[Federal Register Volume 67, Number 120 (Friday, June 21, 2002)]
[Rules and Regulations]
[Pages 42462-42465]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-15825]



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Part VII





Department of Transportation





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Federal Aviation Administration



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14 CFR Part 187



Fees for FAA Services for Certain Flights; Final Rule

  Federal Register / Vol. 67, No. 120 / Friday, June 21, 2002 / Rules 
and Regulations  

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 187

RIN 2120-AG17


Fees for FAA Services for Certain Flights

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of agency reconsideration of Final Rule.

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SUMMARY: Since August 1, 2000, the FAA has been charging fees, required 
by law, for air traffic control and related services provided to 
aircraft that fly in U.S.-controlled airspace but neither take off 
from, nor land in, the United States. These fees, commonly referred to 
as ``Overflight Fees,'' were authorized by the Federal Aviation 
Reauthorization Act of 1996, enacted on October 9, 1996.
    The Aviation and Transportation Security Act (the 2001 Act), 
enacted on November 19, 2001, amended the Overflight Fee authorization 
in several respects. First, the 2001 Act changed the wording of the 
operative standard by substituting ``reasonably'' for ``directly'' 
(thereby requiring that fees be ``reasonably related'' to costs, rather 
than ``directly related'') and ``Administration's costs as determined 
by the Administrator'' for ``Administration's costs.'' Second, the 2001 
Act provided that ``the determination of such costs by the 
Administrator is not subject to judicial review.''
    On May 6, 2002, the FAA published a notice of inquiry in the 
Federal Register seeking public comment on whether and to what extent, 
if any, these statutory changes require the FAA to modify its Final 
Rule on Overflight Fees (67 FR 30334). That rule is the subject of a 
petition for review before the United States Court of Appeals for the 
District of Columbia Circuit (the Court).
    The purpose of this document is to summarize the public comments 
received, to indicate the disposition of those comments, and to advise 
the public of the results of the FAA's reconsideration of the Final 
Rule.

FOR FURTHER INFORMATION CONTACT: Randall Fiertz, Office of Cost and 
Performance Management (APF-2), Federal Aviation Administration, 800 
Independence Avenue, SW., Washington, DC 20591, (202) 267-7140; or Dr. 
Harold (Woody) Davis, Office of the Chief Counsel (AGC-200), Federal 
Aviation Administration, 800 Independence Avenue, SW., Washington, DC 
20591, (202) 267-3152.

SUPPLEMENTARY INFORMATION:

History

    The Federal Aviation Reauthorization Act of 1996 (the Act) directs 
the FAA to establish, by Interim Final Rule, a fee schedule and 
collection process for air traffic control (ATC) and related services 
provided to aircraft, other than military and civilian aircraft of the 
U.S. Government or of a foreign government, that fly in U.S.-controlled 
airspace but neither take off from, nor land in, the United States (49 
U.S.C. 45301, as amended by Public Law 104-264). Such flights are 
commonly referred to as ``Overflights.'' The Act further directs the 
FAA to seek public comment after issuing the Interim Final Rule, and 
subsequently to issue a Final Rule.
    As originally enacted, the Act directed the FAA to ensure that the 
fees authorized by the Act were ``directly related'' to the FAA's costs 
of providing the services rendered. The Act further states: ``services 
for which costs may be recovered include the costs of air traffic 
control, navigation, weather services, training and emergency services 
which are available to facilitate safe transportation over the United 
States and other services provided by the Administrator or by programs 
financed by the Administrator to flights that neither take off from, 
nor land in, the United States.''
    On March 20, 1997, the FAA published an Interim Rule (IFR), ``Fees 
for Air Traffic Services for Certain Flights through U.S.-Controlled 
Airspace'' (62 FR 13496), which established the Overflight Fees. The 
FAA invited public comment on the IFR and held a public meeting on May 
1, 1997. The effective date of the rule was May 19, 1997, and the 
comment period closed on July 18, 1997. The FAA also published two 
amendments to that IFR on May 2, 1997 (62 FR 24286) and October 2, 1997 
(62 FR 51736).
    That rulemaking was subsequently challenged in the United States 
Court of Appeals for the District of Columbia Circuit. The Air 
Transport Association of Canada (ATAC) and seven foreign air carriers 
petitioned the Court to review the rule. On January 30, 1998, the Court 
issued its Opinion on the eight consolidated petitions in the case of 
Asiana Airlines v. FAA, 134 F. 3d 393 (D.C. Cir. 1998). The Court 
rejected the petitioners' claims that: (a) the FAA acted improperly in 
employing an expedited procedure before the effective date of the IFR; 
and (b) the FAA violated the anti-discrimination provisions of various 
international aviation agreements. The Court, however, concluded that 
the FAA's methodology for determining costs violated statutory 
requirements, vacated the IFR fee schedule, and remanded to the FAA for 
further proceedings. The FAA subsequently refunded all fees (nearly $40 
million) collected under the IFR. On July 24, 1998, the FAA published a 
Final Rule (63 FR 40000) removing the 1997 IFR.
    Although the 1997 IFR had been removed, the statutory requirement 
that FAA establish Overflight Fees by IFR remained in effect. 
Therefore, in 1998 the FAA began developing a new IFR on Overflight 
Fees using a different methodology. The fees this time were to be 
derived from cost data produced by the agency's new Cost Accounting 
System (CAS), then under development. On June 6, 2000, the FAA 
published a new IFR with a request for comments and notice of another 
public meeting (65 FR 36002, June 6, 2000). The FAA held the public 
meeting on June 29, 2000, and 12 individuals representing 10 different 
organizations made presentations. A discussion of the comments made at 
the public meeting can be found in the docket of this rulemaking 
(Docket No. FAA-00-7018). (This may be found on the Internet by going 
to the search function of the Department of Transportation's electronic 
Docket Management System (DMS) Web page http://dms.dot.gov/search), 
typing in the last four digits of the Docket number (7018), and 
clicking on ``search.'') The FAA began charging fees under the new IFR 
on August 1, 2000. The FAA twice extended the comment period; first on 
October 6, 2000 (65 FR 59713), and again on October 27, 2000 (65 FR 
64401), closing it finally on December 26, 2000.
    On November 1, 2000, the Congress enacted the National 
Transportation Safety Board Amendments Act of 2000 (Public Law 106-
424). Section 16 of that Act deemed the Interim Final Rule, published 
on June 6, 2000, to have been issued in accordance with the procedural 
requirements of the Act.
    Just before the August 1, 2000, effective date of the fees, the 
ATAC and seven foreign air carriers again petitioned the Court to 
review the new IFR. The petitions were again consolidated into a single 
case (ATAC v. FAA). Issues raised by the petitioners included some of 
the same process and procedure questions raised in the previous 
litigation. Petitioners also, raise new issues regarding the adequacy 
of information provided by the FAA to support the fees and whether the 
fees met the then existing statutory requirement of being ``directly 
related''

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to the FAA's costs of providing the services. The Court heard oral 
arguments on May 14, 2001 and, on July 13, 2001, issued an Opinion 
finding that the FAA had failed to provide an adequate explanation for 
one assumption in its fee setting methodology (i.e., that the costs, on 
a per-mile basis, of providing ATC and related services to Overflights 
are the same as the costs of providing such services to flights that 
take off and/or hand in the United States). Because the FAA had failed 
to address this assumption, the Opinion directed that the IFR be 
vacated. At the time the Opinion was issued, the FAA was in the final 
stages of Executive Branch review of a Final Rule on Overflight Fees, 
which contained a detailed explanation of the assumption in question. 
Because the Court faulted only FAA's failure to provide an explanation 
of an assumption in support of the IFR, and not the substance of the 
IFR itself, the FAA decided to proceed with issuance of the Final Rule 
in order to both meet the requirements of the Act and address the 
concerns of the Court.
    The Final Rule was published in the Federal Register on August 20, 
2001. It reduced the fees established under the IFR by approximately 
15%, effective immediately, and provided for retroactive application 
back to the original date of imposition (i.e., August 1, 2000). The 
same group of eight petitioners who had sought judicial review of the 
most recent IFR again sought such review of the Final Rule. That 
litigation is ongoing (the second ACTAC v. FAA case).
    Following the August 20, 2001 publication of the Final Rule, the 
FAA petitioned the Court on August 24, 2001 to reconsider the remedy 
(vacating the IFR) it had imposed in its Opinion of July 13, 2001. On 
December 28, 2001, the Court granted the FAA's request, modifying its 
July 13 Opinion and issuing a Mandate that remanded but did not vacate 
the IFR.

Legislative Action

    On November 19, 2001, the President signed new legislation 
addressing Overflight Fees. The Aviation and Transportation Security 
Act (the 2001 Act), Public Law No. 107-71, contained the following 
amendment (Section 119(d)):

    (d) AMENDMENT OF GENERAL FEE SCHEDULE PROVISION.--Section 
45301(b)(1) (B) of title 49, United States Code, is amended--(1) by 
striking ``directly'' and inserting ``reasonably''; (2) by striking 
``Administration's costs'' and inserting ``Administration's costs, 
as determined by the Administrator,''; and (3) by adding at the end 
``The Determination of such costs by the Administrator is not 
subject to judicial review.''

    Thus, the statutory authorization for the Overflight Fees (49 
U.S.C. 45301(b)(1)(B)) now provides:

(the Administrator) shall ensure that each of the fees required by 
subsection (a) is reasonably related to the Administration's costs, 
as determined by the Administrator, of providing the service 
rendered. Services for which costs may be recovered include the 
costs of air traffic control, navigation, weather services, training 
and emergency services which are available to facilitate safe 
transportation over the United States, and other services provided 
by the Administrator or by programs financed by the Administrator to 
flights that neither take off nor land in the United States. The 
Determination of such costs by the Administrator is not subject to 
judicial review.

    The accompanying Conference Committee Managers' Report on the 2001 
Act (the Report) addressed the amendment of the ``Overflight Fee'' 
language, as follows:

    The Conference substitute amends section 45301(b) of title 49, 
United States Code, with respect to limitations on overflight fees 
to (1) to make the language consistent with the new security fee 
language of this Act, and (2) to clarify Congressional intent with 
respect to the FAA costs upon which the fees can be based. 
Specifically, the conference substitute replaces the word 
``directly'' with ``reasonably,'' since the word directly has been a 
source of much confusion and narrow interpretation, and has been a 
primary cause of securing litigation which as frustrated and delayed 
the FAA's imposition of the overflight fees for a number of years. 
Additionally, this amendment specifies that the FAA's costs upon 
which the fees are based are to be determined solely by the 
Administrator. This is a clarify that the Administrator has full 
authority to determine costs by appropriate means. This amendment is 
not intended to require revision of the fees recently promulgated by 
the FAA (66 FR 43680, Aug. 20, 2001) but rather, to clarify 
longstanding Congressional intent that the FAA expeditiously and 
continuously collect the fees authorized under section 453012(a) of 
title 49.

Reconsideration of Final Rule

Remand of Record in Final Rule Case

    On January 25, 2002, The FAA sought from the Court a limited remand 
of the record in the Final Rule case. As stated in the agency motion:

    The purpose of the requested remand would be to permit the FAA, 
on it own initiative, to conduct a limited reconsideration of the 
final rule in light of the new legislation. More specifically, the 
agency would conduct such reconsideration solely to determine the 
extent, if any, to which the change in the operative statutory 
standard requires the FAA to modify its final rule. If the agency 
determines that no such modification is required by the changes in 
the statute from ``directly related'' to ``reasonably related,'' and 
the substitution of ``Administration's costs, as determined by the 
Administrator'' for ``Administration's costs,'' the agency would 
continue with the final rule that it has already adopted. This is 
because the FAA seeks to determine only whether Congress has 
required the agency to make changes in its final rule, and does not 
contemplate making any discretionary changes at this time.

    The FAA's motion also explained that it intended to seek public 
comment on the new legislation:

    Although the FAA believes that it could proceed without 
additional notice and comment (see 5 U.S.C. 553(b)(A) (excepting 
interpretive rules from notice and comment rulemaking)), it has 
concluded that providing an opportunity for such comment would be in 
the public interest. Accordingly, before making its decision as to 
whether the statutory change requires a modification of the final 
rule, the FAA would provide a 30-day period in which interested 
parties could address the matter of the new provision's 
requirements.

    On April 22, 2002, the Court ordered the Final Rule record returned 
to the FAA ``so that it may conduct proceedings, for no more than 60 
days from the date of this order, to determine to what extent, if any, 
the Aviation and Transportation Security Act, Pub. L. No. 107-71, 
Section 119(d) (November 19, 2001), requires the agency to modify its 
final rule, `Fees for [F]AA Services for Certain Flights' 66 FR 46380 
(Aug. 20, 2001).''

Request for Comments

    The FAA published a notice of inquiry in the Federal Register on 
May 6, 2002, seeking public comment (within 30 days, or by no later 
than June 5, 2002) regarding the extent, if any, to which the statutory 
changes require the FAA to modify its Final Rule.

Summary of Comments and Disposition

    The FAA received two comments in response to its notice; from (1) 
Britannia Airways, Ltd., and (2) the seven petitioners in the ongoing 
Overflight Fee litigation, who submitted joint comments prepared by 
their counsel in the litigation (referred to hereafter as ``the ATAC 
comments'').
    Both the Britannia and the ATAC comments state that the November 
2001 amendments to 49 U.S.C. 45301 (section 119(d) of the 2001 Act) do 
not affect or apply to the Final Rule issued by the FAA in August 2001, 
and therefore do not require any rulemaking with regard to the Final 
Rule. In reaching this conclusion, both comments refer to the 
legislative history of the 2001 Act, citing

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the statement in the Report that the amendment ``is not intended to 
require revision of the fees recently promulgated by the FAA. . .''
    The ATAC comments make three points: (1) That Section 119(d) is not 
retroactive; (2) that Section 119(d) is not self-executing; and (3) 
that the Final Rule is invalid. The Britannia comments review the 
history of 49 U.S.C. 45301 and conclude that the November 2001 
amendments are ``entirely prospective.'' With respect to the first two 
points, while agreeing with the conclusion that the amendments do not 
require any rulemaking by the FAA at this time, the FAA rejects, as 
detailed below, the commenters' assertion that Section 119(d) has no 
application to the Final Rule and is ``entirely prospective.'' The FAA 
will not address the third point because it is beyond the narrow scope 
of this notice, but notes that in connection with the issuance of the 
Final Rule, the FAA fully explained why the Final Rule meets all 
statutory requirements.

Agency Consideration of Effects of Statutory Changes

    The FAA has carefully considered all relevant comments received, as 
well as all applicable legislative history and applicable statutes. The 
FAA concludes that the 2001 Act does not require rulemaking because the 
statute merely clarifies and amplifies congressional intent so as to 
provide further validation of both the Interim and Final Rules. More 
specifically, the FAA concludes that, first, the 2001 Act applies to 
both rules, and second, the Interim and Final Rules, both issued under 
the previous version of 49 U.S.C. 45301, meet the requirements of the 
2001 Act. This conclusion is consistent with the explicit language of 
the Act, the Report, and applicable case law.
    The FAA finds that these conclusions are supported by analysis of 
the changes made in 49 U.S.C. 45301 by the 2001 Act, as detailed below:
    (1) By striking ``directly'' and inserting ``reasonably''.
    As previously noted, Congress made this change to clarify how the 
FAA's methodology for setting Overflight Fees is measured. Instead of 
the previous language stating that fees must be ``directly'' related to 
costs, the statute now states that fees must be ``reasonably'' related 
to costs, which, according to the Report, is what Congress intended 
when it originally enacted 49 U.S.C. 45301.
    Congress has not prescribed a precise method that must be followed 
by the FAA in setting Overflight Fees, but rather has set the 
parameters within which final action must fall. The change in the 
``reasonably related'' language makes clear Congress' desire that the 
FAA have reasonable latitude to establish Overflight Fees within the 
basic parameter that such fees be cost-based. As a result, a fee-
setting methodology that is acceptable under the ``directly related'' 
language must also be acceptable as ``reasonably related'' to costs. 
The FAA has already concluded that the fee-setting methodology first 
used in the Interim Final Rule and then in the Final Rule meets the 
``direct related'' standard. The FAA now finds that this methodology 
also, necessarily, meets the ``reasonably related'' standard.
    In its discussion of the amendment of the statutory standard, the 
Report emphasized that the ``directly related'' standard ``has been a 
source of much confusion and narrow interpretation, and has been a 
primary cause of recurring litigation which has frustrated and delayed 
the FAA's imposition of the overflight fees for a number of years.'' 
When Congress, as a matter of clarification, changed the ``directly 
related'' language to ``reasonably related,'' the Report indicated that 
``directly related'' was always intended to be broadly construed. 
Consequently, the clear significance of the change in the statutory 
language, coupled with the new limitation on judicial review of these 
fees, is that Congress wants a standard affording the agency reasonable 
latitude applied to both the Interim Final and the Final Rules. In this 
regard, the Report specifically notes that Congress did not ``intend to 
require revision of the fees'' already promulgated, and directs the FAA 
to ``expeditiously and continuously collect the fees'' as Congress 
always intended since enactment of the Overflight Fee authorization in 
1996.
    Thus, the FAA believes that the new statutory language applies to 
the fees previously established by the IFR and by the Final Rule of 
August 20, 2001. In the FAA's view, those fees were properly 
established under the ``directly related'' standard, and the Congress' 
clarification of that standard by the change in language to 
``reasonably related'' necessitates no further rulemaking. Even if one 
were to conclude that the fees established in the IFR and the Final 
Rule of August 20, 2001 were not ``directly related,''--a conclusion 
with which the FAA would disagree--the fees nevertheless would clearly 
meet the ``reasonably related'' standard to costs. Accordingly, no 
further rulemaking would be required.
    (2) By striking ``Administration's costs'' and inserting 
``Administration's costs, as determined by the Administrator,''
    One of the issues raised in the current litigation has been whether 
the FAA's CAS accurately captures the FAA's costs of providing air 
traffic control and related services to overflying aircraft. Both the 
2001 Act and the Report address this issue. First, by the Act, stating 
that costs are to be determined solely by the Administrator as well as 
the determination is not subject to judicial review. Then, by the 
Report emphasizing that ``the FAA's costs upon which the fees are based 
are to be determined solely by the Administrator. This is to clarify 
that the Administrator has full authority to determine costs by 
appropriate means.''
    This language explicitly provides that the Administrator may use 
whatever methods or systems she deems appropriate (such as the CAS) in 
making cost determinations for fee setting purposes. It is entirely her 
decision. While the FAA believes that the Administrator could delegate 
this authority, like other Administrator authorities, to others in the 
FAA, in fact the Administrator personally approved both the Interim 
Final Rule and the Final Rule. Thus, because the costs for Overflight 
Fee purposes have already been determined personally by the 
Administrator, both of those determinations are within the explicit 
provisions of the revised statute. Therefore, she need make no further 
determinations under the 2001 Act with regard to either the Interim 
Final Rule or the Final Rule.
    (3) By adding at the end ``The Determination of such costs by the 
Administrator is not subject to judicial review.''
    This provision pertains solely to the jurisdiction of the reviewing 
court and thus is unrelated to the substance of the Interim and Final 
Rules, the matter at issue here. The FAA believes it is noteworthy, 
however, that the provision supports the decision of the FAA not to 
initiate rulemaking in response to the 2001 Act. Clearly, Congress 
acted to limit judicial review in order to help keep the current rules 
in place and to allow the FAA to ``expeditiously and continuously 
collect the fees* * * .''
    In summary, based on careful analysis of the 2001 Act and all 
relevant comments, the FAA has concluded that the current Final Rule 
and Interim Final Rule comply fully with the amended statutory standard 
for Overflight fees. The FAA has considered the two comments received 
during the course of the proceeding, and finds that no further notice 
and public comment is required under the Administrative Procedure Act

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or was contemplated by the Congress when it made the statutory change. 
The FAA has also concluded that an additional round of notice and 
comments in the context of a rulemaking proceeding addressing Congress' 
recent changes to the statute would not be in the public interest. As 
the Conference Committee Managers' Report says:

    This amendment is not intended to require revision of the fees 
recently promulgated by the FAA (66 FR 43680, Aug. 20, 2001) but 
rather, to clarify longstanding Congressional intent that the FAA 
expeditiously and continuously collect the fees authorized under 
section 45301(a) of title 49.

    Dated: June 19, 2002.
Jane F. Garvey,
Administrator.
[FR Doc. 02-15825 Filed 6-20-02; 8:45 am]
BILLING CODE 4910-13-M