This rule has been reviewed by the Office of Management and Budget (OMB) and determined to be not significant for purposes of Executive Order 12866.

Pursuant to the requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq. ), the AMS has considered the economic impact of this action on small entities. It is determined that its provisions would not have a significant economic impact on a substantial number of small entities.

The AMS provides, under the authority of the Agricultural Marketing Act (AMA) of 1946, a voluntary, user-fee funded seed testing and certification service to approximately 65 businesses per year. Many of the users of the testing and certification services would be considered small businesses under the criteria established by the Small Business Administration (13 CFR 121.201). Over ninety-five percent of the samples tested in this program represent seed and grain scheduled for export. Grain is examined for the presence of specified weed and crop seeds upon request of the USDA's Grain Inspection, Packers and Stockyards Administration. A Federal Seed Analysis Certificate, containing purity, germination, noxious-weed seed examination, and other test results is issued upon completion of the testing. The Federal Seed Analysis Certificate is required documentation for shipments of seed and grain from the United States entering certain countries.

The AMS regularly reviews its user fee financed programs to determine if the fees are adequate. The most recent review determined that the existing fee schedule will not generate sufficient revenues to cover program costs while maintaining an adequate reserve balance. Without a fee increase, FY 2002 revenues for seed testing and certification services are projected at $138,000, costs are projected at $149,000, and the trust fund balance is projected to be $92,000 or 7.4 months of operating reserve. With a fee increase, FY 2002 revenues are projected at $160,000, costs are projected at $151,000, and the trust fund balance is projected to be $113,000 or 9.0 months of operating reserve.

This action will raise the hourly rate charged to users of the seed testing and certification services. This proposed fee increase is necessary to offset increased program operating costs resulting from: (1) Salary increases for all Federal employees for 2001 and projected increases in 2002, (2) increases in rent, (3) increases in costs of supplies needed for testing samples, and (4) purchases of replacement equipment needed to provide the service.

The AMS estimates that this proposed rule will yield an additional $22,000 during FY 2002. The hourly rate for seed testing and certification services will increase by approximately 17 percent. The costs to entities will be proportional to their use of the service, so that costs are shared equitably by all users. The increase in costs to individual firms will be, on average, approximately $13.00 per Federal Seed Analysis Certificate issued. There will also be an increase of $1.90 for each duplicate certificate issued. In addition, this action will establish a fee of $13.00 to recover the cost of issuing preliminary test reports.

This action has been reviewed under Executive Order 12988, Civil Justice Reform. This action is not intended to have retroactive effect. This rule would not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule. There are no administrative procedures that must be exhausted prior to any judicial challenge to the provisions of this rule.

The information collection requirements that appear in Part 75 of the regulations have been previously approved by OMB and assigned OMB Control Number 0581-0140 under the Paperwork Reduction Act (44 U.S.C. Chapter 35).

The Secretary of Agriculture is authorized by the AMA of 1946, as amended, 7 U.S.C. 1621 et seq. , to provide voluntary Federal seed testing and certification services to facilitate the orderly marketing of seed and grain and to enable consumers to obtain the quality of seed and grain they desire. The AMA provides that reasonable fees be collected from users of the program services to cover, as nearly as practicable, the costs of services rendered.

The AMS regularly reviews programs to determine if fees are adequate and if costs are reasonable. This action will increase the hourly fee rate and charges for voluntary seed testing and certification services provided to the seed and grain industries to reflect the costs currently associated with providing the services.

A recent review of the current hourly fee rate, effective March 1, 2001, revealed that anticipated revenue will not cover increased program costs. Without a fee increase, FY 2002 revenues for seed testing and certification services are projected at $138,000, costs are projected at $149,000, and the trust fund balance is projected to be $92,000 or 7.4 months of operating reserve. With a fee increase, FY 2002 revenues are projected at $160,000, costs are projected at $151,000, and the trust fund balance is projected to be $113,000 or 9.0 months of operating reserve.

The hourly fee for service is established by distributing the projected annual program operating costs over the estimated revenue hours of service provided to users of the service. Revenue hours include the time spent conducting tests, keeping sample logs, preparing Federal Seed Analysis Certificates and storing samples. As program operating costs continue to rise, the hourly fees must be adjusted to enable the program to remain financially self-supporting as required by law. Program operating costs include the salaries and fringe benefits of seed analysts, supervision, training, and all administrative costs of operating the program.

Employee salaries and benefits account for approximately 75 percent of the total budget. A general and locality salary increase of 3.81 percent for Federal employees involved in the seed testing and certification service became effective in January 2001 and has materially affected program costs. Another general and locality salary increase is expected in January 2002.

This proposed fee increase is necessary to offset increased program operating costs resulting from: (1) Salary increases for all Federal employees for 2001 and projected increases in 2002, (2) increases in rent, (3) increases in costs of supplies needed for testing samples, and (4) purchases of replacement equipment needed to provide the service.

In view of these increases in costs, the Agency is proposing to increase the hourly rate charged to applicants for the service, including the issuance of Federal Seed Analysis Certificates from $44.40 to $52.00. The fee for issuing additional duplicate certificates will increase from $11.10 to $13.00 and a fee of $13.00 will be established for issuing preliminary reports.

The proposed action will recover the costs associated with providing the voluntary testing service to the seed and grain industry. Although the proposed user-fee increase will increase costs to individual firms, the cost for providing the seed testing and certification services will increase by an average of only $13.00 per Federal Seed Analysis Certificate and $1.90 for each duplicate certificate. It is estimated that the total revenue generated will increase by approximately $22,000 annually.

For the reasons set forth in the preamble, 7 CFR Part 75 is proposed to be amended as follows:

This administrative action is governed by the provisions of Sections 556 and 557 of Title 5 of the United States Code and, therefore, is excluded from the requirements of Executive Order 12866.

Notice is hereby given of a public hearing to be held at the Hilton Hotel—Kansas City Airport, 8801 N.W. 112th Street, Kansas City, Missouri 64164; (816) 891-8900; beginning at 8:30 a.m., on Wednesday, November 14, 2001, with respect to proposed amendments to the tentative marketing agreement and to the order regulating the handling of milk in the Central marketing area.

The hearing is called pursuant to the provisions of the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), and the applicable rules of practice and procedure governing the formulation of marketing agreements and marketing orders (7 CFR part 900).

The purpose of the hearing is to receive evidence with respect to the economic and marketing conditions which relate to the proposed amendments, hereinafter set forth, and any appropriate modifications thereof, to the tentative marketing agreement and to the order.

Evidence also will be taken to determine whether emergency marketing conditions exist that would warrant omission of a recommended decision under the rules of practice and procedure (7 CFR 900.12(d)) with respect to any of the proposed amendments.

Actions under the Federal milk order program are subject to the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). This Act seeks to ensure that, within the statutory authority of a program, the regulatory and informational requirements are tailored to the size and nature of small businesses. For the purpose of the Act, a dairy farm is a “small business” if it has an annual gross revenue of less than $750,000, and a dairy products manufacturer is a “small business” if it has fewer than 500 employees. Most parties subject to a milk order are considered as a small business. Accordingly, interested parties are invited to present evidence on the probable regulatory and informational impact of the hearing proposals on small businesses. Also, parties may suggest modifications of these proposals for the purpose of tailoring their applicability to small businesses.

The amendments to the rules proposed herein have been reviewed under Executive Order 12988, Civil Justice Reform. They are not intended to have a retroactive effect. If adopted, the proposed amendments would not preempt any state or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.

The Agricultural Marketing Agreement Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 8c(15)(A) of the Act, any handler subject to an order may request modification or exemption from such order by filing 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 the law. A handler is afforded the opportunity for a hearing on the petition. After a 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 its principal place of business, has jurisdiction in equity to review the Secretary's ruling on the petition, provided a bill in equity is filed not later than 20 days after the date of the entry of the ruling.

Interested parties who wish to introduce exhibits should provide the Presiding Officer at the hearing with three copies of such exhibits for the Official Record. Also, it would be helpful if additional copies are available for the use of other participants at the hearing.

On May 2001, the National Energy Policy Development Group (NEPD Group) reported a National Energy Policy to the President. One of the recommendations called for the President to direct the Secretary of Energy to take steps to improve the energy efficiency of appliances. The recommendation included supporting the existing appliance standards program, setting higher standards where technologically feasible and economically justified, and expanding the scope of the program to include additional consumer products and commercial and industrial equipment where technically feasible and economically justified.

The Federal Register notice dated August 28, 2001 (66 FR 45188), announced the September 11, 2001, public meeting and requested written comments be submitted by October 11, 2001. The September 11 public was to discuss the priorities of the existing appliance standards program and any possible expansion of the scope of the program to include additional consumer products and commercial and industrial equipment. However, as a result of the tragic events of September 11, 2001, the public meeting was cut short. At the September 11 public meeting, the interested parties discussed the criteria DOE should consider in deciding whether to expand the scope of the program, including the factors, data and analysis methods that might be used by DOE in its decision making process. Following the September 11 public meeting, DOE received written comments supporting adding a new factor, impact on innovation to the existing priority setting criteria.

DOE developed the list of possible new commercial and residential products from various independent sources which was presented at the September 11 public meeting. DOE has incorporated an additional criterion suggested at the September 11 public meeting, and developed preliminary data sheets for potential new products. This list as well as a listing of current rulemakings and the preliminary data sheets can be found on the following web-site: http://www.eren.doe.gov/buildings/codes_standards/index.htm

The November 6, 2001, public meeting will be to: continue the discussion of the possible expansion of the scope of the program, and review the comments received in response to the August 28, 2001, notice of public meeting; discuss how these comments should be incorporated into the process; review the preliminary data sheets developed; and discuss how these products should be considered for prioritization. The outcome of the meeting would be to screen out products which do not merit further consideration for either a standard and/or voluntary program.

The meeting will be conducted in an informal, conference style. There will not be any discussion of proprietary information, costs or prices, market shares, or other commercial matters regulated by the U.S. antitrust laws.

After the meeting and expiration of the period for submitting written statements, the Department will begin consideration of the comments received.

If you would like to participate in the meeting, receive meeting materials, or be added to the DOE mailing list to receive future notices and information regarding the energy conservation program for consumer products and commercial and industrial equipment, please contact Ms. Brenda Edwards-Jones at (202) 586-2945.

This document contains proposed regulations under section 414(v) of the Internal Revenue Code of 1986 (Code). Section 414(v) was added by section 631 of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) (Public Law 107-16), enacted on June 7, 2001. Under section 414(v), an individual age 50 or over is permitted to make additional elective deferrals (up to a dollar limit provided in that section) under a plan that otherwise permits elective deferrals if certain requirements provided under that section are satisfied. Section 414(v) also provides that a plan will not violate any provision of the Code by permitting these additional elective deferrals to be made.

These proposed regulations would implement new section 414(v) by providing that an employer plan is not treated as violating any provision of the Code solely because the plan permits a catch-up eligible participant (as defined in these proposed regulations) to make catch-up contributions. Catch-up contributions generally are elective deferrals made by a catch-up eligible participant that exceed an otherwise applicable limit and that are treated as catch-up contributions under the plan, but only to the extent they do not exceed the maximum amount of catch-up contributions permitted for the taxable year. An employer is not required to provide for catch-up contributions in any of its plans, even if the plans provide for elective deferrals. If, however, any plan of an employer provides for catch-up contributions, all plans of the employer that provide elective deferrals must comply with the universal availability requirements described below.

Under these proposed regulations, a participant is a catch-up eligible participant, and thus is permitted to make catch-up contributions, if the participant is otherwise eligible to make elective deferrals under the plan and is age 50 or older. For purposes of this rule, a participant who is projected to attain age 50 before the end of a calendar year is deemed to be age 50 as of January 1 of that year. The effect of this rule is that all participants who will attain age 50 during a calendar year are treated the same beginning January 1 of that year, without regard to whether the participant survives to his or her 50th birthday or terminates employment during the year and without regard to the employer's choice of plan year.

A catch-up eligible participant can make catch-up contributions under a section 401(k) plan, a SIMPLE IRA plan as defined in section 408(p), a simplified employee pension as defined in section 408(k) (SEP), a plan or contract that satisfies the requirements of section 403(b), or a section 457 eligible governmental plan, as long as the participant can otherwise make elective deferrals under the plan or contract. For this purpose, elective deferrals include not only elective deferrals defined in section 402(g)(3), but also any contribution to a section 457 eligible governmental plan.

In describing section 631 of EGTRRA, the Conference report states that “the otherwise applicable dollar limit on elective deferrals under a section 401(k) plan, section 403(b) annuity, SEP, or SIMPLE, or deferrals under a section 457 plan is increased for individuals who have attained age 50 by the end of the year.” Conf. Rep. No. 107-84, at 236 (2001). The legislative history to section 631 of EGTRRA indicates that the intent of Congress in enacting section 414(v) was to allow a catch-up eligible participant to make additional elective deferrals over and above any otherwise applicable limit, up to the catch-up contribution limit for the taxable year. The proposed regulations would provide that elective deferrals made by a catch-up eligible participant are treated as catch-up contributions if they exceed any otherwise applicable limit, to the extent they do not exceed the maximum dollar amount of catch-up contributions permitted under section 414(v). However, the regulations would not require that a participant have made elective deferrals in excess of an otherwise applicable limit in order to be a catch-up eligible participant. A plan providing for $1,000 of catch-up contributions in 2002 could allow a participant who is over age 50 to make elective deferrals in an amount projected to exceed the otherwise applicable limit by $1,000 at any time during 2002.

Under the proposed regulations, catch-up contributions would be determined by reference to three types of limits: statutory limits, employer-provided limits, and the actual deferral percentage (ADP) limit. A statutory limit is a limit contained in the Code on elective deferrals or annual additions permitted to be made under the plan or contract (without regard to section 414(v)). Statutory limits include the requirement under section 401(a)(30) that the plan limit all elective deferrals within a calendar year under the plan and other plans (or contracts) maintained by members of a controlled group to the amount permitted under section 402(g).

An employer-provided limit is a limit on the elective deferrals an employee can make under the plan (without regard to section 414(v)) that is contained in the terms of the plan, but that is not a statutory limit. For example, a limit on elective deferrals of highly compensated employees to 10% of pay is an employer-provided limit. The condition that a employer-provided limit be contained in the terms of the plan is intended to correspond with the requirements of § 1.401-1 that a qualified plan have a definite written program and provide for a definite predetermined formula for allocating contributions made to the plan.

For a section 401(k) plan that would fail the ADP test of section 401(k)(3) if it did not correct under section 401(k)(8), the ADP limit is the highest dollar amount of elective deferrals that may be retained in the plan by a highly compensated employee after the application of section 401(k)(8)(C) (without regard to section 414(v)). For example, if after ADP testing, elective deferrals by highly compensated employees in excess of $8,000 would be required to be distributed or recharacterized as employee contributions under the statutory correction set forth under section 401(k)(8)(C), then the ADP limit is $8,000. Similar rules apply in the case of a SEP.

The amount of elective deferrals in excess of an applicable limit is generally determined as of the end of a plan year by comparing the total elective deferrals for the plan year with the applicable limit for the plan year. For example, if a plan limits elective deferrals to 10% of compensation, then whether the participant has elective deferrals in excess of 10% of compensation is determined at the end of the plan year. Similarly, elective deferrals in excess of the ADP limit are determined as of the end of the plan year. For a limit that is determined on the basis of a year other than a plan year (such as the calendar year limit on elective deferrals under section 401(a)(30)), the determination of whether elective deferrals are in excess of the applicable limit is made on the basis of such other year.

If a plan provides for separate employer-provided limits on separate portions of compensation during the plan year, the determination of the amount of elective deferrals in excess of the employer-provided limit is still made on an annual basis, with the applicable limit for the year equal to the sum of the dollar limits that apply to the separate portions of compensation. This situation may occur, for example, when the plan sets a deferral percentage limit for each payroll period.

If the plan limits elective deferrals for separate portions of the plan year, then, solely for purposes of determining the amount that is in excess of an employer-provided limit, the plan may provide, as an alternative rule, that the applicable limit for the plan year is the product of the employee's plan year compensation and the time-weighted average of the deferral percentage limits. For example, if a plan using this time-weighted average limits deferrals to 8 percent of compensation during the first half of the year and 10 percent of compensation for the second half of the year, the applicable limit will be 9 percent of each employee's plan year compensation.

Under the proposed regulations, elective deferrals in excess of an applicable limit would be treated as catch-up contributions only to the extent that such elective deferrals do not exceed the catch-up contribution limit for the taxable year reduced by elective deferrals previously treated as catch-up contributions for the taxable year. The catch-up contribution limit for a taxable year is generally the applicable dollar catch-up limit for such taxable year, except that an elective deferral will not be treated as a catch-up contribution to the extent that the elective deferral, when added to all other elective deferrals for the taxable year under all plans of the employer, exceeds the participant's compensation (determined in accordance with section 415(c)(3)).

These proposed regulations would include a timing rule for purposes of determining when elective deferrals in excess of an applicable limit are treated as catch-up contributions. This rule is necessary because the maximum amount of catch-up contributions is based on a participant's taxable year, but the determination of whether an elective deferral is in excess of an applicable limit is determined on the basis of a taxable year, plan year, or limitation year, depending on the underlying limit. Under the proposed regulations, whether these elective deferrals in excess of an applicable limit can be treated as catch-up contributions would be determined as of the last day of the relevant year, except that if the limit is determined on a taxable or calendar year basis, then whether elective deferrals in excess of the limit can be treated as catch-up contributions would be determined at the time they are deferred. This timing rule is most significant for a plan with a plan year that is not the calendar year. For example, in a plan with a plan year ending on June 30, 2005, elective deferrals in excess of the employer-provided limit or the ADP limit for the plan year ending June 30, 2005, would be treated as catch-up contributions as of the last day of the plan year, up to the catch-up contribution limit for 2005. Any amounts deferred after June 30, 2005, that are in excess of the section 401(a)(30) limit for the 2005 calendar year would also be treated as catch-up contributions at the time they are deferred, up to the catch-up contribution limit for 2005 reduced by elective deferrals treated as catch-up contributions as of June 30, 2005.

If an elective deferral is treated as a catch-up contribution, it is not subject to otherwise applicable limits under the plan and the plan will not be treated as failing otherwise applicable nondiscrimination requirements because of the making of catch-up contributions. The proposed regulations would provide guidance on how catch-up contributions under the plan are taken into account for purposes of these various requirements under the Code. Under the proposed regulations, catch-up contributions would not be taken into account in applying the limits of section 401(a)(30), 401(k)(11), 402(h), 402A(c)(2), 403(b), 404(h), 408(k), 408(p), 415, or 457 to other contributions or benefits under the plan offering catch-up contributions or under any other plan of the employer.

For purposes of ADP testing, the proposed regulations would provide that any elective deferral for the plan year that is treated as a catch-up contribution because it is in excess of a statutory limit or an employer-provided limit is disregarded for purposes of calculating the participant's actual deferral ratio (i.e., catch-up contributions are subtracted from the participant's elective deferrals for the plan year prior to determining the participant's actual deferral ratio). This subtraction applies without regard to whether the catch-up eligible participant is a highly compensated employee or a nonhighly compensated employee. If, after running the ADP test, a plan needs to take corrective action under section 401(k)(8), the plan must determine the amount of elective deferrals that are catch-up contributions because they are in excess of the ADP limit. The elective deferrals that are treated as catch-up contributions must be retained by the plan. The plan would not be treated as failing section 401(k)(8) by reason of this retention of catch-up contributions. Excess contributions treated as catch-up contributions would nevertheless be treated as excess contributions for purposes of section 411(a)(3)(G). Therefore, if the plan does not provide for matching contributions on catch-up contributions, any matching contributions related to excess contributions treated as catch-up contributions can be forfeited. The approach under the proposed regulations would exclude those catch-up contributions that can be identified before ADP testing, and allow the plan to treat elective deferrals as catch-up contributions for those participants who would be limited under the plan (because the plan otherwise would be required to distribute some of their elective deferrals), while minimizing changes to current plan administration.

Catch-up contributions with respect to the current plan year are not taken into account for purposes of section 416 or 410(b). However, catch-up contributions made to the plan in prior years are taken into account in determining whether a plan is top-heavy under section 416, and for purposes of average benefit percentage testing to the extent prior years' contributions are taken into account (i.e., if accrued to date calculations are used).

A plan does not fail the requirements of section 401(a)(4) merely because it permits only catch-up eligible participants to make catch-up contributions. Similarly, if a plan applies a single matching formula to elective deferrals whether or not they are catch-up contributions, the matching formula as applied to catch-up eligible participants is not treated as a separate benefit, right, or feature under § 1.401(a)(4)-4 from the matching formula as applied to the other participants. However, the matching contributions under the matching formula must satisfy the actual contribution percentage test under section 401(m)(2) taking into account all matching contributions, including matching contributions on catch-up contributions.

Under the proposed regulations, a plan that offers catch-up contributions would satisfy the requirements of section 401(a)(4) only if all catch-up eligible participants are provided with the effective opportunity to make the same dollar amount of catch-up contributions. Therefore, if an employer provides for catch-up contributions under a section 401(k) plan, all other employer plans in the controlled group that provide for elective deferrals, including plans not subject to section 401(a)(4), must provide catch-up eligible participants with the same effective opportunity to make catch-up contributions. This universal availability requirement applies solely with respect to catch-up eligible participants. Because the definition of catch-up eligible participants requires that the participant be eligible to make elective deferrals under a plan without regard to section 414(v), the universal availability requirement will not require plans that do not otherwise provide for elective deferrals to provide for catch-up contributions.

In order to provide catch-up eligible participants with an effective opportunity to make catch-up contributions, the plan would have to permit each catch-up eligible participant to make sufficient elective deferrals during the year so that the participant has the opportunity to make elective deferrals up to the otherwise applicable limit plus the catch-up contribution limit. An effective opportunity could be provided in several different ways. For example, a plan that limits elective deferrals on a payroll-by-payroll basis might also provide participants with an effective opportunity to make catch-up contributions that is administered on a payroll-by-payroll basis (i.e., by allowing catch-up eligible participants to increase their deferrals above the otherwise applicable limit by a pro-rata portion of the catch-up limit for the year). However, as discussed above, whether these elective deferrals are treated as catch-up contributions would not be determined until the end of the year.

A plan would not fail the universal availability requirement solely because an employer-provided limit did not apply to all employees or different employer-provided limits apply to different groups of employees. As under current law, a plan could provide for different employer-provided limits for different groups of employees, as long as each limit satisfies the nondiscriminatory availability requirements of § 1.401(a)(4)-4 for benefits, rights, and features. Thus, for example, a plan could provide for an employer-provided limit that applies to highly compensated employees, even though no employer-provided limit applies to nonhighly compensated employees. However, a plan is not permitted to provide lower employer-provided limits for catch-up eligible participants.

The proposed regulations would provide several exceptions to this universal availability requirement. First, the proposed regulations would provide for coordination between catch-up contributions under section 414(v) and the provisions of section 457(b)(3) in accordance with section 414(v)(6)(C). The proposed regulations would also provide transition rules for collectively bargained employees and newly-acquired plans.

As discussed in Section B above, the intent of section 414(v) is to permit a catch-up eligible participant to make elective deferrals in an amount equal to the catch-up contribution limit for the year in addition to the amount of elective deferrals that the participant would otherwise have been allowed to defer under the plan or plans in which the catch-up eligible participant participated. Many of the statutory limits that would otherwise limit the participant's elective deferrals are applied on an aggregated basis, for example, across all plans within a controlled group. Accordingly, the proposed regulations would provide that, for purposes of determining whether elective deferrals are in excess of a statutory limit, all elective deferrals in excess of the statutory limit are aggregated in the same manner as the underlying limit and the aggregate amount of elective deferrals treated as catch-up contributions because they exceed the statutory limit must not exceed the applicable dollar catch-up limit.

For example, compliance with section 401(a)(30) is determined based on elective deferrals under all section 401(k) plans and all section 403(b) contracts sponsored by the employer. Therefore, all section 401(k) plans and section 403(b) contracts in the controlled group of the employer would be aggregated for purposes of determining the total amount of elective deferrals in excess of the section 401(a)(30) limit. The amount of elective deferrals treated as catch-up contributions by reason of exceeding the section 401(a)(30) limit under the aggregated plans or contracts must not exceed the dollar amount of the catch-up limit for the taxable year.

In calculating the actual deferral ratio (ADR) (as defined in § 1.401(k)-1(g)) for a highly compensated employee who participates in more than one section 401(k) plan of the employer during the year, all section 401(k) plans are treated as one section 401(k) plan. Consistent with this approach, if a highly compensated employee participates in more than one section 401(k) plan of an employer, in determining the elective deferrals in excess of an employer-provided limit, the proposed regulations would take into account the elective deferrals and employer-provided limits under all section 401(k) plans in which the employee participates. In such a case, the proposed regulations would provide that in determining whether an employee's elective deferrals exceed an employer-provided limit, the applicable limit for the plan year is the sum of the dollar amounts of the limits under the separate plans and the employee's elective deferrals under all these plans are combined to determine if that aggregate employer-provided limit is exceeded.

When the elective deferrals in excess of a statutory or employer-provided limit would be determined based on more than one plan, the aggregate amount of elective deferrals in excess of that limit made under all section 401(k) plans of the employer in which a catch-up eligible participant who is a highly compensated employee participates would be treated as elective deferrals in excess of an applicable limit under each of those section 401(k) plans. In the case of a highly compensated employee, all elective deferrals that exceed a statutory or employer-provided limit and are treated as catch-up contributions under the section 401(k) plans of the employer in which the catch-up eligible participant participates are subtracted from the participant's elective deferrals for purposes of determining the participant's ADR. However, if any of the section 401(k) plans corrects through distribution of excess contributions under section 401(k)(8) in order to comply with section 401(k)(3), only the catch-up contributions made under that plan are permitted to be subtracted from elective deferrals for purposes of this correction.

When the elective deferrals in excess of a statutory or employer-provided limit are determined on an aggregated basis, it must be determined under which plan the elective deferrals in excess of the limit were made. The plan under which the elective deferrals in excess of the limit were made may be determined in any manner that is not inconsistent with the manner in which such amounts were actually deferred under the plans. For example, if a catch-up eligible participant participates in a section 401(k) plan only during the first 6 months of the year and during the second 6 months of the year, while participating in a section 403(b) contract, the participant's contributions reach and exceed the section 401(a)(30) limit for the year, then all elective deferrals in excess of the section 401(a)(30) limit for the year could be treated as made to the section 403(b) contract.

Catch-up contributions are generally not treated as exceeding the applicable dollar amount of section 402(g)(1). The proposed regulations would also provide that a catch-up eligible participant who participates in multiple plans may treat an elective deferral as a catch-up contribution (up to the maximum amount of catch-up contributions permitted for the taxable year) because it exceeds the catch-up eligible participant's section 402(g) limit for the taxable year. This rule would allow a catch-up eligible participant who participates in plans of two or more employers an exclusion from gross income for elective deferrals that exceed the section 402(g) limit, even though the elective deferrals do not exceed an applicable limit for either employer's plan. The treatment by an individual of such elective deferrals as catch-up contributions will not have any impact on either employer's plan. This treatment is parallel to the treatment of excess deferrals for an individual under age 50 who exceeds the section 402(g) limit in the plans of two unrelated employers. Accordingly, the proposed regulations would not provide for the ADP test to be rerun to disregard elective deferrals that an individual treats as catch-up contributions because they exceed the section 402(g) limit. However, the total amount of elective deferrals in excess of the applicable dollar limit in section 402(g)(1)(B) that are not includible in income because they are treated as catch-up contributions cannot exceed that limit by more than the catch-up contribution limit for the taxable year.

The regulations are proposed to apply to contributions in taxable years beginning on or after January 1, 2002. Taxpayers may rely on these proposed regulations for guidance pending the issuance of final regulations. If, and to the extent, future guidance is more restrictive than the guidance in these proposed regulations, the future guidance will be applied without retroactive effect.

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 Code, these proposed regulations 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 (preferably a signed original and eight (8) copies) that are submitted timely to the IRS. In addition to the other requests for comments set forth in this document, the IRS and Treasury also request comments on the clarity of the proposed rule and how it may be made easier to understand. All comments will be available for public inspection and copying.

A public hearing has been scheduled for February 21, 2002, at 10 a.m. in the IRS Auditorium (7th 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 this 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 31, 2002.

A period of 10 minutes will be allotted to each person for 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 authors of these regulations are R. Lisa Mojiri-Azad and John T. Ricotta of the Office of the Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the IRS and Treasury participated in their development.

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

Under section 6416(b)(2), the person that paid the gasoline tax imposed by section 4081 to the government may receive a credit or refund of the amount of the tax if the gasoline is, by any person, exported, used or sold for use as supplies for vessels or aircraft, sold to a state or local government for its exclusive use, sold to a nonprofit educational organization for its exclusive use, or used or sold for use in the production of special fuels (exempt purposes).

Section 6102 of the Technical and Miscellaneous Revenue Act of 1988 (the 1988 Act) (Public Law 100-647, 102 Stat. 3342) added section 6416(a)(4) to the Internal Revenue Code. Under section 6416(a)(4)(A), a wholesale distributor (described in section 6416(a)(4)(B)) that buys gasoline on which the tax imposed by section 4081 has been paid and sells the gasoline to its ultimate purchaser for an exempt purpose is treated as the person (and the only person) that paid the tax to the government and thus is the person eligible to claim a credit or refund of that tax.

Section 6416(a)(4)(B), as added by the 1988 Act, provides that the term wholesale distributor includes any person that sells gasoline to producers, retailers, or to users that purchase in bulk quantities and accept delivery into bulk storage tanks. For this purpose, the term producer includes a refiner, blender, or wholesale distributor of gasoline, or a dealer selling gasoline exclusively to producers of gasoline. The term wholesale distributor does not include any person that is an importer, refiner, or blender of gasoline, or is a dealer selling gasoline exclusively to producers. Section 905 of the Taxpayer Relief Act of 1997 (Public Law 105-34, 111 Stat. 788) amended section 6416(a)(4)(B) of the Code by providing that the term wholesale distributor also includes any person that makes retail sales of gasoline at 10 or more retail motor fuel outlets.

Notice 89-29 (1989-1 C.B. 669) provides rules for implementing section 6416(a)(4), as added by the 1988 Act. These include rules that allow claims by the person that actually paid the tax to the government instead of claims by the wholesale distributor if (1) tax is not included in the price of the gasoline bought by the wholesale distributor or (2) the sale by the wholesale distributor is charged on an oil company credit card issued to an exempt person.

In response to questions that have arisen concerning the application of the rules in Notice 89-29, the IRS is considering proposing regulations under section 6416(a)(4) that, when finalized, would replace the guidance provided by Notice 89-29. The IRS invites comments from the public on issues that should be addressed in the regulations, including issues relating to refund claims by persons other than the wholesale distributor.

VA proposes to rewrite 38 CFR 3.104 in plain language. This regulation explains how a decision made by one VA field office affects other field offices as well as the VA Insurance Center. There is also a discussion of the circumstances under which VA may change a decision. The current regulation is located in subpart A of part 3. We propose to create new § 3.2120 to restate the current regulation. The new section would be located in subpart D, Universal Adjudication Rules that Apply to Benefit Claims Governed by part 3 of This Title.

Paragraph (a) of proposed new § 3.2120 informs claimants that when a Veterans Service Center makes a decision, the claimant is informed and given appeal rights. That decision is then binding on all other Veterans Service Centers. There are three exceptions to this general rule. The specific conditions under which a decision can be changed, based on the same evidence, are listed in paragraphs (a)(1) through (a)(3). Paragraphs (a)(1) and (a)(2) are restatements of the exceptions currently found in § 3.104(a). Paragraph (a)(3) incorporates new § 3.2600, Review of benefit claims decisions.

Proposed paragraph (b) of new § 3.2120 lists types of VA decisions that are made by both Veterans Service Centers and the VA Insurance Center. For clarity, we have added some examples of “domestic relations” issues. It explains that a decision by one Center is binding on the other Centers, as long as the facts of the case have not changed, and the instructions and criteria used to make the decision have not changed. The only exception is if VA determines the decision was based on a clear and unmistakable error, since VA will revise such decisions. This is a restatement of § 3.104(b).

This rulemaking reflects VA's goal of making government more responsive, accessible, and comprehensible to the public. The Plain Language Regulations Project was developed as a long-term comprehensive project to reorganize and rewrite in plain language the adjudication regulations in part 3 of title 38, Code of Federal Regulations. This proposed rule is part of a series of proposed revisions to those regulations.

The Unfunded Mandates Reform Act, Public Law 104-4, March 22, 1995, requires (in section 202) that agencies prepare an assessment of anticipated costs and benefits before developing any rule that may result in an expenditure by State, local, or tribal governments, in the aggregate, or by the private sector of $100 million or more in any given year. This proposed rule will have no consequential effect on State, local, or tribal governments.

This document contains no provisions constituting a collection of information under the Paperwork Reduction Act (44 U.S.C. 3501-3520).

The Secretary certifies that the adoption of the proposed rule would not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-612. This proposed rule does not directly affect any small entities. Only VA beneficiaries could be directly affected. Therefore, pursuant to 5 U.S.C. 605(b), this amendment is exempt from the initial and final regulatory flexibility analysis requirements of sections 603 and 604.

The catalog of Federal Domestic Assistance program numbers for this proposal are 64.100, 64.101, 64.104, 64.105, 64.109, 64.110, and 64.127.

For the reasons set forth in the preamble, VA proposes to amend 38 CFR part 3 as follows:

The index and some supporting materials are available on the Internet. You can find these materials at http://www.epa.gov/epaoswer/non-hw/muncpl/landfill/pb-paint.htm.

The official record for this action will be kept in paper form. Accordingly, EPA will transfer all comments received electronically into paper form and place them in the official record, which will also include all comments submitted directly in writing. The official record is the paper record maintained at the address in ADDRESSES at the beginning of this document.

EPA responses to comments, whether the comments are written or electronic, will be in a notice in the Federal Register or in a response to comments document placed in the official record for this rulemaking. EPA will not immediately reply to commenters electronically other than to seek clarification of electronic comments that may be garbled in transmission or during conversion to paper form, as discussed above.

You may be potentially affected by this proposed rule if you generate residential lead-based paint (LBP) waste as a result of LBP activities (including abatement, rehabilitation, renovation and remodeling) in homes, residences, and other households. By “households,” we mean single and multiple residences, hotels and motels, bunkhouses, ranger stations, crew quarters, campgrounds, picnic grounds, and day-use recreation areas.

Affected categories and entities would include:

This table is not intended to be exhaustive, but rather lists the types of entities that EPA is now aware of that could potentially be affected by this action. Other types of entities not listed in this table could also be affected. (Please see Sections X.A. and X.B. of this preamble for further discussion of affected entities. Also, in the docket for today's rule, see “Economic Analysis of EPA's Direct Final Rule Amending 40 CFR part 257 and 258.”) If you have any questions regarding the applicability of this action to a particular entity, consult the persons listed in the preceding FOR FURTHER INFORMATION CONTACT section.

EPA is proposing this rule pursuant to section 1008(a)(3), 2002(a), 4004(a) and 4010(c) of the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. §§ 6907(a), 6912(a), 6944(a), 6949a(c). We are also proposing to correct a typographical error in the existing statement of authority in part 257 by amending the citation to 42 U.S.C. 6949(c) to read “6949a(c).”

The Centers for Disease Control and Prevention (CDC) have estimated that approximately 900,000 children, or about 4.4% of children under the age of 6 years old, may have unacceptably high levels of lead in their blood. (See: “Update: Blood Lead Levels—United States, 1991-1994.” Morbidity and Mortality Weekly Report, Vol. 46, No. 7, February 21, 1997. CDC, U.S. Department of Health and Human Services.) Children are more susceptible than adults to the toxic effects of lead because their nervous systems are still developing and their bodies more readily absorb lead once exposed to it. (For a fuller discussion of this issue, see 66 FR 1206-1240, January 5, 2001). The most common sources of residential lead exposure include contaminated dust and paint chips from deteriorated lead-based paint (LBP) in older homes, activities that disturb LBP (such as abatement, deleading, home renovation and remodeling), lead-contaminated drinking water, and lead-contaminated soil around homes and play areas. It is estimated that approximately 38 million homes in the United States contain interior LBP. (See “Economic Analysis of EPA's Direct Final Rule Amending 40 CFR Part 257 and 258,” p. 31.

In response to this health threat, Congress enacted the Residential Lead-Based Paint Hazard Reduction Act of 1992 (hereinafter referred to as Title X of the Housing and Community Development Act of 1992, or as Title X). Among other provisions, Title X amended the Toxic Substances Control Act (TSCA) and directed the Environmental Protection Agency (EPA) to develop and finalize standards governing: (1) the training and certification of individuals engaged in LBP activities; (2) the accreditation of training programs; and (3) the process by which LBP activities are conducted by certified individuals. Congress also directed EPA to identify by regulation LBP hazards, lead-contaminated dust, and lead-contaminated soil. As a result of the enactment of Title X, there is an increasing effort to reduce the hazards posed by LBP (especially to children) in residential housing and other buildings.

The Resource Conservation and Recovery Act (RCRA) was enacted in 1976 to address management of solid waste, including industrial and municipal wastes. Subtitle C of RCRA governs the generation, transportation, treatment, storage and disposal of hazardous waste. A solid waste is a “hazardous waste” if it exhibits one or more of the characteristics of hazardous waste pursuant to 40 CFR part 261, subpart C (toxicity, ignitability, corrosivity, and reactivity) or if it is listed as a hazardous waste in part 261 subpart D. Subtitle D of RCRA addresses the management of nonhazardous solid waste (including municipal and nonmunicipal waste). Subtitle D was amended in 1984 to address two classes of hazardous wastes exempt from Subtitle C hazardous waste requirements: conditionally exempt small quantity generator (CESQG) waste and household hazardous waste. Household waste is defined in 40 CFR 258.2 as “any solid waste (including garbage, trash, and sanitary waste in septic tanks) derived from households (including single and multiple residences, hotels and motels, bunkhouses, ranger stations, crew quarters, campgrounds, picnic grounds, and day-use recreation areas).” Household waste is excluded from RCRA hazardous waste regulations at 40 CFR 261.4(b)(1).

Abatements, renovations, and remodeling activities in housing units with LBP can generate large quantities of residential LBP waste. In cases where the waste exhibits the toxicity characteristic for lead, the waste would be classified as a hazardous waste subject to the comprehensive “cradle to grave” hazardous waste management regulations of RCRA Subtitle C, unless they qualify for an exemption. Lead abatement contractors and public housing agencies argued that the application of these hazardous waste rules to residential LBP waste poses a barrier to the cost-effective abatement of lead hazards. EPA and HUD met to review the disposal requirements for lead-based paint waste and to consider regulatory relief from the applicability of RCRA Subtitle C to waste generated from residential LBP activities. Additionally, several States and advocacy groups (such as the Alliance to End Childhood Lead Poisoning) expressed concern that the RCRA requirements were considerably reducing the number of residential LBP abatements by imposing significant waste disposal costs. They argued that the benefits of handling lead-based paint waste as a hazardous waste were outweighed by the potential risk to children resulting from the disincentive the RCRA regulations created for lead-based paint abatement. They requested that EPA consider ways to minimize management and disposal costs and provide an appropriate regulatory framework that would both accelerate the pace of lead abatements (by lowering costs) and ensure that waste from such activities be managed and disposed of reliably, effectively, and in a manner which protects human health and the environment. They further contended that any regulatory relief that would avoid the cost of managing LBP waste as a hazardous waste would allow public housing authorities to use cost savings to perform additional abatements, thus reducing current and future exposure of children to residential lead-based paint.

In order to facilitate efforts to address lead-based paint hazards to children and respond to stakeholders' requests for regulatory relief, EPA analyzed waste characterization, laboratory leachate, and the risk and cost of disposal for lead-based paint debris. Based on those analyses, EPA published two proposals on December 18, 1998—the TSCA Proposed Rule (“Management and Disposal of Lead-Based Paint Debris”), and the RCRA Proposed Rule (“Temporary Suspension of Toxicity Characteristic Rule for Specified Lead-Based Paint Debris”). The Agency believed that these rules, if finalized, would help reduce the costs associated with the management and disposal of LBP debris, increasing the number of LBP abatements, while continuing to protect human health and the environment.

Under the mandate of Title X of TSCA, we proposed new TSCA management and disposal standards for LBP debris generated by contractors from pre-1978 homes and public and commercial buildings (63 FR 70190-70233, December 18, 1998). These standards would allow the disposal of contractor-generated LBP debris in a variety of facilities, including construction and demolition (C&D) landfills. EPA based the C&D landfill disposal option on the results of the groundwater risk analysis performed to support the proposal. The results showed that the potential impact to groundwater resources from the disposal of LBP debris in C&D landfills would be negligible. (For further details, see “USEPA. June 1998, Groundwater Pathway Analysis for Lead-Based Paint (LBP) Architectural Debris; Background Document” in the docket for today's rule. Also, see Section VII of this preamble.) The TSCA proposal has not been finalized.

The preamble to the proposed TSCA rule also clarified that the RCRA Subtitle C household waste exclusion in 40 CFR 261.4(b)(1) applies to residential LBP waste generated by do-it-yourselfers in their homes (see 63 FR 70241-70242). This clarification remains in place.

In 1998, EPA proposed to temporarily suspend the applicability of the Toxicity Characteristic (TC) rule to contractor-generated LBP debris that would be subject to the TSCA management and disposal standards cited above. The Agency proposed this suspension in order to avoid duplication with other statutes implemented by EPA as mandated under RCRA Section 1006(b)(1).

On July 31, 2000, EPA issued a memorandum clarifying the regulatory status of waste generated as a result of LBP activities (including abatement, renovation and remodeling, and rehabilitation) in homes and other residences.

Specifically, the memorandum clarified that contractors can manage residential LBP waste as household waste and thus are not subject to RCRA Subtitle C requirements. This means contractors can dispose residential LBP waste as household waste in municipal solid waste landfills or municipal solid waste combustors, according to State and local requirements. Dumping and open burning of residential LBP waste are not allowed. (See RCRA Sections 1008 and 4004.)

By interpreting residential LBP waste as a household waste under 40 CFR 261.4(b)(1), the July 2000 memorandum could be construed as allowing land disposal of LBP waste only in municipal solid waste landfill units complying with the requirements of 40 CFR part 258. This is because a “municipal solid waste landfill unit” is defined in 40 CFR 258.2 as receiving “household waste.” Therefore, under section 258.2, a C&D landfill that receives residential LBP waste could be deemed to be receiving household waste and may need to comply with EPA's Municipal Solid Waste Landfill Criteria found in 40 CFR part 258. Today's rule is designed to expressly state that C&D landfills can receive residential LBP waste without becoming subject to the requirements for a MSWLF in part 258.

Please note that the memorandum does not affect the regulatory status of nonresidential LBP waste, such as that generated during the abatement or renovation and remodeling of a commercial building. In addition, the memorandum does not cover residential demolition and deconstruction. EPA does not consider demolition and deconstruction waste to be household waste, since it is not similar to those wastes generated by a consumer in the home in the course of daily living. (For more information visit, http://www.epa.gov/lead/hhwmemo-july00fnl.pdf for a direct link to the memorandum. See “Regulatory Status of Waste Generated by Contractors and Residents from Lead-Based Paint Activities Conducted in Households” by visiting http://www.epa.gov/lead/fslbp.htm, or call the RCRA Hotline at 1-800-424-9346.)

The Agency evaluated if and how to finalize the 1998 RCRA and TSCA proposals. EPA decided to use alternative policy and regulatory vehicles ( i.e. , the July 31, 2000 policy memorandum and today's rule) in order to expeditiously accomplish some of the same goals of the 1998 proposals for certain key noncontroversial aspects. The Agency has no further plans to finalize the 1998 RCRA proposal.

Today's rule would expressly allow construction and demolition landfills to receive residential lead-based paint waste, by adding a statement to the definition of MSWLF unit. The definition of MSWLF unit in 40 CFR 257.2 and 258.2 would be amended by inserting at the end of the definition, the sentence, “A construction and demolition landfill that receives residential lead-based paint waste and does not receive any other household waste is not a MSWLF unit.” As previously explained, the existing definition of a MSWLF unit includes language which states that a disposal unit “that receives household waste” is a municipal solid waste landfill unit. This language can be construed to prohibit the disposal of any household waste into a facility that is not designed and operated in conformance with 40 CFR part 258 regulations. Today, we are proposing to amend the definition of MSWLF unit, in order to distinguish residential lead-based paint waste, which has been determined to be a household waste, from other types of household waste, for purposes of disposal.

The amended definition would read, “Municipal solid waste landfill (MSWLF) unit means a discrete area of land or an excavation that receives household waste, and that is not a land application unit, surface impoundment, injection well, or waste pile, as those terms are defined in this section. A MSWLF unit also may continue to receive other types of RCRA Subtitle D wastes, such as commercial solid waste, nonhazardous sludge, and industrial solid waste. Such a landfill may be publicly or privately-owned. A MSWLF unit may be a new MSWLF unit, an existing MSWLF unit or a lateral expansion. A construction and demolition landfill that receives residential lead-based paint waste and does not receive any other household waste is not a MSWLF unit.”

It is important to understand that today's proposed change to the definition of a municipal solid waste landfill unit would not in any way affect these disposal units. This change would simply distinguish residential lead-based paint waste from other household wastes. Today's amendment would not alter what a MSWLF can or cannot receive. MSWLFs can continue to receive residential LBP waste as household waste. The proposed rule would expressly provide an additional land-based waste disposal option for residential LBP waste. Furthermore, this rule would in no way affect or change the operation and design requirements for municipal solid waste landfills or any other MSWLF criteria.

As stated above, the revised definition of “municipal solid waste landfill unit” would allow a subset of household waste—residential LBP waste—to be disposed of in construction and demolition landfills as well as MSWLF units. Today's proposed rule would also add a definition of a construction and demolition landfill in order to expressly allow only C&D landfills, and no other types of land disposal units that meet the criteria of 40 CFR part 257 to receive this subset of household waste.

Based on a groundwater risk analysis used to support the TSCA proposal, we believe that the disposal of residential LBP debris in C&D landfills is appropriate and would not pose adverse health risks to residents living near C&D landfills. (For more information, see Section VII of this preamble.)

A C&D landfill would be defined in 40 CFR part 257 as follows: “Construction and demolition (C&D) landfill means a solid waste disposal facility subject to the requirements of subparts A or B of this part that receives construction and demolition waste and does not receive hazardous waste (defined in § 261.3 of this chapter) other than conditionally exempt small quantity generator waste (defined in § 261.5 of this chapter), or industrial solid waste (defined in § 258.2 of this chapter). A C&D landfill typically receives any one or more of the following types of solid wastes: roadwork material, excavated material, demolition waste, construction/renovation waste, and site clearance waste.” A parallel definition would also be added to 40 CFR part 258.

EPA proposed a similar definition of C&D landfill in the TSCA proposal, and received no germane comments on the definition during the public comment period.

Today's proposed rule would also add a definition of “residential lead-based paint waste” in order to clarify the scope of the waste stream addressed by today's rule. The proposed definition of residential lead-based paint waste states: “Residential lead-based paint waste means waste generated as a result of lead-based paint activities (including abatement, rehabilitation, renovation and remodeling) in homes and other residences. The term residential lead-based paint waste includes, but is not limited to, lead-based paint debris, chips, dust, and sludges.” Not included in the proposed definition of residential LBP waste are residential LBP demolition and deconstruction waste, and LBP waste from nonresidential structures such as public and commercial buildings, warehouses, bridges, water towers, and transmission towers.

In drafting this definition, we included these particular LBP activities because they are those limited to residences and that could pose lead hazards to occupants, especially to children. We included these particular waste types ( i.e. , debris, chips, dust, and sludges) because they are those that are typically generated during the named LBP activities.

The technical basis for today's proposal is the analytical data and groundwater risk analysis used to support the 1998 TSCA proposal. (See “USEPA. June 1998, Groundwater Pathway Analysis for Lead-Based Paint (LBP) Architectural Debris; Background Document” in the docket for today's rule.) Based on that data and analysis, EPA has concluded that residential LBP waste is not hazardous household waste when disposed of in C&D landfills. What follows is a discussion of that data and analysis and how they support today's proposed rule.

In the groundwater risk analysis used to support the 1998 TSCA proposal, we assumed that all lead-based paint from the entire pre-1978 U.S. housing stock would be disposed of in C&D landfills, and that the LBP would be removed from housing while it was still attached to architectural ( i.e. , building) components that are removed during LBP activities. Examples of architectural components are doors, window frames, moldings, painted plaster boards, concrete, and bricks. We assumed that the components would be removed with intact LBP because we believed that component removal, if cost-effective, would be preferred over paint scraping and other paint removal options, since the latter pose worker and occupant exposure concerns. This assumption was necessary due to the lack of data indicating what portion of pre-1978 housing would undergo paint removal vs. component removal and what types and quantities of LBP waste are generated at what frequency from various residential LBP activities. Also, in the groundwater analysis, we used the term “LBP debris” to refer to architectural components with intact LBP.

To estimate lead loading from residential LBP debris in C&D landfills around the country, we relied upon the 1990 Report to Congress prepared by the U.S. Department of Housing and Urban Development (HUD). The Report estimated total quantities of building components from pre-1978 homes in the U.S. From the amount of painted surfaces per housing unit reported in the HUD Report, we estimated the total quantities of building materials with LBP that would be disposed of in the landfills.

Then, in our groundwater risk analysis, we used leachate data, calculated the potential lead concentration in groundwater, and estimated risks from the disposal of LBP debris in C&D landfills. We also assumed that all of the lead from the LBP debris (which in this analysis meant the equivalent of all of the lead in all of the lead-based paint from the entire pre-1978 U.S. housing stock) would eventually end up in the leachate. The lead concentration in C&D landfill leachate varied depending on the landfill size. These lead concentrations served as inputs to the groundwater modeling we conducted to simulate the subsurface movement of landfill leachate and the resultant potential contamination of groundwater with lead.

The results from this analysis show that the lead concentration in groundwater would potentially exceed the drinking water action level of 0.015 mg/L for lead in less than 1% of the receptor wells in the vicinity of C&D landfills receiving LBP debris during the first 2,000 years after disposal. During the first 10,000 years after disposal of LBP debris, the drinking water action level would be exceeded in fewer than 5% of the receptor wells.

Based on these groundwater modeling results and the general geochemical behavior of lead in a subsurface environment, the Agency concluded that, on a national scale, the disposal of LBP debris in C&D landfills would, in general, be protective of human health and the environment at the 95th percentile protection level. This level of protectiveness is at the high end ( i.e. , most protective) of the levels that the Agency has used in regulating hazardous wastes under the RCRA program. (See 63 FR 70203, December 18, 1998.) When deciding whether to regulate industrial solid wastes as hazardous wastes, the Agency has considered a 90th percentile or higher level as the appropriate protection level and so has not regulated wastes satisfying this level of protection as hazardous wastes. Thus, in the 1998 TSCA proposal, we concluded that the disposal of LBP debris in C&D landfills is appropriate and would not pose adverse health risks to residents living near C&D landfills. Note that the Agency received many public comments addressing various aspects of the groundwater risk analysis. The comments were generally supportive of the proposed provision to allow LBP debris to be disposed of in C&D landfills and provided no data supporting a contrary decision. 1

EPA believes that the technical basis for the 1998 TSCA proposal, as discussed above, also supports today's proposed rule. This is because our groundwater risk analysis assumed that the total mass of lead-based paint from pre-1978 U.S. housing was disposed of in C&D landfills, and that all of the lead from that lead-based paint ended up in the C&D landfill leachate. Hence, it was irrelevant to the results of the analysis whether or not the LBP entered the C&D landfills by being attached to architectural components ( i.e. , as LBP debris), or rather did so in the form of other types of LBP waste, such as chips, dusts, and sludges.

In conclusion, we have determined that residential LBP waste from abatement, rehabilitation, renovation and remodeling activities does not pose a substantial hazard to human health and the environment when disposed of in C&D landfills. The disposal of residential LBP waste in C&D landfills is therefore an appropriate and legal disposal option.

Today's proposed rule would not alter the authority of State, local and Tribal governments to regulate LBP waste more stringently than does EPA. Generators of residential LBP waste should contact State environmental agencies to determine if there are additional or more stringent disposal requirements for residential LBP waste. Also, generators should comply with applicable HUD and/or TSCA regulations when addressing residential LBP hazards.

Because today's proposed rule would be less stringent than existing federal criteria, States would not be required to amend permit programs which have been determined to be adequate under 40 CFR Part 239. States would have the option to amend statutory or regulatory definitions pursuant to today's proposed rule. If a state chooses to amend its permit program pursuant to today's action, the State would be required to notify the Regional Administrator of the modification as provided by 40 CFR 239.12.

Today's proposed amendments would be directly applicable to landfills in States without an approved permit program under Part 239 and in Indian Country. We would also encourage Tribes to adopt today's proposed amendments into their programs in order to promote lead-based paint abatement activities in homes and other residences in Indian Country.

Under Executive Order 12866, EPA must determine whether a regulatory action is significant and therefore subject to Office of Management and Budget (OMB) review and the other provisions of the Executive Order. The Order defines a 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 rights and obligations or 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 Executive Order 12866.

It has been determined that this rule is not a “significant regulatory action” under the terms of Executive Order 12866 and is therefore not subject to OMB review.

EPA has performed a full economic analysis, “Economic Analysis of EPA's Direct Final Rule Amending 40 CFR parts 257 and 258,” which is available in the docket for today's rule. The EA concludes that this rule will impose no additional costs to parties, but may result in cost savings and incremental public health benefits. The rule authorizes the disposal of residential LBP waste in C&D landfills, where previously, under the July 31, 2000 policy memorandum, disposal was authorized only in MSWLFs. As a result, EPA believes that, in those parts of the country where it is cheaper to transport and dispose of residential LBP waste in C&D landfills compared to MSWLFs, some residential LBP waste will be diverted from MSWLFs to C&D landfills. Where this occurs, generators will benefit from lower waste management and disposal costs.

EPA assumes that only residential LBP waste generators in the Midwest, Northeast, and South regions will shift disposal from MSWLFs to C&D landfills, based on an analysis of the relative costs of MSWLF and C&D landfill disposal by region. EPA further assumes that the percentage of residential LBP waste that is affected is proportional to the share of these three regions in the number of housing units with LBP, which is 84.4 percent. Under these assumptions, an estimated 0.87 million tons of residential LBP waste will be diverted from MSWLFs to C&D landfills annually. This represents 0.73 percent of the total volume of all waste disposed of in MSWLFs annually. This shift in disposal would save residential LBP waste generators in the Midwest, Northeast, and South regions up to an estimated $16.76 million annually. The savings accruing to generators of residential LBP abatement waste is estimated at $0.79 million per year, while the savings accruing to generators of residential renovation and remodeling waste is $15.98 million per year.

EPA estimates that of the $0.79 million in savings that could accrue to generators of residential LBP abatement waste, an estimated 39.7 percent, or $0.31 million, will be generated annually in the public housing sector. EPA assumes that in the public sector, any savings in residential LBP waste management and disposal costs will be used to conduct additional LBP abatements. Given an average cost for LBP abatement in public housing units of $3,650, the $0.31 million in annual savings would fund an additional 86 abatements each year. This ensuing increase in LBP abatement projects would result in a more rapid reduction in the potential for exposure to the hazards of LBP, especially for children. These hazards include decreased intelligence (i.e., lower IQ), behavioral problems, reduced physical stature and growth, and impaired hearing.

The Regulatory Flexibility Act (RFA), as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 U.S.C. 601 et seq. , generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions.

For purposes of assessing the impacts of today's proposed rule on small entities, small entity is defined as: (1) A small business that meets the Small Business Administration size standards established for industries as described in the North American Industry Classification System ( see http://www.sba.gov/size/NAICS-cover-page.html ); (2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.

After considering the economic impacts of today's proposed rule on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities. This proposed rule will not impose any new requirements on small entities. The rule will provide an additional non-mandatory option for the disposal of residential LBP waste.

Today's proposed rule is in compliance with the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. This proposed rule does not require the collection of information from the States, Federal Agencies, or industry. Therefore, we do not need to prepare an Information Collection Request.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub. L. 104-4, establishes requirements for Federal agencies to assess the effects of regulatory actions on State, local, and Tribal governments, and the private sector. Under Section 202 of the UMRA, EPA generally must prepare a written statement, including a cost-benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures to State, local, and tribal governments, in the aggregate, or to the private sector, of $100 million or more in any one year. Before promulgating an EPA rule for which a written statement is needed, Section 205 of the UMRA generally requires EPA to identify and consider a reasonable number of alternatives and adopt the least costly, most cost effective or least burdensome alternative that achieves the objective of the rule. The provisions of Section 205 do not apply when they are inconsistent with applicable law. Moreover, Section 205 allows EPA to adopt an alternative other than the least costly, most cost-effective or least burdensome alternative if the Administrator publishes with the final rule an explanation why that alternative was not adopted. Before EPA establishes any regulatory requirements that may significantly or uniquely affect small governments, including tribal governments, it must have developed under Section 203 of the UMRA a small government agency plan. The plan must provide for notifying potentially affected small governments, enabling officials of affected small governments to have meaningful and timely input in the development of EPA regulatory proposals with significant Federal intergovernmental mandates, and informing, educating, and advising small governments on compliance with the regulatory requirements.

Today's proposed rule contains no Federal mandates (under the regulatory provisions of Title II of the UMRA) for State, local, or tribal governments or the private sector. This proposed rule would impose no enforceable duty on any State, local or tribal governments or the private sector. Thus, today's proposed rule is not subject to the requirements of sections 202 and 205 of UMRA.

Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999), requires EPA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in the Executive Order to include regulations that 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.”

This proposed rule does not have federalism implications. It will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. As explained in Section IX of this preamble, none of today's proposed revisions are more stringent or broaden the scope of the existing Federal requirements. Therefore, States are not required to adopt the revision to the definition of MSWLF unit nor the additional definitions of construction and demolition (C&D) landfill and residential lead-based paint waste in today's rule. Thus, Executive Order 13132 does not apply to this proposed rule.

Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 6, 2000), requires EPA to develop an accountable process to ensure “meaningful and timely input by tribal officials in the development of regulatory policies that have tribal implications.” “Policies that have tribal implications” is defined in the Executive Order to include regulations that have “substantial direct effects on one or more Indian tribes, on the relationship between the Federal government and the Indian tribes, or on the distribution of power and responsibilities between the Federal government and Indian tribes.”

This proposed rule does not have tribal implications. It will not have substantial direct effects on tribal governments, on the relationship between the Federal government and Indian tribes, or on the distribution of power and responsibilities between the Federal government and Indian tribes, as specified in Executive Order 13175. Today's proposed rule would expressly provide an additional option for disposal of certain waste applicable in Indian Country, but would not create any mandate on Indian tribal governments. Thus, Executive Order 13175 does not apply to this rule.

Executive Order 13045, “Protection of Children from Environmental Health Risks and Safety Risks” applies to any rule that: (1) is determined to be “economically significant” as defined under Executive Order 12866, and (2) concerns an environmental health or safety risk that EPA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, the Agency must evaluate the environmental health or safety effects of the planned rule on children, and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by the Agency.

This proposed rule is not subject to Executive Order 13045 because it is not an economically significant rule as defined by Executive Order 12866. However, this rule will affect decisions involving the environmental health or safety risks to children. It will benefit children by allowing environmentally protective disposal of residential lead-based paint waste in C&D landfills, which is less costly than disposal in MSWLFs in certain areas of the U.S., therefore reducing the cost of lead abatements. Reducing the cost of LBP abatements will also reduce the amount of time needed to complete abatements in public housing. Lower abatement costs may increase the amount of private homes undergoing abatements. By reducing costs associated with the disposal of LBP waste, the Agency believes that the number of abatements may marginally increase, thus resulting in a reduction of the number of children exposed to LBP.

Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Pub L. No. 104-113, § 12(d) (15 U.S.C. 272 note) directs us to use voluntary consensus standards in our regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (for example, materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies. The NTTAA directs EPA to provide Congress, through OMB, explanations when we decide not to use available and applicable voluntary consensus standards. Today's proposed rule does not involve technical standards, voluntary or otherwise. Therefore, the NTTAA does not apply to today's proposed rule.

Under Executive Order 12898, “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations,” as well as through EPA's April 1995, “Environmental Justice Strategy, OSWER Environmental Justice Task Force Action Agenda Report,” and National Environmental Justice Advisory Council, EPA has undertaken to incorporate environmental justice into its policies and programs. EPA is committed to addressing environmental justice concerns, and is assuming a leadership role in environmental justice initiatives to enhance environmental quality for all residents of the United States. The Agency's goals are to ensure that no segment of the population, regardless of race, color, national origin, or income, bears disproportionately high and adverse human health and environmental effects as a result of EPA's policies, programs, and activities.

Today's proposed rule is not expected to negatively impact any community, and therefore is not expected to cause any disproportionately high and adverse impacts to minority or low-income communities versus non-minority or affluent communities. On the contrary, since the rule will reduce the cost of performing LBP abatements in certain regions of the U.S., EPA assumes that the savings will afford public housing authorities, in particular, the opportunity to conduct additional abatements of LBP hazards in affected housing units. Tenants of public housing units are possibly more likely to be minority and lower-income households, and the rule should have the effect of providing a differential benefit to such populations.

This proposed rule is not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 Fed. Reg. 28355 (May 22, 2001) because it is not a significant regulatory action under Executive Order 12866.

Section 4(b)(3)(D)(ii) of the Act and our listing regulations (50 CFR 424.14(c)(3)) require that within 12 months after receiving a petition that is found to present substantial information indicating that revision of a critical habitat may be warranted, we shall determine how we intend to proceed with the requested revision, and promptly publish notice of such intention in the Federal Register .

On August 26, 1999, Mr. Sidney Maddock, Biodiversity Legal Foundation, submitted a petition to us, on behalf of himself, the Biodiversity Legal Foundation, the Florida Biodiversity Project, Brian Scherf, and Rosalyn Scherf, to revise critical habitat for the Cape Sable seaside sparrow. We received the petition on August 31, 1999.

After considering the petition and review of all available scientific and commercial information, we found that the petition presented substantial information indicating that the requested action may be warranted. We published a notice announcing our finding in the Federal Register on July 10, 2000 (65 FR 42316).

We designated critical habitat for the sparrow on August 11, 1977 (42 FR 40685). Currently designated critical habitat encompasses about 76,883 hectares (189,979 acres) in the southern Everglades along the eastern flank of Shark River Slough and along Taylor Slough. Most of the critical habitat is on Federal or State managed lands, including portions of Everglades National Park managed by the National Park Service, and portions of the Southern Glades Wildlife and Environmental Area managed by the Florida Fish and Wildlife Conservation Commission. Major constituent elements within the designated critical habitat requiring special management considerations or protection were not described in detail in this designation.

At the time the sparrow was listed, limited published information was available on the species' natural history and habitat requirements, and existing research had been conducted primarily on the sparrow's eastern habitats. To fill these gaps, much detailed research was conducted on the sparrow during the 1990s. Recent research has focused on determining natural history parameters, demographic parameters, and management strategies for habitat and populations. Agencies or organizations involved in these efforts include Everglades National Park, U.S. Geological Survey—Biological Resources Division, Army Corps of Engineers (Corps), and the Florida Fish and Wildlife Conservation Commission. Concerted efforts since the early 1990s have resulted in annual rangewide breeding season surveys, investigation of non-breeding season habitat use and movements, population modeling, habitat management including exotic vegetation and fire control, and a revised recovery plan. These efforts have expanded and refined our knowledge about critical habitat for the sparrow. Monitoring required for consultations under section 7 of the Act has also contributed to our database regarding critical habitat.

We have reviewed the petition, the information provided in the petition, other literature, and information gathered since the previous critical habitat designation, as well as submitted comments and information. Based on the best scientific and commercial information available, we find that revision of critical habitat is warranted for the Cape Sable seaside sparrow. Based on this new information, some new areas will likely need to be added and others removed from the designation.

Section 4(b)(3)(D)(ii) of the Act provides that with a 12-month warranted finding, we shall determine how we intend to proceed with the requested revision and publish such notice of our intention in the Federal Register . We have determined that the revision is warranted and we intend to proceed according to the following steps:

Criteria for designating critical habitat are provided in our regulations at 50 CFR 424. We must consider for inclusion in critical habitat those areas that meet physiological, behavioral, ecological, and evolutionary requirements that are essential to the conservation of a species and that may require special management considerations or protection. Such requirements include, but are not limited to: (1) Space for individual and population growth, and for normal behavior; (2) food, water, air, light, minerals, or other nutritional or physiological requirements; (3) cover or shelter; (4) sites for breeding, reproduction, rearing of offspring, germination, or seed dispersal; and (5) habitats that are protected from disturbance or are representative of the historic geographical and ecological distribution of a species.

When considering how to revise the designation of critical habitat, we will focus on the principal biological or physical constituent elements that are essential to the Cape Sable seaside sparrow's conservation. Known primary constituent elements will be listed with the critical habitat. Areas that contain these primary constituent elements must be determined for the sparrow.

We will designate as critical habitat areas essential to the conservation of the sparrow. The quantity and overall quality of habitat, ownership, land use, and connectivity with other sparrow habitat changes significantly from site to site. Once identified, the habitats must be delineated, mapped, and described for the proposed designation process. This process may include review of aerial photography, ownership maps, field ground truthing, locating landmarks or other geographical markers using survey techniques such as geographic positioning systems to locate latitude and longitude, with the final product being a usable map.

Section 4(b)(2) of the Act requires us to designate critical habitat on the basis of the best scientific and commercial data available and to consider the economic and other relevant impacts of designating a particular area as critical habitat. We will conduct the economic analysis for the proposed critical habitat designation prior to making a final determination. We may exclude areas from critical habitat upon a determination that the benefits of such exclusions outweigh the benefits of specifying such areas as critical habitat. We cannot exclude such areas from critical habitat when such exclusion will result in the extinction of the species.

We will develop and publish a proposed rule to revise critical habitat for the Cape Sable seaside sparrow as soon as feasible, considering our workload priorities and available funding. Currently, most of our listing budget must be directed to complying with numerous court orders, settlement agreements, litigation related activities, and due and overdue final listing determinations.

We will coordinate with Federal, State, Tribal, local, and private landowners during the habitat assessment process.

At this time, we are part of the Federal government's efforts to improve water management in the Everglades, and thus conserve species, including the Cape Sable seaside sparrow, that depend on appropriate water levels. In 1999, we issued a Jeopardy Biological Opinion to the U.S. Army Corps of Engineers (Corps) for the Modified Water Deliveries to Everglades National Park project, Experimental Water Deliveries Program, and the C-111 Project proposed by the Corps in South Florida. This opinion contains Reasonable and Prudent Alternatives (RPAs) that address all of the currently known subpopulations of the Cape Sable seaside sparrow. These RPAs include elements that are designed to protect and improve the habitat of all of these subpopulations, regardless of whether the specific location of that habitat is currently designated as critical habitat. As a result of that Opinion, we have been working with the Corps, Everglades National Park, and the South Florida Water Management District to establish water-management practices that will achieve the aims of the RPAs, including protection and improvement of all known areas where sparrows have been documented since the early 1980s. Efforts for protection of the sparrow and its habitat in the near future will include coordination with the Florida Fish and Wildlife Conservation Commission and the Miccosukee Tribe of Indians. Through this section 7 process and our work with the Federal and State agencies in south Florida, we will continue to protect and improve habitat for the Cape Sable seaside sparrow.

The primary author of this document is David Martin (see ADDRESSES section).

The authority for this action is the Endangered Species Act (16 U.S.C. 1531-1544).

Regulations implementing the Fishery Management Plan for the Atlantic Mackerel, Squid, and Butterfish Fisheries (FMP), prepared by the Mid-Atlantic Fishery Management Council (Council), appear at 50 CFR part 648, subpart B. Regulations governing foreign fishing appear at 50 CFR part 600, subpart F. These regulations, at §§ 600.516(c) and 648.21, require that NMFS, based on the maximum optimum yield (Max OY) of each fishery as established by the regulations, annually publish a proposed rule specifying the initial amounts of the initial optimum yield (IOY), as well as the amounts for allowable biological catch (ABC), domestic annual harvest (DAH), domestic annual processing (DAP), total allowable level of foreign fishing (TALFF), and JVP for the affected species managed under the FMP. The regulations also specify that there will be no JVP or TALFF specified for Loligo squid, Illex squid, or butterfish, except that a butterfish bycatch TALFF will be specified if TALFF is specified for Atlantic mackerel. Procedures for determining the initial annual amounts are found in § 648.21.

On August 10, 2001, regulations were implemented under Framework Adjustment 1 to the FMP to allow the specification of quota set-asides to be used for research purposes. For each of the four species managed under the FMP, the Council recommended that up to 2 percent of the 2002 IOY be set aside for scientific research purposes. A Request for Proposals has been published to solicit proposals for 2002 based on research priorities identified by the Council (66 FR 38636, July 25, 2001, and 66 FR 45668, August 29, 2001). The deadline for submission was September 14, 2001, and proposals are currently under review. The quota set-asides will be adjusted in the final rule establishing the annual specifications for the MSB fisheries, consistent with projects forwarded to the NOAA Grants Office for award. If the awards are not made for any reason, NMFS will publish an additional rule to restore the unused set-aside amount to the annual quota.

Overfishing for Atlantic mackerel is defined by the FMP to occur when the catch associated with a threshold fishing mortality rate (F) of F MSY (the F that produces MSY (maximum sustainable yield)) is exceeded. When spawning stock biomass (SSB) is greater than 890,000 mt, the maximum F threshold is F MSY (0.45), and the target F is 0.25. To avoid low levels of recruitment, the FMP contains a control rule whereby the threshold F decreases linearly from 0.45 at 890,000 mt SSB to zero at 225,000 mt SSB (1/4 of the biomass level that would produce MSY on a continuing basis (B MSY )), and the target F decreases linearly from 0.25 at 890,000 mt SSB to zero at 450,000 mt SSB (1/2 B MSY ). Annual quotas are specified that correspond to the target F resulting from this control rule.

Since SSB is currently above 890,000 mt, the target F for 2002 is 0.25. The yield associated with that target F at the estimated stock size is 369,000 mt. The ABC recommendation of 347,000 mt represents an adjustment to the yield estimate of 369,000 mt, minus the estimated Canadian catch of 22,000 mt. The proposed IOY for the 2002 Atlantic mackerel fishery is 85,000 mt, which is equal to the proposed DAH. The specification for DAH is computed by calculating the estimated recreational catch, the proposed DAP and JVP. The recreational catch component of DAH is estimated to be 15,000 mt. DAP and JVP components of DAH have historically been estimated using the Council's annual processor survey, which is intended to obtain estimates of processing capacity in the domestic and joint venture (JV) fisheries. However, for the years 1994 through 2002, response to this voluntary survey was low and did not contain projections from some large processors. The Council believes, based on the best data available, that the capacity of the domestic fleet to harvest mackerel greatly exceeds the domestic processors’ capacity to process mackerel.

Therefore, the Council has recommended, and NMFS proposes, a specification of 20,000 mt of JVP for the 2002 fishery, with a possible increase to 30,000 mt later in the year. If additional applications for JVP are received, the Council could authorize NMFS to increase this allocation to 30,000 mt by publishing notification in the Federal Register . The Council also recommended, and NMFS proposes, a TALFF of zero and a DAP of 50,000 mt, yielding a DAH of 85,000 mt, which includes the 15,000-mt recreational catch estimate. The Council chose to specify TALFF at zero despite the minimal loss to the Nation that may result from the loss of poundage fees collected from foreign vessels. The Council was concerned that the perceived competition TALFF represents to U.S. processors could impede the future expansion of mackerel processing facilities.

As authorized by §§ 600.501 and 600.520(b)(2)(ii), the Council recommended, and NMFS proposes, that several special conditions be imposed on the 2002 Atlantic mackerel fishery, as follows: (1) JVs would be allowed south of 37°30' N. lat., but river herring bycatch may not exceed 0.25 percent of the over-the-side transfers of Atlantic mackerel; (2) the Regional Administrator should ensure that impacts on marine mammals are reduced in the prosecution of the Atlantic mackerel fishery; (3) the mackerel optimum yield (OY) may be increased during the year, but the total should not exceed 347,000 mt; and (4) applications from a particular nation for an Atlantic mackerel JV allocation for 2002 may be based on an evaluation by the Regional Administrator of that nation's performances relative to purchase obligations for previous years.

The FMP defines overfishing for Loligo squid as occurring when the catch associated with a threshold of the fishing mortality that produces the maximum sustainable level of yield per recruit (F MAX ) is exceeded (F MAX is a proxy for F MSY ). When an estimate of F MSY becomes available, it will replace the current overfishing proxy F MSY . Max OY is specified as the catch associated with F MAX . In addition, the biomass target is specified as B MSY .

The most recent stock assessment for Loligo squid (the 29th Northeast Regional Stock Assessment Workshop, August 1999 (SAW-29)) concluded that the stock was approaching an overfished condition and that overfishing was occurring. However, recent survey data for Loligo squid indicate that abundance of this species has increased significantly since SAW 29 was conducted. Estimates of biomass based on NMFS' Northeast Fisheries Science Center (NEFSC) fall 1999, spring 2000, and fall 2000 survey indices for Loligo squid indicate that the stock is currently at or near B msy . The stock is also no longer listed as overfished in NMFS' Report to Congress: Status of the Fisheries of the United States (January 2001).

Based on the assumption that the stock will be at or near B msy in 2002, the Council recommended no changes from the 2001 quota level. The 2002 quota is specified as the yield associated with 75 percent of F msy at B msy , or 17,000 mt, based on projections from SAW-29. The regulations continue to specify Max OY as the yield associated with F max , or 26,000 mt. Thus, the 2002 proposed Max OY for Loligo squid is 26,000 mt and the recommended ABC for the 2002 fishery is 17,000 mt.

In Amendment 5 to the FMP, the Council concluded that U.S. vessels have the capacity to, and will harvest the OY on an annual basis, so that DAH equals OY. The Council also concluded that U.S. fish processors, on an annual basis, can process that portion of the OY that will be harvested by U.S. commercial fishing vessels, so that DAP equals DAH, and JVP is zero. Since U.S. fishing vessels have the capacity to harvest, and are expected to attempt to harvest, the entire OY, there is no portion of the OY that can be made available for foreign fishing, making TALFF zero.

The Loligo squid 2000 annual quota was allocated among three 4-month trimesters. Due to the premature closures and overages that occurred during the 2000 fishing year, the 2001 annual DAH for Loligo squid was allocated into quarterly periods. The Council has proposed, and NMFS recommends, no change from the 2001 quarterly distribution system. The 2002 quarterly allocations would be as follows:

Also unchanged from 2001, NMFS proposes that the 2002 directed fishery be closed in Quarters I-III when 80 percent of the period allocation is harvested, with vessels restricted to a 2,500-lb (1,134-kg) Loligo squid trip limit per single calender day until the end of the respective quarter. The directed fishery would close when 95 percent of the total annual DAH has been harvested, with vessels restricted to a 2,500-lb (1,134-kg) Loligo squid trip limit per single calender day for the remainder of the year. Quota overages from Quarter I would be deducted from the allocation in Quarter III, and any overages from Quarter II would be deducted from Quarter IV.

The Council has also recommended, and NMFS proposes, to modify the method for carrying over Loligo squid quarterly underages for 2002 and subsequent fishing years. For the 2001 fishing year, by default, quarterly underages carried over into Quarter IV because the fourth quarter does not close until 95 percent of the total annual quota has been harvested. However, beginning with the 2002 fishing year, NMFS proposes to add a provision under 50 CFR part 648.21 stating that, in the event that the first quarter landings for Loligo squid are less than 70 percent of the first quarter allocation, the underage below 70 percent would be applied to Quarter III. Underages from quarters II and III would continue to be added to Quarter IV by default, based on the 95-percent closure rule mentioned above.

The approved overfishing definition for Illex squid states that overfishing for Illex squid occurs when the catch associated with a threshold fishing mortality rate of F MSY is exceeded. Maximum OY is to be specified as the catch associated with a fishing mortality rate of F MSY . In addition, the biomass target is specified as B MSY . The minimum biomass threshold is specified as 1/2 B MSY .

The most recent assessment of the Illex squid stock (SAW-29) concluded that the stock is not overfished and that overfishing is not occurring. The previous assessment, the 21st Northeast Regional Stock Assessment (1996), had concluded that the U.S. Illex squid stock is fully exploited. Due to a lack of adequate data, the estimate of yield at F MSY was not updated in SAW-29. However, an upper bound on annual F was computed for the U.S. Exclusive Economic Zone portion of the stock, based on a model that incorporated weekly landings and relative fishing effort and mean squid weights during 1994-1998. These estimates of F were well below the biological reference points. Current absolute stock size is unknown and no stock projections were done in SAW-29.

Since data limitations did not allow an update of yield estimates at the threshold and target F values, the Council recommended, and NMFS proposes, that the specification of Max OY and ABC remain unchanged from 2001 at 24,000 mt (the yield associated with F MSY ). Under this option, the directed fishery for Illex squid would remain open until 95 percent of the ABC is taken (22,800 mt). Once 95 percent of the ABC is estimated to have been taken, the directed fishery would be closed and a 5,000-lb (2,268-kg) trip limit would take effect for the remainder of the fishing year. Similar to Loligo squid, when a trip limit is in effect, vessels are prohibited from possessing or landing more than 5,000 lb (2,268 kg) in a single calendar day. Amendment 5 to the FMP eliminated the possibility of JVP and TALFF for the Illex squid fishery because of the domestic fishing industry's ability to harvest and to process the OY from this fishery.

The FMP set OY for butterfish at 16,000 mt. Based on the most current stock assessment, the Council recommends, and NMFS proposes, an ABC of 7,200 mt for the 2002 fishery. This represents no change in the specifications since 1996. Commercial landings of butterfish have been low at 2,798 mt, 1,964 mt, and 2,116 mt for the 1997 through 1999 fisheries, respectively. Lack of market demand and the difficulty in locating schools of market-sized fish have impacted this fishery.

For the 2002 fishing year, the Council recommended, and NMFS proposes, an IOY for butterfish of 5,900 mt. The IOY is composed of a DAH of 5,900 mt and a bycatch TALFF that is equal to zero. Amendment 5 eliminated the possibility of JVP or TALFF specifications for butterfish except for a bycatch TALFF specification if TALFF is specified for Atlantic mackerel. Because the Council did not recommend TALFF for Atlantic mackerel, TALFF for butterfish is set at zero.

This action is authorized by 50 CFR part 648 and has been determined to be not significant for purposes of Executive Order 12866.

The Council prepared an IRFA in section 5.0 of the RIR that describes the economic impacts this proposed rule, if adopted, would have on small entities. A description of the action, why it is being considered, and the legal basis for this action are contained at the beginning of the SUPPLEMENTARY INFORMATION section. A summary of the IRFA follows:

The numbers of potential fishing vessels in the 2002 fisheries are 395 for Loligo squid/butterfish, 77 for Illex squid, and 2,098 for Atlantic mackerel. All of the vessels are considered small entities. Many vessels participate in more than one of these fisheries; therefore, the numbers are not additive. The proposed ABC specifications of 347,000 mt and DAH of 85,000 mt for Atlantic mackerel, the DAH specifications of 24,000 mt for Illex squid, and the DAH specifications of 5,900 mt for butterfish represent no constraint on vessels in these fisheries. The level of landings in the proposed specifications for 2002 have not been achieved by vessels in these fisheries in recent years. Absent such a constraint, no impacts on revenues are expected as a result of the proposed action.

From 1996-2000, Loligo squid landings averaged 16,548 mt. If the 2002 proposed DAH specification of 17,000 mt for Loligo squid is achieved, there would be an increase in catch and revenue in the Loligo squid fishery relative to the average landings from 1996-2000. NMFS also proposes to modify the provision for carrying over Quarter I Loligo squid underages. Under the new measure, Loligo squid Quarter I underages less than 70 percent of the first quarter allocation would be applied to Quarter III. Currently, all underages from Quarter I are applied to Quarter IV because Quarter IV does not close until 95 percent of the total annual quota is harvested. However, by making the underage available during Quarter III, Loligo squid permit holders could continue to fish during a time when the quarter may have otherwise been closed. This could provide an added economic benefit to fishers during Quarter III. However, because this provision would only shift a limited amount of quota from one period to another, and does not modify the Loligo squid annual quota, no overall change in revenue is expected.

One alternative considered for the Atlantic mackerel fishery was to set the 2002 specifications at the same level as 2001. The specifications under this alternative were similar to the preferred alternative, with the exception of IOY and TALFF. Under this alternative, the IOY specification would be slightly higher (88,000 mt) because TALFF would be specified at 3,000 mt. The specification of TALFF above zero was rejected by the Council as inconsistent with the FMP because it would not meet the policy objectives of the Council relative to further development of the U.S. domestic harvest for Atlantic mackerel. NMFS accepted the Council recommendation regarding IOY as accomplishing this objective. However, this alternative would place no constraints, and consequently no revenue impacts on the fishery because the proposed levels of harvest for Atlantic mackerel under this alternative have not been harvested in recent years. A second alternative for Atlantic mackerel was to set ABC at the long-term potential catch (LTPC), or 134,000 mt. This alternative was found inconsistent with the FMP because it would not allow for variations and contingencies in the status of the stock. For example, the current adult stock was recently estimated to exceed 2.1 million mt. The specification of ABC at LTPC would effectively result in an exploitation rate of only about 6 percent, well below the optimal level of exploitation. The level of foregone yield under this alternative was considered unacceptable, but would not impact the IOY specifications. A third alternative considered for mackerel included the elimination of JVP for 2002, which would lower the specification of IOY to 68,000 mt, also far in excess of recent landings. This alternative was rejected due to the need for JVP’s, which allow U.S. harvesters to take Atlantic mackerel at levels in excess of current U.S. processing capacity. However, these alternatives would not constrain the mackerel fishery and were determined to have no impact on the revenues of participants in this fishery.

For Loligo squid, one alternative that was considered was to set the ABC, DAH, DAP, and IOY at 13,000 mt, or a 23.3-percent reduction from the 2001 level. This was the same level as the 2000 fishing year until an inseason adjustment increased the ABC, DAH, DAP, and IOY to 15,000 mt (65 FR 60118, October 10, 2000). If the 13,000-mt alternative was adopted for the 2002 fishing year, 132 of the 497 impacted vessels would experience a total gross revenue reduction (all species combined) of greater than 5 percent. The remaining 365 vessels would experience a less than 5-percent reduction in revenue or an increase in revenue. A second alternative would set ABC, DAH, DAP, and IOY at 11,700 mt. This would represent a 31-percent reduction in landings relative to 2000. Under this scenario, 170 of the 497 impacted vessels would experience gross revenue reductions (all species combined) of greater than 5 percent. The remaining 327 vessels would experience a less than 5-percent reduction in revenue, or an increase in revenue.

For Illex squid, one alternative considered would set Max OY, ABC, IOY, DAH, and DAP at 30,000 mt and a second alternative would set Max OY at 24,000 mt and ABC, IOY, DAH, and DAP at 19,000 mt. These specifications would be far in excess of recent landings in this fishery. Therefore, there would be no constraints, and, thus, no revenue reductions, associated with these specifications. However, the first alternative was considered unacceptable because an ABC specification of 30,000 mt may not prevent overfishing in years of moderate to low abundance of Illex squid. Conversely, under the second alternative an ABC of 19,000 mt would not allow the fishery to perform at its optimal exploitation level during a year of relatively high abundance, and was therefore rejected.

For butterfish, the Council considered two alternatives; the first alternative set a Max OY of 16,000 mt and an ABC, IOY, DAH, and DAP of 7,200 mt, and the second alternative set a Max OY of 16,000 mt and a ABC, IOY, DAH, and DAP at 10,000 mt. These specifications far exceed recent harvests in the butterfish fishery and would not constrain or impact the industry; however, they could lead to overfishing of the stock, and, thus, were rejected by the Council.

It has been determined that this rule does not contain policies with Federalism implications as that term is defined in Executive Order 13132.

This proposed rule does not contain or involve any information collection requirements that require the approval of the Office of Management and Budget pursuant to the Paperwork Reduction Act, 44 U.S.C. chapter 35.

A copy of the IRFA is available from the Council (see ADDRESSES ).

TSA petitioned the U.S. Department of Commerce to promulgate an emergency rule to reduce the 2001 TAC in the directed fisheries for red snapper in the Gulf of Mexico from 9.12 million lb (MP)(4.14 million kg) to not more than 3 million lb (1.36 million kg) and to shorten the recreational fishing season as part of the TAC reduction. The petition alleged that overfishing has been occurring in the fishery and will occur again in 2001 without the requested emergency rulemaking. On April 19, 2001, NMFS published a notice of receipt of the TSA petition and requested public comments on the petition (66 FR 20129). After thorough consideration of the petition and of all public comments received, NMFS has denied TSA's petition for emergency rulemaking.

The TSA petition states that the following are causes of previous and continuing overfishing (NMFS responses are provided as appropriate):

(1) TSA asserts that the current definition of “optimum yield” (OY) in the Fishery Management Plan (FMP) for the Reef Fish Resources of the Gulf of Mexico (Reef Fish FMP) does not conform to the more rigorous definition of OY required by the Sustainable Fisheries Act (SFA) of 1996, which amended the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act).

Response: The current definition of OY in the Reef Fish FMP is “any harvest level which maintains, or is expected to maintain, over time a survival rate or biomass into the stock of spawning age to achieve at least 20 percent spawning potential ratio (SPR).” Additionally, the Reef Fish FMP currently requires that overfished red snapper stocks be restored to a level of 20 percent SPR by 2019. However, the Magnuson-Stevens Act and NMFS’ National Standard Guidelines (NSG) (63 FR 24212; May 1, 1998) require that the Councils and NMFS develop new definitions of “overfishing” and “overfished” for managed stocks based on the ability of a stock to produce maximum sustainable yield (MSY) on a continuing basis. While NMFS has approved proposed definitions of overfishing that are based on static SPR as a proxy for fishing mortality rate, definitions of overfished and stock rebuilding targets must be biomass-based, as required by the Magnuson-Stevens Act and the NSG. For overfished stocks, the Magnuson-Stevens Act and the NSG require that a recovery plan must be developed to restore overfished stocks to the biomass level capable of producing MSY on a continuing basis (B MSY ).

NMFS agrees that these Magnuson-Stevens Act (as amended by the SFA) and NSG requirements represent a more conservative fishery management approach than is reflected in the Reef Fish FMP’s current definition of overfishing (when a reef fish stock or stock complex is overfished, overfishing is defined as harvesting at a rate that is not consistent with a program established to rebuild the stock or stock complex to the 20 percent SPR level), which is estimated to be the minimal level needed to prevent future declines in the stock. On November 17, 1999, NMFS disapproved the Gulf of Mexico Fishery Management Council's (Council) red snapper rebuilding targets, as proposed in its Generic Sustainable Fisheries Act (SFA) Amendment to the Council's FMPs (Generic SFA Amendment), because the Generic SFA Amendment specified a fishing mortality-based stock rebuilding target rather than the required biomass-based target. Further, the Generic SFA Amendment did not estimate the time to rebuild in the absence of fishing mortality, as required by the Magnuson-Stevens Act and the NSG. NMFS also disapproved the Generic SFA Amendment’s proposed SPRs as proxies for MSY, OY, and other stock status determination criteria. In conjunction with these disapproval actions, NMFS informed the Council that it must submit a new red snapper rebuilding plan as soon as possible for agency review.

In order to comply with the requirements of the Magnuson-Stevens Act, the Council has recently submitted to NMFS, for Secretarial review, a framework action under the Reef Fish FMP that provides for a revised red snapper rebuilding plan through 2032. While a final agency decision on this proposal has not yet been made, the rebuilding plan does contain new biomass-based targets and thresholds, including a revised OY and recovery time-frame parameters that, upon preliminary review, appear consistent with the Magnuson-Stevens Act, as amended by the SFA, and the NSG. The proposed action would institute a red snapper 31-year rebuilding plan with 5-year interim management goals. The rebuilding plan would maintain the current TAC set at 9.12 MP under a constant catch scenario for the years 2001-2005, with existing bycatch reduction requirements. Thereafter, the plan would shift to a constant fishing mortality rate strategy. At that time, a reduction in the red snapper TAC is likely, unless other means of reducing bycatch and bycatch mortality are more effective than currently anticipated and the stock achieves a greater level of rebuilding than currently anticipated. Under the constant fishing mortality rate strategy, TAC is set as a constant proportion of the stock that can be removed that would allow the stock to rebuild within the required time period. As stock size increases, so can the TAC (i.e., as the stock size approaches BMSY, TAC will be approaching OY). Because red snapper are such a long-lived species and the fishery is in need of stability in all sectors, the rebuilding plan aspires to make TAC adjustments, as necessary, at 5-year intervals. Of course, section 304(e)(7) of the Magnuson-Stevens Act requires the Secretary of Commerce (Secretary) to review independently the stock rebuilding plan itself in no more than 2-year intervals to ensure adequate progress toward ending overfishing and rebuilding the affected stock. The framework procedure under the Reef Fish FMP currently contemplates annual review of the status of managed fish stocks. If the Secretary's independent review, pursuant to section 304(e)(7), results in a finding that the rebuilding plan is not making adequate progress, the Secretary is required to notify the Council immediately and recommend appropriate further conservation and management measures (see section 304(e)(7)(b) of the Magnuson-Stevens Act). In light of the Council's recent proposal for a revised red snapper stock rebuilding plan, a reduction in TAC now, based on the current Reef Fish FMP’s OY definition, would be premature.

(2) TSA asserts that NMFS’ scientific studies indicate that bycatch reduction devices (BRDs) required in shrimp trawls in the Exclusive Economic Zone (EEZ) of the Gulf of Mexico west of Cape San Blas, Florida, have reduced juvenile red snapper mortality by 40 percent or less instead of the 50- to 60-percent reduction necessary as a basis for the present TAC of 9.12 MP. Further, TSA asserts that NMFS and the Council have greatly exaggerated the importance (positive impact) of bycatch reduction for rebuilding the red snapper stock; and

(3) TSA asserts that recent scientific information presented to the Council's Reef Fish Stock Assessment Panel (RFSAP) (a Council scientific advisory committee) indicates that the overfished condition of the red snapper fishery is a result of excessive fishing pressure by the directed fisheries, in particular the recreational sector of the fishery, and not a result of bycatch mortality associated with shrimp harvest.

Response: The RFSAP again endorsed the red snapper stock rebuilding plan under consideration by the Council and currently under review by NMFS. The RFSAP did not alter its long-standing opinion that bycatch reduction in the shrimp fishery is necessary to rebuild the red snapper stock. The combined effects of excessive fishing mortality in the directed fishery and bycatch mortality of juvenile red snappers in the shrimp fishery have all contributed to the overfished status of red snapper in the Gulf of Mexico. Red snapper stock assessments reviewed by the RFSAP, dating back to 1990, as well as the Congressionally Mandated Red Snapper Peer Review (1997), have not only indicated that fishing mortality in the directed fishery must be reduced, but also that the Gulf red snapper stock will not recover from its overfished condition without a significant reduction in bycatch mortality of juvenile red snappers associated with shrimp trawling. In fact, the magnitude of the shrimp fishery’s bycatch of juvenile red snappers far outweighs the impacts of TAC adjustments on rebuilding the red snapper stock. The best available scientific information, as represented by continuing scientific stock assessments and various scientific peer reviews over recent years during which the 9.12 MP TAC has been in place, consistently demonstrates that even if the red snapper TAC were set at zero, BRDs and other measures to address bycatch mortality of juvenile red snappers in the shrimp fishery would still be required in order to rebuild this fish stock. As described earlier, NMFS is currently reviewing the Council’s stock rebuilding plan, which will likely result in future reductions in the red snapper TAC. However, it appears that an immediate TAC reduction would achieve only limited short-term conservation benefits not justified in the face of resulting significant and immediate adverse impacts on the red snapper fishery.

A 40-percent reduction in juvenile red snapper bycatch mortality in the Gulf shrimp fishery has been achieved, as substantiated by data that NMFS submitted to the Council (Nichols, 1990; Nichols & Pellegrin, 1992), and that the RFSAP reviewed. Further, NMFS biologist Dr. Scott Nichols, at the September 20-24, 1999, RFSAP meeting, and at the October 27, 1999, meeting of the Council’s Scientific and Statistical Committee, stated that, excluding the now illegal configuration of a fisheye BRD covered by the trawl net's elephant ear, fisheye BRDs are currently attaining a 40-percent reduction in fishing mortality of juvenile red snappers and that a 50-percent reduction appears feasible. Additionally, NMFS biologist Dr. John Watson, in statements to the Council at its November 8-12, 1999, and November 13-16, 2000, meetings, indicated that a 50-percent bycatch reduction could be achieved from fisheye BRDs. NMFS believes that further reductions are possible with improved BRD technology. Tests conducted by NMFS have already demonstrated that prototype BRDs can reduce bycatch mortality of red snapper in shrimp trawls by as much as 70 percent.

BRDs have significantly reduced shrimp trawl bycatch mortality of red snapper and other species in the western Gulf. However, National Standard 9 requires that bycatch be reduced to the extent practicable and the Council must continue to review possible measures that would achieve higher levels of bycatch reduction and minimize bycatch mortality. NMFS has encouraged the Council to take additional actions throughout the Gulf to reduce shrimp trawl bycatch. Such actions could include extending the requirement for BRDs into Federal waters east of Cape San Blas, FL; effort reduction in the shrimp fishery; closed areas; or seasonal closures. Additionally, monitoring of bycatch in the shrimp fishery must be improved. This could be accomplished with vessel permits (as proposed under Amendment 11 to the FMP for the Shrimp Fishery of the Gulf of Mexico (Shrimp FMP)), mandatory observers, and mandatory logbooks.

Consultants for TSA presented scientific information regarding the preceding TSA assertion (No. 3) at the RFSAP meeting held at the NMFS Southeast Fisheries Science Center (SEFSC) on September 28-October 1, 2000. The RFSAP considered three presentations in the context of the proposed revised red snapper rebuilding plan: Two were by the TSA consultants, Mr. Gazey and Dr. Gallaway, and one was by Dr. Shipp. The RFSAP concluded that “the presentations by Mr. Gazey, Dr. Gallaway, and Dr. Shipp do not affect our previous endorsement of the rebuilding plan.”

(4) TSA asserts that the recreational sector of the directed fishery continues to exceed its annual quota under the present season opening and closing dates.

Response: While NMFS recognizes that quota overruns in the recreational fishery have occurred in the past, the Council and NMFS have taken steps to rectify this situation. In December 1999, at the Council's request, NMFS issued an interim rule to implement management measure changes for the red snapper fishery to address quota overages in the recreational sector and, thus, reduce overfishing (64 FR 71056). The interim rule established a Federal recreational season from April 21 through October 31. Also, the rule reduced fishing effort that would have occurred in state waters after the closure of the Federal season under the regulations in effect prior to implementation of the interim rule. These actions appear to have been successful, as preliminary data for the 2000 fishing year indicate that the recreational red snapper harvest was approximately 320,000 pounds under the allowable quota (4.47 MP). The interim rule measures were implemented on a permanent basis under an approved regulatory amendment, pursuant to the Reef Fish FMP’s framework procedure, through a final rule issued August 17, 2000 (65 FR 50158). NMFS' goal is to continue monitoring the recreational fishery quota and to take additional action as warranted. Further discussion of NMFS and Council efforts to structure a red snapper recreational fishing season that best prevents recreational fishery quota overruns is contained in the response to public comment number 2 (see below).

(5) TSA asserts that NMFS is significantly underestimating fishing effort in the recreational sector, which allows that sector to harvest red snapper in excess of its share of the TAC; and

(6) TSA asserts that NMFS has failed to make a reduction in the recreational sector's share of the TAC to account for these excessive harvests.

Response: The best scientific information available indicates that effort in the red snapper charter vessel sector, the largest component of the recreational fishery, has not been underestimated, and that charter vessels currently account for approximately 42 percent of the total annual recreational harvest of red snapper in the Gulf of Mexico. NMFS has recently adopted new and more precise and accurate methodologies for estimating the recreational red snapper harvest that were developed cooperatively by NMFS and the Gulf States Marine Fisheries Commission. This is part of a continuing effort by NMFS to improve data collection for the recreational sector. There is no evidence to suggest that recreational landings have been underestimated.

NMFS received 1, 567 comments addressing this petition. They are summarized and responded to here:

Comment 1: Fifteen hundred and sixty three comments were received that opposed the petition for emergency rulemaking submitted by TSA including any reduction in the TAC or shortening of the 2001 recreational fishing season.

Response: The best available scientific information indicates that the 9.12 MP (4.14 million kg) TAC for 2001 may slow the recovery in the early part of any stock rebuilding program but would not jeopardize recovery of the stock consistent with the rebuilding requirements of the Magnuson-Stevens Act, particularly if greater reductions in bycatch mortality are achieved, as expected. However, an immediate reduction in TAC or shortening of the recreational fishing season for red snapper would have serious adverse economic effects upon participants in the fishery.

Comment 2: Included in the group of comments opposed to the TSA petition was a comment from an environmental group expressing its concerns regarding NMFS’ regulation of the red snapper recreational fishing season and the history of TAC overruns in this fishery. Further, this group requested that NMFS close the recreational and commercial red snapper fisheries, once their allocations are met, based on available real-time data.

Response: The Magnuson-Stevens Act requires that the Gulf of Mexico red snapper recreational fishery be closed when its quota is reached. To comply with this requirement, NMFS works jointly with the Council to implement management measures and establish closure dates that, based upon the best available scientific information, are likely to result in annual catches that approximate the quota, within the margin of error of the harvest projections. NMFS uses a computer simulation model to assess the future status of the red snapper stock. The model integrates estimates of stock abundance with fishing effort to project how many fish will be caught for various time periods. This projection assumes that the current year's fishing effort will be similar to that of previous years. In-season data are not used to establish or adjust closure dates; instead, a closure date is based entirely on projections of the model used. This is the only practicable method of setting closure dates because the NMFS Marine Recreational Fishery Statistics Survey (MRFSS) is not designed for real-time quota monitoring. MRFSS data are available in 2-month blocks, referred to as waves, and landings are not available until 5 weeks after the end of a wave. Thus, there is a time lag of at least 3 months before even preliminary MRFSS landings data can be evaluated; consequently, NMFS cannot determine the closure date based on real-time fishery data. In projecting recreational fishery harvest rates and closure dates, NMFS attempts to approximate the quota in the long term, while recognizing that annual variations in the catch are inevitable. Based on the last two years' monitoring, the projections appear accurate since no overruns occurred.

Comment 3: Four comments were received in support of the petition, including two from TSA that requested an immediate reduction in TAC to no more than 3 MP (1.36 million kg) and a shortening of the 2001 recreational fishing season.

Response: NMFS has reviewed the administrative records and court decisions from prior litigation on the issue of the red snapper TAC. NMFS has also reviewed more recent information regarding the conduct of the red snapper fishery, as discussed above, including the petition received on behalf of TSA and the public comments received on the petition. NMFS disagrees with TSA that the law or the present circumstances in the red snapper fishery require an immediate reduction in TAC. As described below, this is because (a) the Council’s proposed red snapper stock rebuilding plan appears to comply with the Magnuson-Stevens Act requirements to end overfishing; (b) the deployment of BRDs in the shrimp fishery appears to be more effective than TAC adjustments in rebuilding the red snapper stock; (c) NMFS believes that greater than current levels of reduction in bycatch mortality of juvenile red snapper in shrimp trawls are attainable; and (d) the shrimp fishery does not appear to be subject to any disproportionate regulatory impacts compared to the directed red snapper fisheries.

For these reasons, NMFS disagrees with TSA's assertions, the majority of which have been raised previously by TSA and refuted by NMFS (see Florida Wildlife Federation, et al. v. Daley , Case No. 4:98cv101RH (N. D. Fla.); affirmed Case No. 99-14747c (11th Circuit Court of Appeals); Texas Shrimp Association v. Daley, Case No. 4:000v20RH (N. D. Fla,); affirmed Case No. 00-12328 (11th Circuit Court of Appeals). As TSA, through its legal counsel, recently noted, “nothing in the petition raised any novel questions” (see July 11, 2001, letter from TSA Counsel to Dr. William T. Hogarth). Rather, TSA asserts that the agency is making decisions based on political pressure rather than on scientific information and the Magnuson-Stevens Act (id.).

The best available scientific information affirms that the status quo TAC of 9.12 MP (4.14 million kg) is compatible with the stock rebuilding requirements of the Magnuson-Stevens Act, provided that expected bycatch reduction levels are met, that harvests will not exceed quotas, and that future recruitment, on average, will increase as spawning stock biomass increases. Additionally, the Council has submitted a framework action under the Reef Fish FMP to NMFS for approval and implementation that would establish a revised red snapper rebuilding plan through 2032. The plan contains new biomass-based targets and thresholds, including a revised OY and recovery time-frame parameters that are consistent with the Magnuson-Stevens Act, as amended by the SFA, and the NSG. The proposed action would institute a red snapper 31-year rebuilding plan with 5-year interim management goals. The rebuilding plan would maintain the current TAC set at 9.12 MP under a constant catch scenario for the years 2001-2005, with existing bycatch reduction requirements. Thereafter, the plan would shift to a constant fishing mortality rate strategy, and the status of the stock would be reviewed every 5 years to evaluate the need for additional bycatch reductions or adjustments in TAC. Under the constant fishing mortality rate strategy, TAC is set as a constant proportion of the stock that can be removed that would allow the stock to rebuild within the required time period. As stock size increases, so can the TAC (i.e., as the stock size approaches B MSY , TAC will be approaching OY).

The best available scientific information, as represented by continuing scientific stock assessments and various scientific peer reviews over the recent years during which the 9.12 MP TAC has prevailed, consistently demonstrates that even if the red snapper TAC were set at zero, BRDs and other measures to address bycatch mortality of juvenile red snappers in the shrimp fishery would still be required in order to rebuild this stock. Although the Court in the BRD litigation held that a sufficient nexus existed between the need for BRDs and the red snapper TAC for purposes of conferring legal standing upon the shrimp industry so they could challenge the BRD requirement, elsewhere in the opinion, as noted above, the Court acknowledged that shrimp trawlers' severe effects upon the red snapper population is beyond dispute (Order Denying Petitions Challenging Regulations, at 7, 41). The magnitude of the impacts of the shrimp fishery’s bycatch of juvenile red snappers far outweighs the impacts of TAC adjustments on rebuilding the red snapper stock. However, the current and foreseeable future regulatory burden for the shrimpers is far less than that of the red snapper fishery participants.

Section 304(e)(4)(A) of the Magnuson-Stevens Act explicitly states that, in pertinent part, fishery management plans, plan amendments, or proposed regulations for an overfished fishery shall “specify a time period for ending overfishing.” The Council’s proposed red snapper stock rebuilding plan, inter alia, would do just that, while maintaining stability in the fishery. As Judge Hinkel noted in the decision upholding the BRD requirement, which was affirmed on appeal, rejecting one viewpoint in favor of another, when weighing competing scientific opinions and making policy determinations, is not an abuse of discretion (see Order Denying Petitions Challenging Regulations, Case No. 4:98cv101-RH, N. D. Fla, at 22). Further, the Court noted that uncertain scientific evidence does not preclude making a decision based, in part, upon reasonable expectations (id. at 43).

NMFS believes that greater reductions in bycatch mortality of juvenile red snapper in shrimp trawls are attainable, and further believes that this expectation is reasonable based upon the following considerations. First, the Jones-Davis BRD already by far exceeds the necessary level of bycatch reduction, demonstrating concretely that, in fact, such reduction is attainable. Although the Jones-Davis BRD is not widely used, due in large part to greater shrimp loss rates, given its outstanding performance at reducing bycatch mortality, it may be practicable to expand its usage, particularly if shrimp loss rates can be reduced. Second, the level of reduction in bycatch mortality for the more widely used BRD designs has steadily improved since the BRD requirement became effective. Initially, reduction levels among those BRDs measured 27 percent, but current levels are between 40 percent and 50 percent. Some of this improvement has resulted from minor modifications to the gear arising from actual use, such as adjusting the “elephant ear” flap in the shrimp trawls. Finally, NMFS is in the process of revising its BRD certification protocol following its experience since the original protocol was implemented several years ago. Information from BRD users as well as the Gulf and South Atlantic Fisheries Foundation has indicated the need for greater flexibility in the provisions of the BRD certification protocol. NMFS expects that once these revisions are effected, more efficient and better performing BRD designs will be developed and certified, resulting in greater reductions of bycatch and bycatch mortality of red snapper.

These developments show that reductions in red snapper bycatch mortality based on technology are feasible and likely. However, technological advances are not the only means under consideration for reducing red snapper bycatch in the shrimp fishery. In addition to technological considerations, the Council is developing Amendment 10 to its Shrimp FMP to further address general bycatch issues. Among the alternative actions included in Amendment 10 are those that would require the use of BRDs east of Cape San Blas, FL. Although the original BRD requirement exempted this area because of minimal red snapper occurrence in that area, more recent information (Schirripa & Legault, 1999) demonstrates a significantly increased occurrence of red snapper there. The objective of Amendment 10 is not limited to reducing bycatch and bycatch mortality of red snapper, but it now appears that red snapper bycatch mortality would be reduced somewhat, along with that of other species, if such a geographic expansion in the use of BRDs were implemented. Amendment 10 also contains other action alternatives, such as those based on seasonal and areal adjustments that, in the course of addressing bycatch issues in a general sense, will clearly effect some level of reduction in red snapper bycatch mortality.

In addition to Amendment 10, further regulation of the Gulf shrimp fishery to address red snapper issues may become necessary. For example, the Council has proposed, under its Reef Fish FMP’s framework action, a 31-year rebuilding program for red snapper. A fundamental element of that proposal is the achievement of greater reductions in red snapper bycatch mortality; however, the plan also provides for the contingency of not achieving that goal. It seems clear that without greater red snapper bycatch mortality reductions, both a future reduction in the red snapper TAC and further regulation of the shrimp fishery in the EEZ are likely. The latter possibility appears to form the basis for TSA's assertions that the Council's and NMFS' management of the red snapper fishery is somehow unfair to shrimpers. These claims were addressed in prior litigation, and the Court then wrote that although the BRD requirement placed serious costs on the shrimp industry, the directed red snapper fishery had for years been subject to numerous restrictions, including increased minimum fish size limits, TAC limits, and reduced bag limits and trip limits. The judge also noted that the shrimp industry had, until recently, not only been required to do very little to address bycatch, but actually enjoyed a statutory prohibition against regulations addressing the bycatch issue. In an earlier footnote within that Court opinion, the Court stated that the specific and severe effects upon the red snapper population from shrimp trawlers is “beyond dispute.” The judge concluded that imposing the BRD requirement and attendant costs, even with a TAC at 9.12 MP, was not only not an abuse of agency discretion or inequitable, but “perhaps required” (Order Denying Petitions Challenging Regulations, Case No. 4:98cv101-RH, at 7, 23, 24, 25, 43-46).

These conclusions are still applicable today. The Council has submitted Amendment 11 to the Shrimp FMP, which would establish mandatory Federal permits for the shrimp fishery, for Secretarial review, approval, and implementation. However, this is the only additional regulation currently proposed for the shrimp fishery. The Gulf shrimp fishery is the only federally managed fishery in the southeastern United States not subject to a permit requirement. The Federal shrimp permit would be available without any qualifying criteria, and the permit requirement would constitute only a minimal burden on shrimp fishermen. The red snapper commercial and recreational fisheries, however, are now and have long been subject to a much more complex and burdensome regulatory program. In particular, since entry of the legal opinion referred to above, the recreational red snapper fishing season has been significantly reduced in order to comply with the statutory quota provisions enacted under the SFA in 1996. While TSA seems to overlook this development, one benefit is that the quota appears to have eliminated the recreational overruns about which TSA complains. If approved and implemented, Shrimp FMP Amendment 10, discussed above, is likely to result in additional regulations for the Gulf shrimp fishery. However, even if the most restrictive of the amendment’s alternative actions under consideration were implemented, they would not necessarily produce an inequitable result for shrimp fishermen.

The NSG make clear that under National Standard 4 an allocation of fishing privileges may impose a hardship upon one group if it is outweighed by the total benefits received by another group or groups (50 CFR 600.325 (c)(3)(i)). Although this guidance generally applies to a single fishery, in this instance, the red snapper stock is more significantly affected by the shrimp fishery than by the directed red snapper fishery. The situation is clearly analogous to an allocation of fishing privileges within a single fishery.

In light of the foregoing, it appears that additional regulation of the shrimp fishery would not result in a disproportionate regulatory impact upon shrimpers. Further, rebuilding the red snapper stock and minimizing shrimp fishery bycatch is mandated by law. Clearly, reductions in shrimp trawl bycatch mortality would benefit red snapper fishery participants. However, even with additional shrimp regulations and maintenance of a 9.12 MP TAC for red snapper, the overall result would not leave the shrimp fishery with a greater regulatory burden than the red snapper fishery.

Even if the shrimp fishery does incur additional regulatory burdens, any hardships for the shrimpers will likely be far outweighed by the overall benefits of ending overfishing of red snapper and restoring the red snapper fishery. Conversely, immediately lowering the red snapper TAC, as suggested by TSA, would not result in any apparent benefit to the shrimp industry.

Based on the discussion above, since lowering the red snapper TAC would not relieve either the biological need nor the legal requirement to address the bycatch and bycatch mortality of juvenile red snappers in shrimp trawls, and since such a TAC change would severely disrupt and adversely impact the red snapper fishery, the National Marine Fisheries Service has denied the TSA petition.