts that are linked but not guaranteed or supported are included as protected contracts under section 210(c)(16).

This commenter also objected that the Proposed Rule exceeded the intended effect of section 210(c)(16) by providing the power to enforce subsidiary and affiliate contracts not only to the FDIC as receiver but also to transferees of the covered financial company, such as bridge financial companies and third party acquirers. While the FDIC does not view the provision in the Proposed Rule that would have granted such authority to a transferee as providing any significant powers that were not suggested by the text of section 210(c)(16), the extension of such authority to transferees is not necessary to achieve the purposes of section 210(c)(16) and has not been included in the Final Rule. As noted in III. The Final Rule—Section-by-section analysis below, such contracts remain enforceable by the applicable subsidiary or affiliate as well as by the FDIC as receiver.

The financial industry association letter also expressed concern that setoff or netting rights in respect of qualified financial contracts could be impaired unless the Proposed Rule was revised to limit the scope of section 210(c)(16) by providing that qualified financial contracts of subsidiaries or affiliates of a covered financial company would be enforceable only to the extent that such enforcement does not impair setoff or netting rights with respect to other qualified financial contracts. The limitation sought by the commenter generally was not consistent with the Statute. Moreover, in the examples provided in the letter, the asserted practical limitation on setoff or netting rights would result from the counterparty deciding to close out contracts, a situation wholly within the control of the counterparty.

The financial industry association letter also requested clarification of the terms “adequate protection” and “indubitable equivalent.” As discussed below, it is intended that these terms be interpreted consistently with their treatment under the Bankruptcy Code. The letter correctly observes that under the Bankruptcy Code these terms are applied in the context of secured obligations and that they are subject to varying treatment among different jurisdictions and cases. Nonetheless, there is sufficient guidance in this precedent to provide at least a comparable degree of certainty in application as is provided by the Bankruptcy Code. The fact that under the Final Rule these terms are also to be applied to unsecured obligations should not detract from the guidance provided by such precedent.

The financial industry associations also requested that the option to provide cash payments as a form of adequate protection be clarified and that the difference between this option and option of providing a guaranty of the receiver be clarified. The option to provide cash payments was included for cases where a full guaranty by the receiver would provide a disproportionate benefit to a counterparty or where there might be other reasons why the FDIC might prefer the use of cash to a guaranty. Such a situation might arise, for example, where there was a limited guaranty in favor of the counterparty that was not transferred to a bridge financial company. Another situation would be where a portion of collateral supporting a counterparty obligation was not transferred. In each of these cases, there might be an increased risk of loss to the counterparty arising from such failure to transfer, but the loss might be limited in nature.

The letter also stated that “[w]hile we believe that the FDIC means for `adequate protection' to protect counterparties from any incremental loss sustained due to actions taken by the FDIC as receiver for a covered financial company, clarifying this view could help provide much-needed certainty with respect to the application of this term.” As suggested above, this is not a correct reading of the Final Rule. With respect to contracts of subsidiaries and affiliates that the receiver desires to remain enforceable notwithstanding an applicable specified financial condition clause, adequate protection would be provided only to compensate for the increased risk of loss due to the non-transfer of all or any portion of the covered financial company's support for such contract or related assets and liabilities.

This letter also requested that the FDIC provide a procedure for counterparties to challenge the FDIC's adequate protection determinations. Such special procedures would be inconsistent with the urgency of the FDIC's responsibility to act expeditiously and efficiently in resolving a covered financial company. The Act makes clear that the FDIC as receiver should not be subject to delays of the type that are inherent in the bankruptcy process. For example, section 210(e) of the Act provides that no court may take any action to restrain or affect the exercise of powers or functions of the receiver.

The letters from the insurance industry included certain comments that relate only to the insurance industry. One letter proposed that the Final Rule state that section 210(c)(16) will not be applied to enforce a contract of an affiliate or subsidiary of a covered financial company if the affiliate or subsidiary is an insurance company. The commenter argued that because the Act provides that an insurance company should be liquidated in accordance with state law, Congress intended that insurance company subsidiaries and affiliates of a covered financial company should not be subject to the orderly liquidation provisions of Title II. In fact, to the contrary, insurance companies are expressly included among financial companies that may, in the circumstances set forth in the Act, become covered financial companies.

Two insurance industry letters urged that the Final Rule include a provision that excludes director's or officer's liability insurance contracts and depository and financial institution bonds from the scope of the Final Rule. Both letters cited section 210(c)(13) of the Act, which specifically exempts liability insurance contracts and financial institution bonds entered into by a covered financial company from that section's general invalidation of ipso facto provisions, but both letters also noted that the Proposed Rule was not intended to override section 210(c)(13). One of these letters cited the “common practice of a parent financial institution including its affiliates or subsidiaries as insureds under its financial institution bond.” The other letter argued that the Proposed Rule would override a “key historical element” of a director's or officer's liability insurance contract that allows an “automatic run-off” upon a change in control of the insured company. The FDIC agrees that if the bond or insurance contract is entered into with the covered financial company and not with the subsidiary or affiliate in question, pursuant to section 210(c)(13) the contract with the covered financial company would be terminable by the insurance company. Unlike the ipso facto provisions of the Act, however, section 210(c)(16) does not exempt director and officer liability policies. Rather, it applies to all contracts. Thus, if the obligations to the subsidiary or affiliate under the bond or insurance contract constitute a contract between the insurance company and the subsidiary or affiliate, such obligations would not be covered by the exception to the ipso facto provisions of section 210(c)(13) and the contract with the subsidiary or affiliate would not be terminable by the insurance company upon the appointment of the receiver for the covered financial company. This is particularly important because the subsidiaries and affiliates are expected to include companies which will continue to operate and will need to have the protection afforded by this insurance.

One of the insurance industry letters also proposed that the definition of “support” be expanded to include support that is not financial in nature, such as an agreement by a covered financial company to provide specific performance of the obligations of a subsidiary or affiliate. The phrase “guaranteed or otherwise supported” in section 210(c)(16) strongly suggests that the reference to support is support that is financial in nature.

Finally, this letter also objected to the provision in the Proposed Rule that permits notice of the transfer of support and related assets and liabilities or the provision of adequate protection to be made on a Web site. As noted in the NPR, section 210(c)(16) does not require that any notice be given. However, the FDIC recognizes that counterparties will need to know the status of their contracts and the Web site posting option is included in the Final Rule in acknowledgement of the public's growing reliance on internet communication as well as the prevalence of online commerce. The Final Rule permits such posting in order to provide a means for the giving of notice that is practical from the perspective of the receiver, which might otherwise be burdened with having to send many thousands of notices, as well as from the perspective of the parties to the applicable contracts with the subsidiaries and affiliates, which would ordinarily be expected to monitor public information relating to covered financial companies and their subsidiaries and affiliates. The FDIC believes that the notice provisions of the Final Rule are reasonably calculated to provide actual notice.

The Final Rule clarifies that the power of the Corporation as receiver to enforce contracts of subsidiaries and affiliates under Dodd-Frank Act section 210(c)(16) effectively preserves contractual relationships of subsidiaries and affiliates of the covered financial company during the orderly liquidation process. The Final Rule identifies certain contracts that are “linked to” the covered financial company within the meaning of the Statute, as well as contracts that also are “supported by” the covered financial company. Under the Statute, a contract is “linked to” a covered financial company if it contains a provision that provides a contractual right to “cause the termination, liquidation or acceleration of such contract based solely on the insolvency, financial condition, or receivership of the covered financial company.” That type of provision, called a “specified financial condition clause” in the Final Rule, is more fully defined in the Final Rule. Although the Statute speaks in terms of the power to enforce a contract to which the receiver is not a party, the Final Rule recognizes the practical effect of this authority, which is that the counterparty to such a contract may not exercise remedies in connection with a specified financial condition clause if the statutory conditions are met. No action is required of the receiver to enforce a linked contract; the Final Rule makes clear that the contract will remain in full force and effect unless the receiver fails to meet the requirements with respect to any supporting obligations of the covered financial company.

The Final Rule establishes that if the subsidiary's obligations under the linked contract are supported by the covered financial company through, for example, guaranties or the granting of collateral that supports the obligations, the Corporation as receiver must either (a) transfer such support (along with all related assets and liabilities) to a qualified transferee not later than 5:00 p.m. (eastern time) on the business day following the appointment of the receiver, or (b) provide “adequate protection” to contract counterparties following notice given to the counterparties in accordance with the guidelines set forth in the Final Rule by the one-business-day deadline.

The Final Rule also clarifies the meaning of the statutory provision regarding a contractual obligation that is “guaranteed or otherwise supported by” the covered financial company. Support includes guaranties that may or may not be collateralized and other examples of financial support of the obligations of the subsidiary or affiliate under the contract. In circumstances where a contract of a subsidiary or affiliate is linked to the financial condition of the parent company via a “specified financial condition clause,” but where the obligations of the subsidiary or affiliate are not “supported by” the covered financial company through guaranties or similar supporting obligations, the requirement to transfer support and related assets or provide adequate protection does not apply. The mere existence of a “specified financial condition clause” does not constitute a “support” obligation by the covered financial company, and the Final Rule makes it clear that the subsidiary or affiliate contract remains enforceable without any requirement to effectively create new support where none originally existed. This is consistent with the effect of section 210(c)(13), providing that ipso facto clauses in contracts of the covered financial company are unenforceable, and section 210(c)(8) of the Dodd-Frank Act, providing that “walkaway clauses” in qualified financial contracts of the covered financial company are unenforceable. In the case of those types of contractual provisions, there is no specified entity required to provide support, hence the concept of alternate support or adequate protection is inapplicable. In the same way, under the Final Rule, the concept of adequate protection does not arise in the absence of supporting obligations by the specified entity.

The Final Rule applies broadly to all contracts, and not solely to qualified financial contracts. For example, a real estate lease or a credit agreement, neither of which would typically be classified as a qualified financial contract, is subject to enforcement under section 210(c)(16) and the Final Rule notwithstanding a specified financial condition clause that might, for instance, give a lessor the right to terminate a lease based upon a change in financial condition of the parent of the lessee. A swap agreement of a subsidiary or affiliate is subject to section 210(c)(16) and the Final Rule in the same manner if the agreement contains specified financial condition clause.

The Final Rule does not affect other provisions of the Dodd-Frank Act governing qualified financial contracts, such as sections 210(c)(8) (“Certain Qualified Financial Contracts”) and 210(c)(9) (“Transfer of Qualified Financial Contracts”). For example, where a covered financial company's support of a subsidiary or affiliate obligation would itself be considered a qualified financial contract, such as a securities contract, the provisions of section 210(c)(9) that prohibit the selective transfer of qualified financial contracts with a common counterparty (or a group of affiliated counterparties) continue to apply. Likewise, the provisions in section 210(c)(10) of the Dodd-Frank Act applicable to counterparties of qualified financial contracts also continue to apply. On the other hand, if the covered financial company's support of a subsidiary or affiliate consists of multiple contracts that are not qualified financial contracts, the Corporation as receiver may transfer all or a portion of such group of contracts as long as it provides adequate protection for the supporting obligations that were not transferred. Similarly, the Corporation may transfer all or a portion of “related assets and liabilities” that are not qualified financial contracts if it provides adequate protection for the portion of the assets and liabilities that was retained by the Corporation as receiver.

Paragraph (a) of the Final Rule states the general rule with respect to the authority granted under section 210(c)(16) of the Dodd-Frank Act, i.e., that the contracts of a subsidiary or affiliate of a covered financial company are enforceable notwithstanding the existence of a “specified financial condition clause” that provides a counterparty with the right to terminate or exercise remedies based upon the financial condition of the parent or affiliate covered financial company, provided that the FDIC as receiver for the covered financial company transfers all support and related assets and liabilities that back the obligations of such subsidiary or affiliate. To the extent that the receiver fails to transfer all support and related assets and liabilities, it must provide adequate protection to such counterparty to preserve its right to enforce the contracts of the subsidiary. The effect of this ability to enforce the contract is intended to be broad enough to preclude the counterparties from terminating or exercising other remedies such as requiring additional collateral but is intended to be limited in scope solely to remedies arising out of a specified financial condition clause, not other contractual defaults by the subsidiary or affiliate. The ability either to transfer support or to provide adequate protection can be exercised in the alternative, or in combination. For example, if some, but not all collateral is transferred, appropriate adequate protection may be provided in lieu of the collateral not transferred.

The deadline for the transfer of support is the same as the time limit applicable to the transfer of qualified financial contracts under section 210(c)(10) of the Dodd-Frank Act, i.e., by 5:00 p.m. (eastern time) on the next business day. Although the decision to provide adequate protection in lieu of transferring support must also be made and steps must be taken that are reasonably calculated to provide notice within a business day, the language of the Final Rule does not require that the adequate protection be fully in place by that next-day deadline. Although the failure to complete within a business day the necessary documentation or transactions should not be deemed to be a waiver of the right to enforce the contract, once the receiver has provided notice of its intent to transfer support or provide adequate protection, the counterparty would be entitled to the benefit of the support or adequate protection even if the need for access to such support or protection arises before the applicable documentation or transfer of collateral is fully completed.

The Final Rule provides, as set forth in the Statute, that the Corporation as receiver has the authority to enforce linked contracts under section 210(c)(16) of the Dodd-Frank Act. Also, the subsidiary or affiliate continues to have the ability to enforce the terms of such contracts as well. In essence, the effect of such authority to enforce is substantively the same as a prohibition of the counterparty to assert a specified financial condition clause against the subsidiary or affiliate. Effectively, the Final Rule makes clear that the practical effect of the operation of section 210(c)(16) is similar to that of section 210(c)(13) (prohibiting counterparties from the exercise of certain rights arising out of ipso facto clauses) and section 210(c)(8)(F) (prohibiting counterparties to qualified financial contracts from the exercise of certain rights arising out of walkaway clauses); i.e., that the counterparties are prohibited from exercising remedies under a specified financial condition clause if the statutory conditions are met.

Section 210(c)(16) expressly states that the power to enforce contracts of a subsidiary in the circumstances described in the Statute is vested in “[t]he Corporation, as receiver for a covered financial company or as receiver for a subsidiary of a covered financial company (including an insured depository institution).” This is captured in section 380.12(a)(3) of the Final Rule. This recognizes that the preservation of value through the enforcement of subsidiary and affiliate contracts is important to all of the interconnected entities that are related to the entity in receivership. The effect of the Statute is to prohibit the counterparty from terminating or exercising remedies based solely on the financial condition of the covered financial company. Once the essential link to the covered financial company is established via the specified financial condition clause, the contract is enforceable by the receiver and by the subsidiary or affiliate that is the direct party-in-interest to the contract.

Section 380.1 is revised in the Final Rule because four terms have been added to it. These terms—“subsidiary,” “affiliate,” “control” and “business day”—are used in the Final Rule but have been included as defined terms under section 380.1 because they are, or may be, used on more than one occasion in part 380. One of these terms—“business day”—was not included in the Proposed Rule but is defined in Title II of the Act. The other terms were included in the Definitions section of the Proposed Rule.

The Final Rule includes six definitions in its Definitions section: “linked,” “specified financial condition clause,” “support,” “related assets and liabilities,” “qualified transferee” and “successor” that relate specifically to the matters discussed in the Final Rule and therefore are not included in section 380.1 among definitions of general applicability to Part 380.

A contract is “linked” to a covered financial company if it contains a specified financial condition clause naming the covered financial company as the specified company.

The term “specified financial condition clause” is intended to broadly capture any provision that gives any counterparty a right to terminate, accelerate or exercise default rights or remedies as a result of any action or circumstance that results in or arises out of the exercise of the orderly liquidation authority. Each aspect of the definition of the term “specified financial condition clause” should be read expansively so that counterparties are effectively stayed from exercising rights under such a clause to terminate contracts or exercise other remedies during a Title II resolution process if the requirements of the Statute are met. Thus, a specified financial condition clause includes any clause that might be interpreted as giving rise to a termination right or other remedy due to the insolvency of the specified covered financial company that might have precipitated the appointment of the receiver, such as an act of insolvency or a downgrade in a rating from a rating agency. Likewise, as indicated in the NPR, the definition is broad enough to include a change in control provision that creates termination rights or other remedies upon the appointment of the FDIC as receiver or other change in control, such as the transfer of stock in the subsidiary to the bridge financial company or the sale, conversion or merger of the bridge financial company or its assets or the issuance of interests in the bridge financial company or its successor to creditors of the covered financial company in satisfaction of their claims. As stated in the NPR, the intent is to allow the subsidiary or affiliate contract to remain in effect despite the exercise of any or all of the authorities granted to the FDIC as receiver for a covered financial company throughout the orderly liquidation process.

Although the language of the Statute refers to the counterparty's rights as “termination, liquidation or acceleration,” that list of remedies cannot be read to be exclusive, as the purpose of the provision is provide the FDIC with the power it needs to preserve going-concern value of the covered financial company as long as the rights of counterparties to receive bargained-for support is respected. Accordingly, the Final Rule uses the broader phrase “terminate, liquidate, accelerate or declare a default under” the contract. In effect, the specified financial condition clause is unenforceable if the statutory requirements are met. In addition, by clarifying that the link created by the specified financial condition clause may operate “directly or indirectly,” the Final Rule clarifies that the scope of the defined term includes contracts where the specified company under the clause may be another company or an affiliate in the corporate structure so long as the ultimate triggering event relates to the financial condition of the covered financial company or the Title II actions taken with respect to that covered financial company. The term “specified company” used in the definition is consistent with terminology commonly used in such provisions in derivatives contracts to refer to the company whose financial condition is the basis for the termination right or other remedy.

Language in this definition is borrowed from sections of the Dodd-Frank Act addressing related matters, such as the enforceability of contracts of the covered financial company notwithstanding ipso facto clauses (section 210(c)(13)) and walkaway clauses with respect to qualified financial contracts (section 210(c)(8)(F)). The fact that this language is adapted and expanded upon should not be deemed to reflect any interpretation of the meaning or possible limitations of those sections. The broad language of this definition reflects the authority granted in section 210(c)(16), which ensures that the receiver has the power to avoid precipitous terminations by counterparties of the subsidiary resulting in disorderly collapse and a loss of value to the covered financial company.

In the event a counterparty (including its affiliates) has more than one contract with the subsidiary or affiliate of the covered financial company, any contract with a cross-default provision with respect to another contract containing a specified financial condition clause also would be “linked.” The same would be true of a single contract of a counterparty with a subsidiary or affiliate that cross-defaulted to the contract of another subsidiary or affiliate that contained a specified financial condition clause.

In order to make unmistakably clear that, as set forth in the Proposed Rule, section 210(c)(16) and the Final Rule protect covered contracts of subsidiaries and affiliates from the exercise of remedies until completion of the resolution process, a new subclause (G) has been added to specifically refer to a step that may be taken in the resolution process by the successor to a bridge financial company. The listed steps are intended to be illustrative but not exclusive. As stated in the NPR, section 210(c)(16) and the Final Rule give the receiver the necessary tools to keep subsidiary and affiliate contracts with specified financial condition clauses in place throughout the resolution process. This is further discussed below in the description of the definition of “successor.”

The term “support” means to guarantee, indemnify, undertake to make any loan, advance or capital contribution, maintain the net worth of the subsidiary or affiliate, or provide other financial assistance. This would include a pledge of collateral that directly secures an obligation of a subsidiary or affiliate. The definition does not include other assistance that is not financial in nature, such as an undertaking to conduct specific performance. Generally, if the obligation of the counterparty to perform is linked to the financial condition of the parent, the support also would likely be financial, and other types of arrangements are beyond the scope of the Statute. One comment was received in response to a question included in the NPR as to the sufficiency of this definition. As noted under II. Summary of Comments on the Proposed Rule above, this commenter argued that the definition should be expanded to include support that is not financial in nature. However, including such type of support in the definition would be inconsistent with section 210(c)(16).

The term “related assets and liabilities” includes assets of the covered financial company serving as collateral securing the covered financial company's support obligation, and setoff rights or netting arrangements to which the covered financial company is subject if they are related to the covered financial company's support. It should be noted, however, that if the “support” were in the nature of a guaranty, the related assets and liabilities would not consist of all of the assets of the covered financial company unless the guaranty was secured by all assets of the covered financial company. The transfer of an unsecured guaranty or obligation to a qualified transferee would meet the requirements of the Final Rule in this regard, without the transfer of any particular assets. The definition also broadly includes any liabilities of the covered financial company that directly arise out of or relate to its support of the obligations or liabilities of the subsidiary or affiliate. In some instances, this definition may be redundant with the definition of support, as a guaranty could be both a related liability and a supporting obligation. The broader definition is intended to make clear that the full range of supporting obligations and related assets and liabilities must be transferred to ensure that the counterparties are in substantially the same position as they were prior to the transfer to the qualified transferee.

It is important to note that in some situations “support” and “related assets and liabilities” are themselves qualified financial contracts. Section 210(c)(8)(D)(ii)(XII) of the Act includes “securities contracts” as qualified financial contracts, and defines securities contracts to include “any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in this clause, including any guaranty or reimbursement obligation in connection with any agreement or transaction referred to in this clause.” Other types of qualified financial contracts, such as for example, swaps (in section 210(c)(8)(D)(vi)(VI) of the Act), are similarly defined to include related security agreements arrangements and other credit enhancements. To the extent such support and related assets and liabilities themselves constitute financial contracts, they are subject to the rules applicable to the treatment of qualified financial contracts, including the so-called all-or-none rule under section 210(c)(9).

The term “qualified transferee” specifically includes a bridge financial company as well as any unrelated third party (other than a third party for which a conservator, receiver, trustee in bankruptcy, or other legal custodian has been appointed, or which is otherwise the subject of a bankruptcy or insolvency proceeding). A qualified transferee can include both the bridge financial company and a subsequent transferee; for instance, if assets and liabilities, including the support and related assets and liabilities are transferred first to a bridge financial company and then to another acquirer either prior to or upon the termination of the bridge financial company pursuant to the orderly liquidation authorities granted under Title II of the Dodd-Frank Act.

The definition of the terms “subsidiary” and “affiliate” are consistent with the definitions given to such terms in the Dodd-Frank Act. Section 2(18) of the Act, codified at 12 U.S.C. 5301(18), provides that these terms will have the same meanings as in section 3 of the FDI Act (12 U.S.C. 1813). Under the Federal Deposit Insurance Act (“FDI Act”), the term “subsidiary” is broadly defined as “any company which is owned or controlled directly or indirectly by another company * * *.” “Affiliate” is defined by reference to the Bank Holding Company Act, 12 U.S.C. 1841(k) as “any company that controls, is controlled by, or is under common control with another company.”

The term “control” is used in the definitions of the terms “subsidiary” and “affiliate.” The Statute refers to the definition of “control” provided in the FDI Act, which in turn, refers to the definition provided in the Bank Holding Company Act, 12 U.S.C. 1841(a). In defining the use of this term for purposes of the definitions of “subsidiary” and “affiliate,” the Final Rule streamlines these cross-references, clarifies that certain provisions of the Bank Holding Company Act definition are inapplicable in this context, and adopts the flexible approach of conforming to the relevant provisions of the Bank Holding Company Act and regulations promulgated thereunder at the time of appointment of the receiver.

In effect, the definition of “control” includes, as a company in “control” of another company, a company that directly or indirectly or acting through one or more persons owns, controls, or has the power to vote 25 percent or more of any class of voting securities of the other company. Under the Final Rule, a company may also exercise “control” if that company controls in any manner the election of a majority of the directors or trustees of the company. This definition is consistent with the Bank Holding Company Act definition as it has been reflected in regulations promulgated under that section, including Regulation W (12 CFR 223.3(g)) and Regulation Y (12 CFR 225.2(e)).

Section 2 of the Dodd-Frank Act expressly adopts the FDI Act definitions that incorporate the Bank Holding Company Act definitions “except to the extent the context otherwise requires.” Parts of the Bank Holding Company Act definition of “control” are inapposite to the context of section 210(c)(16). Provisions that provide for a determination of “control” made by the Federal Reserve Board of Governors pursuant to a notice and hearing are inconsistent with the expedited decision-making expressly required by section 210(c)(16).

An entity is deemed to be a “successor” of a bridge financial company if it is the company into which the bridge financial company is converted by way of incorporation under the laws of a state or if it is the surviving company of a merger or consolidation of the bridge financial company with another company (whether before or after any such conversion). Although this definition was not included in the Proposed Rule, no substantive change is effected by its insertion in the Final Rule. Under the Act, it is possible that a bridge financial company's status as such could terminate before the resolution process is completed and a successor merely constitutes a continuation of a qualified transferee. By including this definition for “successor,” the Final Rule more specifically reflects a possible step and strategy in the resolution process that, while clearly within the general scope of the Proposed Rule and NPR, was not given specific mention.

The term “business day” is defined in the same way such term is defined in section 210(c)(10)(D) of the Act, relating to notification of transfer of qualified financial contracts. This is consistent with the notice requirement in the Final Rule, which provides for steps to be taken to provide notice during the same time period that is applicable for the taking of steps to provide notice of the transfer of qualified financial contracts. This was also contemplated by a question included in the NPR (in respect of which no responses were received) as to whether “business day” should be defined consistently with the definition in section 210(c)(10)(D).

Paragraph (c) of the Final Rule describes the different ways that the Corporation may provide adequate protection in the event that it does not transfer a covered financial company's support to a qualified transferee. The definition of adequate protection is consistent with the definition in section 361 of the Bankruptcy Code, 1 which also formed the basis of the definition of adequate protection in the context of treatment of certain secured creditors under 12 CFR 380.52. Adequate protection may include any of the following: (1) Making a cash payment or periodic cash payments to the counterparties of the contract to the extent that the failure to cause the assignment and assumption of the covered financial company's support and related assets and liabilities causes a loss to the counterparties; (2) providing to the counterparties a guarantee, issued by the Corporation as receiver for the covered financial company, of the obligations of the subsidiary or affiliate of the covered financial company under the contract; or (3) providing relief that will result in the realization by the claimant of the indubitable equivalent of the covered financial company's support. The phrase “indubitable equivalent,” which appears in section 361 of the Bankruptcy Code, is intended to have a meaning consistent with its meaning in bankruptcy, in conformance with section 209 of the Dodd-Frank Act that requires rules promulgated under Title II of the Act to be “harmonized” with the Bankruptcy Code where possible. One comment was received requesting further clarification of the definitions of adequate protection and indubitable equivalent. As discussed under II. Summary of Comments on the Proposed Rule above, no further clarification of these terms was deemed necessary.

It is important to note that although a guaranty of the Corporation as receiver is expressly included among the enumerated examples of “adequate protection” in paragraph (c) of the Final Rule, the omission of such specific reference in 12 CFR 380.52 is not intended to suggest that such a guaranty would not constitute adequate protection to secured creditors under to 12 CFR 380.52. The guaranty of the receiver is, in any event, the indubitable equivalent of any guaranty or support that it may replace, and the express mention of the guaranty is added only for the avoidance of any doubt. Any such guaranty issued in accordance with the Act would be backed by the assets of the covered financial company, and also would be supported by the orderly liquidation fund and the authority of the Corporation as manager of the orderly liquidation fund to assess the financial industry pursuant to section 210(o) of the Act. Such a guaranty would in all events qualify as the indubitable equivalent of any guaranty or support that it may replace. The express mention of the guaranty is added merely for the avoidance of any doubt.

Paragraph (d) of the Final Rule provides that if the Corporation as receiver transfers any support and related assets and liabilities of the covered financial company or decides to provide adequate protection in accordance with subparagraphs (a)(1) and (2), it will promptly take steps to notify contract counterparties of such transfer or provision of adequate protection. Although the Statute does not contain a notice requirement, the Final Rule requires that these reasonable steps be taken to provide notice in recognition of the practical reality that contract counterparties will need to know whether they may exercise remedies under a specified financial condition clause. In acknowledgement of the public's growing reliance on internet communication as well as the prevalence of online commerce, the Final Rule provides that the Corporation may post such notice on its public Web site, the Web site of the covered financial company or the subsidiary or affiliate, or provide notice via other electronic media. One comment was received in response to the question posed by the NPR as to whether these steps were reasonably calculated to provide notice. This commenter objected that navigation of Web sites is often difficult and that counterparties may not be aware that the parent financial company was placed into receivership and that, accordingly, this form of notice was inadequate. As discussed under II. Summary of Comments on the Proposed Rule above, no change has been made in the Final Rule. The use of electronic notification is effective and efficient in connection with the failure of a systemically important financial company. In such a case, individually directed notice would be unduly cumbersome and burdensome.

While the Corporation will endeavor to provide notice in a manner reasonably calculated to provide notification to the parties in a timely manner, the provision of actual notice is not a condition precedent to enforcing such contracts. Any action by a counterparty in contravention of section 210(c)(16) will be ineffective, whether or not such counterparty had actual notice of the transfer of support or provision of adequate protection. Further, where the contract of the subsidiary or affiliate is linked to the covered financial company but not otherwise supported by the covered financial company, actual notice of by the Corporation of its appointment as receiver or its intent to exercise the authority under section 210(c)(16) is not required.

In accordance with the Paperwork Reduction Act (44 U.S.C. 3501, et seq. ) (“PRA”), the FDIC may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid Office of Management and Budget (OMB) control number. The Final Rule would not involve any new collections of information pursuant to the Paperwork Reduction Act (44 U.S.C. 3501, et seq. ). Consequently, no information will be submitted to the Office of Management and Budget for review.

The Regulatory Flexibility Act 5 U.S.C. 601, et seq. (RFA) requires each federal agency to prepare a final regulatory flexibility analysis in connection with the promulgation of a final rule, or certify that the final rule will not have a significant economic impact on a substantial number of small entities. 2 Pursuant to section 605(b) of the Regulatory Flexibility Act, the FDIC certifies that the Final Rule will not have a significant economic impact on a substantial number of small entities.

The Office of Management and Budget has determined that the Final Rule is not a “major rule” within the meaning of the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), (5 U.S.C. 801 et seq. ). As required by the SBREFA, the FDIC will file the appropriate reports with Congress and the General Accounting Office so that the Final Rule may be reviewed.

The FDIC has determined that the Final Rule will not affect family well-being within the meaning of section 654 of the Treasury and General Government Appropriations Act, enacted as part of the Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1999 (Pub. L. 105-277, 112 Stat. 2681).

Section 722 of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113 Stat.1338, 1471), requires the Federal banking agencies to use plain language in all proposed and final rules published after January 1, 2000. The FDIC has sought to present the Final Rule in a simple and straightforward manner.

For the reasons stated above, the Board of Directors of the Federal Deposit Insurance Corporation amends part 380 of title 12 of the Code of Federal Regulations as follows:

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to include an AD that would apply to the specified products. That NPRM was published in the Federal Register on July 25, 2012 (77 FR 43545), and proposed to supersede AD 2011-17-04, Amendment 39-16768 (76 FR 50403, August 15, 2011). That NPRM proposed to correct an unsafe condition for the specified products. The Mandatory Continuing Airworthiness Information (MCAI) states:

We gave the public the opportunity to participate in developing this AD. We received no comments on the NPRM (77 FR 43545, July 25, 2012) or on the determination of the cost to the public.

We reviewed the available data and determined that air safety and the public interest require adopting the AD as proposed.

Based on the service information, we estimate that this AD affects about 65 products of U.S. registry.

The actions that are required by AD 2011-17-04, Amendment 39-16768 (76 FR 50403, August 15, 2011), and retained in this AD take about 8 work-hours per product, at an average labor rate of $85 per work hour. Required parts would cost about $479 per product. Where the service information lists required parts costs that are covered under warranty, we have assumed that there will be no charge for these costs. As we do not control warranty coverage for affected parties, some parties may incur costs higher than estimated here. Based on these figures, the cost of the currently required actions is $1,159 per product.

We estimate that it takes about 1 work-hour per product to comply with the new basic requirements of this AD. The average labor rate is $85 per work-hour. Based on these figures, we estimate the cost of the AD on U.S. operators to be $5,525, or $85 per product.

We have received no definitive data that would enable us to provide a cost estimate for the on-condition actions specified in this AD.

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

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

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

For the reasons discussed above, I certify that this AD:

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

2. Is not a “significant rule” under 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.

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

You may examine the AD docket on the Internet at http://www.regulations.gov; or in person at the Docket Operations office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains the NPRM (77 FR 43545, July 25, 2012), the regulatory evaluation, any comments received, and other information. The street address for the Docket Operations office (telephone (800) 647-5527) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt.

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

The FAA is authorized to issue this final rule pursuant to 49 U.S.C. 44701. Under that section, the FAA is authorized to establish regulations and minimum standards for other practices, methods, and procedures the Administrator finds necessary for air commerce and national security.

On July 12, 2005, the FAA published Special Federal Aviation Regulation 106 (SFAR 106) entitled, “Use of Certain Portable Oxygen Concentrator Devices Onboard Aircraft” (70 FR 40156). SFAR 106 is the result of a notice the FAA published in July 2004 (69 FR 42324) to address the needs of passengers who must travel with medical oxygen. Before publication of SFAR 106, passengers in need of medical oxygen during air transportation faced many obstacles when requesting service. Many aircraft operators did not provide medical oxygen service aboard flights, and those that did often provided service at a price that travelers could not afford. Coordinating service between operators and suppliers at airports was also difficult, and passengers frequently chose not to fly because of these difficulties.

Medical oxygen technologies approved by the Food and Drug Administration (FDA) reduce the risks typically associated with compressed oxygen and provide a safe alternative for passengers who need oxygen therapy. Numerous manufacturers have developed small portable oxygen concentrators (POC) that work by separating oxygen from nitrogen and other gases contained in ambient air and dispensing it in concentrated form to the user with an oxygen concentration of about 90%. The POCs operate using either rechargeable batteries or, if the aircraft operator obtains approval from the FAA, aircraft electrical power.

In addition, the Pipeline and Hazardous Materials Safety Administration (PHMSA) has determined that the POCs covered by this amendment are not hazardous material. Thus, they do not require the same level of special handling as compressed oxygen, and are safe for use on board aircraft, provided certain conditions for their use are met.

SFAR 106 permits passengers to carry on and use certain POCs on board aircraft if the aircraft operator ensures that the conditions specified in the SFAR for their use are met. The devices initially determined acceptable for use in SFAR 106, published July 12, 2005, were AirSep Corporation's LifeStyle and Inogen, Inc.'s Inogen One POCs. SFAR 106 has been amended several times to allow passengers to use additional devices. This final rule adds additional POC devices, including AirSep Corporation's Focus, AirSep FreeStyle 5, Inogen One G3, Inova Labs, Inc.'s LifeChoice Activox, Phillips Respironics Simply Go, Precision Medical Inc.'s EasyPulse and SeQual Technologies, Inc.'s SAROS that may be carried on and used by a passenger on board an aircraft.

In addition, on January 27, 2012 (77 FR 4219), the FAA published a Technical Amendment to update the names of two approved POC manufacturers due to business changes. The LifeChoice POC is currently being manufactured by Inova Labs, Inc. and the RS-00400 POC is currently being manufactured by Oxus, Inc. In the technical amendment, the FAA inadvertently removed the previous manufacturer's names from the list of approved POCs in SFAR 106. People still have POCs marked with those manufacturer's names. In this final rule, the FAA will add those previous manufacturer's names (International Biophysics Corporation's LifeChoice and Delphi Medical Systems' RS-00400) back to the list of approved POCs in SFAR 106.

Aircraft operators can meet certain conditions and allow passengers to carry on and use one of the POC devices covered in SFAR 106. SFAR 106 is an enabling rule, which means that no aircraft operator is required to allow passengers to operate these POC devices on board its aircraft, but it may allow them to be operated on board. If one of these devices is allowed by the aircraft operator to be operated on board, the conditions in the SFAR must be met.

When SFAR 106 was published, the FAA committed to establishing a single performance standard for all POCs so the regulations wouldn't apply to specific manufacturers and models of device. Whenever possible, the FAA tries to regulate by creating performance-based standards rather than approving by manufacturer. In the case of SFAR 106, the most efficient way to serve both the passenger and the aircraft operator was to allow the use of the devices determined to be acceptable by the FAA in SFAR 106 in a special, temporary regulation. As the FAA stated in the preamble discussion of the final rule that established SFAR 106, “while we are committed to developing a performance-based standard for all future POC devices, we do not want to prematurely develop standards that have the effect of stifling new technology of which we are unaware.” The FAA developed and published SFAR 106 so passengers who otherwise could not fly could do so with an affordable alternative to what existed before SFAR 106 was published.

The FAA continues to pursue the performance-based standard for all POCs. This process is time-consuming, and the FAA intends to publish a notice in the Federal Register and offer the public a chance to comment on the proposal when it is complete. In the meantime, manufacturers continue to create new and better POCs, and manufacturers have requested that their product also be included as an acceptable POC in SFAR 106. Precision Medical, Inc., Inogen, Inc. and AirSep Corporation have formally submitted petitions for exemption to the FAA that would allow their POCs to be used on aircraft. In addition, SeQual Technologies, Inc., Inova Labs, Inc., and Phillips Respironics have submitted requests for approval and addition to SFAR 106, with all required documentation for their POCs, to the Department of Transportation's Docket Management System.

Additionally, as stated in Section 2 of SFAR 106, no covered device may contain hazardous materials as determined by PHMSA (written documentation necessary), and each device must also be regulated by the FDA. All manufacturers have included technical specifications for their devices in each request for approval, as well as the required documentation from PHMSA and the FDA.

This amendment to SFAR 106 will include the AirSep Focus, AirSep FreeStyle 5, Inogen One G3, Inova Labs LifeChoice Activox, Respironics Simply Go, Precision Medical EasyPulse and SeQual SAROS devices in the list of POC devices authorized for use in air commerce. The FAA has reviewed these devices and accepted the documentation provided by the manufacturers. That documentation includes letters provided to the manufacturer by PHMSA and the FDA affirming the status of the device as it applies to the requirements stated in SFAR 106. After reviewing the applicable FDA safety standards and the PHMSA findings, the device was determined by the FAA to be acceptable for use in air commerce.

Additionally, in the January 27, 2012 technical amendment to SFAR 106, while updating manufacturer's names due to business changes, the FAA inadvertently removed the previous manufacturer's names from the list of approved POCs. Even though these POCs are manufactured under new manufacturer's names, people still have POCs marked with the previous manufacturer's names. In this final rule, the FAA will add those previous manufacturer's names (International Biophysics Corporation's LifeChoice and Delphi Medical Systems' RS-00400) back to the list of approved POCs in SFAR 106.

Section 553 of the Administrative Procedure Act, 5 U.S.C 553(b)(3)(B), provides that, when an agency for good cause finds that notice and public procedure are impracticable, unnecessary, or contrary to the public interest, the agency may issue a rule without providing notice and an opportunity for public comment. We have determined that there is good cause for making the rule final without prior proposal and opportunity for comment because the issues related to the use of POC devices on board aircraft have already been discussed as part of an earlier rulemaking. More specifically, on July 14, 2004, the FAA issued a notice of proposed rulemaking on the use of portable oxygen concentrator devices on board aircraft (69 FR 42324). Then, on July 12, 2005, after reviewing public comments received, the FAA published Special Federal Aviation Regulation 106 (SFAR 106) entitled, “Use of Certain Portable Oxygen Concentrator Devices on Board Aircraft.” (70 FR 40156) Therefore, it is unnecessary and contrary to the public interest to publish a notice requesting comments on this amendment.

Moreover, pursuant to 5 U.S.C.553(d)(3), we find that good cause exists for making this rule effective in less than 30 days. This rule is being made effective 15 calendar days after its publication in the Federal Register to prevent unnecessary delay in acceptance of these devices as authorized for use on board aircraft by airlines while still providing airlines adequate notice and time to ensure the devices can be used safely on board aircraft. We believe, based on information the Department has received from airlines, that fifteen calendar days is sufficient amount of time for an airline to ensure/confirm that an FAA-approved POC does not cause interference with avionics system on that carrier's aircraft and convey this information to the appropriate airline personnel in order to accept these devices on board aircraft for use by passengers who need oxygen therapy for air travel. As such, the FAA believes that good cause exists for making this rule effective 15 calendar days after its publication in the Federal Register .

Changes to Federal regulations must undergo several economic analyses. First, Executive Order 12866 and Executive Order 13563 directs that each Federal agency shall propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs. Second, the Regulatory Flexibility Act of 1980 (Pub. L. 96-354) requires agencies to analyze the economic impact of regulatory changes on small entities. Third, the Trade Agreements Act (Pub. L. 96-39) prohibits agencies from setting standards that create unnecessary obstacles to the foreign commerce of the United States. In developing U.S. standards, this Trade Act requires agencies to consider international standards and, where appropriate, that they be the basis of U.S. standards. Fourth, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires agencies to prepare a written assessment of the costs, benefits, and other effects of proposed or final rules that include a Federal mandate likely to result in the expenditure by State, local, or tribal governments, in the aggregate, or by the private sector, of $100 million or more annually (adjusted for inflation with base year of 1995). This portion of the preamble summarizes the FAA's analysis of the economic impacts of this final rule.

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

This action amends SFAR 106 to allow for the use of additional POC devices on board aircraft, provided certain conditions in the SFAR are met. This action is necessary to allow additional POC devices deemed acceptable by the FAA to be available to the traveling public in need of oxygen therapy, for use in air commerce. When this rule becomes effective, there will many different POC devices the FAA finds acceptable for use on board aircraft, and passengers will be able to carry these devices on board the aircraft and use them with the approval of the aircraft operator. As the rule increases the number of acceptable POC devices on board aircraft, the rule does not increase costs and provides additional benefits. The FAA has, therefore, determined that this final rule is not a “significant regulatory action” as defined in section 3(f) of Executive Order 12866, and is not “significant” as defined in DOT's Regulatory Policies and Procedures.

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

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

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

This final rule adds additional POC devices to the list of authorized POC devices in SFAR 106. This economic impact is minimal. Therefore, as the Acting FAA Administrator, I certify that this action will not have a significant economic impact on a substantial number of small entities.

Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires each Federal agency to prepare a written statement assessing the effects of any Federal mandate in a proposed or final agency rule that may result in an expenditure of $100 million or more (in 1995 dollars) in any one year by State, local, and tribal governments, in the aggregate, or by the private sector; such a mandate is deemed to be a “significant regulatory action.” The FAA currently uses an inflation-adjusted value of $143.1 million in lieu of $100 million. This final rule does not contain such a mandate; therefore, the requirements of Title II of the Act do not apply.

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

Information collection requirements associated with this final rule have been approved previously by the Office of Management and Budget (OMB) under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) and have been assigned OMB Control Number 2120-0702. This final rule requires that if a passenger carries a POC device on board the aircraft with the intent to use it during the flight, he or she must inform the pilot in command of that flight. Additionally, the passenger who plans to use the device must provide a written statement signed by a licensed physician that verifies the passenger's ability to operate the device, respond to any alarms, the extent to which the passenger must use the POC (all or a portion of the flight), and prescribes the maximum oxygen flow rate. The Paperwork Reduction Act paragraph in the final rule that established SFAR 106 still applies to this amendment. The availability of a new POC device will likely increase the availability and options for a passenger in need of oxygen therapy, but the paperwork burden discussed in the original final rule is unchanged. Therefore, the OMB Control Number associated with this collection remains 2120-0702.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.

In keeping with U.S. obligations under the Convention on International Civil Aviation, it is FAA policy to conform to International Civil Aviation Organization (ICAO) Standards and Recommended Practices to the maximum extent practicable. The FAA has determined that there are no ICAO Standards and Recommended Practices that correspond to these regulations.

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

FAA Order 1050.1E identifies FAA actions that are categorically excluded from preparation of an environmental assessment or environmental impact statement under the National Environmental Policy Act in the absence of extraordinary circumstances. The FAA has determined this rulemaking action qualifies for the categorical exclusion identified in paragraph 312f and involves no extraordinary circumstances.

The FAA has analyzed this immediately adopted final rule under the principles and criteria of Executive Order 13132, Federalism. The agency determined that this action will not have a substantial direct effect on the States, or the relationship between the Federal Government and the States, or on the distribution of power and responsibilities among the various levels of government, and, therefore, does not have Federalism implications.

The FAA analyzed this immediately adopted final rule under Executive Order 13211, Actions Concerning Regulations that Significantly Affect Energy Supply, Distribution, or Use (May 18, 2001). The agency has determined that it is not a “significant energy action” under the executive order and it is not likely to have a significant adverse effect on the supply, distribution, or use of energy.

An electronic copy of a rulemaking document my be obtained by using the Internet—

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

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

3. Access the Government Printing Office's Web page at http://www.gpo.gov/fdsys/ .

Copies may also be obtained by sending a request (identified by notice, amendment, or docket number of this rulemaking) to the Federal Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence Avenue SW., Washington, DC 20591, or by calling (202) 267-9680.

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

In consideration of the foregoing, the Federal Aviation Administration amends SFAR No. 106 to Chapter I of title 14, Code of Federal Regulations as follows:

Background

On September 20, 2012, SpaceX submitted a petition to the Federal Aviation Administration's (FAA's) Office of Commercial Space Transportation (AST) requesting a waiver under its launch license, for flight of a Falcon 9 launch vehicle carrying a Dragon reentry vehicle, and the related reentry license, for reentry of the Dragon. SpaceX requested a partial waiver of 14 CFR 440.17, which requires a licensee to enter into a reciprocal waiver of claims (a “cross-waiver”) with each of its customers.

The FAA licenses the launch of a launch vehicle and reentry of a reentry vehicle under authority granted to the Secretary of Transportation by the Commercial Space Launch Act of 1984, as amended and re-codified by 51 U.S.C. Subtitle V, chapter 509 (Chapter 509), and delegated to the FAA Administrator and the Associate Administrator for Commercial Space Transportation, who exercises licensing authority under Chapter 509.

The petition for waiver applies to SpaceX's October launch of a Falcon 9 launch vehicle and Dragon reentry vehicle to the International Space Station (ISS) and return of the Dragon from the ISS to Earth. The Dragon spacecraft will carry cargo for NASA to resupply the ISS and return with cargo from the ISS. The Falcon 9 will also carry a commercial satellite for ORBCOMM, Inc. as a secondary payload, and has signed cross-waivers covering that payload. The cross-waiver among SpaceX, ORBCOMM and the FAA is amended to provide that ORBCOMM waives claims against any other customer as defined by 14 CFR 440.3. The petition for partial waiver of the requirement that the licensee implement a cross-waiver with each customer applies to all launches and reentries under SpaceX's current licenses with respect only to the customers that are the subject of this waiver.

In addition to the ISS supplies and ORBCOMM satellite, SpaceX will carry other payloads whose transport NASA has arranged. These consist of a NanoRacks, LLC, (NanoRacks) locker insert and student experiments created under NASA's Student Spaceflight Experiments Program (SSEP). NASA describes SSEP as a national science, technology, engineering and mathematics education initiative. 1 According to its Space Act Agreement with NASA, 2 NanoRacks arranges to carry the student experiments on a locker insert to put into an experimental locker on board the ISS. The Space Act Agreement provides that NASA will provide on-orbit resources and limited launch opportunities to NanoRacks for the launch of its insert and the experiments the insert carries. SpaceX advises by amendment dated October 3, 2012, to its petition for waiver that, to the best of its knowledge, no NanoRacks employees will be present at the launch site during flight.

NanoRacks and each student who places a payload on board the NanoRacks insert qualify as customers under the FAA's definitions. Section 440.3 defines a customer, in relevant part, as any person with rights in the payload or any part of the payload, or any person who has placed property on board the payload for launch, reentry, or payload services. A person is an individual or an entity organized or existing under the laws of a State or country. 51 U.S.C. 50901(12), 14 CFR 401.5. The subjects of this waiver are persons because the students are individuals and NanoRacks is an entity, a limited liability corporation. Accordingly, because NanoRacks and the students are persons who have rights in their respective payloads, the locker insert and the experiments, due to their ownership of those objects, and because they have placed property on board, they are customers. Section 440.17 requires their signatures as customers.

In this instance, however, NanoRacks and the students are also subject to a NASA reciprocal waivers of claims, a cross-waiver, which is governed by NASA's regulations at 14 CFR part 1266. Article 8 of the Space Act Agreement between NASA and NanoRacks governs liability and risk of loss and establishes a cross-waiver of liability.

Chapter 509 allows the FAA to waive a license requirement if the waiver (1) will not jeopardize public health and safety, safety of property; (2) will not jeopardize national security and foreign policy interests of the United States; and (3) will be in the public interest. 51 U.S.C. 50905(b)(3) (2011); 14 CFR 404.5(b)(2012).

The FAA waives the 14 CFR 440.17, which requires a licensee to enter into a reciprocal waiver of claims with each of its customers, with respect to NanoRacks and the SSEP participants.

In 1988, as part of a comprehensive financial responsibility and risk sharing regime that protects launch participants and the U.S. Government from the risks of catastrophic loss and litigation, Congress required that all launch participants agree to waive claims against each other for their own property damage or loss, and to cover losses experienced by their own employees. 51 U.S.C. 50915(b). This part of the regime was intended to relieve launch participants of the burden of obtaining property insurance by having each party be responsible for the loss of its own property and to limit the universe of claims that might arise as a result of a launch. Commercial Space Launch Act Amendments of 1988, H.R. 4399, H. Rep. 639, 11-12, 100th Cong., 2d Sess. (May 19, 1988); Commercial Space Launch Act Amendments of 1988, H.R. 4399, S. Rep. 593, 14, 100th Cong., 2d Sess. (Oct. 6, 1988); Financial Responsibility Requirements for Licensed Launch Activities, Notice of Proposed Rulemaking, 61 FR 38992, 39011 (Jul. 25, 1996). The FAA's implementing regulations may be found at 14 CFR part 440.

In its request for a waiver, SpaceX maintains that the NASA requirements imposed on NanoRacks and the SSEP participants are equivalent to the requirements imposed on each customer under the FAA's requirements of 14 CFR part 440. A comparison of the two regimes shows that in this particular situation the two sets of cross-waivers are sufficiently similar that the statutory goals of 51 U.S.C. 50914(b) will be met by the FAA agreeing to accept the NASA cross-waivers in this instance.

The FAA cross-waivers require the launch participants, including the U.S. Government and each customer, and their respective contractors and subcontractors, to waive and release claims against all the other parties to the waiver and agree to assume financial responsibility for property damage sustained by that party and for bodily injury or property damage sustained by the party's own employees, and to hold harmless and indemnify each other from bodily injury or property damage sustained by their respective employees resulting from the licensed activity, regardless of fault. 14 CFR 440.17(b) and (c). Each party  3 to the cross-waiver must indemnify the other parties from claims by the indemnifying party's contractors and subcontractors if the indemnifying party fails to properly extend the requirements of the cross-waivers to its contractors and subcontractors. 14 CFR 440.17(d). A comparison of each element shows that, although there are some differences, because the NASA cross-waiver signed by NanoRacks is consistent with Congressional intent and the FAA's regulations, and because relevant employees will not be present at the launch site, NanoRacks and the SSEP participants need not sign a cross-waiver under 14 CFR part 440.

Both the FAA's cross-waivers and NASA's agreement with NanoRacks apply to damages resulting from an FAA licensed activity, regardless of fault. 14 CFR 440.17(b); NanoRacks Agreement, Art. 8, par. 3(a) and 2(e). An FAA license applies, in relevant part, to launch and reentry. 51 USC 50904(a)(1); 14 CFR 440.3. The FAA's definition of launch also includes pre- and post-flight ground operations at a launch site in the United States. 51 U.S.C. 50902; 14 CFR 401.5. The NanoRacks Agreement applies under Article 8, paragraph 3(a) to damages arising out of “protected space operations,” which paragraph 2(e) defines to include all launch or transfer vehicle  4 activities on Earth, in outer space or in transit between Earth and outer space. Because protected space operations encompass development, test, manufacture, assembly, integration, operation and use of launch and transfer vehicles the meaning of protected space operations is broad enough to encompass launch, reentry, and pre- and post-flight ground operations.

Under the FAA cross-waivers and the NanoRacks Agreement, covered claims include those for property damage or bodily injury sustained by any party. The NanoRacks Agreement defines damage to mean both damage to, loss, or loss of the use of any property; and bodily injury to, including the impairment of health of, or death of, any person. NanoRacks Agreement Art. 8, par. 2a. The FAA defines “property damage” to mean partial or total destruction, impairment, or loss of tangible property, real or personal. 14 CFR 440.3. The FAA defines “bodily injury” to mean physical injury, sickness, disease, disability, shock, mental anguish, or mental injury sustained by any person, including death. 14 CFR 440.3. To the extent that the NanoRacks Agreement does not, at first look, appear to address mental injuries, the FAA notes that, generally, the courts have tied mental anguish to physical injuries. An injury to the mind, acquired as a form of bodily injury should be barred by the cross-waivers.

The persons to whom both cross-waivers apply are the same for the FAA's purposes. 5 The FAA requires its licensee, each customer of the licensee, and each of their respective contractors and subcontractors to waive claims, and to agree to be responsible for their own property damage and for the bodily injury or property damage sustained by their own employees. 14 CFR 440.17(a). 6 The parties agree to waive claims against, among others, the other party, each “related entity” of the other party, and the respective employees of each of them. NanoRacks Agreement Art. 8, par. 3(a)(i)-(iv). Under paragraph 2(f) of the NanoRacks Agreement, a “related entity” means a contractor or subcontractor of another party to the waiver at any tier or a user or customer of a party at any tier. The terms “contractor” and “subcontractor” include suppliers of any kind. Because a related entity includes a customer or user at any tier, NanoRacks, as a customer of NASA and each SSEP participant with an experiment on NanoRack's manifest is a related entity.

Both the FAA cross-waivers and the NanoRacks Agreement require the parties to extend the requirements of the cross-waivers to certain related entities, which extension is frequently referred to as a “flow-down” of the cross-waiver requirements. Under the FAA's requirements, each customer must extend the cross-waiver requirements to its contractors and subcontractors by requiring them to waive and release all claims they may have against the licensee, each other customer, and the United States, and against the respective contractors and subcontractors of each. Waiver of Claims and Assumption of Responsibility for Licensed Launch, including Suborbital Launch, With More than One Customer, 14 CFR part 440, appendix B, part 1, subpart B (FAA Cross-Waiver), par. 4(b). Likewise, NanoRacks must extend the requirements of the cross-waiver it has signed with NASA to its related entities, including its users or customers, the SSEP students. This means that, just as with the FAA cross-waivers, NanoRacks and the owners of the experiments on its locker insert, have waived the requisite claims.

Although the two schemes appear to diverge with regards to indemnification for any failure by a party to extend the cross-waiver requirements to its contractors and subcontractors, the legal effect of the different cross-waivers remains the same. The FAA cross-waiver expressly requires indemnification  7 for the consequences of a party's failure to “flow-down” the requirements. FAA Cross-Waiver at par. 5(b) (customer indemnification for claims brought by its contractors and subcontractors). SpaceX notes that, because of the obligations each party accepts under the different cross-waivers, a failure to extend the requirements to related entities still results in a duty to indemnify the other parties for the failure, even where the duty is not express. State courts have long recognized that where a special relationship between parties exists, even where there is no express promise to indemnify, a duty to indemnify may arise. This has been true for indemnification of claims brought by employees. See, e.g., Howard Univ. v. Good Food Svcs., Inc., 608 A.2d 116, 1124 (DC 1992) (special relationship may be found where there is an on-going contractual relationship); Rucker Co. v. M&P Drilling Co., 653 P2.2d 1239, 1242 (Okl. 1982) (where intention of parties to a contract is clear that one party shall not be liable for damages, labeling the relationship as exculpatory or indemnitory is irrelevant and the results are the same). See also 100 ALR 3d 350.

Analogous cases may apply to indemnification for claims brought by a contractor or subcontractor of someone who failed to extend the cross-waiver requirements. See, e.g., Jinwoong, Inc. v. Jinwoong, Inc., 310 F.3d 962, 965 (7th Cir. 2002) (even where parties fail to include an indemnity provision by contract, one may be implied unless disclaimed). Jinwoong' s discussion of the issue is illuminating. The Seventh Circuit noted that contract completion is a standard function of common law courts, and gives the parties what, if they were omniscient, they would have provided regarding all contingencies that might arise under a contract. 310 F.3d at 965. Thus, when the NanoRacks Agreement requires all parties to extend the waivers of claims to each of their related entities, the FAA may reasonably rely on the implicit presence of an agreement to indemnify. The FAA's reliance is further bolstered by Article 8, paragraph (3)(d)(v), of the NanoRack Agreement, which states that the cross-waiver does not apply to claims for damage arising out of a party's failure to extend the cross-waiver to its related entities. The cross-waiver itself contemplates recourse. Additionally, for those situations where courts find necessary the existence of a special relationship before finding a duty to indemnify, a special relation exists here by virtue of the agreement between NanoRacks and NASA.

The FAA notes that its cross-waivers, in addition to requiring waivers of claims and indemnification, also require the parties to assume responsibility for their own losses. The intent of the NASA cross-waivers suggests this is unnecessary. NASA itself has noted its own long and consistent responsibility of requiring the parties to its cross-waiver to waive claims for loss or damage and, thus, in NASA's own words, “assume responsibility for the risks inherent in space exploration.” Cross-Waiver of Liability, Notice of Proposed Rulemaking, 71 FR 62061 (Oct. 23, 2006). In the context of a customer assuming responsibility for its own property loss, the NASA explanation may suffice. However, in its implementing regulations, the FAA made it clear that it considers a party's assumption of responsibility a separate element of the cross-waiver. Financial Responsibility Requirements for Licensed Launch Activities, Final Rule, 63 FR 45592, 45601-06 (Aug. 26, 1998).

For this waiver, the FAA analyzed the significance of the assumption of responsibility in two parts. The FAA determined that it may rely on the indemnification implicit in the NanoRacks cross-waiver, as discussed above, for claims for property damage, because the parties expressly waive claims for property damage. It is a different matter with respect to employees. The parties may not waive claims on behalf of their employees. Additionally, here, the NanoRacks cross-waiver does not address employee claims in the first instance. This does not interfere with the FAA's ability to grant SpaceX's request for a waiver with respect to the student customers because they presumably do not have employees. However, NanoRacks itself does have employees. If any of them were to be at risk at the launch site, the FAA might not have been able to grant SpaceX's request for a waiver with respect to NanoRacks itself. SpaceX recently advised the FAA, however, that it was its understanding that no NanoRacks employees would be present at the launch site during the flight.

The final issue the FAA must consider is that NASA's regulations provide that the NASA cross-waiver is not applicable when 51 U.S.C. Subtitle V, Chapter 509 is applicable. 8 14 CFR 1266.102(c)(6). At first glance, this might create the impression that the NanoRacks cross-waiver does not apply when a launch or reentry is conducted under FAA license. However, by waiving the requirement that all customers sign, the FAA is not applying the specific requirements of Chapter 509 to NanoRacks and each SSEP participant. Accordingly, the NanoRacks agreement should retain legal effect.

This waiver implicates no safety, national security or foreign policy issues. The waiver is consistent with the public interest goals of Chapter 509. Under 51 U.S.C. 50914, Congress determined that it was necessary to reduce the costs associated with insurance and litigation by requiring launch participants, including customers, to waive claims against each other. Because the NanoRacks Agreement under 14 CFR part 1266 accomplishes these goals by the same or similar means, the FAA finds this request in the public interest, and grants the waiver with respect to NanoRacks and the SSEP participants in reliance on the representations SpaceX made in its petition and subsequent communications.

Pursuant to the authority granted in 33 U.S.C. 1605, the DoN amends 32 CFR Part 706.

This amendment provides notice that the DAJAG (Admiralty and Maritime Law), under authority delegated by the Secretary of the Navy, has certified that USS PELELIU (LHA 5) is a vessel of the Navy which, due to its special construction and purpose, cannot fully comply with the following specific provisions of 72 COLREGS without interfering with its special function as a naval ship: Annex I, paragraph 3(a) pertaining to the horizontal distance between the forward and aft masthead lights; Rule 21(a) pertaining to placement of masthead lights over the fore and aft centerline of the vessel; Annex I, paragraph 2(g) pertaining to the placement of sidelights above the hull of the vessel; Annex I, paragraph 2(i)(iii) pertaining to the vertical position and spacing of task lights. The DAJAG (Admiralty and Maritime Law) has also certified that the lights involved are located in closest possible compliance with the applicable 72 COLREGS requirements.

Moreover, it has been determined, in accordance with 32 CFR Parts 296 and 701, that publication of this amendment for public comment prior to adoption is impracticable, unnecessary, and contrary to public interest since it is based on technical findings that the placement of lights on this vessel in a manner differently from that prescribed herein will adversely affect the vessel's ability to perform its military functions.

For the reasons set forth in the preamble, amend part 706 of title 32 of the CFR as follows:

On December 29, 2011, VA published in the Federal Register (76 FR 81834) an interim final rule amending its adjudication regulation regarding compensation for disabilities suffered by veterans who served in the Southwest Asia Theater of Operations during the Persian Gulf War. In order to ensure that benefits established by Congress are fairly administered, VA extended the evaluation period in which disabilities associated with undiagnosed illnesses and chronic multi-symptom illnesses must become manifest in order for a veteran to be eligible for compensation. Accordingly, VA removed the date, “December 31, 2011” from 38 CFR 3.317(a)(1)(i) and added, in its place, December 31, 2016.

Interested persons were invited to submit written comments on or before February 27, 2012; VA received 169 comments in response to the interim final rule. VA received comments from veterans service organizations and advocacy groups. VA also received comments and material from blogs and surveys established for Gulf War veterans who were deployed in the Southwest Asia Theater of Operations and also for those non-deployed during the Gulf War era. Lastly, VA received comments from military service members and their families.

VA received general comments that were not associated with extension of the time frame for VA to continue to evaluate undiagnosed illnesses and medically unexplained chronic multi-symptom illnesses in Persian Gulf War veterans. Some commenters asserted that undiagnosed illness is not fully understood even though 20 years have lapsed since the beginning of the Persian Gulf War. Others asserted that VA should revise the definition of Southwest Asia Theater of Operations or revise the type of service required and add medically unexplained chronic multi-symptom illnesses associated with different time periods. One commenter stated that VA examinations should be provided only by VA examiners and not contracted out. One commenter supported a minimum 30-percent rating for all Persian Gulf War veterans suffering from an undiagnosed illness. These comments are beyond the scope of this rulemaking. Therefore, VA makes no changes based on these comments.

VA received numerous comments from veterans regarding their individual claims for veterans benefits and comments from family members and friends in support of Gulf War veterans. These comments are beyond the scope of this rulemaking. Therefore, VA makes no changes based on these comments.

Several commenters asserted the need for VA to consider those suffering from undiagnosed and medically unexplained chronic multi-symptom illnesses associated with the wars in Iraq, Afghanistan, and other Post-9/11 locations. As required by 38 U.S.C. 101(33), VA acknowledges that the Persian Gulf War period continues until an end date is established by Congress or Presidential proclamation. Section 1117(f) of the same title provides that the term “`Persian Gulf veteran' means a veteran who served on active duty in the Armed Forces in the Southwest Asia theater of operations during the Persian Gulf War,” and, as reflected in 38 CFR 3.317(e)(2), “[t]he Southwest Asia theater of operations refers to Iraq, Kuwait, Saudi Arabia, the neutral zone between Iraq and Saudi Arabia, Bahrain, Qatar, the United Arab Emirates, Oman, the Gulf of Aden, the Gulf of Oman, the Persian Gulf, the Arabian Sea, the Red Sea, and the airspace above these locations.” As such, VA's regulatory provisions already pertain to Post-9/11 veterans who previously served or continue to serve in these theaters of operation. Further, any suggestions to expand the types of service to which the statute and regulation apply are beyond the scope of this rulemaking. Therefore, we make no changes based on these comments.

VA received comments expressing gratitude for the extension to December 31, 2016, and asserting that VA should extend the date immediately. One such commenter expressed the belief that “this amendment is reasonable and effective.” With regard to the immediate extension of the expiration date, the interim final rule was effective immediately upon its date of publication, December 29, 2011, and extended the manifestation period of the regulation through December 31, 2016. This final rule merely keeps that regulation in effect. Accordingly, this final rule is effective upon publication.

The majority of commenters, some of whom thanked VA for the extension to December 31, 2016, asserted that VA should completely eliminate the expiration date. Some provided statements such as “undiagnosed illnesses remain difficult to identify or treat”; “veterans may not realize they need help until after the five-year extension”; the presumption for Amyotrophic Lateral Sclerosis has no end date; diseases affecting Vietnam veterans are still emerging 50 years later with no end date for filing, and some Gulf War veterans are more ill than Vietnam veterans; “undiagnosed and chronic multi-symptom illnesses cause life-long disabilities” warranting no time restrictions on a veteran to seek presumptive service connection; “medical conditions may take decades to manifest,” and the Persian Gulf War period continues under 38 U.S.C. 101(33); and the regulations should cover veterans of the interim war period between the Gulf War and the Iraq War and those “on the ground as late as December 2011.”

We will make no change based on these comments. Section 102(7) of the Persian Gulf War Veterans' Benefits Act states Congress' finding that further research must be undertaken to determine the causes of Gulf War veterans illnesses and that “pending the outcome of such research, veterans who are seriously ill as the result of such illnesses should be given the benefit of the doubt and be provided compensation to offset the impairment in earning capacities they may be experiencing.” Congress contemplated an ongoing process for investigating the nature and causes of Gulf War veterans' illnesses. The statutory scheme reflects the hope that further research may eventually diminish the need for the presumptions in section 1117. Accordingly, we believe that extending the presumptive period for a significant, but not indefinite, period to permit further investigation is consistent with the goals of this statutory scheme.

In section 1117(b), Congress provided the Secretary with discretion to prescribe a presumptive period based upon, among other things, a review of credible medical or scientific evidence. As stated in the interim final rule, the Secretary is extending the presumptive period to December 31, 2016, in order to provide more time for scientific and medical research regarding diseases and illnesses that may be related to service in the Southwest Asia Theater of Operations. Based on the current lack of scientific certainty surrounding the cause of illnesses suffered by Gulf War veterans, the Secretary's decision to extend the presumption period until December 31, 2016, is within the discretion given to him by section 1117.

Two commenters thanked VA for extending the time frame to December 31, 2016, but asserted that since VA publicly announced the intention to draft a rule extending the presumptive date by an additional 7 years, VA should follow through by extending the date to December 31, 2018, versus December 31, 2016, in the final rule. One of these comments stated that a VA Web page describing that VA intended to extend the date through 2018 remained publicized and called this “overt duplicity” on the part of VA. The Web page information referred to by the commenter is not publicized at this time and was removed as soon as the error was noted. It appears the date publicized was mistaken and should have stated December 31, 2016. One commenter supported extending the time frame to 2050. The two previously established time frame extensions implemented by VA for medically unexplained chronic multi-symptom illnesses and undiagnosed illnesses that appeared in Gulf War veterans were 5-year periods. VA determined that it was appropriate to extend the time frame again by 5 years consistent with the extensions that have occurred in the past. Therefore, we make no change based on these comments.

Some commenters conveyed disagreement with the apparent premise of scientific studies that only those serving in certain areas during the Gulf War era are afflicted with Gulf War Syndrome and prone to adverse effects and toxins of war because this premise is based on “a flawed definition set by Congress in 1994.” Commenters in this group assert that ill Gulf War era veterans, including those both deployed and non-deployed, should be considered equally in regards to researching causative agents and treatments. Commenters asserted that non-deployed veterans are excluded from participation in the Gulf War Illness Registry and consideration of all Gulf War veterans, those deployed and non-deployed, would narrow the field of possible main causes down to causative agents and treatments, vaccines, immunizations, and infectious communicable diseases/biological weapons. Some commenters asserted the need for more time for investigation, medical and scientific research, and testing regarding undiagnosed and medically unexplained chronic multi-symptom illnesses. Others asserted the need for enhanced medical care for Gulf War veterans, testing for possible effects on offspring, and the need for VA to examine Gulf War veterans before VA makes a decision on an extension deadline.

VA recognizes the need for further investigation and scientific and medical research until more consistent evidence is available to the Secretary. This rulemaking finalizes an extension of the time frame in which manifestations of undiagnosed illnesses and medically unexplained chronic multi-symptom illnesses must appear in Gulf War veterans to be presumed as service-connected diseases to allow time for further research. To the extent the comments call for specific types of research, they are outside the scope of this rulemaking. We, therefore, make no change based on these comments.

On September 29, 2010, VA published AN24, “Presumptions of Service Connection for Persian Gulf Service,” in the Federal Register at 75 FR 59968 and replaced the title “§ 3.317 Compensation for certain disabilities due to undiagnosed illnesses” with “§ 3.317 Compensation for certain disabilities occurring in Persian Gulf veterans.” Subsequently, on October 7, 2010, VA published an amendment to the final rule which removed a provision reserving to the Secretary the authority for certain determinations and, inadvertently, also switched the title back to its original form. Therefore, in this final rule, VA makes a technical correction to replace the current title with “§ 3.317 Compensation for certain disabilities occurring in Persian Gulf veterans.”

Based on the rationale set forth in the interim final rule and this document, we are adopting the provisions of the interim final rule as a final rule with no changes other than correction of the title of § 3.317.

This document contains no provisions constituting a new collection of information under the Paperwork Reduction Act (44 U.S.C. 3501-3521).

The Secretary hereby certifies that this rule will 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. This rule will not affect any small entities. Only VA beneficiaries could be directly affected. Therefore, pursuant to 5 U.S.C. 605(b), this rule is exempt from the initial and final regulatory flexibility analysis requirements of sections 603 and 604.

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 the Office of Management and Budget (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 final rule have been examined and it has been determined not to be a significant regulatory action under Executive Order 12866.

The Unfunded Mandates Reform Act of 1995 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 year. This rule will have no such effect on State, local, and tribal governments, or on the private sector.

The Catalog of Federal Domestic Assistance program number and title for this rule is 64.109, Veterans Compensation for Service-Connected Disability.

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, approved this document on October 4, 2012, for publication.

Accordingly, the interim final rule amending 38 CFR part 3 that was published at 76 FR 81834 on December 29, 2011, is adopted as a final rule with the following change:

Throughout this document whenever “we,” “us,” or “our” is used, we mean EPA.

The following outline is provided to aid in locating information in this preamble.

Under CAA section 110(a)(1), states are required to submit plans called state implementation plans (SIPs) that provide for the implementation, maintenance and enforcement of each NAAQS. 42 U.S.C. 7410(a)(1). Section 110(a)(2)(D)(i)(I) of the CAA, in turn, specifically requires SIPs to contain provisions adequate to prohibit emissions activity within the state that contributes significantly to nonattainment or interferes with maintenance in another state. 42 U.S.C. 7410(a)(2)(D)(i)(I).

On July 23, 2012, EPA published a Notice of Proposed Rulemaking (NPR) for the States of Connecticut, Maine, Massachusetts, and New Hampshire. See 77 FR 43023. The NPR proposed action on submittals from these four states that outlined how each state's SIP meets the requirements of section 110(a) of the Clean Air Act (CAA) for the 1997 and 2006 PM 2.5 standards.

The States of Connecticut, Maine, Massachusetts and New Hampshire submitted SIPs to meet infrastructure requirements under section 110(a)(2) for the 1997 and 2006 PM 2.5 NAAQS. The SIPs addressed the following section 110(a)(2) components:

(A) Emission limits and other control measures.

(B) Ambient air quality monitoring/data system.

(C) Program for enforcement of control measures.

(D) Interstate transport.

(E) Adequate resources.

(F) Stationary source monitoring system.

(G) Emergency power.

(H) Future SIP revisions.

(J) Consultation with government officials, Public notification, Prevention of significant deterioration (PSD) and Visibility protection.

(K) Air quality modeling/Data

(L) Permitting fees.

(M) Consultation/participation by affected local entities.

EPA proposed to approve the submittals from all four states as fully meeting the infrastructure requirements for the 1997 and 2006 PM 2.5 standards for the following section 110(a)(2) elements and sub-elements: (B), (C) (enforcement program only), (E)(i), (E)(iii), (F), (G), (H), (J) (consultation), (J) (public notification), (K), (L), and (M). EPA also proposed to approve the submittals from Maine and New Hampshire as fully meeting the infrastructure requirements for the 1997 and 2006 PM 2.5 standards for the two prongs of section 110(a)(2)(D)(i)(I). These two prongs are (1) contribute significantly to nonattainment in any other state with respect to any such national primary or secondary NAAQS, and (2) interfere with maintenance by any other state with respect to the same NAAQS. EPA proposed to determine that their existing SIPs satisfy these prongs because emissions from these states do not contribute significantly to nonattainment or interfere with maintenance of the 1997 annual or the 2006 24-hour PM 2.5 NAAQS in any other state. See 77 FR 43207. In addition, EPA proposed to approve the submittals from Maine for the prong of section 110(a)(2)(D)(i)(II) related to interference with visibility protection, and the submittals from New Hampshire for section 110(a)(2)(D)(ii) related to interstate and international pollution abatement.

EPA proposed to conditionally approve the submittals from all four states for the following section 110(a)(2) elements and sub-elements: (A) and (E)(ii) (state boards and conflict of interest provisions). We proposed to conditionally approve the submittals from three states (Connecticut, Maine, and New Hampshire) for section 110(a)(2) sub-elements (C), (D)(i)(II), and (J) as they relate to the states' PSD programs. We also proposed to conditionally approve the submittals from Connecticut and Maine for section 110(a)(2)(D)(ii).

For Massachusetts, EPA proposed to disapprove the state's submittals for section 110(a)(2) sub-elements (C), (D)(i)(II), and (J) as they relate to the state's PSD program, as well as (D)(ii), which relates to interstate and international pollution abatement. Notwithstanding our conclusion that Massachusetts' section 110(a) submissions do not meet these PSD requirements, the state is already subject to a Federal Implementation Plan (FIP) for PSD, and so EPA has no additional FIP obligations under section 110(c). Furthermore, the state will not be subject to mandatory sanctions as a result of this disapproval.

A detailed explanation of the requirements for PM 2.5 infrastructure SIPs, as well as EPA's analysis of the submittals from Connecticut, Maine, Massachusetts, and New Hampshire, was provided in the NPR and is not restated here.

EPA received comments on our proposed action from an anonymous commenter and from the Sierra Club. The anonymous commenter noted that EPA's action on the four states' infrastructure SIPs for the 1997 and 2006 PM 2.5 NAAQS is a good move to alleviate air pollution, thus reducing poor air quality days. EPA agrees with this commenter. The Sierra Club's comments focused on the states' air-quality standards and PSD programs, and a recent judicial decision vacating the Cross State Air Pollution Rule (CSAPR). The comments are provided in the dockets for today's final actions. A summary of the comments and EPA's responses are provided below.

Comment 1: The Sierra Club noted that section 110(a)(2)(A) requires SIPs to include enforceable emission limits. The Sierra Club argued that any infrastructure SIP submissions ultimately approved by EPA must include emissions limitations on direct PM 2.5 emissions, PM precursors, and condensable PM. It also asserted that the state infrastructure SIP submissions needed to impose specific PM 2.5 emissions limitations on major sources such as the Schiller and Merrimack coal-fired power plants in New Hampshire, the Mount Tom and Brayton Point plants in Massachusetts, and the Bridgeport plant in Connecticut.

Response 1: In this action, EPA is conditionally approving the states' PM 2.5 infrastructure SIPs with respect to section 110(a)(2)(A) pending each state's timely submission (i.e., within one year of conditional approval) of specific enforceable measures to fulfill specific requirements of section 110(a)(2)(A) as explained in the proposal. We will review each state's submission as it is received, and will propose to approve or disapprove that submission based on our evaluation of whether the submission meets the applicable requirements of section 110(a)(2)(A) relevant to infrastructure SIP requirements. At that time, it will be appropriate for commenters to raise any questions regarding whether the submission has met applicable requirements.

Comment 2: The Sierra Club noted that sections 110(a)(2)(C), (D), and (J) require infrastructure submittals to include, among other things, a SIP-approved PSD program that meets all federal requirements. The Sierra Club argued that any infrastructure SIP submission approved by EPA must include PM 2.5 increments under the PSD Program.

Response 2: In this action, EPA is conditionally approving the infrastructure SIPs submitted by Connecticut, Maine, and New Hampshire with respect to sections 110(a)(2)(C), (D), and (J) pending each state's timely submission (i.e., within one year of conditional approval) of specific enforceable measures to fulfill requirements of sections 110(a)(2)(C), (D), and (J) as explained in the proposal. EPA proposed conditional approval consistent with EPA's authority under section 110(k)(4), and based upon a commitment by each State to address these deficiencies within one year. We will review each state's submission as it is received, and will propose to approve or disapprove that submission based on our evaluation of whether the submission meets the applicable requirements of section 110(a)(2)(C), D(i)(II), and (J), relevant to infrastructure SIP requirements. At that time, it will be appropriate for commenters to raise any questions regarding whether the submission has met applicable requirements. As described in section 110(k)(4), should the States fail to meet their commitments to address these deficiencies, a final conditional approval for these elements would become a disapproval. The Commenter does not argue that this proposed action is inconsistent with the requirements of the CAA.

However, EPA disagrees with Commenter's suggestion that EPA must generally approve the PM 2.5 increments prior to fully approving sections 110(a)(2)(C), (D), and (J). Pursuant to the 2010 PSD for PM 2.5 Rule (75 FR 64864, October 20, 2010) and CAA section 166(b), States were not required to submit a revised SIP addressing the PM 2.5 increments until July 20, 2012. The Agency proposed action on Connecticut, Maine, and New Hampshire's infrastructure SIPs in a notice signed on July 16, 2012. 2 Therefore, on the date that the proposed rule was signed by the Agency, the PM 2.5 increments were not required to be included in the States' SIPs in order for the States to meet the PSD requirements of sections 110(a)(2)(C), (D), and (J) of the Act. However, Connecticut, Maine, and New Hampshire each submitted to EPA a request for a conditional approval of these infrastructure elements based, in part, on its commitment to adopt the PM 2.5 increments into the State rules and submit revisions including the PM 2.5 increments to EPA within one year of EPA's conditional approval. Accordingly, although EPA would not generally have been required to address the PM 2.5 increments prior to the deadline for submission of such revisions on July 20, 2012, because the States requested conditional approval contingent on their commitments to address the increments, EPA's proposed conditional approval was also made contingent on those commitments. EPA will review the sufficiency of any future submissions made by the States in order to satisfy the conditional approvals consistent with its commitments and in accordance with the CAA.

Furthermore, we are disapproving the Massachusetts submittals with respect to sections 110(a)(2)(C), (D), and (J). Massachusetts does not have an approved PSD SIP, and has long been subject to a FIP. Because the state is subject to a PSD FIP, PM 2.5 increments are applied consistent with the federal program. Although Massachusetts' infrastructure submissions are not approvable with respect to sections 110(a)(2)(C), (D), and (J), the state is not subject to mandatory sanctions because the SIP deficiencies are not associated with a submittal required under part D or in response to a SIP call. In addition, because state requirements are satisfied by the FIP, this disapproval action will not trigger additional FIP obligations.

Comment 3: The Sierra Club noted that on August 21, 2012, the D.C. Circuit Court issued an opinion vacating the Cross State Air Pollution Rule (CSAPR), which is also known as the Transport Rule and was promulgated by EPA in 2011 to address interstate pollution issues. See EME Homer City Generation, L.P. v. EPA, No. 11-1302 (D.C. Cir. August 21, 2012). The Sierra Club asserted that EPA can no longer approve any submission in which compliance with interstate transport (section 110(a)(2)(D)(i)(I)) or visibility (section 110(a)(2)(D)(i)(II)) requirements are based on the CSAPR.

Response 3: We discuss sections 110(a)(2)(D)(i)(I) and 110(a)(2)(D)(i)(II) separately.

Section 110(a)(2)(D)(i)(I): In this action, EPA is approving infrastructure SIP submissions for Maine and New Hampshire with respect to both prongs of section 110(a)(2)(D)(i)(I): (1) contribute significantly to nonattainment in any other state with respect to any such national primary or secondary NAAQS; and (2) interfere with maintenance by any other state with respect to that NAAQS. The CSAPR also addressed and quantified certain states' requirements under section 110(a)(2)(D)(i)(I). See 76 FR 48208. Neither Maine nor New Hampshire were subject to any requirements under the CSAPR, see 76 FR 48208, 48236-45 (Aug. 8, 2011), and neither state's compliance with the requirements of section 110(a)(2)(D)(i)(I) is based on CSAPR. As such, this action does not rely on any requirements of the CSAPR or emission reductions associated with that rule to support its conclusion that these two states have met their 110(a)(2)(D)(i)(I) obligations with respect to the 1997 and 2006 PM 2.5 NAAQS.

EPA's decision to approve the infrastructure SIPs for Maine and New Hampshire for this element is based on our conclusion that the existing SIPs for both states have adequate provisions to satisfy the obligation under section 110(a)(2)(D)(i)(I) of the CAA to address these requirements with respect to the 1997 annual and the 2006 24-hour PM 2.5 NAAQS. As explained in section III of this notice, this conclusion is based on air quality modeling originally conducted to quantify each individual state's contributions to downwind nonattainment and maintenance areas during the rulemaking process for the CSAPR.

The recent D.C. Circuit opinion in the CSAPR litigation, EME Homer City Generation v. EPA, No. 11-1302 (D.C. Cir., August 21, 2012), does not alter our conclusion that the existing SIPs for Maine and New Hampshire adequately address this requirement. Nothing in the Homer City opinion disturbs or calls into question that conclusion or the validity of the air quality modeling on which the conclusion is based. In addition, nothing in that opinion undermines our conclusion that Maine and New Hampshire do not contribute significantly to nonattainment or interfere with maintenance in another state because emissions from neither state contributes more than one percent of the 1997 or 2006 PM 2.5 NAAQS to any downwind area with nonattainment or maintenance problems. 3

Section 110(a)(2)(D)(i)(II): For New Hampshire, we will take separate action on PM 2.5 infrastructure SIP visibility requirements. Notably, we recently approved the New Hampshire Regional Haze SIP. See 77 FR 50602, August 22, 2012. However, we are not taking action on section 110(a)(2)(D)(i)(II) visibility requirements for New Hampshire today.

For Maine, in this action, we are approving Maine's PM 2.5 infrastructure SIP as meeting the visibility requirements of section 110(a)(2)(D)(i)(II). This approval is based on the fact that EPA has approved Maine's Regional Haze SIP for the first planning period from 2008 through 2018 (77 FR 24385).

EPA is approving PM 2.5 infrastructure SIP submittals from Connecticut, Maine, Massachusetts, and New Hampshire as fully meeting the infrastructure requirements for the 1997 and 2006 PM 2.5 standards for the following 110(a)(2) elements and sub-elements: (B), (C) (enforcement program), (E)(i), (E)(iii), (F), (G), (H), (J) (consultation), (J) (public notification), (K), (L), and (M). EPA is also approving the submittals from Maine and New Hampshire as fully meeting the infrastructure requirements for the 1997 and 2006 PM 2.5 standards for the two prongs of section 110(a)(2)(D)(i)(I). These two prongs are (1) contribute significantly to nonattainment in any other state with respect to any such national primary or secondary NAAQS, and (2) interfere with maintenance by any other state with respect to the same NAAQS. EPA's decision to approve the infrastructure SIPs for Maine and New Hampshire for this element is based on our conclusion that the existing SIPs for both states have adequate provisions to satisfy the obligation under section 110(a)(2)(D)(i)(I) of the CAA to address these requirements with respect to the 1997 and 2006 PM 2.5 NAAQS. This conclusion is based on air quality modeling originally conducted to quantify each individual state's contributions to downwind nonattainment and maintenance areas during the rulemaking process for the CSAPR. A technical support document describing that modeling is available in the dockets for the Maine and New Hampshire portions of this rulemaking. This air quality modeling demonstrates that emissions from the states of Maine and New Hampshire do not contribute more than one percent of the NAAQS to any downwind areas with nonattainment and maintenance problems with respect to the 1997 and the 2006 PM 2.5 NAAQS. For this reason, EPA concludes that these states do not contribute significantly to nonattainment or interfere with maintenance of the 1997 or 2006 PM 2.5 NAAQS in another state.

In addition, EPA is approving the submittals from Maine for the prong of section 110(a)(2)(D)(i)(II) related to interference with visibility protection. EPA is also approving the submittals from New Hampshire for 110(a)(2)(D)(ii) related to interstate and international pollution abatement.

EPA is conditionally approving the submittals from all four states for the following 110(a)(2) elements and sub-elements: (A) and (E)(ii) (state boards and conflict of interest provisions). We are conditionally approving the submittals from three states (Connecticut, Maine, and New Hampshire) for section 110(a)(2) sub-elements (C), (D)(i)(II), and (J) as they relate to the states' PSD programs. We are also conditionally approving the submittals from Connecticut and Maine for 110(a)(2)(D)(ii).

For Massachusetts, EPA is disapproving the state's submittals for section 110(a)(2) sub-elements (C), (D)(i)(II), and (J) as they relate to the state's PSD program, as well as (D)(ii), which relates to interstate and international pollution abatement. Notwithstanding our conclusion that the Massachusetts' 110(a) submissions do not meet these PSD requirements, the state is already subject to a Federal Implementation Plan (FIP) for PSD, and so EPA has no additional FIP obligations under section 110(c). Furthermore, the state will not be subject to mandatory sanctions as a result of this disapproval.

Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve State choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this action merely approves State law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:

• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Order 12866 (58 FR 51735, October 4, 1993);

• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq. );

• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. );

• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);

• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);

• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);

• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);

• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and

• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).

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

Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by December 17, 2012. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2)).

Part 52 of chapter I, title 40 of the Code of Federal Regulations is amended as follows:

Table of Contents I. Background II. This Action III. EPA's Response to Comments IV. Final Action V. Statutory and Executive Order Reviews I. Background

Upon promulgation of a new or revised NAAQS, sections 110(a)(1) and (2) of the CAA require states to address basic SIP requirements, including emissions inventories, monitoring, and modeling to assure attainment and maintenance for that new NAAQS. On July 18, 1997 (62 FR 38652), EPA promulgated a new annual PM 2.5 NAAQS and on October 17, 2006 (71 FR 61144), EPA promulgated a new 24-hour PM 2.5 NAAQS. On July 24, 2012, EPA proposed to approve North Carolina's April 1, 2008, and September 21, 2009, infrastructure submissions for the 1997 annual and 2006 24-hour PM 2.5 NAAQS. See 77 FR 43196. A summary of the background for today's final action is provided below. See EPA's July 24, 2012, proposed rulemaking at 77 FR 43196 for more detail.

Section 110(a) of the CAA requires states to submit SIPs to provide for the implementation, maintenance, and enforcement of a new or revised NAAQS within three years following the promulgation of such NAAQS, or within such shorter period as EPA may prescribe. Section 110(a) imposes the obligation upon states to make a SIP submission to EPA for a new or revised NAAQS, but the contents of that submission may vary depending upon the facts and circumstances. The data and analytical tools available at the time the state develops and submits the SIP for a new or revised NAAQS affect the content of the submission. The contents of such SIP submissions may also vary depending upon what provisions the state's existing SIP already contains. In the case of the 1997 annual and 2006 24-hour PM 2.5 NAAQS, states typically have met the basic program elements required in section 110(a)(2) through earlier SIP submissions in connection with previous PM NAAQS.

More specifically, section 110(a)(1) provides the procedural and timing requirements for SIPs. Section 110(a)(2) lists specific elements that states must meet for “infrastructure” SIP requirements related to a newly established or revised NAAQS. As already mentioned, these requirements include SIP infrastructure elements such as modeling, monitoring, and emissions inventories that are designed to assure attainment and maintenance of the NAAQS. The requirements that are the subject of this final rulemaking are listed below 1 and in EPA's October 2, 2007, memorandum entitled “Guidance on SIP Elements Required Under Section 110(a)(1) and (2) for the 1997 8-Hour Ozone and PM 2.5 National Ambient Air Quality Standards.” and September 25, 2009, memorandum entitled “Guidance on SIP Elements Required Under Section 110(a)(1) and (2) for the 2006 24-Hour Fine Particle (PM 2.5 ) National Ambient Air Quality Standards.”

This document announces that, on September 17, 2012, OMB approved, for a period of three years, the information collection requirements contained in the Commission's Report and Order, FCC 12-21, published at 77 FR 34233, June 11, 2012. The OMB Control Number is 3060-0519. The Commission publishes this notice as an announcement of the effective date of those amendments. If you have any comments on the burden estimates listed below, or how the Commission can improve the collections and reduce any burdens caused thereby, please contact Cathy Williams, Federal Communications Commission, Room 1-C823, 445 12th Street SW., Washington, DC 20554. Please include the OMB Control Number, 3060-0519, in your correspondence. The Commission will also accept your comments via the Internet if you send them to PRA@fcc.gov.

To request materials in accessible formats for people with disabilities (Braille, large print, electronic files, audio format), send an email to fcc504@fcc.gov or call the Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

As required by the Paperwork Reduction Act of 1995 (44 U.S.C. 3507), the FCC is notifying the public that it received OMB approval on September 17, 2012, for the information collection requirements contained in the Commission's revised rules at 47 CFR 64.1200(a)(2), 64.1200(a)(3), 64.1200(a)(7), and 47 CFR 64.1200(b)(3).

Under 5 CFR 1320, an agency may not conduct or sponsor a collection of information unless it displays a current, valid OMB Control Number.

No person shall be subject to any penalty for failing to comply with a collection of information subject to the Paperwork Reduction Act that does not display a current, valid OMB Control Number. The OMB Control Number is 3060-0519.

The foregoing notice is required by the Paperwork Reduction Act of 1995, Public Law 104-13, October 1, 1995, and 44 U.S.C. 3507.

The total annual reporting burdens and costs for the respondents are as follows:

OMB Control Number: 3060-0519.

OMB Approval Date: September 17, 2012.

OMB Expiration Date: September 30, 2015.

Title: Rules and Regulations Implementing the Telephone Consumer Protection Act (TCPA) of 1991, CG Docket No. 02-278.

Form Number: N/A.

Type of Review: Revision of a currently approved collection.

Respondents: Business or other for-profit entities; Individuals or households; Not-for-profit institutions.

Number of Respondents and Responses: 50,151 respondents; 147,453,559 responses.

Estimated Time per Response: .004 hours (15 seconds) to 1 hour.

Frequency of Response: Recordkeeping requirement; Annual, on-occasion and one-time reporting requirement; Third party disclosure requirement.

Obligation to Respond: Required to obtain or retain benefits. The statutory authority for the information collection requirements is found in the Telephone Consumer Protection Act of 1991 (TCPA), Public Law 102-243, December 20, 1991, 105 Stat. 2394, which added Section 227 of the Communications Act of 1934, [47 U.S.C. 227] Restrictions on the Use of Telephone Equipment.

Total Annual Burden: 712,140 hours.

Total Annual Cost: $3,989,700.

Nature and Extent of Confidentiality: Confidentiality is an issue to the extent that individuals and households provide personally identifiable information, which is covered under the FCC's system of records notice (SORN), FCC/CGB-1, “Informal Complaints and Inquiries.” As required by the Privacy Act, 5 U.S.C. 552a, the Commission also published a SORN, FCC/CGB-1 “Informal Complaints and Inquiries”, in the Federal Register on December 15, 2009 (74 FR 66356) which became effective on January 25, 2010. A system of records for the do-not-call registry was created by the Federal Trade Commission (FTC) under the Privacy Act. The FTC originally published a notice in the Federal Register describing the system. See 68 FR 37494, June 24, 2003. The FTC updated its system of records for the do-not-call registry in 2009. See 74 FR 17863, April 17, 2009.

Privacy Impact Assessment: Yes. The Privacy Impact Assessment (PIA) was completed on June 28, 2007. It may be reviewed at: http://www.fcc.gov/omd/privacyact/Privacy_Impact_Assessment.html.

Needs and Uses: The reporting requirements included under this OMB Control Number 3060-0519 enable the Commission to gather information regarding violations of Section 227 of the Communications Act, the Do-Not-Call Implementation Act, and the Commission's implementing rules. If the information collection were not conducted, the Commission would be unable to track and enforce violations of Section 227 of the Communications Act, the Do-Not-Call Implementation Act, or the Commission's implementing rules. The Commission's implementing rules provide consumers with several options for avoiding most unwanted telephone solicitations.

The national do-not-call registry supplements the company-specific do-not-call rules for those consumers who wish to continue requesting that particular companies not call them. Any company that is asked by a consumer, including an existing customer, not to call again originally had to honor that request for five years. In a subsequent order, the Commission required sellers and/or telemarketers to honor registrations with the National Do-Not-Call Registry indefinitely.

A provision of the Commission's rules, however, allows consumers to give specific companies permission to call them through an express written agreement. Nonprofit organizations, companies with whom consumers have an established business relationship, and calls to persons with whom the telemarketer has a personal relationship are exempt from the “do-not-call” registry requirements.

On September 21, 2004, the Commission released the Safe Harbor Order establishing a limited safe harbor in which persons will not be liable for placing autodialed and prerecorded message calls to numbers ported from a wireline service within the previous 15 days. The Commission also amended its existing National Do-Not-Call Registry safe harbor to require telemarketers to scrub their lists against the Registry every 31 days.

On December 4, 2007, the Commission released a notice of proposed rulemaking seeking comment on its tentative conclusion under the Do-Not-Call Improvement Act of 2007 that registrations with the Registry should be honored indefinitely, unless a number is disconnected or reassigned, or the consumer cancels his registration.

On June 17, 2008, in accordance with the Do-Not-Call Improvement Act of 2007, the Commission revised its rules to minimize the inconvenience to consumers of having to re-register their preferences not to receive telemarketing calls and to further the underlying goal of the National Do-Not-Call Registry to protect consumers' privacy rights. The Commission released a Report and Order in CG Docket No. 02-278, FCC 08-147, amending the Commission's rules under the Telephone Consumer Protection Act (TCPA) to require sellers and/or telemarketers to honor registrations with the National Do-Not-Call Registry so that registrations will not automatically expire based on the then-existing five-year registration period. Specifically, the Commission modified § 64.1200(c)(2) of its rules to require sellers and/or telemarketers to honor numbers registered on the Registry indefinitely or until the number is removed by the database administrator or the registration is cancelled by the consumer.

Most recently, on February 15, 2012, the Commission released a Report and Order in CG Docket No. 02-278, FCC 12-21, revising its rules to: (1) Require prior express written consent for all autodialed or pre-recorded telemarketing calls to wireless numbers and for all pre-recorded telemarketing calls to residential lines; (2) eliminate the established business relationship exception to the consent requirement for pre-recorded telemarketing calls to residential lines; (3) require telemarketers to include an automated, interactive opt-out mechanism in all pre-recorded telemarketing calls, to allow consumers more easily to opt-out of future robocalls during a robocall itself; and (4) require telemarketers to comply with the 3% limit on abandoned calls during each calling campaign, in order to discourage intrusive calling campaigns.

Finally, the Commission exempted from the Telephone Consumer Protection Act requirements pre-recorded calls to residential lines made by health-care-related entities governed by the Health Insurance Portability and Accountability Act of 1996.

I. Background

The NTSB previously issued an advance notice of proposed rulemaking (ANPRM), 75 FR 80452 (Dec. 22, 2010), and a notice of proposed rulemaking (NPRM), 77 FR 6760 (Feb. 9, 2012), concerning 49 CFR parts 821 and 826. (Part 826 sets forth rules of procedure concerning applications for fees and expenses under the Equal Access to Justice Act of 1980.) Prior to the NTSB's issuance of a final rule concerning parts 821 and 826, Congress enacted the Pilot's Bill of Rights, Public Law 112-53, 126 Stat. 1159 (August 3, 2012), which implemented statutory changes for, among other things: (1) The FAA to disclose its enforcement investigative report (EIR) to each respondent in an aviation certificate enforcement case; (2) the NTSB to apply the Federal Rules of Civil Procedure and Federal Rules of Evidence to each case; and (3) litigants now to have the option of appealing the Board's orders to either a Federal district court or a Federal court of appeals. The Board therefore issues this interim final rule in response to these legislative changes. Elsewhere in today's Federal Register , the NTSB published a final rule concerning those portions of its February 2012 NPRM not affected by enactment of the Pilot's Bill of Rights.

As a result of enactment of the Pilot's Bill of Rights and to ensure compliance with it, the NTSB is immediately changing its Rules of Practice applicable to air safety proceedings. The statute is effective immediately, thus requiring the NTSB to promulgate regulatory changes without delay. As a result, the NTSB believes the statute constitutes good cause for issuance of an interim final rule. The NTSB will consider comments received during the comment period, and will alter the interim final rule issued herein if the comments warrant alteration.

Pursuant to subsection 2(a) of the Pilot's Bill of Rights, the Federal Rules of Evidence and Federal Rules of Civil Procedure, to the extent practicable, are applicable to all NTSB proceedings conducted under 49 CFR part 821, subparts C (rules applicable to proceedings under 49 U.S.C. 44703, which governs airman certificates), D (rules applicable to proceedings under 49 U.S.C. 44709, which governs amendments, modifications, suspensions, and revocations of certificates), and F (rules applicable to hearings conducted under 49 CFR part 821).

Subsection 2(b) of the statute requires the FAA provide “timely, written notification” to individuals who are the subject of an FAA enforcement action regarding the “nature of the investigation.” The FAA must inform the individual he or she need not respond to an FAA letter of investigation and will not be adversely affected if he or she elects not to respond. The statute requires the Administrator of the FAA to make available the releasable portions of the EIR to each individual, and provide certain air traffic data. The statute further provides that the Administrator may delay this notification if the FAA determines the notification would threaten the integrity of the investigation.

In addition, subsection 2(c) of the statute strikes from 49 U.S.C. 44703(d)(2), 44709(d)(3), and 44710(d)(1) the phrase, “but is bound by all validly adopted interpretations of laws and regulations the Administrator carries out unless the Board finds an interpretation is arbitrary, capricious, or otherwise not according to law.” The statute also strikes from 49 U.S.C. 44709(d)(3) and 44710(d)(1) the language stating the Board is bound by FAA policy guidance concerning sanctions for violations.

Subsection 2(d) of the statute provides individuals with the option of appealing a Board order to a Federal district court or a Federal court of appeals. Previously, only the Federal courts of appeals had jurisdiction to review appeals of Board orders on certificate actions. Additionally, the statute states, absent a stay from the Board, an emergency order the Administrator issues under 49 U.S.C. 44709(e)(2) will remain in effect pending the exhaustion of the appeal to Federal district court. Regarding review of orders, the statute requires Federal district courts to give “full independent review” of the Administrator's decision; and in the case of emergency orders, the statute requires Federal district courts to give “substantive independent and expedited review” of the Administrator's decision to make the order immediately effective.

Other provisions of the Pilot's Bill of Rights involve notices to airmen (section 3) and the FAA medical certification process (section 4). These provisions do not directly affect the Board's Rules of Practice and therefore do not require changes to the Board's rules.

As a result of these statutory provisions, the Board herein implements the following changes to 49 CFR part 821. As indicated above, the NTSB will consider all comments concerning this rulemaking received by the deadline, but will only alter any provisions implemented in this rule if the comments establish such alteration is necessary.

The NTSB herein adds a new section, 821.5, entitled “Procedural rules” within Subpart B of part 821. This new section will state, “In proceedings under subparts C, D, and F, for situations not covered by a specific Board rule, the Federal Rules of Civil Procedure will be followed to the extent they are consistent with sound administrative practice.” The NTSB considers the phrase, “to the extent they are consistent with sound administrative practice,” to preclude the application of Federal Rules of Civil Procedure that are obviously inapplicable. For example, Federal administrative agencies do not conduct jury trials. See, e.g., Atlas Roofing Co., Inc. v. OSHRC, 430 U.S. 442, 455 (1977). Likewise, rules concerning class actions are inapplicable. Overall, the NTSB has reviewed the Federal Rules of Civil Procedure and notes the inapplicability of the following rules: 5.1 (“Constitutional Challenge to a Statute—Notice, Certification, and Intervention”), 5.2 (“Privacy Protection for Filings Made with the Court”), 13 (“Counterclaim and Crossclaim”), 14 (“Third-Party Practice”), 35 (“Physical and Mental Examinations”), 38 (“Right to a Jury Trial; Demand”), 39 (“Trial by Jury or by the Court”), 47 (“Selecting Jurors”), 48 (“Number of Jurors; Verdict; Polling”), 49 (“Special Verdict; General Verdict and Questions”), 50 (“Judgment as a Matter of Law in a Jury Trial; Related Motion for a New Trial; Conditional Ruling”), 51 (“Instructions to the Jury; Objections; Preserving a Claim of Error”), 53 (“Masters”), and the Rules contained in Titles IV (“Parties”), VIII (“Provisional and Final Remedies”), IX (“Special Proceedings”), X (“District Courts and Clerks; Conducting Business; Issuing Orders”), and “Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions” of the Federal Rules of Civil Procedure.

Furthermore, the NTSB considers the rules contained in subpart B of 49 CFR part 821 (“General Rules Applicable to Petitions for Review, Appeals to the Board, and Appeals from Law Judges' Initial Decisions and Appealable Orders”) analogous to local rules, as referenced in various parts of the Federal Rules of Civil Procedure. In this regard, the NTSB will consider its rules in subpart B of part 821 to supplement the overarching applicable Federal Rules of Civil Procedure. To the extent the timelines for filing or responding, as well as procedural processes such as for discovery or subpoenas, differ slightly from the Federal Rules of Civil Procedure, the NTSB will consider the rules in subpart B as the local rules followed in practice before the Board.

The NTSB believes this new section adequately provides notice to parties of the application of the Federal Rules of Civil Procedure, yet still complies with the statutory directive in section 2(a) of the Pilot's Bill of Rights—that the Board's Rules of Practice adopt the Federal Rules of Civil Procedure “to the extent practicable.” Notably, most sections within subpart B of the Board's Rules of Practice have a Federal Rule counterpart. Sections 821.7 (“Filing of documents with the Board”) and 821.8 (“Service of documents”) of the Board's Rules of Practice are supplemental to Federal Rules of Civil Procedure (FRCP) 5 (“Serving and Filing Pleadings and Other Papers”) and 7 (“Pleadings Allowed; Form of Motions and Other Papers”), respectively. Concerning sections 821.10 (“Computation of time”) and 821.11 (“Extensions of time”), FRCP 6 (“Computing and Extending Time; Time for Motion Papers”) is also applicable. Similarly, section 821.12(a) will function as a supplement to FRCP 15 (“Amended and Supplemental Pleadings”), and section 821.12(b) will function as a supplement to FRCP 41(a) (“Dismissal of Actions”). The NTSB will read Title III (“Pleadings and Motions”) of the FRCPs in conjunction with section 821.14, concerning motion practice before the Board. Sections 821.24 and 821.30, both entitled “[i]nitiation of proceeding,” will function as supplements to FRCP 3, which simply states, “[a] civil action is commenced by filing a complaint with the court.” Likewise, section 821.40, concerning the record of the proceeding before the NTSB law judge, will function as a supplement to FRCP 44 (“Proving an Official Record”).

As a general matter, the Board encourages parties to resolve discovery disputes on their own. In cases where parties seek a ruling from an NTSB law judge on a discovery dispute, the NTSB encourages parties to articulate clearly their position by relying on the Federal Rules of Civil Procedure as read in conjunction with the Board's Rules of Practice.

Subsection 821.19(a), entitled “Depositions,” will now include a reference to the Federal Rules of Civil Procedure within the second sentence, to read as follows: “Reasonable notice shall be given in writing to the other parties, stating the name of the witness and the time and place of the taking of the deposition, in accordance with the Federal Rules of Civil Procedure.” Federal Rules 30 (“Depositions by Oral Exam”) and 31 (“Depositions by Written Questions”) address deposition testimony, and require such written notice. The Board believes subsection 821.19(a) is fully consistent with FRCPs 30 and 31; therefore, the Board intends to retain the text of subsection (a) and simply add a reference to the Federal Rules.

Subsection (b), entitled “[e]xchange of information by the parties,” is amended to state: “The parties must exchange information in accordance with the Federal Rules of Civil Procedure. Copies of discovery requests and responses shall be served on the law judge to whom the proceeding has been assigned or, if no law judge has been assigned, on the Case Manager. In the event of a dispute, either the assigned law judge or another law judge delegated this responsibility (if a law judge has not yet been assigned or if the assigned law judge is unavailable) may issue an appropriate order, including an order directing compliance with any ruling previously made with respect to discovery.” The NTSB herein strikes the previous language at the beginning of subsection (b), which allowed parties to set their own discovery schedules, as this language is not consistent with FRCPs 26 (“Duty to Disclose; General Provisions Governing Discovery”) and 34 (“Producing Documents, Electronically Stored Information, and Tangible Things, or Entering onto Land, for Inspections and Other Purposes”).

Subsection 821.19(c) is entitled “[u]se of the Federal Rules of Civil Procedure,” and describes the NTSB's use of the Federal Rules as instructive, rather than mandatory. The NTSB herein strikes that subsection, and recodifies the previous subsection (d), entitled, “Failure to provide or preserve evidence,” as new subsection (c). The text of that subsection will remain unchanged. The NTSB will read this subsection in conjunction with FRCP 11 (“Signing Pleadings, Motions, and Other Papers; Representations to the Court; Sanctions”), which provides sanction for noncompliance with discovery obligations.

Subsection 2(b)(2)(E) of the Pilot's Bill of Rights requires the FAA to make available the releasable portions of its EIR concerning each individual against whose certificate it takes action. The disclosure must occur in a timely manner, unless doing so would threaten the integrity of the investigation. The FAA's guidance to its inspectors concerning implementation of Pilot's Bill of Rights' provisions indicates the FAA intends to release the EIRs contemporaneously with the FAA's letters of investigation. FAA Notice N 8900.195 (Aug. 8, 2012), available at http://fsims.faa.gov/wdocs/notices/n8900_195.htm (to be incorporated in FAA Order 8900.1).

In order to implement this provision of the statute, the NTSB herein adds new subsection 821.19(d), entitled “Motion to dismiss for failure to include copy of releasable portion of Enforcement Investigative Report (EIR).” This new subsection states as follows: “(1) Where the FAA fails to provide the releasable portion of its EIR with its required notification to the respondent, the respondent may move to dismiss the complaint and, unless the Administrator establishes good cause for that failure, the law judge shall dismiss the complaint. The law judge may accept arguments from the parties on the issue of whether a dismissal resulting from failure to provide the releasable portions of the EIR should be deemed to occur with or without prejudice. (2) The releasable portion of the EIR shall include all information in the EIR, except for the following: (i) Information that is privileged; (ii) Information that is an internal memorandum, note or writing prepared by a person employed by the FAA or another government agency; (iii) Information that would disclose the identity of a confidential source; (iv) Information of which applicable law prohibits disclosure; (v) Information about which the law judge grants leave to withhold as not relevant to the subject matter of the proceeding or otherwise, for good cause shown; or (vi) Sensitive security information, as defined at 49 U.S.C. 40119 and 49 CFR 15.5. (3) Nothing in this section shall be interpreted as preventing the Administrator from releasing to the respondent information in addition to that which is contained in the releasable portion of the EIR.”

The NTSB will only enforce the statutory mandate for the FAA to make available the releasable portions of the EIR in cases coming within the purview of the Board's jurisdiction. Therefore, the NTSB implements this requirement by way of a motion to dismiss, rather than as a predicate to a respondent's filing of an appeal.

The NTSB herein changes the text of section 821.38, concerning evidence, to read as follows: “In any proceeding under the rules in this part, all evidence which is relevant, material, reliable and probative, and not unduly repetitious or cumulative, shall be admissible. All other evidence shall be excluded. Unless inconsistent with the requirements of the Administrative Procedure Act, the Federal Rules of Evidence will be applied in these proceedings.” This change is consistent with section 2(a) of the Pilot's Bill of Rights, which mandates the Federal Rules of Evidence be applied to NTSB proceedings under part 821, subparts C, D, and F “to the extent practicable.”

The previous version of section 821.38 permitted hearsay evidence. Under the provision in the Pilot's Bill of Rights requiring application of the Federal Rules of Evidence “to the extent practicable,” the NTSB believes NTSB law judges must exclude hearsay evidence unless an exception to the hearsay rule applies. Therefore, the language from the previous rule permitting hearsay (to include hearsay within hearsay) is stricken from the rule.

Subsection 3(d), paragraph (1) of the Pilot's Bill of Rights provides for judicial review in either a Federal district court or a Federal court of appeals. Subsection 821.64(a) of the Board's Rules of Practice previously informed parties they may seek judicial review “by the filing of a petition for review with the appropriate United States Court of Appeals within 60 days of the date of entry (i.e., service date) of the Board's order.” The Board herein adds “or United States District Court” to the first sentence, in accordance with the Pilot's Bill of Rights.

This rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of the potential costs and benefits under section 6(a)(3) of that Order. As such, the Office of Management and Budget has not reviewed this rule under Executive Order 12866. Likewise, this rule does not require an analysis under the Unfunded Mandates Reform Act, 2 U.S.C. 1501-1571, or the National Environmental Policy Act, 42 U.S.C. 4321-4347.

In addition, the NTSB has considered whether this rule would have a significant economic impact on a substantial number of small entities, under the Regulatory Flexibility Act (5 U.S.C. 601-612). The NTSB certifies under 5 U.S.C. 605(b) that this rule would not have a significant economic impact on a substantial number of small entities. Moreover, in accordance with 5 U.S.C. 605(b), the NTSB will submit this certification to the Chief Counsel for Advocacy at the Small Business Administration.

Moreover, the NTSB does not anticipate this rule will have a substantial, direct effect on state or local governments or will preempt state law; as such, this rule does not have implications for federalism under Executive Order 13132, Federalism. This rule also complies with all applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. In addition, the NTSB has evaluated this rule under: Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights; Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks; Executive Order 13175, Consultation and Coordination with Indian Tribal Governments; Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use; and the National Technology Transfer and Advancement Act, 15 U.S.C. 272 note. The NTSB has concluded that this rule does not contravene any of the requirements set forth in these Executive Orders or statutes, nor does this rule prompt further consideration with regard to such requirements.

The NTSB invites comments relating to any of the foregoing determinations and notes the most helpful comments reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data.

For the reasons discussed in the preamble, the NTSB amends 49 CFR part 821 as follows:

I. Notice of Proposed Rulemaking

On February 9, 2012, the NTSB published an NPRM inviting public comments concerning the NTSB procedural rules codified at 49 CFR parts 821 and 826. 77 FR 6760. The NPRM also addressed each of the 20 relevant comments received in response to the ANPRM, which the NTSB published on December 22, 2010. 75 FR 80452. In addition to various technical changes, the NTSB proposed in the NPRM changes to various regulations to allow for the electronic filing of certain documents; a requirement that the FAA provide a copy of the releasable portions of its enforcement investigation report (EIR) by the date on which an emergency order is issued; a statement that the law judge may consider the facts of each case and determine whether to dismiss the case with prejudice when the FAA withdraws its complaint; and a statement that the law judge will accept evidence in determining whether a case warrants emergency status. The NTSB also proposed amendments to 49 CFR part 826, governing claims brought under the EAJA, to bring the regulations up-to-date and ensure petitioners are aware of the steps necessary to obtain fees from the FAA following an order requiring the payment of fees.

Both the ANPRM and NPRM included a discussion of the Board's procedure for handling certain aspects of emergency cases. The FAA issues emergency orders when it determines the interests of aviation safety require that the order take effect immediately, and, in those cases, the certificate holder may not exercise certificate privileges during the pendency of an appeal with the NTSB. Section 716 of the Aviation Investment and Reform Act for the 21st Century (“AIR-21”) amended 49 U.S.C. 44709 by granting the NTSB authority to review such emergency determinations. Public Law 106-181, section 716 (April 5, 2000) (codified at 49 U.S.C. 44709(e)(3)). The NTSB's rules governing review of the emergency status of a case have been the subject of debate in the aviation legal community in the recent past. Specifically, § 821.54(e) directs NTSB's law judges to dispose of petitions for review of the FAA's emergency determinations by:

The NTSB received nine comments in response to the NPRM, which are available at http://www.regulations.gov (Docket No. NTSB-GC-2011-0001). The NTSB carefully considered all comments received in response to the NPRM, as well as the preceding ANPRM. 1 This section contains summaries of the NRPM comments. The NTSB's responses to the comments are included in the section below entitled “Changes.”

The comments primarily address the NTSB's regulations governing review of emergency determinations, but also provide feedback concerning other NTSB regulations. Most of the comments assert the current standard for review of FAA emergency determinations is fundamentally unfair because it requires the NTSB's law judges to assume the truth of the factual allegations the FAA makes in its emergency order. While the NTSB did not propose changing the standard of review in the NPRM, it did propose a requirement that the FAA provide a copy of the EIR to each respondent in emergency cases at the time the FAA issues its emergency order. Following publication of the NPRM and the comment period, Congress passed the Pilot's Bill of Rights. Pub. L. No. 112-153 (August 3, 2012). The statute requires the FAA to release the EIR in each case. Id. section 2(b)(2)(E). As a result, the EIR proposal in the NPRM is moot as it now is required by statute. Therefore, this final rule will not address the release of the EIR, rather the NTSB addresses that requirement in an interim final rule in response to the Pilot's Bill of Rights. This interim final rule is published elsewhere in this issue of the Federal Register .

In addition, the NTSB proposed a rule that the law judge may consider evidence concerning whether the case warrants emergency status when the respondent submits such evidence with his or her petition for review of the emergency order. This proposal also prompted much discussion from the commenters, as described below.

Regarding respondents' challenges to the emergency status of a case under section 821.54, the FAA contends the NTSB should not have used a drug testing refusal case as an example of a case where the law judge granted a respondent's petition regarding the emergency status of the case. The FAA's comment asserts the NTSB gave the impression that a respondent's opportunity to submit evidence was equivalent to a trial on the merits. The comment suggests adding the following sentence at the end of § 821.54(b): “The respondent may include attachments to the petition for review (e.g., affidavits, other records) limited to evidence the respondent believes supports the reasons enumerated in the petition for why the Administrator's emergency determination is not warranted in the interest of aviation safety.”

The Air Line Pilots Association, International (ALPA), also submitted a comment concerning the emergency actions. ALPA strongly disagrees with the decision to leave the “assuming the truth” standard of review undisturbed, and proposed adding a requirement that law judges must consider evidence a respondent submits in his or her challenge to the emergency status of a case. ALPA's comment also states the NTSB should consider the amount of time the FAA knew of the alleged wrongdoing before issuing an emergency order, as this time period is relevant to whether the case is a legitimate emergency.

Similarly, the Aircraft Owners and Pilots Association (AOPA) disagrees with the intent to leave the emergency determination standard of review unchanged. AOPA's comment contends Congress, in authorizing us to review emergency appeals of aviation certificate actions, intended to provide each respondent with a “substantive review” of the emergency action. AOPA notes it “remains perplexed as to why the NTSB maintains that this type of review does not lend itself to evidentiary proof.” AOPA states it is mindful of the time constraints applicable to emergency cases, but contends the time limits should not be a reason to “undermine meaningful review” of the emergency status. AOPA suggests an allowance for telephonic presentations and arguments concerning whether the emergency status of a case is warranted, and argues the law judges should have discretion concerning whether to assume the truth of the factual allegations contained in the FAA's emergency orders. AOPA agrees with the proposal that law judges may consider evidence a respondent submits in challenging an emergency order.

The National Air Transportation Association (NATA) also commented on the NPRM. As with the ANPRM, NATA is in favor of eliminating the “assuming the truth” standard of review concerning the emergency status of cases. NATA asserts no statute requires this standard of review, nor does any legislative history indicate this standard is necessary. NATA contends emergency actions, and deferential review of them, are fundamentally unfair, and asserts emergency actions must be subject to “meaningful review” by an “impartial and independent body.” NATA suggests the NTSB impose a rebuttable presumption standard concerning emergency challenges. In particular, the comment states:

The National Business Aviation Association (NBAA) submitted a comment identical to that of NATA.

The Aeronautical Repair Station Association (ARSA) also submitted a comment expressing disagreement with the intent not to remove the “assuming the truth” standard of review applicable to emergency cases. ARSA contends the FAA's authority to issue an emergency order remains unchecked, and the “assuming the truth” standard “effectively swallows the rule” because it renders review of petitions challenging emergency status meaningless. ARSA asserts an emergency order should be used sparingly, because the effect of such an order is severe.

Carstens and Cahoon, LLP, submitted a brief comment concurring with the proposal to retain the “assuming the truth” standard, as it is “in full accord with 49 U.S.C. 44709(e).” The commenter also agrees with the proposed rule to permit respondents to present evidence challenging the emergency nature of the case, as this proposal “provides both sides with fairness and justice for the purpose of the limited review by the law judge of the FAA's emergency determination.”

The Transport Workers Union of America (TWU) commented concerning the standard of review of the emergency status of cases. TWU acknowledges the need for some deference to the FAA's factual allegations, given the fact that a challenge concerning the emergency status is limited in scope and cannot consist of litigating the merits of the case. As with its response to the ANPRM, TWU again suggests adoption of a less deferential standard of review than the current “assuming the truth” standard. TWU analogizes its proposed review of FAA emergency cases to Federal courts' review of temporary restraining orders or preliminary injunctionsto require the FAA to show a substantial likelihood of success on the merits. 3 TWU notes other Federal agencies apply this “substantial likelihood of success” standard when determining whether to grant a stay of a case. 4

The Aviation Law Firm submitted a comment discussing the proposed changes regarding emergency cases. The commenter recommends the NTSB change the permissive language of “should permit evidence, if appropriate” within § 821.54(e) to say “shall permit evidence.” The Aviation Law Firm contends such a change would provide sufficient clarity that law judges will consider evidence a petitioner submits.

The FAA Whistleblowers Alliance submitted a brief comment stating the FAA misuses its authority to issue emergency orders. The comment indicates the organization agrees with this rulemaking activity concerning review of emergency orders.

The NTSB carefully reviewed all comments regarding procedures applicable to emergency cases. As indicated above, the FAA is authorized, under 49 U.S.C. 44709(e)(2), to issue orders amending, modifying, suspending, or revoking certificates issued on an “emergency” basis. In 2000, AIR-21 amended 49 U.S.C. 44709 to grant the NTSB authority to review such emergency determinations. In particular, section 44709(e)(3) and (4) states:

In order to implement these statutory provisions, on July 11, 2000, the NTSB published an interim rule with a request for comments. 65 FR 42637. This interim rule amended 49 CFR part 821 by providing NTSB's law judges with the authority to issue orders affirming or denying the FAA's emergency determination under 49 U.S.C. 44709(e). The interim rule directed NTSB law judges to determine whether the Administrator abused his or her discretion in finding an emergency existed under the facts alleged in the Administrator's order. The NTSB assumed the facts to be true for the limited purpose of reviewing the emergency determination. The NTSB incorporated the abuse of discretion standard of review that had been set forth in Nevada Airlines v. Bond, 622 F.2d 1017 (9th Cir. 1980). 5 Courts have since upheld the “arbitrary and capricious, an abuse of discretion, or otherwise not in accordance with law” standard in other cases. See Ickes v. FAA, 299 F.3d 260 (3d Cir. 2002) (citing Blackman v. Busey, 938 F.2d 659, 663 (6th Cir. 1991)); Armstrong v. FAA, 515 F.3d 1294 (D.C. Cir. 2008).

On April 29, 2003, the NTSB published the final rule altering the standard of review for emergency determinations. 58 FR 22623. Since 2003, § 821.54(e) has provided:

In the 2010 ANPRM, the NTSB revisited this standard of review, requesting comments. 75 FR 80452-01 (Dec. 22, 2010). In the ANPRM, the NTSB reminded parties § 821.54(e) does not explicitly state the allegations of the FAA's complaint are “deemed true,” but instead uses the word “assum[ed].” The NTSB modeled this language after subsection (b) of the Board's Stale Complaint Rule, codified at 49 CFR 821.33.

In the 2012 NPRM, the NTSB did not propose changing this “assuming the truth” standard of review. The NTSB concluded that a challenge to an emergency determination should not be an opportunity to contest the factual allegations underlying the certificate action. This determination simply is the result of the statutory time constraints applicable to emergency cases.

If the NTSB held a hearing for every petition challenging the emergency status of a case, it could not fulfill its obligation to rule on the merits of the case within the statutorily required 60-day time frame. A commenter's suggestion to utilize telephonic hearings for emergency cases demonstrates an understanding of this predicament. The NTSB carefully considered alternatives to the “assuming the truth” standard, especially in light of the comments received in response to both the ANPRM and the NPRM, and determined it simply cannot issue a ruling on a petition challenging the emergency status of a case within 5 days if the NTSB holds a hearing.

The NTSB currently does not have the resources to hold hearings on petitions contesting emergency determinations, given the expedited time frame. Scheduling a time in which the parties are available to participate in a hearing, securing a space for the hearing, and ensuring a law judge is available for the hearing, would all be difficult to accomplish within 5 days. These considerations are only applicable to the scheduling of the hearing. Issuing a well-reasoned decision following the receipt of evidence and testimony from a hearing would require additional time.

Moreover, the NTSB only has four administrative law judges, all of whom are responsible for holding hearings across all 50 states, the District of Columbia, and Puerto Rico. Consistent with § 821.37(a), the NTSB holds hearings at the most convenient locations for the parties. The NTSB generally refrains from conducting telephonic hearings at which the NTSB's law judges must make factual determinations, because the law judges' ability to assess the credibility of witnesses at such hearings is greatly diminished.

Additionally, the four-prong standard applicable to preliminary injunctions or temporary restraining orders is similar to the manner in which NTSB law judges currently handle emergency challenges. By policy, the FAA attaches to each emergency order a document outlining the reason the FAA believes emergency treatment of the case is necessary. Under the Pilot's Bill of Rights, the FAA is now required to also provide a copy of releasable portions of the EIR to each respondent. In the document providing the FAA's justification for pursuing the case as an emergency, the FAA articulates the public interest at stake, which is akin to a showing of how irreparable harm would ensue if it could not proceed with the case as an emergency. The FAA's statement also contains a factual summary as to why the FAA would prevail on the merits, and why the FAA believes the public interest supports proceeding under our emergency rules. Federal courts, in applying the four-part preliminary injunction or temporary stay standard, must weigh the facts in a similar manner. For example, in such cases, they do not have time for a trial on the merits of the case wherein they apply a preponderance of the evidence standard. Instead, the courts must weigh the facts in favor of the party seeking action in analyzing the four prongs to determine whether short-term, immediate legal action is appropriate. The NTSB law judges' review of emergency challenges is similar to this analysis.

For the reasons set forth above, the NTSB retains the “assuming the truth” standard of review in § 821.54(e). However, the NTSB will also consider this analysis anew in light of any petition for rulemaking, that includes novel suggestions or points not previously articulated.

Finally, the NTSB adopts the suggestion from the Aviation Law Firm, recommending a change in the language of § 821.54(e) to state the law judge “shall” consider evidence a respondent submits in challenging the FAA's decision to proceed with a case as an emergency. The NTSB also adds the phrase “if appropriate” to the sentence, to ensure parties are aware the law judge ultimately makes the determination as to whether the evidence the respondent submits is relevant to the emergency determination. Therefore, this portion of § 821.54(e) will now read, “* * * the law judge is not so limited to the order's factual allegations themselves, but also shall permit evidence, if appropriate, pertaining to the propriety of the emergency determination * * *.”

Several parties commented on the proposed changes to allow for electronic submission of documents. All commenters generally concur with permitting electronic submission. AOPA agrees with the move toward an electronic filing system by accepting documents via electronic mail, and stated it also agrees with the proposal to continue receiving documents by facsimile or postal mail, as not all respondents may have access to electronic mail. NBAA and NATA, however, both suggest creation of an electronic docketing system, such as the Federal courts' Public Access to Court Electronic Records (PACER) system. They indicate electronic docketing would provide for the timeliest and most efficient means of allowing parties to receive documents, and therefore provide a “level playing field” for both parties. ALPA's comment states it agrees with the proposed changes to allow for electronic submission of documents.

The Aviation Law Firm suggests an allowance for electronic submission of documents in emergency cases. Therefore, it proposes an amendment to § 821.54(b), to provide a respondent challenging the emergency status of an emergency order to file his or her petition via electronic mail.

The FAA also agrees with the proposal to allow for electronic submission of documents, and offered several suggestions. With regard to § 821.7, the FAA suggests adding the following sentence to subsections (a)(1) and (a)(2) of the regulation, to simplify it: “Paragraph (3) provides the acceptable methods for filing documents under this provision.” As for subsection (a)(3), the FAA suggests the NTSB not adopt the proposed rule stating, “Documents filed by electronic mail must be signed and transmitted in a commonly accepted format, such as Adobe Portable Document Format (PDF),” and instead adopt the following language: “Documents filed by electronic mail must be signed and transmitted in accordance with the procedures established by the Board for accepting electronically filed documents, which can be found at [reference Web site where procedures can be found].” The FAA suggests this amendment to provide the NTSB with flexibility in the future to alter the procedures as technology changes. The FAA's comment states that if the NTSB adopts this approach, the language in § 821.52 could be changed to clarify whether parties may submit documents in emergency cases via electronic mail.

The FAA also suggests clarification as to whether parties must file the “originally signed document” in addition to the copy received via facsimile or electronic mail. The FAA states, “[a]s currently drafted, it appears that no hard copy needs to follow if a document is filed by facsimile or email.” The FAA suggests requiring a hard copy submission in addition to facsimile or electronic mail submission, to “ensure the NTSB is aware of the filing and that technical glitches do not undermine an otherwise timely and intended filing.” The FAA also recommends establishing an automatic receipt to be transmitted in response to electronic mail filings.

With regard to the proposed change to § 821.8(b), which would require a party serve any other party by any method prescribed in § 821.7(a)(3), and allow a party the option of receiving service via electronic mail only, the FAA recommends clarifying this section by stating whether parties must also serve a hard copy of the document. The FAA states the reference to § 821.7(a)(3) creates this ambiguity. In response, the FAA recommends explicitly requiring, “as a general matter,” that any party serving a document by electronic mail or facsimile also serve a hard copy, to ensure the other party receives the document.

Finally, the FAA, like the Aviation Law Firm, questions why service via electronic mail is not permitted for emergency cases. The FAA recommends allowing electronic service of documents in the initial proceedings before the law judges. Several other commenters also recommend allowing electronic submission of documents in emergency cases.

As stated above, all commenters approve of the concept of permitting electronic filing in emergency cases. Given the time constraints applicable to emergency cases, the NTSB has determined adopting such a requirement would be advantageous to all parties. For this reason, the NTSB herein adopts the requirement for emergency cases as well as cases that proceed on the normal case disposition timeline. This change involves deleting references to expedited filing in § s 821.54(b) and (c), and 821.57(b). Additionally, the change requires adding a new subsection within § 821.52 to clarify electronic submission of documents is permissible in emergency cases.

The NTSB has determined the FAA's suggestion to provide a reference to the NTSB public Web site for a listing of procedures for electronic filing is advantageous. Such an approach will provide the NTSB with the flexibility to accommodate technological changes. In addition, listing procedures on the NTSB public Web site will be helpful as the NTSB seeks to design, build and utilize a robust electronic docketing system for enforcement cases. As a result, the NTSB adopts this change, and notes these procedures will be available on the NTSB Web site after publication of this final rule, but before its effective date.

Finally, the NTSB intends to provide in its online electronic filing procedures additional clarifications concerning § 821.8(d)(3), in which the following language was proposed: “[We will presume lawful service] when a document is transmitted by facsimile or electronic mail and there is evidence to confirm its successful transmission to the intended recipient.” By this change, the NTSB encourages parties filing via electronic mail to keep a copy of the transmission from their “sent mail” file. With an electronic docketing system, the NTSB may have the ability in the future to provide a fill-able electronic Web page that automatically generates an electronic “receipt” for documents.

Some commenters urge the NTSB to implement a robust electronic docketing system, such as the Federal courts' PACER system. The NTSB is currently in the process of gathering requirements and working with a contractor to design a system for the NTSB's docketing and electronic filing needs. The NTSB intends to develop and implement such a docketing system; however, this process may take some time, due to resource and fiscal constraints.

Several commenters address the proposed change to § 821.12(b), which addressed the FAA's voluntary withdrawal of a complaint. The proposed language stated: “The law judge may accept arguments from the parties on the issue of whether a dismissal resulting from the withdrawal of a complaint should be deemed to occur with or without prejudice.” As explained in the preamble of the NPRM, the issue of dismissal with or without prejudice is directly relevant to whether a party has achieved “prevailing party” status under the EAJA.

Some commenters, such as NATA and NBAA, indicate they have “no objection” to the proposed change in § 821.12(b). The Aviation Law Firm suggests changing the word “may” to “shall,” to require law judges to accept arguments on the issue of dismissal with or without prejudice. The comment from the Aviation Law Firm includes a summary of recent cases concerning the EAJA. In particular, in the case of Green Aviation Management Co., LLC v. Federal Aviation Administration, 676 F.3d 200 (DC Cir. 2012), the DC Circuit indicated the with-or-without-prejudice prong of the three-prong test articulated in District of Columbia v. Straus, 590 F.3d 898 (DC Cir. 2010), is indeed an important consideration. In Green, the District of Columbia Circuit Court of Appeals held the applicant was the prevailing party because the law judge dismissed the complaint with prejudice. Green, 676 F.3d at 204-205. Because this prong is such an important consideration, the Aviation Law Firm suggests the NTSB rules state law judges “shall” consider arguments concerning whether they should dismiss a case with prejudice when the FAA withdraws the complaint.

The FAA's comment states the proposed addition to § 821.12(b) lacks clarity, because the rule also states the law judge's approval is not necessary “in the case of a petition for review, an appeal to the Board, a complaint, or an appeal from the law judge's initial decision or appealable order.” Therefore, the FAA indicates the proposed change implies approval from a law judge is necessary to allow the FAA to withdraw a complaint. The FAA's comment suggests if this implication is correct, then the NTSB should specify “such withdrawal must be by motion of the party.” The FAA suggests the following concerning such a motion: (1) The motion state why the moving party is requesting withdrawal; (2) the motion state whether the moving party is requesting dismissal with prejudice; and (3) the motion state whether the non-moving party consents to the motion. The FAA also suggests stating that the law judges will summarily grant uncontested motions to withdraw without prejudice.

The FAA also suggests a change to part 826. The comment recommends changing the formula in § 826.6(b)(1) to the following: X/$125 per hour = CPI_NEW/CPI_1996. The FAA states the formula in the current rule is outdated and results in a higher cap on fees.

AOPA agrees with the proposed change to § 821.12(b). AOPA's comment, however, addresses a different aspect of the EAJA: the time for which an EAJA applicant may recover fees. With an extensive amount of research cited in its comment, AOPA contends the NTSB should allow an applicant to petition for fees and expenses incurred prior to the commencement of the applicant's appeal. AOPA states applicants and their representatives often expend time and resources in preparation for a defense prior to filing an appeal.

The majority of the comments regarding the EAJA focused on § 821.12(b), involving dismissal of the complaint with or without prejudice. As stated in the NPRM, this issue is a critical consideration in determining whether a party is the “prevailing party” for purposes of the EAJA. The NTSB understands the comment from the Aviation Law Firm, wherein it suggests inclusion of the word “shall,” to require the law judges to consider parties' arguments concerning whether to dismiss a case with prejudice. The NTSB initially chose to include the word “may” in the proposed language to acknowledge parties were not required to make such arguments. If parties are silent on the issue, then the law judges would not consider such arguments. The NTSB does not want to penalize parties who do not present any arguments on the issue of whether the law judge should dismiss with prejudice. As a result, the NTSB amends the proposed language to include the word “shall,” in conjunction with the phrase, “if offered.”

The FAA's comment on the issue of dismissal with prejudice was helpful. The NTSB believes the clearest way to address the issue of dismissal with prejudice is to require a motion to dismiss in light of the FAA's withdrawal of a complaint. As a result, the NTSB changes the language in § 821.12(b) to require dismissals based on withdrawals of complaints to occur only on oral or written motion.

The FAA's comment also recommends updating the formula for the calculation of the cap on the maximum hourly rate for attorney's fees under the EAJA, found at 49 CFR 826.6(b)(1). The NTSB did not propose such a change or solicit comments concerning this calculation in either the ANPRM or the NPRM. As a result, the NTSB declines to consider this change in the current rulemaking.

Likewise, AOPA submitted a comment urging the NTSB to change the EAJA rules to allow a respondent to recover fees from the time he or she begins preparing the defense ( i.e., once the respondent becomes aware of the investigation). As with the FAA's suggestion regarding the calculation for the cap of fees under the EAJA, the NTSB did not propose a change or solicit comments regarding when to permit recovery of fees to commence. As a result, the NTSB declines to consider this change in the current rulemaking.

If the FAA, AOPA, or any other commenter wishes the NTSB to consider making changes to these rules under the EAJA, they may petition for a new rulemaking.

The majority of the comments concur with the miscellaneous technical changes. The FAA provided several suggested changes to the proposed language in this category. Concerning § 821.8(d) (entitled “service of documents”), the NTSB proposed to add a new subsection (3), to presume lawful service “[w]hen a document is transmitted by facsimile or electronic mail and there is evidence to confirm its successful transmission to the intended recipient.”

With regard to § 821.64(b) (entitled “judicial review”), the NTSB proposed adding the following language: “[n]o request for a stay pending judicial review will be entertained unless it is served on the Board within 20 days after the date of service of the Board's order. The Administrator may, within 2 days after the date of service of such a motion, file a reply thereto.” The FAA's comment notes the NTSB based this change on the incorrect presumption that only a respondent would seek a stay. The FAA contends there may be times when the FAA needs to file a motion for a stay, and therefore recommends adopting party-neutral language in the rule (such as “moving party” and “non-moving party”). The FAA also believes it is unreasonable to allow the non-moving party only 2 days to file a reply to the motion for stay, when the moving party has 20 days. In this regard, the FAA suggests permitting the moving party 10 days from the date of service of the Board's order to file a motion for stay, and allow the non-moving party 10 days to submit a reply to the motion.

In response to the FAA's suggestions regarding motions for stays, the NTSB herein amends the language in 821.64(b) to ensure it is party-neutral. The FAA also suggests altering the timeframe to allow the moving party 10 days to file a motion for stay, and the non-moving party an additional 10 days to reply to the motion. The NTSB considered this suggestion, and believes the most reasonable and fair filing timeframe is as follows: a party may file a motion for stay within 15 days of the date of service of the Board's order, and the non-moving party may reply to the motion within 5 days of the date of service of the motion for stay. The NTSB adopts this change, as it will ensure the NTSB does not encounter a situation in which a party files a motion for stay on the 29th day following service of the Board's order, but still provides sufficient time for a party to submit the motion. Likewise, the NTSB believes a 5-day timeframe to reply following service of the motion is reasonable.

Finally, ARSA suggests an alteration to the language in the stale complaint rule (codified at 49 CFR 821.33), to shift the burden to the FAA in response to a respondent's motion to dismiss based on the stale complaint rule. Specifically, ARSA suggests changing the rule to require the FAA to reply within 15 days of a motion to dismiss based on the stale complaint rule, and to require the reply show good cause existed for the FAA's delay, or that public interest warrants imposition of the sanction, notwithstanding the delay. The NTSB did not propose a change or request comments concerning the stale complaint rule. Therefore, as indicated above, the NTSB will not attempt to issue such a change herein.

For the foregoing reasons, the NTSB finalizes the language of 49 CFR parts 821 and 826 as set forth below.

In the NPRM, the NTSB included a regulatory analyses section concerning various Executive Orders and statutory provisions. The NTSB did not receive any comments concerning the results of these analyses. The NTSB again notes the following concerning such Executive Orders and statutory provisions.

This final rule is not a significant regulatory action under Executive Order 12866. Therefore, Executive Order 12866 does not require a Regulatory Assessment. As such, the Office of Management and Budget (OMB) has not reviewed this proposed rule under Executive Order 12866. In addition, on July 11, 2011, the President issued Executive Order 13579, “Regulation and Independent Regulatory Agencies,” 76 FR 41587, July 14, 2011). Section 2(a) of the Executive Order states:

Consistent with Executive Order 13579, the NTSB's amendments to 49 CFR parts 821 and 826 reflect its judgment that these rules should be updated and streamlined.

This rule does not require an analysis under the Unfunded Mandates Reform Act, 2 United States Code (U.S.C.) 1501-1571, or the National Environmental Policy Act, 42 U.S.C. 4321-4347.

As stated in the NPRM, the NTSB has also analyzed these amendments in accordance with the principles and criteria contained in Executive Order 13132. Any rulemaking proposal resulting from this notice would not propose any regulations that would: (1) Have a substantial direct effect on the states, the relationship between the national government and the states, or the distribution of power and responsibilities among the various levels of government; (2) impose substantial direct compliance costs on state and local governments; or (3) preempt state law. Therefore, the consultation and funding requirements of Executive Order 13132 do not apply.

The NTSB is also aware that the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) requires each agency to review its rulemaking to assess the potential impact on small entities, unless the agency determines that a rule is not expected to have a significant economic impact on a substantial number of small entities. The NTSB certifies this final rule will not have a significant economic impact on a substantial number of small entities.

Regarding other Executive Orders and statutory provisions, this final rule also complies with all applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. In addition, the NTSB has evaluated this rule under: Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights; Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks; Executive Order 13175, Consultation and Coordination with Indian Tribal Governments; Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use; and the National Technology Transfer and Advancement Act, 15 U.S.C. 272 note. The NTSB has concluded that this rule does not contravene any of the requirements set forth in these Executive Orders or statutes, nor does this rule prompt further consideration with regard to such requirements.

For the reasons discussed in the preamble, the NTSB amends 49 CFR parts 821 and 826 as follows: