On May 24, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) became law. Section 214 of EGRRCPA (section 214 of EGRRCPA) 1 added a new section, Section 51, to the Federal Deposit Insurance Act (FDI Act).2 Section 51 of the FDI Act provides a statutory definition of high volatility commercial real estate acquisition, development, or construction (HVCRE ADC) loan. Under section 51 of the FDI Act, the agencies may only require a depository institution to assign a heightened risk weight to a high volatility commercial real estate (HVCRE) exposure, as defined under the capital rule, if such exposure is an HVCRE ADC loan. Section 214 was effective upon enactment of EGRRCPA in May 2018.

The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Board), and the Federal Deposit Insurance Corporation (FDIC) (collectively, the agencies) issued an interagency statement on July 6, 2018 (interagency statement) that provided information on rules and associated reporting requirements that the agencies jointly administer and that EGRRCPA immediately affected, including the HVCRE exposure definition in the capital rule (as affected by section 214 of EGRRCPA).3 With respect to section 214 of EGRRCPA, the interagency statement provided that banking organizations could use available information to reasonably estimate and report only HVCRE ADC loans (as set forth in section 214 of EGRRCPA) for the purpose of reporting HVCRE exposures on Schedule RC-R, Part II of the Consolidated Reports of Condition and Income (Call Report) 4 and Schedule HC-R, Part II of FR Y-9C. The interagency statement further provided that banking organizations would be permitted to refine their estimates as they obtain additional information. The interagency statement also indicated that, alternatively, banking organizations would be permitted to continue to report and risk-weight HVCRE exposures in a manner consistent with the current capital rule and instructions to the Call Report or FR Y-9C until the agencies took further action.

On September 28, 2018, the agencies published an HVCRE notice of proposed rulemaking (HVCRE proposal) in the Federal Register to revise the HVCRE exposure definition in section 2 of the capital rule to conform to the statutory definition of an HVCRE ADC loan.5 As part of the HVCRE proposal, to facilitate its consistent application, the agencies proposed to interpret certain terms in the revised definition of HVCRE exposure generally consistent with their usage in other relevant regulations or the instructions to the Call Report, where applicable, and requested comment on whether any other terms in the revised definition would also require interpretation. On July 23, 2019, the agencies proposed to clarify a portion of the HVCRE proposal by publishing in the Federal Register a subsequent proposal (Land Development proposal) that would have added a new paragraph to the proposed definition of HVCRE exposure.6 The new paragraph would have provided that the exclusion for one- to four-family residential properties from the definition of HVCRE exposure does not include credit facilities that solely finance land development activities, such as the laying of sewers, water pipes, and similar improvements to land, without any construction of one- to four-family residential structures.

In the HVCRE proposal, the agencies proposed to revise the definition of an HVCRE exposure for the purpose of calculating risk-weighted assets under both the standardized approach and the internal ratings-based approach (advanced approaches).7 The proposal would have applied a 150 percent risk weight to loans that meet the revised definition of HVCRE exposure under the capital rule's standardized approach.8 A banking organization that calculates its risk-weighted assets under the advanced approaches would have referred to the definition of an HVCRE exposure in section 2 of the capital rule for the purpose of identifying wholesale exposure categories.9

Consistent with section 214 of EGRRCPA, in the HVCRE proposal, the agencies proposed to exclude from the revised HVCRE exposure definition any loan made prior to January 1, 2015.10 Unless a lower risk weight would have applied, banking organizations would have been permitted to apply a 100 percent risk weight to acquisition, development, or construction (ADC) loans originated prior to January 1, 2015, even if those loans were classified as HVCRE exposures under the superseded HVCRE exposure definition.11

As discussed further below, the agencies are adopting a final definition of HVCRE exposure with modifications based on comments received on the HVCRE and Land Development proposals. In adopting a final rule (final rule), the agencies made minor modifications to the proposed regulatory text by removing the separate paragraph describing the land development loans that qualify for the one- to four-family residential properties exclusion and including that same language in the part of the revised HVCRE exposure definition that allows for the exclusion of one- to four-family residential properties. By its terms, the statutory definition of an HVCRE ADC loan applies only to depository institutions. As stated in the HVCRE proposal, applying separate definitions of HVCRE ADC loan at the depository institution level and at the holding company level within an organization could result in undue burden without contributing meaningfully to any regulatory objective. Accordingly, the final rule applies the revised definition of an HVCRE exposure to all banking organizations that are subject to the agencies' capital rule, including bank holding companies, savings and loan holding companies, and U.S. intermediate holding companies of foreign banking organizations. Additionally, to facilitate the consistent application of the revised HVCRE exposure definition, the agencies are also clarifying the interpretation of certain terms in the revised HVCRE exposure definition generally to be consistent with their usage in other relevant regulations or the instructions to the Call Report and FR Y-9C, where applicable. The agencies plan to make conforming changes to the instructions of applicable regulatory reports (Schedule RC-R, Part II of the Call Report and Schedule HC-R, Part II of the FR Y-9C).12

The effective date of the final rule is April 1, 2020. Prior to the effective date of the final rule, banking organizations should refer to the interagency statement. On and after April 1, 2020, the final rule will supersede the HVCRE exposure section of the interagency statement, as well as the set of Frequently Asked Questions (FAQs) issued by the agencies pertaining to HVCRE exposures.13 Accordingly, starting April 1, 2020, banking organizations subject to the capital rule must evaluate ADC credit facilities in accordance with the revised definition of HVCRE exposure in this final rule.

In response to the HVCRE proposal, the agencies received 54 comment letters, and, in response to the Land Development proposal, the agencies received 9 comment letters. Numerous commenters supported revising the definition of HVCRE exposure in accordance with section 214 of EGRRCPA, though commenters were less supportive of the Land Development proposal. Many commenters offered suggestions on how the agencies should interpret several of the terms used in section 214 of EGRRCPA and in the revised definition of HVCRE exposure. Several commenters observed that the revised HVCRE exposure definition would be narrower than the previous regulatory definition of HVCRE exposure, and, that the revised definition would apply only to a relatively small number of exposures. These commenters suggested that the agencies should therefore remove the distinction between HVCRE and other ADC exposures under the capital rule's standardized approach and apply a flat 100 percent risk weight to all ADC loans. One commenter recommended eliminating the distinction between HVCRE and other ADC exposures only for banking organizations with less than $50 billion in total assets. One commenter, by contrast, opposed the proposal and indicated that it could lead to increased risk taking by banking organizations.

ADC loans, which are a subset of all commercial real estate exposures, generally exhibit heightened risks relative to other commercial real estate exposures. The revised HVCRE exposure definition is intended to capture those ADC exposures that have increased risk characteristics. These risks apply regardless of the size of the institution that has the exposure, and, therefore, the final rule applies the same HVCRE exposure definition to all banking organizations subject to risk-based capital requirements. The agencies have decided to maintain, as proposed, the 150 percent risk weight under the standardized approach for any loan that meets the revised definition of an HVCRE exposure. A banking organization that calculates its risk-weighted assets under the advanced approaches also would refer to the definition of an HVCRE exposure in section 2 of the capital rule for the purpose of identifying the appropriate wholesale exposure category for its ADC exposures.14

In the HVCRE proposal, the agencies invited comment on whether banking organizations should be required to reevaluate all ADC loans originated on or after January 1, 2015, under the revised HVCRE exposure definition. Several commenters stated that the agencies should clarify how a banking organization would apply the new definition to ADC loans originated after January 1, 2015, but before the effective date of the final rule. These commenters stated that banking organizations should be allowed, but not required, to reevaluate existing loans to determine whether they are HVCRE exposures under the revised definition.

In response to the comments, the final rule amends the HVCRE exposure definition to provide banking organizations with the option to maintain their current capital treatment for ADC loans originated between January 1, 2015, and the effective date of this final rule. Consistent with the interagency statement, a banking organization also will have the option to reevaluate any or all of its ADC loans originated on or after January 1, 2015, but before the effective date of the final rule, using the revised HVCRE exposure definition. Loans originated after the effective date of this final rule must be risk-weighted using the revised HVCRE exposure definition. If a loan is an HVCRE exposure, the loan will remain an HVCRE exposure until reclassified by the banking organization as a non-HVCRE exposure. Therefore, with respect to ADC loans originated between January 1, 2015, and prior to the effective date of the final rule that have been classified as non-HVCRE exposures, the agencies are not requiring banking organizations to reevaluate those exposures using the revised HVCRE exposure definition. In the case of a banking organization that modifies a loan or when the project is altered in a manner that materially changes the underwriting of the credit facility (such as increases to the loan amount, changes to the size and scope of the project, or removing all or part of the 15 percent minimum capital contribution in a project), the banking organization should treat the loan as a new ADC exposure and reevaluate the exposure to determine whether or not it is an HVCRE exposure.

In the HVCRE proposal, consistent with section 214 of EGRRCPA, the agencies proposed to require that a credit facility meet the following three-prong criteria in order to be classified as an HVCRE exposure. First, the credit facility must primarily finance or refinance the acquisition, development, or construction of real property. Second, the purpose of the credit facility must be to provide financing to acquire, develop, or improve such real property into income-producing real property. Finally, the repayment of the credit facility must depend upon the future income or sales proceeds from, or refinancing of, such real property.

The agencies received several comments on these three criteria. One commenter stated that the agencies should provide banking organizations more flexibility to interpret the statutory term “primarily finances.” This commenter stated that there may be instances where a credit facility should not be considered to “primarily finance” ADC activities, even where more than 50 percent of the proposed use of the funds is for ADC activities. Another commenter asked the agencies to state that a loan secured by an owner-occupied property does not “primarily finance” ADC activities because the financed property is not “income producing.” Another commenter asked the agencies to clarify the meaning of the statutory term “income-producing real property” and specify whether the term applies to hotel properties or real estate that are primarily occupied by a small business, but are leased in part.

In accordance with section 214 of EGRRCPA, the agencies also proposed to define HVCRE exposure as “a credit facility secured by land or improved real property.” The agencies stated in the HVCRE proposal that this statutory term should be applied consistently with the current Call Report definition for “a loan secured by real estate.” Under the Call Report and FR Y-9C instructions, “a loan is secured by real estate” if the estimated value of the real estate collateral at origination (after deducting all senior liens held by others) is greater than 50 percent of the principal amount of the loan at origination.15 Therefore, for purposes of the revised HVCRE exposure definition, the HVCRE proposal would have clarified that a “credit facility secured by land or improved real property” referred to a credit facility that meets this collateral criterion. Commenters generally supported using the Call Report instructions for determining whether a loan is secured by real estate and agreed that this clarification is consistent with the reference in section 214 of EGRRCPA to a “credit facility secured by land or improved real property.”

For purposes of the final rule, consistent with the HVCRE proposal, the statutory term “credit facility secured by land or improved real property,” as it is used in the revised definition of HVCRE exposure, should be interpreted in a manner that is consistent with the current definition for “a loan secured by real estate” in the Call Report and FR Y-9C instructions. For clarity, the agencies refer to the following example, which is also contained in the glossary of the Call Report and FR Y-9C under the term, “loan secured by real estate.” Assume a banking organization loans $700,000 to a dental group to construct and equip a building that will be used as the dental group's office. The loan will be secured by both the real estate and the dental equipment. At origination, the estimated values of the building, upon completion, and the equipment are $400,000 and $350,000, respectively. The loan should be reported as a loan secured by real estate given that the value of the real estate collateral represents 57 percent of the loan amount. In contrast, if the estimated values of the building and equipment at origination are $340,000 and $410,000, respectively, the loan should not be reported as a loan secured by real estate as the real estate collateral only represents 48 percent of the loan amount.

In response to comments, the agencies also are clarifying that for purposes of the final rule, consistent with the reporting requirements, loans reported as “Loans secured by nonfarm nonresidential properties” in item 1.e of Schedules RC-C, Part I and HC-C of the Call Report and FR Y-9C, generally would not meet the criteria to be HVCRE exposures because such loans are not dependent upon future income or sales proceeds from, or refinancing of, the real property being financed for repayment. However, loans that finance nonfarm, nonresidential property construction or land development projects, as well as loans secured by vacant lots, generally would meet the three-prong scoping criteria for HVCRE exposures under the final rule.

Under both the HVCRE and Land Development proposals, “other land loans” (generally loans secured by vacant land, except land known to be used for agricultural purposes) were included within the scope of the revised HVCRE exposure definition. Several commenters expressed the view that loans to purchase vacant land should not automatically be considered HVCRE exposures, as these loans may not have the purpose of providing financing to develop the land or improve it into income-producing real property. These commenters requested that the HVCRE exposure definition apply only to a loan secured by vacant land if the loan is extended for the purpose of developing or improving the real property and repayment of the loan depends on the future income, sales proceeds, or refinancing of the developed or improved land. Multiple commenters stated that requiring a heightened risk weight for all loans secured by vacant land could discourage investments made for the purpose of future development.

For purposes of the final rule, the agencies are clarifying that under the final rule “other land loans” are not automatically included as an HVCRE exposure. Such loans would be included in the scope of the revised HVCRE exposure definition if they meet the three-prong criteria of an HVCRE exposure. For example, if a loan is made to acquire or refinance raw or developed land, and the source of repayment is dependent upon the income produced from resale or refinance of the land, then the loan meets all three prongs of the criteria. This would be consistent with the statutory definition and with the risks posed by such loans. The inclusion of such land loans in the scope of the revised HVCRE exposure definition is also consistent with the Call Report's and FR Y-9C's inclusion of “other land loans” with construction and development loans. Furthermore, treating such loans as HVCRE exposures is consistent with the Interagency Guidelines on Real Estate Lending Policies (referred to as “interagency real estate guidelines”), which recognize the heightened risk profile of “raw land” loans, through the supervisory loan-to-value ratio assigned to such loans.16 Aligning the treatment of loans secured by vacant land under the regulatory reporting requirements, the interagency real estate guidelines, and the regulatory capital requirements should promote a simpler framework that reflects the elevated risks generally posed by these exposures. In certain cases, land loans could still qualify for one of the exclusions under the revised HVCRE exposure definition. For example, if the repayment of a loan secured by vacant land is not dependent on income to be produced from the property, or on the future sale of the financed property, the banking organization may be able to exclude the loan from the HCVRE exposure category if the loan were made in accordance with the banking organization's loan underwriting standards for permanent financings and classified accordingly. Therefore, the agencies are clarifying for purposes of the final rule that “other land loans” or “raw land” loans that meet a banking organization's loan underwriting standards for permanent financings generally would not meet the three-prong criteria of an HVCRE exposure as a permanent financing would generally not be dependent upon future income or sales proceeds from, or refinancing of, the real property being financed for the repayment of such credit facility.

Under the HVCRE proposal, the exposures described in the following paragraphs would have been excluded from the definition of HVCRE exposure:

Consistent with section 214 of EGRRCPA, the HVCRE proposal would have excluded from the definition of HVCRE exposure, credit facilities that finance the acquisition, development, or construction of one- to four-family residential properties. In the HVCRE proposal, the agencies stated that the scope of the one- to four-family residential properties exclusion should be consistent with the definition of one- to four-family residential property set forth in the interagency real estate lending guidelines. The interagency real estate lending guidelines define a one- to four-family residential property as a property containing fewer than five individual dwelling units, including manufactured homes permanently affixed to the underlying property (when deemed to be real property under state law). The interagency real estate lending guidelines further state that the construction of condominiums and cooperatives should be considered multifamily construction for risk-management purposes, including for the purpose of determining the appropriate loan-to-value ratio. Accordingly, the HVCRE proposal stated that loans that finance the construction of condominiums and cooperatives generally should not qualify for exclusion from the HVCRE exposure treatment as one- to four-family residential properties. Additionally, in order to qualify for this exclusion, the HVCRE proposal stated that credit facilities extended for the purpose of the acquisition, development, or construction of properties that are one- to four-family residential properties would include both loans to construct one- to four-family residential structures and loans that finance both the acquisition of the land and the development or construction of one- to four-family residential structures, including lot development loans. However, loans used solely to acquire undeveloped land would fall outside the scope of the one- to four-family residential properties exclusion regardless of how the land is zoned.

In response to the HVCRE proposal, the agencies received several comments on the scope of the proposed exclusion for one- to four-family residential properties from the HVCRE exposure definition. Many commenters stated that the HVCRE exposure definition should exclude loans to finance any development where the units are rentals or owner-occupied. Several commenters requested that the agencies align the one- to four-family residential properties exclusion with the reporting instructions for one- to four-family residential construction loans in the Call Report and FR Y-9C. Several commenters stated that if the agencies aligned the exclusion criteria with the regulatory reporting instructions, one- to four-unit condominium residential properties would qualify for the one- to four-family residential properties exclusion, as the loans are secured and reported as one- to four-family residential properties. These commenters also stated that if the agencies follow the definition of one- to four-family residential property loans set forth in the interagency real estate lending guidelines, the Call Report and FR Y-9C instructions should be amended to align with the revised HVCRE exposure definition.

After considering the comments on the HVCRE proposal, the agencies have decided to align the exclusion of loans that finance one- to four-family residential properties with the definition and reporting of one- to four-family residential property loans set forth in the Call Report and FR Y-9C, rather than the definition set forth in the interagency real estate lending guidelines. Allowing banking organizations to apply a consistent definition of one- to four-family residential property construction loans in this manner should simplify reporting requirements. Under the final rule, one- to four-family residential property construction loans reported in the Call Report and FR Y-9C (in item 1.a. (1) of Schedules RC-C, Part I and HC-C) will qualify for the one- to four-family residential property exclusion.17 Construction loans secured by single-family dwelling units, duplex units, and townhouses are reported in the Call Report and FR Y-9C (in item 1.a. (1) of Schedules RC-C, Part I and HC-C) and therefore these types of loans will qualify for the one- to four-family residential property exclusion. Condominium and cooperative construction loans will also qualify for the one- to four-family residential property exclusion, even if the loan is financing the construction of a building with five or more dwelling units as long as the repayment of the loan comes from the sale of individual condominium dwelling units or individual cooperative housing units. This treatment is consistent with the definition and reporting of one- to four-family residential property loans set forth in the Call Report and FR Y-9C.

The agencies are also clarifying for purposes of the final rule that loans for multifamily residential property construction and land development purposes and loans secured by vacant lots in established multifamily residential sections would not qualify for the one- to four-family residential properties exclusion. The construction of rental apartment buildings with 5 or more dwelling units are reported in the Call Report and FR Y-9C (in item 1.a.(2) of Schedules RC-C, Part I and HC-C). The agencies also note that in instances where a credit facility's underwriting materially changes, which may occur when a project changes from relying on the sale of individual condominium dwelling units for repayment to relying instead on apartment rental income for repayment, the banking organization should reevaluate the exposure to determine whether or not it is an HVCRE exposure.

Commenters on the HVCRE proposal indicated that it remained unclear whether a facility that finances the purchase of land to be developed into lots but does not finance the construction of dwellings would be considered one- to four-family residential property financing and excluded from the definition of HVCRE exposure. After reviewing the comments on the HVCRE proposal related to the one- to four-family residential property exclusion, the agencies determined that the regulatory capital treatment for lot development loans warranted further consideration and clarification. Therefore, the agencies issued the Land Development proposal, which proposed to add a new paragraph to the definition of HVCRE exposure providing that the exclusion for one- to four-family residential properties would not include credit facilities that solely finance land development activities, such as the laying of sewers, water pipes, and similar improvements to land, without any construction of one- to four-family residential structures.

In order for a loan to be eligible for this exclusion, the Land Development proposal provided that the credit facility would be required to include financing for construction of one- to four-family residential structures. Therefore, a credit facility that combines the financing of land development and the construction of one- to four-family residential structures would qualify for the one- to four-family residential properties exclusion. However, a facility that solely finances land development generally would have met the three-prong criteria of an HVCRE exposure.

In response to the Land Development proposal, multiple commenters stated that treating land development loans as HVCRE exposures and thus applying heightened capital requirements to them could lead to increases in fees, costs, and interest rates for consumers who will purchase the completed one- to four-family residences. Another commenter stated that treating land development loans as HVCRE exposures could create undue barriers to the development of new housing, including affordable housing.

Several commenters acknowledged the heightened risk that land development and lot development loans pose to banking organizations and stated that such loans warrant heightened scrutiny. However, these commenters further stated that a banking organization's management of such risk should be assessed as part of the supervisory process and not addressed through a one-size-fits-all capital requirement.

Multiple commenters stated that for a variety of financial, tax, and liability reasons, standard practice is to establish one entity to develop lots and a separate entity to erect structures on the land. Commenters described that under the proposal, a loan to the first entity would be considered an HVCRE exposure, while a loan to the second entity would qualify for the exclusion. Another commenter stated that land development financing structures would prevent many loans from qualifying for the contributed capital exclusion because profits are normally and customarily distributed to investors throughout the project as lots are sold, rather than retained until the loan is paid off. Several commenters also stated that they believed the Land Development proposal was inconsistent with their interpretation of the statutory definition of HVCRE ADC.

One commenter on the Land Development proposal requested clarification on whether two loans originated simultaneously—a land acquisition and development loan and a loan for the construction of one- to four-family properties—would be eligible for the one- to four-family residential properties exclusion. The same commenter asked for clarification on whether a land development loan originated prior to the origination of the construction loan would cease to be an HVCRE exposure upon origination of the construction loan for one- to four-family properties.

After reviewing the comments to the Land Development proposal, the agencies believe that the proposed treatment of lot development loans for the purpose of the one- to four-family residential properties exclusion is more risk-sensitive and promotes safety and soundness, and therefore, the final rule includes the proposed treatment of these exposures. Under the final rule, this treatment would be consistent with the reporting instructions for such loans in the Call Report and FR Y-9C. Loans for the development of building lots and loans secured by vacant land are reported in item 1.a.(2), “Other construction loans and all land development and other land loans”, of Schedules RC-C, Part I and HC-C unless the loan also finances the construction of one- to four-family residential properties. The final rule provides that loans used solely to acquire undeveloped land would not be within the scope of the one- to four-family residential properties exclusion, regardless of how the land is zoned. A credit facility should not be eligible for the one- to four-family residential properties exclusion if it does not finance the construction of one- to four-family residential structures.

The agencies do not anticipate that the final rule will have a negative impact on the financing of affordable housing. This is because credit facilities that finance the acquisition, development, or construction of real property projects for which the primary purpose is community development will continue to be excluded from the definition of HVCRE exposure. The exclusion for community development projects is described in more detail in the following section.

While several commenters stated that the risk associated with land development loans should be addressed through the supervisory process, rather than capital requirements, the agencies believe that including such loans in the revised HVCRE exposure definition is appropriate given that the agencies have long considered land development loans to be relatively riskier than construction loans. For example, consistent with this view, the interagency real estate lending guidelines require more stringent supervisory loan-to-value ratios for land development loans (75 percent) than for construction loans (80 or 85 percent depending on property type) because of elevated credit risk.18 Furthermore, in some cases, land development loans may be made for speculative purposes, generate no cash flow prior to resale, and require other sources of cash to service the debt. For these reasons, the agencies believe that it is important to address the risk of these exposures through both the normal supervisory process and the regulatory capital standards.

In addition, the clarification of the treatment of land development loans in the revised HVCRE exposure definition is consistent with the statutory definition. As stated in the Land Development proposal, this revision would generally align with the instructions set forth in the Call Report and FR Y-9C in item 1.a.(1) of Schedules RC-C, Part I and HC-C. Exposures reported in this line item finance the construction of one- to four-family residential structures or dwelling units as other construction loans and all land development and other land loans are reported in item 1.a.(2) of Schedules RC-C, Part I and HC-C. Including specific language in the revised HVCRE exposure definition to clarify that loans that solely finance improvements such as the laying of sewers, water pipes, and similar improvements to land, will not qualify for the one- to four-family residential properties exclusion is intended to help banking organizations apply the definition consistently and promote uniform application of the capital rule.

In response to comments received on both proposals, the agencies are clarifying for purposes of the final rule that a facility that finances the purchase of land to be developed into lots, but does not include the construction of dwellings, does not qualify for the one- to four-family residential properties exclusion. Based on the risks arising from land development loans, the agencies believe it would be imprudent to exclude from heightened capital requirements loans that solely finance the preparation of land for the construction of new structures, but do not actually finance the construction of one- to four-family residential structures.

Under the final rule, combination land acquisition, lot development, and construction loans that finance the construction of one- to four-family residential structures qualify for the one- to four-family residential property exclusion, as these exposures are reported in the Call Report and FR Y-9C in item 1.a.(1) of Schedules RC-C, Part I and HC-C. Such combination loans that finance land development and one- to four-family residential structures generally pose less risk than loans that solely finance land acquisition or lot development. Applying the exclusion for the financing of one- to four-family residential properties in a manner consistent with the Call Report and FR Y-9C reporting requirements will simplify the reporting requirements for these exposures and provide greater consistency in the risk-based capital treatment of these exposures across banking organizations.

The agencies are also clarifying for purposes of the final rule that when a land acquisition and development loan and a loan to construct one- to four-family dwellings are originated simultaneously, the individual exposures must be evaluated separately to determine whether each loan on its own qualifies for an exclusion under the revised HVCRE exposure definition. Similarly, for a land loan that is originated prior to the origination of the construction loan, the land loan and the construction loan must be evaluated individually to determine whether either or both loans could be classified as a non-HVCRE exposure. Banking organizations should refer to the requirements for reclassifying an exposure as a non-HVCRE exposure, which are contained in the revised HVCRE exposure definition and described in more detail later in this Supplementary Information.

For the reasons stated above, the agencies are adopting the Land Development proposal as proposed. Therefore, under the final rule, a facility that solely finances land development will be categorized as an HVCRE exposure, unless the exposure meets an exclusion criterion from the revised HVCRE exposure definition.

Consistent with section 214 of EGRRCPA, the HVCRE proposal would have excluded from the revised HVCRE exposure definition credit facilities that finance the acquisition, development, or construction of real property projects for which the primary purpose is community development, as defined by the agencies' Community Reinvestment Act (CRA) regulations.19 Generally, these types of projects include affordable housing, community services targeted to low- and moderate-income individuals, economic development through the financing of small farms and small businesses that meet a size and purpose test, and activities that revitalize and stabilize certain designated geographical areas.

As stated in the HVCRE proposal, under the agencies' CRA regulations, loans must be evaluated to determine whether they meet the criteria for community development projects. As an example, the agencies stated that an ADC loan conditionally taken out with U.S. Small Business Administration (SBA) section 504 financing would have to be evaluated under the criteria for community development projects in the agencies' CRA regulations in order to determine if the loan would qualify for this exclusion.

The agencies received numerous comments on the community development exclusion. A few commenters supported linking the exemption for community development loans to the CRA regulations and stated the proposed approach was clear and did not need further clarification. However, other commenters raised operational concerns with the exclusion. Multiple commenters objected to the proposal's requirement that loans conditionally taken out with SBA section 504 financing would have to be evaluated against the agencies' CRA regulations to determine whether such exposures could be excluded from the HVCRE exposure definition. These commenters stated that all SBA section 504 loans should be excluded from the definition of HVCRE exposure, regardless of whether they qualify as community development investments under the agencies' CRA regulations. Other commenters stated that the exclusion for community development exposures should apply, without exception, to all real estate loans, including interim lender loans and third-party lender loans, made in connection with either the SBA 7(a) or 504 loan program.

Notwithstanding the comments in favor of broadening the exclusion, the agencies are adopting the proposed community development exclusion in the final rule without modification. Referring to the CRA regulations 20 to determine whether an exposure qualifies for the community development exclusion in the revised definition of HVCRE exposure is consistent with the agencies' practice of looking to the same or substantially similar terms in other regulations or regulatory reporting instructions to clarify the interpretation of the statutory definition of an HVCRE ADC loan.

The agencies note that it is possible that some loans extended in connection with SBA guarantees or participations may not meet the criteria for community development under the agencies' CRA regulations. The final rule does not contain a broad exclusion from the HVCRE exposure definition for all loans made in connection with SBA programs. An ADC loan that is not conditionally guaranteed by a U.S. government agency or does not qualify for the community development exclusion should be categorized as an HVCRE exposure, unless the exposure meets another exclusion criterion in the final rule. While no broad exemption for loans made in connection with SBA programs exists under the final rule, the agencies generally view the SBA 7(a) guaranty to the lender as “conditional,” based on the lender following certain requirements established by the program. As permitted by the capital rule, the portion of a loan conditionally guaranteed by a U.S. government agency receives a 20 percent risk weighting under the standardized approach in the capital rule.

Additionally, the agencies are clarifying for purposes of the final rule that some interim-lender loans and third-party lender loans, made in connection with the SBA 504 loan program, may be considered in certain instances to be bridge loans. Bridge loans generally do not qualify as permanent financing because the cash flow being generated by the real property usually is insufficient to support the debt service and expenses of the real property. Bridge loans that finance ADC projects often pose greater credit risk than permanent loans, and, therefore, should be subject to a higher risk weight. However, if an interim-lender loan or third-party lender loan made in connection with the SBA 504 loan program meets the criteria for community development under the agencies' CRA regulations, the exposure could be excluded from the HVCRE exposure definition.

In the HVCRE proposal, the agencies proposed to exclude from the revised HVCRE exposure definition credit facilities financing the acquisition, development, or construction of agricultural land. The Supplementary Information to the HVCRE proposal stated that “agricultural land,” for the purpose of the revised HVCRE exposure definition, should have the same meaning as “farmland,” as used in the Call Report and FR Y-9C instructions.21 In these instructions, the term “farmland” includes all land known to be used or usable for agricultural purposes but excludes loans for farm property construction and land development purposes.

Two commenters stated that the proposed exemption for agricultural land was clear and did not need further clarification. Accordingly, the agencies are adopting this proposed exclusion from the definition of HVCRE exposure without change.

The revised definition of HVCRE exposure in the HVCRE proposal would have excluded credit facilities that finance the acquisition or refinancing of existing income-producing real property secured by a mortgage on such property, so long as the cash flow generated by the real property covers the debt service and expenses of the property in accordance with the lender's underwriting criteria for permanent loans. The agencies also proposed to exclude credit facilities financing improvements to existing real property secured by a mortgage on such property.

Commenters generally supported this aspect of the HVCRE proposal. The agencies note that they may review the reasonableness of a supervised entity's underwriting criteria for permanent loans through the supervisory process to ensure the real estate lending policies are consistent with safe and sound banking practices. The agencies are adopting this exclusion from the proposed definition of HVCRE exposure without modification.

The HVCRE proposal would have excluded from the revised HVCRE exposure definition credit facilities for certain commercial real property projects that are underwritten in a safe-and-sound manner in accordance with the interagency real estate lending guidelines and where the borrower has contributed a specified amount of capital to the project. The HVCRE proposal provided that a credit facility financing a commercial real property project would be required to meet four criteria to qualify for this exclusion from the revised HVCRE exposure definition. First, the loan-to-value ratio must be less than or equal to the applicable supervisory loan-to-value ratio in the interagency real estate lending guidelines. Second, the borrower must have contributed capital to the project of at least 15 percent of the real property's appraised “as completed” value. Third, the required capital must be contributed prior to the banking organization's advancement of funds, except for nominal sums meant to secure the banking organization's lien on the real property. Fourth, the 15 percent capital contribution must be contractually required to remain in the project until the loan can be reclassified as a non-HVCRE exposure.

As proposed, the HVCRE exposure definition provided that cash, unencumbered readily marketable assets, development expenses paid out-of-pocket, and contributed real property or improvements could count as forms of contributed capital. The agencies stated that a banking organization could consider costs incurred by the project and paid by the borrower, prior to the advancement of funds by the banking organization, as out-of-pocket, development expenses paid by the borrower.

The HVCRE proposal provided that the value of contributed real property means the appraised value of real property contributed by the borrower as determined under the appraisal standards prescribed by section 1110 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3339). The agencies further stated that the value of the real property that could count toward the 15 percent contributed capital requirement would be reduced by the aggregate amount of any liens on the real property securing the HVCRE exposure.

Several commenters agreed with this aspect of the proposal, noting that it is generally consistent with industry practice. A few commenters asked the agencies to clarify whether funds borrowed from a third party (such as another banking organization, an owner or parent organization, or a related party) could be included in a borrower's capital contribution. One commenter also asked the agencies to clarify if other real estate outside of the project that has been pledged toward the loan could count toward the 15 percent contributed capital requirement.

A few commenters asked the agencies to clarify how a borrower could contribute readily marketable assets (such as securities) to a project for the purpose of this exclusion. These commenters noted that the agencies previously have not allowed for pledged assets to count as borrower-contributed capital. The commenters stated that requiring a borrower to sell such assets and contribute the cash proceeds would render this provision of the statutory language meaningless, since borrower-contributed capital in the form of cash is addressed separately.

In response to the questions about borrowed funds as a form of capital contribution, the agencies are clarifying for purposes of the final rule that any such borrowed funds should not be derived from, related to, or encumber the project that the credit facility is financing or encumber any collateral that has been contributed to the project to ensure that tangible equity is invested in the project. Additionally, the recognition of any contribution of funds to a project must be done so in conformance with safe and sound lending practices and should be in accordance with the banking organization's underwriting criteria and its internal policies.

In addition, for purposes of the final rule, contributed real property or improvements should be directly related to the project to be eligible to count toward the 15 percent contributed capital requirement. Real estate not developed as part of the project should not be counted toward the contributed capital requirement under the revised HVCRE exposure definition.

For purposes of the final rule, the agencies are clarifying that they would interpret the statutory term “unencumbered readily marketable assets” for the purpose of the revised HVCRE exposure definition consistent with the definition and treatment of readily marketable collateral contained within the interagency real estate lending guidelines. Consistent with the interagency real estate lending guidelines, readily marketable collateral means insured deposits, financial instruments, and bullion in which the lender has a perfected interest. For collateral to be considered “readily marketable” by a lender, the lender's expectation would be that the financial instrument and bullion would be salable under ordinary circumstances with reasonable promptness at a fair market value determined by quotations based on actual transactions, an auction or similarly available daily bid and ask price market. Readily marketable collateral should be appropriately discounted by the lender consistent with the lender's usual practices for making loans secured by such collateral. The agencies note that the reasonableness of a lender's underwriting criteria may be reviewed through the supervisory process to ensure the real estate lending policies are consistent with safe and sound banking practices. With the aforementioned clarifications, the agencies are finalizing this aspect of the proposal without change.

The HVCRE proposal would have required that the 15 percent capital contribution be calculated using the real property's appraised “as completed” value. In the proposal, the agencies stated that they would permit the use of an “as is” appraisal in instances where an “as completed” value appraisal was not available, such as in the case of purchasing raw land without plans for development in the near term. In addition, the agencies stated they would allow the use of an evaluation of the real property instead of an appraisal to determine the “as completed” appraised value, for purposes of the revised HVCRE exposure definition, where the agencies' appraisal regulations 22 permit evaluations to be used in lieu of appraisals.

A few commenters asked the agencies to allow greater flexibility in applying the appraisal requirement. The commenters stated that measuring the capital contribution relative to an appraised “as stabilized” value may be appropriate for certain projects. Another commenter suggested allowing the lower of cost or appraised value for the purpose of calculating the “as completed” value. Section 214 of EGRRCPA specifically requires an appraised “as completed” value for the contributed capital exclusion from the statutory definition of HVCRE ADC loan. Therefore, other than the clarifications contained in this Supplementary Information pertaining to “as is” appraisals for raw land loans and evaluations for loans in amounts under certain specified thresholds, the agencies are adopting this aspect of the proposal without change.

In the HVCRE proposal, the agencies stated that the 15 percent capital contribution and the “as completed” value appraisal would be measured in relation to a “project.” The agencies noted that some credit facilities for the acquisition, development, or construction of real property may have multiple phases as part of a larger construction or development project. The agencies stated that in the case of a project with multiple phases, in order for a loan financing a phase to be eligible for the contributed capital exclusion, the phase must have its own appraised “as completed” value or an appropriate evaluation in order for it to be deemed a separate “project” for the purpose of the 15 percent capital contribution calculation.

A few commenters asked the agencies to clarify whether individual phase-level appraisals would always be required. Another commenter asked whether it would be possible to value all the phases of a multiphase project as one project, stating that obtaining individual phase-level appraisals may not always be necessary or appropriate.

The agencies are adopting this aspect of the rule as proposed. For purposes of the final rule, the agencies expect that each project phase being financed by a credit facility have a proper appraisal or evaluation with an associated “as completed” value. Where appropriate and in accordance with the banking organization's applicable underwriting standards, a banking organization may look at a multiphase project as a complete project rather than as individual phases.

Consistent with section 214 of EGRRCPA, for purposes of the HVCRE proposal, the agencies stated that a banking organization would have been allowed to reclassify an HVCRE exposure as a non-HVCRE exposure when the substantial completion of the development or construction on the real property has occurred and the cash flow generated by the property covered the debt service and expenses on the property in accordance with the banking organization's loan underwriting standards for permanent financings. Commenters generally supported allowing a banking organization to reclassify an HVCRE exposure as a non-HVCRE exposure once the exposure meets the statutory criteria for such reclassification as a non-HVCRE exposure. One commenter requested that the agencies provide more specificity with regard to the terms that agencies would expect to be included in a lender's underwriting standards for permanent financing.

The agencies are clarifying for purposes of the final rule that the reclassification criteria from an HVCRE exposure to a non-HVCRE exposure relies on the banking organization's loan underwriting standards for permanent financings. The agencies expect a banking organization to have prudent, clear, and measurable underwriting standards. The reasonableness of a banking organization's underwriting criteria for permanent loans may be reviewed through the supervisory process. The agencies are adopting this aspect of the proposal without change.

On April 6, 2015, the agencies published FAQs on the capital rule, including FAQs on HVCRE exposures.23 In the HVCRE proposal, the agencies invited comment on the potential advantages and disadvantages of incorporating the agencies' interpretations of the terms used in the revised HVCRE exposure definition into the rule text or in another published format (such as guidance or another FAQ document). A few commenters addressed this aspect of the proposal and stated that the agencies should rescind or withdraw any existing FAQs that are no longer in effect. Some commenters stated that the agencies should publish new FAQs as necessary and issue new interpretations of the revised definition of HVCRE exposure only after first publishing them for notice and public comment. One commenter stated that the Interagency Guidance on CRE Concentration Risk Management 24 should be adjusted to reflect the revised HVCRE exposure definition. Two commenters stated that the agencies should sponsor periodic industry forums to monitor the application and administration of rules pertaining to commercial real estate markets. According to the commenters, these forums would allow stakeholders to provide transparent feedback to the agencies on the implementation of the capital rule.

After reviewing the comments received, the agencies have decided to rescind all outstanding HVCRE exposure-related FAQs upon the effective date of the final rule. FAQs related to topics other than the superseded definition of HVCRE exposure will not be rescinded. Banking organizations that have questions about the final rule should contact their primary federal supervisor. In addition, upon the effective date of the final rule, the HVCRE exposure section of the interagency statement will no longer be applicable. Banking organizations must thereafter evaluate ADC credit facilities in accordance with the revised definition of HVCRE exposure in this final rule.

Certain provisions of the final rule contain “collection of information” requirements within the meaning of the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3521). In accordance with the requirements of the PRA, the agencies may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The OMB control number for the OCC is 1557-0318, Board is 7100-0313, and FDIC is 3064-0153. These information collections relate to the regulatory capital rules for each agency. However, the agencies expect that these information collections will not be affected by this final rule and therefore no submissions will be made under section 3507(d) of the PRA (44 U.S.C. 3507(d)) and § 1320.11 of the OMB's implementing regulations (5 CFR part 1320) for each of the agencies' regulatory capital rules.25

The final rule also requires changes to the Call Reports (FFIEC 031, FFIEC 041, and FFIEC 051; OMB Nos. 1557-0081 (OCC), 7100-0036 (Board), and 3064-0052 (FDIC)) and Risk-Based Capital Reporting for Institutions Subject to the Advanced Capital Adequacy Framework (FFIEC 101; OMB Nos. 1557-0239 (OCC), 7100-0319 (Board), and 3064-0159 (FDIC)), and Consolidated Financial Statements for Holding Companies (FR Y-9C; OMB No. 7100-0128), which will be addressed in separate Federal Register notices.

OCC: The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., (RFA), requires an agency, in connection with a final rule, to prepare a final Regulatory Flexibility Analysis describing the impact of the rule on small entities (defined by the SBA for purposes of the RFA to include commercial banks and savings institutions with total assets of $600 million or less and trust companies with total assets of $41.5 million of less) or to certify that the final rule would not have a significant economic impact on a substantial number of small entities.

As of December 31, 2018, the OCC supervises 782 small entities.26

The final rule applies to all OCC-supervised depository institutions, except for qualifying community banking organizations electing to use the Community Banking Leverage Ratio Framework. Two hundred and eleven small OCC-supervised institutions report HVCRE exposures. Therefore, the rule will affect a substantial number of small entities. However, the OCC does not find that the impact of this final rule will be economically significant.

Therefore, the OCC certifies that the final rule will not have a significant economic impact on a substantial number of OCC-supervised small entities.

The final rule impacts three principal areas: (1) The impact associated with implementing revisions to the capital rule to make the definition of an HVCRE exposure consistent with the new statutory definition; (2) the capital impact associated with implementing revisions to the one- to four-family residential properties exclusion in the revised HVCRE exposure definition and, (3) the impact associated with the time required to update policies and procedures.

As described in the Supplementary Information section in the preamble to this final rule, the OCC believes the change to the definition of HVCRE exposure will result in fewer loans being deemed HVCRE exposures. Therefore, the amount of capital required will decrease for impacted OCC-supervised entities. Further, the OCC believes no currently reported non-HVCRE acquisition, development, or construction (ADC) exposures will be reclassified as HVCRE exposures, and thus there will be no additional compliance burden to OCC-supervised entities for the non-HVCRE component of their ADC portfolios. The final rule will not require OCC-supervised entities to amend previously filed reports as OCC-supervised entities adjust their estimates of existing HVCRE exposures. This will serve to minimize the compliance burden for OCC-supervised entities.

Compliance burdens that OCC-supervised entities may face include: (1) Updating policies and procedures to classify newly issued HVCRE loans; and (2) time spent reevaluating existing HVCRE exposures in order to determine if any are eligible to be reclassified and thus receive a lower risk-weight of 100 percent; and (3) updating policies and procedures to identify whether or not a newly issued land development loan is eligible for the one- to four-family residential properties exclusion in the revised HVCRE exposure definition.

Based on the OCC's supervisory experience, OCC staff estimates that it would take an OCC-supervised institution, on average, a one-time investment of one business week, or 40 hours, to update policies and procedures to classify newly issued HVCRE loans and to re-evaluate existing HVCRE exposures, and a one-time investment of one business day, or 8 hours, to update policies and procedures to classify newly issued land development loans.

The OCC's threshold for a significant effect is whether cost increases associated with a rule are greater than or equal to either 5 percent of a small bank's total annual salaries and benefits or 2.5 percent of a small bank's total non-interest expense. Institutions that do not report HVCRE exposures will incur an estimated one-time compliance cost of $2,280 per institution (20 hours × $114 per hour), while those that report HVCRE exposures will incur an estimated one-time compliance cost of $4,560 per institution (40 hours × $114 per hour). Additionally, updating policies and procedures regarding classifying land development loans will result in an estimated one-time compliance cost of $912 per institution (8 hours × $114 per hour). OCC staff finds that the cost of complying with the final rule will not exceed either of the thresholds for a significant impact on any OCC-supervised small entities.

For this reason, the OCC certifies that the final rule will not have a significant economic impact on a substantial number of OCC-supervised small entities.

Board: An initial regulatory flexibility analysis (IRFA) was included in the proposal in accordance with section 603(a) of the Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq. (RFA). In the IRFA, the Board requested comment on the effect of the proposed rule on small entities and on any significant alternatives that would reduce the regulatory burden on small entities. The Board did not receive any comments on the IRFA. The RFA requires an agency to prepare a final regulatory flexibility analysis unless the agency certifies that the rule will not, if promulgated, have a significant economic impact on a substantial number of small entities.

Under regulations issued by the Small Business Administration, a small entity includes a bank, bank holding company, or savings and loan holding company with assets of $600 million or less (small banking organization).27 As of June 30, 2019, there were approximately 2,976 small bank holding companies, 133 small savings and loan holding companies, and 537 small SMBs.

The Board has considered the potential impact of the final rule on small entities in accordance with the RFA and has prepared a final RFA analysis detailed below. Based on the Board's analysis, and for the reasons stated below, the Board believes that the final rule will not have a significant economic impact on a substantial of number of small entities.

As discussed in this Supplementary Information, the final rule would revise the definition of HVCRE exposure to conform to the statutory definition of “high volatility commercial real estate acquisition, development, or construction (HVCRE ADC) loan,” in accordance with section 214 of EGRRCPA. The final rule would also clarify that certain land development loans as defined in the Call Report and FR Y-9C instructions are included in the revised definition of HVCRE exposure.

For purposes of the standardized approach, loans that meet the revised definition of an HVCRE exposure would receive a 150 percent risk weight under the capital rule's standardized approach. A banking organization that calculates its risk-weighted assets under the advanced approaches of the capital rule would refer to the definition of an HVCRE exposure in section 2 of the capital rule for purposes of identifying wholesale exposure categories and wholesale exposure subcategories. Based upon data reported on the FR Y-9C and on Call Report information, as of June 30, 2019, about 19 percent of state member banks, bank holding companies, and savings and loan holding companies report holdings of HVCRE exposures.

The final rule would apply to all state member banks, as well as all bank holding companies and savings and loan holding companies that are subject to the Board's capital rule. Certain bank holding companies, and savings and loan holding companies are excluded from the application of the Board's capital rule. In general, the Board's capital rule only applies to bank holding companies and savings and loan holding companies that are not subject to the Board's Small Bank Holding Company and Small Savings and Loan Holding Company Policy Statement, which applies to bank holding companies and savings and loan holding companies with less than $3 billion in total assets that also meet certain additional criteria.28 Thus, most bank holding companies and savings and loan holding companies that would be subject to the final rule exceed the $600 million asset threshold at which a banking organization would qualify as a small banking organization.

In assessing whether the final rule would have a significant impact on a substantial number of small entities, the Board has considered the final rule's capital impact as well as its compliance, administrative, and other costs. As of June 30, 2019, there were 157 small state member banks and three small bank or savings and loan holding companies that reported combined HVCRE exposures totaling $670 million and one- to four family residential construction loans totaling $1.2 billion. To estimate the capital impact of the final rule, the Board assumed a range of 75 to 95 percent of one- to four family residential construction loans would remain exempt from the revised definition of HVCRE exposure. Based on this assumption, the difference in required capital would be in the range of $7 million to $36 million for small banking organizations supervised by the Board.

In addition to capital impact, the Board has considered the compliance, administrative, and other costs associated with the final rule. Given that the final rule does not impact the recordkeeping and reporting requirements that affected small banking organizations are currently subject to, there would be no change to the information that small banking organizations must track and report. Some small banking organizations may incur costs associated with updating internal policies to reflect the revised definition of HVCRE exposure, including the treatment of land development loans. However, because the final rule would clarify the treatment of HVCRE exposure and land development loans that may currently be in effect at many small banking organizations, the Board does not anticipate that a substantial number of small banking organizations will incur significant costs to update internal systems or policies to reflect the revised HVCRE exposure definition. The agencies separately are updating relevant reporting forms to the extent necessary to align with the capital rule.

The Board does not believe that the final rule duplicates, overlaps, or conflicts with any other Federal rules. In addition, there are no significant alternatives to the final rule. In light of the foregoing, the Board does not believe that the final rule will have a significant economic impact on a substantial number of small entities.

FDIC: The RFA generally requires that, in connection with a final rulemaking, an agency prepare and make available for public comment a final regulatory flexibility analysis describing the impact of the rule on small entities.29 However, a regulatory flexibility analysis is not required if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. The Small Business Administration (SBA) has defined “small entities” to include banking organizations with total assets of less than or equal to $600 million that are independently owned and operated or owned by a holding company with less than or equal to $600 million in total assets.30 Generally, the FDIC considers a significant effect to be a quantified effect in excess of 5 percent of total annual salaries and benefits per institution, or 2.5 percent of total non-interest expenses. The FDIC believes that effects in excess of these thresholds typically represent significant effects for FDIC-supervised institutions. For the reasons described below and under section 605(b) of the RFA, the FDIC certifies that this rule will not have a significant economic impact on a substantial number of small entities.

As of June 30, 2019, the FDIC supervised 3,424 depository institutions,31 of which 2,665 were considered small entities for the purposes of RFA. As of that date, 2,081 small, FDIC-supervised institutions reported a positive value on Call Report schedule RC-C 1.a(2) (other construction loans and all land development loans and other land loans), 680 reported holding some volume of HVCRE loans, and 2,091 reported some volume of HVCRE or report a positive value on RC-C 1.a(2). The rule revises the capital treatment of HVCRE and certain land development loans. Therefore, the FDIC estimates that the rule is likely to affect a substantial number, 2,091 (78.5 percent), of small, FDIC-supervised institutions.32

This rule removes certain loans from the definition of an HVCRE exposure and therefore, reduces the risk weight from 150 percent to 100 percent on some of the HVCRE loans held in portfolio by small, FDIC-supervised institutions, resulting in a reduction in their risk-based capital requirements. Institutions are permitted, but not required, to reclassify HVCRE loans that they currently hold to take advantage of the lower risk weight. The rule also clarifies that land development loans for one- to four family residential properties should be considered HVCRE, and therefore should receive a 150 percent risk weight, going forward unless such loans would qualify for a different exclusion. Institutions are not required to reclassify as HVCRE any land development loans they currently hold that would, under the rule, receive a 150 percent risk weight. Instead, they may continue to assign a 100 percent risk weight to such loans.

For purposes of this analysis, the FDIC assumes that no current land development loans receiving a 100 percent risk weight would be reclassified as HVCRE at a 150 risk-weight, and that some or all current HVCRE loans eligible for exclusion from the HVCRE category as a result of the rule would be reclassified at a 100 percent risk weight. There would thus be some reduction in risk-based capital requirements among the 680 small institutions reporting some HVCRE. The amount of the reduction would depend on the amount of each institution's current HVCRE that is newly eligible to be excluded from that category, and whether each institution views such reclassification as being worth the effort. The FDIC does not have access to sufficiently granular data to determine which HVCRE loans would qualify for a lower risk weight, nor to determine the portion of loans eligible to be reclassified that actually would be reclassified.

Going forward, new loans that would have been classified as HVCRE but for this rule would receive a 100 percent risk weight instead of a 150 percent risk weight. New land development loans for one-to-four family residential properties would receive a 150 percent risk weight instead of a 100 percent risk weight. Future effects on risk-based capital requirements would depend on the volume of land development loans that small institutions issue in the future, and the volume of loans that otherwise would have been categorized as HVCRE in their loan portfolios that would be eligible for a lower risk weight as a result of this rule.

The FDIC believes that the overall impact of this rule on the risk-based capital requirements of small institutions, now and going forward, will be small. The FDIC considered the maximum reduction in risk-based capital for the affected small institutions under the assumption that all of their current HVCRE loans are reclassified from a 150 percent risk weight to a 100 percent risk weight, that their current loan portfolios are representative of their future loan portfolios, and that institutions would maintain the same ratio of risk-based capital to risk-weighted assets before and after this rule becomes effective. Under these assumptions, more than 98 percent of the 680 institutions currently reporting HVCRE would reduce their risk-based capital by less than five percent.33 The actual amount and frequency of reductions in risk-based capital would be expected to be even less, since some portion of current and future loans would likely still be categorized as HVCRE.

As stated previously, covered institutions are not required to reclassify as HVCRE any land development loans they currently hold that would, under the rule, receive a 150 percent risk weight, therefore this aspect of the final rule will not have any immediate effects on small, FDIC-supervised institutions. To assess the maximum possible future effect of this aspect of the final rule the FDIC also considered the maximum increase in risk-based capital requirements for the affected small institutions under the assumption that all current acquisition, development and construction loans currently reported in Call Report item RC-C-1.a(2) are land development loans for one-to-four family residential properties, that all would be reclassified to 150 percent risk weights even though this is not required, that current loan portfolios are representative of future loan portfolios for these institutions, and that institutions would maintain the same ratio of risk-based capital to risk-weighted assets before and after this rule becomes effective. Under these assumptions, more than 93 percent of the 2,081 small institutions currently reporting loans in this category would experience an increase in risk-based capital of less than five percent. Specifically, there were 137 small institutions that would experience an increase in risk-based capital of five percent or more under the highly unlikely assumptions that all their loans reported in Call Report item RC-C-1(a)(2) were land development loans for one-to-four family residential property, that current loan portfolios are representative of future loan portfolios for these institutions, and that institutions would maintain the same ratio of risk-based capital to risk-weighted assets before and after this rule becomes effective. Since this Call Report item includes all commercial construction loans and all land development loans for multifamily and commercial real estate, far fewer than 137 small institutions would likely experience increases in risk-based capital of five percent or greater.

The rule could pose some administrative costs for covered institutions. The rule gives covered institutions the option to review any loans held in portfolio that were originated after January 1, 2015 to determine if those loans meet the criteria to receive a risk weight of 100 percent rather than 150 percent. It is difficult to accurately estimate the costs that each institution will incur in order to conduct reviews since it depends on each institution's volume of loans categorized as HVCRE. The FDIC assumes that each institution will require 40 hours of labor annually, on average, in order to conduct such reviews. Assuming an hourly cost of $83.61,34 that amounts to $3,344.40 per institution or $2,274,192 for all small, FDIC-supervised institutions that have some volume of loans classified as HVCRE as of the most recent reporting date. These administrative costs amount to less than two percent of annualized salary expense, and less than one percent of annualized noninterest expense, for all small, FDIC-supervised institutions directly affected by the rule.35

As noted earlier, the rule is likely to reduce capital requirements for some loans currently classified as an HVCRE exposure and to increase capital requirements for certain future lot development loans. The revised capital treatment in this rule could change the volume of lending, or the types of loans issued, by small, FDIC-supervised institutions. As described in the preceding analysis, the FDIC believes that this effect will likely be small given that the amendments only affect a subset of HVCRE loans and a subset of land development loans. Finally, changes in required capital could affect the resiliency of institutions in the event of an economically stressful scenario. Since the changes affect only a narrowly defined segment of institutions' loan portfolios, the FDIC believes any increase in risk resulting from the changes is unlikely to be material.

Based on this supporting information, the FDIC certifies that this rule will not have a significant economic impact on a substantial number of small entities.

Section 722 of the Gramm-Leach-Bliley Act 36 requires the Federal banking agencies to use plain language in all proposed and final rules published after January 1, 2000. The agencies have sought to present the final rule in a simple and straightforward manner, and did not receive any comments on the use of plain language.

The OCC analyzed the final rule under the factors set forth in the Unfunded Mandates Reform Act of 1995 (UMRA) (2 U.S.C. 1532). Under this analysis, the OCC considered whether the rule includes a Federal mandate that may result in the expenditure by State, local, and Tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year (adjusted for inflation). The OCC has determined that this rule will not result in expenditures by State, local, and Tribal governments, or the private sector, of $100 million or more in any one year. Accordingly, the OCC has not prepared a written statement to accompany this final rule.

Pursuant to section 302(a) of the Riegle Community Development and Regulatory Improvement Act (RCDRIA),37 in determining the effective date and administrative compliance requirements for new regulations that impose additional reporting, disclosure, or other requirements on insured depository institutions, each Federal banking agency must consider, consistent with principles of safety and soundness and the public interest, any administrative burdens that such regulations would place on depository institutions, including small depository institutions, and customers of depository institutions, as well as the benefits of such regulations. In addition, section 302(b) of RCDRIA requires new regulations and amendments to regulations that impose additional reporting, disclosures, or other new requirements on insured depository institutions generally to take effect on the first day of a calendar quarter that begins on or after the date on which the regulations are published in final form.38

In accordance with these provisions of RCDRIA, the agencies considered any administrative burdens, as well as benefits, that the final rule would place on depository institutions and their customers in determining the effective date and administrative compliance requirements of the final rule. This final rule revises the definition of HVCRE exposure in the capital rule to conform to the statutory definition of HVCRE ADC loan in section 214 of EGRRCPA. In conjunction with the requirements of RCDRIA, the final rule is effective on April 1, 2020.

For purposes of Congressional Review Act, the Office of Management and Budget (OMB) makes a determination as to whether a final rule constitutes a “major” rule.39 If a rule is deemed a “major rule” by OMB, the Congressional Review Act generally provides that the rule may not take effect until at least 60 days following its publication.40

The Congressional Review Act defines a “major rule” as any rule that the Administrator of the Office of Information and Regulatory Affairs of the OMB finds has resulted in or is likely to result in (A) an annual effect on the economy of $100,000,000 or more; (B) a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies or geographic regions, or (C) significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises in domestic and export markets.41 As required by the Congressional Review Act, the agencies will submit the final rule and other appropriate reports to Congress and the Government Accountability Office for review.

For the reasons set out in the SUPPLEMENTARY INFORMATION, the OCC is amending 12 CFR part 3 as follows.

For the reasons set out in the Supplementary Information, part 217 of chapter II of title 12 of the Code of Federal Regulations is proposed to be amended as follows:

For the reasons set out in the SUPPLEMENTARY INFORMATION, the FDIC proposes to amend 12 CFR part 324 as follows.

The European Union Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2019-0084, dated April 17, 2019 (“EASA AD 2019-0084”) (also referred to as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for all Dassault Aviation Model MYSTERE FALCON 50, MYSTERE FALCON 900, and FALCON 900EX airplanes; and Model FALCON 2000 and FALCON 2000EX airplanes. You may examine the MCAI in the AD docket on the internet at https://www.regulations.gov by searching for and locating Docket No. FAA-2019-0604.

The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to all Dassault Aviation Model MYSTERE FALCON 50, MYSTERE FALCON 900, and FALCON 900EX airplanes; and Model FALCON 2000 and FALCON 2000EX airplanes. The NPRM published in the Federal Register on August 13, 2019 (84 FR 39991). The NPRM was prompted by a report that the Dassault MPD of the related Dassault AMM states that the “combined service/storage life” of the fire extinguisher percussion cartridges is longer than it should be, and could have a safety impact in case of fire. The NPRM proposed to require replacing the fire extinguisher percussion cartridges with serviceable parts. The FAA is issuing this AD to address the total life limit of the fire extinguisher percussion cartridges, which if not corrected, could prevent extinguishing a fire and possibly result in damage to the airplane and injury to occupants. See the MCAI for additional background information.

The FAA gave the public the opportunity to participate in developing this final rule. The following presents the comment received on the NPRM and the FAA's response to each comment.

NetJets, Inc., requested that certain language be added to the proposed AD that allows using a logbook entry to determine the manufacturer date of the fire extinguisher percussion cartridge.

The FAA agrees to clarify. The FAA agrees that a review of the logbook entry is one acceptable method to verify the manufacturer date of the fire extinguisher percussion cartridge, provided that the manufacture date can be conclusively determined from that review. However, the FAA notes that this AD does not require using a specific method to determine the manufacturer date of the fire extinguisher percussion cartridge. Therefore, the FAA has not revised this AD in this regard.

In the proposed AD, the FAA inadvertently omitted one AMM task in figure 1 to paragraph (i) of this AD, which specifies AMM tasks that provide guidance for the replacement required by paragraph (h) of this AD. The FAA has revised figure 1 to paragraph (i) of this AD to include the omitted AMM task for the auxiliary power unit (APU) on Model FALCON 2000 and FALCON 2000EX airplanes.

The FAA reviewed the relevant data, considered the comment received, and determined that air safety and the public interest require adopting this final rule with the change described previously and minor editorial changes. The FAA has determined that these minor changes:

• Are consistent with the intent that was proposed in the NPRM for addressing the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM.

The FAA also determined that these changes will not increase the economic burden on any operator or increase the scope of this final rule.

The FAA estimates that this AD affects 1,013 airplanes of U.S. registry. The FAA estimates the following costs to comply with 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.

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

This AD is issued in accordance with authority delegated by the Executive Director, Aircraft Certification Service, as authorized by FAA Order 8000.51C. In accordance with that order, issuance of ADs is normally a function of the Compliance and Airworthiness Division, but during this transition period, the Executive Director has delegated the authority to issue ADs applicable to transport category airplanes and associated appliances to the Director of the System Oversight Division.

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) Will not affect intrastate aviation in Alaska, and

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

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

On October 1, 2019, the FAA received a report from Gulfstream of an inflight rudder surface shutdown that resulted in lateral-directional oscillations on a Model GVI airplane. The flight crew experienced an amber “Rudder Fail” crew alerting system message at flight level 340 and was unable to command any movement of the rudder. The flight crew attempted a Flight Control Reset, but the condition remained. Following the rudder shutdown, the airplane experienced sustained lateral-directional oscillations, which persisted for eight minutes before the flight crew was able to stop the oscillations. The flight crew made an emergency landing of the airplane with no rudder authority.

The investigation of this inflight event revealed the root cause as an unstable rudder hinge moment when the aircraft is in a sideslip condition, combined with a rudder surface shutdown, which is inherent to the GVI aircraft type design.

A rudder “shutdown” occurs when the flight control computer detects a rudder control anomaly and commands the rudder hydraulic actuators into damped bypass mode. When this happens, the rudder becomes unusable and “floats” at the aerodynamic neutral position. After a rudder shutdown, the combination of the unstable rudder hinge movement with an airplane sideslip could lead to uncontrollable lateral-directional oscillations of the airplane when operated within the flight envelope at high altitude and high speed.

This condition, if not addressed, could result in catastrophic structural damage or loss of control of the airplane. The FAA is issuing this AD to address the unsafe condition on these products.

The FAA reviewed Gulfstream Aerospace G650 Airplane Flight Manual Supplement No. G650-2019-03, dated November 4, 2019; and Gulfstream Aerospace G650ER Airplane Flight Manual Supplement No. G650ER-2019-03, dated November 4, 2019. For the applicable airplane designations, the AFMSs contain new altitude limitations, revised airspeed limitations, and revised abnormal procedures for loss of rudder or yaw damper. These limitations prevent the airplane from operating in the portion of the flight envelope where instability has occurred. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

The FAA is issuing this AD because it evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.

This AD requires revising the AFM for your airplane by adding the applicable AFMS, which contains limitations to the operating envelope of the airplane and revised abnormal procedures for loss of rudder or yaw damper.

The AFMSs apply to Model GVI airplanes that do not incorporate aircraft service change (ASC) 134. However, this AD applies to all Model GVI airplanes, regardless of whether the airplane has ASC 134. Gulfstream plans to develop a modification, tentatively identified as ASC 134, to correct the unsafe condition and terminate the operating limitations and abnormal procedures in the AFMS.

The FAA considers this AD interim action. Gulfstream is analyzing the airplane lateral-directional oscillations and developing a terminating action that will address the unsafe condition identified in this AD. Once this action is developed, approved, and available, the FAA may consider additional rulemaking.

An unsafe condition exists that requires the immediate adoption of this AD without providing an opportunity for public comments prior to adoption. The FAA has found that the risk to the flying public justifies waiving notice and comment prior to adoption of this rule because a rudder shutdown during high altitude and high speed could produce uncontrollable lateral-directional oscillations of the airplane and result in catastrophic structural damage or loss of control of the airplane. Based on data from Gulfstream, the FAA determined that corrective action within 15 days was necessary because of the probability that a recurrence of this event could lead to loss of control of the airplane or catastrophic structural damage. Therefore, the FAA finds good cause that notice and opportunity for prior public comment are impracticable. In addition, for the reasons stated above, the FAA finds that good cause exists for making this amendment effective in less than 30 days.

This AD is a final rule that involves requirements affecting flight safety and was not preceded by notice and an opportunity for public comment. However, the FAA invites you to send any written data, views, or arguments about this final rule. Send your comments to an address listed under the ADDRESSES section. Include Docket Number FAA-2019-0960 and Product Identifier 2019-CE-049-AD at the beginning of your comments. The FAA specifically invites comments on the overall regulatory, economic, environmental, and energy aspects of this final rule. The FAA will consider all comments received by the closing date and may amend this final rule because of those comments.

The FAA will post all comments it receives, without change, to https://www.regulations.gov, including any personal information you provide. The FAA will also post a report summarizing each substantive verbal contact it receives about this final rule.

The FAA estimates that this AD affects 262 airplanes of U.S. registry.

The FAA estimates the following costs to comply with 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.

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

This AD is issued in accordance with authority delegated by the Executive Director, Aircraft Certification Service, as authorized by FAA Order 8000.51C. In accordance with that order, issuance of ADs is normally a function of the Compliance and Airworthiness Division, but during this transition period, the Executive Director has delegated the authority to issue ADs applicable to small airplanes, domestic business jet transport airplanes, and associated appliances to the Director of the Policy and Innovation Division.

The requirements of the Regulatory Flexibility Act (RFA) do not apply when an agency finds good cause pursuant to 5 U.S.C. 553 to adopt a rule without prior notice and comment. Because FAA has determined that it has good cause to adopt this rule without notice and comment, RFA analysis is not required.

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, and

(2) Will not affect intrastate aviation in Alaska.

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

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it establishes Class E airspace at St. Simons Island Airport, St. Simons, GA, and Brunswick Golden Isles Airport, Brunswick, GA, as well as amend Class E airspace in Brunswick, GA to support IFR operations in the area. Also, this action removes outdated airspace in the area.

The FAA published a notice of proposed rulemaking in the Federal Register (84 FR 40301, August 14, 2019) for Docket No. FAA-2019-0591 to establish Class E surface airspace at St. Simons Island Airport, St. Simons, GA, and Brunswick Golden Isle Airport, Brunswick, GA, and amend Class E airspace extending upward from 700 feet or more above the surface at Brunswick, GA, by updating the airport names to St. Simons Island Airport (formerly Brunswick/Malcolm-McKinnon Airport), and Brunswick Golden Isles Airport (formerly Glynco Jetport Airport), and updating the geographic coordinates of St. Simons Island Airport to coincide with the FAA's aeronautical database.

Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. One comment supporting the action was received.

Class E airspace designations are published in Paragraphs 6002 and 6005, respectively, of FAA Order 7400.11D, dated August 8, 2019, and effective September 15, 2019, which is incorporated by reference in 14 CFR part 71.1. The Class E airspace designation listed in this document will be published subsequently in the Order.

This document amends FAA Order 7400.11D, Airspace Designations and Reporting Points, dated August 8, 2019, and effective September 15, 2019. FAA Order 7400.11D is publicly available as listed in the ADDRESSES section of this document. FAA Order 7400.11D lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

This amendment to Title 14 Code of Federal Regulations (14 CFR) part 71 establishes Class E surface airspace at St. Simons Island Airport, St. Simons, GA, and Brunswick Golden Isle Airport, Brunswick, GA. Also, this action amends Class E airspace extending upward from 700 feet or more above the surface at Brunswick, GA, by updating the airport names to St. Simons Island Airport (formerly Brunswick/Malcolm-McKinnon Airport), and Brunswick Golden Isles Airport (previously Glynco Jetport Airport). Also, the geographic coordinates of St. Simons Island Airport are adjusted to coincide with the FAA's aeronautical database.

These changes are necessary for continued safety and management of IFR operations at this airport.

FAA Order 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that only affects air traffic procedures and air navigation, it is certified that this rule, when promulgated, does not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures,” paragraph 5-6.5a. This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exist that warrant preparation of an environmental assessment.

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

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it amends Class E airspace extending upward from 700 feet above the surface in the Grove City, PA area.

The FAA published a notice of proposed rulemaking in the Federal Register (84 FR 41937, August 16, 2019) for Docket No. FAA-2019-0590 to amend Class E airspace extending upward from 700 feet above the surface for Grove City Airport, Grove City, PA, by updating the geographic coordinates of the airport, and updating the name and geographic coordinates of the Grove City Medical Center Heliport (formerly United Community Hospital Heliport) to coincide with the FAA's aeronautical database.

Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received.

Class E airspace designations are published in Paragraph 6005 of FAA Order 7400.11D, dated August 8, 2019, and effective September 15, 2019, which is incorporated by reference in 14 CFR part 71.1. The Class E airspace designation listed in this document will be published subsequently in the Order.

This document amends FAA Order 7400.11D, Airspace Designations and Reporting Points, dated August 8, 2019, and effective September 15, 2019. FAA Order 7400.11D is publicly available as listed in the ADDRESSES section of this document. FAA Order 7400.11D lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

This amendment to Title 14 Code of Federal Regulations (14 CFR) part 71 amends Class E airspace extending upward from 700 feet above the surface at Grove City Airport, Grove City, PA, by updating the geographic coordinates of the airport. Also the name and geographic coordinates of Grove City Medical Center Heliport (formerly United Community Hospital Heliport) are updated to coincide with the FAA's aeronautical database. Subsequent to publication of the Notice of Proposed Rulemaking, the FAA found the geographic coordinates of Grove City Medical Center Heliport were incorrect. This action corrects the error.

These changes are necessary for continued safety and management of IFR operations at this airport.

FAA Order 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that only affects air traffic procedures and air navigation, it is certified that this rule, when promulgated, does not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures,” paragraph 5-6.5a. This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exist that warrant preparation of an environmental assessment.

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

Background

The final regulations (TD 9879) that are the subject of this correction are issued under sections 101 and 6050Y of the Internal Revenue Code.

As published, the final regulations (TD 9879) contain errors that may prove to be misleading and are in need of clarification.

Background

The final regulations (TD 9879) that are the subject of this correction are under sections 101 and 6050Y of the Internal Revenue Code.

As published October 31, 2019 (84 FR 58460), the final regulations (TD 9879; FR Doc. 2019-23559) contained errors that may prove misleading and therefore need to be corrected.

Accordingly, 26 CFR part 1 is corrected by making the following correcting amendments:

PBGC's regulations on Allocation of Assets in Single-Employer Plans (29 CFR part 4044) and Benefits Payable in Terminated Single-Employer Plans (29 CFR part 4022) prescribe actuarial assumptions—including interest assumptions—for valuing and paying plan benefits under terminating single-employer plans covered by title IV of the Employee Retirement Income Security Act of 1974 (ERISA). The interest assumptions in the regulations are also published on PBGC's website (https://www.pbgc.gov).

PBGC uses the interest assumptions in appendix B to part 4022 (“Lump Sum Interest Rates for PBGC Payments”) to determine whether a benefit is payable as a lump sum and to determine the amount to pay as a lump sum. Because some private-sector pension plans use these interest rates to determine lump sum amounts payable to plan participants (if the resulting lump sum is larger than the amount required under section 417(e)(3) of the Internal Revenue Code and section 205(g)(3) of ERISA), these rates are also provided in appendix C to part 4022 (“Lump Sum Interest Rates for Private-Sector Payments”).

This final rule updates appendices B and C of the benefit payments regulation to provide the rates for January 2020 measurement dates.

The January 2020 lump sum interest assumptions will be 0.25 percent for the period during which a benefit is (or is assumed to be) in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for December 2019, these assumptions represent no change in the immediate rate and are otherwise unchanged.

PBGC uses the interest assumptions in appendix B to part 4044 (“Interest Rates Used to Value Benefits”) to value benefits for allocation purposes under section 4044 of ERISA, and some private-sector pension plans use them to determine benefit liabilities reportable under section 4044 of ERISA and for other purposes. The first quarter 2020 interest assumptions will be 2.12 percent for the first 25 years following the valuation date and 2.26 percent thereafter. In comparison with the interest assumptions in effect for the fourth quarter of 2019, these interest assumptions represent no change in the select period (the period during which the select rate (the initial rate) applies), a decrease of 0.41 percent in the select rate, and a decrease of 0.27 percent in the ultimate rate (the final rate).

PBGC updates appendix B of the asset allocation regulation each quarter and appendices B and C of the benefit payments regulation each month. PBGC has determined that notice and public comment on this amendment are impracticable and contrary to the public interest. This finding is based on the need to issue new interest assumptions promptly so that they are available to value benefits and, for plans that rely on our publication of them each month or each quarter, to calculate lump sum benefit amounts.

Because of the need to provide immediate guidance for the valuation and payment of benefits under plans with valuation dates during January 2020, PBGC finds that good cause exists for making the assumptions set forth in this amendment effective less than 30 days after publication.

PBGC has determined that this action is not a “significant regulatory action” under the criteria set forth in Executive Order 12866.

Because no general notice of proposed rulemaking is required for this amendment, the Regulatory Flexibility Act of 1980 does not apply. See 5 U.S.C. 601(2).

In consideration of the foregoing, 29 CFR parts 4022 and 4044 are amended as follows:

The Coast Guard will enforce the special local regulation in 33 CFR 100.701, Item No. (g)(6), for the Charleston Harbor Christmas Parade of Boats from 4:00 p.m. through 8:30 p.m. on December 14, 2019. This action is being taken to provide for the safety of life on navigable waterways during this event. Our regulation for marine events within the Seventh Coast Guard District § 100.701, Item No. (g)(6), specifies the location of the regulated area for the Charleston Harbor Christmas Parade of Boats, which encompasses a portion of the waterways during the parade transit from Charleston Harbor Anchorage A through Bennis Reach, Horse Reach, Hog Island Reach, Town Creek Lower Reach, Ashley River, and finishing at City Marina. During the enforcement periods, as reflected in § 100.701(c)(1), if you are the operator of a vessel in the regulated area you must comply with directions from the Patrol Commander or any Official Patrol displaying a Coast Guard ensign.

In addition to this notice of enforcement in the Federal Register, the Coast Guard plans to provide notification of this enforcement period via the Local Notice to Mariners, Broadcast Notice to Mariners, and on-scene designated representatives.

On July 31, 2019 (84 FR 37081), the United States Patent and Trademark Office (USPTO) published in the Federal Register a final rule amending the Rules of Practice in Trademark Cases and the Rules of Practice in Filings Pursuant to the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks to mandate electronic filing of trademark applications based on section 1 and/or section 44 of the Trademark Act (Act), 15 U.S.C. 1051, 1126, and all submissions associated with trademark applications and registrations, and to require the designation of an email address for receiving USPTO correspondence, with limited exceptions (Mandatory Electronic Filing Rule). The effective date of the July 31, 2019, rule was delayed until December 21, 2019 (84 FR 52363, October 2, 2019). In § 2.21, the Mandatory Electronic Filing Rule addressing the requirements for receiving a filing date were amended to require the “domicile address” of each applicant. Prior to the July 31, 2019, Mandatory Electronic Filing Rule, the regulations at § 2.21(a) required “[t]he name of the applicant” and “[a] name and address for correspondence.” 37 CFR 2.21(a)(1), (2). In the May 30, 2018 notice of proposed rulemaking, the USPTO proposed to amend § 2.21(a)(1) to require “[t]he name, postal address, and email address of each applicant” to receive a filing date and made a conforming amendment to § 2.32(a)(2) to require the same information for a complete application. In the July 31, 2019, final rule, the USPTO replaced the word “postal” with “domicile” in amended § 2.21(a)(1) and amended § 2.32(a)(2) to reconcile the final rule with the provisions of another final rule entitled “Requirement of U.S. Licensed Attorney for Foreign Trademark Applicants and Registrants” (84 FR 31498, July 2, 2019) (U.S. Counsel rule) that required provision of domicile addresses. The USPTO has determined that substituting the wording “domicile address” for “postal address” in the July 31, 2019, final rule might result in the unintended consequence of the loss of a filing date for some applicants who provide an address that is later determined not to be their domicile address. Therefore, the USPTO has determined that the better practice is to retain the existing requirement for an “address” as a filing-date requirement. The requirement for a “domicile address” remains a requirement for a complete application in amended § 2.32(a)(2). Thus, this rulemaking amends § 2.21(a)(1) in the July 31, 2019, final rule to remove the word “domicile.”

In addition, in light of the amendment made to § 2.21(a)(1), the USPTO makes a conforming change to § 2.22(a)(1) in the July 31, 2019, final rule to reinsert the requirement for a domicile address. In the U.S. Counsel rule, the USPTO added the requirement for the applicant's domicile address to the regulation addressing the requirements for a TEAS Plus application. 37 CFR 2.22(a)(1). Subsequently, in the July 31, 2019, Mandatory Electronic Filing Rule, the USPTO removed this requirement from § 2.22(a)(1) as duplicative because the domicile requirement added to § 2.21(a)(1) also applied to TEAS Plus applications. The amendment made to § 2.21(a)(1) in this rulemaking removes the requirement for a domicile address from § 2.21(a)(1), as discussed above, and requires the USPTO to reinsert it back in § 2.22(a)(1) so that it will continue to apply to TEAS Plus applications as a requirement for receiving a reduced filing fee.

Administrative Procedure Act: The changes in this rulemaking involve rules of agency practice and procedure, and/or interpretive rules. See Perez v. Mortg. Bankers Ass'n, 135 S. Ct. 1199, 1204 (2015) (Interpretive rules “advise the public of the agency's construction of the statutes and rules which it administers.” (citation and internal quotation marks omitted)); Nat'l Org. of Veterans' Advocates v. Sec'y of Veterans Affairs, 260 F.3d 1365, 1375 (Fed. Cir. 2001) (Rule that clarifies interpretation of a statute is interpretive.); Bachow Commc'ns Inc. v. FCC, 237 F.3d 683, 690 (D.C. Cir. 2001) (Rules governing an application process are procedural under the Administrative Procedure Act.); Inova Alexandria Hosp. v. Shalala, 244 F.3d 342, 350 (4th Cir. 2001) (Rules for handling appeals were procedural where they did not change the substantive standard for reviewing claims.).

Accordingly, prior notice and opportunity for public comment for the changes in this rulemaking are not required pursuant to 5 U.S.C. 553(b) or (c), or any other law. See Perez, 135 S. Ct. at 1206 (Notice-and-comment procedures are required neither when an agency “issue[s] an initial interpretive rule” nor “when it amends or repeals that interpretive rule.”); Cooper Techs. Co. v. Dudas, 536 F.3d 1330, 1336-37 (Fed. Cir. 2008) (stating that 5 U.S.C. 553, and thus 35 U.S.C. 2(b)(2)(B), does not require notice and comment rulemaking for “interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice” (quoting 5 U.S.C. 553(b)(A))).

In addition, good cause exists under 5 U.S.C. 553(b)(B) and (d)(3) to issue this rule without prior notice and opportunity for comment and the 30-day delay in effectiveness, as it would be impracticable and contrary to the public interest. This action amends § 2.21(a)(1) to avoid a possible unintended consequence (i.e., possible loss of a filing date for some applicants who provide an address that is later determined not to be their domicile address) that might result from substituting the wording “domicile address” for “postal address” in the July 31, 2019 final rule. Therefore, the USPTO has determined that the better practice is to retain the existing requirement for an “address” as a filing-date requirement. The requirement for a “domicile address” remains a requirement for a complete application in amended § 2.32(a)(2). Delay of this correction to allow for prior notice and opportunity for comment would result in the implementation of a requirement that may result in a loss of a filing date for some applicants as well as confusion among applicants regarding the requirements for a filing date. In addition, because the July 31, 2019 final rule is not effective until December 21, 2019, no party has been negatively impacted or affected by this rulemaking, which is being published prior to that effective date. Therefore, the USPTO waives the requirement for prior notice and opportunity for comment, and implements this correction on the effective date of this rule.

In FR Doc. 2019-16259 appearing on page 37081 in the Federal Register of Wednesday, July 31, 2019, delayed at 84 FR 52363, October 2, 2019, the following corrections are made:

Public Law 114-223, the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, and Zika Response and Preparedness Act (the “2017 Act”), section 260, allows VA to use appropriated funds available to VA for the Medical Services account to provide fertility counseling and treatment using assisted reproductive technology (ART) to a covered veteran or the spouse of a covered veteran, or adoption reimbursement to a covered veteran. On January 19, 2017, VA published an interim final rule at 82 FR 6275 addressing fertility counseling and treatment using ART, including in vitro fertilization (IVF) (which is a type of ART), for both covered veterans and spouses. On March 5, 2018, VA published an interim final rule to implement our authority to provide reimbursement of qualifying adoption expenses to covered veterans (83 FR 9208). The latter interim final rule was effective on the date of publication. The rule included a provision, consistent with funding authority under the 2017 Act, stating that authority to provide reimbursement for qualifying adoption expenses incurred by a covered veteran in the adoption of a child under 18 years of age expires September 30, 2018.

Following publication of the interim final rule Congress enacted a bill renewing and revising our authority to provide the adoption reimbursement benefit. While 2017 Act was the original authority for VA's adoption reimbursement program, it lapsed once the relevant funding period ended. VA's authority to provide reimbursement of qualifying adoption expenses to the same cohort described in the 2017 Act was subsequently renewed and extended in nearly identical form in Section 236 of Division J, Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2018, Public Law 115-141 (March 23, 2018) (the “2018 Act”) and Section 235 of Division C, Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2019, Public Law 115-244 (September 21, 2018) (the “2019 Act”). Under this most recent authority, VA's adoption expense reimbursement program remains subject to the funding period covered by the 2019 Act and the availability of appropriations.

When we published the interim final rule, we provided a 60-day comment period, which expired on May 4, 2018. We received 4 comments from the public, all of which were supportive of this rulemaking. However, the commenters raised several issues that we address here. We make no changes based on public comments. VA adopts as final, with changes based on subsequent statutory authority, an interim final rule providing for reimbursement of qualifying adoption expenses incurred by a veteran with a service-connected disability that results in the inability of the veteran to procreate without the use of fertility treatment.

Per the 2017 Act, 2018 Act, and 2019 Act, veterans with a service-connected disability that results in the inability of the veteran to procreate without the use of fertility treatment are authorized to receive reimbursement for certain adoption-related expenses for an adoption that is finalized after September 29, 2016, (the date the 2017 Act was enacted) under the same terms as apply under the adoption reimbursement program of DoD, as authorized in DoD Instruction 1341.09, including the reimbursement limits and requirements set forth in that DoD policy. DoD Instruction 1341.09, “DoD Adoption Reimbursement Policy” (July 5, 2016) establishes policy, assigns responsibilities within DoD, and provides procedures for the reimbursement of qualifying adoption expenses incurred by members of the Military Services (including document submission requirements) pursuant to 10 U.S.C. 1052. That statute was enacted in 1991 and establishes the parameters of DoD's adoption reimbursement program. The interim final rule added a new § 17.390 to provide for reimbursement of qualifying adoption expenses to covered veterans, consistent with the policies and procedures established by DoD in implementing 10 U.S.C. 1052.

Section 17.390(b)(1) states that no more than $2,000 may be reimbursed under this section to a covered veteran, or to two covered veterans who are spouses of each other, for expenses incurred in the adoption of a child. In the case of two married covered veterans, only one spouse may claim reimbursement for any one adoption. Paragraph (b)(2) states that no more than $5,000 may be paid under this section to a covered veteran in any calendar year. In the case of two married covered veterans, the couple is limited to a maximum of $5,000 per calendar year.

One commenter suggested changing the reimbursement limits so two married covered veterans are not limited to the same reimbursement level of just a single covered veteran. The commenter recommended that in cases of two married covered veterans, they would have twice the benefit as a single covered veteran. Otherwise, a married veteran whose non-veteran spouse received an adoption benefit from an employer would be at an advantage relative to two married veterans. The commenter stated that allowing the benefit to be limited to each veteran (and not per family) would place VA in a position of not disadvantaging veterans who are spouses of each other.

One commenter noted that under paragraph (b) funds are limited by time period rather than by child. The commenter stated that this limitation could discourage veterans who may wish to adopt older children who are siblings, keeping them together. The commenter recommended addressing the limitation on adoption expense reimbursement by child rather than per year.

As noted above, VA is required by statute to administer its adoption reimbursement program under the same terms as apply under the adoption reimbursement program of DoD, as authorized in DoD Instruction 1341.09, including the reimbursement limits and requirements set forth in that DoD policy. The DoD policy implements 10 U.S.C. 1052, which provides that servicemembers may request reimbursement up to $2,000 per adoptive child or a maximum of $5,000 per calendar year for qualifying expenses. In the case of two married military servicemembers, only one member may claim reimbursement and the couple is limited to a maximum of $5,000 per calendar year. Our rule is consistent with these provisions. Per 38 CFR 17.390(a)(2), the application for reimbursement must be submitted no later than 2 years after the adoption is final or, in the case of adoption of a foreign child, no later than 2 years from the date a certificate of United States citizenship is issued. This is also consistent with the DoD policy. The only substantive difference in our program is that, per statute, VA may reimburse qualifying adoption expenses incurred by covered veterans only for adoptions finalized after September 29, 2016, the date the 2017 Act was enacted. VA has no statutory authority to expand the program to allow two covered veterans who are spouses to each file an application for reimbursement of qualifying adoption expenses, or increase either the per-child or annual reimbursement limits. Likewise, we do not have the statutory authority to alter the time limits reflected in this rule. We make no changes based on these comments.

One commenter asked whether a Vietnam veteran rated at 100% service-connected disability based on conditions related to Agent Orange exposure who, since 1970, has been unable to father a child is eligible for reimbursement of qualifying adoption expenses. Eligibility for reimbursement of qualifying adoption expenses is not based on status as a combat veteran or a particular rating of a service-connected disability. Reimbursement of qualifying adoption expenses is available to covered veterans with a service-connected disability that results in the inability of the veteran to procreate without the use of fertility treatment. Regardless of the disability rating or the cause of said disability, the veteran would be eligible for this benefit if the rated service-connected disability prevents the veteran from procreating without the use of fertility treatment. We make no changes based on this comment.

Finally, based on the 2019 Act, we remove paragraph (f) which provided that authority to provide reimbursement for qualifying adoption expenses incurred by a covered veteran in the adoption of a child under 18 years of age expires September 30, 2018. Under the most recent authority, VA's adoption expense reimbursement program remains subject to the funding period covered by the 2019 Act and the continuing availability of appropriations. However, Congress could again renew and extend this authority. For this reason and to avoid the need to continually update these regulations when a subsequent appropriations law (or other law) renews this authority, we eliminated the section that specifies an expiration date. VA's ability to provide reimbursement will remain subject to the limitations provided in the applicable statutory provisions.

Based on the rationale set forth in the interim rule and in this document, VA adopts the interim final rule as a final rule, with a technical amendment consistent with enactment of the 2019 Act.

Title 38 of the Code of Federal Regulations, as revised by this final rulemaking, represents VA's implementation of its legal authority on this subject. Other than future amendments to this regulation or governing statutes, no contrary guidance or procedures are authorized. All existing or subsequent VA guidance must be read to conform with this rulemaking if possible or, if not possible, such guidance is superseded by this rulemaking.

This final rule contains provisions constituting a collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521). As required by 44 U.S.C. 3507(d), VA submitted this information collection to the Office of Management and Budget (OMB) for its review. OMB approved the new information collection requirements associated with the final rule under a 6-month emergency clearance and assigned OMB control number 2900-0860. OMB control number 2900-0860 expired on March 31, 2019. VA has applied to OMB for a renewal of this information collection under a separate document and notice of OMB approval for this information collection will be published in a future Federal Register document.

The Secretary hereby certifies that this final 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 final rule directly affects only individuals and will not directly affect small entities. Therefore, pursuant to 5 U.S.C. 605(b), this rulemaking is exempt from the initial and final regulatory flexibility analysis requirements of 5 U.S.C. 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. The Office of Information and Regulatory Affairs has determined that this rule is not a significant regulatory action under Executive Order 12866. VA's impact analysis can be found as a supporting document at http://www.regulations.gov, usually within 48 hours after the rulemaking document is published. Additionally, a copy of the rulemaking and its impact analysis are available on VA's website at http://www.va.gov/orpm by following the link for VA Regulations Published from FY 2004 through FYTD. This rule is not an E.O. 13771 regulatory action because this rule is not significant under E.O. 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 one year. This final rule will have no such effect on State, local, and tribal governments, or on the private sector.

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), the Office of Information and Regulatory Affairs designated this rule as not a major rule, as defined by 5 U.S.C. 804(2).

There are no Catalog of Federal Domestic Assistance numbers and titles affected by this document.

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. Pamela Powers, Chief of Staff, Department of Veterans Affairs, approved this document on December 6, 2019, for publication.

For the reasons set forth in the preamble, the VA adopts the interim final rule amending 38 CFR part 17, which published on March 5, 2018 (83 FR 9208), as final with the following changes:

Throughout this document, the terms “we”, “us”, and “our” refer to the EPA.

This rule approves Indiana's June 20, 2019 submission to provide for maintenance of the 1997 ozone NAAQS for the Indianapolis, La Porte County, and South Bend-Elkhart areas and the Indiana portions of the Chicago, Cincinnati, and Louisville areas through the end of the second 10-year maintenance period. The background for this action is discussed in detail in EPA's notice of proposed rulemaking (NPRM), dated September 25, 2019 (84 FR 50354).

In the NPRM, EPA provided a 30-day review and comment period for the proposed rule. The comment period ended on October 25, 2019. We received no comments on the proposed rule.

EPA is approving, as a revision to the Indiana SIP, the State's plan for maintaining the 1997 ozone NAAQS for the Indianapolis, La Porte County, and South Bend-Elkhart areas and the Indiana portions of the Chicago, Cincinnati, and Louisville areas through the end of the second 10-year maintenance period.

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

• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);

• Is not an Executive Order 13771 (82 FR 9339, February 2, 2017) regulatory action because it is not a significant regulatory action under Executive Order 12866;

• 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 disproportionate human health or environmental effects with practical, appropriate, and legally permissible methods under Executive Order 12898 (59 FR 7629, February 16, 1994).

In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

40 CFR part 52 is amended as follows:

Throughout this document, whenever “we,” “us,” or “our” is used, we mean EPA. This supplementary information section is arranged as follows:

In this action, EPA is approving a “Negative Declaration” for Lake and Porter Counties in Indiana regarding the CTG for the Oil and Gas Industry issued by EPA on October 20, 2016. As discussed more fully in the June 26, 2019 proposed approval (84 FR 30066), IDEM has adequately documented that there are no sources in Lake and Porter Counties to which the Oil and Gas CTG is applicable.

EPA received both supportive and adverse comments from one commenter. The adverse comments are addressed below.

(1) Comment—“Looking at Indiana's analysis of all its resources in Lake and Porter Counties coming directly from the department of Oil and Natural Gas Industry which is experienced in its analysis and has a niche in Indiana. However, I also feel that the report that has been provided may have been biased based on additional cost needed to be spent on RACT related activities.”

EPA Response—As stated in the proposal, Indiana searched its own oil and gas well records and air permits and, therefore, did not rely exclusively on the Indiana Department of Natural Resources' (IDNR) Division of Oil and Gas.

(2) Comment—“The report that the IDNR released mentions that they did this based on the database and not based on actual research performed by them. I would like to question how often their data base is updated and the sample size they have mentioned consisting of just 3 places seems like a small amount in proportion to the 2 counties.”

EPA Response—The IDNR administers Indiana's oil and gas statutes and regulates petroleum exploration and production operations in Indiana. Its analysis should provide a very sound basis for an accurate database. The sample size did not consist of just three places. Rather, three facilities were selected for further evaluation based upon their industry codes and descriptions.

(3) Comment—“EPA's proposal looks pretty dated and has been based on ozone rules back from 2016 and currently there have been so many changes that it is bound to be outdated and not effective, I think the EPA should release another updated rule to judge the negative declaration areas.”

EPA Response—The Oil and Gas CTG is, in fact, EPA's newest CTG and there is no indication that it is outdated. More importantly, Indiana's determination that there are no applicable sources is current.

(4) Comment—“The Bulk petroleum facilities which were investigated although not part of Lake and Porter County does exist and the report by the Indiana Department of Natural Resources did not provide much information as to what their findings were.”

EPA Response—This comment is not relevant because the negative declaration is only for Lake and Porter Counties.

EPA is approving Indiana's Negative Declaration for the Oil and Gas CTG. Indiana has adequately documented that it has no sources in Lake and Porter Counties to which the Oil and Gas CTG would be applicable. Approval of this Negative Declaration also supports EPA's February 13, 2019 approval of Indiana's VOC RACT Certification for Lake and Porter Counties.

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

• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);

• Is not an Executive Order 13771 (82 FR 9339, February 2, 2017) regulatory action because SIP approvals are exempted under Executive Order 12866;

• 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).

In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

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 February 11, 2020. 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).)

40 CFR part 52 is amended as follows:

Rulemaking Documents

For access to docket FMCSA-2019-0120 to read background documents, go to https://www.regulations.gov at any time, or to Docket Operations at U.S. Department of Transportation, Room W12-140, 1200 New Jersey Avenue SE, Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays.

Regulations established by the final rule, “Commercial Driver's License Drug and Alcohol Clearinghouse” (Clearinghouse final rule) (81 FR 87686 (Dec. 5, 2016)), require that, beginning January 6, 2020, State Driver Licensing Agencies (SDLAs) request information from the Clearinghouse prior to issuing, renewing, upgrading, or transferring a CDL.1 The Clearinghouse final rule did not address how SDLAs would use Clearinghouse information for drivers licensed, or seeking to become licensed, in their State. Accordingly, the final rule's Regulatory Impact Analysis did not identify any safety benefit associated with the States' query requirement. This final rule, which delays the States' query requirement, from January 6, 2020, to January 6, 2023, would therefore have no impact on safety. In addition, under this final rule, beginning on January 6, 2020, SDLAs wishing to access the Clearinghouse may do so as an authorized user to determine whether the individual is prohibited from operating a commercial motor vehicle (CMV) because the individual has not completed the return-to-duty process. This optional access to the Clearinghouse would be exercised solely at the States' discretion.

This extension of the compliance date is necessary to allow the Agency time to complete its forthcoming rulemaking to address SDLA access to and use of driver-specific information from the Clearinghouse, as discussed below. The compliance date of January 6, 2020, continues to apply to all other requirements set forth in the Clearinghouse final rule. Beginning January 6, 2020, CDL holders' drug and alcohol testing program violations must be reported to the Clearinghouse, and motor carrier employers must perform the required queries for prospective and current driver-employees.

Because the Clearinghouse final rule did not establish a cost or benefit to the SDLA query, there are neither costs nor benefits associated with this rulemaking.

This final rule amends regulations established by the Clearinghouse final rule by extending the date by which States would be required to achieve compliance with the query requirements currently set forth in 49 CFR 383.73 and 49 CFR 384.235. The Clearinghouse final rule implements section 32402 of the Moving Ahead for Progress in the 21st Century Act (MAP-21) (Pub. L. 112-141, 126 Stat. 405, 795, codified at 49 U.S.C. 31306a), which requires the Secretary of Transportation (the Secretary) to establish a national clearinghouse for records related to drug and alcohol testing of CDL holders. As part of that mandate, MAP-21 requires the Secretary to establish a process by which States can request and receive an individual's Clearinghouse record (49 U.S.C. 31306a(h)(2)). In addition, section 32305(b)(1) of MAP-21, codified at 49 U.S.C. 31311(a)(24), requires that States request information from the Clearinghouse prior to issuing or renewing a CDL. The Agency's authority to extend the compliance date for those State-specific requirements relies on these MAP-21 provisions. This final rule is also based on the broad authority of the Commercial Motor Vehicle Safety Act of 1986, as amended, codified generally in 49 U.S.C. chapter 313, which requires the Secretary to establish minimum standards for the issuance of CDLs (49 U.S.C. 31308), as well as minimum standards to ensure the fitness of individuals operating a CMV (49 U.S.C. 31305(a)).

The Administrative Procedure Act requires publication of a substantive rule not less than 30 days before its effective date, except “as otherwise provided by the agency for good cause found and published with the rule” (5 U.S.C. 553(d)(3)). Due to the imminence of the initial compliance date of January 6, 2020 for the States' query requirement, established by the Clearinghouse final rule, the Agency finds “good cause” to make this final rule effective on the date of publication.

Finally, under 49 CFR 1.87(e)(1), the FMCSA Administrator is delegated authority to carry out the functions vested in the Secretary by 49 U.S.C. chapter 313, relating to CMV operation.

The Clearinghouse final rule implemented the Congressional mandate, set forth in section 32402 of MAP-21, requiring the establishment of a national drug and alcohol clearinghouse containing CDL holders' violations of FMCSA's drug and alcohol testing regulations set forth in 49 CFR part 382. The Clearinghouse regulations, which go into effect on January 6, 2020, will enable FMCSA and motor carrier employers to identify drivers who, under 49 CFR 382.501(a), are prohibited from operating a CMV due to drug and alcohol program violations.

Additionally, as discussed above in section III. “Legal Basis,” MAP-21 required that SDLAs be provided access to the Clearinghouse records of individuals applying for a CDL in order to determine whether they are qualified to operate a CMV, and that SDLAs request information from the Clearinghouse before renewing or issuing a CDL to an individual. FMCSA incorporated these statutory requirements into the Clearinghouse final rule.

Following publication of the final rule, the American Association of Motor Vehicle Administrators (AAMVA), a trade association representing driver licensing authorities from the 50 States and the District of Columbia, asserted that the rule failed to address various operational issues related to the States' role in the Clearinghouse.2 Some of the concerns and questions AAMVA raised were: (1) What does FMCSA intend that the States do with information they receive from the Clearinghouse; (2) what specific information would States receive in response to a request for information about an individual CDL holder or applicant; (3) what privacy and data controls will be applied to the transmission of Clearinghouse information to SDLAs; (4) how would an erroneous Clearinghouse record be corrected; and (5) what are the cost implications for the SDLAs.

The Agency is currently working on a proposed rule (“Clearinghouse II” notice of proposed rulemaking (NPRM)), which will specifically address the issues raised by AAMVA. Delaying the implementation of the States' query requirement will provide FMCSA time to resolve AAMVA's concerns and ensure a seamless implementation of the States' Clearinghouse-related requirements.

FMCSA published a NPRM on September 6, 2019 (84 FR 46923) to extend the date by which States must query the Clearinghouse prior to issuing, renewing, transferring, or upgrading a CDL. The NPRM proposed extending the compliance date of the States' query requirement, established by the 2016 Clearinghouse final rule, from January 6, 2020, to January 6, 2023. The NPRM made clear that all other provisions of the Clearinghouse final rule would go into effect on January 6, 2020. Additionally, under the NPRM, SDLAs wishing to request information from the Clearinghouse could do so on a voluntary basis, beginning on January 6, 2020, by accessing the Clearinghouse as an authorized user and conducting a query prior to issuing, renewing, transferring or upgrading a CDL. If Clearinghouse information received in response to a voluntary query by an SDLA indicates the driver is prohibited from operating a CMV due to a drug or alcohol testing violation, it would be up to the State to decide whether, and how, to act on that information.

The Agency received 13 comments in response to the NPRM. Three individuals opposed extending the compliance date for the States' query requirements, noting the importance of implementing the Clearinghouse without delay. However, two of those commenters erroneously believed the proposal was to delay the entire Clearinghouse final rule and not solely the States' query provision.

The Owner-Operator Independent Drivers Association (OOIDA) commented that the proposed extension may cause confusion, noting that “[d]rivers might interpret any delay in the Clearinghouse as a delay in the entire program, thus failing to register at the proper time.” OOIDA suggested that FMCSA consider extending the compliance date for all Clearinghouse requirements “to allow the entire industry sufficient opportunity to register . . . and provide additional time for the Agency to ensure an efficient rollout.”

The American Trucking Associations (ATA) expressed disappointment that FMCSA proposed to delay the States' query requirement by three years, but acknowledged the need to “resolve AAMVA's concerns and ensure a seamless implementation of the States' Clearinghouse requirements.” ATA also recommended that, during the 3-year delay, the Agency encourage States to “to adopt their own procedures to review Clearinghouse information through the FMCSA portal before issuing, upgrading, renewing, or transferring a CDL.”

The Virginia Department of Motor Vehicles supported the proposal “on the grounds provided in the NPRM.” The Oregon Department of Transportation (Oregon DOT) also supported the proposed compliance date extension, noting the need “to permit both FMCSA and the States to complete necessary IT changes, and additionally for States to pursue any required statutory changes related to the Clearinghouse.” The Drug and Alcohol Testing Industry Association supported the proposed extension, but only if employers, or Consortia/Third-Party Administrators (C/TPAs) acting on their behalf, are also granted a 3-year extension from the requirement “for mandatory queries to the database.”

An individual from Connecticut asked whether the States' query requirement would apply only to a CDL, or whether a State would also have to query the Clearinghouse prior to the issuance, renewal, or upgrade or transfer of a Commercial Learner's Permit (CLP). A commenter wanted to know if Clearinghouse registration would open in the fall.

Several comments were beyond the scope of this rulemaking. One commenter believed that the pre-employment verification process “should be easier for businesses and more thorough,” and suggested that DOT create “a multi-modal solution of DOT safety sensitive work with all divisions of the DOT to qualify or suspend the individual.” Another commenter questioned how drivers without access to the internet would authorize the release of information when an employer makes a full query. The Oregon DOT advocated extending the States' Clearinghouse requirements to the issuance of CLPs. Two commenters did not take a position on the proposal.

The Agency finds that comments suggesting FMCSA should delay the entire Clearinghouse rule, or parts of the rule unrelated to the States' query requirement, are without merit. Clearinghouse registration for authorized users has been underway since October 1, 2019, and FMCSA intends to make the Clearinghouse operational beginning January 6, 2020, as required by the 2016 final rule. The Clearinghouse represents an important step forward in improving compliance with FMCSA's drug and alcohol use testing requirements and removing drivers from the roadway until the return-to-duty process has been completed, thus enhancing highway safety. It is neither necessary nor desirable to delay implementation of the core Clearinghouse reporting and query obligations applicable to motor carrier employers and their service agents, including medical review officers, C/TPAs, and to substance abuse professionals.

For the reasons stated in the NPRM, this final rule does, however, extend the compliance date applicable to the States' query requirement, from January 6, 2020, to January 6, 2023. Accordingly, FMCSA adopts, without change, the regulatory text as proposed in the NPRM. Additionally, as proposed, States wishing to voluntarily access the Clearinghouse to obtain driver-specific information prior to the issuance, renewal, transfer, or upgrade of a CDL, may do so beginning January 6, 2020. Instructions for SDLAs wishing to access the Clearinghouse will be available on the Clearinghouse website prior to that date. States opting to access the Clearinghouse during the 3-year voluntary query period would determine what, if any, action the SDLA would take if the query indicates the applicant is prohibited from operating a CMV due to a drug and alcohol program violation.

In response to the question concerning whether the State query requirement pertains to CLP holders, or only to CDL holders, FMCSA notes that the Clearinghouse final rule required only that States conduct a query prior to the issuance, renewal, transfer, or upgrade of a CDL; CLPs were not included within the scope of the requirement. While the question of whether the States' query requirement should be extended to include CLPs, as suggested by the Oregon DOT, is outside the scope of this rule, that issue will be addressed in the Clearinghouse II NPRM.

The Agency acknowledges ATA's comment suggesting that FMCSA “encourage” States to “adopt procedures” to review Clearinghouse information when conducting the specified CDL transactions. In response, FMCSA again emphasizes that the Clearinghouse final rule did not require that States take any licensing action based on driver-specific information obtained by conducting a query. As noted in the NPRM, a query does not, in and of itself, confer a safety benefit. When a voluntary query conducted in accordance with this final rule indicates an applicant is prohibited from operating a CMV because the individual has failed to complete the return-to-duty process following a drug or alcohol program violation, whether or not an SDLA would take a licensing action would be determined by State law. As discussed above, issues involving the States' use of Clearinghouse information will be addressed in the Clearinghouse II rulemaking.

The Federal Motor Carrier Safety Regulations (FMCSRs), and any exceptions to the FMCSRs, apply only within the United States (and, in some cases, United States territories). Motor carriers and drivers are subject to the laws and regulations of the countries in which they operate, unless an international agreement states otherwise. Drivers and carriers should be aware of the regulatory differences among nations.

FMCSA amends § 382.725(a) to permit States to request information from the Clearinghouse beginning January 6, 2020, and to require that States request information from the Clearinghouse on or after January 6, 2023.

In parts 383 and 384, FMCSA amends §§ 383.73(b)(10), (c)(10), (d)(9), (e)(8), and (f)(4) and 384.235, by changing the date from January 6, 2020, to January 6, 2023.

FMCSA determined that this final rule is not a significant regulatory action under section 3(f) of E.O. 12866 (58 FR 51735, Oct. 4, 1993), Regulatory Planning and Review, as supplemented by E.O. 13563 (76 FR 3821, Jan. 21, 2011), Improving Regulation and Regulatory Review. Accordingly, the Office of Management and Budget has not reviewed it under those Orders. This rule is also not significant within the meaning of DOT regulatory policies and procedures (DOT Order 2100.6, dated Dec. 20, 2018). In addition, this rule does not require an assessment of potential costs and benefits under section 6(a)(3) of E.O. 12866. Because the Clearinghouse final rule did not establish a cost or benefit for the SDLA query, there are neither costs nor benefits associated with this rulemaking.

This rule has been designated as a deregulatory action under E.O. 13771 by the Office of Information and Regulatory Affairs because it delays a compliance date for a requirement.

Pursuant to the Congressional Review Act (5 U.S.C. 801, et seq.), the Office of Information and Regulatory Affairs designated this rule as not a “major rule,” as defined by 5 U.S.C. 804(2).3

The Regulatory Flexibility Act of 1980 (5 U.S.C. 601 et seq.) as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121, 110 Stat 857) requires Federal agencies to consider the effects of the regulatory action on small business and other small entities and to minimize any significant economic impact. The term “small entities” comprises small businesses and not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000 (5 U.S.C. 601(6)). Accordingly, DOT policy requires an analysis of the impact of all regulations on small entities, and mandates that agencies strive to lessen the adverse effects on these businesses.

As described above, the Clearinghouse final rule requires the SDLAs to query the Clearinghouse before completing certain licensing transactions. This final rule extends that compliance date from January 6, 2020, to January 6, 2023. The extension of the compliance date is limited to the SDLAs' query requirement. The extension does not impose costs on the SDLAs.

The regulatory flexibility analysis the Agency prepared for the Clearinghouse final rule did not include the SDLAs among the small entities affected by the rule. State governments and their agencies are not included in the definition of “small governmental jurisdictions” (5 U.S.C. 601(5)) or “small entities” (5 U.S.C. 601(6)). That determination, combined with the fact that the SDLAs are the only entity affected by the extension of the compliance date, and no costs would be imposed on the SDLAs, demonstrates that the rule does not have a significant impact on small entities. Consequently, I certify the action will not have a significant economic impact on a substantial number of small entities.

In accordance with section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996, FMCSA wants to assist small entities in understanding this final rule so that they can better evaluate its effects on themselves and participate in the rulemaking initiative. If the final rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please consult the FMCSA point of contact, Ms. Nikki McDavid, listed in the FOR FURTHER INFORMATION CONTACT section of this final rule. Small businesses may send comments on the actions of Federal employees who enforce or otherwise determine compliance with Federal regulations to the Small Business Administration's Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of FMCSA, call 1-888-REG-FAIR (1-888-734-3247). DOT has a policy regarding the rights of small entities to regulatory enforcement fairness and an explicit policy against retaliation for exercising these rights.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. The Act addresses actions that may result in the expenditure by a State, local, or Tribal government, in the aggregate, or by the private sector of $165 million (which is the value equivalent of $100 million in 1995, adjusted for inflation to 2018 levels) or more in any one year. This rule would not result in such an expenditure. As discussed above, FMCSA estimates the final rule would result in costs less than zero.

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

A rule has implications for federalism under Section 1(a) of E.O. 13132 if it has “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.” FMCSA determined that this rule would not have substantial direct costs on or for States, nor would it limit the policymaking discretion of States. Nothing in this document preempts any State law or regulation. Therefore, this rule does not have sufficient federalism implications to warrant the preparation of a Federalism Impact Statement.

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

E.O. 13045, Protection of Children from Environmental Health Risks and Safety Risks (62 FR 19885, Apr. 23, 1997), requires agencies issuing “economically significant” rules, if the regulation also concerns an environmental health or safety risk that an agency has reason to believe may disproportionately affect children, to include an evaluation of the regulation's environmental health and safety effects on children. The Agency determined this rule is not economically significant. Therefore, no analysis of the impacts on children is required. In any event, the Agency does not anticipate that this regulatory action could in any respect present an environmental or safety risk that could disproportionately affect children.

FMCSA reviewed this rule in accordance with E.O. 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights, and has determined it will not effect a taking of private property or otherwise have taking implications.

The Consolidated Appropriations Act, 2005, (Pub. L. 108-447, 118 Stat. 2809, 3268, 5 U.S.C. 552a note), requires the Agency to conduct a privacy impact assessment (PIA) of a regulation that will affect the privacy of individuals. This rule does not change the collection of personally identifiable information (PII) as set forth in the 2016 Clearinghouse final rule. The supporting PIA, available for review on the DOT website, http://www.transportation.gov/privacy, gives a full and complete explanation of FMCSA practices for protecting PII in general and specifically in relation to the 2016 Clearinghouse rule, which would also apply to this final rule.

The regulations implementing E.O. 12372 regarding intergovernmental consultation on Federal programs and activities do not apply to this program.

FMCSA has analyzed this rule under E.O. 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. The Agency has determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” likely to have a significant adverse effect on the supply, distribution, or use of energy. Therefore, it does not require a Statement of Energy Effects under E.O. 13211.

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

The National Technology Transfer and Advancement Act (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the Office of Management and Budget (OMB), with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards (e.g., specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) are standards that are developed or adopted by voluntary consensus standards bodies. This rule does not use technical standards. Therefore, FMCSA did not consider the use of voluntary consensus standards.

FMCSA analyzed this rule for the purpose of the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) and determined this action is categorically excluded from further analysis and documentation in an environmental assessment or environmental impact statement under FMCSA Order 5610.1 (69 FR 9680, March 1, 2004), Appendix 2, paragraphs (6)(t)(2). The Categorical Exclusion (CE) in paragraph (6)(t)(2) covers regulations ensuring States comply with the provisions of the Commercial Motor Vehicle Act of 1986, by having the appropriate information technology systems concerning the qualification and licensing of persons who apply for and persons who are issued a CDL. The requirements in this rule are covered by this CE, and the action does not have the potential to significantly affect the quality of the environment. The CE determination is available for inspection or copying in the regulations.gov website listed under ADDRESSES.

E.O. 13783 directs executive departments and agencies to review existing regulations that potentially burden the development or use of domestically produced energy resources, and to appropriately suspend, revise, or rescind those that unduly burden the development of domestic energy resources. In accordance with E.O. 13783, DOT prepared and submitted a report to the Director of OMB that provides specific recommendations that, to the extent permitted by law, could alleviate or eliminate aspects of agency action that burden domestic energy production. This rule has not been identified by DOT under E.O. 13783 as potentially alleviating unnecessary burdens on domestic energy production.

Pursuant to regulations implemented under the Western and Central Pacific Fisheries Convention Implementation Act, 16 U.S.C. 6901 et seq., NMFS established an annual limit of 3,554 t of bigeye tuna for U.S. longline vessels fishing in the Convention Area (83 FR 33851, July 18, 2018, codified at 50 CFR 300.224). The limit applies only to U.S. vessels, but does not apply to U.S. vessels operating as part of the longline fisheries of American Samoa, Guam, or the Commonwealth of the Northern Mariana Islands (CNMI). Regulations at 50 CFR 300.224(b), (c), and (d) detail the manner in which longline-caught bigeye tuna is attributed among the fisheries of the United States and the U.S. Participating Territories.

NMFS monitored catches of longline-caught bigeye tuna using logbook data submitted by vessel captains and other available information, and determined that the 3,554 t catch limit for 2019 would be reached by July 27, 2019. In accordance with 50 CFR 300.224(e), NMFS closed the U.S. longline fishery for bigeye tuna in the Convention Area through a temporary rule effective on July 27, 2019 through December 31, 2019 (84 FR 35568; July 24, 2019). The closure does not apply to vessels operating as part of the longline fisheries of American Samoa, Guam, or the CNMI, including vessels identified in a valid specified fishing agreement under 50 CFR 665.819(c), in accordance with 50 CFR 300.224(f)(1)(iv).

NMFS also specified a 2019 limit of 2,000 t of longline-caught bigeye tuna for each of the U.S. territories (American Samoa, Guam, and the CNMI) (84 FR 34321, July 18, 2019). That rule allows each territory to allocate up to 1,000 t to U.S. longline vessels identified in a valid specified fishing agreement.

On August 1, 2019, NMFS announced a valid specified fishing agreement between the CNMI and the Hawaii Longline Association (HLA) (84 FR 37592). In accordance with procedures in 50 CFR 300.224(d) and 50 CFR 665.819(c)(9), NMFS began attributing bigeye tuna caught by vessels identified in the CNMI/HLA agreement to the CNMI beginning on July 20, 2019. NMFS forecasted that the fishery would reach the CNMI allocation limit by November 4, 2019, and closed the fishery on that date (84 FR 57827, October 29, 2019).

On October 28, 2019, NMFS announced a valid specified fishing agreement between American Samoa and HLA, and began attributing bigeye tuna caught by vessels identified in the agreement to American Samoa starting on that date (84 FR 57652). NMFS forecasts that the fishery will reach the American Samoa allocation limit by December 22, 2019, and will stop attributing on that date.

Since NMFS closed the U.S. longline fishery in July 2019, NMFS has subsequently determined that the fishery caught and retained only 3,456 t of the 3,554 t limit while it was open from January through July 26, leaving 98 t available for catch and retention. Based on average bigeye tuna catch rates by the U.S. longline fishery in the month of December in calendar years 2012 to 2018, we estimate that the fishery could catch 98 t in five calendar days. Accordingly, this rule reopens the fishery for five days, after which, the closure published on July 24, 2019 (84 FR 35568), will again, take effect through December 31, 2019.

To prevent a disruption to the continuity of fishing operations, the reopening will begin the day after the date that NMFS stops attributing catch to American Samoa. All fishing under the remaining 98 t limit must be done in accordance with the regulations at 50 CFR 300.224 and any other applicable regulations.

There is good cause under 5 U.S.C. 553(b)(B) to waive prior notice and opportunity for public comment on this action. Compliance with the notice and comment requirement would be unnecessary and contrary to the public interest. Because the fishery closure on July 27, 2019 was based upon estimated landings, this action simply provides an opportunity to harvest unused catch that remains available in 2019. The action is a benefit to fishermen since they would not be able to access the fishery after December 22, 2019. Moreover, NMFS solicited and responded to public comments on the rule establishing the calendar year bigeye tuna catch limit of 3,554 t (83 FR 33851, July 18, 2018). Although this action is being implemented without the opportunity for prior notice and comment, NMFS is soliciting and will respond to public comments from those affected by or otherwise interested in this rule.

Additionally, NMFS has determined that good cause exists to waive the 30-day delay in effectiveness of this rule because, under 5 U.S.C. 553(d), this rule relieves a restriction on the regulated community, and requiring a 30-day delay would be contrary to the public interest. NMFS closed the U.S. longline fishery for bigeye tuna in the Convention Area through a temporary rule effective on July 27, 2019, through December 31, 2019. The closure does not apply to vessels operating identified in a valid specified fishing agreement under 50 CFR 665.819(c), in accordance with 50 CFR 300.224(f)(1)(iv).

Currently, vessels in the U.S. longline fishery are operating under a valid specified fishing agreement between American Samoa and HLA, which allocates 1,000 t of bigeye tuna to vessel identified in the agreement. NMFS forecasts that the fishery will reach the American Samoa allocation limit by December 22, 2019, and will stop attributing bigeye tuna to American Samoa on that date. If the effectiveness of this rule is delayed, the fishery would once again, be subject to the July 27, 2019 closure through December 31, 2019, and would be unable to access the remainder of the available 2019 bigeye tuna limit. Because this rule relives a restriction by temporarily reopening the fishery for bigeye tuna, it is not subject to the 30-day delayed effectiveness pursuant to 5 U.S.C. 553(d)(1).

This action is taken under 50 CFR 300.224(e) and is exempt from review under Executive Order 12866.

NMFS manages the Gulf reef fish fishery, which includes lane snapper, under the Fishery Management Plan for the Reef Fish Resources of the Gulf of Mexico (FMP). The FMP was prepared by the Gulf of Mexico Fishery Management Council (Council) and is implemented by NMFS under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act) through regulations at 50 CFR part 622. All lane snapper weights discussed in this temporary rule are in round weight.

The stock annual catch limit (ACL) for Gulf lane snapper is 301,000 lb (136,531 kg). As specified in 50 CFR 622.41(k), if during a fishing year the sum of the commercial and recreational lane snapper landings exceeds the stock ACL, then during the following fishing year, if the sum of commercial and recreational landings reaches or is projected to reach the stock ACL, NMFS is required to close the commercial and recreational sectors for the remainder of that fishing year. In the 2018 fishing year, lane snapper landings exceeded the stock ACL by 58,551 lb (26,558 kg). For the 2019, fishing year, NMFS has determined that the 2019 stock ACL for Gulf lane snapper has been met. Accordingly, this temporary rule closes the commercial and recreational sectors for Gulf lane snapper effective at 12:01 a.m., local time, on December 13, 2019 and both sectors will remain closed through the end of the current fishing year on December 31, 2019.

During the commercial and recreational closures, the commercial sale or purchase of lane snapper taken from the Gulf EEZ is prohibited and the recreational bag and possession limits for lane snapper in or from the Gulf EEZ are zero. The prohibition on possession of Gulf lane snapper also applies in Gulf state waters for a vessel issued a valid Federal charter vessel/headboat permit for Gulf reef fish. During the closures, the operator of a vessel with a valid commercial vessel permit for Gulf reef fish having lane snapper on board must have landed and bartered, traded, or sold such lane snapper prior to 12:01 a.m., local time, on December 13, 2019. The prohibition on the sale or purchase of lane snapper does not apply to fish that were harvested, landed ashore, and sold prior to 12:01 a.m., local time, on December 13, 2019, and were held in cold storage by a dealer or processor.

The Regional Administrator for the NMFS Southeast Region has determined this temporary rule is necessary for the conservation and management of Gulf lane snapper and is consistent with the Magnuson-Stevens Act and other applicable laws.

This action is taken under 50 CFR 622.41(k) and is exempt from review under Executive Order 12866. These measures are exempt from the procedures of the Regulatory Flexibility Act because the temporary rule is issued without opportunity for prior notice and comment.

This action responds to the best scientific information available. The Assistant Administrator for NOAA Fisheries (AA) finds that the need to immediately implement this action to close the commercial and recreational sectors for lane snapper constitutes good cause to waive the requirements to provide prior notice and opportunity for public comment on this temporary rule pursuant to the authority set forth in 5 U.S.C. 553(b)(B), because such procedures are unnecessary and contrary to the public interest. Such procedures are unnecessary because the rule establishing the closure provisions was already subject to notice and comment, and all that remains is to notify the public of the closures. Such procedures are contrary to the public interest because of the need to immediately implement this action to protect lane snapper. Prior notice and opportunity for public comment would require time and would potentially allow the sectors to further exceed the stock ACL.