This proposed rule is issued under Marketing Agreement No. 84 and Marketing Order No. 905, both as amended (7 CFR part 905), regulating the handling of oranges, grapefruit, tangerines, and tangelos grown in Florida, hereinafter referred to as the “order.” The marketing agreement and order are effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”

This proposed rule is also issued under section 8e of the Act, which provides that whenever certain specified commodities, including grapefruit, are regulated under a Federal marketing order, imports of these commodities into the United States are prohibited unless they meet the same or comparable grade, size, quality, or maturity requirements as those in effect for the domestically produced commodities.

The Department of Agriculture (Department) is issuing this rule in conformance with Executive Order 12866.

This proposed rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is not intended to have retroactive effect. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.

The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the Act, any handler subject to an order may file with the Secretary a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. A handler is afforded the opportunity for a hearing on the petition. After the hearing the Secretary would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review the Secretary's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling.

There are no administrative procedures which must be exhausted prior to any judicial challenge to the provisions of import regulations issued under section 8e of the Act.

The order for Florida citrus provides for the establishment of minimum grade and size requirements with the concurrence of the Secretary. The minimum grade and size requirements are designed to provide fresh markets with fruit of acceptable quality and size, thereby maintaining consumer confidence for fresh Florida citrus. Maintaining confidence in the commodity shipped contributes to stable marketing conditions in the interest of growers, handlers, and consumers, and helps increase returns to Florida citrus growers.

Section 905.52 of the order, in part, authorizes the Committee to recommend minimum grade and size requirements to the Secretary. Section 905.306 specifies minimum grade and size requirements for different varieties of fresh Florida citrus. Such regulations may be modified, suspended, or terminated under § 905.52. Section 905.53 specifies that whenever the handling of a variety of a type of fruit is regulated pursuant to § 905.52, each handler who handles any such type of fruit shall, prior to such handling of any lot of such variety, cause the lot to be inspected by the Federal-State Inspection Service and certified as meeting all applicable requirements of that regulation.

This proposed rule would clarify inspection requirements for oranges, grapefruit, tangerines, and tangelos grown in Florida and imported grapefruit. Current inspection procedures allow undersize tolerances for domestic shipments of Florida citrus failing to meet minimum size regulations under the order. These procedures also allow undersize tolerances for imported grapefruit failing to meet minimum size requirements established under the grapefruit import regulation. Specifically, these procedures allow for a 10 percent tolerance for undersize fruit in each lot and a 15 percent tolerance for undersize fruit in any individual sample. Undersize tolerances allow for variations to proper sizing and reduce handler packing costs. This change would specify these inspection procedures in the order's rules and regulations and in the grapefruit import regulation. The Committee unanimously recommended specifying the undersize tolerances for Florida citrus in the regulations at a meeting on April 6, 1999.

Paragraph (c) of § 905.306 currently references sections of the United States Standards for Grades of Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida with the intention of providing tolerances for undersized fruit. However, the sections specified reference grade defects, not size tolerances. Therefore, specific undersize tolerances for Florida grown oranges, grapefruit, tangerines, and tangelos would be added to the text of the regulations.

Paragraph (c) of § 905.306 would be revised to allow for a 10 percent tolerance for undersized fruit in each lot and a 15 percent tolerance for undersized fruit in any individual sample. Additionally, paragraph (c) of § 944.106 of the grapefruit import regulation would also be revised to reference the undersize tolerances specified in paragraph (c) of § 905.306 to recognize current inspection procedures.

This rule would also renumber citations in the order to reflect the revised United States Standards for Grades of Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida. Effective August 1, 1996, the various grade standards for Florida citrus were amended. Some sections of the amended standards were renumbered. This action would renumber some section references to the U.S. grade standards in §§ 905.146 and 905.306 to bring them into conformity with the renumbered sections in the amended standards.

Similar changes also would be made in paragraph (c) of § 944.106 of the grapefruit import regulation issued under section 8e of the Act. That section provides that when certain domestically produced commodities, including grapefruit, are regulated under a Federal marketing order, imports of that commodity must meet the same or comparable grade, size, quality, and maturity requirements. The grapefruit import regulation is based on the requirements issued under the marketing order for Florida citrus. Accordingly, a corresponding change to the grapefruit import regulation would be necessary.

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA), the AMS has considered the economic impact of this action on small entities. Accordingly, AMS has prepared this initial regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of business subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and the rules issued thereunder, are unique in that they are brought about through group action of essentially small entities acting on their own behalf. Thus, both statutes have small entity orientation and compatibility. Import regulations issued under the Act are based on those established under Federal marketing orders.

There are approximately 100 Florida citrus handlers subject to regulation under the marketing order, about 11,000 Florida citrus producers in the regulated area, and about 25 grapefruit importers. Small agricultural service firms, which include handlers and importers, have been defined by the Small Business Administration (13 CFR 121.201) as those whose annual receipts are less than $5,000,000, and small agricultural producers are defined as those whose annual receipts are less than $500,000.

Based on the Florida Agricultural Statistics Service and Committee data for the 1998-99 season, the average annual f.o.b. price for fresh Florida citrus during the 1998-99 season was $8.66 per 4/5 bushel carton for all shipments, and the total shipments for the 1998-99 season were 63.6 million cartons of citrus. Using information provided by the Committee, about 60 percent of citrus handlers could be considered small businesses under the SBA definition, and the Department believes that the majority of Florida citrus producers and grapefruit importers may be classified as small entities.

Section 905.52 of the order, in part, authorizes the Committee to recommend minimum grade and size requirements to the Secretary. Section 905.306 specifies minimum grade and size requirements for different varieties of fresh Florida citrus. Section 905.53 specifies that whenever the handling of a variety of a type of fruit is regulated pursuant to § 905.52, each handler who handles any such type of fruit shall, prior to such handling of any lot of such variety, cause the lot to be inspected by the Federal-State Inspection Service and certified as meeting all applicable requirements of that regulation.

This proposed rule would clarify inspection requirements for oranges, grapefruit, tangerines, and tangelos grown in Florida and imported grapefruit. Current inspection procedures allow for a 10 percent tolerance for undersize fruit in each lot and a 15 percent tolerance for undersize fruit in any individual sample for both domestic and import shipments. This action would add to undersize tolerances to the order's rules and regulations and in the import regulation for grapefruit. This change would also renumber citations in the order to reflect revisions in the United States Standards for Grades of Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida made in August 1996. Similar changes would also be made to the grapefruit import regulation issued under section 8e of the Act.

This rule would have a positive impact on affected entities. This action would enhance the understandability of the text of the regulations. The undersize tolerances allow for variations to proper sizing and reduce handler packing costs. Without such tolerances, more fruit would fail to meet minimum size requirements without reconditioning, and handler packing costs would increase accordingly. Thus, the tolerances help facilitate shipments of Florida citrus. The Committee unanimously recommended specifying the undersize tolerances for Florida citrus in the regulations at a meeting on April 6, 1999.

During the period January 1, 1999, through December 31, 1999, imports of grapefruit totaled 19,400,000 pounds (approximately 456,470 cartons). Recent yearly data indicate that imports from May through November are typically negligible. Future imports should not vary significantly from the 19,400,000 pounds. The Bahamas were the principal source of imported grapefruit, accounting for 93 percent of the total. Israel, Mexico, and Turkey supplied remaining imports. Most imported grapefruit enters the United States from November through May.

With regard to alternatives, this action offers the best alternative to achieve the intended purpose of clarifying the inspection requirements.

This rule would not impose any additional reporting or recordkeeping requirements on either small or large Florida citrus handlers and importers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sectors. In addition, the Department has not identified any relevant Federal rules that duplicate, overlap or conflict with this rule. However, Florida citrus must meet the requirements specified in the U.S. standards for the various types of citrus grown in Florida issued under the Agricultural Marketing Act of 1946 (7 U.S.C. 1621 through 1627).

Further, the Committee's meeting was widely publicized throughout the Florida citrus industry and all interested persons were invited to attend the meeting and participate in Committee deliberations. Like all Committee meetings, the April 6, 1999, meeting was a public meeting and all entities, both large and small, were able to express their views on this issue. Finally, interested persons are invited to submit information on the regulatory and informational impacts of this action on small businesses.

A small business guide on complying with fruit, vegetable, and speciality crop marketing agreements and orders may be viewed at the following website: http://www.ams.usda.gov/fv/moab.html. Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

In accordance with section 8e of the Act, the United States Trade Representative has concurred with the issuance of this proposed rule.

A 60-day comment period is provided to allow interested persons to respond to this proposal. All written comments timely received will be considered before a final determination is made on this matter.

The proposed rule and interim final rule, published in the Federal Register on July 12, 2000 (65 FR 43092 and 43088), indicated that public comments were to be submitted to the OTS no later than October 10, 2000. OTS has received a request for an extension of the comment period to accommodate the views of a number of mutual institution managers who will be meeting in the next 30 days. In order to afford the public adequate time to comment, the OTS has determined to extend the comment period for 30 days to accommodate this request. Therefore, the comment period is hereby extended until November 9, 2000.

Interested persons are invited to participate in the making of the proposed rule by submitting such written data, views, or arguments as they may desire. Communications shall identify the Rules Docket number and be submitted in triplicate to the address specified above. All communications received on or before the closing date for comments, specified above, will be considered before taking action on the proposed rule. The proposals contained in this notice may be changed in light of the comments received.

Submit comments using the following format:

• Organize comments issue-by-issue. For example, discuss a request to change the compliance time and a request to change the service bulletin reference as two separate issues.

• For each issue, state what specific change to the proposed AD is being requested.

• Include justification ( e.g., reasons or data) for each request.

Comments are specifically invited on the overall regulatory, economic, environmental, and energy aspects of the proposed rule. All comments submitted will be available, both before and after the closing date for comments, in the Rules Docket for examination by interested persons. A report summarizing each FAA-public contact concerned with the substance of this proposal will be filed in the Rules Docket.

Commenters wishing the FAA to acknowledge receipt of their comments submitted in response to this notice must submit a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket Number 2000-NM-157-AD.” The postcard will be date stamped and returned to the commenter.

Any person may obtain a copy of this NPRM by submitting a request to the FAA, Transport Airplane Directorate, ANM-114, Attention: Rules Docket No. 2000-NM-157-AD, 1601 Lind Avenue, SW., Renton, Washington 98055-4056.

The FAA has received a report indicating fatigue cracking of an inboard midspar fitting on the number two pylon of a Boeing Model 767 series airplane powered by General Electric engines. The crack was detected during replacement of a midspar fitting bushing, and the airplane had accumulated 21,375 total flight hours and 11,563 total flight cycles. A cracked midspar fitting could result in a fractured fitting and drooping of the strut at the strut-to-wing interface. Structural assessment indicates that the actual operational loads applied to the nacelle strut and wing structure are higher than the analytical loads that were used during the initial design. Subsequent analysis and service history, which includes numerous reports of fatigue cracking on certain strut and wing structure, indicate that fatigue cracking can occur on the primary strut structure before an airplane reaches its design service objective of 20 years or 50,000 total flight cycles. Analysis also indicates that such cracking, if it were to occur, would grow at a much greater rate than originally expected. This condition, if not corrected, could result in reduced structural integrity of the strut and separation of the strut and engine.

The FAA has reviewed and approved Boeing Service Bulletin 767-54A0101, Revision 1, dated February 3, 2000, which describes procedures for accomplishment of either repetitive detailed visual or high frequency eddy current inspections to detect discrepancies (cracking, incorrect fastener hole diameter), of the aft-most fastener holes in the horizontal tangs of the midspar fitting of the strut, and corrective actions. The corrective actions consist of rework of the aft-most fastener holes or replacement of the midspar fittings of the strut. The service bulletin references the strut improvement program (SIP) for accomplishment of the replacement. The service bulletin also specifies contacting the manufacturer for accomplishment of certain repairs. Accomplishment of the actions specified in the service bulletin is intended to adequately address the identified unsafe condition.

Since an unsafe condition has been identified that is likely to exist or develop on other products of this same type design, the proposed AD would require accomplishment of the actions specified in the service bulletin described previously, except as discussed below.

Operators should note that, although the service bulletin describes procedures for inspections of the two aft-most fastener holes of the midspar fitting to detect cracking, this proposed AD would require inspections of the four aft-most fastener holes of the midspar fitting. The FAA has determined that this is necessary due to the service history of cracking on the Model 747 series airplane midspar fittings, which are made of the same material as the midspar fittings on the Model 767 series airplane and are also subject to similar loading conditions.

Operators also should note that, although the service bulletin specifies that the manufacturer may be contacted for disposition of certain repair conditions; this proposed AD would require the repair of those conditions to be accomplished in accordance with a method approved by the FAA, or in accordance with data meeting the type certification basis of the airplane approved by a Boeing Company Designated Engineering Representative who has been authorized by the FAA to make such findings.

This proposed AD also would allow operators the option, if cracking is detected, of either repair of the midspar fitting or replacement with a serviceable fitting in accordance with a method approved by the FAA. This is due to the fact that parts are not always readily available and operators required to accomplish the strut improvement program before further flight could have a problem obtaining these parts.

There are approximately 636 Model 767 series airplanes of the affected design in the worldwide fleet. The FAA estimates that 235 airplanes of U.S. registry would be affected by this proposed AD.

It would take approximately 1 work hour per airplane to accomplish the proposed detailed visual inspection, at an average labor rate of $60 per work hour. Based on these figures, the cost impact of the proposed inspection on U.S. operators is estimated to be $14,100, or $60 per airplane, per inspection cycle.

It would take approximately 3 work hours per airplane to accomplish the proposed eddy current inspection, at an average labor rate of $60 per work hour. Based on these figures, the cost impact of the proposed inspection on U.S. operators is estimated to be $42,300, or $180 per airplane, per inspection cycle.

The cost impact figures discussed above are based on assumptions that no operator has yet accomplished any of the proposed requirements of this AD action, and that no operator would accomplish those actions in the future if this proposed AD were not adopted. The cost impact figures discussed in AD rulemaking actions represent only the time necessary to perform the specific actions actually required by the AD. These figures typically do not include incidental costs, such as the time required to gain access and close up, planning time, or time necessitated by other administrative actions.

The regulations proposed herein would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, it is determined that this proposal would not have federalism implications under Executive Order 13132.

For the reasons discussed above, I certify that this proposed regulation (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) if promulgated, 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. A copy of the draft regulatory evaluation prepared for this action is contained in the Rules Docket. A copy of it may be obtained by contacting the Rules Docket at the location provided under the caption ADDRESSES.

Accordingly, pursuant to the authority delegated to me by the Administrator, the Federal Aviation Administration proposes to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows:

Interested persons are invited to participate in the making of the proposed rule by submitting such written data, views, or arguments as they may desire. Communications shall identify the Rules Docket number and be submitted in triplicate to the address specified above. All communications received on or before the closing date for comments, specified above, will be considered before taking action on the proposed rule. The proposals contained in this notice may be changed in light of the comments received.

Comments are specifically invited on the overall regulatory, economic, environmental, and energy aspects of the proposed rule. All comments submitted will be available, both before and after the closing date for comments, in the Rules Docket for examination by interested persons. A report summarizing each FAA-public contact concerned with the substance of this proposal will be filed in the Rules Docket.

Commenters wishing the FAA to acknowledge receipt of their comments submitted in response to this notice must submit a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket Number 99-NM-127-AD.” The postcard will be date stamped and returned to the commenter.

Any person may obtain a copy of this NPRM by submitting a request to the FAA, Transport Airplane Directorate, ANM-114, Attention: Rules Docket No. 99-NM-127-AD, 1601 Lind Avenue, SW., Renton, Washington 98055-4056.

The FAA has received reports indicating that the airplane manufacturer has accomplished a structural reassessment of the damage tolerance capabilities of the Boeing Model 767 series airplane powered by General Electric engines. This reassessment indicates that the actual operational loads applied to the nacelle strut and wing structure are higher than the analytical loads that were used during the initial design. Subsequent analysis and service history, which includes numerous reports of fatigue cracking on certain strut and wing structure, indicate that fatigue cracking can occur on the primary strut structure before an airplane reaches its design service objective of 20 years or 50,000 flight cycles. Analysis also indicates that such cracking, if it were to occur, would grow at a much greater rate than originally expected. Fatigue cracking in the primary strut structure would result in reduced structural integrity of the strut.

Boeing recently has developed a modification of the strut-to-wing attachment structure installed on Model 767 series airplanes powered by General Electric engines. This modification significantly improves the load-carrying capability and durability of the strut-to-wing attachments. Such improvements also will substantially reduce the possibility of fatigue cracking and corrosion developing in the attachment assembly.

The FAA has reviewed and approved Boeing Service Bulletin 767-54-0081, dated July 29, 1999, which describes procedures for modification of the nacelle strut and wing structure. The modification consists of replacing many of the significant load-bearing components of the strut and wing (e.g., the side link fittings, the midspar fittings, the side load fittings, certain fuse pins assemblies, etc.) with improved components.

The service bulletin contains a formula for calculating an optional compliance threshold for the specified modification. This formula is intended to be used as an alternative to the 20-year calendar threshold specified in the service bulletin.

In addition, Table 2 of the service bulletin also identifies six related service bulletin modifications that must be accomplished before or at the same time as the modification in Boeing Service Bulletin 767-54-0081:

• Boeing Service Bulletin 767-29-0057: The FAA has reviewed and approved Boeing Service Bulletin 767-29-0057, dated December 16, 1993, which describes procedures for modification of the electrical wiring support of the alternating current motor pump of the main hydraulic power system. The modification involves installing new band clamps and index-straps, and on certain airplanes, installing new wire support brackets on the strut bulkhead.

• Boeing Service Bulletin 767-54-0069: The FAA has reviewed and approved Boeing Service Bulletin 767-54-0069, Revision 1, dated January 29, 1998, which describes procedures for rework of the side load fitting and tension fasteners, as applicable, and replacement of midspar fuse pins with new, higher-strength midspar fuse pins. The rework involves increasing the size of the tension bolts of the inboard and outboard side load fittings. The replacement also involves installing new, higher-strength bolts and radius fillers in the side load fittings and backup support structure, and installing higher-strength fasteners common to the front spar and rib number 8 rib post.

• Boeing Service Bulletin 767-54-0083: The FAA has reviewed and approved Boeing Service Bulletin 767-54-0083, dated September 17, 1998, which describes procedures for replacement of the upper link with a new, improved part that will increase the strength and durability of the upper link installation. That service bulletin also describes procedures for modification of the wire support bracket attached to the upper link.

• Boeing Service Bulletin 767-54-0088: The FAA has reviewed and approved Boeing Service Bulletin 767-54-0088, Revision 1, dated July 29, 1999, which describes procedures for replacement of the upper link fuse pin and aft pin with new, improved pins that will increase the strength and durability of the upper link installation.

• Boeing Service Bulletin 767-54A0094: The FAA has previously reviewed and approved Boeing Service Bulletin 767-54A0094, Revision 1, dated September 16, 1999. This service bulletin is referenced as the appropriate service information for accomplishing the actions required in AD 2000-07-05, amendment 39-11659, which was issued March 31, 2000 (65 FR 18883, April 10, 2000). This service bulletin describes procedures for repetitive detailed visual inspections to detect cracking of the one-piece diagonal brace of the forward and aft lugs, and corrective actions, if necessary. The corrective actions involve installing a new, three-piece diagonal brace, which eliminates the need for the repetitive inspections. The service bulletin also describes procedures for rework of the three-piece diagonal brace, which increases the inspection intervals of the three-piece diagonal brace.

• Boeing Service Bulletin 767-57-0053: Boeing Service Bulletin 767-54-0081 lists Boeing Service Bulletin 767-57-0053, Revision 1, however, the FAA has previously reviewed and approved Boeing Service Bulletin 767-57-0053, Revision 2, dated September 23, 1999. This service bulletin is referenced as the appropriate source of service information for accomplishing the actions required in AD 2000-12-17, amendment 39-11795, which was issued June 9, 2000 (65 FR 37843, June 19, 2000). Revision 1 also is acceptable for compliance with the requirements in that AD. Revision 2 of the service bulletin describes procedures for repetitive ultrasonic and eddy current inspections of the pitch load fitting lugs of the wing front spar for cracking, and rework of the fitting, if necessary.

Accomplishment of the actions specified in the service bulletins is intended to adequately address the identified unsafe condition.

Since an unsafe condition has been identified that is likely to exist or develop on other products of this same type design, the proposed AD would require accomplishment of the actions specified in the service bulletins described previously, except as discussed below.

Operators should note that, although Boeing Service Bulletin 767-54-0081 specifies that the manufacturer may be contacted for disposition of certain damage conditions that may be detected during accomplishment of the modification, this proposal would require the repair of those conditions to be accomplished in accordance with a method approved by the FAA.

There are approximately 381 airplanes of the affected design in the worldwide fleet. The FAA estimates that 159 airplanes of U.S. registry would be affected by this proposed AD, that it would take approximately 1,006 work hours, including time for gaining access and closing up, per airplane to accomplish the proposed modification in Boeing Service Bulletin 767-54-0081, and that the average labor rate is $60 per work hour. Based on these figures, the cost impact of the proposed AD on U.S. operators is estimated to be $9,597,240, or $60,360 per airplane.

It would take approximately 16 work hours per airplane to accomplish the proposed actions described in Boeing Service Bulletin 767-29-0057, at an average labor rate of $60 per work hour. Required parts would be provided at no cost by the airplane manufacturer. Based on these figures, the cost impact of these proposed actions on U.S. operators is estimated to be $152,640, or $960 per airplane.

It would take approximately 106 work hours per airplane to accomplish the actions described in Boeing Service Bulletin 767-53-0069, Revision 1, at an average labor rate of $60 per work hour. Required parts would be provided at no cost by the airplane manufacturer. Based on these figures, the cost impact of these proposed actions on U.S. operators is estimated to be $1,011,240, or $6,360 per airplane.

It would take approximately 1 work hour per airplane to accomplish the actions described in Boeing Service Bulletin 767-54-0083, at an average labor rate of $60 per work hour. Required parts would be provided at no cost by the airplane manufacturer. Based on these figures, the cost impact of these proposed actions on U.S. operators is estimated to be $9,540, or $60 per airplane.

It would take approximately 4 work hours per airplane to accomplish the actions described in Boeing Service Bulletin 767-54-0088, Revision 1, at an average labor rate of $60 per work hour. Required parts would be provided at no cost by the airplane manufacturer. Based on these figures, the cost impact of these proposed actions on U.S. operators is estimated to be $38,160, or $240 per airplane.

It would take approximately 20 work hours per airplane to accomplish the proposed actions described in Boeing Service Bulletin 767-54A0094, Revision 1, at an average labor rate of $60 per work hour. Required parts would be provided at no cost by the airplane manufacturer. Based on these figures, the cost impact of these proposed actions on U.S. operators is estimated to be $190,800, or $1,200 per airplane. Because the actions described in this service bulletin are already required by another AD action, this proposed requirement would add no new costs for affected operators.

It would take approximately 5 work hours per airplane to accomplish the proposed actions described in Boeing Service Bulletin 767-57-0053, Revision 2, at an average labor rate of $60 per work hour. Based on these figures, the cost impact of these proposed actions on U.S. operators is estimated to be $47,700, or $300 per airplane. Because the actions described in this service bulletin are already required by another AD action, this proposed requirement would add no new costs for affected operators.

Some operators may have accomplished certain modifications on some or all of the airplanes in their fleets, while other operators may not have accomplished any of the modifications on any of the airplanes in their fleets. As indicated earlier in this preamble, the FAA invites comments specifically on the overall economic aspects of this proposed rule.

The cost impact figures discussed above are based on assumptions that no operator has yet accomplished any of the current or proposed requirements of this AD action, and that no operator would accomplish those actions in the future if this AD were not adopted. The cost impact figures discussed in AD rulemaking actions represent only the time necessary to perform the specific actions actually required by the AD. These figures typically do not include incidental costs, such as the time required to gain access and close up, planning time, or time necessitated by other administrative actions.

The regulations proposed herein would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, it is determined that this proposal would not have federalism implications under Executive Order 13132.

For the reasons discussed above, I certify that this proposed regulation (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) if promulgated, 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. A copy of the draft regulatory evaluation prepared for this action is contained in the Rules Docket. A copy of it may be obtained by contacting the Rules Docket at the location provided under the caption ADDRESSES.

Accordingly, pursuant to the authority delegated to me by the Administrator, the Federal Aviation Administration proposes to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows:

Interested persons are invited to participate in the making of the proposed rule by submitting such written data, views, or arguments as they may desire. Communications shall identify the Rules Docket number and be submitted in triplicate to the address specified above. All communications received on or before the closing date for comments, specified above, will be considered before taking action on the proposed rule. The proposals contained in this notice may be changed in light of the comments received.

Submit comments using the following format:

• Organize comments issue-by-issue. For example, discuss a request to change the compliance time and a request to change the service bulletin reference as two separate issues.

• For each issue, state what specific change to the proposed AD is being requested.

• Include justification ( e.g., reasons or data) for each request.

Comments are specifically invited on the overall regulatory, economic, environmental, and energy aspects of the proposed rule. All comments submitted will be available, both before and after the closing date for comments, in the Rules Docket for examination by interested persons. A report summarizing each FAA-public contact concerned with the substance of this proposal will be filed in the Rules Docket.

Commenters wishing the FAA to acknowledge receipt of their comments submitted in response to this notice must submit a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket Number 2000-NM-184-AD.” The postcard will be date stamped and returned to the commenter.

Any person may obtain a copy of this NPRM by submitting a request to the FAA, Transport Airplane Directorate, ANM-114, Attention: Rules Docket No. 2000-NM-184-AD, 1601 Lind Avenue, SW., Renton, Washington 98055-4056.

On March 5, 1997, the FAA issued AD 97-06-04, amendment 39-9961 (62 FR 11760, March 13, 1997), applicable to certain Boeing Model 757-200 series airplanes, to require inspections to detect cracking on the free edge of the tang, if necessary, and of the fastener holes in the lower spar chord; and various follow-on actions. That AD also provides for optional terminating action for the repetitive inspections. That action was prompted by a report of fatigue cracking in the lower spar chord of two Model 757 series airplanes. The requirements of that AD are intended to detect and correct such fatigue cracking, which could result in reduced structural integrity of the engine strut.

This proposed AD is related to AD 99-24-07, amendment 39-11431 (64 FR 66370, November 26, 1999), applicable to certain Boeing Model 757 series airplanes equipped with Rolls Royce RB211 engines, that requires modification of the nacelle strut and wing structure. In the preamble to AD 97-06-04, the FAA specified that the actions required by that AD were considered “interim action” and that the manufacturer was developing a modification to positively address the unsafe condition. The FAA indicated that it may consider further rulemaking action once the modification was developed, approved, and available. The manufacturer now has developed such a modification, and the FAA issued AD 99-24-07 to require accomplishment of that modification.

Since the issuance of AD 97-06-04, the FAA has reviewed and approved Boeing Service Bulletin 757-54-0031, Revision 4, dated November 11, 1999, which describes procedures for additional bolt hole inspections to detect further cracking of the fastener holes that promulgated in a different direction in the lower spar chord than the area described in that AD. This inspection was added due to a report of a crack in the lower spar chord on a Model 757 series airplane with fewer flight cycles than the number of flight cycles stated in the threshold table of Boeing Service Bulletin 757-54-0031, Revision 2, dated December 19, 1996. Revision 2 was referenced as the appropriate source of service information for accomplishment of the actions required by AD 97-06-04, but did not include the lower spar chord area specified in Revision 4.

Since an unsafe condition has been identified that is likely to exist or develop on other products of this same type design, the proposed AD would supersede AD 97-06-04 to continue to require inspections to detect cracking on the free edge of the tang, if necessary, and of the fastener holes in the lower spar chord; and various follow-on actions. This proposed AD also would continue to provide an optional terminating action for the repetitive inspections. This new action would add inspections to detect additional cracking of the fastener holes in the lower spar chord. This action also adds an optional terminating modification. The actions would be required to be accomplished in accordance with the service bulletin described previously, except as discussed below.

Operators should note that, although the service bulletin referenced in this AD recommends accomplishment of the second eddy current inspection within 6,000 flight cycles after accomplishment of the first inspection, this AD adds a “grace period” of 60 days due to the length of time that has passed since the issuance of that AD. The FAA has been advised that a significant number of the affected Model 757 series airplanes have already accomplished the first inspection. In developing an appropriate compliance time for this action, the FAA considered not only the degree of urgency associated with addressing the subject unsafe condition, but the manufacturer's recommendation as to an appropriate compliance time, parts availability, and the practical aspect of accomplishing the required inspection within an interval of time that parallels the normal scheduled maintenance for the majority of affected operators.

In light of this, the FAA has determined that, for operators that have already accomplished the first inspection, a “grace period” of 60 days is necessary to ensure that the affected airplanes are inspected in a timely manner and that an acceptable level of safety is maintained.

There are approximately 418 Model 757-200 series airplanes of the affected design in the worldwide fleet. The FAA estimates that 151 airplanes of U.S. registry would be affected by this proposed AD.

The inspections that are currently required by AD 97-06-04 take approximately 52 work hours per airplane to accomplish, at an average labor rate of $60 per work hour. Based on these figures, the cost impact of the currently required actions on U.S. operators is estimated to be $471,120, or $3,120 per airplane.

The new inspections that are proposed in this AD action would take approximately 4 work hours per inspection, per airplane to accomplish, at an average labor rate of $60 per work hour. Based on these figures, the cost impact of the proposed requirements of this AD on U.S. operators is estimated to be $36,240, or $240 per airplane.

The cost impact figures discussed above are based on assumptions that no operator has yet accomplished any of the current or proposed requirements of this AD action, and that no operator would accomplish those actions in the future if this AD were not adopted. The cost impact figures discussed in AD rulemaking actions represent only the time necessary to perform the specific actions actually required by the AD. These figures typically do not include incidental costs, such as the time required to gain access and close up, planning time, or time necessitated by other administrative actions.

The regulations proposed herein would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, it is determined that this proposal would not have federalism implications under Executive Order 13132.

For the reasons discussed above, I certify that this proposed regulation (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) if promulgated, 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. A copy of the draft regulatory evaluation prepared for this action is contained in the Rules Docket. A copy of it may be obtained by contacting the Rules Docket at the location provided under the caption ADDRESSES.

Accordingly, pursuant to the authority delegated to me by the Administrator, the Federal Aviation Administration proposes to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows:

As a measure to prevent the use of the United States passport in international child abduction, Congress enacted Section 236 of the Admiral James W. Nance and Meg Donovan Foreign Relations Authorization Act, Pub.L. 106-113. The Section affects the passport application process for minors under the age of 14 by requiring that both parents execute the passport application on behalf of the minor; if only one parent executes the application, that parent must establish sole authority to execute the application or the other parent's consent to the application. This law will directly affect the passport applications of about one million families each year. Although Section 236 places an additional burden on the parents of minor children under the age of 14, the statute clearly reflects a judgment that its value in reducing child abduction will be seen to outweigh the burden of establishing both parents' consent to passport applications for children.

International parental child abduction is an ever more frequent phenomenon, reflecting in part the increasing number of international marriages and the ease with which persons can travel across international boundaries. In recent years, the Department of State, the Department of Justice, and the Congress of the United States have given cases of international parental child abduction greater attention and have sought new and more effective mechanisms for dealing with them. At present, both criminal and civil remedies can be invoked to deal with parental abductions after they occur. Such cases remain extremely difficult to resolve, however, and it is clear that preventing an abduction in the first instance is preferable.

Under the Department's existing regulation, 22 CFR 51.27, a parent may request that his or her minor child's name be placed in the Department's passport namecheck clearance system so that, if an application is received for the child, the objecting parent will be notified before issuance. The passport may be denied if the Department has on file an order from a court of competent jurisdiction granting the objecting parent sole or joint custody or prohibiting the child's travel outside the court's jurisdiction without the express permission of the court or of the other parent. The Department recommends that parents who have a specific concern about international child abduction make use of the existing program in addition to relying on Section 236. The public should note that the provisions of the existing regulation extend to all minor children under age 18. This program for children under age 18 will remain in place when the new regulations relating to children under 14 go into effect.

The Department recognizes that denying passport issuance may not prevent an abduction. Many U.S. citizen children acquire a second nationality at birth through a non-U.S. citizen parent or by birth outside the United States to a U.S. citizen parent. The inability to obtain a U.S. passport, therefore, does not prevent a child from obtaining and traveling on a foreign passport. Even an exit-control system, which the United States does not have, could not fully prevent all cases of dual-national children being wrongfully removed from the United States by an abducting parent. Nevertheless, limiting access to passports for minors may have some preventative effect. Consistent with this possibility, the Congress decided that the Department's long-standing passport-denial-to-minors program should be supplemented by a requirement that both parents sign a passport application for a minor child under age 14 except in situations specified by statute or regulation. This regulation implements the new statutory requirement in a way that the Department believes meets the requirements of the statute and appropriately provides for exceptions.

The proposed regulation amends subsection 51.27(d)(l)(i) to extend it to instances when court-ordered limitations on a child's travel are brought to the Department's attention in the course of a passport application rather than by an objecting parent. This change, for example, will preclude a parent with sole custody, ordinarily entitled to apply for a child's passport under the Act, from obtaining a passport if the custody order contains a limitation on the minor's ability to travel.

Under current passport regulations, either parent or the legal guardian, regardless of citizenship, may execute a passport application on behalf of a minor under 13 years of age; minors 13 years of age and over are expected to execute their own passport applications. To implement the statutory requirement that both parents must execute the passport application on behalf of a child under the age of 14, the proposed rule raises the age at which a minor should execute his or her own application to 14. The proposed rule adds the requirement that both parents execute a passport application on behalf of a minor under the age of 14.

When only one parent is available to execute the application, that parent must provide, under penalty of perjury, documentary evidence demonstrating that he or she has sole legal custody of the child or has the written consent of the other parent to the issuance of the passport. Documents supporting sole custody or the authority to obtain a passport include, but are not limited to: a birth certificate or other official birth registration which names only the applying parent; an adoption decree naming only the adopting parent; a court order granting sole custody to the applying parent if the order does not limit the minor's ability to travel; a court order specifically authorizing passport issuance, regardless of custodial arrangements; a declaration of incompetence of the non-applying parent by a court of competent jurisdiction; the non-applying parent's death certificate.

A written statement of a parent not executing the passport application giving consent to the issuance of the passport will also be accepted at the discretion of the adjudicating officer who will take into account the totality of the circumstances in deciding whether to issue the passport.

The Department has long recognized that there are instances when it is impossible for a parent to execute a passport application on behalf of a minor. Many children are in the physical custody of relatives or foster parents, as well as adoption agencies or child welfare agencies. In accepting applications executed on behalf of minors by individuals in loco parentis, it has been the Department's policy to require that those individuals provide a notarized statement or affidavit from a parent authorizing the applying person to execute the application.

The new regulation will require that the individual executing the passport application on behalf of a minor under age 14 in loco parentis present a notarized statement from both parents or from the parent exercising parental authority. In instances when only one parent grants in loco parentis, the same documentary evidence required when only one parent executes a passport application on behalf of a minor under age 14 to demonstrate that person's sole authority should accompany the application.

The statute provides for two exceptions to the general requirement: (1) exigent circumstances involving the health and welfare of the child; or, (2) when the Secretary of State determines that issuance of a passport is warranted by special family circumstances.

Exigent circumstances are defined as time-sensitive circumstances when the inability of the minor to obtain a passport would jeopardize the health or welfare of the minor. The requirement of establishing the second parent's consent to issuance of the passport or formal documentation of the reason for the absence of the second parent may be waived in such circumstances.

Examples of exigent circumstances include, but are not limited to: instances when the minor must travel to receive emergency medical treatment; when a minor's passport is lost or stolen while traveling accompanied by only one parent or traveling unaccompanied with a school, church or other group; when the minor needs to travel because of the serious illness of a person in the minor's immediate family, or, when failure to issue would prevent the child from returning to the U.S. and there is insufficient time before travel is necessary to obtain the normally required documentation.

Special family circumstances are defined as circumstances when the minor's family situation prevents one or both of the parents from executing the passport application. As with the exigent circumstance exception, the requirement of establishing the second parent's consent or formal documentation of the reason for the absence of the second parent is waived. Examples of special family circumstances include, but are not limited to, instances when the second parent is unable to apply for the passport in person or to provide a statement authorizing the application and issuance of the passport because he or she has abandoned the family or is unavailable due to serious health problems. Individuals claiming a special family circumstance will be required to provide a statement, under penalty of perjury, explaining the special family circumstance.

Decisions to apply this exception will be made by the Deputy Assistant Secretary for Passport Services or a senior passport adjudicator within the United States, or by the Deputy Assistant Secretary for Overseas Citizens Services or a consular officer if abroad.

While the great majority of passports are issued within the United States, a significant number are issued annually to U.S. citizens living and traveling overseas. We anticipate that parents overseas generally will comply fully with the requirements of the law in much the same manner as parents applying within the United States. Nonetheless, in proposing these regulations, the Department has sought to take into account, and provide for, certain differing circumstances that pertain in much greater measure to the issuance of U.S. passports overseas. For example, exigent circumstances would include instances when a delay in departure would pose a grave danger for the minor abroad. Civil unrest, natural disaster, war, or invasion may make imperative the urgent travel or evacuation of U.S. citizens, particularly minors, from such regions. In less dramatic fashion, exigent circumstances could encompass a situation when, for example, a child traveling with a school group loses his or her passport and would need a replacement to remain with the group in its ongoing travel. Despite the lack of time to procure documents or statements relating to parental consent, it is essential that a passport be issued quickly in both cases, and as the exigent circumstances exception in subsection (b) permits, to protect the health and welfare of the minor.

Circumstances overseas can differ in another respect. Specifically, the U.S. consular officer may have access to post registration records that relate to family situations. Particularly in smaller countries, an officer may have personal knowledge of a family situation, e.g., that the child is in the care of an individual in loco parentis or the fact that a parent is widowed, which would be relevant in a situation when documentary evidence was not available or could not be obtained in a timely fashion. Accordingly, the proposed rule will give the Department flexibility to utilize such information in this and other instances, consistent with the consular officer's exercise of good judgment, as allowed by the statute's reference to special family circumstances.

Section 51.1 is amended to provide a definition of “passport application”. Section 51.21 is amended to incorporate the two-parent signature requirement to passport renewals by minors under the age of 14 and to provide for compliance with the two-parent signature requirement in mail-in applications abroad. Section 51.27 is amended to raise the age after which a minor should execute his or her own passport application from 13 to 14. Sections 51.40 and 51.41 are amended to bring them into conformity with current passport practice regarding individuals included in the passport and to comply with the requirements of the Act. Since 1981, U.S. passports have been issued to document only the bearer: they do not include any other person. The regulation is amended to reflect that change. Section 51.41 is also amended to require applicants under the age of 14, whether applying for their first passport or for a renewal, to present evidence of parentage in addition to evidence of nationality. This will assist in the adjudication not only of the citizenship of the minor under age 14, but in the determination of the parent(s) entitled to obtain a passport on the minor's behalf. The document should include the name, date and place of birth of the child and the name(s) of the parent(s).

These proposed changes to the regulations are not expected to have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act, 5 U.S.C. 605(b). They impose certain information collection requirements under the provisions of the Paperwork Reduction Act, 44 U.S.C. Chapter 35. These rules have no federalism implications warranting the preparation of a Federalism Assessment in accordance with E.O. 12988. These rules are exempt from review under E.O. 12988 but have been reviewed and found consistent with its objectives.

Accordingly, for the reasons set forth in the preamble, 22 CFR Part 51 is amended as follows:

This document contains proposed amendments to the Income Tax Regulations (26 CFR part 1) under section 121 of the Internal Revenue Code relating to the exclusion of gain from the sale or exchange of a taxpayer's principal residence. These proposed regulations reflect changes to the law made by the Taxpayer Relief Act of 1997, Public Law 105-34 (111 Stat. 788 (TRA 1997)), as amended by the Internal Revenue Service Restructuring and Reform Act of 1998, Public Law 105-206 (112 Stat. 805 (RRA 1998)).

Prior to the repeal by TRA 1997, section 1034 provided that gain from the sale or exchange of a principal residence (old residence) was recognized only to the extent that the taxpayer's adjusted sales price of the old residence exceeded the taxpayer's cost of purchasing a new residence within the replacement period (generally 2 years before or after the date of sale).

Prior to amendment by TRA 1997, former section 121 provided that a taxpayer could make a one-time election to exclude up to $125,000 of gain from the sale or exchange of property. To qualify for the exclusion, the taxpayer must have: (1) Been age 55 or older on the date of the sale or exchange; and (2) owned and used the property as the taxpayer's principal residence for at least 3 years during the 5-year period ending on the date of the sale or exchange.

TRA 1997 amended section 121 and repealed section 1034 for sales and exchanges of principal residences after May 6, 1997 (except, at the election of the taxpayer, to a sale or exchange: (1) Made on or before August 5, 1997; (2) made pursuant to a binding contract in effect on August 5, 1997; or (3) that would qualify under section 1034 by reason of a new residence acquired on or before August 5, 1997 or pursuant to a binding contract in effect on August 5, 1997). Under section 121 as amended, a taxpayer generally excludes up to $250,000 ($500,000 for certain joint returns) of gain realized on the sale or exchange of property if the property was owned and used as the taxpayer's principal residence for at least 2 years during the 5-year period ending on the date of the sale or exchange. The exclusion applies regardless of the age of the taxpayer, and the full exclusion can be used only once every 2 years. A taxpayer who fails to meet these requirements by reason of a change in place of employment, health, or, to the extent provided in regulations, unforeseen circumstances may be entitled to a reduced exclusion.

RRA 1998 amended TRA 1997 to clarify that the reduced exclusion amount under section 121(c) is a portion of the maximum limitation amount ($250,000 or $500,000 for certain joint returns), not a portion of the realized gain. See H.R. Rep. No. 356, 105th Cong., 1st Sess. 17 (1997); S. Rep. No. 174, 105th Cong., 2d Sess. 150 (1998). In addition, the amendments provided that for married taxpayers filing jointly but failing to meet the ownership, use, or timing requirements of section 121(b)(2)(A), the maximum limitation amount will be the sum of each spouse's limitation amount determined on a separate basis as if they had not been married. S. Rep. No. 174, 105th Cong., 2d Sess. 151 (1998); H.R. Conf. Rep. No. 599, 105th Cong., 2d Sess. 337 (1998). Lastly, the amendments clarified that a taxpayer may elect to apply prior law under section 1034 or former section 121 to a sale or exchange occurring on as well as before the date of enactment, August 5, 1997. H.R. Rep. No. 356, 105th Cong., 1st Sess. 18 (1997); S. Rep. No. 174, 105th Cong., 2d Sess. 151 (1998).

This document also contains proposed amendments to the Income Taxation Regulations (26 CFR part 1) under section 1398 of the Internal Revenue Code. Under the authority provided in section 1398(g)(8), the regulations add the section 121 exclusion to the list of tax attributes of the debtor that the bankruptcy estate of an individual in a chapter 7 or 11 bankruptcy case under title 11 of the United States Code succeeds to and takes into account in computing the taxable income of the estate. Although these regulations are proposed to be applicable on or after the date they are published as final regulations in the Federal Register, in view of the IRS's acquiescence in the case of Internal Revenue Service v. Waldschmidt (In re Bradley), AOD CC-1999-009 (August 30, 1999), and Chief Counsel Notice (35)000-162 (August 10, 1999), the IRS will not challenge the position taken prior to the effective date of these regulations that a bankruptcy estate may use the section 121 exclusion if the debtor would otherwise satisfy the section 121 requirements.

Section 1.121-1(b) of the proposed regulations addresses the definition of principal residence. This section provides that whether or not property is the taxpayer's principal residence, and whether or not property is used by the taxpayer as the taxpayer's principal residence (in the case of a taxpayer using more than one property as a residence), depends upon all the facts and circumstances. If a taxpayer alternates between two properties, using each as a residence for successive periods of time, the property that the taxpayer uses a majority of the time during the year will ordinarily be considered the taxpayer's principal residence.

Section 1.121-1(c) of the proposed regulations addresses the use requirement under section 121(a). This section provides that, in order for a taxpayer to satisfy the use requirement under section 121(a), the taxpayer must occupy the residence (except for short temporary absences) for at least 2 years during the 5-year period ending on the date of the sale or exchange. See H.R. Rep. No. 148, 105th Cong., 1st Sess. at 348 (1997); S. Rep. No. 33, 105th Cong., 1st Sess. at 37 (1997); H.R. Conf. Rep. No. 220, 105th Cong., 1st Sess. at 386 (1997).

Section 1.121-1(d) provides that the section 121 exclusion does not apply to so much of the gain from the sale or exchange of property as does not exceed the portion of the depreciation adjustments (as defined in section 1250(b)(3)) attributable to periods after May 6, 1997, in respect of the property.

Section 1.121-1(e) of the proposed regulations provides that if a taxpayer satisfies the use requirement only with respect to a portion of the property sold or exchanged, section 121 will apply only to the gain from the sale or exchange allocable to that portion. Thus, if the residence was used partially for residential purposes and partially for business purposes, only that part of the gain allocable to the residential portion is excludable under section 121. Furthermore, the section 121 exclusion does not apply to the extent that depreciation attributable to periods after May 6, 1997, exceeds gain allocable to the business-use portion of the property.

Under section 121(c), a reduced exclusion is available for a taxpayer who sells or exchanges property used as the taxpayer's principal residence but fails to satisfy the ownership and use requirements described in section 121(a) or the 2-year limitation described in section 121(b)(3). Section 1.121-3(a)(1) of the proposed regulations provides that the reduced exclusion applies only if the sale or exchange is necessitated by a change in place of employment, health, or, to the extent provided in forms, instructions, or other appropriate guidance including regulations and letter rulings, unforeseen circumstances. The IRS and the Treasury Department request written comments regarding what should qualify as an unforeseen circumstance for purposes of determining whether a taxpayer is eligible to claim the reduced exclusion available under section 121(c).

Under section 121(d)(8), a taxpayer must make an election to have the section 121 exclusion apply to a sale or exchange of a remainder interest in the taxpayer's principal residence. Section 1.121-4(f)(3) provides that the taxpayer makes the election by filing a return for the taxable year of the sale or exchange that does not include the gain from the sale or exchange of the remainder interest in the taxpayer's gross income.

Under section 121(f), a taxpayer must make an election to have the section 121 exclusion not apply to a sale or exchange of the taxpayer's principal residence. Section 1.121-4(h) provides that the taxpayer makes the election by filing a return for the taxable year of the sale or exchange that includes the gain from the sale or exchange of the residence in the taxpayer's gross income.

Section 1.1398-3 of the proposed regulations provides that the bankruptcy estate of an individual in a chapter 7 or 11 bankruptcy case under title 11 of the United States Code succeeds to and takes into account the debtor's section 121 exclusion if the taxpayer satisfies the requirements of section 121.

These regulations are proposed to be applicable for sales or exchanges that occur on or after the date they are published as final regulations in the Federal Register.

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because these regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Internal Revenue Code, this notice of proposed rulemaking will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Before these proposed regulations are adopted as final regulations, consideration will be given to any electronic or written comments (a signed original and eight (8) copies of written comments) that are submitted timely (in the manner described in the ADDRESSES caption) to the IRS. The IRS and Treasury request comments on the clarity of the proposed rules and how they may be made easier to understand. All comments will be available for public inspection and copying.

A public hearing has been scheduled for January 23, 2001, beginning at 10 a.m. in the IRS Auditorium, Seventh Floor, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC. Due to building security procedures, visitors must enter at the 10th Street entrance, located between Constitution and Pennsylvania Avenues, NW. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 15 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the FOR FURTHER INFORMATION CONTACT section of the preamble.

The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments at the hearing must submit written comments and an outline of the topics to be discussed and the time to be devoted to each topic (signed original and eight (8) copies) by January 3, 2001. A period of 10 minutes will be allotted to each person making comments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing.

The principal author of these regulations is Sara P. Shepherd, Office of Assistant Chief Counsel (Income Tax and Accounting). However, other personnel from the IRS and the Treasury Department participated in the development of the regulations.

Accordingly, 26 CFR part 1 is proposed to be amended as follows:

Pursuant to sections 182 and 184 of the Clean Air Act (CAA), States are required to implement RACT for major sources of volatile organic compounds (VOCs) and/or nitrogen oxides (NO X ) emissions which are: (1) Located in those areas which have not attained the National Ambient Air Quality Standard for ozone (ozone nonattainment areas) which are designated in 40 CFR part 81 as having moderate or above nonattainment problems; or (2) located in the ozone transport region (OTR), which was established by section 184 of the CAA. A source is defined as major if its VOC and/or NO X emissions exceed specified levels, defined in sections 182 and 184 of the CAA, which vary depending upon the ozone air quality designation of the area where the source is located, and on whether or not the source is located in the OTR.

Pursuant to the CAA's requirements, the Commonwealth of Virginia (the Commonwealth) submitted revisions to its SIP consisting of regulations pertaining to RACT requirements for major NO X and VOC sources located in ozone nonattainment areas and in its portion of the OTR. The Commonwealth's regulation pertaining to RACT requirements for major NO X sources, for which EPA granted conditional limited approval on April 28, 1999 (64 FR 22789), provides that sources with steam generating units, process heaters, or gas turbines either accept specified RACT limits for these units or request case-by-case RACT determinations for them. The regulation also provides that sources with other types of emission units must obtain case-by-case RACT determinations for those units.

The Commonwealth's regulation pertaining to RACT requirements for major VOC sources, which EPA approved on March 12, 1997 (62 FR 11332), provides that subject sources obtain case-by-case RACT determinations.

When EPA granted conditional limited approval of the Commonwealth's RACT regulation applying to major NO X sources, EPA established the condition that the Commonwealth was required to submit its case-by-case RACT determinations for NO X sources to EPA for incorporation into the Commonwealth's SIP.

The Commonwealth established case-by-case RACT requirements for sources which had requested RACT determinations pursuant to the provisions of the Commonwealth's RACT regulations. This proposed rulemaking action pertains to the Commonwealth's request that EPA revise the Commonwealth's SIP to include the Commonwealth's case-by-case RACT SIP submittals for 16 sources. The Commonwealth's submittals consist of operating permits and/or consent agreements which contain the RACT requirements for each source, as well as supporting documentation.

The 16 sources for which the Commonwealth submitted case-by-case RACT determinations, their types and locations, the pollutants they emit for which RACT requirements are established, and the dates of the Commonwealth's RACT SIP submittals for them are listed in the table found in Section III below, entitled, “Proposed RACT SIP Revision Approvals.” The emission limitations and other RACT requirements for each of these sources are discussed in the TSD prepared by EPA in support of this proposed action. The TSD is included in the administrative record for this rulemaking action, and is available upon request from the EPA Region III office listed in the ADDRESSES section of this document.

EPA is proposing to approve the Commonwealth of Virginia's RACT SIP revisions for the sources listed in the table, below:

In 1995, Virginia adopted legislation that provides, subject to certain conditions, for an environmental assessment (audit) “privilege” for voluntary compliance evaluations performed by a regulated entity. The legislation further addresses the relative burden of proof for parties either asserting the privilege or seeking disclosure of documents for which the privilege is claimed. Virginia's legislation also provides, subject to certain conditions, for a penalty waiver for violations of environmental laws when a regulated entity discovers such violations pursuant to a voluntary compliance evaluation and voluntarily discloses such violations to the Commonwealth and takes prompt and appropriate measures to remedy the violations.

Virginia's Voluntary Environmental Assessment Privilege Law, Va. Code Section 10.1-1198, provides a privilege that protects from disclosure documents and information about the content of those documents that are the product of a voluntary environmental assessment. The Privilege Law does not extend to documents or information: (1) That are generated or developed before the commencement of a voluntary environmental assessment; (2) that are prepared independently of the assessment process; (3) that demonstrate a clear, imminent and substantial danger to the public health or environment; or (4) that are required by law.

On January 12, 1997, the Commonwealth of Virginia Office of the Attorney General provided a legal opinion that states that the Privilege law, Va. Code Section 10.1-1198, precludes granting a privilege to documents and information “required by law,” including documents and information “required by federal law to maintain program delegation, authorization or approval,” since Virginia must “enforce federally authorized environmental programs in a manner that is no less stringent than their federal counterparts. * * *” The opinion concludes that “[r]egarding § 10.1-1198, therefore, documents or other information needed for civil or criminal enforcement under one of these programs could not be privileged because such documents and information are essential to pursuing enforcement in a manner required by federal law to maintain program delegation, authorization or approval.”

Virginia's Immunity law, Va. Code Section 10.1-1199, provides that “[t]o the extent consistent with requirements imposed by Federal law,” any person making a voluntary disclosure of information to a state agency regarding a violation of an environmental statute, regulation, permit, or administrative order is granted immunity from administrative or civil penalty. The Attorney General's January 12, 1997 opinion states that the quoted language renders this statute inapplicable to enforcement of any federally authorized programs, since “no immunity could be afforded from administrative, civil, or criminal penalties because granting such immunity would not be consistent with federal law, which is one of the criteria for immunity.” Therefore, EPA has determined that Virginia's Privilege and Immunity statutes will not preclude the Commonwealth from enforcing its program consistent with the federal requirements.

In any event, because EPA has also determined that a state audit privilege and immunity law can affect only state enforcement and cannot have any impact on federal enforcement authorities, EPA may at any time invoke its authority under the Clean Air Act, including, for example, sections 113, 167, 205, 211 or 213, to enforce the requirements or prohibitions of the state plan, independently of any state enforcement effort. In addition, citizen enforcement under section 304 of the Clean Air Act is likewise unaffected by this, or any, state audit privilege or immunity law.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this proposed action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. This proposed action merely approves state law as meeting federal requirements and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this proposed rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ).

Because this rule proposes to approve pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Public Law 104-4). For the same reason, this proposed rule also does not significantly or uniquely affect the communities of tribal governments, as specified by Executive Order 13084 (63 FR 27655, May 10, 1998).

This proposed rule will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999), because it merely approves a state rule implementing a federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. This proposed rule also is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997), because it is not economically significant.

In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards (VCS), EPA has no authority to disapprove a SIP submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a SIP submission, to use VCS in place of a SIP submission that otherwise satisfies the provisions of the Clean Air Act. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply.

As required by section 3 of Executive Order 12988 (61 FR 4729, February 7, 1996), in issuing this proposed rule, EPA has taken the necessary steps to eliminate drafting errors and ambiguity, minimize potential litigation, and provide a clear legal standard for affected conduct.

EPA has complied with Executive Order 12630 (53 FR 8859, March 15, 1988) by examining the takings implications of the rule in accordance with the “Attorney General's Supplemental Guidelines for the Evaluation of Risk and Avoidance of Unanticipated Takings' issued under the executive order.

This proposed rule pertaining to RACT SIP revisions for 16 sources in Virginia does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

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

On October 5, 1978, we promulgated primary and secondary National Ambient Air Quality Standards (NAAQS) for Pb and its compounds, measured as elemental Pb (40 CFR 50.12). The primary and secondary standards were set at 1.5 micrograms per cubic meter ( μ g/m 3 ), maximum arithmetic mean, averaged over a calendar quarter. On July 9, 1984, we approved a revision to the Montana SIP which set forth a Pb control strategy to provide for attainment and maintenance of the Pb NAAQS in East Helena. In response to continuing violations of the Pb NAAQS following implementation of the July 9, 1984 SIP, on October 1, 1988, we sent a letter to the Governor of Montana, providing notification that the Pb SIP for East Helena was inadequate to attain and maintain the Pb NAAQS. We published this notification on December 2, 1988 in 53 FR 48642. Pursuant to the new authority in the 1990 amendments to the Act, on November 6, 1991, we designated the East Helena area as a nonattainment area for Pb. This designation was effective on January 6, 1992 and required the State to submit a Part D SIP by July 6, 1993. The SIP must provide for attainment of the Pb NAAQS as expeditiously as practicable, but no later than January 6, 1997.

The Montana Department of Environmental Quality (MDEQ) developed the Pb SIP for East Helena in consultation with the ASARCO primary Pb smelter, the major Pb source in East Helena, and American Chemet, a paint pigment plant. The State's efforts have been coordinated with us to ensure compliance with SIP requirements. On August 16, 1995, the Governor of Montana submitted the first Pb SIP revision. This submittal consists of (1) a Montana Board of Environmental Review (MBER) approved order which adopted the stipulation between MDEQ and ASARCO, as well as controlled emissions on some of the streets of East Helena, and (2) a MBER approved order which adopted the stipulation between MDEQ and American Chemet. On July 2, 1996, the Governor of Montana submitted the second Pb SIP revision. This submittal consists of MBER orders and stipulations, between MDEQ and ASARCO, approved on April 12, 1996 and June 21, 1996. The Governor of Montana submitted the third Pb SIP revision on October 20, 1998 which included an August 28, 1998 board order adopting the stipulation between MDEQ and ASARCO. The third Pb SIP revision, dated October 20, 1998, was submitted to make the SIP consistent with permit conditions in Montana Air Quality Permits # 2557-08, dated January 3, 1997, and # 2557-09, dated April 6, 1998. On April 28, 2000, MDEQ submitted a formatting revision to the SIP correcting a typographical error in the footnotes of the SIP.

These Pb SIP revisions were reviewed using the criteria established by the Act. The requirements for all SIPs are contained in section 110(a)(2) of the Act. Section 172(c) of the Act specifies the provisions applicable to areas designated as nonattainment for any of the NAAQS. Further guidance and criteria are set forth in the “State Implementation Plans for Lead Nonattainment Areas; Addendum to the General Preamble for the Implementation of Title I of the Clean Air Act Amendments of 1990” (58 FR 67748).

Our Technical Support Document (TSD) for this action discusses our criteria for deciding whether to approve or disapprove the East Helena Pb SIP and whether or not the State of Montana's submittals satisfy those criteria. The TSD also discusses most of the issues we raised on various drafts and final submittals of the East Helena Pb SIP revisions and how the State of Montana addressed these issues. See the TSD for a more detailed review of the Pb SIP and how it satisfies the Act's requirements.

We are proposing to partially approve the East Helena Pb SIP revisions, submitted by the Governor of Montana on August 16, 1995, July 2, 1996, and October 20, 1998. Except for those provisions that we are proposing to partially disapprove, we believe the submitted plans satisfy the Act's requirements for Pb nonattainment areas.

On August 16, 1995, the Governor of Montana submitted the first Pb SIP revision. This submittal consists of (1) a MBER approved order which adopted the stipulation between MDEQ and ASARCO to limit Pb emissions from ASARCO's Pb smelting operations as well as controlled emissions on some of the streets of East Helena, and (2) a MBER approved order which adopted the stipulation between MDEQ and American Chemet to limit Pb emissions from the # 1 Copper Furnace Baghouse Stack.

On July 2, 1996, the Governor of Montana submitted the second Pb SIP revision. This submittal contains a series of orders approved by the MBER adopting stipulations between MDEQ and ASARCO. An April 12, 1996 board order and stipulation allows ASARCO operational flexibility, while still assuring attainment and maintenance of the NAAQS for Pb in the East Helena area. A June 21, 1996 board order and stipulation revises ASARCO's method for handling furnace Pb based on safety and engineering concerns.

On March 24, 1998, we sent MDEQ comments on this Pb SIP revision asking for clarification on emission limits and inventory, air modeling, ambient data, department discretion, and other general issues. Based on the November 16, 1999 response from MDEQ, we have determined the SIP revision is acceptable, except for the department discretion issues and enforceability concerns with two test methods. We are proposing to grant a partial disapproval due to the department discretion issues and enforceability concerns with two test methods in the East Helena Pb SIP.

On October 20, 1998, the Governor of Montana submitted the third Pb SIP revision which included a June 12, 1998 board order adopting the stipulation between MDEQ and ASARCO. These modifications allow ASARCO to change the emission control and ventilation system for a specific operation. These changes to the emission control system will not result in any changes in emission limitations at the ASARCO facility. On April 28, 2000, MDEQ submitted a formatting revision to the SIP correcting a typographical error in the footnotes of the SIP.

On September 9, 1998, the MDEQ responded to our comments on the draft version of this Pb SIP revision. We were concerned the proposed changes contravened our stack height rules, and questioned ASARCO's possible use of dispersion techniques, such as changes in volumetric flow rate and final exhaust gas plume rise. The MDEQ adequately documented its basis for concluding that the proposed changes do not constitute prohibited dispersion techniques and assured us that the proposed changes comply with the stack height rules. We have concluded, based on the information MDEQ provided, that these revisions result in a negligible change in volumetric flow rate and final exhaust gas plume rise, and result in no change in the operation of specific equipment or other parameters that might affect the exhaust gas stream. Therefore, we agree that the changes at ASARCO do not contravene section 123 of the Act or our stack height rules.

Section 110(k) of the Act addresses our actions on submissions of SIP revisions. The Act also requires States to observe certain procedures in developing SIP revisions. Section 110(a)(2) of the Act requires that each SIP revision be adopted after reasonable notice and public hearing. We have evaluated the State's submissions and determined that the necessary procedures were followed.

We are proposing to partially disapprove this SIP revision, because it does not fully meet the Act provisions regarding plan submissions and requirements for nonattainment areas. The current version of East Helena's Pb SIP does not conform to the requirement of section 110(a)(2) of the Act that SIP limits must be enforecable nor to the requirement of section 110(i) that the SIP can only be modified through the SIP revision process. In our March 24, 1998 letter to MDEQ, we raised concerns about places in the stipulation where MDEQ has the discretion to modify existing provisions, or add future documents or compliance monitoring methods to the Pb SIP. The stipulations were not clear whether any of these changes would be submitted as SIP revisions or by any other process for us to review and approve. We indicated in places where the stipulation allowed MDEQ to exercise discretion, the words “and EPA” must be added. The State did not revise the SIP to address our concern and in its November 16, 1999 response, MDEQ indicated that the department discretion issues would be addressed at a later date. We are proposing to partially disapprove the SIP because of the provisions which allow department discretion and two provisions which contain enforceability issues related to the test method.

By partially approving the SIP, we are making those portions of the State's submittal federally enforceable (and enforceable by citizens under the Act). These portions of the SIP that we partially disapprove are not made federally enforceable. We believe that the proposed partial approval of the East Helena Pb SIP, except for those provisions that we are proposing to partially disapprove, satisfy the Act's criteria for Pb nonattainment SIPs. Even though we are proposing to partially disapprove portions of the SIP, the State is not required to revise the SIP to fully meet the Act's Pb nonattainment requirements. Therefore, because the State is not required to complete any further SIP revisions as a result of the partial disapproval, sanctions and Federal Implementation Plan clocks (FIP) under sections 179(a) and 110(c), repsectively, will not be started if we finalize our proposal to partially disapprove the East Helena Pb SIP.

Section 172(c)(3) of the Act requires that nonattainment plan provisions include a comprehensive, accurate, current inventory of actual emissions from all sources of relevant pollutants in the nonattainment area. The MDEQ identified three major sources of Pb in the East Helena area: the ASARCO Smelter complex; re-entrained dust from the roads of East Helena; and the American Chemet copper oxide manufacturing facility.

The North American Weather Consultants (NAWC) conducted a detailed Pb emission inventory of the ASARCO smelter facility in the summer and fall of 1990. The NAWC developed a complete testing protocol describing test locations and actual test methods. The final emission inventory is located in the “ASARCO East Helena Primary Lead Smelter Task 5 Summary Report Volumes 1-5,” NAWC, May 1992. We reviewed the testing protocol and emissions inventory in detail and provided numerous comments to the State. The State and ASARCO responded to most of our comments. We believe the report provides, for the most part, a complete and accurate Pb emission inventory of the entire facility for use in dispersion modeling studies.

The MDEQ conducted a base year Pb emission inventory of the town of East Helena. The final report is entitled “East Helena Lead Emission Inventory” and dated February 1992. This effort focused mainly on the Pb emissions from re-entrained road dust but also included Pb emission estimates from automobile exhaust, wind erosion of barren ground, and agricultural tillage. The base year selected for this study ran from July 1, 1990 through June 30, 1991. Results of the study show that re-entrained road dust accounts for 93.6% of the total annual Pb emissions, while automobile tailpipe emissions contribute 3.8%. The remaining 2.6% of the total Pb emissions comes from parking lots, unpaved roads, wind erosion, and agricultural sources. 1

The MDEQ conducted an emissions inventory of the American Chemet facility between July 1, 1990 and June 30, 1991. The MDEQ used historical testing data, along with a log of actual hours of operation, and material processed, to estimate Pb emissions during the study period. The MDEQ inventoried a total of 16 point sources, including scrubber and baghouse exhausts, during the study period. A supplemental report prepared by the Department, entitled “American Chemet Corporation 1990 Emission Inventory,” contains complete details of the emission inventory for American Chemet.

Results of the emission inventory showed that only one point source, the #1 Copper Furnace Baghouse Stack (previously referred to as the pyrometallurgical process baghouse stack), had Pb emissions significant enough to be considered in the Pb SIP revision for East Helena. None of the other sources at this facility were considered further in the Pb SIP. We support the emission inventories prepared for the sources in the Pb nonattainment area because they appear to be accurate and MDEQ has addressed our previously identified concerns.

Section 172(c)(1) of the Act mandates that SIPs provide for the implementation of RACM as expeditiously as practicable, including RACT. Our Addendum to the General Preamble for the implementation of Title I of the Act defines RACT for Pb as a control technology which is necessary to achieve the NAAQS (58 FR 67750, December 22, 1993). The same document provides that RACM for Pb should be determined by evaluating the available control measures for reasonableness, considering their technological feasibility, and the cost of control in the area to which the SIP applies. In determining what is reasonably available (for RACM), our guidance indicates that areas should evaluate all the measures contained in Appendix 1 to the Lead Addendum to the General Preamble, and provide a reasoned justification for rejection of any available control measure. Based on our comparison of the available control measures (identified in Appendix 1) and those incorporated into this Pb SIP, we find that, for the most part, ASARCO is implementing most of the available measures. Therefore, we believe the State has demonstrated that the control measures applied to ASARCO, American Chemet, and the streets of East Helena are reasonable and will maintain the Pb NAAQS.

The control strategy for the Pb SIP requires ASARCO to enclose various buildings or areas, install baghouses, develop a new technology for handling furnace Pb, capture fugitive emissions, build dust conveying and handling systems, and eliminate some emission sources. In addition, there are emission limitations on various emission points, process weight limitations, time-of-day restrictions and wind speed limitations on material handling, minimum ventilation requirements on building ventilation systems, and property access restrictions. There is also a five percent visible emission limitation on the paved and unpaved roads and areas within the ASARCO facility, and a requirement to treat the unpaved areas and sweep the paved areas to reduce fugitive Pb emissions.

The MDEQ has offered American Chemet two options as part of the control strategy. If American Chemet chooses not to build a new stack, it is subject to a more stringent emission limit on its existing stack. If it chooses to build a higher stack, it has a less stringent emission limit on the new stack. Regardless of the option chosen, modeling has shown that the area will continue to attain the Pb NAAQS. Finally, American Chemet will also adopt a limit on the Pb content of its plant feed material.

With respect to the East Helena road dust, MDEQ requires ASARCO to sample road dust on paved public streets and roads, and maintain the streets so that they meet the quarterly average Pb loading limits.

All measures and other elements in this Pb SIP revision must be enforceable by the State and us (see sections 172(c)(6), 110(a)(2)(A), and 57 FR 13556). The ASARCO and American Chemet stipulations explicitly provide for applicability of the regulations, compliance dates, compliance periods, recordkeeping requirements, test methods, and malfunction provisions. In our judgement, these provisions are sufficiently clear and prescriptive to meet reasonable standards of enforceability, with two exceptions. The current version of East Helena's Pb SIP does not conform to requirements of the Act nor our policy with respect to department discretion and enforceability. In our March 24, 1998 letter to MDEQ, we raised concerns about places in the stipulation where MDEQ has the discretion to modify existing provisions or add future documents or compliance monitoring methods to the Pb SIP. The stipulations were not clear whether any of these changes would be submitted as SIP revisions or by any other process for us to review and approve. We indicated in places where the stipulation allowed MDEQ to exercise discretion, the words “and EPA” must be added. The provisions containing department discretion are discussed in Table 1 below:

In addition to the department discretion issues, we believe that sections 2(A)(22) and 2(A)(28), of ASARCO Exhibit A, contain enforceability problems. These sections, which discuss how moisture content and silt content will be determined, indicate that sampling will be performed by specified methods or equivalent methods. The definition is not clear who will determine that the equivalent methods are acceptable. Any revision to a testing method or provision should be evaluated for significance and if determined to be significant, the revision must be approved as a SIP revision or approved through the Title V process. (See footnote 2 above.)

Because these provisions could allow changes in requirements without EPA and public review or EPA approval, and could allow use of test methods not accepted by us, the East Helena Pb SIP revisions present Federal enforceability issues and thus fail to comply with the general enforceability provisions of section 172(c)(6) of the Act. Therefore, we are proposing to partially approve and partially disapprove the Pb SIP revision under section 110(k)(3) of the Act. With this partial approval and partial disapproval, we are incorporating into the federally approved SIP all provisions of the stipulation, exhibits, and attachments except those provisions that allow the Department or sources to modify the SIP without seeking SIP approval through us. (Please see the proposed regulatory text at the end of this notice for the exact provisions we are proposing to partially disapprove.) We note that portions of the SIP we are proposing to partially approve indicate that under certain circumstances ASARCO may need to revise attachments to Exhibit A. Since we are not proposing to approve the Department's discretion to allow these revisions unilaterally, we interpret these provisions to mean that revisions to the attachments for Exhibit A will be adopted at the State level and submitted as a SIP revision to us for approval. Additionally, we do not believe that our proposed partial disapproval of the above-mentioned provisions would render the SIP more stringent than the State of Montana intends, since our action does not change the stringency of any of the substantive requirements the State of Montana has imposed and is currently able to enforce under the SIP.

The Pb SIP must provide for RFP, defined in section 172(c)(2) of the Act as such reductions in emissions of the relevant air pollutant as are required by Part D, or may reasonably be required by the Administrator for the purpose of ensuring attainment of the applicable NAAQS by the applicable date. As discussed in the Lead Addendum to the General Preamble, we construe RFP as “adherence to an ambitious compliance schedule” which is expected to periodically yield significant emission reductions, and, as necessary, linear progress. The Pb SIP provides for an ambitious compliance schedule but does not quantify the achievable emission reductions for each measure, since most of the measures should be implemented by the attainment date and not on a staggered schedule before the attainment date. However, since the attainment date of January 6, 1997 has passed and all evidence indicates that the area is attaining the Pb NAAQS, we conclude this Pb SIP has met the RFP requirements.

As provided in section 172(c)(9) of the Act, all nonattainment area SIPs must include contingency measures. Contingency measures should consist of other available measures that are not part of the area's control strategy for attaining the NAAQS. These measures must take effect without further action by the state or us, upon a determination that the area has failed to meet RFP or attain the Pb NAAQS by the applicable statutory deadline. The MDEQ will implement the contingency measures for the East Helena Pb SIP following a Pb NAAQS violation after the first calendar quarter of 1997, or if there is a lack of RFP. The contingency measures consist of two tiers, Tier I and Tier II. The MDEQ has designed the two-tier approach to address possible multiple violations, and to target any significant additional sources of Pb as predicted by the model.

Tier I contingency measures contain measures such as reducing outdoor storage of sinter material, ceasing operation during the night shift, imposing a more stringent Pb loading limit on the East Helena paved roads, paving or treating some unpaved streets in East Helena, and reducing spills on East Helena streets. The Tier II contingency measures contain measures such as imposing an even more stringent Pb loading limit on the East Helena paved roads, eliminating all storage and handling of sinter outdoors, and paving or covering 50,000 square feet of surface area within the ASARCO facility. If ASARCO implements these measures as a result of a failure to make RFP, once the RFP deficiency has been corrected, the contingency measures will be lifted. If these measures are implemented due to a violation of the Pb NAAQS, the measures will remain in effect until the Board approves a revised Pb SIP. We believe the Pb SIP meets the contingency measures requirements.

Section 192(a) of the Act requires that SIPs must provide for attainment of the Pb NAAQS as expeditiously as practicable but not later than five years from the date of an area's nonattainmnet designation. Through modeling, the State has demonstrated that the emission points (at ASARCO and American Chemet), and the area emissions from the streets of East Helena, at their allowable limits, will protect the Pb NAAQS, i.e., there will be no violations of the Pb NAAQS. Subsequent to the initial modeled attainment demonstration, there have been a few changes to the control strategy, but we believe they will not cause or contribute to a violation of the NAAQS. First, ASARCO increased the percent Pb per pot processed which correlates to an increase in the Pb emission limit at the Laboratory Assay Stacks. In our March 24, 1998 letter to MDEQ, we requested that MDEQ provide us with the modeling diskettes. In its November 16, 1999 response, MDEQ indicated there are no diskettes because it did not rerun the model, but simply extracted the values from the previous model, and scaled up the predicted concentrations. We have determined this to be sufficient because: (1) The emission point is one of the smaller sources, (2) there is a linear relationship between the percent Pb per pot processed and the Pb emission limit, (when percent Pb per pot processed increases, the Pb emission limit increases at the same rate) and (3) when the limit is scaled up, there was not an exceedance of the Pb NAAQS.

Secondly, American Chemet may elect to raise its stack. The American Chemet stipulation allows American Chemet to choose between one of two emission limits depending on the stack height (20 meters (m) or 8.8 m). The July 1995 air modeling report shows the American Chemet Copper Furnace stack was only modeled at 20 m. In our March 24, 1998 letter to MDEQ, we questioned if the American Chemet Copper Furnace stack was modeled at the 8.8 m stack height. In its November 16, 1999 response, MDEQ indicated the stack was modeled at its current height of 8.8 m in the 1993 modeling effort. The 1993 modeling report and diskettes were forwarded to us in 1994. We have evaluated the modeled ambient impacts from the 8.8 m stack in conjunction with the 1995 modeled ambient impacts and believe the attainment modeling demonstration is sufficient and satisfies our concerns. The 1993 study showed that the Pb NAAQS could be attained when the American Chemet stack is modeled at 8.8 m. There is very little difference in total predicted Pb concentrations between an 8.8 m stack height and a 20 m stack height, because this source represents less than 0.5 percent of the emissions that were modeled in the attainment demonstration. The difference in modeled concentration is negligible.

Finally, in its November 16, 1999 letter, MDEQ indicated it recalculated the East Helena area emissions because it could not recreate how the control emission inventory (attainment inventory) was generated in the past. Except for one road segment, all other East Helena paved roads and parking lots were recalculated to have fewer emissions than those used in the attainment demonstration. We accept the recalculation and do not think it is necessary to remodel for that one road segment, because it appears likely that the emission increases on the road section would be more than offset in the modeling results by the emission decreases from the parking lots and other road sections. The net result would likely be slightly lower predicted Pb concentrations at the highest concentration receptor sites. With these changes, the attainment modeling shows the SIP will protect the Pb NAAQS. The most sensitive receptor in the modeling domain was modeled at 1.47 μg/m 3 of Pb, demonstrating compliance with the Pb NAAQS of 1.50 μg/m 3 . However, any future permit or SIP action that involves modeling must fully incorporate all the revisions mentioned above.  9

Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission. In commenting, please refer to file code HCFA-2071-P. Comments received timely will be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, in Room 443-G of the Department's office at 200 Independence Avenue, SW., Washington, DC, on Monday through Friday of each week from 8:30 to 5 p.m. (phone: (202) 690-7890).

This Federal Register document is also available from the Federal Register online database through GPO Access, a service of the U.S. Government Printing Office. The Website address is: http://www.access.gpo.gov/nara/index.html.

Title XIX of the Social Security Act (the Act) authorizes Federal grants to States for Medicaid programs that provide medical assistance to low-income families, elderly and persons with disabilities. Each State Medicaid program is administered by the State in accordance with an approved State plan. While the State has considerable flexibility in designing its State plan and operating its Medicaid program, it must comply with Federal requirements specified in the Medicaid statute, regulation and program guidance. Additionally, the plan must be approved by the Secretary, who has delegated this authority to HCFA.

Section 1902(a)(30) of the Act requires a State plan to meet certain requirements in setting payment amounts to obtain Medicaid care and services. One of these requirements is that payment for care and services under an approved State Medicaid plan be consistent with efficiency, economy, and quality of care. This provision provides authority for specific upper payment limits (UPL) set forth in Federal regulations in 42 CFR part 447 relating to different types of Medicaid covered services. With respect to inpatient hospital services, nursing facility (NF) services and intermediate care facility services for the mentally retarded (ICF/MR), upper payment limits are set forth in regulations at § 447.272, “Application of upper payment limits.” This provision limits overall aggregate State payments and aggregate payments to State-operated providers. With respect to outpatient hospital services and clinic services, upper payment limits are set forth in regulations at § 447.321, “Outpatient hospital services and clinic services: Upper limits of payment.”

These regulations stipulate that aggregate State payments for services provided by each group of health care facilities, that is, inpatient hospital and outpatient hospital services, NF services, ICF/MR services, and clinic services may not exceed a reasonable estimate of the amount the State would have paid under Medicare payment principles. Under §§ 447.257, “FFP: Conditions relating to institutional reimbursement,” and 447.304, “Adherence to upper limits; FFP, paragraph (c),” FFP is not available for State expenditures that exceed the applicable upper payment limit.

The statute also permits States some flexibility to use local government resources. Under section 1902(a)(2) of the Act, States may fund up to 60 percent of the non-Federal share of Medicaid expenditures with local government funds. Section 1903(w)(6) of the Act specifically limits the Secretary's ability to place restrictions on a State's use of certain funds transferred to it from a local unit of government subject to the requirements in section 1902(a)(2) of the Act.

Before 1981, States were required to pay rates for hospital and long term care services that were directly related to cost reimbursement. To obtain approval from HCFA, many States set rates using Medicare reasonable cost payment principles.

In 1980 and 1981, the Congress enacted legislation, at section 962 of the Omnibus Reconciliation Act of 1980 (OBRA ‘80), Pub. L. 96-499 and section 2173 of the Omnibus Budget Reconciliation Act of 1981 (OBRA ‘81), Pub. L. 97-35, collectively known as the “Boren Amendment” that amended section 1902(a)(13) of the Act to give States flexibility to deviate from Medicare's cost payment principles in setting payment rates for hospital and long term care services.

The Boren Amendment was primarily considered a floor on State spending because it required States to set rates that would meet the costs incurred by efficiently and economically operated facilities. However, the Boren Amendment also supported upper payment limits on overall rates. In legislative history, the Congress directed the Secretary to maintain ceiling requirements that limited State payments in the aggregate from exceeding Medicare payment levels. The Senate Finance Committee report on the legislation states that “the Secretary would be expected to continue to apply current regulations that require that payments made under State plans do not exceed amounts that would be determined under Medicare principles of reimbursement.” S. Rep. No. 96-471, 96 Cong., 1st Sess. 1979.

In 1986, the Congress affirmed the use of upper limits on payments for inpatient hospital services, NF services and intermediate care facility (ICF) (now ICF/MR) services. Section 9433 of the Omnibus Budget Reconciliation Act of 1986 (Pub. L. 99-509) titled “A Clarification of State Flexibility for State Medicaid Payment Systems for Inpatient Services” precluded the Secretary from placing limits on State disproportionate share hospital (DSH) payments but maintained the application of limits on regular inpatient payment rates.

The current upper limits were last changed in a final rule in the Federal Register (52 FR 28141) on July 28, 1987 that addressed the application of the upper payment limit to States that had multiple payment rates for the same class of services. This rule addressed the differential rate issue in the context of State-operated facilities because several audits had revealed that the circumstances of State-operated facilities resulted in a lack of incentives to curb excessive payments. A high volume of uninsured patients will increase the costs of providing services in State-owned or operated facilities. These costs, in turn, are passed on to the State. To offset those higher costs, States established payment methodologies which paid State-owned or operated facilities at a higher rate than privately-operated facilities. Higher Medicaid payments to State-owned or operated facilities allowed States to obtain additional Federal Medicaid dollars to cover costs formerly met entirely by State dollars. To ensure payments to State-operated facilities would be consistent with efficiency and economy, the final rule applied the Medicare upper limit test to State-operated facilities separate from other facilities. However, the final rule did not create a separate upper payment limit for other government facilities, allowing their payments to count toward the same aggregate upper payment limit as private facilities.

Section 4711 of the Balanced Budget Act of 1997 (BBA)(Pub. L. 105-33) amended section 1902(a)(13) of the Act to increase State flexibility in rate setting by replacing the substantive requirements of the Boren amendment with a new public process. Under section 4711 of the BBA, States have flexibility to target rate increases to particular types of facilities so long as the rates are established in accordance with the new public process requirements.

It has become apparent that the current regulation creates a financial incentive for States to overpay non-State-operated government facilities because States, counties, cities and/or public providers can, through this practice, lower current State or local spending and/or gain extra Federal matching payments. This practice is not consistent with Medicaid statute and has contributed to rapidly growing Medicaid spending.

The incentive and ability for States to pay excessive rates to non-State government-owned or operated Medicaid providers can be explained as follows. As stated previously, the current aggregate upper payment limit is applied to both private and non-State government-owned or operated facilities. By developing a payment methodology that sets rates for proprietary and nonprofit facilities at lower levels, States can set rates for county or city facilities at substantially higher levels and still comply with the current aggregate upper payment limit. The Federal government matches these higher payment rates to public facilities. Because these facilities are public entities, funds to cover the State share may be transferred from those facilities (or the local government units that operate them) to the State, thus generating increased Federal funding with no net increase in State expenditures. This is not consistent with the intent of statutory requirements that Medicaid payments be economical and efficient.

On July 26, 2000, the Director of the Center for Medicaid and State Operations sent a letter to all State Medicaid Directors notifying them that “the Administration is developing a proposal to ensure that Medicaid payments meet the statutory definition of efficiency and economy” and that we would issue a proposed rule to address this problem. The Office of the Inspector General (OIG) and the General Accounting Office (GAO) have begun to monitor States with State plans that permit these types of payments. Both the GAO and OIG testified on the scope of the financing practices, their impact on State and Federal spending, and on the resultant uses of increased Federal funds. Preliminary results of OIG's work to date are described below.

To date, the OIG has substantially completed reviews in three States and is continuing reviews in three additional States. Although the specifics of the enhanced payment programs and associated financing mechanisms differed somewhat in the three States they have reviewed thus far, they have found that the payment programs share some common characteristics. These similarities are included below:

• The States did not base the enhanced payments on the actual cost of providing services or increasing the quality of care to the Medicaid residents of the targeted nursing facilities.

• The counties involved in the enhanced payment process used little or none of the enhanced payments to provide services to Medicaid residents. Instead, the counties returned these funds to their original source. That is, the funds were returned to the State's general funds or used to repay loans that were made to initiate the transaction, or both.

• The States were clear winners in that they were able to reduce their share of Medicaid costs and cause the Federal government to pay significantly more than it should for the same volume and level of Medicaid services. The Federal share of the enhanced funding went into State accounts and, in some cases, could be used for any purpose.

• Some States effectively recycled the Federal funds received from these enhanced payments to generate additional Federal matching funds.

Similarly, the GAO testified that current arrangements violate the basic integrity of Medicaid as a joint Federal/State program. By taking advantage of a technicality, these financing schemes allow States, in effect, to replace State Medicaid dollars with Federal Medicaid dollars.

To address these problems, we are proposing to revise the regulations at §§ 447.272, “Application of upper payment limits,” and 447.321, “Outpatient hospital services and clinic services: Upper limits of payment,” to establish separate upper payment limits for non-State government-owned or operated facilities. This approach is consistent with the last regulatory change which created separate upper payment limits for State-operated facilities. While the proposal would still allow for flexibility in payment methodologies, it prevents States from setting rates to public facilities well in excess of the average upper payment limit and the actual cost of providing Medicaid covered services to eligible individuals. This change is necessary to ensure that the Medicaid regulations conform to Medicaid statutory requirements that promote efficiency and economy.

The upper payment limit requirements for Medicaid inpatient hospital services, NF services and ICF/MR services are set forth in regulations at § 447.272. Paragraph (a) of this section provides that aggregate payments by an agency to each group of health care facilities (that is, hospitals, nursing facilities and ICFs for the mentally retarded (ICFs/MR)), may not exceed a reasonable estimate of what would have been paid for those services under Medicare payment principles. Paragraph (a) provides an exception to specify that disproportionate share hospital payments are not counted toward the general limit. We would amend paragraph (a) to specify that an exception also applies for payments made to non-State-owned or operated public hospitals under paragraph (b)(2) of this section.

Paragraph (b) of this section currently limits aggregate payment to State-operated facilities in each class of service. We would revise § 447.272(b) to establish an additional upper payment limit that would apply to payments made to all other types of government facilities. To establish this new upper payment limit, we propose to make the following changes to § 447.272(b).

Specifically, we propose to revise paragraph (b) of this section to specify that payments made to each type of government-owned or operated health care facility (that is, inpatient hospital, NF, ICF/MR) may not exceed the specified allowable limits. Proposed paragraph (b)(1) would continue the limitation on aggregate payments made to State-owned or operated facilities from exceeding a reasonable estimate of what would have been paid using Medicare payment principles. In addition, we propose to add a new paragraph (b)(2) that would impose an aggregate upper limit restriction on payments for services furnished by all other government-owned or operated facilities (other than Indian Health Service (IHS) facilities and tribal facilities funded through Pub. L. 93-638) that are not State-owned or operated. (Although we invite specific comments, we excluded IHS facilities because we believe there is little incentive for States to pay enhanced rates to these facilities. Rates to these facilities are generally set by the State in accordance with rates published by the Federal government.) Under paragraph (b)(2), we would specify that aggregate payments to NFs IFCs/MR may not exceed a reasonable estimate of what would have been paid for those services under Medicare payment principles. We would also specify that aggregate payment to non-State-owned or operated public hospitals may not exceed 150 percent of a reasonable estimate of what would have been paid for those services under Medicare payment principles.

We are proposing a higher upper payment limit for services in non-State-owned or operated public hospitals operated by governmental entities other than the State itself because we believe that allowing higher Medicaid payments will fully reflect the value of public hospitals' services to Medicaid and the populations it serves. Public hospitals are established to ensure access to needed care in underserved areas, and often provide a range of care not readily available in the community, including expensive specialized services, such as trauma and burn care and outpatient tuberculosis services. They also provide a significant proportion of the uncompensated care in the nation.

The size and scale of public hospitals create extreme stresses and uncertainties, especially given their dependence on public funding sources. We are concerned that these stresses may threaten the ability of these public hospitals to fulfill their mission and fully serve the Medicaid population. As such, we are proposing a higher UPL for these facilities. Specifically, this higher aggregate UPL would allow States to pay non-State-owned or operated public hospitals up to 150 percent of the amount that would have been paid for inpatient and outpatient services using Medicare payment principles.

We also recognize that, in some instances, these public hospitals may be required by State or local governments to transfer back a portion of payments that they receive under Medicaid. This practice raises serious concerns about whether the purposes of the higher payment limits being proposed for public hospitals will be met. To ensure that higher payment levels will assist in ensuring the stability of public hospitals as a vital link in the resources available for care to Medicaid beneficiaries, we intend to require in our final rule that payments made to public hospitals under this provision be separately identified and reported to HCFA. We request comment on the most suitable ways of reporting and accounting for these payments. In addition, we are soliciting comments on whether the 150 percent limit is appropriate.

For outpatient hospital services and clinic services, the current upper payment limit is in regulations at § 447.321. This limit precludes FFP on aggregate payments for outpatient hospital services and clinic services that exceed the amount that would be payable to all providers (State-owned or operated, other government-owned or operated, and private) under comparable circumstances under Medicare. Unlike other classes of services subject to the upper payment limit, there is no separate limit for State-owned or operated facilities. We propose to amend § 447.321 to establish additional upper payment limits that would apply to aggregate payments for Medicaid services furnished by State-owned or operated and all other government-owned or operated facilities.

We propose to move the current provisions under paragraph (a) of this section, as discussed below, to § 447.304 and add a new paragraph (a) to conform the language in this section to the language in § 447.272, for purposes of consistency within the Medicaid regulations. We would provide in § 447.321(a) that aggregate payments by an agency to each group of health care facilities (that is, outpatient hospitals and clinics) may not exceed a reasonable estimate of what would have been paid for each of those services under Medicare payment principles. We would also specify that an exception applies for payments made to non-State-owned or operated public hospitals under paragraph (b)(2) of this section. Consistent with the changes to § 447.272, we propose to establish separate upper payment limits for Medicaid services furnished by—(1) State-owned or operated facilities; and (2) all other government-owned or operated facilities that are not State-owned or operated. In § 447.321, proposed paragraph (b)(1) would establish the upper payment limit for Medicaid services furnished by State-owned or operated facilities. Like the current UPL for inpatient hospital services, aggregate Medicaid payments for outpatient services or clinic services furnished by State facilities would be limited to a reasonable estimate of what would have been paid under Medicare reimbursement principles.

Proposed paragraph (b)(2) would establish a similar aggregate upper limit restriction for Medicaid services furnished by all other government providers that are not State-owned or operated except that the payment maximum for outpatient services would be set at 150 percent of what would have been paid using Medicare payment principles. See the earlier discussion of our rationale for the higher limit to these public hospitals. Under the proposed limits in §§ 447.272 and 447.321, States would have flexibility to consider either Medicare principles of reasonable cost reimbursement or a Medicare prospective payment system if available, to estimate the Medicare payment amount for Medicaid services.

In addition, we are moving the language regarding prohibition for FFP currently found in § 447.321(a) to § 447.304, “Adherence to upper limits; FFP,” paragraph (c). The provision in § 447.304(c) currently specifies that FFP is available for State expenditures that do not exceed upper limits. We propose to revise this section to specify that FFP is not available for payment that exceeds the upper limits specified in subpart F. This revision would conform to our approach in § 447.257.

We recognize that the new upper payment limits we are proposing may disrupt State budget arrangements for States with approved enhanced plan amendments. Therefore, we are proposing a transition policy for States with approved rate enhancement amendments that would be affected by the proposed UPLs. We refer to these amendments as noncompliant because they result in payments that exceed the maximum amount allowable under the new UPLs. We are proposing two transition periods and are soliciting comments on the material elements of these transition periods, including the starting point for the phase-out, the percentage reduction each year, and whether a longer or shorter period would be appropriate.

1. Transition period for noncompliant approved State plan amendments effective on or after October 1, 1999.

For noncompliant approved State plan amendments with an effective date on or after October 1,1999, we are proposing a transition period that would end on September 30, 2002. Because these programs are relatively new (in fact, some may be deemed approved during the comment period for this proposed rule), States are not likely to have developed the same level of reliance on the enhanced payments addressed in this proposed rule as States with older programs. Additionally, during the review period for these amendments, we have been informing States of our intent to curtail this practice and advising them not to rely on the continuation of this funding. For these reasons, we believe a short transition period is appropriate.

2. Transition period for noncompliant approved State plan amendments effective before October 1, 1999.

For noncompliant approved State plan amendments with an effective date before October 1, 1999, we are proposing a 3-year transition period beginning in the State FY that begins calendar year 2002.

We propose to implement the reductions on a State Fiscal Year (FY) basis starting with the first full State FY that begins in calendar year 2002. Specifically, the transition generally consists of reducing aggregate payments with the proposed classes to the proposed UPLs in increments, with the proposed UPL becoming fully effective in the first State FY beginning in Calendar Year 2005. In the first year of implementation, States would have to reduce the aggregate payments above the new UPL by 25 percent. In the second year, the amount of excess aggregate payments must be reduced by 50 percent and in the third year by 75 percent. By the first day of the fourth year, State payments would have to be in compliance with the new UPL policy.

We are proposing to use State FY 2000 as the base period to determine the excess payment that must be phased down. To compute the dollar amount of the excess, States would be required to compare State FY 2000 payments paid to the current class of providers to the maximum aggregate payments for its new class of providers (that is, State-owned or operated and other government-owned or operated) under the proposed UPL for State FY 2000. The difference is considered the excess payment that must be phased out over the transition period.

The table below illustrates the transition policy. In this example, State FY 2000 payments for nursing facility services provided by other government-owned or operated providers are $300 million and new UPL is $100 million. The amount in excess of the upper payment limit, $200 million, must be reduced in successive State FYs by 25 percent, 50 percent and 75 percent respectively. The steps to calculate the maximum allowable payment during this transition period are as follows:

• Subtract the amount that would have been allowed under the new UPL for State FY 2000 services from the State FY 2000 payment.

• Multiply that difference by the phase down rate.

• Add to that result, the new UPL for Medicaid services furnished on or after State FY 2000.

At the end of the transition period, State payments would have to be in full compliance with the new upper payment limit.

Congress created the National Flood Insurance Program (NFIP) in 1968 to provide federally supported flood insurance coverage, which generally had not been available through private insurance companies. The program is based on an agreement between the Federal Government and each community that chooses to participate in the program. We make flood insurance available to property owners within a community provided that the community adopts and enforces floodplain management regulations that meet or exceed the minimum requirements of the NFIP set forth in part 60 of the NFIP Floodplain Management Regulations (44 CFR 60).

Identifying and mapping flood hazards. FEMA identifies and maps flood hazard areas by conducting flood hazard studies and publishing Flood Insurance Rate Maps (FIRMs). These flood hazard areas, referred to as Special Flood Hazard Areas (SFHAs), are based on a flood that would have a 1-percent chance of being equaled or exceeded in any given year (the 100-year flood or base flood). We determine the 1-percent annual chance flood, shown on the FIRMs as A Zones or V Zones, from information that we obtain through consultation with the community, floodplain topographic surveys, and detailed hydrologic and hydraulic analyses.

Floodplain management requirements. The NFIP minimum building and development regulations require that new or substantially improved buildings in A Zones have their lowest floor (including basement) elevated to or above the Base Flood Elevation (BFE) (the elevation of the 1-percent annual chance flood). Non-residential buildings in A Zones can either be dry floodproofed or elevated to the BFE. In V Zones, the bottom of the lowest horizontal structural member of the lowest floor of all new or substantially improved buildings must be elevated to or above the BFE. We have designed the NFIP floodplain management requirements at 44 CFR 60.3 to protect buildings constructed in floodplains from flood damages.

Freeboard and Floodplain Storage. Freeboard, generally expressed in terms of feet above a flood level for purposes of floodplain management, proves to be a successful method for reducing damage due to flooding and acts to compensate for the many uncertain factors that contribute to flood heights greater than the base flood. We recognize communities that incorporate the concept of freeboard in their permitting and planning processes through the Community Rating System, Project Impact, and insurance rating in general.

Local officials, developers, and the public at large should understand that the placement of fill in the SFHA could result in an increase in the base flood elevation by reducing the ability of the floodplain to convey and store floodwaters. Communities may want to consider prohibiting or limiting fill in floodplains, or requiring compensatory storage, and zero rise floodways as extra protection. Furthermore, development outside the SFHA but within the watershed can further increase the flood hazard by aggravating downstream flooding conditions. Therefore, FEMA will continue to encourage local officials, planners, design professionals, and developers to consider the long term benefits of elevating above the published base flood elevation when constructing projects in and near the SFHA.

Local responsibility. When a community joins the NFIP, it must initially adopt a resolution or ordinance that expresses a commitment to recognize and evaluate flood hazards in all official actions and to take such other official action as reasonably necessary to carry out the objectives of the program [44 CFR 59.22(a)(8)]. This is in addition to the general requirement that the community take into account flood hazards to the extent that they are known in all official actions relating to land management and use [44 CFR 60.1(c)]. Furthermore, all communities participating in the NFIP must “determine whether proposed building sites will be reasonably safe from flooding” [44 CFR 60.3(a)(3)]. This proposed rule emphasizes the role and responsibility of the community in permitting development and ensuring that areas within their jurisdiction are reasonably safe from flood hazards.

Flood insurance. The National Flood Insurance Act of 1968 requires that we charge full actuarial rates reflecting the complete flood risk to buildings built or substantially improved on or after the effective date of the initial FIRM for the community or after December 31, 1974, whichever is later, so that the risks associated with buildings in flood prone areas are borne by those located in such areas and not by the taxpayers at large. We refer to these buildings as Post-FIRM. The NFIP bases flood insurance rates for new construction on the degree of the flood risk reflected by the flood risk zone on the FIRM. Flood insurance rates also take into account a number of other factors including the elevation of the lowest floor above or below the BFE, type of building, and the existence of a basement or an enclosure.

Mandatory purchase of insurance. The Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994 mandate the purchase of flood insurance as a condition of Federal or federally-related financial assistance for acquisition or construction of buildings in SFHAs of any community. The two Acts prohibit Federal agency lenders, such as the Small Business Administration, United States Department of Agriculture's Rural Housing Service, and Government-Sponsored Enterprises for Housing (Freddie Mac and Fannie Mae) from making, guaranteeing, or purchasing a loan secured by improved real estate or mobile home(s) in an SFHA of a participating community, unless flood insurance has been purchased and maintained during the term of the loan. The Acts also prohibit federally-regulated lenders from making, extending, or renewing any loan secured by improved real estate located in the SFHA in a participating community unless the secured property and any personal property securing the loan is covered by flood insurance. Federal financial assistance may not be provided in the SFHAs of non-participating communities.

We revise NFIP flood maps for a number of reasons, such as the availability of improved techniques for assessing the flood risk, changes in the physical condition of the floodplain or watershed, or as additional data become available to improve the identification of flood hazards. The requirements for revising the FIRMs are established in the NFIP Regulations at 44 CFR Part 65, Identification and Mapping of Special Hazard Areas. We can also revise a FIRM when property owners, whose land is in a SFHA and the elevation is below the BFE, request a map change as a result of grading and filling their site to raise the level of the land above the 1-percent annual chance flood level. The criteria for determining whether to remove unimproved land or land with structures from the SFHA by raising ground elevations using engineered earthen fill are established in section 65.5. If the criteria under section 65.5 are met, we will issue a Letter of Map Revision Based on Fill (also referred to as a LOMR-F).

Specifically, unimproved land (land without a structure) can be removed from the SFHA under 44 CFR 65.5(a)(3) if the ground elevations of the entire legally defined parcel of land are at or above the elevation of the base flood. Land that is removed under paragraph 65.5(a)(3) is no longer subject to the NFIP floodplain management requirements at 44 CFR 60.3, which includes the requirement that the lowest floor (including basement) be elevated to or above the BFE. In addition, future structures placed on this unimproved land would not be subject to the mandatory flood insurance purchase requirement of the NFIP.

When a structure is involved (see 64 FR 47813, September 1, 1999), we previously determined whether it could be removed from the SFHA under 44 CFR 65.5(a)(4) by comparing the elevation of the lowest floor (including basement) and the elevation of the lowest adjacent grade with the elevation of the base flood. If the entire structure and the lowest adjacent grade were at or above the elevation of the base flood, the structure was removed from the SFHA. Once we issue a LOMR-F, the NFIP floodplain management requirements at 44 CFR 60.3 and the mandatory flood insurance purchase requirement of the NFIP no longer apply. However, if the structure involved did not meet the lowest floor and lowest adjacent grade criteria, the structure was not removed from the SFHA, thus it remained subject to the NFIP floodplain management requirements and the mandatory flood insurance purchase requirement.

These regulations have caused confusion for State and local floodplain managers and permitting officials. This confusion stems from the fact that buildings constructed on fill in areas removed from the SFHA under paragraph 65.5(a)(3) are not required to have their lowest floor (including basement) elevated above the BFE. However, buildings constructed on fill in areas not previously removed from the SFHA under paragraph 65.5(a)(3) must have their lowest floors elevated to or above the base flood before they can be removed from the SFHA as outlined in paragraph 65.5(a)(4).

We are concerned that this confusion may lead to unwise construction near floodplains and that structures built on land removed from the SFHA under section 65.5(a)(3) may be subject to residual flood damages during the base flood. The risk to structures built in these areas will vary depending the soil conditions at the site, the location of the structure relative to the flooding source, and whether the structure has a basement below the BFE. Therefore, to eliminate this confusion, we propose to revise portions of 44 CFR 65.2, 65.5, and 65.6(a) to reinforce the existing requirements of 44 CFR 60.3 and to ensure land and structures removed from the SFHA based on fill are reasonably safe from flooding during the base flood.

We would process all LOMR-F requests received after the date of the final rule as follows (these procedures would apply to single and multi-lot LOMR-F requests, which may involve one structure or multiple structures):

• Paragraph 65.5(a)(3) would apply to requests to remove from the SFHA land that is elevated by placement of engineered fill, whether structures exist or not.

• We would delete paragraph 65.5(a)(4) and in its place would require that a local official assure that the land or structure to be removed from the SFHA is “reasonably safe from flooding” as currently required in section 60.3(a).

• A local community's determination that land or a structure is “reasonably safe from flooding” must consider best engineering practices, and analyses that demonstrate that risk from the base flood would be mitigated must support the determination. Depending on the circumstances, communities may wish to require that the applicant perform these analyses and that a registered design professional must certify the analyses, particularly for construction below the base flood elevation.

• The Director may request supporting documentation regarding the decision process leading to the conclusion that the land or structure to be removed from the SFHA is reasonably safe from flooding.

• We would provide technical guidance to local officials regarding standard fill placement and building practices when avoiding development in the floodplain is unavoidable. The guidance would give local officials the ability to require that all fill be adequately protected from the forces of erosion, scour, or differential settlement. It would also encourage local officials to require elevation above the base flood. In addition to existing guidance, we propose to publish a Technical Bulletin (FIA-TB-10), entitled “Ensuring that Structures Built in or Near Special Flood Hazard Areas Are Reasonably Safe From Flooding” to provide further guidance to communities and design professionals in the implementation of this proposed rule. A copy of proposed TB # 10 can be obtained either by downloading it from FEMA's web site at www.fema.gov/mit/techbul.htm or by contacting FEMA's publication distribution facility at 1-800-480-2520 and requesting a copy.

• If we learn that the community has not met the minimum floodplain management requirements of section 60.3, we could take action to remedy the violation and we could hold the request to revise the map in abeyance. This includes the requirement that residential structures in mapped SFHAs be built with their lowest floors (including basement) above the base flood.

• We would not actively review previously issued determinations under section 65.5 for conformity with these revised procedures. We would, however, review previously denied applications for a LOMR-F processed under paragraph 65.5(a)(4) upon written request.

• New LOMR-F requests and requests for LOMR-F redeterminations would be subject to the current fee schedule established in 44 CFR part 72.

• We would monitor the effectiveness of this rule change. Factors considered would include: ease of implementation, appropriateness of supporting engineering analyses, impact on floodplain management practices at the State and local level, and effectiveness in mitigating against flood loses. Within one year after we publish the final rule, we plan to re-evaluate this decision to determine whether changes to these or other related rules are warranted.

Under 44 CFR 1.4(e) it is our normal policy to afford the public at least 60 days to submit comments on a proposed rule, unless the Director makes an exception and explains the reasons for the exception. The Director makes an exception to the 60-day comment policy for this proposed rule on the grounds that the rule is a clarification of existing policy and that it is in the public interest of remove the confusion and inconsistency that exists in the current rule, to remove the rule's adverse impact on property owners, and to enhance the ability of local officials to make sound floodplain management decisions as soon as possible consistent with the requirements of the Administrative Procedure Act.

FEMA will not prepare an environmental analysis under NEPA since this rule would address an apparent administrative inconsistency that has no bearing on building practices or on the built or natural environment. This proposed rule would remove the current distinction between fill placed in an SFHA containing structures and fill placed in an SFHA without structures, both of which are allowable under current laws and regulations governing participation in the National Flood Insurance Program. Removing this distinction would resolve an apparent inconsistency in the floodprone status of a subset of structures built on fill within the SFHA. These apparent inconsistencies result from differences in the administrative processes followed by communities that permit development in floodplains rather than from physical differences in the built environment. We will continue to permit earthen fill and other types of development within the SFHA when applicable, and we will continue to require residential structures built in identified flood hazard areas to have their lowest floor (including basement) elevated to or above the base flood.

We have prepared and reviewed this proposed rule under the provisions of E.O. 12866, Regulatory Planning and Review. Under Executive Order 12866, 58 FR 51735, October 4, 1993, a significant regulatory action is subject to OMB review and the requirements of the Executive Order. The Executive Order defines “significant regulatory action” as one that is likely to result in a rule that may:

(1) have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities;

(2) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;

(3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or

(4) raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order.

This proposed rule would change the criteria that we would use to determine whether we can issue a LOMR-F to remove unimproved land or land with structures from the Special Flood Hazard Area (SFHA) by raising ground elevations using engineered earthen fill. We know of no conditions that would qualify the rule as a “significant regulatory action” within the definition of section 3(f) of the Executive Order. To the extent possible this proposed rule adheres to the principles of regulation as set forth in Executive Order 12866. This proposed rule has been reviewed by the Office of Management and Budget under the provisions of Executive Order 12866.

In accordance with the provisions of the Paperwork Reduction Act of 1995, 44 U.S.C. 3501 et seq. , the Office of Management and Budget (OMB) approved the collections of information applicable to this proposed rule: OMB Number 3067-0147, Report to Submit Technical or Scientific Data to Correct Mapping Deficiencies Unrelated to Community-Wide Elevation Determinations (Amendments & Revisions to National Flood Insurance Program Map).

Following is a summary of how each form will be used:

(a) FEMA Form 81-87. Property Information. This form describes the location of the property, what is being requested, and what data are required to support the request.

(b) FEMA Form 81-87E. Credit Card Information. This form outlines the information needed to process a request when the requester is paying by credit card.

(c) FEMA Form 82-87A. Elevation Information. This form indicates what the Base Flood (100-year) Elevation (BFE) for the property is, how the BFE was determined, the lowest ground elevation on the property, and/or the elevation of the lowest adjacent grade to any structures on the property. This information is required for FEMA to determine whether the property that is being requested to be removed from the SFHA is above the BFE.

(d) FEMA Form 81-87C. Community Acknowledgment of Requests Involving Fill. 44 CFR 65.5(a)(6) requires that if fill is placed to remove an area from the SFHA then the community must acknowledge the request. This form ensures that the requester fulfills this requirement before submitting the request to FEMA.

(e) FEMA Form 81-87D. Summary of Elevations—Individual Lot Breakdown. This form is used in conjunction with the Elevation Information Form for requests involving multiple lots or structures. It provides a table to allow the required submitted data to be presented in a manner for quick and efficient review.

The estimated burden on individual property owners is:

The number of requesters will vary from year to year, as we have no control over the number of people who will seek to have determinations made for their properties. For the purposes of this rule we estimate the following annual burdens:

This is a synopsis of the Commission's Notice of Proposed Rule Making, MM Docket No. 00-188, adopted September 29, 2000, and released December 12, 2000. The full text of this Commission decision is available for inspection and copying during normal business hours in the FCC Reference Center 445 12th Street, SW, Washington, DC. The complete text of this decision may also be purchased from the Commission's copy contractor, International Transcription Services, Inc., (202) 857-3800, 1231 20th Street, NW, Washington, DC 20036.

Provisions of the Regulatory Flexibility Act of 1980 do not apply to this proceeding.

Members of the public should note that from the time a Notice of Proposed Rule Making is issued until the matter is no longer subject to Commission consideration or court review, all ex parte contacts are prohibited in Commission proceedings, such as this one, which involve channel allotments. See 47 CFR 1.1204(b) for rules governing permissible ex parte contacts.

For information regarding proper filing procedures for comments, see 47 CFR 1.415 and 1.420.

The public hearings will be convened to take public comment on draft Amendment 7. Draft Amendment 7 would create a Federal trap certificate program for the commercial stone crab fishery in the EEZ off Florida. This program would be similar to the trap certificate program adopted by the State of Florida.

A summary of the proposed Amendment 7 Federal stone crab trap certificate program follows:

1. The Federal program would recognize the Florida stone crab license and tags for use in the EEZ but would not require them.

2. Persons who could not obtain or chose not to obtain the state license/tags could apply for a Federal vessel permit, trap certificate, and trap tags.

3. The same qualifying criteria would apply for obtaining the Federal vessel permit/trap certificate/trap tags as apply for obtaining the state license/tags (i.e., 300 lb (136.1 kg) of claws landed in one of the six fishing seasons 1993/1994 through 1998/1999). The end of the draft Amendment 7 qualifying period would be May 15, 1999.

4. Persons would have 90 days to apply for a Federal vessel permit/trap certificate/trap tags after the effective date of implementation of the final rule.

5. Persons qualifying would be issued a Federal vessel permit/trap certificate/trap tags based on their landings divided by 5 lb (2.3 kg), which is the annual harvest level that would occur when the number of traps is reduced to the optimum level of 600,000 traps.

6. Federal vessel permits, trap certificates, and tags would be non-transferrable.

7. It is anticipated that the cost of the Federal trap tags would be higher than the cost of the state trap tags (i.e., $1.10 vs $0.50).

8. Draft Amendment 7 includes a Federal appeals process allowing fishermen to appeal denied applications for a Federal vessel permit/trap certificate/trap tags.

Public hearings for draft Amendment 7 will be held at the following locations, dates, and times:

1. October 16, 2000, 7 p.m., Marathon Government Center, BOCC Room, 2798 Overseas Highway MM 47.5, Marathon, FL 33050; telephone: 305-295-4385.

2. October 18, 2000, 7 p.m., Plantation Inn & Gulf Resort, 9301 West Fort Island Trail, Crystal River, FL 34429; telephone: 352-795-4211.

These meetings are physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to Anne Alford at the Council (see ADDRESSES ) by November 3, 2000.