The Mexican fruit fly ( Anastrepha ludens ) is a destructive pest of citrus and many other types of fruit. The short life cycle of the Mexican fruit fly allows rapid development of serious outbreaks that can cause severe economic losses in commercial citrus-producing areas.

The Mexican fruit fly regulations, contained in 7 CFR 301.64 through 301.64-10 (referred to below as the regulations), were established to prevent the spread of the Mexican fruit fly to noninfested areas of the United States. The regulations impose restrictions on the interstate movement of regulated articles from the regulated areas.

In an interim rule effective on December 13, 2002, and published in the Federal Register on December 23, 2002 (67 FR 78127-78128, Docket No. 02-121-1), we amended the regulations by adding a portion of Los Angeles County, CA, as a regulated area. Prior to the effective date of that rule, the only areas regulated for the Mexican fruit fly were portions of Texas. In this interim rule, we are designating an additional portion of Los Angeles County, CA, as a regulated area.

Section 301.64-3 provides that the Deputy Administrator for Plant Protection and Quarantine, Animal and Plant Health Inspection Service (APHIS), shall list as a regulated area each quarantined State, or each portion of a quarantined State, in which the Mexican fruit fly has been found by an inspector, in which the Deputy Administrator has reason to believe the Mexican fruit fly is present, or that the Deputy Administrator considers necessary to regulate because of its proximity to the Mexican fruit fly or its inseparability for quarantine enforcement purposes from localities in which the Mexican fruit fly occurs.

Less than an entire quarantined State is designated as a regulated area only if the Deputy Administrator determines that the State has adopted and is enforcing a quarantine or regulation that imposes restrictions on the intrastate movement of the regulated articles that are substantially the same as those that are imposed with respect to the interstate movement of the articles and the designation of less than the entire State as a regulated area will otherwise be adequate to prevent the artificial interstate spread of the Mexican fruit fly.

Recent trapping surveys by inspectors of California State and county agencies and by APHIS inspectors reveal that an additional portion of Los Angeles County, CA, is infested with the Mexican fruit fly.

Accordingly, to prevent the spread of the Mexican fruit fly to noninfested areas of the United States, we are amending the regulations in § 301.64-3 by adding that portion of Los Angeles County, CA, to the existing regulated area for the Mexican fruit fly. The addition is described in detail in the rule portion of this document. The Deputy Administrator has determined that it is not necessary to designate the entire State of California as a regulated area.

This rulemaking is necessary on an emergency basis to prevent the Mexican fruit fly from spreading to noninfested areas of the United States. Under these circumstances, the Administrator has determined that prior notice and opportunity for public comment are contrary to the public interest and that there is good cause under 5 U.S.C. 553 for making this rule effective less than 30 days after publication in the Federal Register .

We will consider comments we receive during the comment period for this interim rule ( see DATES above). After the comment period closes, we will publish another document in the Federal Register . The document will include a discussion of any comments we receive and any amendments we are making to the rule.

This rule has been reviewed under Executive Order 12866. For this action, the Office of Management and Budget has waived its review under Executive Order 12866.

This rule restricts the interstate movement of regulated articles from an area in Los Angeles County, CA. Within the regulated area there are approximately 389 small entities that may be affected by this rule. These include 351 fruit sellers, 3 growers, 33 nurseries, 1 certified farmers' market, and 1 swapmeet. These 389 entities comprise less than 1 percent of the total number of similar entities operating in the State of California. Additionally, these small entities sell regulated articles primarily for local intrastate, not interstate, movement, so the effect, if any, of this rule on these entities appears to be minimal.

The effect on those few entities that do move regulated articles interstate will be minimized by the availability of various treatments that, in most cases, will allow these small entities to move regulated articles interstate with very little additional cost.

Under these circumstances, the Administrator of the Animal and Plant Health Inspection Service has determined that this action will not have a significant economic impact on a substantial number of small entities.

This program/activity is listed in the Catalog of Federal Domestic Assistance under No. 10.025 and is subject to Executive Order 12372, which requires intergovernmental consultation with State and local officials. (See 7 CFR part 3015, subpart V.)

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule: (1) Preempts all State and local laws and regulations that are inconsistent with this rule; (2) has no retroactive effect; and (3) does not require administrative proceedings before parties may file suit in court challenging this rule.

An environmental assessment and finding of no significant impact have been prepared for this interim rule. The site-specific environmental assessment provides a basis for the conclusion that the implementation of integrated pest management to eradicate the Mexican fruit fly will not have a significant impact on human health and the natural environment. Based on the finding of no significant impact, the Administrator of the Animal and Plant Health Inspection Service has determined that an environmental impact statement need not be prepared.

The environmental assessment and finding of no significant impact were prepared in accordance with: (1) The National Environmental Policy Act of 1969 (NEPA), as amended (42 U.S.C. 4321 et seq. ), (2) regulations of the Council on Environmental Quality for implementing the procedural provisions of NEPA (40 CFR parts 1500-1508), (3) USDA regulations implementing NEPA (7 CFR part 1b), and (4) APHIS' NEPA Implementing Procedures (7 CFR part 372).

Copies of the environmental assessment and finding of no significant impact are available for public inspection in our reading room (information on the location and hours of the reading room is provided under the heading ADDRESSES at the beginning of this document). In addition, copies may be obtained from the individual listed under FOR FURTHER INFORMATION CONTACT.

This interim rule contains no information collection or recordkeeping requirements under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

Section 2509(a) of the Food, Agriculture, Conservation, and Trade Act of 1990 (21 U.S.C. 136a), referred to below as the FACT Act, authorizes the Animal and Plant Health Inspection Service to collect user fees for agricultural quarantine and inspection (AQI) services. The FACT Act was amended by § 917 of the Federal Agricultural Improvement and Reform Act of 1996 (Pub. L. 104-127), on April 4, 1996.

In an interim rule effective and published in the Federal Register on September 3, 2002 (67 FR 56217-56218, Docket No. 02-085-1), we amended the user fee regulations in 7 CFR part 354 to ensure that fiscal year 2002 rates remain in effect beyond fiscal year 2002 until the fees are revised.

Comments on the interim rule were required to be received on or before November 4, 2002. We did not receive any comments. Therefore, for the reasons given in the interim rule, we are adopting the interim rule as a final rule.

This action also affirms the information contained in the interim rule concerning Executive Order 12866 and the Regulatory Flexibility Act, Executive Orders 12372 and 12988, and the Paperwork Reduction Act.

Further, for this action, the Office of Management and Budget has waived its review under Executive Order 12866.

Exotic Newcastle disease (END) is a contagious and fatal viral disease affecting the respiratory, nervous, and digestive systems of birds and poultry. END is so virulent that many birds and poultry die without showing any clinical signs. A death rate of almost 100 percent can occur in unvaccinated poultry flocks. END can infect and cause death even in vaccinated poultry.

The regulations in “Subpart A—Exotic Newcastle Disease (END)” (9 CFR 82.1 through 82.15, referred to below as the regulations) were established to prevent the spread of END in the United States in the event of an outbreak. In § 82.3, paragraph (a) provides that any area where birds or poultry infected with END are located will be designated as a quarantined area, and that a quarantined area is any geographical area, which may be a premises or all or part of a State, deemed by epidemiological evaluation to be sufficient to contain all birds or poultry known to be infected with or exposed to END. Less than an entire State will be designated as a quarantined area only if the State enforces restrictions on intrastate movements from the quarantined area that are at least as stringent as the regulations. The regulations prohibit or restrict the movement of birds, poultry, products, and materials that could spread END from quarantined areas. Areas quarantined because of END are listed in § 82.3, paragraph (c).

On October 1, 2002, END was confirmed in the State of California. The disease was confirmed in backyard poultry, which are raised on private premises for hobby, exhibition, and personal consumption, and in commercial poultry.

In an interim rule effective on November 21, 2002, and published in the Federal Register on November 26, 2002 (67 FR 70674-70675, Docket No. 02-117-1), we amended the regulations in § 82.3(c) by quarantining Los Angeles County, CA, and portions of Riverside and San Bernardino Counties, CA, and restricting the interstate movement of birds, poultry, products, and materials that could spread END from the quarantined area.

In a second interim rule effective on January 7, 2003, and published in the Federal Register on January 13, 2003 (68 FR 1515-1517, Docket No. 02-117-2), we further amended § 82.3(c) by adding Imperial, Orange, San Diego, Santa Barbara, and Ventura Counties, CA, and the previously non-quarantined portions of Riverside and San Bernardino Counties, CA, to the list of quarantined areas. Because the Secretary of Agriculture signed a declaration of extraordinary emergency with respect to the END situation in California on January 6, 2003 ( see 68 FR 1432, Docket No. 03-001-1, published January 10, 2003), that second interim rule also amended the regulations to provide that the prohibitions and restrictions that apply to the interstate movement of birds, poultry, products, and materials that could spread END will also apply to the intrastate movement of those articles in situations where the Secretary of Agriculture has issued a declaration of extraordinary emergency (new § 82.16).

On January 16, 2003, END was confirmed in backyard poultry on a premises in Las Vegas, NV. Therefore, in this interim rule we are amending § 82.3(c) by designating as a quarantined area all of Clark County, NV, and that portion of Nye County, NV, that lies south of U.S. Highway 95 and east of State Highway 373 and by prohibiting or restricting the movement of birds, poultry, products, and materials that could spread END from the quarantined area. As provided for by the regulations in § 82.3(a), this quarantined area encompasses the area where poultry infected with END were located and a surrounding geographical area deemed by epidemiological evaluation to be sufficient to contain all birds or poultry known to be infected with or exposed to END.

This rulemaking is necessary on an emergency basis to prevent the spread of END. Under these circumstances, the Administrator has determined that prior notice and opportunity for public comment are contrary to the public interest and that there is good cause under 5 U.S.C. 553 for making this rule effective less than 30 days after publication in the Federal Register .

We will consider comments that we receive during the comment period for this interim rule (see DATES above). After the comment period closes, we will publish another document in the Federal Register . The document will include a discussion of any comments we receive and any amendments we are making to the rule.

This rule has been reviewed under Executive Order 12866. For this action, the Office of Management and Budget has waived its review under Executive Order 12866.

This rule amends the regulations by quarantining Clark County, NV, and a portion of Nye County, NV, and prohibiting or restricting the movement of birds, poultry, products, and materials that could spread END from the quarantined area. This action is necessary on an emergency basis to prevent the spread of END from the quarantined area.

This emergency situation makes timely compliance with section 604 of the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) impracticable. We are currently assessing the potential economic effects of this action on small entities. Based on that assessment, we will either certify that the rule will not have a significant economic impact on a substantial number of small entities or publish a final regulatory flexibility analysis.

This program/activity is listed in the Catalog of Federal Domestic Assistance under No. 10.025 and is subject to Executive Order 12372, which requires intergovernmental consultation with State and local officials. ( See 7 CFR part 3015, subpart V.)

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule: (1) Preempts all State and local laws and regulations that are in conflict with this rule; (2) has no retroactive effect; and (3) does not require administrative proceedings before parties may file suit in court challenging this rule.

This rule contains no new information collection or recordkeeping requirements under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

The Direction Generale De L'Aviation Civile (DGAC), which is the airworthiness authority for France, notified the FAA that an unsafe condition may exist on Eurocopter Model AS350 and AS355 helicopters. The DGAC advises that there has been one report of a sliding door aft roller dislodgment in flight due to severe wear on the rail.

Eurocopter has issued Alert Telex No. 05.00.41, applicable to Model AS350 helicopters, and Alert Telex No. 05.00.39, applicable to Model AS355 helicopters, both dated May 16, 2002, which specify measuring the diameter of the sliding door aft roller and rail opening dimension to determine wear, and prohibit operating the door during flight if certain dimensions are exceeded. The DGAC classified these alert telexes as mandatory and issued AD No. 2002-344-093(A), applicable to Model AS350 helicopters, and AD No. 2002-345-070(A), applicable to Model AS355 helicopters, both dated June 26, 2002, to ensure the continued airworthiness of these helicopters in France.

These helicopter models are manufactured in France and are type certificated for operation in the United States under the provisions of 14 CFR 21.29 and the applicable bilateral agreement. Pursuant to the applicable bilateral agreement, the DGAC has kept the FAA informed of the situation described above. The FAA has examined the findings of the DGAC, reviewed all available information, and determined that AD action is necessary for products of these type designs that are certificated for operation in the United States.

This unsafe condition is likely to exist or develop on other helicopters of the same type designs registered in the United States. Therefore, this AD is being issued to prevent the roller from coming out of the middle rail when operating the door, which could lead to the sliding door separating from the helicopter during flight and possibly damaging critical flight components, resulting in subsequent loss of control of the helicopter. This AD requires, before further flight and thereafter at intervals not to exceed 100 hours time-in-service, measuring the diameter of the roller and the dimensions of the front end opening of the sliding door rail for wear, and if necessary, installing a placard prohibiting operating the sliding door during flight. The actions must be accomplished in accordance with the alert telexes described previously. The short compliance time involved is required because the previously described critical unsafe condition can adversely affect the controllability or structural integrity of the helicopter. Therefore, measuring the diameter of the roller and the dimensions of the rail to determine if excessive wear exists, and if necessary, installing a placard prohibiting the opening of the sliding door during flight is required prior to further flight, and this AD must be issued immediately.

Since a situation exists that requires the immediate adoption of this regulation, it is found that notice and opportunity for prior public comment hereon are impracticable, and that good cause exists for making this amendment effective in less than 30 days.

The FAA estimates that 50 helicopters will be affected by this AD, that it will take approximately 1 work hour to measure the roller and rail, and 1 work hour to make and apply a placard to the inside door, if necessary, and that the average labor rate is $60 per work hour. Required parts will cost approximately $10 per helicopter if installing a placard is necessary. Based on these figures, the total cost impact of the AD on U.S. operators is estimated to be $21,500 per year, assuming each helicopter in the fleet is measured 6 times per year, assuming no placards will be necessary.

Although this action is in the form of a final rule that involves requirements affecting flight safety and, thus, was not preceded by notice and an opportunity for public comment, comments are invited on this rule. Interested persons are invited to comment on this rule by submitting such written data, views, or arguments as they may desire. Communications should identify the Rules Docket number and be submitted in triplicate to the address specified under the caption ADDRESSES. All communications received on or before the closing date for comments will be considered, and this rule may be amended in light of the comments received. Factual information that supports the commenter's ideas and suggestions is extremely helpful in evaluating the effectiveness of the AD action and determining whether additional rulemaking action would be needed.

Comments are specifically invited on the overall regulatory, economic, environmental, and energy aspects of the rule that might suggest a need to modify the rule. All comments submitted will be available in the Rules Docket for examination by interested persons. A report that summarizes each FAA-public contact concerned with the substance of this AD will be filed in the Rules Docket.

Commenters wishing the FAA to acknowledge receipt of their mailed comments submitted in response to this rule must submit a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. 2002-SW-41-AD.” The postcard will be date stamped and returned to the commenter.

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

The FAA has determined that this regulation is an emergency regulation that must be issued immediately to correct an unsafe condition in aircraft, and that it is not a “significant regulatory action” under Executive Order 12866. It has been determined further that this action involves an emergency regulation under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979). If it is determined that this emergency regulation otherwise would be significant under DOT Regulatory Policies and Procedures, a final regulatory evaluation will be prepared and placed in the Rules Docket. A copy of it, if filed, may be obtained from the Rules Docket at the location provided under the caption ADDRESSES.

Transport Canada, the airworthiness authority for Canada, notified the FAA that an unsafe condition may exist on Bell Model 407 helicopters. Transport Canada advises that there has been one occurrence of a cracked tail rotor gearbox support casting that is part of the tailboom assembly. They state that the crack originated from a weld repair made during fabrication of the part and that Bell has identified other castings that have the same repair and potential for cracking.

Bell has issued Bell Helicopter Textron Alert Service Bulletin, No. 407-02-53, dated June 5, 2002, which specifies a procedure for determining if an affected tailboom and casting are installed, and specifies an initial and 25-hour time-in-service recurring visual inspections of the casting for cracks. Transport Canada classified this alert service bulletin as mandatory and issued AD No. CF-2002-32R1, dated July 31, 2002, to ensure the continued airworthiness of these helicopters in Canada.

This helicopter model is manufactured in Canada and is type certificated for operation in the United States under the provisions of 14 CFR 21.29 and the applicable bilateral agreement. Pursuant to the applicable bilateral agreement, Transport Canada has kept the FAA informed of the situation described above. The FAA has examined the findings of Transport Canada, reviewed all available information, and determined that AD action is necessary for products of this type design that are certificated for operation in the United States.

This unsafe condition is likely to exist or develop on other helicopters of the same type design registered in the United States. Therefore, this AD is being issued to detect a crack in the casting and prevent failure of the casting, loss of the vertical fin and tail rotor, and subsequent loss of control of the helicopter. This AD requires determining if an affected tailboom assembly and casting are installed, and if so, visually inspecting the casting for a crack before further flight at intervals not to exceed 25 hours time-in-service (TIS). Replacing any tailboom assembly that has a cracked casting is also required before further flight. The actions must be accomplished in accordance with the alert service bulletin described previously. Replacing the tailboom with a tailboom assembly having a serial number other than those listed in the Applicability section of this AD is a terminating action for the requirements of this AD. The short compliance time involved is required because the previously described critical unsafe condition can adversely affect the controllability and structural integrity of the helicopter. Therefore, inspecting for a crack in affected castings is required within 10 hours TIS or 7 days, whichever occurs first, and this AD must be issued immediately.

Since a situation exists that requires the immediate adoption of this regulation, it is found that notice and opportunity for prior public comment hereon are impracticable, and that good cause exists for making this amendment effective in less than 30 days.

The FAA estimates that 284 helicopters will be affected by this AD and that it will take approximately 1.5 work hours to determine if an affected tailboom assembly and casting are installed and 25 work hours to replace a tailboom. There are seven helicopters that will require repetitively inspecting the affected casting; it will take approximately 1 work hour to conduct the visual inspection of the casting. The average labor rate is $60 per work hour. If a crack is found in the casting, required parts will cost approximately $64,578 per helicopter. Based on these figures, the total cost impact of the AD on U.S. operators is estimated to be $573,786, assuming (1) a one-time inspection for 284 helicopters to determine if affected tailbooms and castings are installed; and (2) the tailboom is replaced on the seven helicopters after 204 repetitive inspections. The manufacturer states that they are offering a prorated warranty credit for replacement tailboom, P/N 407-030-801-203.

Although this action is in the form of a final rule that involves requirements affecting flight safety and, thus, was not preceded by notice and an opportunity for public comment, comments are invited on this rule. Interested persons are invited to comment on this rule by submitting such written data, views, or arguments as they may desire. Communications should identify the Rules Docket number and be submitted in triplicate to the address specified under the caption ADDRESSES. All communications received on or before the closing date for comments will be considered, and this rule may be amended in light of the comments received. Factual information that supports the commenter's ideas and suggestions is extremely helpful in evaluating the effectiveness of the AD action and determining whether additional rulemaking action would be needed.

Comments are specifically invited on the overall regulatory, economic, environmental, and energy aspects of the rule that might suggest a need to modify the rule. All comments submitted will be available in the Rules Docket for examination by interested persons. A report that summarizes each FAA-public contact concerned with the substance of this AD will be filed in the Rules Docket.

Commenters wishing the FAA to acknowledge receipt of their mailed comments submitted in response to this rule must submit a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. 2002-SW-33-AD.” The postcard will be date stamped and returned to the commenter.

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

The FAA has determined that this regulation is an emergency regulation that must be issued immediately to correct an unsafe condition in aircraft, and that it is not a “significant regulatory action” under Executive Order 12866. It has been determined further that this action involves an emergency regulation under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979). If it is determined that this emergency regulation otherwise would be significant under DOT Regulatory Policies and Procedures, a final regulatory evaluation will be prepared and placed in the Rules Docket.

A copy of it, if filed, may be obtained from the Rules Docket at the location provided under the caption ADDRESSES.

Since 1996, Customs has recognized a decrease in both the number of drawback claims and the amount of drawback payments. To verify these trends, and to determine how to most efficiently operate the Drawback Program, Customs conducted an internal evaluation of the program. Customs also retained the services of an independent contractor to review the Drawback Program to ensure that the agency's findings were valid. The findings of both the agency-led review and the independent contractor's assessment indicated the benefits of consolidating the processing of drawback claims by reducing the number of Drawback Centers.

In a Notice to Congress on March 12, 2001, filed in accordance with 19 U.S.C. 2075, Customs proposed the closure of four Drawback Centers. The Senate Finance and House Ways and Means Committees concurred with the proposal for consolidation, but with the recommendation that only three Drawback Centers be eliminated and the San Francisco Drawback Center remain operational. The Commissioner of Customs concurred with this recommendation and it was proposed to phase-in the closure of the Drawback Centers located at the ports of Boston, MA; Miami, FL; and New Orleans, LA.

On August 21, 2002, Customs published in the Federal Register (67 FR 54137) a proposed amendment to the Customs Regulations to reflect the planned closure of these Customs Drawback Centers, and a request for public comment regarding the proposed actions. In that document, Customs described a phased-in closure process whereby the Customs Drawback Centers located at the ports of Boston and New Orleans would close 30 days from the date a final rule adopting the proposed changes was published in the Federal Register , and the Drawback Center located at the port of Miami would close 180 days from such date. The document also stated that any unliquidated drawback claims that remained at each of these Drawback Centers twelve months after their respective closing dates would be transferred to another Drawback Center for processing as follows: Remaining claims from Boston would be transferred to the New York/Newark, NJ Drawback Center; remaining claims from New Orleans would be transferred to the Houston Drawback Center; and remaining claims from Miami would be transferred to the Chicago Drawback Center.

In accordance with the proposal, the five Drawback Centers located at the ports of New York/Newark, NJ; Houston, TX; Chicago, IL; Los Angeles, CA; and San Francisco, CA, will remain operational.

Fourteen comments were received in response to the solicitation of public comment published in the August 21, 2002, Federal Register document. A description of the comments received, together with Customs analyses, is set forth below.

Comment: Several commenters expressed concern that closure of three Drawback Centers will negatively impact the level of service at the remaining Drawback Centers. Specific comments were submitted regarding anticipated inefficiencies at the remaining Drawback Centers resulting from:

• Reduction in full-time Customs Drawback Specialist positions;

• Increased workload for remaining Drawback Specialists and failure to utilize existing Drawback personnel to their potential;

• Transfer of backlogged drawback cases;

• Lack of specific published proposals demonstrating how service levels will be maintained; and

• Lack of realistic methods of determining which Drawback Centers should have been closed;

Customs Response: To ensure that the level of service at the remaining Drawback Centers will remain the same as before the consolidation, Customs reviewed the workload of each Center and assessed the burden of any workload that would be transferred to another Drawback Center as result of the consolidation. The determination as to which Drawback Centers would receive drawback cases that remain unliquidated twelve months after closure of a Center was based upon this review. It is noted, however, that the workload transfers that were described in the August 21, 2002, Federal Register document have been changed, due to further internal analysis of workloads, staffing and backlogs, and are described in the section of this document entitled “Further Customs Analysis,” set forth below.

Regarding staffing issues, Customs recognizes that Drawback personnel levels at the remaining Drawback Centers will have to be routinely reviewed to ensure that the centers are able to sustain pre-consolidation levels of service. Customs is striving to automate and simplify the drawback process to reduce the workload of Drawback Specialists. In an effort to utilize Drawback personnel to their potential, Drawback Specialists will continue to receive annual training.

The Customs Drawback Program has evolved over the years, and the processing procedures in place today are to ensure that the workload increases do not create unworkable backlogs and preserve a pre-consolidation level of service to the trade.

Lastly, Customs notes that its determination to close three Drawback Centers was based on a detailed internal evaluation of the program, as well as the findings of an independent contractor. The findings of the agency-led review and the independent contractor's assessment were based on facts and clearly indicated the benefits of consolidation of the program.

Comment: Two commenters requested that the requirement to re-apply for a new letter of intent to operate under a general drawback ruling when transferring from one drawback center to another be waived.

Customs response: Claimants will not have to re-file a general drawback ruling request at the Drawback Center designated to receive their claims. If, however, a claimant opts to file a claim at a Drawback Center other than the one designated to receive their claims, that claimant will have to file a new letter of intent to operate under a general drawback ruling at that location.

Comment: Several commenters questioned whether consolidating the drawback program would subvert the intent of Congress to assist in increasing U.S. exports.

Customs response: Consolidation of the drawback program will not negatively impact U.S. exports.

Comment: One commenter objected to the fact that the identity of the independent contractor brought in to perform the review of the Drawback Program was not made public.

Customs response: The purpose of retaining an independent contractor was to have an unbiased third party conduct a review of the Drawback Program. Individuals seeking more information may file a request for information pursuant to the Freedom of Information Act (5 U.S.C. 552).

Comment: Several commenters noted that although the number of drawback claims has decreased, the volume of import and export shipments that appear on claims has increased.

Customs response: Customs has data that reflects that the number of underlying imports in 2001 decreased over 40% from 1999 levels. While it is true that more exports are being claimed in a summarized format, consolidation of the drawback program is a legitimate means of increasing the program's efficiency without impairing U.S. exports.

Comment: Two commenters questioned why claimants are not allowed to file a single application for the waivers and privileges set forth in §§ 191.91, 191.92 and 191.195 of the Customs Regulations ( i.e. , waiver of prior notice of intent to export, accelerated payment, certification in the drawback compliance program).

Customs response: Claimants do have the option of filing a single application for these waivers and privileges pursuant to 19 CFR 191.93.

Comment: Several commenters noted that all Drawback Specialists must now perform more mandatory audits and/or desk reviews as ordered by the General Accounting Office (GAO).

Customs response: Customs has enhanced the processing procedures for drawback so that fewer full desk reviews are completed by each Drawback Specialist. Audits are completed by Regulatory Auditors with input from the Drawback Specialist. It is noted that the number of audits over the years has remained consistent.

Comment: One commenter noted that the proposed rulemaking should have stated that only a customs broker requires a license/permit to file a drawback claim, and not a drawback claimant.

Customs response: Customs agrees; the background section of the proposed rulemaking published in the Federal Register (67 FR 54137) on August 21, 2002, should have specified that a drawback claimant's customs broker must possess a district or national permit to file a drawback claim.

Comment: One commenter questioned whether a broker must file drawback claims via the Automated Broker Interface (ABI) to have a national permit, and noted that the Customs Regulations permit drawback claims to be filed either manually or electronically (via ABI).

Customs response: Section 111.19(f) of the Customs Regulations (19 CFR 111.19(f)) allows for national broker permits under any of the circumstances described in § 111.2(b)(2)(i) (19 CFR 111.2(b)(2)(i)). Section 111.2(b)(2)(i)(B) allows for electronic (ABI) drawback claims. There is no allowance in § 111.2(b)(2)(i) for manual drawback claims. Drawback claims may be filed manually by brokers with a district permit. See 19 CFR 111.2(b)(2)(ii).

Comment: Several commenters noted that by closing Drawback Centers, Customs will be unable to liquidate and audit drawback claims within the three year time period allowed by law.

Customs response: As stated previously, Customs believes that consolidation of the Drawback Program will bring about more efficient and effective drawback claim processing, and thereby claims should get liquidated more expeditiously. It is noted that there is no legal or regulatory requirement to liquidate or audit a drawback claim within three years. A drawback claimant is required to retain records for three years after payment of a drawback claim. See 19 CFR 163.4(b)(1). If drawback is paid via accelerated payment, pursuant to 19 CFR 191.92, and the three year time period to retain records expires prior to the underlying claim being liquidated, there may be instances where the records necessary to verify a claim are no longer available. This problem, however, has no bearing on the consolidation of the Drawback Program. It is further noted that audits are performed on unliquidated drawback claims, and this document does not make any changes to the Regulatory Audit functions of drawback.

Comment: One commenter viewed the requirement to provide advance notification to Customs of any changes to a drawback claim as impractical, and questioned who, within Customs, should be notified in such instances.

Customs response: Notification of changes to a drawback claim should be provided to the Drawback Specialist handling the original claim.

Comment: One commenter questioned whether the Government will actually save money by closing three Drawback Centers and reducing personnel, given the fact that no specific information as to the expected savings have been presented.

Customs response: The proposed rulemaking published in the August 21, 2002, Federal Register stated that the consolidation is “intended to promote operational efficiency in the processing of drawback claims.” The document does not suggest savings as a reason for the consolidation.

Comment: One commenter noted that consolidation of the Drawback Program will necessitate submission of drawback applications to Customs Drawback Centers that are outside the Customs port areas most familiar with the claimant/company and thereby further increase delays and backlogs. Additionally, if drawback claims are required to be submitted at ports other than the port of import, the process of obtaining records will be more difficult, time-consuming and expensive.

Customs response: The Drawback Program is not currently a port-specific program. Therefore, Drawback Specialists are already adept at reviewing claims that originate from outside their geographical area. Also, the process of transmitting or shipping data to other Customs ports is already followed by all ports that do not have a Drawback Center.

Comment: One commenter requested that Customs publish each Drawback Center's drawback claims filing statistics ( i.e. , dollar amounts claimed, number of drawback personnel assigned to the Drawback Center, number of exports being claimed).

Customs response: Relevant export data is unavailable because it is not part of Customs automated system. The other types of drawback statistics specified in the comment may be available by information requests made pursuant to the Freedom of Information Act (5 U.S.C. 552).

Comment: One commenter noted that a decline in the number of drawback claims suggests that existing Drawback Centers have idle time and that privileges and claims should all be approved on time, including those applications made at Customs Headquarters.

Customs response: Applications for privileges are not approved at Customs Headquarters. Customs is being proactive, rather than reactive, by consolidating the Drawback Program and ensuring that Drawback resources are used optimally.

Comment: One commenter stated that Customs will increase costs by closing some of the Drawback Centers because a Drawback Specialist usually visits the drawback claimant with an Auditor and this will increase Customs travel expenses. In a related comment, several commenters noted that by closing the Boston Drawback Center, Customs expenses will increase because Auditors and Inspectors will have to travel to remote customs sites beyond their port's geographical area to review and audit drawback claims.

Customs response: A Drawback Specialist does not always accompany an Auditor. Moreover, Drawback Specialists are technical experts that an Auditor can consult as a resource either electronically or telephonically. Customs already incurs some of these travel expenditures in that a drawback claimant can use any of the eight existing Drawback Centers and does not always choose to file a drawback claim at the Center located nearest the claimant. Regarding the comment directed at the Boston Drawback Center, it is noted that Auditors and Inspectors are located throughout the Customs Service. Regulatory Auditors will remain in Boston, as well as other sites. Inspectors located at the port of export will perform the export examinations, as they always have. They perform functions separate from those of a Drawback Specialist and the role of Inspectors will not be affected by the consolidation.

Comment: Several commenters stated that the cost of staffing and training new Drawback personnel will be significant.

Customs response: The remaining Drawback Centers have well-trained, capable staffs and there is no need to immediately increase staffing levels at those Centers. New staff will be hired to replace personnel lost through attrition or retirement and to accommodate any sustained increase in drawback filings nationwide.

Comment: Several commenters noted that as proposed Free Trade Agreements and yearly reductions in duty rates will eventually eliminate the need for drawback, closure of the Drawback Centers at this time is unwarranted.

Customs response: Customs views a consolidated, more efficient Drawback Program as consistent with the trade trends cited in the comment above.

Comment: Several commenters are of the view that it is not prudent to change the Drawback Program during this time of transition of the Customs Service to the Homeland Security Department and that any such changes will distract from the goals of fighting terrorism.

Customs response: Customs is of the view that the agency's efforts regarding anti-terrorism and its move to the Homeland Security Department will not be impacted by any of the changes to the Drawback Program discussed in this document.

Comment: Several commenters questioned why California will have two Drawback Centers operating after the consolidation, even though Boston has more volume than the Los Angeles Drawback Center. The commenters also suggested documenting the length of time it takes certain Drawback Centers to process drawback claims and correcting inefficiencies.

Customs response: As stated above, many factors were taken into consideration in making the determination to close the Boston Drawback Center. Regarding workload volume, Customs notes that the volume at the Boston and Los Angeles Centers is approximately the same.

Comment: Several commenters stated that exporters will have their costs increased by having to submit drawback applications and claims to remote Drawback Centers. The commenters also expected increased delays in having to wait for shipment inspections and payment of drawback claims.

Customs response: Exporters file their claims at the port of exportation. A Drawback Center has no bearing on the export process. There is no reason to believe there will be any delays in shipment inspections, as there have been no changes made to this process.

Customs has determined that based on the above comments, no change is necessary to the proposed rulemaking published in the Federal Register on August 21, 2002 (67 FR 54137). However, it has come to Customs attention, upon further review of the proposed consolidation, that a redistribution of the workload that is to be transferred from the closed Drawback Centers, as well as an extension of the time period that the Boston Drawback Center will remain operational, will assist in maintaining the level of service at the remaining Drawback Centers that existed prior to consolidation.

The original phased-in consolidation plan, which detailed the transfer of remaining unliquidated drawback cases and the time frames for Drawback Center closures, as published in the August 21, 2002, Federal Register document, remains in effect except for the following changes:

(1) Drawback claims that remain unliquidated twelve months after closure of the Miami Drawback Center and require Customs review will be forwarded to the Los Angeles Drawback Center (not to the Chicago Drawback Center); and

(2) The Drawback Center at the port of Boston, MA will close 180 days from the date of publication of this document in the Federal Register (not 30 days from such date as originally planned). As of that date, drawback claims will no longer be accepted at the Boston Drawback Center and claims must be filed at one of the five remaining Drawback Centers. Drawback claims submitted to the Boston Drawback Center after this date will be rejected. Once rejected, it is the responsibility of the claimant to ensure timely filing of the drawback claim at one of the five remaining Drawback Centers. Customs personnel at the port of Boston will continue to process drawback claims for a period of 12-months after closure of the Boston Drawback Center. After this time, all remaining unliquidated drawback claims filed at the Boston Drawback Center prior to its closure that require Customs review will be forwarded to the Chicago Drawback Center for final processing (not to the New York/Newark Drawback Center as originally planned).

After analysis of the comments and further review of the matter, Customs has determined to adopt as a final rule the amendments proposed in the Notice of Proposed Rulemaking published in the Federal Register (67 FR 54137) on August 21, 2002.

Although this final rule was issued after a notice for public comments, it is not subject to the notice and public procedure requirements of 5 U.S.C. 553 because it relates to agency management and organization. Customs solicited and reviewed comments as a courtesy to the public. Accordingly, there is no requirement for a delayed effective date for this regulation.

Because these amendments relate to agency management and organization, they are not subject to the notice and public procedure requirements of 5 U.S.C. 553. Accordingly, this document is not subject to the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). Agency organization matters, such as this proposed closing of three Customs Drawback Centers, are not subject to Executive Order 12866.

The principal author of this document was Ms. Suzanne Kingsbury, Regulations Branch, Office of Regulations and Rulings, U.S. Customs Service. However, personnel from other offices participated in its development.

The Internal Revenue Code of 1986 (Code) provides general nonrecognition treatment for reorganizations specifically described in section 368(a). Section 368(a)(1)(A) provides that the term reorganization includes “a statutory merger or consolidation.” Section 1.368-2(b)(1) currently provides that a statutory merger or consolidation must be “effected pursuant to the corporation laws of the United States or a State or Territory or the District of Columbia.”

A business entity (as defined in § 301.7701-2(a)) that has only one owner may be disregarded as an entity separate from its owner for Federal tax purposes. Examples of disregarded entities include a domestic single member limited liability company that does not elect to be classified as a corporation for Federal tax purposes, a corporation (as defined in § 301.7701-2(b)) that is a qualified REIT subsidiary (within the meaning of section 856(i)(2)) (hereinafter referred to as “QRS”), and a corporation that is a qualified subchapter S subsidiary (within the meaning of section 1361(b)(3)(B)) (hereinafter sometimes referred to as “QSub”).

Because a QRS and QSub are corporations under state law, state merger laws generally permit them to merge with other corporations. In addition, many state merger laws permit a limited liability company (LLC) to merge with another LLC or with a corporation.

On May 16, 2000, the IRS and Treasury issued a notice of proposed rulemaking (REG-106186-98; 65 FR 31115) (hereinafter referred to as the 2000 proposed regulations) providing that neither the merger of a disregarded entity into a corporation nor the merger of a corporation into a disregarded entity would qualify as a reorganization under section 368(a)(1)(A). While commentators generally agreed that the merger of a disregarded entity into a corporation should not qualify as a reorganization under section 368(a)(1)(A), commentators asserted that the merger of a corporation into a disregarded entity with a corporate owner should be able to qualify as a reorganization under section 368(a)(1)(A).

On November 15, 2001, after consideration of the comments received regarding the 2000 proposed regulations, the IRS and Treasury withdrew the 2000 proposed regulations (REG-106186-98; 66 FR 57400) and issued another notice of proposed rulemaking (REG-126485-01; 66 FR 57400) (hereinafter referred to as the 2001 proposed regulations).

The 2001 proposed regulations provide that, for purposes of section 368(a)(1)(A), a statutory merger or consolidation must be effected pursuant to the laws of the United States or a State or the District of Columbia. Pursuant to such laws, the following events must occur simultaneously at the effective time of the transaction: (1) All of the assets (other than those distributed in the transaction) and liabilities (except to the extent satisfied or discharged in the transaction) of each member of one or more combining units (each a transferor unit) become the assets and liabilities of one or more members of one other combining unit (the transferee unit); and (2) the combining entity of each transferor unit ceases its separate legal existence for all purposes. For this purpose, a combining entity is a business entity that is a corporation (as defined in § 301.7701-2(b)) that is not a disregarded entity) and a combining unit is a combining entity and all of its disregarded entities.

The 2001 proposed regulations provide that the merger of a disregarded entity into a corporation will not qualify as a statutory merger or consolidation under section 368(a)(1)(A) because all of the transferor unit's assets may not be transferred to the transferee unit and the separate legal existence of the combining entity of the transferor unit does not terminate as a matter of law. The 2001 proposed regulations, however, generally provide that the merger of a corporation into a disregarded entity will qualify as a statutory merger or consolidation if it satisfies the requirements of the regulations.

No public hearing regarding the 2001 proposed regulations was requested or held. Nonetheless, a number of written comments were received.

The IRS and Treasury have studied the comments received regarding the 2001 proposed regulations. Although the IRS and Treasury are continuing to study a number of the comments received regarding the proposed regulations, in response to a number of comments requesting immediate guidance in this area upon which taxpayers may rely, the IRS and Treasury are promulgating these regulations as temporary regulations in this Treasury Decision. The temporary regulations retain the general framework of the 2001 proposed regulations, but make certain modifications in response to comments received. The following sections describe a number of the most significant comments and the extent to which they have been incorporated in these temporary regulations. Further changes to the temporary regulations, however, are possible before these regulations are finalized.

As described above, the 2001 proposed regulations define a combining entity as a business entity that is a corporation that is not a disregarded entity. Although the preamble to the 2001 proposed regulations clarifies that, for this purpose, the term corporation is defined as provided in § 301.7701-2(b), commentators requested that that clarification also be provided in the text of the regulations. In response to these comments, the temporary regulations provide that a combining entity is a corporation (as defined in § 301.7701-2(b)) that is not a disregarded entity.

As stated above, the 2001 proposed regulations require that all of the assets of a transferor unit become the assets of a transferee unit. A number of comments were received regarding this requirement. The following paragraphs describe these comments and the extent to which the temporary regulations reflect them.

One comment suggested that the regulations be amended to clarify that whether the all of the assets requirement is satisfied is determined by reference to the assets of the transferor unit immediately prior to the merger. These temporary regulations add an example that illustrates that a transaction that is preceded by a distribution by the transferor unit to its shareholders may qualify as a statutory merger under these temporary regulations, even if the “substantially all” requirement applicable to certain other types of reorganizations would not be satisfied. The example is provided solely to illustrate the meaning of the all of the assets requirement. No inference is intended regarding the shareholder level and other tax consequences of the transaction described therein.

Another comment stated that the proposed regulations are unclear as to whether a transaction in which an entity that is disregarded as an entity separate from the combining entity of the transferor unit becomes an entity that is disregarded as an entity separate from the combining entity of the transferee unit satisfies the all of the assets requirement. These temporary regulations amend Example 2 of the 2001 proposed regulations, as described below, to clarify that this transaction may satisfy the all of the assets requirement and, therefore, qualify as a statutory merger or consolidation.

The 2001 proposed regulations require that the combining entity of each transferor unit “ceases its separate legal existence for all purposes.” One comment requested that the phrase “for all purposes” be deleted from this requirement. The comment suggested that under some corporate laws a merged corporation may continue its existence for a specified time period and for certain limited purposes, such as bringing and defending against lawsuits. This limited continued existence of a combining entity of a transferor unit, the comment suggested, should not prevent a transaction from being treated as failing to satisfy the requirement that the combining entity of each transferor unit cease its separate legal existence for all purposes.

The IRS and Treasury do not believe that the deletion of “for all purposes” from the regulation will alter the terms of the requirement. Nonetheless, these temporary regulations provide that this requirement will be satisfied even if, pursuant to the laws of the United States or a State or the District of Columbia, after the effective time of the transaction, the combining entity of the transferor unit (or its officers, directors, or agents) may act or be acted against, or a member of the transferee unit (or its officers, directors, or agents) may act or be acted against in the name of the combining entity of the transferor unit, provided that such actions relate to assets or obligations of the combining entity of the transferor unit that arose, or relate to activities engaged in by such entity, prior to the effective time of the transaction, and such actions are not inconsistent with the all of the assets requirement.

A number of comments were received regarding Example 2 of the 2001 proposed regulations, which involves the merger of a target corporation into a disregarded entity. The last sentence of the facts of Example 2 states that, “[p]rior to the transaction, [the combining entity of the transferor unit] is not treated as owning any assets of an entity that is disregarded as an entity separate from its owner for Federal tax purposes.” One commentator indicated that it is not clear why this fact is relevant to the conclusion that the transaction qualifies as a statutory merger or consolidation and suggested either deleting or clarifying this fact.

As described above, in order to qualify as a statutory merger or consolidation, all of the assets of a transferor unit must become assets of the transferee unit. In order to determine whether this requirement has been satisfied, it is necessary to know whether the combining entity of the transferor unit owns the interests of any entity that is disregarded as an entity separate from its owner for Federal tax purposes. The last sentence of the facts of Example 2 was merely intended to convey the fact that the only assets of the transferor unit were those that the combining entity owned directly. To clarify the significance of this fact, the temporary regulations amend the analysis in Example 2 to indicate that the transaction would still qualify as a statutory merger or consolidation even if the combining entity of the transferor unit were treated as owning assets of an entity that is disregarded as an entity separate from the combining entity of the transferor unit for Federal tax purposes, provided that those assets become assets of the transferee unit.

One commentator suggested that the scope of the proposed regulations be clarified through additional examples. The following paragraphs describe the suggested examples and the extent to which they have been incorporated in these temporary regulations.

A QSub may cease to be a disregarded entity because of an event that renders the subsidiary ineligible for QSub status, such as a merger into an entity owned by a C corporation. For example, suppose Z, an S corporation, owns all of the stock of B, a QSub, and Z merges with and into X, an entity that is disregarded as an entity separate from Y, a C corporation. B's status as a QSub will terminate at the end of the day on which the merger occurs. See Treas. Reg. § 1.1361-5(a)(1)(iii). A commentator suggested that, in this case, it is not clear whether B is a member of the transferor unit. If B were treated as a member of the transferor unit, the transaction may not qualify as a statutory merger or consolidation because the assets of B may not become assets of the transferee unit. If, however, B were not treated as a member of the transferor unit, the transaction may qualify as a statutory merger or consolidation. The commentator suggested that B should not be treated as a member of the transferor unit. Alternatively, the commentator suggested that the principles of Example 9 of § 1.1361-5(b)(3) could be applied to this case. In Example 9 of § 1.1361-5(b)(3), the acquisition of the stock of a QSub is treated as a transfer of the QSub's assets followed by the transfer of those assets by the acquirer to a new corporation.

The IRS and Treasury agree with the commentator that the principles illustrated by Example 9 of § 1.1361-5(b)(3) apply to determine whether the merger of Z into X qualifies as a statutory merger or consolidation. In particular, the transaction should be treated as a transfer of B's assets to X followed by a transfer of such assets by X to a new corporation. Accordingly, the transaction may qualify as a statutory merger or consolidation provided that the other requirements of a statutory merger or consolidation are satisfied. These temporary regulations include an example illustrating this result.

One commentator suggested that the 2001 proposed regulations be amended to provide an example in which the surviving disregarded entity in an otherwise qualifying statutory merger or consolidation is transitory. For example, suppose corporation Z merges into X, an entity that is disregarded as separate from corporation Y. In the transaction, the shareholders of Z exchange their Z stock for Y stock. Immediately after the merger of Z into X and as part of a plan that includes that merger, X merges into Y. The commentator noted that, in Rev. Rul. 72-405 (1972-2 C.B. 217), the IRS held that a forward triangular merger of a target corporation into a newly formed controlled corporation of a parent corporation followed by the liquidation of the controlled corporation into the parent corporation would be treated as a reorganization under section 368(a)(1)(C) rather than a reorganization under sections 368(a)(1)(A) and 368(a)(2)(D). The commentator suggested that the principles of Revenue Ruling 72-405 should not be applied to prevent the merger of Z into X from qualifying as a reorganization under section 368(a)(1)(A).

The IRS and Treasury agree that the merger of Z into X followed by the merger of X into Y does not implicate the principles of Revenue Ruling 72-405. Because the merger of X into Y does not alter the identity of the tax owner of the former assets of X, that merger would be disregarded. The IRS and Treasury do not believe that an additional example is necessary to illustrate this result.

The 2001 proposed regulations provide that a transaction in which any of the assets and liabilities of a combining entity of a transferor unit become assets and liabilities of one or more disregarded entities of the transferee unit cannot qualify as a statutory merger or consolidation unless such combining entity, the combining entity of the transferee unit, such disregarded entities, and each business entity through which the combining entity of the transferee unit holds its interests in such disregarded entities is organized under the laws of the United States or a State or the District of Columbia. One commentator suggested that where an entity that is disregarded as an entity separate from the combining entity of the transferor unit becomes an entity that is disregarded as an entity separate from the combining entity of the transferee unit, whether such disregarded entity is organized under the laws of the United States or a State or the District of Columbia is not relevant to whether the transaction qualifies as a statutory merger or consolidation. The IRS and Treasury agree and have clarified the domestic entity requirement to exclude such disregarded entities.

Another comment suggested that the domestic entity requirement be eliminated for the disregarded entity into which a target corporation is merged and each business entity through which the combining entity holds its interests in the disregarded entity into which a target corporation is merged. Although these temporary regulations retain that requirement for those entities, as described in the preamble to the 2001 proposed regulations, the IRS and Treasury are continuing to consider further revisions to the regulations under section 368(a)(1)(A) to address statutory mergers and consolidations that involve one or more foreign corporations, including transactions involving a disregarded entity.

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 the regulation does 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 temporary regulations will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

The principal author of these temporary regulations is Richard M. Heinecke, Office of Associate Chief Counsel (Corporate). However, other personnel from the IRS and Treasury Department participated in their development.

In Long v. Gaines, 167 F. Supp. 2d 75 (D.D.C. 2001), the U.S. District Court for the District of Columbia held that the Parole Commission's rules governing the revocation process for District of Columbia parolees were unconstitutional with respect to the time deadlines for making determinations of probable cause and completing the revocation process. On December 17, 2002, the Court vacated its orders and judgment in Long v. Gaines, and entered a consent decree by which the Commission has agreed to withdraw its appeal to the U.S. Court of Appeals for the District of Columbia Circuit, and to adopt as final rules the rules which it adopted to carry out the compliance plan which the district court approved on November 21, 2001. The consent decree also includes certain additional provisions regarding DC Code parolees who are arrested in jurisdictions outside the District of Columbia.

Although the revocation hearing process adopted by these amended rules imposes deadlines for making probable cause and final revocation decisions which are shorter than the Commission believes to be required by the Constitution, the Commission believes that this approach makes sense in the context of a municipal correctional system with seriously strained jail housing resources. The shorter the average stay of each arrested parolee prior to a final disposition of the revocation charges, the faster the parolee can either be released or transferred to a Bureau of Prisons facility, thus limiting the total parolee population in the custody of the DC Department of Corrections at any given time. The most important feature of the revocation system which the Commission has developed as a result of Long v. Gaines is the rule which requires the scheduling of a fixed date for the revocation hearing as soon as probable cause is found, and which prohibits postponement requests submitted to the Commission less than fifteen days before a scheduled hearing except for compelling reasons. By reducing the possibilities for tactical delays which in the past made the Commission's revocation caseload in the District of Columbia nearly unmanageable, this rule permits the Commission to process a very substantial caseload in an orderly manner. An efficient revocation process also maximizes the Commission's ability to revoke the paroles of high-risk parole violators and expeditiously remove them from the community.

Under these amended rules, an examiner of the Commission will make a determination of probable cause no later than five days from arrest, and will hold a revocation hearing not later than 65 days from arrest. The examiner will also have the authority to order the release of the parolee if no probable cause is found, and to set a date for the revocation hearing if probable cause is found. The Commission will issue a final decision no later than 21 days from the revocation hearing ( i.e. , 86 days from arrest). However, in the case of a parolee who admits all charges, waives the right to a local revocation hearing, or is convicted of a new crime, the Commission will conduct an “institutional revocation hearing” as provided in its original rules. The amended rules also require the Commission to ensure that: (1) Each parolee is given notice of the time and purpose of the probable cause hearing and the charged violations; (2) each parolee is provided, prior to the revocation hearing, with disclosure of the evidence to be relied upon by the Commission in determining whether parole was violated and, if so, whether to revoke parole; and (3) each parolee's arguments and evidence are given to the Commission before it renders a final decision.

With respect to parolees arrested outside the District of Columbia, but within the Washington DC Metropolitan Area, and who have not sustained new criminal convictions, the rules provide that an examiner of the Commission will conduct a probable cause hearing within five days of the parolee's arrival at a facility where probable cause hearings are conducted. Normally, the probable cause hearing will be conducted at the DC Jail following the transfer of the parolee from the local jail facility (in Maryland or Virginia) to which the parolee was taken immediately following arrest. The U.S. Marshals Service has issued instructions to all of its U.S. Marshals regarding timely notifications and transfers of parolees for probable cause hearings, which should make it possible for this new procedure to be successful.

Finally, the Commission has decided to extend the revocation procedures set forth in these rules to District of Columbia supervised release cases, even though District of Columbia supervised releasees are not members of the Long v. Gaines class and are not covered by the consent decree of December 17, 2002. (Sentences imposed for D.C. Code crimes committed within the District of Columbia since August 5, 2000, no longer include parole, but instead carry terms of supervised release which come under the Commission's jurisdiction.) In the Commission's judgment, these rules provide the most efficient revocation system for both parolees and supervised releasees in the District of Columbia, and correspondingly the best means of protecting the public safety.

The Commission's regulations at 28 CFR 2.98 through 2.105, and 28 CFR 2.211 through 2.218, as amended by this publication, will be followed by the Commission in the case of all District of Columbia Code parolees and supervised releasees who are arrested and held in the Washington, DC metropolitan area on warrants charging a violation or violations of parole or supervised release. In the case of District of Columbia Code parolees and supervised releasees who are arrested and held outside the Washington, DC metropolitan area on warrants charging a violation or violations of parole or supervised release, the revocation rules applicable to U.S. Code parolees shall apply. Where preliminary interviews are required, the Commission will request the local U.S. Probation Office to conduct a preliminary interview as required by 28 CFR § 2.48 (a) within 3 to 5 days of the Commission being notified by the U.S. Marshals Service of the parolee's arrest, unless exceptional circumstances require additional time not to exceed 10 days.

The U.S. Parole Commission has determined that these final rule amendments do not constitute a significant rule within the meaning of Executive Order 12866. The amended rules will not have a significant economic impact upon a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 605(b), and are deemed by the Commission to be rules of agency practice that do not substantially affect the rights or obligations of non-agency parties pursuant to Section 804(3)(C) of the Congressional Review Act.

(b) Notice and opportunity to postpone hearing. Prior to the commencement of each docket of probable cause hearings in the District of Columbia, a list of the parolees who are scheduled for probable cause hearings, together with a copy of the warrant application for each parolee, shall be sent to the D.C. Public Defender Service. At or before the probable cause hearing, the parolee (or the parolee's attorney) may submit a written request that the hearing be postponed for any period up to thirty days, and the Commission shall ordinarily grant such requests. Prior to the commencement of the probable cause hearing, the examiner shall advise the parolee that the parolee may accept representation by the attorney from the D.C. Public Defender Service who is assigned to that docket, waive the assistance of an attorney at the probable cause hearing, or have the probable cause hearing postponed in order to obtain another attorney and/or witnesses on his behalf. In addition, the parolee may request the Commission to require the attendance of adverse witnesses ( i.e. , witnesses who have given information upon which revocation may be based) at a postponed probable cause hearing. Such adverse witnesses may be required to attend either a postponed probable cause hearing, or a combined postponed probable cause and local revocation hearing, provided the parolee meets the requirements of § 2.102(a) for a local revocation hearing. The parolee shall also be given notice of the time and place of any postponed probable cause hearing.

(c) Review of the charges. At the beginning of the probable cause hearing, the examiner shall ascertain that the notice required by § 2.212(b) has been given to the releasee. The examiner shall then review the violation charges with the releasee and shall apprise the releasee of the evidence that has been submitted in support of the charges. The examiner shall ascertain whether the releasee admits or denies each charge listed on the warrant application (or other notice of charges), and shall offer the releasee an opportunity to rebut or explain the allegations contained in the evidence giving rise to each charge. The examiner shall also receive the statements of any witnesses and documentary evidence that may be presented by the releasee. At a postponed probable cause hearing, the examiner shall also permit the releasee to confront and cross-examine any adverse witnesses in attendance, unless good cause is found for not allowing confrontation. Whenever a probable cause hearing is postponed to secure the appearance of adverse witnesses (or counsel in the case of a probable cause hearing conducted outside the District of Columbia), the Commission will ordinarily order a combined probable cause and local revocation hearing as provided in paragraph (i) of this section.

(d) Probable cause determination. At the conclusion of the probable cause hearing, the examiner shall determine whether probable cause exists to believe that the releasee has violated the conditions of release as charged, and shall so inform the releasee. The examiner shall then take either of the following actions:

(1) If the examiner determines that no probable cause exists for any violation charge, the examiner shall order that the releasee be released from the custody of the warrant and either reinstated to supervision, or discharged from supervision if the term of supervised release has expired.

(2) If the hearing examiner determines that probable cause exists on any violation charge, and the releasee has requested (and is eligible for) a local revocation hearing in the District of Columbia as provided by § 2.215 (a), the examiner shall schedule a local revocation hearing for a date that is within 65 days of the releasee's arrest. After the probable cause hearing, the releasee (or the releasee's attorney) may submit a written request for a postponement. Such postponements will normally be granted if the request is received no later than fifteen days before the date of the revocation hearing. A request for a postponement that is received by the Commission less than fifteen days before the scheduled date of the revocation hearing will be granted only for a compelling reason. The releasee (or the releasee's attorney) may also request, in writing, a hearing date that is earlier than the date scheduled by the examiner, and the Commission will accommodate such request if practicable.

(e) Institutional revocation hearing. If the releasee is not eligible for a local revocation hearing as provided by § 2.215 (a), or has requested to be transferred to an institution for his revocation hearing, the Commission will request the Bureau of Prisons to designate the releasee to an appropriate institution, and an institutional revocation hearing shall be scheduled for a date that is within ninety days of the releasee's retaking.

(f) Digest of the probable cause hearing. At the conclusion of the probable cause hearing, the examiner shall prepare a digest summarizing the evidence presented at the hearing, the responses of the releasee, and the examiner's findings as to probable cause.

(g) Release notwithstanding probable cause. Notwithstanding a finding of probable cause, the Commission may order the releasee's reinstatement to supervision or release pending further proceedings, if it determines that:

(1) Continuation of revocation proceedings is not warranted despite the finding of probable cause; or

(2) Incarceration pending further revocation proceedings is not warranted by the frequency or seriousness of the alleged violation(s), and the releasee is neither likely to fail to appear for further proceedings, nor is a danger to himself or others.

(h) Conviction as probable cause. Conviction of any crime committed subsequent to the commencement of a term of supervised release shall constitute probable cause for the purposes of this section, and no probable cause hearing shall be conducted unless a hearing is needed to consider additional violation charges that may be determinative of the Commission's decision whether to revoke supervised release.

(i) Combined probable cause and local revocation hearing. A postponed probable cause hearing may be conducted as a combined probable cause and local revocation hearing, provided such hearing is conducted within 65 days of the releasee's arrest and the releasee has been notified that the postponed probable cause hearing will constitute his final revocation hearing. The Commission's policy is to conduct a combined probable cause and local revocation hearing whenever adverse witnesses are required to appear and give testimony with respect to contested charges.

(j) Late received charges. If the Commission is notified of an additional charge after probable cause has been found to proceed with a revocation hearing, the Commission may:

(1) Remand the case for a supplemental probable cause hearing if the new charge may be contested by the releasee and possibly result in the appearance of witness(es) at the revocation hearing;

(2) Notify the releasee that the additional charge will be considered at the revocation hearing without conducting a supplemental probable cause hearing; or

(3) Determine that the new charge shall not be considered at the revocation hearing.

On November 25, 2002, the President signed into law the Homeland Security Act of 2002, Pub. L. 107-296, 116 Stat. 2135 (2002). Under Title XI, Subtitle B of the Act, the “authorities, functions, personnel, and assets” of the Bureau of Alcohol, Tobacco, and Firearms are transferred to the Department of Justice, with the exception of certain enumerated authorities that were retained by the Department of the Treasury. The functions retained by the Department of the Treasury are the responsibility of a new Alcohol and Tobacco Tax and Trade Bureau. Section 1111 of the Homeland Security Act further provides that the Bureau will retain its identity as a separate entity within the Department of Justice known as the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF). The transfer takes effect January 24, 2003.

In accordance with the requirements of the Privacy Act of 1974, as amended, 5 U.S.C. 552a, ATF is publishing its Privacy Act systems of records and converting certain ATF systems of records from Department of the Treasury systems to Department of Justice systems pursuant to the reorganization and transfer of ATF to the Department of Justice. (The publication of these systems of records as Justice systems does not rescind the Treasury/ATF systems of records, as they govern the Alcohol and Tobacco Tax and Trade Bureau within the Department of the Treasury.) There has been no change in the maintenance or operations of the systems of records by ATF, nor has there been a change in the exemptions claimed. Rather, these systems notices are being published to reflect the transfer of ATF to the Department of Justice.

Because the transfer of ATF to the Department of Justice is effective on January 24, 2003, it is necessary to immediately establish all appropriate exemptions to the Privacy Act in order to protect law enforcement and investigatory information and functions of ATF. These exemptions must be effective on January 24, 2003, the date of the transfer. It would be contrary to the public interest to allow the disclosure of information that could compromise ongoing investigations and law enforcement activities of the ATF. Accordingly, pursuant to the good cause exceptions found at 5 U.S.C. 553(b)(3)(B) and (d)(3), the Department finds that notice and public procedure on this rule are impracticable and contrary to the public interest.

After considering the comments received, the Department will issue a final rule.

This interim rule relates to individuals, as opposed to small business entities. Nevertheless, pursuant to the requirements of the Regulatory Flexibility Act 5 U.S.C. 601-612, the interim rule will not have a significant economic impact on a substantial number of small entities.

We did not publish a notice of proposed rulemaking (NPRM) for this regulation. Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing an NPRM. Final approval and permitting of this event were not issued in time to engage in full notice and comment rulemaking. Publishing a NPRM and delaying the effective date would be contrary to the public interest since the event would occur before the rulemaking process was complete.

Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . In addition to the reasons stated above, it would be contrary to the public interest not to publish this rule because the event has been permitted and participants and the public require protection.

Gatorade is sponsoring a fireworks show in San Diego Bay, CA on January 24, 2003. The fireworks show will be part of the weeklong Super Bowl XXXVII event known locally as the NFL Experience. The fireworks event involves one (1) barge, to be used as a platform for the launching of fireworks. This barge will be loaded with fireworks and thus contain a large amount of explosives. In order to establish a buffer around this hazardous situation, this rule will establish a safety zone around the barge. This temporary safety zone is necessary to provide for the safety of the crews, spectators, and participants of the Gatorade January 24th Fireworks Show. The proposed temporary safety zones are also necessary to protect other vessels and users of the waterway.

This safety zone is necessary for the Gatorade January 24th Fireworks Show, which will take place on January 24, 2003 starting at 8:45 p.m. (PST) and ending at 9:45 p.m. (PST). The event involves one (1) barge, to be used as a platform for the launching of fireworks.

The temporary safety zone includes the area 120 yards around the fireworks barge anchored off of Southwest Marine Shipyard. The exact coordinates can be found in the regulatory text. This temporary zone will establish a safety buffer around the fireworks barge, which is necessary to provide for the safety of all involved in the event and other users of the waterway. Persons and vessels are prohibited from entering into, transiting through, or anchoring within these safety zones unless authorized by the Captain of the Port, or his designated representative.

This rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. It is not “significant” under the regulatory policies and procedures of the Department of Transportation (DOT) (44 FR 11040, February 26, 1979).

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.

The Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities. This proposed safety zone would not have a significant economic impact on a substantial number of small entities because this zone is limited in scope and duration (in effect for only one (1) hour on January 24, 2003). Vessel traffic will still be able to pass around the zone. The Coast Guard will also issue broadcast notice to mariner alerts via VHF-FM marine channel 16 before the safety zone is enforced.

If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this rule would have a significant economic impact on it, please submit a comment (see ADDRESSES ) explaining why you think it qualifies and how and to what degree this rule would economically affect it.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this proposed rule so that they can better evaluate its effects on them and participate in the rulemaking. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact Petty Officer Austin Murai, Marine Safety Office San Diego at (619) 683-6495.

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

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this rule under that Order and have determined that it does not have implications for federalism.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this rule will not result in such expenditure, we do discuss the effects of this rule elsewhere in this preamble.

This rule will not effect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.

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

We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children.

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

To help the Coast Guard establish regular and meaningful consultation and collaboration with Indian and Alaskan Native tribes, we published a notice in the Federal Register (66 FR 36361, July 11, 2001) requesting comments on how to best carry out the Order. We invite your comments on how this proposed rule might impact tribal governments, even if that impact may not constitute a “tribal implication” under the Order.

We have analyzed this rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. It has not been designated by the Administrator of the Office of Information and Regulatory Affairs as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211.

We have considered the environmental impact of this proposed rule and concluded that, under figure 2-1, paragraph (34)(g), of Commandant Instruction M16475.lD, this rule is categorically excluded from further environmental documentation because we are establishing a safety zone. A “Categorical Exclusion Determination” is available in the docket where indicated under ADDRESSES.

We did not publish a notice of proposed rulemaking (NPRM) for this regulation. Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing an NPRM. Due to the complex planning for this event many details were not finalized in time to publish a notice of proposed rulemaking. Publishing a NPRM and delaying the effective date would be contrary to the public interest since the event would occur before the rulemaking process was complete.

Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . In addition to the reasons stated above, it would be contrary to the public interest since action is needed to ensure the protection of the public and commercial structures and individuals near or in this structure during the National Football League Super Bowl XXXVII NFL Experience event.

Due to the high profile of the Super Bowl, this action is necessary to ensure public safety and prevent sabotage or terrorist acts against the public and commercial structures and individuals near or in this structure during the NFL Experience event to be held at Embarcadero Park and Campbell Shipyard.

The security zone consists of the navigable waters surrounding Embarcadero Park and Campbell Shipyard. The security zone follows along the northern portion of the designated channel in this area as to not impact traffic in the channel. The exact coordinates can be found in the regulatory text.

The zone will be in effect from 8 a.m. (PDT) on January 18, 2003 to 2 a.m. (PDT) January 27, 2003.

Coast Guard and San Diego Harbor Police will patrol and enforce the security zone. See 33 CFR 6.04-11, Assistance of other agencies.

Persons and vessels wishing to enter into or transit through this security zone are required to receive authorization by the Captain of the Port, or his designated representative.

This rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866 and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. It is not “significant” under the regulatory policies and procedures of the Department of Transportation (DOT) (44 FR 11040, February 26, 1979).

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we considered whether this rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

The Super Bowl committee has leased out the entire area affected by this Security zone with the exception to the Marriott Marina. The owners and operators of this marina will not be prohibited from transiting in and out of the marina at their leisure. All vessels will be authorized to transit through the zone after receiving permission from the Captain of the Port or his designated representative. Any vessel transiting through this zone is required to transit at a speed of not greater than 5 knots, excluding Coast Guard and Harbor Police vessels patrolling the security zone. Before the effective period, Marine Safety Office San Diego will issue maritime advisories to users of San Diego Bay.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we offered to assist small entities in understanding the rule so that they could better evaluate its effects on them and participate in the rulemaking process. If your small business or organization is affected by this rule or if you have questions concerning its provisions or options for compliance, please contact Petty Officer First Class Jeff Brown, U.S. Coast Guard Marine Safety Office San Diego at (619) 683-6495. Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247).

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

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this rule under that Order and have determined that it does not have implications for federalism.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this rule will not result in such expenditure, we do discuss the effects of this rule elsewhere in this preamble.

This rule will not effect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.

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

We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children.

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

To help the Coast Guard establish regular and meaningful consultation and collaboration with Indian and Alaskan Native tribes, we published a notice in the Federal Register (66 FR 36361, July 11, 2001) requesting comments on how to best carry out the Order. We invite your comments on how this proposed rule might impact tribal governments, even if that impact may not constitute a “tribal implication” under the Order.

We have analyzed this rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. It has not been designated by the Administrator of the Office of Information and Regulatory Affairs as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211.

The Coast Guard considered the environmental impact of this rule and concluded that under figure 2-1, paragraph (34)(g)), of Commandant Instruction M16475.lD, this rule is categorically excluded from further environmental documentation. A “Categorical Exclusion Determination” is available in the docket for inspection or copying where indicated under ADDRESSES.

This action is needed to protect the U.S. Naval vessel(s) and their crew(s) during a military outload evolution at the National City Marine Terminal from sabotage, or other subversive acts, accidents, criminal actions or other causes of a similar nature. This temporary security zone is necessary for protection of operations during a military outload in support of Operation Enduring Freedom in the area and for the protection of the operations from compromise and interference.

We did not publish a notice of proposed rulemaking (NPRM) for this regulation. Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing an NPRM because it is not required in this instance. Any delay in implementing this rule would be contrary to the public interest since immediate action is necessary to ensure the protection of the vessel and their crews during a military outload as well as for the public and national security.

In keeping with the requirements of 5 U.S.C. 553(d) (3), the Coast Guard also finds that good cause exists for making this regulation effective less than 30 days after publication in the Federal Register .

Due to complex planning, national security reasons, and coordination with all military schedules, information regarding the precise location and date of the event necessitating promulgation of this security zone and other logistical details surrounding the event were not provided until a date fewer than 30 days prior to the event. Due to the sensitive nature of the operations involved, it was necessary for this information to be finalized at a later date.

Furthermore, in order to protect the interests of national security, the Coast Guard is promulgating this temporary regulation to provide safety and security of the U.S. Naval vessel(s) in the navigable waters of the United States. As a result, the enforcement of this security zone is a function directly involved in, and necessary to military operations. Accordingly, based on the military function exception set forth in the Administrative Procedure Act, 5 U.S.C. 553(a) (1), notice and comment rule-making and advance publication, pursuant to 5 U.S.C. 553(b) and (d), are not required for this regulation.

This action is needed to protect the U.S. Naval vessel(s) and their crew(s) during a military outload evolution at the National City Marine Terminal from sabotage, or other subversive acts, accidents, criminal actions or other causes of a similar nature. This temporary security zone is necessary for protection of operations during a military outload in the area and for the protection of the operations from compromise and interference.

The security zone consists of the navigable waters surrounding the National City Marine Terminal and encompassing Sweetwater Channel. The limits of this security zone are more specifically defined as the area enclosed by the following points: starting on shore at 32° 39′25″ N 117° 07′15″ W, then extending northerly to 32° 39′32″ N 117° 07′16″ W, then extending westerly to 32° 39′29″ N 117° 07′36″ W, then southerly to 32° 39′05″ N 117° 07′34″ W, and then easterly to shore at 32° 39′06″ N 117° 07′14.5″ W. All coordinates are North American Datum 1983.

This zone will be in effect from 12 p.m. (noon) (PDT) on January 17, 2003 to 12 p.m. (noon) (PDT) on March 17, 2003.

The security zone will be enforced by Coast Guard patrol craft and San Diego Harbor Police as enlisted by the COTP. See 33 CFR 6.04-11, Assistance of other agencies.

Persons and vessels are prohibited from entering into or transiting through this security zone unless authorized by the Captain of the Port, or his designated representative.

This security zone is established pursuant to the authority of the Magnuson Act regulations promulgated by the President under 50 U.S.C. 191, including subparts 6.01 and 6.04 of Part 6 of Title 33 of the Code of Federal Regulations. Vessels or persons violating this section are subject to he penalties set forth in 50 U.S.C. 192 which include seizure and forfeiture of the vessel, a monetary penalty of not more than $12,500, and imprisonment for not more than 10 years.

This rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. It is not “significant” under the regulatory policies and procedures of the Department of Transportation (DOT)(44 FR 11040, February 26, 1979).

Due to National Security interests, the implementation of this security zone is necessary for the protection of the United States and its people. The size of the zone is the minimum necessary to provide adequate protection for the U.S. Naval vessel(s), their crew(s), adjoining areas, and the public. Most of the entities likely to be affected are pleasure craft engaged in recreational activities and sightseeing. Any hardships experienced by persons or vessels are considered minimal compared to the national interest in protecting U.S. Naval vessel(s), their crew(s), and the public. Accordingly, full regulatory evaluation under paragraph 10 (e) of the regulatory policies and procedures of the DOT is unnecessary.

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities. The Coast Guard coordinated with known private business owners in an effort to reduce any substantial impact on business.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Public Law 104-121), we offer to assist small entities in understanding the rule so that they may better evaluate its effects on them and participate in the rulemaking process. If your small business or organization is affected by this rule or if you have questions concerning its provisions or options for compliance, please contact Lieutenant Commander Rick Sorrell, Chief of Port Operations, U.S. Coast Guard Marine Office San Diego at (619) 683-6495.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247).

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

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this rule and have determined that this rule does not have implications for federalism.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this rule will not result in such expenditure, we do discuss the effects of this rule elsewhere in this preamble.

This rule will not effect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.

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

We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children.

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

We have analyzed this rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that Order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. It has not been designated by the Administrator of the Office of Information and Regulatory Affairs as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211.

We have considered the environmental impact of this rule and concluded that under figure 2-1, paragraph (34)(g), of Commandant Instruction M16475.lD, this rule is categorically excluded from further environmental documentation because we are establishing a security zone. A “Categorical Exclusion Determination” and checklist are available in the docket for inspection or copying where indicated under ADDRESSES.

An interim final rule amending VA's medical regulations at 38 CFR 17.1000-1008 was published in the Federal Register on July 12, 2001. These amendments implemented the provisions of section 111 of Public Law 106-117, The Veterans Millennium Health Care and Benefits Act. These statutory provisions, which are set forth at 38 U.S.C. 1725, authorize VA to establish provisions regarding payment of or reimbursement for the reasonable value of non-VA emergency services provided for nonservice-connected conditions of certain veterans who have no medical insurance and no other recourse for payment.

We provided a 60-day comment period that ended September 10, 2001 for comments on the interim final rule, including comments on the information collection provisions (except for the emergency information collection approval provisions which had a deadline for comments of July 19, 2001). We received no comments as to the emergency approval. Nevertheless, we did receive comments on the interim final rule and on the information collection provisions.

One commenter requested clarification regarding when a facility will be considered to have held itself out as providing emergency care pursuant to § 17.1002(a). They believe that this language is unclear as currently written. No changes are made based on this comment. We believe that the current language is sufficiently descriptive to identify appropriate facilities that provide emergency services to the public without being unduly restrictive, especially in regard to facilities located in rural areas.

This commenter further stated agreement that veterans should be encouraged to seek care at the closest emergency department, regardless of whether it is a VA or other Federal facility, when they believe this is necessary. The commenter further stated that VA should also be aware that state and local Emergency Medical Services (EMS) regulations or ordinances may require that a patient always be taken to the closest emergency department, regardless of his or her status as a veteran. In such cases, they indicated that § 17.1002 (c) should be met. We concur with the comment, but no changes are made since, in our opinion, § 17.1002 (c) states that proposition and reasonably permits that interpretation under those facts.

Another commenter suggested that the inclusion of the parenthetical information in § 17.1002(d) may be redundant and therefore unnecessary. No change is made based on this comment. In our opinion, § 17.1002(d) appropriately interprets the legislative authority.

Another commenter suggested that VA clarify in § 17.1002(d) that the determination of a safe transfer is to be made solely by the attending emergency care physician provider. No change to § 17.1002 is made based on this comment. Section 17.1002(d) is concerned with review of claims for payment, not with clinical determinations concerning transfer of patients. Moreover, § 17.1006 already identifies the appropriate VA clinical officials who are responsible for making all needed medical determinations in connection with VA's review of a claim for reimbursement or payment of the costs of non-VA emergency treatment rendered to a veteran.

This commenter also suggested that VA clarify that payment or reimbursement may be made in situations where the veteran is discharged (as opposed to transfer). The commenter is concerned that § 17.1002(d) could be interpreted to preclude payment or reimbursement where the veteran was discharged after receiving emergency treatment. We agree and have incorporated that term as appropriate.

One commenter suggested that VA remove the 24-month requirement in § 17.1002(e) because otherwise VA may process numerous claims which will have to be denied due to the providers' inability to determine whether the veterans had received care during that time-period. Based on the comment, we believe modifying the certification requirement in § 17.1004(b) to exclude confirmation of enrollment status and receipt of VA care within the previous 24 months preceding the furnishing of the emergency care will clarify that the onus is not on the provider but, rather, on VA to certify this information. We believe this satisfies the commenter's concern.

One commenter agrees that VA's physicians must make all clinical determinations required for purposes of § 17.1002. However, the commenter advises VA to instruct its physicians to apply a prudent lay person standard, not the higher standard of a medical professional, when making determinations under § 17.1002(b) and (c). No changes are made based on this comment. We believe the existing regulation adequately provides that the prudent lay person standard applies to both the initial evaluation and treatment of the emergent medical condition.

One commenter stated that the 48-hour notice provision was too broad and should be amended to apply only to patients who are admitted to a facility for inpatient care. We concur and have changed that provision accordingly.

One commenter believes that the false claims notice in § 17.1004(b) should be eliminated since the current HCFA 1500 form includes a similar false claims notice. While we agree that the additional certification would not be necessary when the HCFA 1500 form is submitted, the rule allows for claims to be submitted on other standard medical billing forms, such as the UB92 form. Consequently, we have amended the rule to require the additional certification only when the form used does not contain a similar false claims notice.

Another commenter stated that requiring a separate written certification would preclude filing claims electronically. This commenter suggests that provisions be made to accept claims centrally and electronically to limit claims filing and processing costs. No changes are made based on this comment. VA is currently exploring centralizing the payment process and utilizing industry standards, such as electronic claims processing, fraud detection, and claims scrubbing.

One commenter states that VA's regulations provide for detailed timeframes for filing claims, but that there are no corresponding provisions establishing prompt payment by VA to claimants. No changes are made based on this comment. VA is studying the feasibility of centralizing the payment process, which would take into account prompt payment requirements.

One commenter indicated that filing a claim within the time periods of § 17.1004(d) is unrealistic. In support of his position, the commenter explains that in many emergency conditions the patient is unable to communicate coverage information to the provider when presenting for emergency care services. The commenter therefore recommends adding a provision to § 17.1004(d) to allow for claims to be submitted within 90-days after the date the veteran provided evidence to the facility/provider of emergency treatment of the veteran's eligibility for coverage under this rule.

No changes are made based on this comment. Adding such a provision would be at cross-purposes with this rule, which was designed to help ensure that claims are decided in a reasonable period of time. We believe that the rule provides ample time for the veteran, the veteran's family, or the veteran's legal representative to provide the required information, as the 90-day periods do not generally begin until after seminal events, e.g. , the veteran's discharge or death, by which time the veteran, the veteran's family, or the veteran's legal representative has been made aware of the veteran's personal liability for the non-VA emergency medical treatment rendered and the need to gather the veteran's insurance and other payment information.

Several commenters stated that § 17.1005(b) provides that reimburse-ment for payment for emergency treatment may be made only for the period from the beginning of the treatment until such time as the veteran could be transferred safely to a VA facility or other federal facility. They asked that we modify this statement by adding “initial evaluation and” before “treatment.” We concur with these comments and have changed that provision accordingly.

Another commenter suggested that VA provide payment for emergency treatment sought by veterans under the prudent layperson standard in § 17.1002(b) from the beginning of treatment (including the evaluation) until the attending emergency physician provider determines the veteran is stabilized and may be safely transferred to a VA facility, other Federal facility, or discharged. No change to § 17.1002 is made based on this comment. Section 17.1006 already identifies the appropriate VA clinical officials who are responsible for making all needed medical determinations in connection with VA's review of a claim for reimbursement or payment for the costs of non-VA emergency treatment rendered to a veteran.

Further, this commenter believes that “emergency treatment” should be clarified to include “evaluation” of the condition. No change is made based on this comment. This is covered by the prudent layperson standard.

Another commenter strongly believes that VA should periodically re-examine the reimbursement rate under § 17.1005(a). That provision currently provides that VA will pay the lesser of the amount for which the veteran is personally liable or 70% of the amount under the applicable Medicare fee schedule. No change is made based on this comment. Medicare rates are adjusted annually. Consequently, VA's 70% rule will effectively reflect annual adjustments made to applicable Medicare rates.

One commenter recommended that VA pay for emergency transportation services in cases where a “prudent lay person” would reasonably expect that the absence of such transport would result in placing the health of such individual in serious jeopardy. In the commenter's view, it would be unjust to hold the veteran liable for the cost of emergency transportation if they erroneously but reasonably believed those services were needed. No change is made based on this comment, which we interpret as essentially seeking to delete the limitations in § 17.1003. A claim for reimbursement for payment of emergency transport services under this section must, similar to other emergency medical services which are the subject of a claim under this rule, meet all the conditions of 38 U.S.C. 1725 to be reimbursable or payable at VA expense. We therefore do not make the recommended changes as the rule is consistent with statutory authority. We also note that because emergency transportation is subject to the requirements of 38 U.S.C. 1725, this section already incorporates a prudent lay person standard.

OMB has approved the information collections in §§ 17.004, 17.1007, and 17.1008 under control number 2900-0620. VA is not authorized to impose a penalty on persons for failure to comply with information collection requirements which do not display a current OMB control number, if required.

This rule is necessary to implement the provisions of section 111 of Public Law 106-117, The Veterans Millennium Health Care and Benefits Act. These provisions, which are set forth at 38 U.S.C. 1725, authorize VA to establish a mechanism for payment of or reimbursement for the reasonable value of non-VA emergency services provided for nonservice-connected conditions of certain veterans who have no medical insurance and no other recourse for payment. This rule would directly impact these veterans positively by avoiding full recourse or payment responsibility for medical care and resulting potential debt collection repercussions. This rule implements a detailed statutory mandate, and we found no potentially effective and reasonably feasible alternatives.

We estimate that the five-year cost of this rule from appropriated funds would be $2.1 billion in benefits costs and $21 million in government operating expenses. Since it is likely that the adoption of the rule may have an annual effect on the economy of $100 million or more, the Office of Management and Budget has designated this rule as a major rule under the Congressional Review Act, 5 U.S.C. 802, and an economically significant regulatory action under Executive Order 12866, Regulatory Planning and Review. The following information is provided pursuant to the Congressional Review Act and Executive Order 12866.

The estimated cost for implementation of the emergency care provisions of the Millennium Act are based on enrollment projections developed by a private actuarial firm and contained in the FY 2001 Enrollment Level Decision Analysis. This baseline population was adjusted, using a survey of enrollees and existing enrollment databases, to calculate the projected number of veterans who had no private or public insurance and who had used VA care within the previous 24 months. These adjustments reflect the criteria contained in the Millennium Act.

Private sector ER-related health care utilization was adjusted to reflect veteran enrollee demographics and relative morbidity, as well as uninsured enrollee reliance on the VA health care system. These utilization estimates, along with Medicare allowable charge levels, were applied to the estimated 990,000 veteran enrollees affected by the emergency care provisions. This resulted in projected estimates for emergency room visits ($93,480,145), ambulance use ($34,108,803), and ER-related inpatient care ($468,221,072). The total of $595,810,019 was then multiplied by the 70 percent reimbursement rate VA will use to pay emergency care providers. This comes to $417,067,014.

This total, however, reflects full implementation of the emergency care provisions. VA believes that it will take time before both providers and eligible veterans are aware of these new benefits and begin to submit acceptable bills to VA for reimbursement. Current experience shows that without widespread dissemination of information, there is limited use of these benefits. VA believes that with the publication of final regulations the submission of claims will increase significantly and could reach 50 percent of the full implementation costs in the first full year after the rule is in effect. Only experience will demonstrate the real demand for this new benefit.

The administrative workload caused by this rule is expected to be 241,457 claims filed in 2001. Administrative workloads assume that not all claims would be granted; it is probable that non-VA related claims will be received from veterans who are not eligible. Medical Care costs are computed on the average cost of a GS4/5 @ $12/hour × 30 minutes × 241,457 claims/60 which equals $1,448,742.00. In addition, the clinical review costs are estimated at $46/hour × 15 minutes × 241,457 claims/60 which equals $2,776,755.00 for total Medical Care costs of $4,225,497.

This document has been reviewed by the Office of Management and Budget under Executive Order 12866.

The Secretary hereby certifies that this final 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 rule would apply only to an extremely small amount of the business of a hospital or health care provider. Otherwise, the rule would only apply to individuals. Accordingly, pursuant to 5 U.S.C. 605(b), this rule is exempt from the initial and final regulatory flexibility analysis requirements of sections 603 and 604.

The Unfunded Mandates Reform Act requires, at 2 U.S.C. 1532, 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 rule would have no consequential effect on State, local, or tribal governments.

The Catalog of Federal Domestic Assistance numbers for the programs affected by this rule are 64.005, 64.007, 64.008, 64,009, 64.010, 64.011, 64.012, 64.013, 64.014, 64.015, 64.016, 64.018, 64.019, 64.022, and 64.025.

On March 25, 1999, the WDNR and the EPA entered into a memorandum of agreement concerning implementation of the joint state/EPA agreement to pursue regulatory innovation and the Wisconsin Environmental Cooperation Pilot Program. On June 7, 2002, Thomas V. Skinner, Regional Administrator, EPA Region 5, sent a letter to Darrell Bazzell, Secretary, WDNR, containing EPA's final response to the WDNR's innovation proposal for alternative permit conditions at the NEC facilities. The NEC facilities affected by this agreement are the Holmen facility, located at 1023 Sand Lake Road, Holmen, La Crosse County, Wisconsin, and the Sparta facility, located at 803 South Black River Street, Sparta, Monroe County, Wisconsin. Both La Crosse and Monroe counties are classified as unclassifiable/attainment for ozone, as of November 15, 1990. Volatile organic compounds are a precursor to ozone. Each facility's permit includes facility-wide emission rates for volatile organic compounds and hazardous air pollutants.

The innovative components of the proposal for the NEC Sparta and Holmen facilities include: (1) Waiver from the requirements that facilities obtain a new permit prior to construction; (2) waiver from the requirement that facilities receive an appropriate permit prior to operating new process equipment; (3) waiver in the facilities' minor source permits of individual process line latest available control technology requirements for controlling volatile organic compound emissions; and (4) record keeping and reporting flexibility.

The Environmental Cooperative Agreement, specifically section XII (Operational Flexibility and Variances), proposes to establish new requirements for the two NEC facilities. The proposed new requirements would replace or revise certain requirements that might otherwise apply to those sources. Some of the requirements to be replaced or revised are currently embodied in Wisconsin's SIP for meeting air quality objectives. In such cases, the proposed flexibility in the Environmental Cooperative Agreement cannot be granted by WDNR unless the new requirements are first approved by EPA as a source-specific revision to the SIP.

The WDNR submitted the following portions of Section XII of the Environmental Cooperative Agreement (Operational Flexibility and Variances) as a source-specific SIP revision:

1. Item: Waiver from the requirements to obtain a construction permit prior to commencing construction of new process equipment, commencing modification of existing equipment, or relocating existing process equipment of a minor stationary source between the facilities covered by this Agreement.

Previous Requirements Superseded by this Agreement: Requirement to obtain a construction permit prior to construction, reconstruction, replacement, relocation of modification of a minor stationary source that is not otherwise exempt under section Natural Resources (NR) 406.04, Wisconsin Administrative (Wis. Adm.) Code. (NR 406.03, Wis. Adm. Code)

a. New Equipment Construction and Modification: The permittee may commence construction or modification (but not operation) of new process equipment prior to obtaining a construction permit, provided the following conditions are met. These conditions do not apply if a proposed project is exempt from the requirement to obtain a construction permit, pursuant to section NR 406.04, Wis. Adm. Code. (section 299.80(2)(h) and (4)(b), Wisconsin Statutes (Wis.Stats.))

(1) The permittee shall submit the following information to the Department of Natural Resources, La Crosse Area Office, 3550 Mormon Coulee Road, Room 104, La Crosse, WI 54601 or other location specified by the Department:

(a) Two copies of a complete construction and operating permit application describing the proposed equipment;

(b) An application fee of $1,350 or other amount as required by section NR 410.03(1)(d), Wis. Adm. Code; and

(c) Information describing how the interested persons group was notified of the proposed project. (sections 299.80(10) and (11)(b), Wis. Stats.)

(2) The Department shall process the permit application in accordance with sections 285.60 through 285.69, Wisconsin Statutes and sections NR 406 and NR 407, Wis. Adm. Code, however, the permittee need not wait for permit issuance to commence construction. The Department shall process the permit application as both a construction permit and a significant revision to the operation permit, and issue both permits simultaneously to reduce the administrative burden of issuing a construction permit that expires 18 months after issuance followed by an operation permit. The Department shall send an invoice outlining the fees required for processing the construction permit for the proposed project, including the fees for an expedited permit review authorized under section NR 410.03(o), Wis. Adm. Code, less the $1,350 permit application fee. (sections 299.80(2)(h), (4)(b), (10) and (11)(b), Wis. Stats.)

(3) The permittee shall pay the total amount of the fee invoice within 30 days of receipt. 1 (s. 299.80(10), Wis. Stats.)

(4) The permittee shall continue to comply with all the requirements of Part I.A. of the permit so long as the cooperative agreement is in affect. 2 (s. 299.80(2)(h) and (4)(b), Wis. Stats.)

(5) Nothing in this section or in any Cooperative Agreement between the Department and the permittee shall be construed as a guarantee that the Department will issue an air pollution control construction and operation permit for a proposed project. The decision on whether to approve a permit application will be made according to the requirements of chapters NR 400 through NR 499, Wis. Adm. Code and s. 285.60 through 285.69, Wis. Stats. If the Department denies a permit application pursuant to ss 285.61 through 285.64, Wis. Stats. all costs and risks associated with installing and operating the proposed equipment shall be incurred solely by the permittee. In the event that the construction and operation permit application for the proposed project is denied, the permittee shall cease construction of the equipment in question immediately.

b. New Equipment Operation: The permittee may operate new process equipment, provided one of the following alternate scenarios are met. The conditions do not apply if a proposed project is exempt from the requirement to obtain a construction permit, pursuant to s. NR 406.04, Wis. Adm. Code. (s. 299.80(2)(h) and (4)(b), Wis. Stats.)

(1) Alternate Scenario #1: The permittee may operate new process equipment provided the permittee submits a complete construction and operation permit application as required by the conditions of I.A.5.a. and the Department issues a construction permit pursuant to ss. 285.60 through 285.69, Wis. Stats and ss. NR 406 and NR 407, Wis. Adm. Code. The permittee shall operate the new process equipment in compliance with the conditions contained in any construction permit issued by the Department. (s. NR 406.03, Wis. Adm. Code)

(2) Alternate Scenario #2: The permittee may initially operate new process equipment prior to obtaining a construction permit provided the permittee submits a complete construction and operation permit application as required by the conditions of I.A.5.a. and the following conditions are met: (s. 299.80(2)(h) and (4)(b), Wis. Stats.)

(a) The permittee shall submit two copies of the following information to the Department of Natural Resources, La Crosse Area Office, 3550 Mormon Coulee Road, Room 104, La Crosse, WI, 54601 or other location specified by the Department, 14 calendar days prior to the date of initial operation:

(i) Information identifying all applicable requirements from the Wisconsin Statutes, Wisconsin Administrative Code, and the Act for the proposed equipment;

(ii) A quantification of the air pollution emissions that would result from the proposed project;

(iii) A computer dispersion modeling analysis showing the National Ambient Air Quality Standards will be protected if the proposed project results in an increase in potential particulate matter, sulfur dioxide, nitrogen oxide, and/or carbon monoxide emissions.

(iv) A computer dispersion modeling analysis showing the Acceptable Ambient Concentrations will be protected if the proposed project results in an increase in emissions of any hazardous air pollutant listed in ch. NR 445, Wis. Adm. Code so that the resulting facility total emissions of the hazardous air pollutant are above the corresponding Table Value(s) OR results in the emission of any hazardous air pollutant listed in ch. NR 445, Wis. Adm. Code that was not previously emitted, at a rate greater than its corresponding Table Value(s); and

(v) An analysis showing the proposed project will not cause the total facility wide potential emissions of particulate matter, sulfur dioxide, nitrogen oxides or carbon monoxide to exceed 100 tons per year. Any proposed new or relocated source that will result in the facility wide potential emissions of any one of these pollutants exceeding 100 tons per year is not eligible for this waiver. If the facility wide potential emissions of any one of the pollutants would be greater than 100 tons per year as the result of a proposed project, the permittee shall comply with the construction permit requirements outlined in ch. NR 406, Wis. Adm. Code and the significant operation permit revision requirements of s. NR 407.13, Wis. Adm. Code. 3 (ss. 299.80(10) and (11)(b), Wis. Stats.)

(b) The Department has 14 calendar days from the date that all the information outlined in (a) is received to request additional information or object to the proposed project. If the Department requests additional information during the original 14 calendar day period the Department shall have an additional 7 calendar days from the date of receipt of the information to request additional information or object to the proposed project. Under no scenario shall the Department have less than 14 days to review original submittal. If the Department does not respond within 14 calendar days from the date that all the information outlined in (a) is submitted, or within 7 days from the date that any additional information requested by the Department is submitted, whichever is later, the permittee may commence initial operation of the proposed equipment. The Department may provide written approval to commence initial operation of the proposed equipment prior to the end of the 14 calendar day period. If this is the case the permittee may commence initial operation upon receipt of this written approval. (ss. 299.80(2)(h) and (11)(b), Wis. Stats.)

(3) Alternate Scenario #3: The permittee may initially operate new process equipment prior to obtaining a construction permit provided the permittee submits a complete construction and operation permit application as required by the conditions of I.A.5.a. and the following conditions are met: (s. 299.80(2)(h) and (4)(b), Wis. Stats.)

(a) The Department provides written approval to commence initial operation of the proposed equipment. This written approval shall only be provided after the Department completes an air quality dispersion modeling analysis to ensure that the national ambient air quality standards and acceptable ambient concentrations will be protected while the proposed equipment is operating; (s. NR 406.09, Wis. Adm. Code)

(b) The permittee shall comply with any specific conditions included in the Department's written approval to commence initial operation;

(4) The permittee shall continue to comply with all the requirements of Part I.A. of this permit so long as the cooperative agreement is in affect. 4 (s. 299.80(2)(h) and (4)(b), Wis. Stats.)

(5) Nothing in this section or in any Cooperative Agreement between the Department and the permittee shall be construed as a guarantee that the Department will issue an air pollution control construction and operation permit for a proposed project. The decision on whether to approve a permit application will be made according to the requirements of chapters NR 400 through NR 499, Wis. Adm. Code and s. 285.60 through 285.69, Wis. Stats. If the Department denies a permit application pursuant to ss 285.61 through 285.64, Wis. Stats. all costs and risks associated with installing and operating the proposed equipment shall be incurred solely by the permittee. In the event that the construction and operation permit application for the proposed project is denied, the permittee shall cease construction and/or operation of the equipment in question immediately.

2. Item: (Sparta Only—Processes P32, P33, P56, P42, and P44) Waiver from the requirements for Processes P32, P33, P56, P42 and P44 at the Sparta facility to comply with the reasonable available control technology (RACT) requirements for controlling volatile organic compound emissions. Previous Requirements Superseded by this Agreement (source of the requirement):

(1) 3 Roll Coating Machines P32: Requirement to limit volatile organic compound emissions from a miscellaneous metal parts or products coating line using baked or specially cured coating technology to not more than: (a) 4.3 pounds per gallon of coating, excluding water, delivered to a coating applicator that applies clear coatings; (b) 3.5 pounds per gallon of coating, excluding water, delivered to a coating applicator that applies extreme performance coatings; (c) 3.0 pounds per gallon of coating, excluding water, delivered to a coating applicator for all other coatings. (s. NR 422.15(2), Wis. Adm. Code, the Specific Emission Limitation for volatile organic compounds in condition I.C.1. and conditions I.C.2.c., I.C.2.d., and I.C.2.e of Air Pollution Control Permit 92-POY-157 and the Specific Emission Limitation for volatile organic compounds in condition I.A.1. and conditions I.A.2.c., I.A.2.d., and I.A.2.e. of Air Pollution Control Permit 91-POY-088)

(2) 2 Metal Spray Booths P33: Requirement to limit volatile organic compound emissions from a miscellaneous metal parts or products coating line using baked or specially cured coating technology to not more than: (a) 4.3 pounds per gallon of coating, excluding water, delivered to a coating applicator that applies clear coatings; (b) 3.5 pounds per gallon of coating, excluding water, delivered to a coating applicator that applies extreme performance coatings; (c) 3.0 pounds per gallon of coating, excluding water, delivered to a coating applicator for all other coatings. ( s. NR 422.15(2), Wis. Adm. Code, the Specific Emission Limitation for volatile organic compounds in condition I.A.1. and conditions I.A.2.c., I.A.2.d., and I.A.2.e. of Air Pollution Control Permit 91-POY-157, and the Specific Emission Limitation for volatile organic compounds in condition I.D.1. of Air Pollution Control Permit 91-POY-088. )

(3) Roll Coating Line with Electric Oven P56: Requirement to limit volatile organic compound emissions from a miscellaneous metal parts or products coating line using baked or specially cured coating technology to not more than: (a) 4.3 pounds per gallon of coating, excluding water, delivered to a coating applicator that applies clear coatings; (b) 3.5 pounds per gallon of coating, excluding water, delivered to a coating applicator that applies extreme performance coatings; (c) 3.0 pounds per gallon of coating, excluding water, delivered to a coating applicator for all other coatings. ( s. NR 422.15(2), Wis. Adm. Code, the Specific Emission Limitation for volatile organic compounds in condition I.F.1. and conditions I.F.2.c. of Air Pollution Control Permit 93-IRS-040. )

(4) Two Roll Coaters with Two Electric Drying Ovens P42: Requirement to limit volatile organic compound emissions from a miscellaneous metal parts or products coating line using baked or specially cured coating technology to not more than: (a) 4.3 pounds per gallon of coating, excluding water, delivered to a coating applicator that applies clear coatings; (b) 3.5 pounds per gallon of coating, excluding water, delivered to a coating applicator that applies extreme performance coatings; (c) 3.0 pounds per gallon of coating, excluding water, delivered to a coating applicator for all other coatings. ( s. NR 422.15(2), Wis. Adm. Code. )

(5) Spray Booth P44: Requirement to limit volatile organic compound emissions from a miscellaneous metal parts or products coating line using baked or specially cured coating technology to not more than: (a) 4.3 pounds per gallon of coating, excluding water, delivered to a coating applicator that applies clear coatings; (b) 3.5 pounds per gallon of coating, excluding water, delivered to a coating applicator that applies extreme performance coatings; (c) 3.0 pounds per gallon of coating, excluding water, delivered to a coating applicator for all other coatings. ( s. NR 422.15(2), Wis. Adm. Code. )

New Requirement: Volatile organic compound emissions from the entire Northern Engraving Corporation, Sparta facility may not exceed 85 tons per year averaged over each 12 consecutive month period.

3. Item: Waiver from individual process line latest available control technique (LACT) requirements for controlling volatile organic compound emissions.

Previous Requirements Superseded by this Agreement (source of the requirement): Requirement to control volatile organic compound emissions from process lines on which construction or modification commenced on or after August 1, 1979, and which are not subject to emission limitations listed elsewhere in chs. NR 419 to 423, by at least 85 percent or where 85 percent control had been demonstrated to be technologically infeasible, to control volatile organic compounds using the latest available control techniques and operating practices demonstrating best current technology, as approved by the Department. ( s. NR 424.03(2)(b) and (c), Wis. Adm. Code )

Alteration of EOP-10-JKC-83-32-081 dated February 12, 1985 Condition: I.A.44.Emission Limitation for Organic Compounds and I.A.50. Emission Limitation for Organic Compounds

EOP-10-JKC-83-32-081—Condition: I.A.38. Emission Limitation of Organic Compounds, I.A.39. Emission Limitation of Organic Compounds, I.A.42. Emission Limitation for Organic Compounds Process P50: s. NR 424.03(2)(b) and (c), Wis. Adm. Code

New Requirement: Volatile organic compound emissions from each of the Sparta and Holmen NEC facilities may not exceed 85 tons per year averaged over each 12 consecutive month period.

4. Item: Monthly rather than daily record keeping requirements and six month emission reporting.

Previous Requirements Superseded by this Agreement (source of the requirement): The following permit conditions require Northern Engraving to keep daily records:

Alteration of permit EOP-10-KJC-83-32-081 dated 2/20/90 Condition I.B.13.

New Requirement: To demonstrate compliance status with the facility wide emission limitations for volatile organic compounds and hazardous air pollutants, NEC would be required to keep monthly records of emissions from each facility and report actual emission every 6 months as follows:

(1) Each month the permittee shall calculate the total volatile organic compound emissions from the facility as follows:

E is the monthly VOC emissions (tons/month);

U is the monthly usage of each ink, coating, solvent, or other VOC containing material used during the month (gallons/month);

W is the density of each ink, coating, solvent, or other VOC containing material used during the month (pounds/gallon)

C is the VOC content of each ink, coating, solvent, or other VOC containing material used during the month expressed as a weight fraction ( i.e. if a material is 25% VOC by weight C would be 0.25);

n identifies each ink, coating, solvent or other VOC containing material used during the month;

S is the amount of each spent ink, coating, solvent or other VOC containing material recovered and shipped off site each month (gallons/month);

P is the VOC content of each spent ink, coating, solvent or other VOC containing material recovered and shipped off site each month in pounds per gallon;

m identifies each spent ink, coating, solvent or other VOC containing material recovered and shipped off site during the month. (s. NR 407.09(4)(a)1., Wis. Adm. Code)

(2) To demonstrate compliance with condition I.A.1.a.(1), the permittee shall calculate the total volatile organic compound emissions from the facility over each 12 consecutive month period by summing the monthly volatile organic compound emissions as calculated in I.A.1.b.(1) for each consecutive 12-month period. This calculation shall be performed within 20 calendar days of the end of each month for the previous 12 consecutive month period. (s. NR 407.09(4)(a)1., Wis. Adm. Code)

(3) The permittee shall use U.S. EPA Method 24, or coating manufacturer's formulation data to determine the VOC content (Cn) and the density (Wn) of the inks, coatings, solvents or other VOC containing materials used. In case of an inconsistency between the Method 24 results and the formulation data, the Method 24 results will govern. (s. NR 439.04(1)(d), Wis. Adm. Code)

(4) The permittee shall analyze the spent ink, coating, solvent and other VOC containing material recovered and shipped off site to determine the VOC content (P) no less than: (a) each time there is a substantial change to materials or process operations that may affect the characteristics of the waste stream; or (b) quarterly, which ever is most frequent. (s. NR 439.04(1)(d), Wis. Adm. Code)

(5) The permittee shall keep records of the following for each ink, coating, solvent, or other VOC containing material used at the facility:

(a) A unique name or identification number; and

(b) The VOC content, expressed as a weight fraction (C n ). (s. NR 439.04(1)(d), Wis. Adm. Code)

(6) The permittee shall keep monthly records of:

(a) The amount of each ink, coating, solvent, or other VOC containing material used in gallons per month (U n );

(b) The density of each ink, coating, solvent, or other VOC containing material used in pounds per gallon (W n );

(c) The amount of spent ink, coating, solvent, or other VOC containing material recovered and shipped off site in gallons per month (S m );

(d) The VOC content of each spent ink, coating, solvent or other VOC containing material recovered and shipped off site in pounds per gallon (P m ).

(e) The total monthly VOC emissions from the facility in tons per month (E), as calculated in I.A.1.b.(1); and

(f) The total VOC emissions from the facility in tons per year as calculated in I.A.1.b.(2). (s. NR 439.04(1)(d), Wis. Adm. Code)

(7) Each month the permittee shall calculate the total emissions of each hazardous air pollutant from the facility regulated by the Act as follows: 5

E x is the monthly emissions of each hazardous air pollutant regulated by the Act (tons/month);

x identifies each HAP emitted from the facility

U is the monthly usage of each ink, coating, solvent, or other HAP containing material used during the month (gallons/month);

W is the density of each ink, coating, solvent, or other HAP containing material used during the month (pounds/gallon)

H is the HAP content of each ink, coating, solvent, or other HAP containing material used during the month expressed as a weight fraction ( i.e. if a material is 25% HAP by weight H would be 0.25);

n identifies each ink, coating, solvent or other HAP containing material used during the month;

S is the amount of each spent ink, coating, solvent or other HAP containing material recovered and shipped off site each month (gallons/month);

I is the HAP content of each spent ink, coating, solvent or other HAP containing material recovered and shipped off site each month in pounds per gallon;

m identifies each spent ink, coating, solvent or other HAP containing material recovered and shipped off site during the month. (s. NR 407.09(4)(a)1., Wis. Adm. Code)

(8) To demonstrate compliance with condition I.A.2.a.(1), the permittee shall calculate the emissions of each hazardous air pollutant regulated by the Act over each 12 consecutive month period by summing the monthly emissions of each hazardous air pollutant regulated by the Clean Air Act (the Act) as calculated in I.A.2.b.(1) for each consecutive 12-month period. This calculation shall be performed within 20 calendar days of the end of each month for the previous 12 consecutive month period. (s. NR 407.09(4)(a)1., Wis. Adm. Code)

(9) Each month the permittee shall calculate the total emissions of hazardous air pollutants regulated by the Act as follows:

The use of “we,” “us,” or “our” in this document refers to EPA.

On November 13, 2002, EPA proposed to find that the Washington serious ozone nonattainment area did not attain the 1-hour ozone NAAQS by November 15, 1999, the attainment deadline for serious ozone nonattainment areas under CAA section 181(a). See 67 FR 68805. The proposed finding was based upon ambient air quality data from the years 1997, 1998, 1999. These data showed that the 1-hour ozone NAAQS of 0.12 parts per million (ppm) had been exceeded on an average of more than one day per year over this three-year period and that the area did not qualify for an attainment date extension under section 181(a)(5). EPA also proposed that the appropriate reclassification of the area was to severe ozone nonattainment.

For the purposes of this final rule, the Washington ozone nonattainment area (the Washington area) consists of: the District of Columbia; Calvert, Charles, Frederick, and Montgomery, Prince Georges counties in Maryland; and, the counties of Arlington, Fairfax, Loudoun, Prince William and Stafford and the cities of Alexandria, Fairfax, Falls Church, Manassas, and Manassas Park in Virginia. See 40 CFR 81.309, 40 CFR 81.321 and 40 CFR 81.347.

Section 110 of the CAA requires states to develop air pollution regulations and control strategies to ensure that state air quality meet the NAAQS established by EPA. These ambient standards are established under section 109 of the CAA, and they currently address six criteria pollutants: carbon monoxide, nitrogen dioxide, ozone, lead, particulate matter, and sulfur dioxide.

Each state must submit these regulations and control strategies to us for approval and incorporation into the Federally-enforceable SIP.

Each Federally-approved SIP protects air quality primarily by addressing air pollution at its point of origin. These SIPs can be extensive. They may contain state regulations or other enforceable documents and supporting information such as emission inventories, monitoring networks, and modeling demonstrations.

The NAAQS for ozone is expressed in two forms which are referred to as the 1-hour and 8-hour standards. Table 1 summarizes the ozone standards.

(Primary standards are designed to protect public health and secondary standards are designed to protect public welfare and the environment.)

The 1-hour ozone standard of 0.12 parts per million (ppm) was promulgated in 1979. The 1-hour ozone standard continues to apply to the Washington area, and it is the classification of the Washington area with respect to the 1-hour ozone standard that is addressed in this document.

On November 13, 2002, EPA proposed its finding that the Washington area did not attain the 1-hour ozone standard by the applicable date (67 FR 68805). In that notice of proposed rulemaking we discussed how we believed the provisions of section 181(b)(2), the relevant sections of the CAA regarding determinations of attainment and reclassifications for failure to attain, would apply to the Washington area. See 67 FR at 68806 to 68808. The proposed finding was based upon ambient ozone concentration data for the period 1997 through 1999, from the monitoring sites in the Washington area, several of which recorded an average of more than one exceedance per day per year.

Section 181(b)(2)(A) of the Clean Air Act requires that when EPA determines that an area has not attained the standard by its statutorily required date the area shall be reclassified by operation of law to the higher of—

(1) The next higher classification for the area, or

(2) The classification applicable to the area's design value as determined at the time EPA publishes its notice that the area failed to attain.

Even if a serious area's design value at the time of reclassification is lower than the design value for serious areas that serious area cannot be reclassified to a lower classification because the minimum statutory classification resulting from a failure to attain is severe.

The air quality data upon which we made the proposed finding of failure to attain the ozone NAAQS were available for comment in our November 13, 2002, notice of proposed rulemaking. For a listing of the average number of days when ambient ozone concentrations exceeded the one-hour ozone standard, See 67 FR at 68807-68808 (November 13, 2002). We received no adverse comments pertaining to that air quality data and the proposed determination of noattainment.

EPA has determined that the relevant air quality data for the period of 1997 through 1999, inclusive, for the Washington area shows that the Washington area contained at least one monitor with an average annual number of expected exceedances that was greater than the 1.0 allowed by the 1-hour ozone NAAQS. Although currently classified as a “serious” nonattainment area, if the Washington area were being classified for the first time today, the classification applicable to the area's design value would be “marginal.” However, section 181(b)(2)(A)(1) requires that an area be reclassified to the higher of its current design value or the next higher classification (with the exception that no area can reclassified to “extreme”). “Severe,” not “marginal,” is the next higher nonattainment classification from “serious” under CAA. Therefore, we make the determination pursuant to section 181(b)(2)(B) of the CAA that the Washington area did not attain the one-hour ozone standard by the November 15, 1999, attainment date, and that the area is reclassified by operation of law to severe nonattainment on the effective date of this rule.

On November 13, 2002, the Sierra Club filed a complaint in the United States District Court for the District of Columbia against EPA ( Sierra Club v. Whitman, No. 1:02CV02235(JR)) regarding, among other things, the attainment status and classification of the Washington area. On December 18, 2002, the United States District Court for the District of Columbia issued an order directing EPA to publish, by January 27, 2003, a determination of whether the Washington area had attained the applicable ozone standard under the CAA. The Court also ordered EPA to publish in the Federal Register a notice of a final action reflecting both this determination and any reclassification of the area required as a result of the determination. Our final determination and this notice comply with the Court's Order.

In this action, EPA is issuing a final determination that the Washington area did not attain the 1-hour ozone NAAQS by November 15, 1999, as prescribed in section 181 of the CAA, in fulfilling our nondiscretionary duty pursuant to the CAA. As a result of this final determination, the Washington area is reclassified by operation of law to severe ozone nonattainment pursuant to section 181(b)(2) of the CAA. In addition, this action sets the dates by which the District of Columbia (the District), Maryland and Virginia (collectively referred to as “the States”) each must submit SIP revisions addressing the CAA's pollution control requirements for severe ozone nonattainment areas (the “severe area SIP”) and to attain the 1-hour NAAQS for ozone. The required post-1999 ROP nine percent reduction originally was required by November 15, 2002 under the CAA. However, that date has elapsed. Therefore, in this action EPA is allowing the District, Maryland and Virginia to demonstrate that the first required post-1999 nine percent ROP is achieved as expeditiously as practicable after November 15, 2002, but in any case no later than November 15, 2005. EPA is allowing the District, Maryland and Virginia to key contingency measures for the 2002 ROP milestone to this new date. 1

In the November 13, 2002, notice of proposed rulemaking (67 FR 68805) for this action, EPA proposed: (1) To find that the Metropolitan Washington, DC serious ozone nonattainment area has failed to attain the one-hour ozone NAAQS by November 15, 1999, and, as a consequence, the Washington area would be reclassified as a severe nonattainment area; (2) to require the District of Columbia, the State of Maryland and the Commonwealth of Virginia to submit revisions to their State Implementation Plan (SIP) that adopt the severe area requirements by the earlier of one year after the effective date of a final action on the attainment determination or March 1, 2004; and (3) to allow the District, Maryland and Virginia to adjust the dates by which the area must achieve a nine percent reduction in ozone precursor emissions to meet the 2002 rate-of-progress requirement to a date as expeditiously as practicable (but in no case any later than November 15, 2005), and to adjust the contingency measure requirement as this relates to the 2002 rate-of-progress requirement accordingly.

We solicited public comments on these issues discussed in the notice of proposed rulemaking as well as other relevant matters. We received comment letters from Earth Justice Legal Defense Fund (on behalf of the Sierra Club), the Virginia Department of Transportation, Dominion Energy and three residents of the Washington area.

In this document, EPA is responding to adverse comments that are germane to this final action and which were submitted in response to the November 13, 2002, notice of proposed rulemaking (67 FR 68805).

EPA received no adverse comments pertaining to the data used for our nonattainment determination, and therefore we are making the determination that Washington did not attain by its attainment deadline.

EPA received comments supporting the determination of nonattainment and the change in the classification from serious to severe. One resident of the District expressed concern about personal health effects of breathing air in the District which the commenter believes is not as clean as in more rural areas. Another commenter stated support for the proposed finding of failure to attain and stated concurrence that the resulting reclassification by operation of law should result in a severe classification.

Comment #1: We received one comment that stated the major reason that the Washington, area is being reclassified from serious to severe is because of transport from outside the area. The commenter claimed that other States and industries in the “Ohio Valley” have not reduced emissions soon enough to enable the Washington area attain by 1999.

Response #1: While EPA agrees that the Washington area is significantly affected by transport from outside the area, the U.S. Court of Appeals for the D.C. Circuit ruled on July 2, 2002 that EPA is precluded from extending the Washington area's attainment date unless the extension qualifies under CAA section 181(a)(5) or it involves reclassification to a higher classification. With respect to attainment date extensions, the D.C. Circuit also ruled that the plain language of the Clean Air Act “sets a deadline without an exception for setbacks owing to ozone transport.” Therefore, the Court held that EPA is without authority to extend the attainment deadline for the Washington area unless we also reclassify the area as a severe nonattainment area. See Sierra Club v. Whitman, 294 F.3d 155, 163 (D.C. Cir. 2002).

EPA is issuing a final finding that the Washington area failed to attain the 1-hour ozone NAAQS and is reclassified by operation of law to severe nonattainment.

One commenter submitted extensive comments in opposition to the proposed schedule for submittal of the severe area SIP.

This commenter claims EPA's use of section 182(i) is arbitrary and capricious and contrary to law. The commenter notes that the CAA set deadlines for SIP submittals for serious and severe areas in CAA sections 182(c)(2) and (d). The commenter claims those deadlines are not subject to adjustment and have long passed.

This commenter noted the following deadlines as examples:

(1) November 15, 1992: “VMT offset” SIP due under CAA section 182(d)(1).

(2) November 15, 1992: NSR program mandated by CAA sections 172(c)(5) and 173 including the lower stationary source major source thresholds for severe areas.

(3) November 15, 1994: for the attainment demonstration due under CAA sections 182(c)(2) and (d).

(4) December 31, 2000: SIP provision due under CAA section 182(d)(3) to fulfill the requirements of section 185.

The commenter claims that section 182(i) requires areas to met the deadlines of sections 182(b)-(d) and allows EPA to adjust those deadlines only to the extent necessary or appropriate to assure consistency among the required submissions. The commenter claims that EPA has not provided a rationale why the proposed schedule is necessary and appropriate and therefore EPA must make immediate “findings of incompleteness” under section 110(k)(1)(B).

The commenter further claims the proposed schedule has other problems in that the schedule runs afoul of the statutory attainment and ROP deadlines:

(1) The 2002 ROP plan will be due 16 months after the 2002 milestone date,

(2) The first potential sanction could only be imposed by August-September 2005 around 34 months after the 2002 ROP milestone date and around two months before the attainment date.

(3) The second potential sanction and the mandate for any needed Federal Implementation Plan would not come due until after the attainment deadline of November 15, 2005. Thus the commenter concludes the proposed schedule also is contrary to the CAA in that the plans would not be submitted and implemented prior to ROP and attainment deadlines.

With regard to the 2002 milestone, the commenter further claims that the Courts have already said that the Washington area SIP ROP plan is deficient and must be disapproved because the plan fails to provide an annual average of three percent ROP after November 15, 1999. The commenter's theory is that section 182(c)(2)(B) mandates post-1999 ROP even for serious areas and that the submittal deadline for this SIP is November 15, 1994. Under this theory the commenter concludes the EPA has no authority to extend the deadline for submittal of the ROP plans since the statutory due date of November 15, 1994 is past.

The same commenter further asserts that even if EPA could lawfully extend the submittal date (although the commenter disputes this very point) the standard for submission should be “as soon as possible.” The commenter submitted a schedule recently developed by the Metropolitan Washington Air Quality Committee (MWAQC)  2 that the commenter interprets as a demonstration that the air quality planning agencies could develop the entire severe area SIP by July 2003. The commenter maintains that EPA must set the submittal date to no later than the date the air quality planning agencies maintain is necessary to finish the task.

One other commenter urged EPA to be proactive in enforcing the severe area requirements and urged EPA to enable an expeditious switch from the MOBILE5 to MOBILE 6.

Response to Comment on Section 182(i): EPA's exercise of discretion under section 182(i) to adjust the submission deadlines for the severe area requirements that become applicable to the D.C. area for the first time upon the effective date of the area's reclassification is not arbitrary or capricious, and is in keeping with the terms and purpose of the statute. Section 182(i) states that the Administrator may adjust applicable deadlines (other than attainment dates) to the extent such adjustment is necessary or appropriate to assure consistency among the required submissions of new requirements applicable to an area which has been reclassified. Where a submission date has passed and is therefore impossible to meet, EPA has concluded that the Administrator may establish a later date. EPA has applied this interpretation in its prior reclassification rulemaking actions. See Santa Barbara, California, (62 FR 65025, December 10, 1997); Phoenix, Arizona (62 FR 60001, November 6, 1997); and Dallas-Fort Worth, Texas (63 FR 8128, February 18, 1998). The structure of the Clean Air Act itself reinforces this interpretation. Under the Act, the original dates for submissions for areas initially classified as serious, severe, and extreme areas was 1994. The attainment date for serious areas is 1999. Thus the Act does not require EPA to make a determination of whether or not a serious area met its 1999 attainment deadline until more than five years after the original submission date for areas originally classified as severe. Since the original 1992, 1994 and 2000 submission dates have elapsed, it is impossible for EPA to establish any of these as the submission deadline for a newly reclassified area.

EPA has determined that in light of the fact that the original submission dates for severe areas have elapsed prior to the time that we issued the proposed reclassification rulemaking for the Washington area, it is a reasonable exercise of EPA's discretion to adjust the applicable submission deadlines in order to ensure consistency among the new requirements. Because it is impossible for the state to meet long-expired deadlines, EPA must set new deadlines that will ensure consistency of submissions for requirements that the state is only being notified that it must meet. This is entirely in keeping with the discretion that Congress accorded EPA in section 182(i), and with EPA's prior reclassification rulemakings making appropriate adjustments to submission deadlines. Because the States must now meet newly imposed requirements such as post-1999 ROP and additional severe area control requirements, EPA must set prospective submission dates, and has authority under section 182(i) to make these dates consistent.

To interpret the Clean Air Act as the commenter suggests would give the reclassification retroactive effect by holding the States in default of their submission obligations before the events necessary to trigger that obligation (reclassification) has occurred. Until EPA acts to reclassify an area, the states are under no obligation to make the required submissions. To subject them to a lapsed deadline after reclassification would be patently unfair and contrary to the statute's intent. Giving the submission deadlines retroactive effect would also be inconsistent with the Administrative Procedure Act, 5 U.S.C. 553(d), which requires that before a rule takes effect, persons affected will have advance notice of its requirements. A failure to meet an obligation, especially one accompanied by sanctions, cannot occur in advance of the imposition of that obligation. The obligation to submit requirements to meet the severe area classification did not exist for the Washington area prior to the final action that reclassifies the area. Giving retroactive effect to the old SIP submission deadlines would also preclude EPA from exercising the discretion with respect to setting the deadlines for these submissions that is specifically afforded by section 182(i).

In Sierra Club v. Whitman, 130 F. Supp.2d 78 (D.D.C. 2001), affirmed, 285 F.3d 63 (D.C. Cir. 2002), a case involving the reclassification of the St. Louis nonattainment area, the District Court refused to interpret the reclassification provisions as authorizing relief that would treat submission deadlines as having lapsed prior to EPA having issued a reclassification rulemaking. The court stated that such an interpretation “could ‘create * * * an injustice at the hands of the court itself.’ ” 130 F. Supp.2d at 94. Such relief “could throw the (area) into extreme noncompliance.” Id. The court refused to impose such relief when it “could effectively penalize the state and local entities that are required to comply with EPA findings.” Id. In the St. Louis case, the Sierra Club demanded not only retroactive reclassification, but also demanded that the district court declare that “the State of Missouri has failed to file a SIP revision that comports with the requirements of section 7511a(c) by the statutory deadline of May 15, 1998,” id. at 87, a date that had long since passed. The district court refused to do so, recognizing that this would unfairly penalize the States, which are entitled to rely on EPA's actions in anticipating the burdens that will be imposed pursuant to the CAA. Imposition of sanctions would also have unfair adverse consequences for emissions sources.

The D.C. Circuit upheld the District court's ruling. “In any event, what Sierra Club sought—to have the effective date of EPA's court-ordered determination converted to the date the statute envisioned, rather than the actual date of EPA's action—was a form of relief the district court quite properly rejected.” Sierra Club v. Whitman 285 F.3d 63, 68 (D.C. Cir. 2002). The D.C. Circuit continued: “Although EPA failed to make the nonattainment determination within the statutory time frame, Sierra Club's proposed solution only makes the situation worse. Retroactive relief would likely impose large costs on the States, which would face fines and suits for not implementing air pollution prevention plans in 1997, even though they were not on notice at the time.” Id. See also NRDC v. EPA, 22 F.3d 1125 (D.C. Cir. 1994).

EPA believes that it has provided an adequate rationale for its exercise of discretion in setting the applicable submission deadlines, and that it would be unreasonable and inappropriate to make the “immediate findings of incompleteness” that the commenter suggests.

The Commenter's contention that the ROP submissions are inadequate also ignores the fact that reclassification is occurring in 2003, and thus it is impossible for the State to meet the 2002 milestone date. See the discussion in the preceding paragraphs regarding the impossibility of meeting deadlines that have already passed, and the ROP discussion in the following paragraphs.

The commenter claims that “the rate of progress plans for the Washington area are already deficient because they fail to provide for the post-1999 progress mandated by section182(c)(2)(B). Sierra Club v. Whitman, 294 F.2d 155, 163 (D.C. Cir. 2002).” The commenter claims plans to fulfill the post-1999 ROP obligation we due to EPA by November 15, 1994, and that because such plans were never submitted, EPA must therefore “disapprove those plans immediately.”

With respect to the claim that EPA must disapprove these previously submitted ROP plans, this claim is not relevant to the proposed action, which was for the reclassification of the Washington area concurrent with the establishment of a reasonable deadline for submitting SIP revisions. EPA will be taking a separate action on the submitted ROP plans, which will address their approvability.

With respect to the claim that the area was required to submit to EPA a plan to fulfill post-1999 ROP by November 15, 1994, the commenter ignores the context of the Circuit Court's decision with respect to post-1999 ROP obligations. The Circuit Court was merely agreeing with an observation made by the plaintiff that “ with an attainment date in 2005, ‘the rate of progress plan for the Washington area had to demonstrate a 9% reduction in emissions from 1996 to 1999, another 9% from 1999 to 2002, and another 9% from 2002 to 2005’” (emphasis added).

However, the Circuit Court vacated as contrary to the statute EPA's approval of a 2005 attainment date for the Washington area to attain as serious area. 294 F.2d at 164. Consequently, until the effective date of final action to reclassify the Washington area as a severe nonattainment area with an attainment date of November 15, 2005, the attainment date for the Washington area remained the November 15, 1999 date for serious areas. Indeed, it is the failure of the Washington area to attain the one-hour ozone NAAQS by November 15, 1999 that results in the area being reclassified as a severe area.

As a serious area with a lapsed attainment date of November 15, 1999, the Washington area had no legal obligation to provide for post-1999 ROP. As noted by the Circuit Court, only an area with an attainment date of 2005 has a legal obligation to provide for post-1999 ROP. The Washington area will not have an attainment date of 2005 until the effective date of its reclassification as a severe area. A serious area has an obligation to provide for ROP until its attainment date, which is 1999. See section 182(c)(2)(B) and section 181(a)(1). Not until it is reclassified to severe does an area have a later attainment date and a consequent obligation to provide for ROP until that later attainment date (2005 in the case of the Washington area). See section 182(d). As explained elsewhere in this section of this document in the responses regarding application of section 182(i), the Administrative Procedure Act requires that new obligations, such as the one to demonstrate post-1999 ROP for an area reclassified to severe nonattainment, cannot be imposed retroactively.

One commenter suggests that because EPA has not provided a rationale why the proposed schedule is necessary and appropriate the SIP is past due (under the schedule provisions of section 182(b)-(d)) and thus EPA must make immediate “findings of incompleteness” under section 110(k)(1)(B). As discussed in previous paragraphs of this document, EPA disagrees with the commenter that section 182(i) prohibits EPA from providing the state with time to submit a SIP consistent with its reclassification from serious to severe. As provided in the preceding paragraphs, EPA has concluded that it is reasonable and appropriate to provide the state until March 1, 2004, to submit a SIP based on its reclassification. Thus, there is no SIP due yet and there is no basis to find that the state failed to submit a complete SIP. To the extent the commenter is suggesting that EPA determine the area's serious area SIP to be incomplete, EPA notes that the serious area SIP revisions for which EPA has not issued a final action were deemed complete or deemed complete by operation of law under CAA section 110(k)(1)(B). These serious area SIP revisions and their submission dates are listed in the following table.

All the attainment demonstration SIP revisions were deemed complete by operation of law under CAA section 110(k)(1)(B) six-months after the dates listed in the preceding table. Therefore, the latest of these revisions related to the attainment demonstration, those submitted in March 2000, were complete by operation of law on or prior to October 1, 2000.

On November 3, 1997, the District submitted the Post-1996 plan to EPA as a proposed revision to the District's SIP. On December 10, 1997, EPA determined that the Post-1996 plan fulfilled the completeness criteria set out at 40 CFR part 51, appendix V (1991), as amended by 57 FR 42216 (August 26, 1991). On May 25, 1999, the District submitted a revised Post-1996 plan document to EPA as a revision to the District's SIP. On July 14, 1999, EPA determined that this revised Post-1996 plan fulfilled the completeness criteria set out at 40 CFR part 51, appendix V.

On December 24, 1997, Maryland submitted the Post-1996 plan to EPA as a proposed revision to Maryland's SIP. On January 14, 1998, EPA determined that the Post-1996 plan fulfilled the completeness criteria set out at 40 CFR part 51, appendix V. On May 20, 1999, Maryland submitted a revised Post-1996 plan document to EPA as a revision to Maryland's SIP. On July 14, 1999, EPA determined that this revised Post-1996 plan fulfilled the completeness criteria set out at 40 CFR part 51, appendix V.

On December 19, 1997, Virginia submitted the Post-1996 plan to EPA as a proposed revision to Virginia's SIP. On January 12, 1998, EPA determined that the Post-1996 plan fulfilled the completeness criteria set out at 40 CFR part 51, appendix V (1991). On May 25, 1999, Virginia submitted a revised 1999 Post-1996 plan document to EPA as a revision to Virginia's SIP. On July 26, 1999, EPA determined that this revised Post-1996 plan fulfilled the completeness criteria set out at 40 CFR part 51, appendix V.

EPA believes that it has provided an adequate rationale for its exercise of discretion in setting the applicable submission deadlines, and that it would be unreasonable, inappropriate and contrary with applicable law to make the “immediate findings of incompleteness” that the commenter suggests.

One commenter submitted a schedule that was presented to the Transportation Planning Board (TPB) at their December 18, 2002, meeting. EPA does not disagree that this schedule was developed on December 4, 2002, and adopted by the Metropolitan Washington Air Quality Committee (MWAQC). However, this schedule clearly shows three parallel tracks of activities: the first is the “SIP schedule”; the second is “State Action Deadlines”; and the third is “TPB Conformity”. The schedule says that in January 2003 the preliminary shortfall analysis for 2005 will be completed. The same document says that in February 2003 the States will provide schedules for Title I modifications.

The severe area SIP has many elements. One is a ROP plan for the post-1999 ROP milestone years to include conformity budgets, emission target levels determinations, and future year emissions levels projections. Another is revisions to the area's mobile source emissions estimates for the base year and previously submitted 2005 budgets using MOBILE6. Historically, the MWAQC develops these elements of the SIP, ensures inter-State coordination and ensures that appropriate consultation regarding the mobile source emissions budgets with the transportation planning agencies occurs. However, it is the States, not MWAQC, that must adopt the MWAQC plans for inclusion in each State's SIP. Historically, the States have had to adopt control measure regulations to support the MWAQC air quality plans and meet CAA requirements for nonattainment areas.

The severe area SIP elements that will require action by the District, Virginia and Maryland include any needed changes to each jurisdiction's new source review permitting rules to incorporate the severe area offset ratios and major source thresholds or to lower reasonable available control technology major source thresholds. Other examples could include adoption of regulations to address any post-1999 ROP plan reduction needs not provided by the current control strategies in the SIPs and to address contingency measure requirements.

The District of Columbia, Virginia and Maryland each have written to EPA indicating that they support the date of March 1, 2004, to complete the total severe area SIP package. These States have clarified that MWAQC's use of the term “severe area SIP” does not mean the total package.

The Maryland Department of the Environment (MDE) understands that MWAQC's plan is to finalize and forward a recommended SIP revision to the States in July 2003. MDE indicates that MDE will need to complete additional tasks after the MWAQC completes its work on the severe area SIP for the Washington area. These tasks include promulgating the new mandatory Title I provisions like New Source Review, contingency measures and any shortfall measures that result from the MWAQC process. Maryland has already started to draft regulations for some of these SIP elements, but believes that it will take until March 1, 2004 to finalize many of the rules that will need to be included as part of the final SIP submittal.

The District of Columbia Department of Health, Division of Air Quality (DC DAQ), points out that the schedule adopted by the MWAQC is very aggressive and establishes milestones and actions for which MWAQC is responsible, but it does not include all the steps involved in developing a complete SIP.

DC DAQ notes it can not complete by July 2003 either the regulatory process for the required Title I NSR changes or the NO X RACT determinations for sources that emit between 25 and 50 tons per year by July 2003. The DC DAQ notes it cannot complete these in less than six months and notes the normal schedule for adoption of rules is ten months. The DC DAQ has informed us that any measures identified as RACM will require time beyond July 2003 for the development of implementation plans and schedules.

The Virginia Department of Environmental Quality (DEQ) points out that the schedule adopted by the MWAQC is very aggressive and establishes milestones and actions for which MWAQC is responsible, but it does not include all the steps involved in developing a complete SIP.

DEQ notes it can not complete by 2004 either the regulatory process for the additional rulemakings required or the NO X RACT determinations for sources that emit between 25 and 50 tons per year before March 2004. DEQ is currently working on both of these tasks. DEQ has informed us that any measures identified as RACM will require time beyond July for the development of implementation plans and schedules.

Given that the contingency measures or other necessary measures (e.g., any remaining reasonably available control measures or measure needed to uncover a shortfall found by the ROP planning which is scheduled to be available only in January 2003) have not been selected (or even identified), EPA does not believe that any State could adopt new measures between January and July 2003. Nothing from the States indicates otherwise.

For the reasons set forth above, we cannot conclude from the information before us that the schedule provided by the one commenter reflects the intention that all three States would submit complete severe area SIP packages to EPA by July 2003. Indeed, three of the States have informed us that they could not meet, and have never intended or committed to meet, a July 2003 SIP submittal deadline.

Likewise, information received from the States provides no reason to extend the severe area SIP submittal date beyond what we proposed on November 13, 2002. We proposed a submittal date of one year after the effective date of a final reclassification to severe but not later than March 1, 2004. Because one year after the effective date of this action will be past March 1, 2004, we are setting a deadline for the submission of the severe area SIP as March 1, 2004.

Two commenters asserted that one year to develop the severe area SIP is insufficient given the length of time required by one state's regulatory adoption process and the need to allow time to identify additional control measure needs to meet the severe area requirement. The first of these two commenters noted that one state needed 18 months to adopt control regulations while the second stated that the same state would require 18 to 24 months for this process. The first of these two commenters urged EPA to set the due date for submittal of the severe area SIP to 24 months. The second of these two commenters urged EPA to add at least six months to the proposed March 1, 2004, date found in the proposal or to allow enforceable commitments.

EPA believes that the deadlines it has set for submission of the severe area requirements are consistent with the Clean Air Act and are adequate for the area to achieve compliance. EPA has discretion to adjust deadlines under section 182(i). EPA believes that a period up to eighteen months would be consistent with the Act, since under section 110(k)(5) the Clean Air Act SIP revision provision, states have up to 18 months to submit a SIP revision after receiving a SIP call notice.

Given that the States have indicated in this case that March 1, 2004, is not unreasonable, and we received no adverse comments from the states during the comment period indicating that they could not meet this deadline, EPA is setting a deadline for the submission of the severe area SIP as March 1, 2004.

One commenter supported the “expeditious” standard as being appropriate. Another commenter agreed with EPA that the nine percent reduction should be achieved as soon as practicable after November 15, 2002.

One commenter stated that EPA cannot move the November 15, 2002, statutory deadline for the 2002 ROP reduction of nine percent between November 15, 1999, and November 15, 2002. The commenter claims that the ROP plan for the Washington area has to demonstrate a nine percent reduction in emissions between November 15, 1999, and November 15, 2002, (as well as nine percent between November 15, 1996, and November 15, 1999, and another nine percent between November 15, 2002, and November 15, 2005). The commenter claims that if the states cannot show a nine percent reduction between November 15, 1999 and November 15, 2002, then the states must implement the only alternative scheme allowed by statute, namely that of section 182(c)(2)(B)(ii).

The same commenter asserts that even if the statute were not explicit as to the ROP deadline, the proposed “as expeditiously as practicable” standard should be “as soon as possible with every control measure.” The commenter further asserts that the term “practicable” in “as expeditiously as practicable” is not defined in terms of what factors will go into the determination and thus could be used to nullify the statutory deadline.

This commenter further asserts that EPA does not have the statutory authority to move the 2002 ROP milestone date and thus there is no need for the contingency plan requirement to account for a date other than November 15, 2002.

Response: With respect to the assertion that EPA lacks authority to allow the States to demonstrate the first required post-1999 nine percent ROP, due under the statute by November 15, 2002, as expeditiously as practicable, EPA disagrees, in light of the fact that the statutory deadline has passed. It is impossible for the states to demonstrate any progress by a date that passed before the time the area became classified a severe area and thus first became subject to the requirement to demonstrate post-1999 ROP. EPA agrees that the Washington area must now demonstrate such progress, but reasonably concludes that the states must have some time in which to actually develop and implement the measures to achieve such ROP. EPA has addressed similar issues on several occasions in the past when areas for various reasons have not timely submitted progress SIPs, and when the date for achieving progress had passed prior to EPA action on a progress SIP. EPA has routinely concluded in these circumstances that the area should demonstrate the required ROP as expeditiously as practicable once the statutory date for achieving such ROP had passed. See, e.g. , 65 FR 31485 (May 18, 2000), 63 FR 28898 (May 27, 1998), 62 FR 31343 (June 9, 1997). Even though, as the commenter points out, there is no provision in the statute expressly addressing the situation where an area has failed to timely submit a progress SIP, EPA must fill the statutory gap where such SIPs are submitted after the date for achieving progress, and EPA has reasonably done so in this case by following its past practice of requiring such SIPs to demonstrate ROP as expeditiously as practicable. Although no court has directly addressed the issue of the propriety of this “as expeditious as practicable” standard, courts have addressed other issues concerning ROP plans submitted after the statutory date for achieving ROP, which have demonstrated ROP as expeditiously as practicable, without expressing any concern with that standard. See, e.g., Sierra Club v. EPA, 252 F.3d 943 (8th Cir. 2001) (Court upheld calculation methods used in 15 percent ROP plan submitted three years after statutory date demonstrating achievement of ROP seven years after statutory date).

The commenter indicates that the only statutory provision allowing less than a nine percent reduction by 2002 is CAA section 182(c)(2)(B)(ii). However, the commenter misconstrues that section which provides for areas to demonstrate that they have adopted various feasible measures in exchange for achieving a less than nine percent reduction. Although this provision would remain available to the Washington area states should they be unable to demonstrate the required average annual three percent reduction after November 15, 1996, through the attainment date of November 15, 2005, EPA did not propose to allow the states to show less than the nine percent reduction. EPA merely acknowledged in the proposal that the statutory date for achieving the nine percent reduction had passed and that in such event the states should demonstrate the full nine percent reduction as expeditiously as practicable.

The commenter also objects to the observed stringency of the “as expeditious as practicable” standard, citing a case involving the 1987 attainment date in the 1977 version of the Clean Air Act, in which the court held that once an attainment date has passed an area must demonstrate attainment “as soon as possible with every available control measure.” Delaney v. EPA, 898 F.2d 687, 691 (9th Cir. 1990). However, that case was interpreting EPA's 1981 guidance on planning for post-1987 attainment, in which EPA had indicated that areas which could not attain by 1987 should identify all “measures possible in a longer time frame that, together with the measures already evaluated, will result in attainment as quickly as possible after 1987.” 46 FR 7186, 7188 (January 22, 1981). Subsequent to the Delaney opinion, EPA published a Federal Register notice in which it clarified that the agency never intended that its 1981 guidance be interpreted to require the imposition of draconian control measures, nor to require immediate attainment after 1987 if only such measures could produce it. 55 FR 38326 (September 17, 1990). To avoid future misinterpretation of this guidance, EPA then revoked those aspects of the 1981 guidance requiring the use of “all possible measures” after 1987. Id., at 38327. The EPA instead concluded that Federal and State post-1987 planning should attain the standard “as expeditiously as practicable,” as required by section 172(a)(2). EPA concluded that the statute does not require measures that are absurd, unenforceable, or impracticable, and thus that, after 1987, EPA would equate its interpretation of the Ninth Circuit's standard in Delaney of attainment “as soon as possible” absent absurd, impossible, or unenforceable measures with the statutory test of attainment “as expeditiously as practicable.” Id. This is the interpretation EPA has consistently held since that time, as noted in the various Federal Register actions mentioned above where areas have missed statutory deadlines for attainment or ROP.

Moreover, EPA notes that one court, while finding Delaney not precisely on point for its purpose of fashioning a remedy in a citizen's enforcement action, nevertheless made some instructive observations on the relationship between the two standards. The Court noted that: “[A]lthough the Delaney opinion utilized the ‘as soon as possible’ standard employed by EPA guidelines, it did not do so out of rejection of the ‘practicable’ standard or out of concern that the two standards differed. Rather it simply had no occasion to compare them. Indeed the Delaney court appeared to blur them when it criticized Arizona for rejecting measures without demonstrating that such measures were ‘impracticable’ or unreasonable.” Citizens for a Better Environment v. Deukmejian, 746 F. Supp. 976, 985 (N.D. Cal. 1990). The Court went on to observe that: “As a practical matter, however, no Court will use its equitable powers to impose remedies that are irrational, albeit ‘possible.’ Thus as long as time is considered paramount, and the term ‘practical’ is strictly construed in keeping with the purposes of the Act, the ‘as expeditiously as practicable’ standard should yield no less results than an ‘as soon as possible’ standard.” Id.

The Court concluded that “when properly interpreted, there is no practical difference between the two standards.” Id. EPA agrees with this assessment.

The commenter further complains that EPA's standard does not impose any particular deadline, and that it is too vague and undefined. However, the standard is the very one established in the statute for attainment of the standard, and years of experience in implementation of the statute has provided EPA and the states sufficient familiarity with the standard. Finally, the commenter notes that the states have already submitted ROP plans which the D.C. Circuit has allegedly found deficient for failure to include progress through 2002, thus warranting disapproval. As we stated previously this claim is not relevant to the proposed action, which was for reclassification of the Washington area concurrent with the establishment of a reasonable deadline for submitting SIP revisions. The commenter's contention that the ROP submissions are inadequate for not having ROP for 2002 and 2005 also ignores the fact that reclassification is occurring in 2003, and thus it is impossible for the State to meet the 2002 milestone date. Refer to the discussion in the preceding section entitled “Severe Area SIP Revision Submittal Schedule” regarding the impossibility of meeting deadlines that have already passed, and the ROP discussion regarding the Washington area's post-1999 ROP obligation that appears elsewhere in this document.

The severe area ROP plan will also have to provide for the second increment of post-1999 ROP for the period 2002 to 2005 and thus must achieve a minimum of 18 percent emission reduction from base line emissions by November 15, 2005. Therefore, this delay does not reduce the overall ROP obligation.

With respect to the claim that EPA incorrectly asserted that contingency plans would need to account for any adjustment in the 2002 ROP milestone date, EPA disagrees. As discussed in the preceding paragraphs, EPA reasonably concluded that after 2002 the 2002 ROP milestone date should be adjusted to be “as expeditiously as practicable,” and thus contingency measures would properly be keyed to this new date.

The requirements for contingency measures for failure to attain the 1-hour ozone NAAQS by November 15, 2005 or a 2005 ROP milestone failure are not affected by this action.

Comment: One commenter urged EPA to specify in the final rulemaking that any adjustment of the 2002 ROP milestone would not trigger or require the implementation of contingency measures in the area.

Response: EPA believes that allowing the first required post-1999 nine percent ROP, due by November 15, 2002, to be demonstrated as expeditiously as practicable after that date does not trigger the need to implement contingency measures prior to that date.

EPA is allowing the District, Maryland and Virginia to demonstrate that the first required post-1999 nine percent ROP, due under the statute by November 15, 2002, as expeditiously as practicable after that date in the event that control measures currently in the SIPs of the District, Maryland and Virginia or already promulgated by EPA, have not already achieved the required nine percent reduction by November 15, 2002. This first post-1999 ROP reduction has to be from base line emissions and account for growth in emissions through November 15, 2002. We have noted that for the Washington area there are emission reductions not relied on or credited in the ROP plan accruing between November 15, 1999, and November 15, 2002, from the January 1, 2000, implementation of phase 2 of the reformulated gasoline program, NO X reductions beyond RACT, and other on-road measures, such as the national low emission vehicle (NLEV) program, and a variety of off-road national emissions reduction programs. See 66 FR at 615, January 3, 2001. These measures have and will continue to provide additional reductions beyond those credited in the area's post-1996 ROP for the November 15, 1999, ROP milestone. These measures meet the ROP creditablity requirements of CAA sections 182(b) and (c) because these measures are already in the approved SIPs or are rules promulgated by the EPA. However, EPA had insufficient information at the time of the November 13, 2002, notice of proposed rulemaking (and currently still has insufficient information) to determine whether or not these measures achieve the required nine percent reduction in base line emissions for the first post-1999 period. One major factor in demonstrating ROP for any milestone year is the release of a revised mobile source emissions factor model, MOBILE6. As discussed elsewhere in this document, as well as in the November 13, 2002, notice of proposed rulemaking (67 FR at 68811) the revised MOBILE6 model must be used for the severe area SIP and the MOBILE6 model must be used to redetermine 1990 base line emissions and prior target levels, as well as the new 2002 and 2005 year target levels and control strategy projections.

In the event that the Washington area can demonstrate that the required nine percent reduction occurred by November 15, 2002, (with the current SIP plus Federal measures), then the contingency requirement will not be triggered. In the event the area cannot demonstrate the required nine percent reduction did occur by November 15, 2002, (with the current SIP plus Federal measures) then EPA has determined that the District, Maryland and Virginia ROP SIP would be able to adjust the milestone date for the first required post-1999 nine percent ROP to a date that is as expeditiously as practicable after November 15, 2002. As explained in prior paragraphs, this is because the statutory 2002 ROP date lapsed before the area was first classified as severe ozone nonattainment. Only a finding that the area failed to achieve the required reductions by that new milestone could trigger the need to implement contingency measures.

Comment #1: One commenter stated agreement with our assessment that a portion of the Washington area air quality problem is due to transport and agreement that there has been improvement in ozone air quality in the area. For these reasons the commenter asserted that the area should not be subjected to punitive measures such as sanctions, nor subject to lapses or “freezes” of the transportation planning processes.

Response #1: This action does not create a “conformity freeze” or impose sanctions. 3 Under section 179(a), sanctions can result from an EPA finding that a State failed to submit a required SIP revision (or has submitted one that does not meet the completeness requirements of the CAA and EPA regulations) or other required submission required under the CAA, result from a disapproval of a required submission, or result from a finding that a State is not implementing all or part of its approved SIP. 4 Likewise, under the conformity rule, 40 CFR part 93, a conformity freeze only results when EPA disapproves a ROP or attainment demonstration SIP revision without making a protective finding. See 40 CFR 93.120(a)(2). This final rule does none of these things.

Comment #2: One commenter asserted that transportation planning should not be subject to a conformity freeze due to action on the plans subject to the July 2, 2002, Court ruling on EPA's January 3, 2001, final rule on the Washington area SIP.

Response #2: This comment is not germane to this action. EPA did not propose action on any SIP revision in the November 13, 2002, notice of proposed rulemaking. The action EPA takes on the SIP revisions formerly covered by the now vacated January 3, 2001, final rule will be the subject of separate rulemaking action(s). EPA intends to establish in a forthcoming notice of proposed rulemaking in the Federal Register a separate public comment period on these SIP revisions.

Comment #3: One commenter stated that the District, Maryland and Virginia had provided MOBILE5 budgets for the Washington area that were found to be adequate. This commenter claimed these budgets were consistent with the attainment plan and were the most recent budgets at the time these budgets were developed. The commenter urged that no conformity freeze should ensue because these budgets are adequate. This commenter urged EPA to allow the area to continue to use any adequate MOBILE5 derived budgets until MOBILE6 based budgets are found to be adequate.

Response #3: This action has no effect on the adequacy status of budgets or the determination of which budgets are in effect. These comments are not germane to this action because EPA did not propose any action on any budgets in the November 13, 2002, notice of proposed rulemaking.

Our discussion of conformity issues in the November 13, 2002, notice of proposed rulemaking was only for the purpose of informing the public of the status of the separate process related to the adequacy status of the budgets in the SIP for which EPA's approval was vacated by the July 2, 2002, court ruling. EPA has taken no final action with respect to adequacy and thus the budgets in the vacated SIPs currently can not be used for conformity. The previously approved ROP budgets in the 15 percent ROP SIPs are currently in effect. ( See 64 FR 42629, August 5, 1999, 65 FR 44686, July 19, 2000, and 65 FR 59727, October 6, 2000.) See the discussion under section XIII of the notice of proposed rulemaking entitled “What are the Transportation Conformity Implications of Reclassification?” (67 FR at 68810, November 13, 2002).

In the November 13, 2002, notice of proposed rulemaking, we discussed the MOBILE6 release to interpret and reiterate application of our guidance affiliated with the January 29, 2002, official release of the MOBILE6 emission factor model to the SIP revisions that the Washington area needed to prepare if the area was reclassified to severe.

Comment #1: One commenter claims the MOBILE5 emission factor model lacks the ability to predict real emissions because it uses average trip speed to predict emissions and thus misses the influence of variations in speed on emissions. The commenter further claims that MOBILE6 will have the same imperfection because it merely substitutes average speed on each link for average trip speed. The commenter asserts that MOBILE6 will be replaced in a few years, that this planned replacement shows MOBILE6 is inadequate and that tax dollars should not be spent on using a model that is inadequate for its intended purpose.

Response #1: In the November 13, 2002, notice of proposed rulemaking, we discussed the MOBILE6 release to interpret and reiterate application of our guidance affiliated with the January 29, 2002, official release of the MOBILE6 emission factor model to the severe area SIP revisions that would become due if the Washington area was reclassified to severe. As a consequence, application of our guidance policy relating to the phase-in of MOBILE6 will require additional plan development in the case of the Washington area that would not have occurred otherwise. This increase in scope of the severe area SIP development is one factor in setting the deadline for submission of the severe area SIP.

The Washington area States had submitted a plan to demonstrate that the Washington area would attain the ozone NAAQS by November 15, 2005, once transport-controls implemented in upwind areas have had time to take effect. This plan included, among other things, 2005 motor vehicle emissions budgets, a ROP plan through 1999 and the approved 1990 base year emission inventory. The District, Maryland and Virginia had used the MOBILE5b model to quantify the on-road mobile source emissions for the ROP plan through 1999, the 2005 motor vehicle emissions budgets and the 1990 base year inventory.

If the Washington area had been reclassified to severe nonattainment well before the release of MOBILE6 the existing submittals might have formed part of the severe area SIP by adding the other elements including (but not limited to) ROP plans through 2005, contingency measures and revised major stationary source thresholds and severe area offset ratios. In the absence of an official release of MOBILE6, the States could have continued to use MOBILE5b to develop the missing ROP plans for 2002 and 2005 and to revise the 2005 attainment motor vehicle emissions budgets to reflect any new transportation control measures that might be adopted.

However, MOBILE6, which has been officially released, incorporates numerous changes in emissions that necessitate a revision to the 1990 base year inventory which is, among other things, the planning base line from which the 2002 and 2005 ROP targets are calculated. The changes incorporated into MOBILE6 were not merely limited to coding in the effects of new regulations under the federal motor vehicle control program but also looked at factors and data that result in changed emission rates for 1999 and earlier years. MOBILE6 is a major revision of the MOBILE model. The revision is based on much new data, but also on new understanding of vehicle emission processes. It includes the effects of regulations that have been issued since MOBILE5b was released, and it includes new features designed to make the model more useful. The improvements in the data and calculations have led to improved estimates of highway vehicle emissions. In some cases, the updated MOBILE6 emissions are significantly different from the emissions estimated with MOBILE5.

In the November 13, 2002, notice of proposed rulemaking, EPA intended to state our position that the severe area ROP plan and attainment demonstration need to use MOBILE6 to calculate ROP targets, ROP and attainment motor vehicle emissions budgets using MOBILE6. Because MOBILE6 is the best model currently available and has been officially released, EPA reaffirms that MOBILE6 must be used by Maryland, Virginia and the District of Columbia to quantify mobile source emissions levels and benefits of mobile source emissions control measures and programs when developing the severe area SIP for the Washington area. These uses include (but are not limited to) revision of the1990 base year emissions inventory, development of the target levels for the 2002 and 2005 ROP plans future year emissions projections, and development of motor vehicle emissions budgets.

EPA is currently developing the framework for the model that will eventually replace MOBILE6. While work has begun on the new model, we estimate that it will not be completed until the fall of 2005. In other words, based on EPA's current schedule it is likely that the new model will not be available more than one or two months prior to the area's attainment date of November 15, 2005. Therefore, it is not possible for EPA to allow the area to wait until the new model is available to submit the severe area SIP revisions that are required. For areas reclassified under section 181(b), pursuant to section 182(i) of the CAA EPA can adjust applicable deadlines (other than the attainment date) such as those for submission of a SIP to meet a new classification or achievement of rate-of-progress, but EPA cannot delay the date by which the Washington area must submit the severe area SIP revision submissions past the attainment date.

With regard to the influence of speeds on emissions, EPA concludes that MOBILE6 provides the best estimates of mobile source emissions currently available including consideration of the effects of speed on emissions. Thus EPA believes it is appropriate for the Washington area to use MOBILE6 for current SIP planning. This is for the reasons discussed in the preceding paragraphs: (1) MOBILE6 is the best model currently available and has been officially released; (2) EPA believes it is unlikely a new model will become available within the time period before the severe area SIPs are due; and (3) because the release date of any successor model cannot be forecast at this time, EPA cannot delay the submittal date indefinitely.

Comment #2: One commenter agreed with EPA that the July 2, 2002, Court ruling vacated approval of the commitment to revise the transportation conformity budgets within one year of the official release of MOBILE6. This commenter urged EPA to set the date by which the area must set transportation conformity budgets using MOBILE6 to coincide with the date by which the severe area plan elements must be submitted.

Response #2: In the November 13, 2002, notice of proposed rulemaking, we discussed the MOBILE6 release to interpret and reiterate application of our guidance affiliated with the January 29, 2002, official release of the MOBILE6 emission factor model to the SIP revisions that would become due if the Washington area was reclassified to severe. Given the time that has now elapsed since the release of the MOBILE6, EPA believes that application of our policy and guidance related to the release of the MOBILE6 model means that MOBILE6 is the only proper model to be used for any motor vehicle emissions budgets submitted to fulfill the severe area requirements. 5

EPA did not propose action on any SIP revision or on any enforceable commitment in the November 13, 2002, notice of proposed rulemaking for this action. Any action EPA takes on the SIP revisions formerly covered by the now vacated January 3, 2001, final rule will be the subject of separate rulemaking action(s). EPA will establish in a forthcoming notice of proposed rulemaking in the Federal Register a separate public comment period on these SIP revisions. EPA anticipates it would not set any different date for submittal of the budgets than the date for submittal of the ROP and attainment demonstration SIP revisions.

One commenter agreed with EPA that the July 2, 2002, Court ruling vacated approval of the commitment to perform a mid-course review (MCR). The commenter contended that the schedule for submittal of the severe area SIP might well negate the need for a MCR and asked EPA to specify whether the severe area SIP needs to include a MCR.

EPA disagrees that the schedule set in this final rule fully negates the need for a commitment to a MCR.

Our 1996 modeling guidance recognizes a need to perform a MCR review as a means for addressing uncertainty in the modeling results.  6 Because of the uncertainty in long term projections, EPA believes a viable attainment demonstration that relies on WOE needs to contain provisions for periodic review of monitoring, emissions, and modeling data to assess the extent to which refinements to emission control measures are needed.

On March 28, 2002, EPA issued further guidance on the performance of the MCR. 7 In this memorandum covered the overall MCR process and timing, including the potential consequences of findings that progress toward attainment is, or is not, being made; guidance for situations where failure to make progress is due to transport; and a special schedule for other ( e.g. , moderate or serious) ozone nonattainment areas with attainment dates of 2004 or earlier. This memorandum revised some of the earlier policy related to areas in the east significantly affected by transport. Originally we required the Washington area to provide an enforceable commitment to perform the MCR following the 2003 ozone season and to submit the results to EPA by the end of the review year ( i.e. , December 31, 2003). We chose the end of calendar year 2003 because at the time we had thought that an analysis in 2003 would be most robust since some or all of the regional NO X emission reductions should be achieved by that date.

In our January 2002, guidance we noted that if a State's implementation plan relies on regional control measures, for a MCR to be useful, a substantial portion of these measures need to have been implemented prior to the most recent ozone season in the nonattainment area for which the MCR is being performed. For example, if NO X SIP call measures are implemented by the spring of 2004, and those measures are an important part of the strategy for meeting the NAAQS in a particular nonattainment area, the MCR should include data from the Summer of 2004. 8 EPA has already concluded that the Washington area is significantly affected by transport and issued the NO X SIP call to prohibit specified amounts of emissions of one of the main precursors of ground-level ozone, NO X , to reduce ozone transport across State boundaries in the eastern half of the United States. See 63 FR 57356, October 27, 1998).

While the District, Maryland and Virginia may be able to perform some aspects of the MCR before submission of the severe area SIP, they will not be able to incorporate 2004 air quality data into the analysis. The 2004 air quality data should be the first to reflect control of NO X throughout the entire eastern half of the United States. EPA believes that the appropriate submission date for the MCR for the Washington area is no later than December 31, 2004, in order to include air quality data that reflects at least one full season of regional NO X controls. Given that the schedule set in this final rule requires submission of the severe area SIP before December 31, 2004, EPA believes that the Washington area needs to revise its commitment to perform a MCR as part of its severe area SIP. The revised commitment would not have to provide an administrative review of additional measures adopted after reclassification to severe, but would have to address other aspects of a MCR.

One commenter asked for clarification regarding a statement made regarding the enforceable transportation control strategies requirement of section 182(d)(1). The text at issue in the proposal was found in item number four in section XII of the proposed rule (67 FR at 68810) which was entitled “What would a Reclassification Mean for the Washington Area?”, November 13, 2002). The commenter noted a discrepancy between the description in the notice of proposed rulemaking and the language found in the statute. The commenter stated that section 182(d)(1) of the CAA requires a State to submit a revision “that identifies and adopts specific enforceable transportation control strategies and transportation control measures to offset any growth in emissions from growth in vehicle miles traveled or numbers of vehicle trips in such area and to attain reduction in motor vehicle emissions as necessary, in combination with other emission reduction requirements of this subpart, to comply with the requirements of subsection (b)(2)(B) and (c)(2)(B) (pertaining to periodic emissions reduction requirements). The State shall consider measures specified in section 108(f), and choose from among and implement such measures as necessary to demonstrate attainment.” In contrast the notice of proposed rulemaking stated “[e]nforceable transportation control strategies and measures to offset projected growth in vehicle miles traveled or number of vehicle trips as necessary to demonstrate attainment and to achieve periodic emissions reduction requirements”.

The commenter asserted that if EPA was changing the requirement for the Washington area from a requirement for measures to offset growth in vehicle emissions due to VMT growth or number of vehicle trips as necessary to attain or achieve ROP to one requiring measures to offset VMT growth or number of vehicle trips then EPA needs to conduct formal notice and comment rulemaking.

EPA intent in section XII entitled “What would a Reclassification Mean for the Washington Area” of the notice of proposed rulemaking was not to change any requirement or any change current guidance or policy. In section XII of the notice of proposed rulemaking we merely outlined some of the major planning elements that the Washington area would have to include in a severe area SIP. EPA agrees that the summary description provided in the notice of proposed rulemaking would have better reflected the statutory requirement if it had said “enforceable transportation control strategies and measures to offset any growth in emissions due to projected growth in vehicle miles traveled or number of vehicle trips as necessary to demonstrate attainment and to achieve periodic emissions reduction requirements.”

One commenter does not agree with EPA's statement in the notice of proposed rulemaking that the air quality in the Washington area has improved significantly since 1990. The commenter claims the notice failed to consider air quality data for the 2002 ozone season and that the 2002 ozone season was the worst in a decade because their were nine days during which at least one monitor exceeded the 1-hour ozone NAAQS.

Some of the air quality data trends presented in the notice of proposed rulemaking were for informational purposes only and do not form the basis for the action we announce in this document. The data relevant for purposes of making the statutory determination of whether the area attained by its deadline is that which shows the area did not attain by November 15, 1999.

As explained elsewhere in this document, section 181(b)(2)(A) of the Clean Air Act requires that when EPA determines that an area has not attained the standard by its statutorily required date the area shall be reclassified by operation of law to the higher of—

(1) The next higher classification for the area, or

(2) The classification applicable to the area's design value as determined at the time EPA publishes its notice that the area failed to attain.

Therefore, even if a serious area's design value at the time of reclassification is lower than the design value for serious nonattainment, that serious area cannot be reclassified to a lower classification because the minimum reclassification resulting from a failure to attain is severe. Likewise, the maximum reclassification is severe because even if an area's design value is beyond the extreme threshold section 181(b)(2) prohibits an area failing to attain from being reclassified to extreme nonattainment.

Therefore, unlike a marginal or moderate nonattainment area where the design value at the time of the reclassification could have a bearing on the final classification resulting from a failure to attain, a serious area can only be reclassified under section 181(b)(2) to severe nonattainment upon a finding of failure to attain because the only operative provision is that which requires reclassification to the next higher classification.

The design value data in the notice of proposed rulemaking was presented mainly as an indicator that had the area been classified for the first time, the area would have been classified as marginal.

The relevant air quality data for EPA's final determination of a failure to attain is that which shows the area contained at least one monitor with an average annual number of expected exceedances for the 1997 through 1999, inclusive, period.

With respect to the 2002 air quality data , we did not present it in the notice of proposed rulemaking for the simple reason that insufficient final data was available for us to make a proper comparison with prior years data at the time the notice of proposed rulemaking was drafted.

Even taking into account the 2002 data, the Washington area's design value corresponds to that of a marginal area. The Washington area's air quality has by this measure improved from the time it was classified as a serous area based upon its design value.

One commenter does not agree that the Washington area states had ever submitted a modeled demonstration of attainment for the area.

This comment is not germane to this action. EPA did not propose action on any SIP revision in the November 13, 2002, notice of proposed rulemaking. What action EPA takes on the SIP revisions formerly covered by the now vacated January 3, 2001, final rule will be the subject of separate rulemaking action(s). EPA will establish in a forthcoming notice of proposed rulemaking in the Federal Register a separate public comment period on these SIP revisions.

In the November 13, 2002, notice of proposed rulemaking, EPA noted that additional sources would become subject to the Title V major stationary source operating permit program as a collateral consequence of a reclassification of the Washington area to severe. The affected sources are those with a potential to emit of more than 25 tons per year of either VOC or NO X or both VOC and NO X . Any newly major stationary sources must submit a timely Title V permit application. “A timely application for a source applying for a part 70 permit for the first time is one that is submitted within 12 months after the source becomes subject to the permit program or on or before such earlier date as the permitting authority may establish.” See 40 CFR 70.5(a)(1) and see 40 CFR 71.5(a)(1). On the effective date of this action that can be found in the DATES section of this final rule, the 12 month (or earlier date set by the applicable permitting authority) time period to submit a timely application will commence in accordance with the state Title V program regulations applicable to that source. 9

For the reasons set forth in the notice of proposed rulemaking and in this final rulemaking notice, EPA has determined that the Washington ozone nonattainment area failed to attain the 1-hour ozone NAAQS by November 15, 1999, as required by section 181(a) of the CAA, and the Washington ozone nonattainment area is reclassified by operation of law to severe ozone nonattainment pursuant to section 181(b)(2) of the CAA.

Under section 181(a)(1) of the CAA, the new attainment deadline for the Washington area as a serious ozone nonattainment areas reclassified to severe under section 181(b)(2) is to attain the 1-hour ozone NAAQS as expeditiously as practicable but no later than November 15, 2005, which is the date applicable to the new severe nonattainment classification.

Under section 181(a)(1) of the Act, the attainment deadline for serious ozone nonattainment areas reclassified to severe under section 181(b)(2) is as expeditiously as practicable but no later than November 15, 2005. Under section 182(i), such areas are required to submit SIP revisions addressing the severe area requirements for the 1-hour ozone NAAQS. Under section 182(d), severe area plans are required to meet all the requirements for serious area plans plus the requirements for severe areas, including, but not limited to: (1) A 25 ton per year major stationary source threshold; (2) additional reasonably available control technology (RACT) rules for sources subject to the new lower major applicability cutoff; (3) a new source review (NSR) offset requirement of at least 1.3 to 1; (4) a post-1999 rate-of-progress plan with on-road mobile source emission budgets in emission reductions of ozone precursors of at least 3 percent per year from November 15, 1999 until the attainment date; and (5) a fee requirement for major sources of volatile organic compounds (VOC) and nitrogen oxides (NO X ) should the area fail to attain by 2005. 10 We have issued a “General Preamble for the Implementation of Title I of the Clean Air Act Amendments of 1990” that sets forth our preliminary views on these section 182 requirements and how we will act on SIPs submitted under Title I. See 57 FR 13498 (April 16, 1992) and 57 FR 18070 (April 28, 1992).

The District's, Maryland's and Virginia's severe ozone SIP for the Washington area must also contain adopted regulations, and/or enforceable commitments to adopt and implement control measures in regulatory form by specified dates, sufficient to make the required rate-of-progress and to attain the 1-hour ozone NAAQS as expeditiously as practicable but no later than November 15, 2005. Section 182(i) further provides that we may adjust the CAA deadlines for submitting these severe area SIP requirements. In addition to establishing a new attainment date, EPA must also address the schedule by which the District, Maryland and Virginia are required to submit SIP revisions meeting the CAA's pollution control requirements for severe areas.

For the reasons set forth in the notice of proposed rulemaking and this final rulemaking notice and pursuant to section 182(i) of the CAA, EPA is requiring the District of Columbia, Maryland and Virginia to submit SIP revisions addressing the CAA's pollution control requirements for severe ozone nonattainment areas by March 1, 2004.

For the reasons set forth in the notice of proposed rulemaking and this final rulemaking notice and pursuant to section 182(i) of the CAA, EPA is allowing the District, Maryland and Virginia to demonstrate the first required post-1999 nine percent ROP, due under the CAA by November 15, 2002, as expeditiously as practicable after that date (but in any case no later than November 15, 2005) in the event that control measures currently in the SIPs of the District, Maryland and Virginia or already promulgated by EPA do not achieve the required nine percent reduction by November 15, 2002.

The severe area SIP will have to provide for a total of a 18 percent reduction from base line emissions between November 15, 1999, through November 15, 2005. Because the 2002 ROP deadline is now past, the first 9 percent reduction requirement for the period 1999 to 2002 will have to be achieved as expeditiously as practicable after November 15, 2002. The second 9 percent reduction in base line emissions must be achieved by November 15, 2005, to address the 2002 through 2005 ROP requirement. Additionally, the area must submit adequate on-road mobile source emission budgets consistent with the 2002 and 2005 ROP plans.

Because EPA is allowing the District, Maryland and Virginia to demonstrate the first required post-1999 nine percent ROP, due under the CAA by November 15, 2002, as expeditiously as practicable after that date (but in any case no later than November 15, 2005), EPA is also allowing the District, Maryland and Virginia to adopt contingency measures keyed to this new date.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), EPA is required to determine whether regulatory actions are significant and therefore should be subject to Office of Management and Budget (OMB) review, economic analysis, and the requirements of the Executive Order. The Executive Order defines a “significant regulatory action” as one that is likely to result in a rule that may meet at least one of the four criteria identified in section 3(f), including, under paragraph (1), that the rule may “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.”

The Agency has determined that the finding of nonattainment would result in none of the effects identified in section 3(f) of the Executive Order. Under section 181(b)(2) of the CAA, determinations of nonattainment are based upon air quality considerations and the resulting reclassifications must occur by operation of law. They do not, in and of themselves, impose any new requirements on any sectors of the economy. In addition, because the statutory requirements are clearly defined with respect to the differently classified areas, and because those requirements are automatically triggered by classifications that, in turn, are triggered by air quality values, determinations of nonattainment and reclassification cannot be said to impose a materially adverse impact on state, local, or tribal governments or communities.

Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law 104-113, section 12(d) (15 U.S.C. 272 note ) directs EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( e.g. , 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 the Agency decides not to use available and applicable voluntary consensus standards.

This final action to reclassify the Washington, DC area as a severe ozone nonattainment area and to adjust applicable deadlines does not involve technical standards. Therefore, EPA did not consider the use of any voluntary consensus standards.

This final action to reclassify the Washington, DC area as a severe ozone nonattainment area and to adjust applicable deadlines does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

The Regulatory Flexibility Act (RFA) generally requires an agency to conduct a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements 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 not-for-profit enterprises, and small governmental jurisdictions.

Determinations of nonattainment and the resulting reclassification of nonattainment areas by operation of law under section 181(b)(2) of the CAA do not in and of themselves create any new requirements. Instead, this rulemaking only makes a factual determination, and does not directly regulate any entities. See 62 FR 60001, 60007-8, and 60010 (November 6, 1997) for additional analysis of the RFA implications of attainment determinations. Therefore, pursuant to 5 U.S.C. 605(b), I certify that this final action does not have a significant impact on a substantial number of small entities within the meaning of those terms for RFA purposes.

Under section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA), signed into law on March 22, 1995, EPA must prepare a budgetary impact statement to accompany any proposed or final rule that includes a Federal mandate that may result in estimated annual costs to state, local, or tribal governments in the aggregate, or to the private sector, of $100 million or more. Under section 205, EPA must select the most cost-effective and least burdensome alternative that achieves the objectives of the rule and is consistent with statutory requirements. Section 203 requires EPA to establish a plan for informing and advising any small governments that may be significantly or uniquely impacted by the rule.

EPA believes, as discussed previously in this document, that the finding of nonattainment is a factual determination based upon air quality considerations and that the resulting reclassification of the area must occur by operation of law. Thus, EPA believes that the proposed finding does not constitute a Federal mandate, as defined in section 101 of the UMRA, because it does not impose an enforceable duty on any entity.

Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks (62 FR 19885, April 23, 1997), 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 final action is not subject to Executive Order 13045 because this is not an economically significant regulatory action as defined by Executive Order 12866.

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.” Under Executive Order 13132, EPA may not issue a regulation that has Federalism implications, that imposes substantial direct compliance costs, and that is not required by statute, unless the Federal Government provides the funds necessary to pay the direct compliance costs incurred by state and local governments, or EPA consults with state and local officials early in the process of developing the proposed regulation. EPA also may not issue a regulation that has Federalism implications and that preempts state law unless the Agency consults with state and local officials early in the process of developing the proposed regulation. This determination of nonattainment and the resulting reclassification of a nonattainment area by operation of law will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999), because this action does not, in and of itself, impose any new requirements on any sectors of the economy, and does not alter the relationship or the distribution of power and responsibilities established in the CAA. Thus, the requirements of section 6 of the Executive Order do not apply to these actions.

This final rule also does not have tribal implications because it will not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

Under Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001), EPA must prepare for those matters identified as significant energy actions. A “significant energy action” is any action by an agency (normally published in the Federal Register ) that promulgates or is expected to lead to the promulgation of a final rule or regulation, including notices of inquiry, advance notices of proposed rulemaking, and notices of proposed rulemaking that is a significant regulatory action under Executive Order 12866 and, and is likely to have a significant adverse effect on the supply, distribution, or use of energy. Under Executive Order 12866, this action is not a “significant regulatory action.” For this reason, the proposed finding of nonattainment and reclassification is also not subject to Executive Order 13211.

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

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by March 25, 2003. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action to reclassify the Washington, DC area as a severe ozone attainment area and to adjust applicable deadlines may not be challenged later in proceedings to enforce its requirements. ( See section 307(b)(2)).

You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer.

Potentially affected entities may include, but are not limited to:

• Crop production (NAICS 111)

• Animal production (NAICS 112)

• Food manufacturing (NAICS 311)

• Pesticide manufacturing (NAICS 32532)

This listing is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in this unit could also be affected. The North American Industrial Classification System (NAICS) codes have been provided to assist you and others in determining whether this action might apply to certain entities. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT .

1. Docket . EPA has established an official public docket for this action under docket ID number OPP-2002-0086. The official public docket consists of the documents specifically referenced in this action, any public comments received, and other information related to this action. Although a part of the official docket, the public docket does not include Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. The official public docket is the collection of materials that is available for public viewing at the Public Information and Records Integrity Branch (PIRIB), Rm. 119, Crystal Mall #2, 1921 Jefferson Davis Hwy., Arlington, VA. This docket facility is open from 8:30 a.m. to 4 p.m., Monday through Friday, excluding legal holidays. The docket telephone number is (703) 305-5805.

2. Electronic access . You may access this Federal Register document electronically through the EPA Internet under the “ Federal Register ” listings at http://www.epa.gov/fedrgstr/. A frequently updated electronic version of 40 CFR part 180 is available at http://www.access.gpo.gov/nara/cfr/cfrhtml_00/Title_40/40cfr180_00.html, a beta site currently under development.

An electronic version of the public docket is available through EPA's electronic public docket and comment system, EPA Dockets. You may use EPA Dockets at http://www.epa.gov/edocket/ to submit or view public comments, access the index listing of the contents of the official public docket, and to access those documents in the public docket that are available electronically. Although not all docket materials may be available electronically, you may still access any of the publicly available docket materials through the docket facility identified in Unit I.B.1. Once in the system, select “search,” then key in the appropriate docket ID number.

In the Federal Register of August 1, 2001 (66 FR 39705) (FRL-6786-4), EPA issued a proposed rule to revoke all tolerances for oxadiazon and tetradifon. Also, the August 1, 2001 proposal provided a 60-day comment period which invited public comment for consideration and for support of tolerance retention under FFDCA standards.

This final rule revokes all FFDCA tolerances for residues of the herbicide oxadiazon because this pesticide active ingredient is not registered under FIFRA for food uses. The tolerances revoked by this final rule are no longer necessary to cover residues of the relevant pesticides in or on domestically treated commodities or commodities treated outside but imported into the United States. Oxadiazon is no longer used on the commodities associated with those tolerances within the United States. No one commented that there was a need for EPA to retain the tolerances to cover oxadiazon residues in or on imported foods. However, EPA did receive a comment regarding the need for the Agency to retain tetradifon tolerances.

EPA has historically expressed a concern that retention of tolerances that are not necessary to cover residues in or on legally treated foods has the potential to encourage misuse of pesticides within the United States. Thus, it is EPA's policy to issue a final rule revoking those tolerances for residues of pesticide chemicals for which there are no active registrations under FIFRA, unless any person commenting on the proposal demonstrates a need for the tolerance to cover residues in or on imported commodities or domestic commodities legally treated.

Generally, EPA will proceed with the revocation of these tolerances on the grounds discussed in Unit II.A. if one of these conditions applies, as follows:

1. Prior to EPA's issuance of a section 408(f) order requesting additional data or issuance of a section 408(d) or (e) order revoking the tolerances on other grounds, commenters retract the comment identifying a need for the tolerance to be retained.

2. EPA independently verifies that the tolerance is no longer needed.

3. The tolerance is not supported by data that demonstrate that the tolerance meets the requirements under FQPA.

Today's final rule does not revoke those tolerances for which EPA received comments stating a need for the tolerance to be retained. In response to the proposal published in the Federal Register of August 1, 2001 (66 FR 39705), EPA did receive comment regarding the need to retain tetradifon tolerances, as follows:

1. Tetradifon . EPA received a comment from Uniroyal Chemical, who requested the retention of tetradifon tolerances. Uniroyal noted that it had submitted certain studies to EPA in 1998 and 1996 and awaits determination of their acceptability by the Agency, and until those determinations are made cannot decide whether to support the tetradifon tolerances. Uniroyal added it would support two tolerances to allow importation of those tetradifon-treated food commodities, but did not name them.

In follow-up communication, Uniroyal expressed interest in maintaining tolerances for apples, citrus, and some vegetables, but did not commit to support any tetradifon tolerances. Also, in follow-up communication, Uniroyal acknowledged that it has not pursued correspondence with EPA since 1998 regarding disposition of the submitted studies nor submitted a registration petition.

Agency Response. EPA is still evaluating the issues described in the comment. Therefore, EPA is not taking final action on the tetradifon tolerances in 40 CFR 180.174 at this time, but may do so after evaluation of these issues.

No comments were received by the Agency concerning oxadiazon.

2. Oxadiazon . There have been no active registrations for oxadiazon concerning food uses since 1991. In a confirmatory letter to EPA, dated January 24, 2001, the registrant maintained its previous position that it will not support the 16 oxadiazon tolerances; although, it is supporting the continued (noncrop) use of oxadiazon for turf and ornamentals. Therefore, EPA is revoking all the tolerances in 40 CFR 180.346 for the combined residues of the herbicide oxadiazon and its metabolites in or on milk; cattle, fat; cattle, meat; cattle, meat byproducts; goats, fat; goats, meat; goats, meat byproducts; hogs, fat; hogs, meat; hogs, meat byproducts; horses, fat; horses, meat; horses, meat byproducts; sheep, fat; sheep, meat; and sheep, meat byproducts. The Agency is removing 40 CFR 180.346 in its entirety.

In addition, because EPA determined on April 21, 2002 that there is no reasonable expectation of finite residues of oxadiazon and its metabolites in or on meat, milk, poultry, and egg commodities, the 16 associated tolerances for livestock commodities were considered by the Agency to no longer be needed under 40 CFR 180.6(a)(3). Therefore, on June 3, 2002, the Agency considered the FQPA safety finding to be met and counted the 16 oxadiazon livestock tolerances as reassessed. Copies of these Agency memoranda will be placed in the public docket.

It is EPA's general practice to propose revocation of tolerances for residues of pesticide active ingredients on crop uses for which FIFRA registrations no longer exist. EPA has historically been concerned that retention of tolerances that are not necessary to cover residues in or on legally treated foods may encourage misuse of pesticides within the United States. Nonetheless, EPA will establish and maintain tolerances even when corresponding domestic uses are canceled if the tolerances, which EPA refers to as “import tolerances,” are necessary to allow importation into the United States of food containing such pesticide residues. However, where there are no imported commodities that require these import tolerances, the Agency believes it is appropriate to revoke tolerances for unregistered pesticides in order to prevent potential misuse.

These actions become effective 90 days following publication of this final rule in the Federal Register . EPA has delayed the effectiveness of these revocations for 90 days following publication of this final rule to ensure that all affected parties receive notice of EPA's actions. Consequently, the effective date is April 24, 2003. For this final rule, tolerances that were revoked because registered uses did not exist concerned uses which have been canceled for more than a year. Therefore, commodities containing these pesticide residues should have cleared the channels of trade.

Any commodities listed in the regulatory text of this document that are treated with the pesticides subject to this final rule, and that are in the channels of trade following the tolerance revocations, shall be subject to FFDCA section 408(1)(5), as established by the FQPA. Under this section, any residue of these pesticides in or on such food shall not render the food adulterated so long as it is shown to the satisfaction of FDA that: (1) The residue is present as the result of an application or use of the pesticide at a time and in a manner that was lawful under FIFRA, and (2) the residue does not exceed the level that was authorized at the time of the application or use to be present on the food under a tolerance or exemption from a tolerance. Evidence to show that food was lawfully treated may include records that verify the dates that the pesticide was applied to such food.

By law, EPA is required by August 2006 to reassess the tolerances in existence on August 2, 1996. As of January 3, 2003, EPA has reassessed over 6,490 tolerances. In this final rule, EPA is revoking 16 tolerances. These tolerances were previously reassessed and counted as described in Unit II.A.

EPA is working to ensure that the U.S. tolerance reassessment program under FQPA does not disrupt international trade. EPA considers Codex Maximum Residue Limits (MRLs) in setting U.S. tolerances and in reassessing them. MRLs are established by the Codex Committee on Pesticide Residues, a committee within the Codex Alimentarius Commission, an international organization formed to promote the coordination of international food standards. When possible, EPA seeks to harmonize U.S. tolerances with Codex MRLs. EPA may establish a tolerance that is different from a Codex MRL; however, FFDCA section 408(b)(4) requires that EPA explain in a Federal Register document the reasons for departing from the Codex level. EPA's effort to harmonize with Codex MRLs is summarized in the tolerance reassessment section of individual REDs. The U.S. EPA has developed guidance concerning submissions for import tolerance support (65 FR 35069, June 1, 2000) (FRL-6559-3). This guidance will be made available to interested persons. Electronic copies are available on the internet at http://www.epa.gov/. On the Home Page select “Laws and Regulations,” then select “Regulations and Proposed Rules ” and then look up the entry for this document under “ Federal Register —Environmental Documents.” You can also go directly to the “ Federal Register ” listings at http://www.epa.gov/fedrgstr/.

Under section 408(g) of the FFDCA, as amended by the FQPA, any person may file an objection to any aspect of this regulation and may also request a hearing on those objections.

You must file your objection or request a hearing on this regulation in accordance with the instructions provided in this unit and in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number OPP-2002-0086 in the subject line on the first page of your submission. All requests must be in writing, and must be mailed or delivered to the Hearing Clerk on or before March 25, 2003.

1. Filing the request . Your objection must specify the specific provisions in the regulation that you object to, and the grounds for the objections (40 CFR 178.25). If a hearing is requested, the objections must include a statement of the factual issue(s) on which a hearing is requested, the requestor's contentions on such issues, and a summary of any evidence relied upon by the objector (40 CFR 178.27). Information submitted in connection with an objection or hearing request may be claimed confidential by marking any part or all of that information as CBI. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2. A copy of the information that does not contain CBI must be submitted for inclusion in the public record. Information not marked confidential may be disclosed publicly by EPA without prior notice.

Mail your written request to: Office of the Hearing Clerk (1900C), Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460-0001. You may also deliver your request to the Office of the Hearing Clerk in Rm.104, Crystal Mall #2, 1921 Jefferson Davis Hwy., Arlington, VA. The Office of the Hearing Clerk is open from 8 a.m. to 4 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Office of the Hearing Clerk is (703) 603-0061.

2. Tolerance fee payment . If you file an objection or request a hearing, you must also pay the fee prescribed by 40 CFR 180.33(i) or request a waiver of that fee pursuant to 40 CFR 180.33(m). You must mail the fee to: EPA Headquarters Accounting Operations Branch, Office of Pesticide Programs, P.O. Box 360277M, Pittsburgh, PA 15251. Please identify the fee submission by labeling it “Tolerance Petition Fees.”

EPA is authorized to waive any fee requirement “when in the judgement of the Administrator such a waiver or refund is equitable and not contrary to the purpose of this subsection.” For additional information regarding the waiver of these fees, you may contact James Tompkins by phone at (703) 305-5697, by e-mail at tompkins.jim@epa.gov, or by mailing a request for information to Mr. Tompkins at Registration Division (7505C), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460-0001.

If you would like to request a waiver of the tolerance objection fees, you must mail your request for such a waiver to: James Hollins, Information Resources and Services Division (7502C), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460-0001.

3. Copies for the Docket . In addition to filing an objection or hearing request with the Hearing Clerk as described in Unit IV.A., you should also send a copy of your request to the PIRIB for its inclusion in the official record that is described in Unit I.B.1. Mail your copies, identified by docket ID number OPP-2002-0086, to: Public Information and Records Integrity Branch, Information Resources and Services Division (7502C), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460-0001. In person or by courier, bring a copy to the location of the PIRIB described in Unit I.B.1. You may also send an electronic copy of your request via e-mail to: opp-docket@epa.gov. Please use an ASCII file format and avoid the use of special characters and any form of encryption. Copies of electronic objections and hearing requests will also be accepted on disks in WordPerfect 6.1/8.0 or ASCII file format. Do not include any CBI in your electronic copy. You may also submit an electronic copy of your request at many Federal Depository Libraries.

A request for a hearing will be granted if the Administrator determines that the material submitted shows the following: There is a genuine and substantial issue of fact; there is a reasonable possibility that available evidence identified by the requestor would, if established resolve one or more of such issues in favor of the requestor, taking into account uncontested claims or facts to the contrary; and resolution of the factual issue(s) in the manner sought by the requestor would be adequate to justify the action requested (40 CFR 178.32).

This final rule revokes tolerances established under section 408 of the FFDCA. The Office of Management and Budget (OMB) has exempted this type of action (i.e., a tolerance revocation for which extraordinary circumstances do not exist) from review under Executive Order 12866, entitled Regulatory Planning and Review (58 FR 51735, October 4, 1993). Because this rule has been exempted from review under Executive Order 12866 due to its lack of significance, this rule is not subject to Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use (66 FR 28355, May 22, 2001). This final rule does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA), 44 U.S.C. 3501 et seq. , or impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) (Public Law 104-4). Nor does it require any special considerations as required by Executive Order 12898, entitled Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations (59 FR 7629, February 16, 1994); or OMB review or any other Agency action under Executive Order 13045, entitled Protection of Children from Environmental Health Risks and Safety Risks (62 FR 19885, April 23, 1997). This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law 104-113, section 12(d) (15 U.S.C. 272 note).

Pursuant to the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq. ), the Agency previously assessed whether revocations of tolerances might significantly impact a substantial number of small entities and concluded that, as a general matter, these actions do not impose a significant economic impact on a substantial number of small entities. This analysis was published on December 17, 1997 (62 FR 66020), and was provided to the Chief Counsel for Advocacy of the Small Business Administration. Taking into account this analysis, and available information concerning the pesticides listed in this rule, I certify that this action will not have a significant economic impact on a substantial number of small entities. Specifically, as per the 1997 notice, EPA has reviewed its available data on imports and foreign pesticide usage and concludes that there is a reasonable international supply of food not treated with oxadiazon. Furthermore, the Agency knows of no extraordinary circumstances that exist as to the present revocations that would change EPA's previous analysis. In addition, the Agency has determined that this action will not have a substantial direct effect on 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, entitled Federalism (64 FR 43255, August 10, 1999). Executive Order 13132 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 final rule directly regulates growers, food processors, food handlers and food retailers, not States. This action does not alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of section 408(n)(4) of the FFDCA. For these same reasons, the Agency has determined that this rule does not have any “tribal implications” as described in Executive Order 13175, entitled Consultation and Coordination with Indian Tribal Governments (65 FR 67249, November 6, 2000). Executive Order 13175, 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 rule 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. Thus, Executive Order 13175 does not apply to this rule.

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

States that have received final authorization from EPA under RCRA section 3006(b), 42 U.S.C. 6926(b), must maintain a hazardous waste program which is equivalent to, consistent with, and no less stringent than the federal program. As the federal program changes, states must revise their programs and ask EPA to authorize the revisions. Revisions to state programs may be necessary when federal or state statutory or regulatory authority is modified or when certain other changes occur. Most commonly, states must revise their programs because of changes to EPA's regulations in 40 Code of Federal Regulations (CFR) parts 124, 260 through 266, 268, 270, 273 and 279.

On October 21, 2002, EPA published a proposed rule (see 67 FR 64594). In the rule, EPA proposed granting authorization of revisions to Ohio's hazardous waste program and provided an opportunity for public comment. EPA received no comments on the proposal.

EPA has determined that Ohio's revisions to its authorized program meet all the statutory and regulatory requirements established by RCRA. Therefore, EPA grants Ohio final authorization to operate its hazardous waste program with the revisions described in the authorization application. Ohio now has responsibility for permitting treatment, storage, and disposal facilities (TSDFs) within its borders (except in Indian country) and for carrying out the aspects of the RCRA program described in its revised program application, subject to the limitations of the Hazardous and Solid Waste Amendments of 1984 (HSWA). New federal requirements and prohibitions imposed by federal regulations promulgated by EPA under the authority of HSWA take effect in authorized states before the states are authorized for the requirements. Thus, EPA implements those requirements and prohibitions in Ohio, including issuing permits, until Ohio is granted authorization to do so.

On June 25, 2002, Ohio submitted a complete program revision application, seeking authorization of its revisions in accordance with 40 CFR 271.21. EPA now makes a final decision that Ohio's hazardous waste management program, as revised, satisfies all requirements under RCRA necessary to qualify for final authorization. Therefore, EPA grants Ohio final authorization for the program revisions described in the October 21, 2002, proposed rule (67 FR 64594). For further details, see the October 21, 2002 proposed rule.

The effect of this decision is that a facility in Ohio that is subject to RCRA will now have to comply with the authorized state requirements in lieu of the corresponding federal requirements in order to comply with RCRA. Such facilities must also comply with any applicable federally-issued requirements, such as, for example, HSWA regulations issued by EPA for which Ohio has not received authorization, and RCRA requirements that are not supplanted by authorized state-issued requirements. Ohio will issue permits for all provisions for which it is authorized and will administer the permits that it issues. Ohio continues to have enforcement responsibility under its state hazardous waste management program for violations of that program, but EPA retains authority under RCRA sections 3007, 3008, 3013 and 7003 (42 U.S.C. 6927, 6928, 6934 and 6973) which includes, among others, the authority to:

• Conduct inspections and require monitoring, tests, analyses or reports;

• Enforce RCRA requirements and suspend or revoke permits; and

• Take enforcement action regardless of whether Ohio has taken its own actions.

Today's action to approve these revisions does not impose additional requirements on the regulated community because the regulations included in the program revisions affected by this authorization decision are already effective under state law and are not changed by today's action.

Ohio will issue permits for all provisions for which it is authorized and will administer the permits that it issues. EPA will continue to administer any RCRA hazardous waste permits or portions of permits that EPA issued prior to the effective date of this authorization, until they expire or are terminated. EPA will not issue any more new permits or new portions of permits for the provisions for which Ohio is authorized after the effective date of this authorization. EPA will continue to implement and issue permits for HSWA requirements for which Ohio is not yet authorized.

Ohio initially received final authorization effective June 30, 1989 (54 FR 27170-27174, June 28, 1989) to implement the RCRA hazardous waste management program. We granted authorization for changes to Ohio's program effective June 7, 1991 (56 FR 14203, April 8, 1991), as corrected June 7, 1991 (56 FR 28808, June 19, 1991); effective September 25, 1995 (60 FR 51244, July 27, 1995); and effective December 23, 1996 (61 FR 54950, October 23, 1996).

Ohio is not authorized to carry out its hazardous waste program in “Indian country,” as defined in 18 U.S.C. 1151. Indian country includes:

1. All lands within the exterior boundaries of Indian reservations within or abutting the State of Ohio;

2. Any land held in trust by the U.S. for an Indian tribe; and

3. Any other land, whether on or off an Indian reservation that qualifies as Indian country. Therefore, this action has no effect on Indian country. EPA retains the authority to implement and administer the RCRA program in Indian country. However, at this time, there is no Indian country within the State of Ohio.

Codification is the process of placing a state's statutes and regulations that comprise the state's authorized hazardous waste program into the Code of Federal Regulations. We do this by referencing the authorized state rules in 40 CFR part 272. We reserve the amendment of 40 CFR part 272, subpart P, for authorization of Ohio's program revisions until a later date.

The Office of Management and Budget has exempted RCRA authorization from the requirements of Executive Order 12866 (58 FR 51735, October 4, 1993), and therefore this action is not subject to review by OMB. Furthermore, this action is not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001) because it is not a significant regulatory action under Executive Order 12866. This action authorizes State requirements for the purpose of RCRA 3006 and imposes no additional requirements beyond those imposed by state law. This authorization will effectively suspend the applicability of certain federal regulations in favor of Ohio's program, thereby eliminating duplicate requirements in the state. Authorization will not impose any new burdens on small entities. Accordingly, I certify that this action will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). Because this action authorizes pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). This action does not have tribal implications within the meaning of Executive Order 13175 (65 FR 67249, November 9, 2000). This action will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999), because it merely authorizes state requirements as part of the state RCRA hazardous waste program without altering the relationship or the distribution of power and responsibilities established by RCRA. This action also is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997), because it is not economically significant and it does not make decisions based on environmental health or safety risks. This action does not include environmental justice-related issues that require consideration under Executive Order 12898 (59 FR 7929, February 16, 1994).

Under RCRA section 3006(b), EPA grants a state's application for authorization as long as the state meets the criteria required by RCRA. It would thus be inconsistent with applicable law for EPA, when it reviews a state authorization application, to require the use of any particular voluntary consensus standard in place of another standard that otherwise satisfies the requirements of RCRA. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272) do not apply. As required by section 3 of Executive Order 12988 (61 FR 4729, February 7, 1996), in issuing this rule, EPA has taken the necessary steps to eliminate drafting errors and ambiguity, minimize potential litigation, and provide a clear legal standard for affected conduct. EPA has complied with Executive Order 12630 (53 FR 8859, March 15, 1988) by examining the takings implications of the rule in accordance with the “Attorney General's Supplemental Guidelines for the Evaluation of Risk and Avoidance of Unanticipated Takings' issued under the executive order. This action does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

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

1. EPA has established an official public docket for this direct final rule under Docket ID No. SFUND-2002-0007. The official public docket consists of the documents specifically referenced in this rule and other information related to this direct final rule. Although a part of the official docket, the public docket does not include Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. The official public docket is the collection of materials that is available for public viewing at the EPA Docket Center located at 1301 Constitution Ave. NW, Washington, DC 20004. This Docket Facility is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding federal holidays. To review docket materials, it is recommended that the public make an appointment by calling (202) 566-0276. The public may copy a maximum of 100 pages from any regulatory docket at no charge. Additional copies cost $0.15/page.

2. Electronic Access. You may access this Federal Register document electronically through the EPA Internet under the Federal Register listings at http://www.epa.gov/fedrgstr/ .

You may use EPA Dockets at http://www.epa.gov/edocket/ to access the index listing of the contents of the official public docket, and to access those documents in the public docket that are available electronically. Once in the system, select “search,” then key in the docket identification number.

Certain types of information will not be placed in the EPA Dockets. Information claimed as CBI, and other information whose disclosure is restricted by statute, which is not included in the official public docket, will not be available for public viewing in EPA's electronic public docket. EPA's policy is that copyrighted material will not be placed in EPA's electronic public docket but will be available only in printed, paper form in the official public docket. To the extent feasible, publicly available docket materials will be made available in EPA's electronic public docket. When a document is selected from the index list in EPA Dockets, the system will identify whether the document is available for viewing in EPA's electronic public docket. Although not all docket materials may be available electronically, you may still access any of the publicly available docket materials through the docket facility identified above.

For public commenters, it is important to note that EPA's policy is that public comments, whether submitted electronically or in paper, will be made available for public viewing in EPA's electronic public docket as EPA receives them and without change, unless the comment contains copyrighted material, CBI, or other information whose disclosure is restricted by statute. When EPA identifies a comment containing copyrighted material, EPA will provide a reference to that material in the version of the comment that is placed in EPA's electronic public docket. The entire printed comment, including the copyrighted material, will be available in the public docket.

Public comments submitted on computer disks that are mailed or delivered to the docket will be transferred to EPA's electronic public docket. Public comments that are mailed or delivered to the Docket will be scanned and placed in EPA's electronic public docket. Where practical, physical objects will be photographed, and the photograph will be placed in EPA's electronic public docket along with a brief description written by the docket staff. For additional information about EPA's electronic public docket visit EPA Dockets online or see 67 FR 38102, May 31, 2002.

You may submit comments electronically, by mail, or through hand delivery/courier. To ensure proper receipt by EPA, identify the appropriate docket identification number in the subject line on the first page of your comment. Please ensure that your comments are submitted within the specified comment period. Comments received after the close of the comment period will be marked “late.” EPA will not consider late comments in formulating a final decision.

1. Electronically. If you submit an electronic comment as prescribed below, EPA recommends that you include your name, mailing address, and an e-mail address or other contact information in the body of your comment. Also include this contact information on the outside of any disk or CD ROM you submit, and in any cover letter accompanying the disk or CD ROM. This ensures that you can be identified as the party submitting the comment and allows EPA to contact you in case EPA cannot read your comment due to technical difficulties or needs further information on the substance of your comment. EPA's policy is that EPA will not edit your comment, and any identifying or contact information provided in the body of a comment will be included as part of the comment that is placed in the official public docket, and made available in EPA's electronic public docket. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment.

Your use of EPA's electronic public docket to submit comments to EPA electronically is EPA's preferred method for receiving comments. Go directly to EPA Dockets at http://www.epa.gov/edocket , and follow the online instructions for submitting comments. To access EPA's electronic public docket from the EPA Internet Home Page, select “Information Sources,” “Dockets,” and “EPA Dockets.” Once in the system, select “search,” and then key in Docket ID No. SFUND-2002-0007. The system is an “anonymous access” system, which means EPA will not know your identity, e-mail address, or other contact information unless you provide it in the body of your comment.

2. E-mail. Comments may be sent by electronic mail (e-mail) to Superfund.Docket@epamail.epa.gov. Make sure this electronic copy is in an ASCII format that does not use special characters or encryption. Cite the docket Number SFUND-2002-0007 in your electronic file. In contrast to EPA's electronic public docket, EPA's e-mail system is not an “anonymous access” system. If you send an e-mail comment directly to the Docket without going through EPA's electronic public docket, EPA's e-mail system automatically captures your e-mail address. E-mail addresses that are automatically captured by EPA's e-mail system are included as part of the comment that is placed in the official public docket, and made available in EPA's electronic public docket.

3. Disk or CD ROM. You may submit comments on a disk or CD ROM that you mail to the mailing address identified above. These electronic submissions will be accepted in WordPerfect or ASCII file format. Avoid the use of special characters and any form of encryption.

4. By Mail. Send two (2) copies of your comments to: EPA Docket Center, U.S. Environmental Protection Agency Headquarters, Mail Code 5305T, 1200 Pennsylvania Ave., NW., Washington, DC, 20460, Attention Docket ID No. SFUND-2002-0007.

5. By Hand Delivery or Courier. Deliver your comments to: EPA Docket Center, EPA West Building, Room B-102, 1301 Constitution Ave., NW., Washington, DC, 20007. Attention Docket ID No. SFUND-2002-0007. Such deliveries are only accepted during the Docket's normal hours of operation as identified above.

Entities potentially regulated by this action include public and private parties who, as bona fide prospective purchasers, contiguous property owners, or innocent landowners, purchase property and intend to claim a limitation on CERCLA liability in conjunction with the property purchase. In addition, any entity conducting a site characterization or assessment with a brownfields grant awarded under CERCLA section104(k)(2)(B)(ii) will be affected by today's action. This includes state, local and Tribal governments that receive brownfields site assessment grants. A summary of the potentially affected industry sectors (by NAICS codes) is displayed in the table below.

The list of potentially affected entities in the above table may not be exhaustive. Our aim is to provide a guide for readers regarding those entities that EPA is aware potentially could be affected by this action. However, this action may affect other entities not listed in the table. If you have questions regarding the applicability of this action to a particular entity, consult the person listed in the preceding section entitled FOR FURTHER INFORMATION CONTACT.

This direct final rule clarifies provisions included in section 223 of the Small Business Liability Relief and Brownfields Revitalization Act which amends section 101(35)(B) of CERCLA (42 U.S.C. 9601(35)) and clarifies interim standards for the conduct of “all appropriate inquiry” for obtaining CERCLA liability relief and for conducting site characterizations and assessments with the use of brownfields grant monies.

On January 11, 2002, President Bush signed the Small Business Liability Relief and Brownfields Revitalization Act (“the Brownfields Law”). In general, the Act amends CERCLA and provides funds to assess and clean up brownfields sites; clarifies CERCLA liability provisions related to innocent purchasers of contaminated properties; and provides funding to enhance State and Tribal clean up programs. In part, subtitle B of Title II of the Act revises some of the provisions of CERCLA section 101(35) and provides some Superfund liability limitations for bona fide prospective purchasers and contiguous property owners, in addition to clarifying the requirements necessary to establish the innocent landowner defense under CERCLA. Among the requirements added to CERCLA is the requirement that such parties undertake “all appropriate inquiry” into prior ownership and use of certain property.

The Act requires EPA to develop regulations within two years which will establish standards and practices for how to conduct all appropriate inquiry. In addition, in the Brownfields Law, Congress established, as the Federal interim standard for conducting all appropriate inquiry, the procedures of the American Society for Testing and Materials (ASTM) including Standard E1527-97 (entitled “Standard Practice for Environmental Site Assessment: Phase 1 Environmental Site Assessment Process”). This interim standard applies to properties purchased on or after May 31, 1997 until EPA promulgates Federal regulations establishing standards and practices for conducting all appropriate inquiry.

Today's direct final rule clarifies that persons may use the current ASTM standard, E1527-2000 for conducting all appropriate inquiry and establishing the innocent landowner defense under CERCLA section 101(35)(B) for properties purchased on or after May 31, 1997, while continuing also to recognize use of ASTM's previous standard, E1527-97.

Following enactment of the Brownfields Law, EPA received inquiries from interested parties expressing concerns that the ASTM standard for all appropriate inquiry that was cited in the Act ( i.e. , ASTM's 1997 standard) has been updated and consequently is no longer available from ASTM. The ASTM standard cited in the Brownfields Law has been updated and replaced with ASTM's revised standard, “Standard E1527-2000.” The revised standard has the same name as the previous standard. The revised standard is not significantly different from the previous standard. Revisions to the 1997 standard that are incorporated into the E1527-2000 updated standard include provisions for potential expansion of an assessment, guidance for better identification of the purpose of the assessment, a provision for inquiring about historical remediation, a provision for facilitating reconstruction of the assessment by a different assessor, and amended guidance for selecting an environmental professional. A summary of the revisions made to the 1997 ASTM standard and included in the 1527-2000 standard is provided in the document “Overview of Additions and Modifications to ASTM 1527-2000 Standard from the 1997 ASTM Standard.” A copy of this document, as well as an annotated copy of the 1997 ASTM standard identifying the specific modifications incorporated into the ASTM 2000 standard, is included in the regulatory docket for today's rule.

EPA believes that it is consistent with Congressional intent to require the use of the most current standards available until EPA has promulgated its standard and not to require the use of standards that have been superseded or that generally are not available. In addition, Congress did not intend to place an undue burden on interested parties seeking to obtain and implement the standard. Given that the version of the ASTM standard cited in the Brownfields Law is no longer available, such an undue burden may occur, if EPA does not undertake today's action. In particular, recipients of grant monies awarded under the new Brownfields Law may experience an undue burden, if required to comply with the ASTM standard that no longer is available or recognized as the current industry standard. Therefore, with today's action, EPA is clarifying that for the purposes of CERCLA section 101 (35)(B), until the Agency promulgates regulations implementing standards for all appropriate inquiry, parties may use either the procedures provided in ASTM E1527-2000, entitled “Standard Practice for Environmental Site Assessment: Phase I Environmental Site Assessment Process,” or the standard ASTM E1527-97. EPA has determined that it is reasonable to promulgate this clarification as a direct final rule that is effective immediately, rather than delay promulgation of the clarification until after receipt and consideration of public comments, to avoid any further confusion with regard to the acceptable standard for conducting all appropriate inquiry and to ensure that new grant recipients are not placed under any undue burden.

EPA is publishing this direct final rule because the Agency wants to reduce any undue burden placed upon grant recipients. In addition, the Agency views this as a noncontroversial action and anticipates no adverse comment. We believe that today's action is reasonable and can be promulgated without consideration of public comment because it: (1) Allows for the use of the updated version of the standard cited in the Brownfields Law, while also allowing the use of the former version, and the updated version of the standard is similar to, and not significantly different than, the previous standard; (2) reduces the burden of obtaining an appropriate standard, given that the standard cited in the Brownfields Law is no longer available; and (3) this action merely clarifies an interim standard that is effective only until EPA promulgates a final rule replacing the interim standard.

Although we view today's action as noncontroversial, in the “Proposed Rules” section of today's Federal Register , we are publishing a separate proposed rule containing the clarification summarized above. That proposed rule will serve as the proposal to be revised, if adverse comments are received. If EPA does not receive adverse comment in response to this rule prior to February 24, 2003, this rule will become effective on March 25, 2003, without further notice. If EPA receives adverse comment, we will publish a timely withdrawal of this rule in the Federal Register informing the public that the rule will not take effect. We will address all public comments in a subsequent final rule. We will not institute a second comment period on this action. Any parties interested in commenting must do so at this time and before February 24, 2003.

EPA also is announcing today its progress in developing regulatory standards for conducting “all appropriate inquiry.” The Brownfields Law requires that EPA promulgate such standards within two years of enactment of the law, or by January 2004. Congress included in the Brownfields Law a list of criteria that the Agency must address in the regulations establishing standards and practices for conducting all appropriate inquiry (section 101(35)(2)(B)(ii)). The Act also requires that parties receiving funding under the Federal brownfields program to conduct site assessments must conduct the site assessment in accordance with the standards and practices for all appropriate inquiry established under the same provision of the Act.

EPA is soliciting the advice and input of public and private stakeholder groups in developing the regulations for conducting all appropriate inquiry in accordance with the criteria set forth by Congress. We understand that voluntary standards developed by standards developing organizations, such as the ASTM 1527-2000 standard, are available and are currently being used to conduct all appropriate inquiry in conjunction with private real estate property transactions. In addition, site assessment protocols have been established under the Federal Superfund remedial action and RCRA corrective action programs, as well as within State clean up programs. We intend to develop Federal regulations that build upon the depth of experience accrued in both the public and private sectors in implementing these standards and programs. We believe that building upon currently available private sector standards for undertaking all appropriate inquiry as well as building on the experience of state and Federal government site assessment programs is the most efficient and economical way to develop Federal regulatory standards that will both meet the criteria set in the Brownfields Law and ensure minimal disruption to the private market and State and Federal site assessment programs.

To ensure that we obtain a diverse array of input from both private sector stakeholders and state program officials, EPA is developing the federal regulations by soliciting private and public sector input under the convening stage of the negotiated rulemaking process, and may supplement our information gathering through the conduct of public meetings. We initiated the convening stage of a negotiated rulemaking process to identify appropriate stakeholder groups and solicit advice and input from experienced public and private sector users of similar standards. Following an evaluation of stakeholder interests and input during the convening process, we either will announce our intent to continue with a negotiated rulemaking process, or announce our intent to solicit public input, by way of an additional notice or a public meeting, on options for a proposed rulemaking that will set standards for all appropriate inquiry. We anticipate announcing our intended approach for the development of a proposed rulemaking in the Federal Register during the winter of 2003. Any questions regarding our future regulatory effort should be directed to the parties listed above in the section entitled FOR FURTHER INFORMATION CONTACT.

a. Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and is therefore not subject to review by the Office of Management and Budget.

b. This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 FR U.S.C. 3501 et seq. )

c. The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the APA 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. This action will not have a significant impact on a substantial number of small entities because it does not create any new requirements.

d. Because the purpose of today's action is to make a clarification that does not create any new requirements it has no economic impact and is not subject to sections 202 and 205 of the Unfunded Mandates Reform Act of 1995 (UMRA) (Pubic Law 104-4). In addition, this action does not significantly or uniquely affect small governments or impose a significant intergovernmental mandate, as described in sections 203 and 204 of UMRA.

e. This rule will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999).

f. This rule does not have tribal implications, as specified by Executive Order 13175 (65 FR 67249, November 6, 2000).

g. This rule is not subject to Executive Order 13045 (62 FR 1985, April 23, 1997), because it is not economically significant.

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

i. This action does involve technical standards; therefore, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272) apply. The NTTAA was signed into law on March 7, 1996 and, among other things, directs the National Institute of Standards and Technology (NIST) to bring together federal agencies as well as state and local governments to achieve greater reliance on voluntary standards and decreased dependence on in-house standards. It states that use of such standards, whenever practicable and appropriate, is intended to achieve the following goals: (a) Eliminate the cost to the government of developing its own standards and decrease the cost of goods procured and the burden of complying with agency regulation; (b) provide incentives and opportunities to establish standards that serve national needs; (c) encourage long-term growth for U.S. enterprises and promote efficiency and economic competition through harmonization of standards; and (d) further the policy of reliance upon the private sector to supply Government needs for goods and services. The Act requires that federal agencies adopt private sector standards, particularly those developed by standards developing organizations (SDOs), wherever possible in lieu of creating proprietary, non-consensus standards. Today's action is compliant with the spirit and requirements of the NTTAA, given that the interim standard for all appropriate inquiry that is the subject of today's action is a private sector standard developed by a standard developing organization. Today's action allows for the use of the American Society for Testing and Materials (ASTM) standard known as Standard E1527-2000 and entitled “Standard Practice for Environmental Site Assessment: Phase 1 Environmental Site Assessment Process” as the interim standard for conducting all appropriate inquiry for properties purchased on or after May 31, 1997, or in the alternative, the use of Standard E1527-97, and entitled “Standard Practice for Environmental Site Assessment: Phase 1 Environmental Site Assessment Process.”

j. Today's action does not involve special consideration of environmental justice related issues as required by Executive Order 12898 (59 FR 7629, February 16, 1994).

k. The Congressional Review Act (5 U.S.C. 801 et seq. ), as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA submitted a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . A Major rule cannot take effect until 60 days after it is published in the Federal Register . This action is not a “major rule” as defined by 5 U.S.C. 804(2). This rule will be effective March 25, 2003 unless EPA publishes a withdrawal in the Federal Register .

In the December 19, 1997 Federal Register (62 FR 66726), we published a proposed rule entitled “Medicare and Medicaid Programs; Hospital Conditions of Participation; Provider Agreements and Supplier Approval” to revise the entire set of Conditions of Participation (CoPs) for hospitals. The CoPs are the requirements that hospitals must meet to participate in the Medicare and Medicaid programs. The CoPs are intended to protect patient health and safety and to ensure that high quality care is provided to all patients. The State survey agencies (SAs), in accordance with section 1864 of the Social Security Act (the Act), survey hospitals to assess compliance with the CoPs. The SAs conduct surveys using the instructions in the State Operations Manual (SOM), (Health Care Financing Administration (HCFA) Publication No. 7). The SOM contains the regulatory language of the CoPs as well as interpretive guidelines and survey procedures and probes that elaborate on regulatory intent and give guidance on how to assess provider compliance. Under § 489.10(d), the SAs determine whether hospitals have met the CoPs and report their recommendations to us.

Under the authority of section 1865 of the Act and the regulations at § 488.5, hospitals accredited by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) or the American Osteopathic Association (AOA) are deemed to meet the requirements in the CoPs, and therefore, are not routinely surveyed for compliance by the SAs. However, all Medicare and Medicaid participating hospitals are required to be in compliance with our CoPs regardless of their accreditation status.

In 1999, the Institute of Medicine (IOM) published a report entitled “To Err is Human: Building a Safer Health System,” which highlighted patient injuries associated with medical errors. In this report, the IOM defined an error as the following: “An error is defined as the failure of a planned action to be completed as intended or the use of a wrong plan to achieve an aim.” The IOM report also indicated that an estimated 44,000 to 98,000 Americans die annually as a result of preventable medical errors. The results of the report have generated substantial media, public, Congressional, and Departmental concerns regarding patients health and safety.

As recommended by the IOM, the Quality Interagency Coordination Task Force (QuIC), evaluated and responded to the recommendations in the IOM report with a strategy to identify patient safety issues and to reduce the number of errors by 50 percent over the next 5 years. In an effort to thoroughly consider all of the relevant issues related to medical errors, the QuIC expanded the IOM's definition to read as follows: “An error is defined as the failure of a planned action to be completed as intended or the use of a wrong plan to achieve an aim. Errors can include problems in practice, products, procedures, and systems.” We have adopted the QuIC revised definition of an error.

Accordingly, the QAPI CoP has been separated from the larger set of CoPs and published in an accelerated timeframe because it provides the framework to implement the Administration's initiatives designed to help distinguish and avoid mistakes in the healthcare delivery system. In addition, we are requiring that a hospital's QAPI program be an ongoing program that shows measurable improvement in indicators for which there is evidence that they will improve health outcomes and identify and reduce medical errors. The remaining provisions of the hospital CoPs will be published at a later date.

Many people believe that medical errors involve medication (for example, an incorrect or improper dosage of medicine) or surgical errors (for example, incorrect site amputation). However, there are many other types of medical errors including—

• Diagnostic errors (for example, misdiagnoses leading to an incorrect choice of therapy or treatment, failure to use an indicated diagnostic test, misinterpretation of test results, and failure to properly act on abnormal test results);

• Equipment failures (for example, a defibrillator without working batteries, or inadvertent dosing of medications in a short time frame due to intravenous pumps with valves that are easily dislodged);

• Infections (for example, nosocomial and post-surgical wound infections);

• Blood transfusion-related injuries (for example, hemolytic blood transfusion reactions); and

• Deaths due to seclusion or restraint use.

Harm experienced while receiving healthcare services is a growing concern for the American public. While both the public and the private sectors have made notable contributions to reducing preventable medical errors, additional and aggressive efforts are needed to further reduce these types of incidents. Therefore, we are publishing this final rule, with some modification in response to comments, to guide improved patient safety in the hospital setting.

Medical errors can be difficult to recognize in healthcare due to the variations in individuals' responses to treatment. In addition, medical professionals may not recognize that a particular product or procedure may have contributed to or caused a problem since the patient is already ill or the event appears unrelated to the product or procedure. Because medical errors usually affect only a single patient at a time, they are treated as isolated incidents and little attention, if any, is drawn to these problems. Finally, the healthcare community acknowledges that errors are most likely under reported due to malpractice threats and practitioner confidentiality concerns. All of these factors explain the ongoing invisibility of medical errors despite the existence of research that documents their high prevalence. The IOM report recommended the following:

• Action to reduce preventable medical errors;

• Implementation of a system of public accountability;

• The development of a knowledge base system regarding medical errors; and

• A culture change in healthcare organizations in order to promote the recognition of errors and improve patient safety.

The proposed revision of the hospital CoPs is part of a larger effort to bring about improvement in the quality of care furnished to beneficiaries through a patient-centered approach to healthcare delivery, quality improvement, and integration of care, as well as our quality of care oversight responsibilities.

The fundamental purpose of the QAPI CoP is to set a clear expectation that hospitals must take a proactive approach to improve their performance and focus on improved patient care. We stress improvement in systems in order to improve processes and patient outcomes. This is not meant to suggest that we plan to abandon our regulatory role. In fact, this approach reinforces our primary responsibility for assuring patient safety and protection through our delegated regulatory authority.

We must note that accreditation surveys for deemed status performed by JCAHO, AOA, and any other national accrediting organization recognized by us in the future, are performed under an extension of our authority. Onsite accreditation surveys may serve as the basis for enforcement activity since accreditation organizations' standards are determined by us to meet or exceed our own CoPs. SAs acting as our regulatory agents perform validation, recertification, and complaint surveys in hospitals to determine compliance with the CoPs.

During surveys the QAPI program will be evaluated for its hospital-wide effectiveness on the quality of care provided. The impact of the program will be assessed during a survey, as surveyors are looking at data gathered at different points in time, compared, and actions taken based on that comparison. The hospitals will be analyzing data and evaluating the effectiveness of their own program continually.

Whenever the state agency surveyors enter the hospital to conduct a survey they will evaluate the hospital's program and its own internal evaluation process along with an evaluation of all hospital services. When there is an onsite review of the hospital's QAPI program, the surveyors determine whether or not the hospital is meeting the QAPI CoP requirements. Following the existing survey process and procedures, if the SA determines that the hospital is significantly out of compliance with the QAPI CoP requirements, the hospital will be scheduled for termination from the Medicare and Medicaid programs. The hospital is then given the opportunity to submit a plan of correction. The SA would conduct a follow-up survey to assess whether the hospital is now in compliance with all of the requirements, prior to the actual termination taking place.

Three to five years after the implementation of this final rule, we will assess Online Survey Certification and Reporting System (OSCAR) data and evaluate how well hospitals have implemented the QAPI process. During this time, we will also assess the state of the art for quality improvement practices.

Similarly, we view the Quality Improvement Organizations (QIOs) (formally known as Peer Review Organizations (PROs)) operating in a largely “penalty-free” environment, as our quality improvement agents. Each State has a QIO that contracts with Medicare to monitor and improve the care delivered to beneficiaries. Each QIO operates under a contract know as a “statement of work” governed by extensive portions of Titles 11 and 18 of the Act, as amended by the Peer Review Improvement Act of 1982. Specific QIO tasks fall under three areas of responsibility, as provided in the Act and reiterated in the statement of work:

• Improve quality of care for beneficiaries by ensuring that beneficiary care meets professionally recognized standards of health care;

• Protect the integrity of the Medicare trust fund by ensuring that Medicare only pays for services and items that are reasonable and medically necessary and that are provided in the most appropriate (for example, economical setting);

• Protect beneficiaries by expeditiously addressing individual cases, such as beneficiary complaints, provider-issued notices of noncoverage, Emergency Medical Treatment and Active Labor Act (EMTALA) violations and other statutory responsibilities.

We look to the QIOs to advance quality of care in the hospital environment. We view accreditation deeming activities as part of our overall responsibility to certify providers for program participation.

Section 1861(e)(1) through (9) of the Act: (1) Defines the term “hospital”; (2) lists the statutory requirements that a hospital must meet to be eligible for Medicare participation; and (3) specifies that a hospital must also meet other requirements as the Secretary finds necessary in the interest of the health and safety of the hospital's patients. Under this authority, the Secretary has established in the regulations 42 CFR part 482, the requirements that a hospital must meet to participate in the Medicare program. Under section 1865 of the Act and 42 CFR 488.5 of the regulations, hospitals that are accredited by the JCAHO or the AOA are not routinely surveyed by SAs for compliance with the CoPs but are deemed to meet most of the requirements based on their accreditation.

Section 1905(a) of the Act provides that Medicaid payments may be applied to hospital services. The regulations at § 440.10(a)(3)(iii) require hospitals to meet the Medicare CoPs to qualify for participation in Medicaid.

We proposed revisions of the CoPs that emphasized lessening Federal regulation: (1) To eliminate unnecessary structural and process requirements; (2) focus on outcomes of care; (3) allow greater flexibility to hospitals and practitioners to meet quality standards; and (4) place a strong emphasis on quality assessment and performance improvement.

The proposed provisions of the QAPI CoPs included three standards that addressed the scope and direction of the performance improvement program, discussed the hospital entity that is responsible and accountable for the QAPI activities, and retained the current requirement on autopsies (existing § 482.22(d)). In addition, we proposed 12 critical areas in which hospitals must, at a minimum, objectively evaluate their performance.

We solicited comments on the feasibility of national outcome-based performance measures for hospitals and the minimum level requirements for performance improvement activities. We did not include in the hospital CoPs any requirement for hospitals to collect and report certain standard data items that could produce quality of care predictors in the future. However, we did invite public comment on the following seven key questions regarding the development and implementation of hospital-based performance measures.

(1) Should CMS assume a leadership role in developing the measures?

(2) How should CMS proceed to develop and implement the measures?

(3) If CMS does not assume a leadership role in this area and hospitals invest in the development of multiple systems, would the overall burden be greater than if a single system had been imposed at the outset?

(4) If CMS does not assume a leadership role in this area and individual hospitals adopt multiple systems that produce nonstandardized data, to what extent would it be difficult to make comparisons between hospitals?

(5) Should CMS require or encourage hospitals to use the standardized measures that some accredited hospitals are using?

(6) Would it be appropriate for CMS to include “placeholder” language in the revised CoPs concerning the eventual need for hospitals to report relevant data, or is this premature?

(7) If CMS includes “placeholder” language, what changes should we make to these proposed requirements to set the stage for the development and implementation of such a system?

We received over 1,200 comments in response to the QAPI requirements presented in the December 19, 1997 proposed rule. These comments were from hospitals, professional organizations, accrediting bodies, practitioners, and other individuals. Summaries of the public comments received and our responses to those comments are set forth below.

We asked for comments on the fundamental shift in our regulatory focus for quality from the current approach that identifies and corrects problems in patient care delivery to an approach that emphasizes improving patient outcomes and satisfaction using a data-driven QAPI program.

Comment: The majority of commenters expressed support for our change in philosophy and the introduction of the new QAPI CoP, stating this approach will create more consistency between accrediting and regulatory bodies' standards.

Response: We appreciate the support. One of our initiatives is to revise many of the provider CoPs, including hospitals, so that they focus on outcomes of care and eliminate unnecessary procedural requirements.

Comment: A commenter requested clarification regarding whether this requirement applies to all patients or only Medicare patients.

Response: This requirement as well as all of the other hospital CoPs applies to all Medicare- and Medicaid-participating hospitals; therefore, all patients receiving services provided by these hospitals are protected by this requirement. Moreover, these standards govern quality of care issues for the hospital and its practitioners and contractors.

Comment: Many commenters were against promulgating a final regulation that is too prescriptive. They emphasized that what is needed, above all, is flexibility to design a program that meets the needs of hospitals of varying sizes and specialties, rather than a “one-size-fits-all” regulation.

Response: We agree and believe that the proposed QAPI condition was designed to incorporate flexibility with the appropriate amount of accountability. We have made several revisions to the QAPI condition, to increase its flexibility and accountability, and minimize burden.

Comment: Some commenters stated that the proposed QAPI condition is process-oriented and conflicts with our intent of reducing process-oriented requirements. In addition, the commenters stated that we should allow hospitals to pursue quality improvement in whatever manner they choose.

Response: We recognize that by permitting hospitals to evaluate themselves in the 12 specific areas we believe are critical to hospital performance, the proposed QAPI appeared prescriptive in nature. Based on public comments, we have deleted the proposed requirement for hospitals to assess their performance in 12 specific areas. We agree that hospitals should be able to pursue quality improvement in a manner of their choosing. We encourage hospitals to identify and resolve performance problems specific to their situations in the most effective and efficient manner possible. The provisions also require collaboration between all hospital departments and services, to ensure that all entities are included, to the greatest extent possible, in the QAPI program. After monitoring, tracking, and assessing performance in all areas of hospital service and operations, the hospital has the flexibility to design a program to address its specific needs. We also believe giving the hospital flexibility to design its own program provides the hospital with the flexibility to adopt its own best practices in specific areas, (for example, hospital staff education, record reviews, and information technology). We believe that it is critically important that hospitals examine the adequacy of their information technology and identify opportunities to improve and expand the use of such technologies to prevent medical errors and improve quality of care. This Administration is committed to working with other public and private stakeholders to develop means for improving and expanding the use of information technologies (for example, bar coding and computerized physician order entry systems) in health care settings.

Comment: Some commenters were concerned that our proposal to have an outcome-oriented and patient-centered regulatory approach would eliminate structure and standardized practice patterns and ultimately jeopardize patient safety.

Response: We did not intend to suggest that hospitals eliminate the standardization of care when appropriate and effective. We believe that one of the most effective means of reducing errors is by standardizing processes wherever possible. For example, by standardizing drug doses and times of administration, the advantages in efficiency as well as in error reduction are obvious. By mandating a QAPI CoP that focuses on performance improvement activities, we expect hospitals to conduct systematic internal QAPI activities including the application of standards of care and best practices throughout the institution. For example, if standardizing insulin coverage sliding scales in the intensive care unit decreased the incidence of hypoglycemia by 25 percent, we would expect the hospital to determine other areas that would benefit from the standardized approach. After making this determination, hospitals should implement and track actions and determine a mechanism to assure achievement of goals and sustained improvement.

Comment: A commenter suggested strengthening the regulation text by adding the phrase “hospital-wide” as used in the preamble.

Response: We agree with the commenter and have made the appropriate changes to § 482.21. The change in language recognizes the importance of assuring that the QAPI program reflects the complexity of the hospital's organization and services.

Comment: Some commenters believed that medical staff provisions should not be deleted as they are not entirely captured in this QAPI provision.

Response: In the December 19, 1997 proposed rule, we proposed to eliminate several process-oriented requirements, currently set forth in §§ 482.12 and 482.22, relating to the composition, organization, and conduct of a hospital's medical staff. We have decided to defer any decision regarding the proposal to delete these requirements until the remaining hospital CoPs are published in their entirety.

We solicited comments on other possible approaches to the QAPI condition to ensure that hospitals invest substantial effort in QAPI. In addition, we solicited comments on how we might offer a more precise explanation of our expectations.

Comment: Several commenters made recommendations for more precise ways to measure performance. One commenter suggested that we use historical billing data to establish minimum benchmarks or standards of performance as a basis for the performance-based reimbursement system, stating that financial incentives are the best way to motivate change and improve performance. Other commenters stated that a combination of outcome data and the assessment of structured quality improvement processes would be more effective. However, most commenters overwhelmingly expressed concerns that we should develop a final requirement that would allow for flexibility.

Response: We appreciate the commenters' suggestions for more precise ways to measure performance but we believe that these suggestions are more prescriptive than the proposed strategy. In addition, we currently do not have a basis or statutory authority for a performance-based reimbursement system based on benchmarks developed from historical billing data. We agree that using outcome data in combination with assessing the structure of the QAPI program and processes of the hospital would be very effective. However, standardized outcome measures that can be used nationwide have not been established to date so this is not feasible at this time. We believe that the QAPI requirements presented in this final rule address the flexibility concerns of the majority of commenters.

Comment: Several commenters suggested creating a transition period in order to ease the burden of creating a QAPI program.

Response: Since hospitals are currently required to have an “effective, hospital-wide quality assurance program” in accordance with § 482.21, we do not believe a transition period is necessary.

Comment: Many commenters stated the proposed QAPI requirements will substitute high-level hospital-wide QI processes for more effective, focused, department-level performance improvement. These commenters suggested strengthening the language by adding sentinel events to the minimum performance elements.

Response: We agree that hospitals should consider adverse events in the development of its QAPI strategy. We expect hospitals to implement an internal error reduction system. Adverse event tracking and analysis of underlying causes are an effective way to determine issues involving medical errors. We emphasize the need for hospitals to assess processes and systems that affect patient care and quality. Section 482.21(c) requires the hospital(s) to establish priorities, and identify areas of risk that affect patient safety. We believe that the identification of adverse events and analyses of events must be an integral part of the hospital's QAPI program, as the analyses will lead to better protections for patients.

JCAHO's performance improvement strategy is consistent with our approach. Their standards require hospitals to collect data to monitor performance of processes that involve risks or may result in sentinel events. Similarly, § 482.21(c) requires hospitals to consider prevalence and severity of identified problems and to give priority to improvement activities that affect clinical outcomes, patient safety, and quality of care. In order to meet the requirements, a hospital should consider information from its own risk-management data or from external sources of information (for example, hospital industry data on problem-prone processes, JCAHO's list of frequently occurring sentinel events; data from the National Patient Safety Foundation) and quality indicators from the Healthcare Cost and Utilization Project (HCUP QIs), as possible data measures to assist hospitals in designing their QAPI programs pertinent data and information from our “science partner” the Agency for Healthcare Research and Quality (AHRQ) ( http://www.arhq.gov/data/hcup/qiact.htm ).

We proposed that the hospital's QAPI program consist of assessment activities in a minimum of 12 areas. We also asked for comments on the minimum content of the QAPI program.

Comment: We received many comments citing concerns in the medical community about the broad language of the proposed rule regarding minimum performance areas and associated projects, and the possibility that it could be interpreted to mean that hospitals must perform 12 simultaneous projects. Commenters stated that projects in all areas would be too prescriptive and burdensome, and suggested allowing hospitals to prioritize and implement improvement activities based upon self-assessment. It was stressed that small hospitals would have difficulty identifying measures predictive of outcomes in all 12 areas and low patient volumes in rural hospitals would produce data of little value.

Response: We proposed 12 specific areas of self-assessment, which we believe are critical to a hospital's evaluation of its performance. However, we gave serious consideration to commenters' concerns regarding burden and the misunderstanding of the self-assessment in the 12 areas and have eliminated this requirement. In this final rule, although we have not specifically prescribed areas to be assessed, the CoP requirement is for the hospital's QAPI program to be, but not be limited to, an ongoing program that shows measurable improvement in indicators for which there is evidence that they will improve health outcomes and identify and reduce medical errors. Section 482.21(c) requires that hospitals set priorities for performance improvement based on the prevalence and severity of identified problems. Hospitals are expected to assess all areas of hospital services and operations, and based on that information prioritize the improvement activities that most directly affect patient safety and clinical outcomes. The most important aspect of a QAPI program is the implementation of actions based on the hospital's assessment of its improvement needs. The hospital must use the data collected and make changes in its processes or programs to improve patient outcomes. When adverse outcomes are identified, hospitals must, when applicable, perform system and process analyses and take action to achieve and sustain long-term corrections. These actions could include changes in protocols and systems and staff education and training.

We recognize the special needs and circumstances of rural hospitals. We also recognize that the collection and analysis of clinical outcome data could represent some increase in burden on some hospitals, particularly on the nonaccredited hospitals that are subject to our survey process. Nonaccredited hospitals typically are smaller than most accredited hospitals, are located in sparsely populated areas, and may not have the resources for extensive data gathering and reporting. For these reasons, the framework established by the QAPI CoP is flexible enough to recognize the unique circumstances and characteristics of hospitals. The QAPI CoP affords the hospital the flexibility to identify processes targeted for improvement based on its unique needs, priorities and patients. Hospitals that have more resources may be able to produce more sophisticated measures that involve more complex issues, but the focus for all hospitals is that they make an aggressive and continuous effort to improve performance and address patient safety issues. Moreover, we would expect the processes targeted for improvement to change over time as the hospital succeeds in its initial efforts.

Comment: Some commenters agreed with our rationale for the inclusion of these areas stating these can point to opportunities for improvement in both hospital and practitioner performance.

Response: Although we agree that our rationale for listing these 12 areas represent identifiable opportunities around which a hospital could develop a QAPI program, we determined that a far more valuable approach, at this time, would be to allow hospitals the flexibility to identify their own areas to address. Characteristics of healthcare delivery are too diverse and hospitals strengths and weaknesses are too varied to take such a narrow approach.

Comment: We were asked to clarify how a hospital would show sustained improvement in all 12 areas, anticipating it would be too difficult to select measures to guarantee and improve patient outcomes.

Response: As stated above, we have eliminated the 12 areas presented in the proposed rule. One of the benefits of operationalizing a QAPI program is that, because it is a continuous process, it affords the hospital a mechanism for evaluating its own improvement efforts. Specifically, the process of improvement includes—

• Identification of an organization's critical patient care and services components;

• Application of performance measures that are predictive of quality outcomes that would result from delivery of the patient care and services; and

• Continuous use of a method of data collection and evaluation that identifies or triggers further opportunities for improvement.

Comment: Commenters requested that we clarify and define the list of 12 areas, but the overwhelming majority of commenters strongly encouraged the deletion of the list. These commenters argued it would be more effective to allow hospitals to assess, measure and analyze themselves, but concurred with the identification of hospital processes and functions that could produce valuable information. Alternatives were given such as the adaptation of JCAHO's standards, or us merely providing the components of the QAPI program and giving the hospital the flexibility to create a program of its own design.

Response: As stated previously, we have eliminated the list of 12 areas for self-assessment. The regulations provide the components of a QAPI program and allow for individual hospital flexibility in implementation.

Comment: Some commenters suggested that nonaccredited hospitals be exempt from QAPI requirements until we provide scientific evidence that participation in external measurement systems by nonaccredited hospitals improves patient care.

Response: We cannot relinquish our responsibility for assuring quality healthcare to all patients. We believe that we have provided hospitals with enough flexibility and have identified enough resources for improving the process of patient care to facilitate the development of an effective QAPI program by a hospital of any size. Therefore, we do not believe there is a need to differentiate our expectations for accredited and nonaccredited hospitals.

We proposed that hospitals use hospital-specific data (for example, medical record and committee information), including QIO, and other relevant data as an integral part of its QAPI program. In this final rule under § 482.21(b), program data, we use the phrase “quality indicator data including patient care data, and other relevant data,” since hospital-specific data, is covered under “other relevant data.” The infrastructure of performance improvement activities is based on the collection of data. Analysis of this data allows hospitals to identify trends, identify process variations, and assess performance patterns. We recognize there may be some costs associated with data collection, and realize it is not feasible nor desirable to collect data on everything. Therefore, we have given the hospital the flexibility to establish, through its priorities and needs, the areas on which to focus. Data collection should focus on areas of prevalence and the severity of identified problems, giving consideration to patient safety and quality of care. The governing body must determine priorities regarding which processes to monitor with data collection and the subsequent development of planned improvement efforts, as needed.

In the preamble to the proposed rule, we asked whether we should require a hospital to engage in a minimum number of improvement projects that are based upon their own performance assessments. In the proposed regulation text, we stated that hospitals must track performance to assure that improvements are sustained. We asked for comment on the advisability and necessity of such a requirement, and also on the best approaches to achieve this minimum level of effort. We also proposed that if a hospital chooses not to participate in a QIO project, it must be able to demonstrate, to the SA, a level of achievement through its own QAPI strategy comparable to or better than expected from QIO participation.

Comment: A commenter stated QAPI should not be required without the supporting scientific evidence showing QAPI improves patient care.

Response: The current quality assurance CoP (§ 482.21) has been in effect since 1986. At that time the healthcare industry as a whole embraced a quality assurance approach to measuring and improving the care delivered to patients. The 1986 CoP reflected state-of-the-art practices. Since that time, the healthcare industry has moved toward a QAPI approach in the delivery and measurement of patient care. The proposed rule was intended to update the existing quality assurance CoP to reflect current practice in quality improvement. We proposed to change the focus of a hospital's quality assurance activities from one that relies on a problem-focused approach of quality assurance to one that focuses on systemic quality improvements, that parallels the JCAHO's overhaul of its accreditation standards.

We specifically requested public comment on the approach as well as the advisability and necessity of the proposed requirements. Commenters were in favor of and supported the continuance of the existing quality assurance CoP. However, they were overwhelmingly opposed to the proposed QAPI requirement that mandated assessment in 12 predetermined areas, stating that this was too rigid and prescriptive.

As stated earlier, we restructured the final rule based on public comments and have eliminated the proposed provision requiring assessment in 12 predetermined areas. We believe that this final rule gives the hospital the flexibility to establish a QAPI program that meets our requirements by conducting systems or process analysis and taking actions to afford long-term correction and improvement of identified or potential problems.

Comment: Several commenters stated that the final regulation should specify both a minimum level of scope, as well as a minimum number of improvement projects. One commenter added the number of improvement projects required should be based on the percentage of all patients receiving services at the hospital. Conversely, the overwhelming majority of commenters were strongly against any such requirement, favoring an approach where the hospital would be required to demonstrate to the SA what projects they are doing and what progress is being achieved.

Response: We considered specific requirements regarding the number, scope, and complexity of projects to be performed by each hospital. In the preamble of the proposed rule, we specifically stated that at a minimum, we were considering requiring that the number of distinct successful improvement activities to be conducted annually be proportional to the scope and complexity of the hospital's programs and we also presented other alternatives for consideration. We decided not to base the number of projects on discharges, number of beds, or operational areas as proposed. Based on public comments, we have decided to require hospitals to document what quality projects are being conducted, the reasons for conducting these projects, and measurable progress achieved on these projects. In fulfilling the QAPI regulatory requirements for collection and use of clinical data, we anticipate that hospitals will make use of information technologies. Indeed, we believe that the effective use of information technology (IT) systems (for example computerized physician order entry systems (CPOE) or barcoding) could over time prove invaluable to the improvement of quality and safety of patient care. As an alternative to a performance improvement project, we added a provision, § 482.21(d)(2), that allows hospitals to invest in information technology; that is, we will allow hospitals to undertake a program of investment and development of IT system that are geared to improvements in patient safety and quality, in place of a QAPI project. In recognition of the time required to develop and implement this type of system, we will not require that such activities have a demonstrable benefit in their initial stages, but we would expect that quality improvement goals and their achievement would be incorporated in the plan for the program. Initial stages of development, include activities such as installation of hardware and software, testing of an installed system, training of staff, piloting the system, and hospital-wide implementation of the system. Upon implementation of the system, monitoring will begin and data will be collected over time as part of the process to evaluate the impact of the new system on patient safety and quality. We believe that this modification demonstrates this Administration's deep commitment to patients, high quality care, and flexibility to our partners. This approach will allow hospitals the flexibility to invest appropriate efforts in their quality program and the freedom to make decisions about the best way to improve the quality of care.

Comment: A commenter stated that we have failed to identify the specific outcomes hospitals should achieve, measure, and report. The commenter advocated uniform, standardized measures.

Response: Our long-term goal is the identification of a standardized measure set for hospitals. However, since these measures have not yet been identified, we expect hospitals to engage in activities based on analyses of their own data, initiatives that promote patient safety, improve quality of care, and increase patient satisfaction. One goal of this rule is to stimulate providers to develop and pursue a wide variety of information and data, from internal and external sources, to guide their improvement efforts. External sources of information and data can include organizations like the National Quality Forum (NQF), QIOs, and accrediting bodies.

Comment: Commenters agreed with the concept of performance improvement, but stated most aspects of quality depend on judgments and subjective assessments. These commenters questioned if quality improvement would be quantified into numerical values, and if so, what numerical value would demonstrate optimum performance, and what should be done if that level is not achieved.

Response: Through our survey process, we intend to assess the hospitals' success in using its own objective data, assessing performance, prioritizing improvement efforts, and demonstrating that sustained improvements have taken place. In the future, based on a set of standardized performance measures that can be used nationwide, some improvement efforts might by quantified into numeric values. However, as stated in the 1999 IOM report, continuous improvement assumes there is no threshold for good performance. The central premise is that healthcare systems should never be content with present performance. Rather, providers of healthcare services should continuously study and improve the process of healthcare and service delivery.

Comment: One commenter proposed a revision to the following requirement: The hospital must take actions that result in performance improvements and must track performance to assure that improvements are sustained. The commenter proposed the requirement should read: “The hospital must take quality assessment and improvement actions that result in improved performance outcomes for identified problems.” Several other commenters wrote seeking clarification regarding the meaning of the phrase, “improvements that are sustained.”

Response: We did not accept the commenter's proposed language verbatim, but we did modify the language. The evaluation should enable a facility to judge where resources need to be focused for priority improvement efforts, while assuring sustained improvement in areas where improvement goals have been achieved. For example, if project(s) to improve reduction in antimicrobial resistance have produced successful improvements in the physician's antibiotic prescribing patterns and in the facility's anti-microbial resistance rate, a hospital might defer funding for this effort to focus on another priority topic. At the same time, success with the first project must be sustained, and where possible, improved further over time. Lessons learned from past projects should be incorporated into staff training and evaluations, where appropriate. The evaluation “loop” of setting priorities for improvement, tracking results and determining continued use of resources based on priorities must include continued evaluation of outcomes in “past” improvement projects and staff education in a manner determined by the facility. These activities should lead to long-term correction and improvement of identified focus areas.

Comment: A commenter stated that not all hospital departments and services, for example marketing and maintenance, should be included in QAPI programs. The commenter also recommended that the language of the requirement be changed to delete the word “all.”

Response: We did not accept the commenter's suggestion to delete the word “all.” We believe that all hospital departments and services furnished under contract or arrangement, must be involved in the hospital-wide QAPI program. The hospital's marketing program may be instrumental in increasing patient satisfaction and performing post-hospital surveys. The hospital's maintenance program may be instrumental in decreasing the potential for infections. There are many ways to involve all areas of the hospital. This final rule, although flexible, requires hospitals to consider the entire scope of its services and operations. However, we reiterate that although a hospital is required to monitor and track performance in all areas of its operations, it must use this surveillance activity to help set priorities for the remainder of its QAPI program including data collection, development of performance measures, and the selection of specific quality improvement projects.

Comment: The overwhelming majority of commenters wrote that not all QIO data is relevant and timely and sought clarification regarding how a hospital choosing not to participate in a QIO project would demonstrate that its own QAPI strategy is comparable to or better than that expected from QIO participation. Some commenters requested clarification regarding demonstrating “value,” as well as the determination of a “sufficient” project.

Response: We share the commenters” concern and as a result, we are revising the proposed regulation text, now § 482.21(d)(4) of this final rule, to require projects of comparable effort. Through our QIOs, we are working to reduce errors of omission for 39 million Medicare beneficiaries. Under their current performance-based contracts, QIOs are working to prevent failures and delays in delivering services for breast cancer, diabetes, heart attack, heart failure, pneumonia, and stroke. These efforts have already decreased mortality for heart attack victims. In assessing projects, hospitals should consider the number of patients affected, range of services covered, the projected magnitude of the benefit to individual patients, as well as the actual changes achieved by the project versus the actual changes achieved by participants in the QIO project. Any improvements in care made by hospitals working with the QIOs on their projects would transfer to better care and services to all patients served by these hospitals. Although hospitals are not required to participate in QIO projects, the hospital must document what quality projects are being conducted, the reason for conducting these projects, and that the measurable progress achieved on these projects demonstrate that the projects are of comparable effort. A hospital can compare its own projects to QIO cooperative projects if the following techniques are used as guidance:

• Improvement Projects—These projects are based upon the hospital's own assessments of its performance and show measured, sustained results that actually benefit patients. Because most organizations identify more improvement opportunities than they can initiate, improvement project priorities have to be set. These priorities must be endorsed by the hospital's governing body. Although we do not require a specific number of projects, we do expect the number of distinct improvement projects conducted annually to be proportional to the scope and complexity of the hospital's program. JCAHO states in its Comprehensive Accreditation Manual for Hospitals that certain criteria—the expected impact on performance; and the selection of a high-risk, high-volume, or problem-prone process to monitor— are helpful in setting project improvement priorities. We are adopting a parallel philosophy by specifying at § 482.21(c) that a hospital must prioritize its performance activities, which must focus on high-risk, high volume, or problem-prone areas; consider the incidence, prevalence, and severity of the problem in those areas; and affect clinical outcomes, patient safety, and quality of care. Therefore, we are giving the hospital the flexibility to determine the areas that require performance projects.

• Quality Improvement Organization Projects—There are two basic areas of consideration used when establishing criteria for selection of QIO projects: identifying clinical topics and prioritizing clinical topics. These criteria were designed to ensure that a project has the greatest likelihood of significantly impacting the health outcomes of Medicare beneficiaries. Hospitals should utilize these same criteria in determining which projects best encompass the needs of their particular hospital, and in determining if projects identified by the hospital would be comparable to the expected outcomes of those identified by their QIO.

Comment: Many commenters understood that the proposed requirement would mean that hospitals would have to demonstrate they are doing as “good of a job” as a QIO if they chose not to participate in QIO projects. These commenters, however, stated that this process would be burdensome for hospitals, and would be counterproductive to the goal of establishing positive cooperative relationships.

Response: We disagree. The requirement is to demonstrate a comparable effort. Since the requirement is to invest equal effort, the following material is included as guidance only as how to better make these decisions.

There are four criteria that QIOs use to assess when identifying clinical topics: prevalence, science, measurability and the opportunity to improve care. These criteria address the issues central to identifying appropriate clinical topics and quality indicators. The remaining criteria are relevant in establishing priorities among those clinical topics that meet the first four criteria (essentially, determining how you can best allocate limited resources to obtain the greatest improvement for the most beneficiaries). We are providing additional guidance regarding the use of criteria for identifying clinical topics as follows:

• Prevalence, Incidence and Disease Impact—The burden (morbidity, mortality) of the clinical condition or medical procedure under consideration is great for the population affected. The burden within a subpopulation (for example, minority, disabled, at-risk) may be another consideration that is taken into account.

• Science—There should be scientific consensus through multiple independent observations or clinical trials that changing a process or procedure of care will measurably improve patient outcomes. Note that we are adopting the operational definition of the term “scientific consensus” by the Office of Medical Applications of Research in the Office of the Director of the National Institutes of Health as follows:

• Measurability—The process(es) or outcome(s) of care for the topic can be stated in clearly defined, discrete, and quantifiable data elements from data sources which are valid and reliable; accessible in a timely manner; from appropriate care settings; and when necessary, span the continuum of care. In addition to the final measures of outcome, interim measures of progress toward achieving the quality improvement goal are desirable.

• Opportunity to Improve Care—Not only should the process or outcome be measurable, there should be a gap between current performance and what can reasonably be achieved. The wider the gap between the present situation and what is feasibly achievable, the greater the opportunity is for improvement. Additionally, there must be a feasible means of narrowing that gap. Merely measuring the problem is not sufficient; you must also be reasonably certain your actions can improve the situation.

Clinical topics meeting the above criteria should be further prioritized. The following criteria should be helpful in that process. Although it is likely that no topic will consistently meet all of the criteria, proposed topics can be compared on the basis of the number and degree to which the criteria are met.

• Previous Projects or Pilot Studies—Demonstrate or provide a citation that demonstrate previous experience with the proposed project methodology or demonstrate that a project of similar design can reasonably be expected to improve healthcare outcomes. Potential priority topics may have been the subject of previous successful projects by QIOs or other organizations. Here, the focus is on selecting topics for which quality improvement has previously been demonstrated or on replicating successful project methodologies.

• Adequate Program Resources—Consider whether you have adequate resources (time, personnel, and funding) to implement the quality improvement project. Alternative potential projects with similar costs should be compared for their relative potential benefit. Whenever feasible, topics that make use of existing data sets should be selected.

• Availability of Partnerships—Select topics that allow you to collaborate with other providers and national, regional, and local organizations with similar goals. Collaboration with other organizations is encouraged for several reasons: planning, implementation, and analytic costs can be shared; planned, coordinated differences in project methods can be compared for efficacy and cost; local lessons learned can be shared and compared; and ideas for second and subsequent improvement cycles can be gathered.

• Ability to Enable or Facilitate Ongoing Quality Improvement—Select topics and interventions that are likely to foster or enhance the development of quality improvement efforts which extend to care processes and conditions beyond those targeted by the improvement project. Some topics may be selected, in part, because of the learning value to the intended user (for example, demonstrating principles and methods that can be applied by the user to other topics) and the ability to sustain the improvements that they trigger.

• Likelihood of Success (Readiness)—Identify topics that are of interest to the relevant stakeholders who will be asked to make improvements. This criterion recognizes the fact that significant improvement is not likely to occur if some pivotal individuals (for example, chiefs of Medicine, department heads, and clinical leaders) do not welcome or are not capable of participating in the project.

Comment: Several commenters stated that the regulation should eliminate the requirement to use QIO data. Others suggested that hospitals, especially rural hospitals, should be required to only use QIO data that is relevant to its own QAPI programs.

Response: A hospital is not required to use QIO data. The QAPI program must incorporate quality indicator data that may include data, for example, QIO data or other relevant data.

Comment: Several commenters stated that the quality of care and patient outcomes should be the focus of the QAPI program, not the usage of specific data. Some commenters stated the proposed data requirement was too prescriptive and unclear. Others stated that many providers are unaware of what “QIO data” is, how to access it, and the associated costs, if any. Several commenters requested this provision be removed.

Response: As stated previously, there is no requirement to use QIO data. QIO data is generally relevant information submitted to (or received) from the hospital's QIO. It can be a good source of quality indicator data to inform the hospital of areas where improvements are necessary. It is important that each quality improvement project have valid and representative baseline data; however, that baseline data may be from QIO data or from another source.

Comment: A commenter stated QIO cooperative projects, rules, and policies are already established and stated referring to them in regulatory text is unnecessary.

Response: As stated before, the QIOs are making great strides in national quality projects; however, hospitals are free to work on projects of their own design as long as the effort is comparable to QIO projects. Our intent is to allow hospitals the greatest flexibility, by offering options and examples.

Through our survey process, we intend to assess whether hospitals have all of the components of a QAPI program in place. The SAs will expect hospitals to demonstrate, with objective data, that improvements have taken place in actual care outcomes, processes of care, patient satisfaction levels, hospital operations, or other performance indicators.

Comment: Many commenters strongly supported our proposal to require, through the survey process, an assessment of the hospital's success in using performance measures and objective data to demonstrate improvements have occurred.

Response: We are encouraged by the comments that support the proposed survey focus for the QAPI requirements. Further, we recognize the need for appropriate training of our surveyors. We do not intend for surveyors to judge the measures used by a hospital. Instead, we will train the SAs to assess the hospital's success in its own efforts to improve its performance. The surveyors will ensure that the number of distinct successful improvement activities conducted annually are proportional to the scope and complexity of the hospital services, operations and patient acuity, and that improvement activities demonstrate sustained improvement over time.

Comment: A commenter stated JCAHO should be involved in enforcement, emphasizing the hospital's familiarity with the current JCAHO requirements regarding QAPI.

Response: We disagree. JCAHO is an accreditation organization that sets healthcare standards but it does not have the direct authority to enforce our regulatory requirements. We also note that compliance with our quality standards is assessed either through an accreditation process that we have determined meets or exceeds our requirements or through the survey and certification process conducted by SAs under contractual agreements with us. Ultimately, we are responsible for enforcing our own requirements; and therefore have the following hospital quality oversight responsibilities: (1) Being a prudent purchaser of quality hospital services; (2) establishing minimum standards to ensure the health and safety of our beneficiaries through the CoPs; (3) ensuring that hospitals are in compliance with the CoPs; and (4) promoting quality improvement in hospitals.

Comment: Many commenters expressed concern over the lack of clarity regarding the specific documentation hospitals are required to provide to surveyors to indicate compliance on surveys and the correlation of this information in determining how these regulations improve and protect the quality of care and increase patient satisfaction. Commenters also questioned the hospital's ability to deny access to information collected for quality activities, citing confidentiality and fear of disclosure.

Response: As previously stated, surveyors will not judge the various measures used by a hospital in its QAPI program. In general, a hospital should maintain materials and documentation that it deems necessary to objectively demonstrate its QAPI goals and outcomes to a surveyor. The surveyor should, at a minimum, expect a hospital to have documentation that describes the program; assessment information (data); the rationale for prioritized improvement projects; and the progress that has been achieved. The SAs and we have the legal authority to review records pertaining to the operation of the provider, including patient medical records (including, medical error reports, and peer review information), when these documents are necessary to determine whether the provider is in compliance with the statutory and regulatory requirements for Medicare and Medicaid participation. Section 1864 of the Act authorizes SAs to determine whether an entity meets hospital qualification under section 1861 of the Act. Included in these qualifications are requirements concerning patient records, hospital administration, and medical and nursing services. The surveyor must have access to the hospital and patient records as necessary to determine compliance for participation in the Medicare program. Also, the facility denial of access to our surveyors or us may prevent us from determining that facility's compliance with program requirements. Therefore, under the statute and regulations, we may need to pursue termination proceedings.

This information is protected by the provision of section 1106 of the Act, 42 CFR 401, as well as, the survey agency's responsibilities for protecting the confidentiality of documents, as set out in sections 3300-3316 and 3318 of the State Operations Manual.

We proposed that the hospital's governing body, medical staff, and administrative officials are responsible for ensuring that the hospital-wide QAPI efforts address identified priorities in the hospital and for implementing and evaluating improvement actions.

Comment: A commenter stated that all of proposed § 482.25(b) should be deleted because it is included in the opening paragraph for the QAPI CoP.

Response: Accountability and leadership are vital to any QAPI program, and the hospital's leadership (for example, administration and governing body) must provide the foundation for its establishment. There must be an explicit organizational goal that is demonstrated by clear leadership and support. With this, the hospital and its staff would be more likely to consider the quality program as a high priority and initiative. We have expanded the proposed standard entitled “Program Responsibilities” and renamed it “Executive Responsibilities” to more appropriately reflect the scope and intent of this standard. The organization's governing body must have an ongoing commitment to creating safe systems of care. The IOM report, “To Err is Human,” states, “Senior level leadership should define program objectives, plans, personnel and budget, and should monitor QAPI activities by requiring reports to the executive committee and board of directors.” The executive responsibilities standard clarifies that it is the responsibility of the hospital's governing body to establish a culture of safety and quality and to define the importance of QAPI activities throughout the institution. The culture of a hospital plays a critical role in how well patient safety and quality of care are viewed throughout the institution. The standard also requires the governing body to ensure that the hospital-wide QAPI efforts address priorities for improved quality of care and patient safety and that all improvement actions are evaluated.

Comment: A commenter stated that the governing body should not be held accountable for the performance of independent contractors in the medical staff because the governing body lacks the scientific knowledge to judge physicians.

Response: We are not asking, nor do we expect, the governing body to “judge” physicians or any member of the multidisciplinary team. The governing body is responsible for assuring that there is an ongoing, effective, internal QAPI program and that this program methodically identifies and addresses priorities in the hospital and initiates efforts to evaluate and address improvement actions. The analysis of these projects and events identified by the quality initiative is an integral part of the program. It is not a separate function performed by the governing body. We expect hospitals to learn from these efforts and initiate plans and actions to improve patient care outcomes, safety, and satisfaction.

We proposed that hospitals must attempt to secure autopsies in all cases of unusual deaths and in the interest of medical, legal, and educational endeavors. The mechanism for documenting permission to perform an autopsy must be defined. There must be a system for notifying the medical staff, specifically the attending practitioner, when performing an autopsy.

Comment: A few commenters asked why we would give hospitals (instead of the medical staff) the responsibility for securing autopsies and then notifying the medical staff and attending practitioner. These commenters suggested that this authority be maintained under the auspices of the physician. Conversely, other commenters supported this shift of authority, but strongly opposed the elimination of the medical staff CoP, stating this group is essential for quality oversight of any hospital. There were other commenters that requested that we delete the autopsy requirements and administrative assessments. These commenters believe that these requirements were particularly burdensome and may have an adverse effect on patient care or are too difficult to measure.

Response: We have removed the proposed standard for autopsies under the QAPI condition. However, we will retain the current autopsy requirements at § 482.22. This requirement states that the medical staff should attempt to secure autopsies in all cases of unusual deaths and of medical, legal and educational interests.

We have a national strategy for standardizing performance measurement and data collection that is, in part, an outgrowth of the creation of a National Forum for Health Care Quality Measurement and Reporting (National Quality Forum (NQF)). In May 1999, the NQF was organized in the private sector and brought together private and public purchasers and stakeholders to reach a consensus on standardizing a national approach to performance measurement in healthcare. The NQF adopted the concepts of our guiding principles and incorporated them into its own national strategy to standardize performance.

The three principles that guide our national performance measurement strategy are as follows:

• Performance measures should be consumer- and purchaser-driven. A major challenge for us is to determine value through quality measurement and to use the information to purchase better healthcare services for beneficiaries. This should be done through collaboration with other purchasers.

• Performance measures and the collection tools needed to collect them should be in the public domain with a publicly held copyright. This means that the public good is served through a broader access to the measures and data collection tools. Further, the government and the public need unrestricted access to the measures and measurement systems to be able to adopt, collect, revise and report results to the public.

• The content and collection of data and performance measures derived from that data should be standardized. Standardization leads to more useful information for consumers and purchasers and reduces the burden for providers and plans.

Our performance measurement strategy is designed to achieve our mission of: (1) Providing consumer information that assists beneficiaries in making choices in healthcare; (2) setting process and outcome criteria to which plans/providers are held accountable; and (3) facilitating quality improvement activities at the program level focusing on national Medicare and Medicaid key clinical priorities at the plan and provider level.

Quality improvement is difficult to measure and accountability for quality improvement may be a new concept for some providers of care. A quality improvement program is developed from the collection of data within a facility that are analyzed and used internally to develop and measure the impact of standards of practice, processes, and systems. The organization learns to compare its measured performance results, using appropriate risk-adjustment techniques, with standardized benchmarks used nationally to evaluate how well it is doing compared to similar institutions across the nation. In order to develop these standardized benchmarks, we participate in pilot projects with our QIOs and accrediting bodies. We are committed to partnering with consumers, health plans, providers, purchasers, States, industry and professional representatives, and accrediting organizations over time, to identify key performance measures of quality that guide what institutions can measure internally for comparisons of standardized measures. Standardization of these measures is key to assure comparability of performance and to make these measures appropriate for accountability purposes. Further refinement and testing of select measures that are suitable for public reporting of comparisons of performance among like-providers is part of the long-range plan for the use of standardized measures. Ultimately, a continuous process of refinement and flexibility in the selection of a core set of standardized measures is our long-term goal. The requirement for hospitals to conduct ongoing monitoring and evaluation of their internal processes and systems through the QAPI program will continue to be a part of the effort for improving the quality of care provided. Standardized measurements will complement QAPI, not replace it.

We are engaged in multiple initiatives that address the development of a core set of evidence-based standardized performance measures, which will be universally applied to hospitals. One initiative is a pilot project where we intend to work with multiple partners, including the JCAHO and the QIOs, in the development of a core set of evidence-based standardized performance measures, which are expected to be presented to the NQF for endorsement. Additionally, we are working with other organizations, like the NQF, on an initiative that will further the national private/public effort to standardize a core set of hospital performance measures that include patient safety measures. Until a core set of measures is developed, we expect hospitals to conduct their QAPI programs using pertinent objective measures of performance. Hospitals also have the opportunity to pursue measurement of clinical practices in focus areas of national high priority. One example of this could be a hospital's assessment of physician prescribing patterns in comparison to evidence-based clinical guidelines, in an effort to reduce the prevalence of antimicrobial resistant organisms.

Since the standardized measures project would involve the Federal government, as well as accrediting bodies and other organizations, its development would not only lessen the burden on hospitals but would also support our goal of developing a regulation that would be universally endorsed. In this process, we will determine how data could be collected, validated, and presented to the general public, and determine the impact of providing this type of information. In the December 19, 1997 proposed rule we stated the following:

Under this proposed rule, we would require a hospital to engage in a quality assessment and performance improvement program that uses objective measures, but we are not proposing that a hospital be required to participate in a system of performance measurement at this time * * * however, we intend to develop such a requirement for inclusion in our final rule and welcome public comments addressing the appropriateness of such a requirement or how it could best be structured.

In this final rule, we are not setting a requirement for using and reporting on a core set of evidence-based performance measures. Once the evidence and methodologies to support a set of performance measures that can be used nationwide are available, we will assess issues such as commonality of data elements, standardization, and reporting systems. We will inform hospitals and the public of the specifics of and the methods for reporting these performance measures via future rulemaking. This will give the public the opportunity to comment on the core measures before implementation.

In the December 19, 1997 preamble to the proposed QAPI Condition, we also asked for responses and comments to seven questions we posed to the public regarding the development of standardized performance measures for hospitals.

a. Question 1: Should CMS assume a leadership role in developing the measures?

Comment: Several commenters stated that we should assume a leadership role in developing a national database of clinical outcomes accessible to all healthcare provider organizations. We received comments from providers as well as practitioners stating that it was the Federal Government's responsibility to set quality standards for the nation with its parallel roles of protecting consumers and supporting healthcare professionals.

Response: We remain committed to our leadership role of protecting consumers and supporting healthcare professionals. We are exploring the concept of requiring Medicare- and Medicaid-participating hospitals to report on a standardized set of performance measures that can be used nationwide. Currently, we are negotiating the terms of a pilot project. The pilot project will be conducted through a collaborative effort among several States, accrediting bodies, and QIOs. These organizations will evaluate a set of standardized performance measures that can be used nationwide. We believe the outcome of this project will yield valuable information regarding the efficacy of data, as well as the effectiveness of requiring Medicare- and Medicaid-participating hospitals to report on a standardized set of performance measures that can be used for national comparative studies.

Comment: Many commenters stated our role should be limited to convening a group of experts and stakeholders to develop performance measures, while others argued that we should not be involved in this process or limit its role to nonaccredited hospitals. Some commenters believed that we should not enter into public/private partnerships to develop measures, stating high accreditation costs would be passed on to consumers. While others stated an outcome measure database should be developed with input from CMS regional office and State agency staff.

Response: We have established a performance measurement leadership agenda to pursue standardization of hospital performance measurement. We plan to work with organizations like the NQF, hospital associations, and accrediting organizations to standardize a core set of hospital performance measures. Through the QIO Program 6th Scope of Work, we currently have performance measures for pneumonia, heart failure, stroke, acute myocardial infarction, diabetes, and breast cancer to offer as a starting point. As stated earlier, we are exploring conducting a pilot program to test these and other standardized measures. One goal of the QIO program is to improve the quality of care to Medicare and Medicaid beneficiaries, which is parallel with our oversight responsibilities.

Before proposing new provider requirements, we routinely network with healthcare providers, regional and State agency staff, and other interested stakeholders so that what is proposed reflects optimal provider practices, to yield optimal results. Finally, although the majority of commenters favored a standardized approach, opinions varied with respect to whom should take the leadership role in the development of these standards.

Comment: Many commenters disagreed with our goal of creating standardized performance measures. These commenters stated this approach should not be required and strongly felt that a national quality assessment database should not be established because comparisons between hospitals will not be meaningful or reliable. Additionally, other commenters expressed concern that there is no basis for recommending one indicator over another, and that reliable and valid measures do not currently exist. It was further argued, that the infrastructure and data elements for performance standards are not available, stating that clear data definitions are needed before a core data set may be implemented to increase the hospital's understanding of what is being measured and how it is being measured.

Response: As we stated previously, we believe that standardization of these measures is key to assuring comparability of performance and to making these measures appropriate for accountability purposes. Further refinement and testing of select measures that are suitable for public reporting of comparisons of performance among like-providers is part of our long-range plan. Ultimately, a continuous process of refinement and flexibility in the selection of a core set of standardized measures will benefit both hospitals and beneficiaries as individual hospital performance on standardized measures will invoke appropriate improvement activities to improve overall patient care.

b. Question 2: How should CMS proceed to develop and implement the measures?

Comment: Several commenters stated that QIOs should formalize a national database.

Response: We plan to utilize all available resources, including QIOs and organizations like the NQF, to formalize and finalize a source for comparable data to be used nationwide. We currently have some data entry software systems that we offer to providers. The systems have tutorial help for users to gain an overall understanding of the applications, with emphasis on designing data entry systems, explaining how to create an analysis, and evaluating the quality of the abstracted data.

Comment: Some commenters were concerned with the impact that the requirements would have on rural hospitals and suggested that we defer to JCAHO's ORYX. The commenters believe that ORYX recognizes these needs.

Response: We do not agree with deferring to the JCAHO to establish a set of standardized performance measures for Medicare- and Medicaid-participating hospitals. However, we recognize the JCAHO's efforts with regard to performance measures and we acknowledge the need to collaborate with accrediting bodies to facilitate the most appropriate principles for standardizing performance measures. While we are aware that there is no single system available for the measurement of a hospital's performance, we are also aware of efforts by the hospital industry to find ways to increase the use of the systems that are currently available. In response to the unique needs of rural hospitals, we want to assure these hospitals that our goal for the utilization of performance measures considers the hospital's size and available resources. We will take into account the special circumstances faced by rural hospitals and ensure their needs are considered when developing performance standards in the future.

Meaningful performance programs are often derived from simple designs that use direct and uncomplicated measures. One of the factors that has impeded this progress is the lack of standardization where possible. These comments reinforce the importance of our adoption of a national performance measurement strategy.

Comment: Commenters stated that we should defer to the private sector until the field of clinical outcome measures has matured, stating there is a lack of consensus in this area. Commenters suggested that we clarify our intent by addressing such issues as data element definition, risk-adjustment methodologies, audit criteria, and modification of existing commercial monitoring systems before mandating a Federal requirement.

Response: We agree that these issues must be addressed before proceeding to mandate utilization of a core set of performance measures. We plan to work with all of our partners, stakeholders, and other interested parties in developing these outcome measures and believe this will provide scientific evidence needed for our national performance measurement strategy.

Comment: A commenter stated we must develop an outcomes survey process independent of JCAHO, noting current significant inconsistencies between JCAHO and State survey agency findings.

Response: We intend, through our survey process, to assess the hospital's success in using performance measures principally in terms of whether the hospital can demonstrate with objective data that sustained improvements have taken place. We recognize the need for surveyor training and education in the area of quality improvement. We do not intend and would not be in a position to judge the measures ourselves. Instead, we would assess the hospital's use of these measures to improve its performance. Whenever the state agency surveyors enter the hospital to conduct a survey they will evaluate the hospital's program and its own internal evaluation process. When there is an onsite review of the hospital's QAPI program, the surveyors determine whether or not the hospital is meeting the QAPI CoP requirements. Following the existing survey process and procedures, if the SA determines that the hospital is significantly out of compliance with the QAPI CoP requirements, the hospital will be scheduled for termination from the Medicare and Medicaid programs. The hospital is then given the opportunity to submit a plan of correction. The SA would conduct a follow-up survey to assess whether the hospital is now in compliance with all of the requirements, prior to the actual termination taking place.

Regarding the survey process, our survey process is developed independent of JCAHO's. In addition, we have an ongoing effort with JCAHO to address inconsistency in survey findings.

c. Question 3: If CMS does assume a leadership role in this area and hospitals invest in the development of multiple systems, would the overall burden be greater than if a single system had been imposed at the outset?

Comment: The majority of commenters focused on the burden that this requirement would impose on hospitals and the healthcare industry. These commenters argued that the increased burden is due to the lack of standardization among technology companies and programs, not due to lack of interest and willingness of providers. These commenters offered the suggestion that we develop and require a single set of performance measures, but allow hospitals to develop their own system as long as it meets established criteria. In like spirit, commenters suggested requiring companies that develop approved systems to include specific attributes of the prescribed measurement system that will be evaluated. The overall tone of the comments genuinely stressed the need for adequate time for any system implementation once decided. Commenters also requested an exemption for rural hospitals stating the needs of these facilities are unique and would not be best served by such a standardized system.

Response: We will consider all possibilities that will reduce burden and enhance a hospital's ability to successfully transition to a single system. We continue to consider the geographical and financial needs of individual hospitals, but we strive to offer the same basic protections and safeguards to all patients regardless of the hospital in which they receive services.

Comment: A commenter stated that we should use available resources, such as Medicare-contracted utilization and quality assurance organizations, QIOs, and other resources. This commenter requested that we outline the current resources that are available to hospitals via these organizations.

Response: It is our intention to avail ourselves of quality assessment resources. We have considered integrating standardized measurement data sets into a system that could provide access, by an institution, to data reported to a QIO.

d. Question 4: If CMS does not assume a leadership role in this area and individual hospitals adopt multiple systems that produce nonstandardized data, to what extent would it be difficult to make comparisons between hospitals?

Comment: Several commenters strongly disagreed with our proposal to allow multiple systems to be used in making comparisons between hospitals. They believe that inherent differences in systems and lack of uniformity provide too many variables to accurately compare hospitals.

Response: We understand the commenters' concerns. Many hospitals will need more experience with data collection methods and in the design, implementation, and monitoring of improvement projects. We realize the difficulty in assessing comparability of hospital performance without the requirement of hospitals to utilize like systems. As stated in the December 19, 1997 preamble of the proposed rule, we sought comment on establishing evaluation criteria that must be a part of the system or systems the hospital may choose.

Currently, hospitals across the country use a wide variety of measurement systems and performance indicators to assess the quality of care delivered. The number of these performance measures has increased in recent years. Hospitals are committing substantial and increasing resources for data collection and measurement, as both consumers and purchasers demand greater accountability from their healthcare providers. Since the various measures are not standardized, the data cannot be used to make accurate comparisons about the quality of care among hospitals.

In December 2002, the American Hospital Association (AHA), the Federation of American Hospitals (FAH), and the Association of American Medical Colleges launched a national voluntary initiative to collect and report hospital quality performance information. This effort is intended to make critical information about hospital performance accessible to the pubic and to inform and invigorate efforts to improve quality. Voluntary reporting is an essential first step to realize this goal. An important component of this coordinated effort is the identification and development of tools for standardizing data collection and making these tools readily available to the industry. We have tools available for utilization that are refined as needed, to include relevant data elements that capture the information needed or the clinical area under assessment. For example, data elements used for collecting information about a patient's experience with acute myocardial infarction would include portions that differ from data elements needed to collect information about a patient's experience with pneumonia. We recognize that not only are the tools important, but even more important are clear definitions to allow consistent categorization and counting of events or values for measurement. Future priorities and measures will be informed by a forthcoming report from the IOM that will identify 15 to 20 priority areas for quality improvement. Measures will be drawn from those endorsed by NQF; measures will be sought that respond to the six aims set forth in IOM's “Crossing the Quality Chasm,” and where possible will include cross-cutting measures. The entire spectrum of stakeholders will be engaged to work toward focusing national public reporting of hospital performance on agreed-upon priorities and NQF-endorsed measures.

Comment: Some commenters stated that JCAHO and NCQA have standardized indicator systems; and therefore, we should not proceed unless it can consolidate and remove existing systems. Numerous commenters stated that the burden should not be placed on the hospitals to invest resources in the development of individual hospital systems, in lieu of the increased resources needed for the collection and analysis of outcome data.

Response: We are aware that there may be costs assumed by hospitals in choosing different systems. The methods and processes for collection of data vary widely. Our interest lies within the ability of hospitals to be measured against one another when different systems are used. We did not specifically propose that hospitals be required to participate with other hospitals in a system of performance measurement. Although we stated this was our intention for inclusion in the final rule, standardized outcome measures that can be used nationwide have not been established; therefore, we have not set forth this requirement in the final rule. Regarding the existence of proprietary indicator systems, we have no authority to “remove” these systems.

e. Question 5: Should CMS require or encourage hospitals to use standardized measures that some accredited hospitals are using?

Comment: Some commenters supported using standardized measures used by accredited hospitals. In contrast, many commenters believed that the measures used by accredited hospitals are outdated.

Response: We intend to require that hospitals use standardized measures. We are committed to advancing the scientific effort already underway nationally to standardize the specifications of measures (that is, the data dictionaries and other elements that define quality indicators). We are working in partnership with the QIO program, State initiatives, the NQF or similar organizations, and accrediting bodies in national efforts being conducted to identify and develop standardized specifications. These specifications would then be presented to the NQF or similar organizations for endorsement and subsequently published in future rulemaking. Our position is that any system of measures that incorporates these specifications would be acceptable for use by hospitals. Our concern focuses on how a measure of quality can be standardized for longitudinal comparative purposes among similar hospitals and includes public reporting. Purchasers and consumers benefit from the establishment of measures that could be used to publicly report hospital-specific performance across the full spectrum of hospitals in the United States. Hospitals benefit from a reduction in burden in data collection and measurement, and an ability to obtain comparative data to evaluate and improve their performance. A collaborative effort to develop standardized measures will provide the basis for an initial measurement set for assessment and reporting of hospital performance. Having purchasers and consumers provide the leadership in defining key content areas for the first set of measures and obtaining consensus around these validated measures as a standardized reporting set would be a major achievement in improving the quality of care in the nation. For example, standardized measures of medical errors could be used widely as part of a hospital's medical error reduction program and ultimately for accountability. We believe that requiring standardized data collection and reporting on consensus-developed, scientifically based measures, is an opportunity for hospitals, purchaser and consumers to work jointly to improve the quality of hospital care. The precise measures to be required will be determined by the Secretary and communicated to the public for comment before they are initiated.

Comment: Some commenters stated that the area of performance improvement needs further development before we require specific measures.

Response: We agree that there is not a wide menu of available performance measures that have proven to be reliable and valid that could be offered to a hospital to use. Currently, we have not set forth requirements; therefore, hospitals will be able to evaluate themselves on their own data.

f. Question 6: Would it be appropriate for CMS to include “placeholder” language in the revised CoPs concerning the eventual need for hospitals to report relevant data, or is this premature?

Comment: The majority of commenters agreed with our plan and supported the goals and objectives of a core set of standardized measures. Some commenters believed that these measures should not replace organization-specific projects. They stated that the technical issues surrounding data definitions, uniform systems, and burden, specifically regarding the ability of hospitals to utilize existing information systems, would have to be addressed.

Response: In the preamble of the proposed rule, we solicited public comment on standards regarding the development and implementation of a standardized set of performance measures to be used nationwide. At that time, we did not propose a requirement for hospitals to participate in a system of performance measurement with other hospitals but we stated that we intend to in the future. We recognize the specific issues that need to be addressed (for example, technical issues surrounding data definitions, uniform systems, and costs) before implementation of a set of standardized performance measures that can be used nationwide. Hopefully, these measures will help hospitals to identify organizational-specific projects.

Comment: Many commenters supported our approach to include placeholder language, because commenters believe it will take a minimum of 2 years for us to develop standardized measures. Some commenters stated placeholder language is premature pending extensive research to insure the accuracy of standardized data, concluding that the QAPI condition be modified at a later date as necessary. Others felt this unnecessary due to the requirement for accrediting bodies to report data.

Response: We remain committed to developing a core set of standardized performance measures but we have decided not to include “placeholder” language in this final rule. A core set of standardized performance measures, as well as the method of reporting these measures, will be defined in a future rulemaking document.

g. Question 7: If CMS should include “placeholder” language, what changes should we make to these proposed requirements to set the stage for the development and implementation of such a system?

Comment: Several commenters wanted to know our projected timeframes for implementation. Others requested that we clarify whether standardized reporting and performance measures will be based solely on standardized clinical data and not on individual programs or projects at the hospital level.

Response: We realize that hospitals will need more experience with data collection methods for standardized measurement. Implementation timeframes for the standardized performance measures and the data to be reported will be presented to the public for comment in a separate rulemaking document.

Comment: Many commenters stated that the primary purpose for establishing a core set of measures is not quality improvement, but rather public accountability and data comparison. These commenters stated that meaningful improvement is best achieved by allowing caregivers the flexibility to identify opportunities for improvement. Commenters added that our focus should be on the hospital's mission and patient quality of care needs.

Response: We agree that a major reason for reporting on standardized data and core measures is public accountability and data comparison. However, we do not believe this QAPI regulation prohibits the hospital from exploring its own methods and implementing actions that are specific to its institution. Furthermore, we are committed to increasing consumer and patient awareness and facilitating the use of healthcare quality information in making key healthcare decisions.

Comment: A commenter suggested that we develop a preliminary set of measures from data on adverse patient events while a complete set of measures is being developed.

Response: After the release of the IOM report, “To Err is Human,” as well as the response by the QuIC, the NQF was given the task of identifying a list of adverse events that should never occur, however, the task has not been completed. We expect, as a part of the hospital's error reduction program, that each hospital will assess institutional adverse events and incorporate this information into its QAPI. For example, if the hospital has had patients that experience adverse reactions, serious harm, or death due to the incorrect administration of intravenous potassium, the hospital should perform an analysis of these events to determine the process that allowed these mistakes and initiate a plan to correct the problem.

Comment: Several commenters stated that we should defer to JCAHO and not create a separate system of performance measures for hospitals, stating the proposed requirement is not consistent with JCAHO's agenda for change.

Response: Although we value JCAHO's role in hospital oversight and quality improvement initiatives, we have responsibility and accountability for quality of care in Medicare- and Medicaid-participating hospitals. We believe that we must directly establish a system of performance measurement for hospitals and maintain a leadership role in hospital oversight. In addition, we are aware of JCAHO's agenda for change. Our representatives sit on key measurement committees and on the various JCAHO clinical advisory panels charged with selection of the initial set of measures. CMS and JCAHO will strive to minimize burden on hospitals through the selection of a single set of core measures. Finally, we are incorporating criteria that will create a minimum amount of burden on hospitals, especially those hospitals that are subject to more than one method of surveillance.

We also invited comment on whether we should require nonaccredited hospitals to participate in one or more performance measurement systems as part of their overall QAPI program (both internally and externally). We received a number of comments on this provision.

Comment: Many commenters supported the requirement that these hospitals participate in a facility-specific or internal QAPI program. They also stated that for external participation (that is, comparison against national benchmarks) it is premature to propose a specific set of quality indicators or performance measures for nonaccredited hospitals.

Response: We do not expect the same utilization of performance measures for small hospitals as we would for large hospitals. We recognize that collection and analysis of clinical outcome data may represent an increased burden on some hospitals, particularly on the nonaccredited hospitals that are routinely subject to our survey process. These nonaccredited hospitals typically are smaller than accredited hospitals, located in more sparsely populated areas, and may not have the resources for extensive data gathering and reporting. Given the uncertain readiness of some individual hospitals to comply with performance expectations under this final rule, quantitative analysis of the effects of these proposed changes is not possible. Hospitals with QAPI programs already in place that meet these requirements, at a minimum level if not in whole, may see little increased burden. However, nonaccredited hospitals are still required to follow this CoP as participants in the Medicare and Medicaid programs. Rather than mandating specific areas of assessment and data collection, this final rule gives hospitals flexibility to identify their own measures of performance for the activities they identify as priorities.

Comment: Some commenters offered suggestions that hospitals be allowed the option of using measures developed by QIOs because these measures will have wider application.

Response: Although hospitals are not required to participate with QIOs on their projects, we recommend that the QIO be used as a resource. By working with its QIO, a hospital will reap the benefits of a more standardized, streamlined, and cost-effective approach to quality improvement.

As stated earlier, since the standardized measures project would involve the Federal government, as well as accrediting bodies and other organizations like the NQF, its development would not only lessen the burden on hospitals but would also support our goal of developing a regulation that would be universally endorsed by all. In that process, we would determine how data can be collected, validated, and presented to the general public, and determine the impact of providing this type of information. In the proposed rule, we considered requiring hospitals to report certain data elements (for example, patient falls, injuries, and medication errors) to us to serve as the basis of a performance database, which could then be used for provider improvement, consumer information, and other purposes; however, sufficient work in this area has not been performed. Therefore, we have not included a requirement for hospitals to report certain data elements in this final rule. As standardized measures are developed and implemented, they will complement, not replace the QAPI process.

Comment: Commenters cited the importance of the provision requiring hospitals to share collected information with patients and consumers, and supported information sharing to facilitate decisions based on quality. Many of these commenters felt as though it was not only prudent, but the Federal government's responsibility to ensure the availability of this information.

Response: We agree. We have the responsibility to increase awareness of patient safety issues and the role beneficiaries can play in enhancing patient safety in general. We would like to enable patients and family members to become more involved in their care and to be active participants in the decision-making that impacts their care. We support the development of patient safety messages and themes that can be used by healthcare purchasers, and consumers to guide their choices in the selection of quality healthcare.

Since this final rule sets forth the requirements for the QAPI CoP only, we are placing the QAPI CoP with the existing hospital CoPs under Subpart C—Basic Hospital Functions at § 482.21 that will replace the existing Quality Assurance requirements. The five standards in this CoP will set forth the requirements for the development of an effective ongoing hospital-wide QAPI program that will focus on indicators related to improve health outcomes and prevention, and reduction of medical errors. As with the existing CoPs, the enforceability of the CoPs will be rooted in the evidence found during the onsite survey. The requirements of the QAPI CoP are as follows:

This condition requires that hospitals must develop, implement, maintain, and evaluate their own QAPI programs. We have retained the provision requiring the hospital's QAPI program to reflect the complexity of the hospital's services and operations. We state that the QAPI program must be hospital-wide, ongoing and focus on indicators related to improved health outcomes. We also added language to— (1) stress the importance of the inclusion of measures that foster the prevention and reduction of medical errors; and (2) require hospitals to maintain and demonstrate evidence of its QAPI program for review by CMS.

The first standard, Program Scope, requires that a hospital's QAPI program include an ongoing program that shows measurable improvements in indicators for which there is evidence that they will improve health outcomes, and identify and reduce medical errors. There is also a provision that the hospital must measure, analyze, and track quality indicators, including adverse patient events, and other aspects of performance that assess processes of care, hospital service and operations. We have deleted the proposed requirement for the mandated assessment of 12 minimum areas.

The second standard, Program Data, provides the framework and clearly defines the expectations for hospitals regarding data the hospital must use as part of its QAPI program. It contains the provisions presented in the proposed rule, that described the type of data to be used including patient care and other data, for example, information submitted to, or received from, the hospital's Quality Improvement Organization.

The third standard, Program Activities, has been added to clarify the hospital's responsibilities. This section contains a requirement on setting priorities for performance improvement, previously found in the proposed rule at § 482.25(a)(5), with some modifications based on comments. The first requirement under the program activities standard requires hospitals to set priorities for improvement, considering prevalence and severity or incidence, or both, of high-risk, high volume or problem prone areas, and giving priority to improvement activities that affect health outcomes, patient safety, and quality of care. A hospital's performance improvement activities should track adverse patient events, analyze their causes, and implement preventive actions and mechanisms of feedback and learning throughout the hospital. This must include incidents of medical errors and adverse patient events. Finally, hospitals are required to take actions that result in performance improvements. After implementing actions, the hospital must measure its success and track its performance to assure that improvements are sustained.

The fourth standard, Performance Improvement Projects, has been added to distinguish the requirements for improvement projects from program activities as requested by the commenters. We require that the number of distinct improvement projects conducted annually must be proportional to the scope and complexity of the hospital's services and operations. Demonstration of minimum effort will be achieved by requiring hospitals to document what projects they are conducting, the reason for conducting these projects, and measurable progress achieved. The standard does not require hospitals to participate in a QIO cooperative project but its own projects are required to be of comparable effort.

The fifth standard, Executive Responsibilities, clarifies our intent to hold the hospital's leadership responsible and accountable for QAPI activities. We have maintained the requirement ensuring that a hospital-wide QAPI program addresses priorities and implements, maintains, and evaluates all improvement actions. This standard is further strengthened by requiring the hospital's governing body to provide strong, clear, and visible attention to setting expectations for safety and for allocating adequate resources for measuring, assessing, improving, and sustaining the hospital's performance and for reducing risks to patients.

We have examined the impact of this rule as required by Executive Order 12866 and the Regulatory Flexibility Act (Pub. L. 96-354). Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits, including potential economic, environmental, public health and safety effects, distributive impacts, and equity.

We generally prepare a regulatory flexibility analysis that is consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 through 612), unless we certify that a final rule would not have a significant economic impact on a substantial number of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and government agencies. We consider most hospitals small entities, either by nonprofit status or by having revenues between $6 million and $29 million. Individuals and States are not considered small entities. We certify that this final rule will not have a significant impact on small entities.

Also, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. That analysis must conform to the revision of section 603 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a Metropolitan Statistical Area and has fewer than 100 beds. We certify that this final rule will not have a significant impact on a substantial number of small rural hospitals.

Section 202 of the Unfunded Mandate Reform Act of 1995 also requires that agencies assess anticipated costs and benefits for any rule that may result in an expenditure in any 1 year by State, local, or tribal governments, in the aggregate, or by the private sector, of $110 million. This final rule has no mandated effect on State, local, tribal governments, or on the private sector that reach the threshold of section 202.

Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct compliance costs on State and local governments, preempts State law, or otherwise has Federalism implications.

In 1994, we invited all interested parties to a town hall meeting to discuss our plans to set forth regulations to establish a new approach to improving the quality of healthcare provided in hospitals. Parties from the Association of Health Facility Survey Agencies, hospital associations, and other stakeholders were in attendance. These agencies were given the opportunity to provide input and were generally in favor of our plans.

We welcomed comments on our December 1997 proposed rule. We received a number of comments on our QAPI CoP but we did not receive any comments indicating that States would be adversely affected by this rulemaking.

Thus, we have examined this final rule and have determined that this final rule will not have a negative impact on the rights, rules and responsibilities of State, local or tribal governments.

In December 1997, we proposed to revise all of the hospital CoPs that emphasized lessening Federal regulations to eliminate unnecessary structural and process requirements, to focus on outcomes of care, to allow greater flexibility to hospitals and practitioners to meet quality standards, and to place a stronger emphasis on QAPI.

Within this newly revised CoP we proposed to establish a QAPI program that encompasses all hospital services and operations. We solicited comments on the QAPI provisions and received overwhelming support for its establishment. There was consensus among, provider, public, professional organizations, accrediting organizations, and the Congress that supported its establishment. The need again arose for a program due to serious concern regarding patient safety and medical errors after publication of the 1999 IOM's report along with the response to the report. These factors led us to set forth this final rule to ensure high quality of care in a safe environment in our nation's hospitals.

Given the shift to regulatory flexibility, for the most part, we are not prescribing the exact process hospitals must follow to meet the regulatory requirements of the QAPI CoP. However, the following components must be established and maintained in the development of a QAPI program: hospitals will be required to have a QAPI program encompassing all services and operations that focuses on indicators related to improved health outcomes and the prevention and reduction of medical errors.

Some hospitals may need to revise their existing programs to conform to this regulation; however, we do not believe this CoP will impose a significant economic burden above what hospitals are already doing to meet the current quality assurance CoP.

Currently under § 482.21, hospitals must ensure that there is an effective, hospital-wide quality assurance program to evaluate the provisions of patient care. Under the existing requirement hospitals must have a written plan of implementation, this plan must include all organized services and contractors. The hospital is also required to document appropriate remedial actions to address deficiencies found through the quality assurance program, as well as the outcome of the remedial actions. However, as a hospital's QAPI program matures, we expect that hospitals will be engaging in quality improvement activities in an expanding number of areas as resources are redirected from areas of program success to new areas, but existing improvements are sustained.

This QAPI CoP focuses provider efforts on the actual care delivered to the patient, the performance of the hospital as an organization, and the impact of the treatment furnished by the hospital on the health status of its patients. In developing this CoP, we have included structure and process-oriented requirements only where we believe they are essential to achieving desired patient outcomes or preventing harmful outcomes. This approach is intended to incorporate into our regulations current best practices in well-managed hospitals, relying on each hospital to identify and resolve its performance problems in the most effective and efficient manner possible.

This QAPI CoP is in fact an extension and modification of the existing quality assurance CoP found at § 482.21. We anticipate that hospitals, both large and small, rural and urban, will or already use a variety of data to inform their internal QAPI programs. Some of these data may be measures designed by the hospital itself, while others will be developed through research or by consensus groups or other sources outside the hospital. Thus, the impact will vary according to each hospitals current quality improvement activities and programs. The impact will also vary and is subject in large part to their decision-making, current policies and procedures, and level of compliance with existing quality assurance regulations. It is important to note that due to the flexibility of these provisions, the extent of the economic impact of most of these requirements is dependent upon decisions made by the hospital. We believe that this CoP will minimize the administrative burden on hospital's to comply with detailed Federal requirements. Instead, this QAPI CoP will provide hospitals with more flexibility to determine how best to pursue our shared quality of care objectives in the most cost-effective manner.

We expect hospitals to develop different approaches to compliance based on their varying resources, patient populations and other factors. There are several provisions that will impact the hospital's processes to a greater or lesser degree. Specifically, this CoP does introduce a new concept that the hospital will have to develop an internal error prevention and reduction program to ensure optimum outcomes for its patients.

The requirements of the rule effect current industry practice. Therefore, hospitals with QAPI programs already in place that meet these requirements, at a minimum level if not in whole, may see little increased burden. Hospitals that do not meet the current QA CoP, may encounter an increased burden in the short-term because resources would have to be devoted to the development of a QAPI program that covers the complexity and scope of the particular hospital's services. Based upon information that we do possess, small and rural hospitals may be the least prepared and may experience an increased burden in implementation of a QAPI program. However, even in the situations where the proposed requirements could result in some immediate costs to an individual hospital (that is, the development and utilization of performance measures to be used in their QAPI program), we believe the changes the hospital would make would produce real but difficult to estimate long-term economic benefits to the hospital, such as cost-effective performance practices or higher patient satisfaction that could lead to increased business for the hospital. Additionally, as hospitals are encouraged to choose projects that reflect the scope of their services, it will become increasingly difficult to quantify the burden of data collection. As QAPI projects vary within each hospital and amongst all hospitals, so will the quantity of and the time required for data collection. Overall, we believe that the benefits of complying with the QAPI CoP will outweigh any associated burden.

For the sake of quantitative analysis, we have based our figures on all hospitals having to develop or update their QAPI program. The projected training time for staff is expected to cost an average hospital allocating a group of 10 clinicians with various duties and responsibilities, approximately $840 based on a average hourly rate of $28 per hour (3 hours x $28 per hour x 10 clinicians = $840). We have proposed 12 hours of training for the QAPI coordinator, which is projected to cost $360, based on a average salary of $30 per hour (12 hours x $30 per hour x 1 coordinator). The total hourly burden for each hospital is projected to be 42 hours (3 hours x 10 staff) and (12 hours x 1 coordinator).

We estimate that the burden associated with updating and in some instances, writing the internal policies would be an average of 8 hours annually. If the updating or writing of the internal policies is done by the nurse coordinator, we estimate the cost at $240 a year (8 hours X 30 per hour). However, we believe that this figure may be much lower, since many hospitals have existing internal quality improvement programs.

We also note that the following factors may also affect the costs of updating and writing of the internal policies:

• Additional Staff Costs. Examples of these costs include— (1) physician or other professional staff reviewing the internal policies; and (2) clerical staff providing typing, printing, or copying support.

• Staff Training Costs. Staff may need additional training to write, update or review the hospital's internal policies.

• Printing and Copying Costs. These costs are dependent upon the magnitude of the hospital's changes to its internal policies and the number of copies of the policy that are made available to staff.

Policy development is necessary to patient health and safety because the by-laws provide the framework within which all patient care services are furnished. The initial development of the by-laws will take approximately 2.5 hours. Not more than 2 hospitals a year become certified under Medicare and Medicaid.

The Federal Government plays many important roles that affect the quality of healthcare Americans receive. In fact, the Federal Government is the largest purchaser and provider of healthcare services in the United States. Our goal is to improve the care delivered by providers and purchased on behalf of Federal beneficiaries, and to facilitate hospitals in developing the infrastructure needed to improve their hospital services. The implementation of the QAPI CoP will benefit and protect not only Medicare and Medicaid beneficiaries, but all patients receiving care in any of the approximately 6,100 Medicare-participating hospitals (that is, short-term, psychiatric, rehabilitation, long-term, children's, and alcohol-drug), including small rural hospitals. We believe the patient will benefit from the hospital establishing a QAPI program, making quality of care and patient safety priorities. We also believe the implementation of the QAPI CoP will lead to an increase in quality care, optimal patient outcomes and a reduction in the number of medical errors.

We do not expect the implementation of the new QAPI CoP to generate any significant cost to the Medicare or Medicaid programs. As our budget pays for survey and certification activities by the States and States already survey hospitals for compliance with the existing hospital quality assurance CoP, surveyors will only change their focus when surveying from a quality assurance approach to a QAPI approach. Surveyors will be trained on the QAPI approach during their normally scheduled training on the hospital CoPs. Therefore, we believe that there will be no additional costs associated with this training. However, as the QAPI program progresses in individual hospitals, surveyors may have to spend more time evaluating an increasingly robust quality program. These efforts are difficult to quantify.

We considered adding requirements that were more prescriptive in nature. However, in response to public comments, and in recognition that this requirement will apply to hospitals of varying size, operating in wide ranges of localities, serving diverse populations, we opted not to utilize this approach. Development of more detailed strategies and policies to comply with the requirement will be left to the discretion of each hospital.

We originally proposed that hospitals use 12 minimum performance areas as the foundation for the QAPI program. However, after analysis of public comments and literature, we agreed with commenters that specifying 12 minimum areas for analysis as part of a hospital's QAPI program was too prescriptive. These commenters argued it would be more effective to allow hospitals to assess, measure, and analyze themselves, but concurred with the identification of hospital processes and functions that could produce valuable information. Alternatives were given, such as, the adaptation of JCAHO's standards, or by us merely providing the components of the QAPI program and giving the hospital the flexibility to create a program of its own design. Some commenters suggested that nonaccredited hospital be exempt from QAPI requirements until we provide scientific evidence that participation in such programs improves patient care.

Based on public comments, we have deleted the proposed requirement for hospitals to assess their performance in 12 specific areas. We agree that hospitals should be able to pursue quality improvement in a manner of their choosing. Regarding the exemption of nonaccreditied hospitals, we cannot relinquish our responsibility for assuring quality healthcare for all patients. We believe that we have provided hospitals with enough flexibility and have identified enough resources for improving the process of patient care to facilitate the development of an effective QAPI program by a hospital of any size. Therefore, we do not believe there is a need to differentiate our expectations for accredited and nonaccredited hospitals.

In the proposed rule, we also solicited comment on standards regarding the development and implementation of a set of evidence-based standardized performance measures. At that time, we did not propose a requirement for hospitals to participate in a system of performance measurements with other hospitals, but we stated that we intend to do so in the future. Many commenters supported our approach to include placeholder language, because commenters believe it will take a minimum of 2 years for us to develop standardized measures. Some commenters stated placeholder language is premature pending extensive research to insure the accuracy of standardized data, concluding that the QAPI condition be modified at a later date as necessary. In this final rule, we have considered public comments and are not setting a requirement for using and reporting on a core set of performance measures. Once the evidence and methodologies to support a set of performance measures that can be used nationwide are available, we will inform hospitals and the public of the specifics of and the methods for reporting these performance measures for future rulemaking. This will give the public the opportunity to comment on the core measures before implementation.

Our goal is to foster and stimulate a culture of shared learning that will help to identify processes, systems, and even events that potentially or actually lead to error or poor quality care and less than optimal patient outcomes. We believe that this final rule will enable hospitals to identify and resolve performance problems specific to their situations in the most effective and efficient manner possible.

Although we view the anticipated results of this regulation as beneficial to the Medicare and Medicaid programs, as well as to Medicare beneficiaries and Medicaid recipients and State governments, it is impossible to quantify meaningfully a projection of the future effects of this standard in the event of noncompliance issues.

We believe that the foregoing analysis concludes that this regulation would not have any significant impact on the aforementioned providers. Also, the burden associated with this requirement will vary, in some instances be greater, depending on the sophistication of the hospital current QA program.

In accordance with the provisions of Executive Order 12866, this final rule was reviewed by the Office of Management and Budget.

Under the Paperwork Reduction Act of 1995, agencies are required to provide 60-day notice in the Federal Register and solicit public comment before a collection of information requirement is submitted to the Office of Management and Budget (OMB) for review and approval. In order to fairly evaluate whether an information collection should be approved, section 43506(c)(2)(a) of the Paperwork Reduction Action of 1995 requires that we solicit comment on the following issues:

• Whether the information collection is necessary and useful to carry out the proper functions of the agency;

• The accuracy of the agency's estimate of the information collection burden;

• The quality, utility, and clarity of the information collection burden; and

• Recommendations to minimize the information collection burden on the affected public, including automated collection techniques.

Therefore, we are soliciting public comment on each of these issues for the information collection requirements summarized and discussed below.

The title and description of the individual information collection requirements are shown below with an estimate of the annual reporting and recordkeeping burden. Included in the estimate, is the time for searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the QAPI process, including education and feedback.

This revised section requires the hospital to develop, implement, and maintain an ongoing effective hospital-wide, data driven, QAPI program. The current requirements provided for the operation of an internal quality assurance program to evaluate the provision of patient care. The revised condition further requires hospitals to examine its methods and practices of providing care, identify opportunities to improve its performance, and then take actions that result in higher quality of care and improved safety for hospital patients. We have not prescribed the structures and methods for implementing this requirement and have focused the condition toward the expected results of the program. This provides flexibility to the hospital, as it is free to develop a creative program that meets the needs of the hospital and reflects the scope of its services. We believe that developing the data systems necessary to implement a QAPI program and internal policies governing the hospitals approach to the development, implementation, maintenance, and evaluation of the QAPI program will impose minimal burden, depending somewhat on the level of compliance with the existing quality assurance requirements. Flexibility is provided to the hospitals to ensure that each program reflects the scope of its services and operations. We believe this requirement provides a performance expectation of hospital's setting their own goals and using information to continuously strive to improve their performance over time. Given the variability across the hospitals in size and experience and the flexibility provided by the regulation, we believe the burden associated with these requirements governing the approach to the development, implementation, and evaluation of the QAPI program will reflect that diversity. We want to provide flexibility and do not want to be prescriptive in defining hourly parameters; however, we need to quantify the burden § 482.21 associated with this requirement.

We estimate that the burden associated with updating and in some instances, developing a QAPI program would be an average of 80 hours annually (although this figure may be much lower, since many hospitals have existing internal quality improvement programs).

This regulation would require data collection and necessitates staff training on data collection. Again, we estimate the burden associated with this requirement would vary, depending on the sophistication of the hospital's quality assurance programs currently in place.

The current QA CoP requires hospitals to document appropriate remedial actions, and address deficiencies found through its QA program. The new QAPI CoP replaces the existing QA CoP by focusing on the continuous improvement of the hospital as an organization requiring hospitals to track incidents, analyze their causes, and share and implement preventive actions and mechanisms of feedback and learning throughout the facility. We realize it is neither practical nor economically feasible to collect data and analyze all areas, processes, and systems of the hospital. Therefore, we are requiring the hospital's governing body to ensure the priorities set by the QAPI program are reflective of the hospitals services, ensure quality of care, and protect the safety of the patients. The burden associated with these requirements are captured above in sections 482.21 (a) and (b).

This new requirement reflects an interdisciplinary, coordinated approach to performance improvement. The proposed new performance improvement projects requirement sets forth the requirement that each hospital must establish a mechanism that further explores the specific needs identified in the organization's assessment. This mechanism of action is a performance improvement project. These projects demonstrate the hospital's ability to: identify problems; evaluate and track quality indicators, or other aspects of performance; and implement actions or adopt changes that reflect processes of care and hospital operations. The hospital must be able to document and demonstrate to the SA what quality improvement projects are being conducted, the reasons for conducting these projects, and the measurable progress achieved on these projects.

We believe, that in order to comply with this QA CoP, hospitals, for the most part, are already documenting their efforts as remedial actions. Nevertheless, we are estimating the QAPI coordinators document the projects being conducted, the reason for the projects, and the measurable progress on these projects.

The participating hospitals must have in writing by-laws governing the medical staff and the governing body. This incorporation of executive responsibilities pertaining to QAPI would be a one-time development by an administrative team consisting of medical staff or an appointed committee of 5 physicians and one clerical personnel. We are not associating burden with this requirement, as by-laws should be updated regularly as a normal function of the hospital. This requirement is necessary to patient health and safety because the by-laws provide the framework within which all patient care services are furnished. The initial development of the by-laws will take approximately 2.5 hours. Not more than 2 hospitals a year become certified under Medicare and Medicaid. Therefore, since this requirement impacts less than 10 hospitals on an annual basis this requirement is exempt from the PRA.

We have submitted a copy of this final rule to OMB for its review of the information collection requirements in § 482.21.

If you have any comments on any of the information collection and record keeping requirements, please mail the original and three copies directly to the following:

This is a summary of the Commission's Second Report and Order, ET Docket No. 00-258, FCC 02-304, adopted November 7, 2002, and released November 15, 2002. The full text of this document is available for inspection and copying during regular business hours in the FCC Reference Center (Room CY-A257), 445 12th Street, SW., Washington, DC 20554. The complete text of this document also may be purchased from the Commission's copy contractor, Qualex International, 445 12th Street, SW., Room, CY-B402, Washington, DC 20554. The full text may also be downloaded at: http://www.fcc.gov. Alternative formats are available to persons with disabilities by contacting Brian Millin at (202) 418-7426 or TTY (202) 418-7365.

1. This Second Report and Order allocated 90 MHz of spectrum in the 1710-1755 MHz and 2110-2155 MHz bands that can be used for Advanced Wireless Service (AWS). This spectrum comes from bands that the Commission previously identified as candidate bands for the provision of AWS, and includes spectrum used by Federal government entities that is slated for transfer to non-Federal government use, spectrum currently used by fixed microwave services and designated for emerging technologies, and spectrum currently used by the Multipoint Distribution Service (MDS).

2. 1710-1755 MHz—The 1710-1755 MHz band was initially identified in 1995 for transfer from Federal government use to mixed Federal government/non-Federal government use. At that time, National Telecommunications Information Administration (NTIA) determined that this band could be made available to non-Federal government users in 2004. NTIA also identified certain incumbent Federal government facilities that may continue to operate in the band and must be protected from interference. In its 2002 Viability Assessment, NTIA outlined additional steps for reaccommodating existing Federal government users in the band segment, including some that have a right to remain in the band indefinitely. The NTIA plan offered a mechanism that could largely clear the band of Federal government users no later than December 31, 2008.

3. Commenters note that the 1710-1755 MHz band enjoys many characteristics that make it suitable for AWS. They note it is already being used in many countries for 2G-style wireless services so it is likely to promote global spectrum harmonization in the long term, which in turn will foster roaming, and economies of scale that can translate into lower development costs and manufacturing efficiencies. They further state that this band can also help ensure that United States residents enjoy the same level of advanced services as in other countries. The parties observe that the 1710-1755 MHz band is slated to be made available for non-Federal Government commercial use, and that the 2002 Viability Assessment offers a plan that can make the band even more useful for AWS. Catholic Television Network also states that the band “offers better propagation characteristics,” than other bands under consideration. We also note that the band size—45 megahertz would provide flexibility to accommodate a variety of channelization plans.

4. We find that it serves the public interest to allocate the 1710-1755 MHz band segment for mobile and fixed services on a co-primary basis contingent on its becoming available for non-Federal government mixed use January 1, 2004. In addition, we are removing the fixed and mobile allocations from the Federal government Table in the 1710-1755 MHz band, except as specified in the new United States footnote US378, which codifies Federal government residual rights. We also retain and modify footnote US311 in the Table of Frequency Allocations. This footnote identifies certain pre-existing radio astronomy activities that exist between 1718.8 MHz and 1722.2 MHz at observatories set forth in Appendix F of the Notice of Proposed Rule Making (NPRM) 66 FR 7438, January 23, 2001. Because radio astronomy facilities in this band operate on an unprotected basis, we conclude that it is not necessary to add rules setting forth coordination procedures and exclusion zones, as the National Academies of Science (NAS) suggests. The footnote, modified to update the list of radio astronomy facilities, will serve to apprise parties of these operations.

5. 2110-2150/2150-2155 MHz—Currently, the 2110-2150 band is used in the United States primarily for non-Federal Government fixed and mobile services licensed under the Fixed Microwave Service in part 101 of the rules, the Public Mobile Services under part 22 of the rules, and the Domestic Public Fixed Radio Services under part 21 of the rules. Federal government use of this band is generally on a secondary basis and is limited to space research earth stations for earth-to-space transmissions in the 2110-2120 MHz portion of the band. The Commission originally identified this band for new advanced fixed and mobile services in the 1992 Emerging Technologies proceeding and adopted rules and procedures to permit new licensees to relocate existing fixed service microwave licensees from this spectrum band.

6. The 2110-2150 MHz band is already allocated to the fixed and mobile services on a primary basis, and thus it is not necessary that we reallocate this spectrum in order to make it available for AWS use. Instead we re-designate the band for new uses consistent with the general outline of our Emerging Technologies proceeding. We also note that the Balanced Budget Act of 1997 (BBA-97) identifies the 2110-2150 MHz band for advanced wireless use and specifies that the band must be assigned under the competitive bidding procedures.

7. In addition, we note that the National Aeronautical and Space Administration (NASA) operates on a primary basis a station in the 2110-2120 MHz band at Goldstone, California as part of the Space Research service. This station, which is authorized via United States footnote US252, is used by NASA's Deep Space Network (DSN) for uplink transmissions to interplanetary spacecraft. In the NPRM, we proposed not to relocate this facility. Moreover, the DSN earth station transmits with a nominal EIRP of 105.5 dBW. In the NPRM, we noted that during command link operations it is likely that mobile receivers on the 2110-2120 MHz segment (and possibly in adjacent bands above 2120 MHz) will not be able to operate within the areas surrounding Goldstone.

8. We examined the interference characteristics of the Goldstone DSN facility and based on its typical operation pattern, which is intermittent, the amount of its signal that would be blocked by terrain in many directions, and the low population density in the areas near Goldstone, we conclude that a significant amount of interference should not occur to AWS. Therefore, we will not formally restrict use of the 2110-2120 MHz band in the vicinity of Goldstone. However, we anticipate that this band will be unusable for advanced services at certain times in the immediate vicinity of Goldstone, and expect that potential licensees will take this fact into account and will develop their business and service plans accordingly. We believe that such an approach is practical, given the comments of the AWS proponents that discussed Goldstone interference, and we will work cooperatively with JPL and other interested parties to insure that our approach does in fact achieve its goals.

9. The 2150-2160 MHz band is allocated internationally to the fixed and mobile services on a primary basis and is regulated under part 21 of our rules as part of MDS. This band is generally operated as two channels—Channel 1 (2150-2156 MHz) and Channel 2A (2156-2160 MHz). In addition, licensees may use channel 2 (2156-2162 MHz) on a limited basis in 50 cities. MDS may also use spectrum in the 2500-2690 MHz band.

10. The Commission concludes that the record supports reallocation of 5 megahertz of spectrum at 2150-2155 MHz to add a mobile allocation to support the provision of AWS. Because this spectrum is contiguous to the 2110-2150 MHz band, this reallocation will allow efficiencies in deploying new AWS. For example, there will be only one point where AWS and MDS bands are adjacent and interference issues will need to be addressed. We note that the 2150-2155 MHz band is part of the “worldwide” IMT-2000 base station transmit band that extends from 2110 MHz to 2170 MHz. Thus our action here more closely aligns U.S. spectrum with allocations in the rest of the world and could lead to lower equipment costs and promote global roaming. Furthermore, this action will provide two contiguous 45 megahertz blocks of paired spectrum ( i.e. , 1710-1755 MHz paired with 2110-2155 MHz), and provide more options for assigning large spectrum blocks suitable for AWS use.

11. The Commission recognizes that our decision here to reallocate the 2150-2155 MHz band from MDS to AWS use requires that we address certain issues regarding MDS operations. In particular, we will have to consider relocation spectrum and propose relocation procedures for MDS, keeping in mind the need to avoid disruption to existing customers. Because we do not anticipate licensing the band for new services until after we adopt service rules, and because the companion Federal government transfer spectrum in the 1710-1755 MHz band will not be available until 2004, there is sufficient time for us to identify in a separate proceeding to be initiated in the near future any necessary relocation spectrum for MDS licensees and to craft appropriate relocation procedures. In addressing relocation, however, we recognize the importance of avoiding unnecessary delay so as to minimize uncertainty to existing licensees.

12. We now turn to the relocation procedures for incumbent fixed microwave service licensees that currently operate in the 2110-2150 MHz band. Because this band was identified and reallocated for new uses in the Emerging Technologies proceeding, a mechanism already exists to clear these incumbent licensees. In the NPRM, we noted that fixed microwave service incumbents holding primary status ( see Second Report and Order, footnote 149 ), in the 2110-2150 MHz band are entitled to compensation for relocation of facilities under these policies. See Emerging Technologies Third Report and Order and Memorandum Opinion and Order, 8 FCC Rcd 6589 (1993) 58 FR 46547, September 2, 1993. New licensees may relocate incumbent licensees' systems at their option. In general, a new licensee will relocate an incumbent system if it determines that the incumbent system will cause interference to the new licensee's system. The main elements of the relocation process include a set negotiation period or periods, usually triggered at the request of the new licensee; a requirement that the parties negotiate in good faith during the mandatory negotiation period; and the right of the incumbent to be relocated to comparable facilities at the expense of the new licensee. The relocation compensation includes all engineering, equipment, site, and FCC fees. The new licensee must complete all activities necessary for implementing the replacement facilities, and must test the new facilities to ensure comparability with the existing facilities. See generally 47 CFR 101.69 through 101.99. We further noted that certain fixed microwave incumbents in the 2110-2150 MHz band segment consist of links that are paired with frequencies in the 2165-2200 MHz band, which was previously reallocated to support MSS. Moreover, some microwave licensees at 2110-2115 MHz have paired links in the 2160-2165 MHz band.

13. In the NPRM, we noted that it would be possible for both relocation procedures to apply to the same new entrant in the 2110-2150 MHz band—the modified MSS relocation procedure for a link paired between the 2110-2150 MHz and 2165-2200 MHz bands and the Emerging Technologies procedure for all other relocations (including the relocation of a link paired between the 2110-2150 MHz and 2160-2165 MHz bands). We thus proposed to use the modified procedure for the relocation of any incumbent user in order to provide a single relocation process for this band. For microwave links paired in the 2110-2150 and 2160-2165 MHz bands, a new licensee would be required to relocate both paths (if such a relocation had not yet been done), but would retain a right to seek reimbursement of 50 percent of its relocation costs from the licensee that ultimately uses frequencies in the second path. All new licensees, regardless of whether they relocate paired or unpaired microwave incumbents, would be subject to the modified relocation rules (such as the shortened mandatory negotiation period).

14. We conclude that the modified relocation procedures, as proposed, represent the best course. A unified approach to our rules and procedures serves the public interest, and can promote the rapid development of AWS, which many commenters support. Moreover, if the demand for the advanced services is as robust as commenters claim, incumbent licensees should find new licensees particularly eager to reach relocation agreements so as not to be competitively disadvantaged by a delay in their service deployment. Finally, we note that under our basic relocation principles, incumbents retain a right to comparable facilities. We stress that we are not altering this process, nor an incumbent's right to seek relief if it believes the relocation process has not been conducted in good faith. We observe, however, that we may need to modify the reimbursement provisions if MDS is reassigned to the 2155-2165 MHz band because Fixed Service microwave operations in the 2160-2165 MHz band would have to be relocated. Under the current rules, for example, MDS would have to reimburse a new AWS entrant who is trying to clear paired microwave links at 2110-2115 and 2160-2165 MHz.

15. 1755-1850 MHz. In the NPRM, we identified the 1755-1850 MHz band for consideration for the provision of AWS. The 1755-1770 MHz band segment was considered as part of the initial NTIA studies, and was again evaluated in the 2002 Viability Assessment. In this most recent review, NTIA concluded that the 1755-1850 MHz band is not viable for use by AWS due to the extensive and critical Federal Government operations in the band, including DOD mobile systems operating in the 1755-1850 MHz range that “have recently been elevated in importance due [to] the war on terrorism, homeland defense, and possible requirements for ballistic missile defense.” Moreover, NTIA was unable to identify alternative spectrum bands that could readily accommodate many of these systems, including air combat training systems, the Land Warrior systems, and DOD satellite telemetry, tracking and command facilities that operate in the 1761-1842 MHz band segment and which cannot be easily re-tuned. The 1770-1850 MHz band segment was previously rejected by NTIA as incompatible for shared use and was not included in the most recent band evaluation process. Throughout the evaluation process, Federal Government users have consistently expressed skepticism that any portion of the 1755-1850 MHz band segment can be made available for advanced commercial wireless systems, either through relocation of Federal users or by shared use. Moreover, NTIA anticipates that the process that will allow it to relocate Federal users from the 1710-1755 MHz band segment will result in system relocations to spectrum above 1755 MHz, as well as a generally more intensive use of the 1770-1850 MHz band segment for existing, relocated, and new systems. We note that some commenters identify benefits from the use of this band for AWS, including regional harmonization and the possibility that allocation of the 1755-1850 MHz band (in conjunction with the 1710-1755 MHz band) would serve as a catalyst for making these frequencies as globally accepted as the core bands identified in IMT-2000.

16. Given the statements by NTIA regarding the intense use of this band by military users and other Federal Government agencies that provide critical safety-of-life operations, and the concern expressed by many commenters about clearing existing government users, we conclude that this band is too encumbered to be used for the provision of AWS. We note that while some comments suggest that we explore a combination of sharing and migration for incumbent users, NTIA and other commenters do not believe that co-channel sharing is possible. We acknowledge the 2002 Viability Assessment's conclusion that “[a] leap forward in technology may permit extensive sharing in all bands below 3 GHz in the future,” but that until such developments occur, it appears that use of the 1755-1770 MHz band for advanced wireless applications is not technically viable. Accordingly, we conclude that the 1755-1850 MHz band is not suitable for the provision of AWS at this time.

17. Currently Allocated Spectrum. In the NPRM , we noted that currently allocated spectrum may also be suitable for the provision of AWS. This spectrum includes television bands that were reallocated to commercial fixed, mobile, and broadcast services and are in the process of being vacated as part of the transition to digital television. We note that the disposition of these bands has taken place in separate proceedings. The record in the instant proceeding contains nothing that would cause us to revisit these decisions, nor to reassess our general conclusion that the reallocated television bands will be available for new uses, including AWS. However, we reach an opposite conclusion with respect to the 2390-2400 MHz band. The record reflects little support for AWS use of this band, which is designated for UPCS and Amateur Service use, and the 2002 Viability Assessment identified this spectrum as suitable replacement spectrum for some Government systems currently operating in the 1710-1755 MHz band. Therefore, we will not further examine the possible use of the 2390-2400 MHz band for the provision of AWS.

18. The 90 megahertz of spectrum that has been allocated will promote the robust deployment of AWS, and we will continue to strive to make allocation decisions that can lead to the widescale deployment of innovative new services. Moreover, technological developments may foster further efficiencies in the deployment of AWS. These technologies include software defined radio (SDR) and adaptive antenna technology (increasing directionality) or new modulation or coding techniques (more information in the same spectrum) that may allow for greater spectral efficiency than that which is typically associated with current wireless systems. Finally, we stress that this action is part of a continuing effort to identify and evaluate both the current and future spectrum needs for AWS. The further decisions that we make in this continuing proceeding may well result in the allocation of additional spectrum for commercial use, including the provision of AWS.

19. As required by the Regulatory Flexibility Act (RFA) 1 an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the Notice of Proposed Rulemaking and Order (NPRM), 2 as well as the Memorandum Opinion and Order and Further Notice of Proposed Rule Making (Further NPRM), 66 FR 47591, September 13, 2001. 3 The Commission sought written public comments on the proposals in the NPRM and Further NPRM, including comment on each IRFA. This present Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA. 4

20. The goal of the Second Report and Order (Second R&O) is to promote the provision of advanced wireless services (AWS) to the public, which in turn supports our obligations under section 706 of the 1996 Telecommunication Act  5 and, more generally, serves the public interest by promoting rapid and efficient radio communication facilities.

21. The Second R&O discusses the need for spectrum allocations of sufficient size and with particular characteristics so as to allow for the provision of AWS, and evaluates spectrum that could be allocated to support these services. Specifically, the Second R&O allocates spectrum that is suitable for advanced services in the 1710-1755 MHz, 2110-2150 MHz, and 2150-2155 MHz bands.

22. There were no comments filed that specifically addressed the rules and policies proposed in the IRFA.

23. The RFA directs agencies to provide a description of, and, where feasible, an estimate of, the number of small entities that may be affected by the rules adopted herein. 6 The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” 7 In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. 8 A “small business concern” is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business Administration (SBA). 9

24. A small organization is generally “any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.” 10 Nationwide, as of 1992, there were approximately 275,801 small organizations. 11 “Small governmental jurisdiction” generally means “governments of cities, counties, towns, townships, villages, school districts, or special districts, with a population of less than 50,000.” 12 As of 1992, there were approximately 85,006 governmental entities in the United States. 13 This number includes 38,978 counties, cities, and towns; of these, 37,566, or 96%, have populations of fewer than 50,000. 14 The Census Bureau estimates that this ratio is approximately accurate for all governmental entities. Thus, of the 85,006 governmental entities, we estimate that 81,600 (96%) are small entities.

25. Fixed Microwave Services. Microwave services include common carrier, 15 private-operational fixed, 16 and broadcast auxiliary radio services. 17 At present, there are approximately 22,015 common carrier fixed licensees and 61,670 private operational-fixed licensees and broadcast auxiliary radio licensees in the microwave services. The Commission has not yet defined a small business with respect to microwave services. For purposes of this FRFA, we will use the SBA's definition applicable to wireless and other telecommunications companies— i.e. , an entity with no more than 1,500 persons. 18 According to Census Bureau data for 1997, there were 977 firms in this category, total, that operated for the entire year. 19 Of this total, 965 firms had employment of 999 or fewer employees, and an additional 12 firms had employment of 1,000 employees or more. 20 Thus, under this size standard, the great majority of firms can be considered small.

26. We note that the number of firms does not necessarily track the number of licensees. We estimate that all of the Fixed Microwave licensees (excluding broadcast auxiliary licensees) would qualify as small entities under the SBA definition. Of these licenses, approximately 8,210 are issued for frequencies in the Emerging Technologies bands affected by this proceeding. In addition, these bands contain approximately 70 licenses in the paging and radiotelephone service and the general aviation and air-ground radio telephone services. Thus, assuming that these entities also qualify as small businesses, as many as 8,280 small business licensees could be affected by the rules we adopt. We note that these entities have been subject to relocation under rules originally adopted ten years ago in the Commission's Emerging Technologies proceeding. The Second Report and Order anticipates that these general relocation rules will continue to apply to FS microwave licensees and does not modify the class of licensees that are subject to these relocation provisions.

27. Multipoint Distribution Service (MDS). This service has historically provided primarily point-to-multipoint, one-way video services to subscribers, and Local Multipoint Distribution Service (LMDS). 21 The Commission recently amended its rules to allow MDS licensees to provide a wide range of high-speed, two-way services to a variety of users. 22 In connection with the 1996 MDS auction, the Commission defined small businesses as entities that had annual average gross revenues for the three preceding years not in excess of $40 million. 23 The Commission established this small business definition in the context of this particular service and with the approval of the SBA. 24 The MDS auction resulted in 67 successful bidders obtaining licensing opportunities for 493 Basic Trading Areas (BTAs). 25 Of the 67 auction winners, 61 met the definition of a small business. At this time, we estimate that of the 61 small business MDS auction winners, 48 remain small business licensees. In addition to the 48 small businesses that hold BTA authorizations, there are approximately 392 incumbent MDS licensees that are considered small entities. 26 After adding the number of small business auction licensees to the number of incumbent licensees not already counted, we find that there are currently approximately 440 MDS licensees that are defined as small businesses under either the SBA or the Commission's rules. Because the Commission's action only affects MDS operations in the 2150-2155 MHz band, the actual number of MDS providers who will be affected by the Second Report and Order will only represent a small fraction of those 440 small business licensees.

28. The Second R&O addressed the possible use of frequency bands below 3 GHz to support the introduction of new AWS, but does not propose service rules. Thus, the item contains no new reporting, recordkeeping, or other compliance requirements. Because the item does not establish procedures for the relocation of MDS incumbents from the 2150-2155 MHz band, there are no new compliance requirements for MDS at this time.

29. The RFA requires an agency to describe any significant alternatives that it has considered in developing its approach, which may include the following four alternatives (among others): “(1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance and reporting requirements under the rule for such small entities; (3) the use of performance rather than design standards; and (4) an exemption from coverage of the rule, or any part thereof, for such small entities.” 27

30. Providing spectrum to support the introduction of new advanced mobile and fixed terrestrial wireless services is critical to the continuation of technological advancement. First and foremost, the Commission believes that our proposal to explore the possible use of several frequency bands that could offer a wide range of voice, data, and broadband services over a variety of mobile and fixed networks may provide substantial new opportunities for small entities.

31. However, we realize that some entities must be displaced to clear a sufficient quantity of contiguous spectrum to support new services. We endeavored to avoid this effect by identifying unencumbered spectrum, but spectrum in the suitable frequency range is heavily used already and a sufficient amount of unencumbered spectrum simply does not exist. We have therefore sought to minimize an adverse impact by proposing to reallocate frequency bands for those incumbents, including small entities, which might be accommodated in other spectrum and could be relocated more easily. The spectrum we allocate in the 1710-1755 MHz band is currently used for Federal government services, and therefore there are no non-Federal government incumbent small entities that will be displaced by the reallocation of this band. Similarly, as noted in paragraph 28 of the Second R&O , the 2110-2150 MHz band was previously identified as an Emerging Technology band, and relocation procedures already exist for incumbents in this band. These existing procedures (as modified in the Second R&O ) should serve to ease the relocation of small entity incumbents in the 2110-2150 MHz band, and make reallocation of this band preferable to the reallocation of other bands where we would have to establish new relocation rules.

32. Finally, the Commission has already received extensive comments in this proceeding on issues related to the possible reallocation of the 2150-2160 MHz (2.1 GHz) spectrum for advanced wireless purposes. Comments filed by the multipoint distribution/instructional television fixed services industry and several equipment manufacturers argue that the 2.1 GHz band is necessary for the continued roll-out of fixed wireless services across the country. Other commenters support the use of 2.1 GHz for advanced wireless services. Although many commenters ask that we reallocate a large contiguous spectrum block to include the entire 2150-2160 MHz band, we instead decide to reallocate 5 megahertz in the 2150-2160 MHz band as part of a 45 megahertz block of contiguous spectrum that can be used to provide advanced services. By doing so, we satisfy the need to designate a large block of contiguous spectrum that can be paired in order to allow for the deployment of advanced services (and thus, serve the goals of this proceeding). However, by allocating 5 megahertz of existing MDS spectrum, we retain greater flexibility to accommodate small entities that are MDS licensees than had we redesignated the entire 2.1 GHz MDS spectrum. For example, paragraph 39 of the Second Report and Order , notes that we retain the option to realign MDS spectrum to a 10 megahertz block in the 2155-2165 MHz band. Had we reallocated the entire 2.1 GHz MDS spectrum, as some commenters had suggested, this option would not have been available.

33. The Commission will send a copy of the Second Report and Order including this FRFA, in a report to be sent to Congress pursuant to the Congressional Review Act. 28 In addition, the Commission will send a copy of the Second Report and Order, including this FRFA, to the Chief Counsel for Advocacy of the SBA.

34. Pursuant to sections 1, 4(i), 7(a), 301, 302(a), 303(f), 303(g), 303(r), 307, 308, 309(j), 316, and 332 of the Communications Act of 1934, as amended, 47 U.S.C. sections 151, 154(i), 157(a), 301, 302(a), 303(f), 303(g), 303(r), 307, 308, 309(j), 316, and 332 the Second Report and Order is hereby adopted. The rules set forth will become effective February 24, 2003.

35. The Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, shall send a copy of this Second Report and Order, including the Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration.

On June 7, 2001, we published in the Federal Register (66 FR 30659) a proposed rule to amend the Department of Veterans Affairs Acquisition Regulation (VAAR), pursuant to 38 U.S.C. 8151-8153, to establish simplified procedures for the competitive acquisition of health-care resources consisting of commercial services or the use of medical equipment or space.

Comments were solicited concerning the proposal for 60 days, ending August 6, 2001. We did not receive any comments.

The information presented in the proposed rule document still provides a basis for this final rule. In addition, the proposed rule requested Paperwork Reduction Act (PRA) comments concerning the collection of information regarding clauses for use in both commercial and non-commercial item and service solicitations and contracts. No comments were received by VA or the Office of Management and Budget (OMB).

Therefore, based on the rationale set forth in the proposed rule document, we are adopting the provisions of the proposed rule as a final rule with no changes, except for a non-substantive change to reflect, at 48 CFR 801.301-70(c), the PRA clearance numbers assigned by OMB to clauses 852.207-70 and 852.237-7.

The Unfunded Mandates Reform Act requires, at 2 U.S.C. 1532, 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 rule would have no consequential effect on State, local, or tribal governments.

This document has been reviewed by the Office of Management and Budget under Executive Order 12866.

This rule may have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612. An Initial Regulatory Flexibility Analysis was published in the Federal Register on June 7, 2001, (66 FR 30672) as part of the proposed rule. No comments were received. As required by the RFA (5 U.S.C. 601 et. seq. ), the following Final Regulatory Flexibility Analysis is set forth.

a. A succinct statement of the need for and the objectives of the rule.

Response: The rule amends the VAAR to implement the provisions of 38 U.S.C. 8151-8153, which authorize the Secretary of Veterans Affairs, in consultation with the Administrator of Federal Procurement Policy, to prescribe simplified procedures for the procurement of health-care resources. We believe the simplified procedures will allow VA to become more efficient in procuring health-care resources.

The objective of the rule is to allow VA to become more efficient in procuring health-care resources and thereby strengthen the medical programs of the Department and improve the quality of health care provided to veterans.

b. A summary of the significant issues raised by public comments in response to the initial regulatory flexibility analysis, a summary of the agency's assessment of such issues, and a statement of any changes made in the proposed rule as a result of such comments.

Response: No public comments were received and no changes were made to the proposed rule.

c. A description of and an estimate of the number of small entities to which the rule will apply or an explanation of why no such estimate is available.

Response: The small entities that could be affected by the rule are any small entities that provide commercial services or the use of medical equipment or space to the health-care industry.

We do not have precise figures on the number of small entities that could potentially be affected by the rule. Any small entity that provides, or wishes to provide, commercial services or the use of medical equipment or space to VA health-care facilities could potentially be affected.

However, the rule will not apply to the majority of VA acquisitions. The rule applies only to competitive acquisitions of commercial services or the use of medical equipment or space conducted by the Veterans Health Administration (VHA) and which specifically reference the authority of 38 U.S.C. 8153. The rule does not apply to acquisitions of supplies or equipment made on behalf of VHA or to acquisitions made on behalf of the Veterans Benefits Administration (VBA) or the National Cemetery Administration (NCA). Except for section 873.108(b), the rule does not apply to VHA sole source acquisitions from affiliated institutions or entities associated with affiliated institutions. The authority for VHA to contract on a sole source basis with an institution affiliated with VA or with a medical practice group or other approved entity associated with an affiliate, addressed in the rule at 873.108(b), is authorized by law and is not dependent upon this rulemaking. The rule does not apply to acquisitions of services for which other specific authorities apply, such as acquisitions of nursing home care services, which are acquired under the authority of 38 U.S.C. 1720, or to acquisitions of non-commercial services, such as construction.

We have no relevant data regarding commercial service acquisitions below $25,000. However, we expect little application of the rule to acquisitions below $25,000. Existing FAR provisions for such acquisitions are already very simple and the provisions of the rule likely would not provide a significant benefit to the Government to warrant use of this authority for such low dollar value acquisitions.

In Fiscal Year (FY) 1998, VHA reported approximately 6,000 individual service transactions valued in excess of $25,000 to the Federal Procurement Data System. This 6,000 figure excludes classification codes C, architect/engineer; E, purchase of structures; Q402, nursing home; Y, construction; and Z, maintenance of real property, all of which we believe are not covered by the rule. Of those 6,000 transactions, approximately 3,000 were awarded to small businesses and approximately 900 were awarded to non-profit businesses. Similar figures were reported for FY 1999. Of the total acquisition dollars associated with these 6,000 annual awards, we estimate that in FY 1998, approximately 42 percent, and in FY 1999, approximately 44 percent, were awarded to small businesses.

d. A description of the projected reporting, recordkeeping, and other compliance requirements of the rule, including an estimate of the classes of small entities which will be subject to the requirement, and the type of professional skills necessary for preparation of the report or record.

Response: The reporting or recordkeeping requirements of the clauses at section 852.207-70, Report of employment under commercial activities, and section 852.237-7, Indemnification and Medical Liability Insurance, were discussed in the Paperwork Reduction Act (PRA) portion of the proposed rule, published in the Federal Register on June 7, 2001 (66 FR 30671). The clause at section 852.207-70 requires the contractor, on contracts where current VA employees are displaced, to report on employment openings and on efforts to hire displaced VA employees. The clause at section 852.237-7 requires contractors, on contracts for nonpersonal health-care services, to provide evidence of liability insurance. The final rule imposes no new reporting or recordkeeping requirements not already required by the VAAR. Currently, the VAAR requires that these clauses be included in all applicable solicitations and contracts, i.e., contracts where VA employees might be displaced (852.207-70) or contracts for nonpersonal health-care services (852.237-7). The rule provides clarification that these clauses would continue to be required in all applicable service contracts, including commercial service contracts issued under the authority of 38 U.S.C. 8153. Small entities currently holding contracts where VA employees might be displaced or contracts for nonpersonal health-care services are required to provide employment reports or evidence of liability insurance, as applicable. Under the rule, there is no change to those requirements and no new added requirements. There are no additional small entities affected by the rule that would not already be affected by the current regulations. No professional skills are necessary to comply with these reporting and recordkeeping requirements.

e. A description of the steps the agency has taken to minimize the significant economic impacts on small entities consistent with the stated objectives of applicable statutes, including a statement of the factual, policy, and legal reasons for selecting the alternative adopted in the final rule, and the reasons for rejecting each of the other significant alternatives.

Response: We believe that, with two exceptions (1. and 2. below), the provisions of the rule, where those provisions differ from the FAR, are small business/large business neutral, i.e. , they would have neither a positive nor a negative impact on small business or large business. The two exceptions concern the authority to waive FAR small business set-aside requirements and the provisions concerning the transmission of solicitation notices to the Governmentwide point of entry (GPE).

1. The rule at section 873.107 contains a provision allowing the head of the contracting activity (HCA) to waive the requirement to set aside an acquisition for small business. The HCA must determine that the waiver is in the best interest of the Government. The availability of this authority may result in acquisitions where small businesses have to compete against large businesses rather than compete only against other small businesses.

The alternatives to this waiver authority that were considered in order to limit the impact of the rule on small businesses included having no waiver authority, limiting the application of that authority to specific types of acquisitions, such as acquisitions for medical services, or limiting the authority to acquisitions in excess of a certain dollar threshold. For the reasons stated below, we determined to place no limits, other than those contained in the rule, on the application of this waiver authority.

As noted above, the rule would only apply to a limited number of acquisitions. We believe the waiver authority would be used in very few of those limited number of acquisitions, primarily in acquisitions where it is critical to broaden the pool of sources considered in order to obtain the highest quality patient care services at reasonable prices. In such cases, it would not be in VA's best interest to exclude non-profit teaching hospitals and universities and other similar high quality large businesses from the competition. Small businesses could still compete and would have an equal opportunity to be considered for award. The availability of this authority, while most critical to direct patient care service acquisitions, could be a necessary element of other commercial service acquisitions that are critical to the optimum functioning of the medical centers.

In some limited circumstances, the waiver authority of section 873.107 may have a beneficial impact on small entities. VA has authority to contract on a sole source basis with medical schools, hospitals, and clinics affiliated with VA. Medical schools, hospitals, and clinics are almost exclusively large or nonprofit businesses. Under the FAR, if a VA medical center wishes to seek competition for services currently being acquired from its affiliate, the affiliate would be excluded from bidding on that competition if there were two or more small businesses capable of providing the services. It is in VA's best interest to obtain state-of-the-art medical services from the highest qualified sources at reasonable prices. Without the waiver authority, VA medical centers would most likely continue to award sole source contracts to their affiliates rather than seek competition, since, under a competitive solicitation, those affiliates might be excluded as potential sources for those services due to the current FAR requirement to set acquisitions aside for small business. While VA medical centers might be willing to consider other sources, they generally are unwilling to exclude their affiliates as potential sources. However, under the waiver procedures of the rule, VA medical centers would no longer be required to set an acquisition aside for small business and exclude their affiliates from consideration. Accordingly, VA medical centers may be more likely to issue competitive solicitations for highly technical medical services rather than acquire such services on a sole source basis from their affiliates. Rather than reducing small business access to VA acquisitions of medical services, the waiver process could result in increased access to such acquisitions by small businesses. In this regard, VA intends to monitor, through the Federal Procurement Data System, the use of the procedures provided in this rule and the impact on VA's socioeconomic programs.

2. The FAR requires that all proposed acquisitions, including sole source acquisitions, exceeding $25,000, with certain exceptions, be transmitted to the GPE. The rule differs from the FAR in several ways. First, it provides, at section 873.108(a), that acquisitions exceeding the simplified acquisition threshold (SAT) (currently $100,000) would not have to be announced in the GPE. Rather, the rule requires that contracting officers publicly announce such proposed acquisitions utilizing a medium designed to obtain competition to the maximum extent practicable. The rule lists a number of examples for where the announcements may be announced, including the GPE. The intent of the rule is to maximize the dissemination of information regarding such proposed acquisitions, not to limit dissemination. Most acquisitions for services are of interest only to the local community. In many cases, it is impossible for a firm located some distance from a VA medical center to provide coronary bypass operations, X-ray or oncology services, or other services necessary to operate the medical center, on a timely basis. We believe that both small and large local service providers of health-care resources ( e.g., hospitals and clinics) are more likely to be made aware of acquisition opportunities if the acquisitions are announced in mediums that are seen and read by the local service community or if they are contacted directly. Accordingly, we believe this provision of the rule will tend to increase competition rather than decrease competition and will provide small businesses with increased opportunities.

Second, the rule at section 873.108(b) provides that sole source acquisitions from institutions affiliated with VA and from medical practice groups and other entities associated with an affiliated institution are exempt from the requirement for synopsis in the GPE. 38 U.S.C. 8153 specifically authorizes VA to acquire health-care resources on a sole source basis from institutions affiliated with VA and from medical practice groups and other entities associated with an affiliated institution. Exempting such acquisitions from synopsis in the GPE is consistent with statute, which imposes no requirement for VA to solicit and consider any other offers. Thus, this provision of the rule will have no impact on competition, since competition is not required under any circumstances.

Section 873.108(b) also exempts from publication sole source acquisitions of hospital care, medical services, and other health-care services from any source, whether or not the source is affiliated with VA. However, as required by 38 U.S.C. 8153(a)(3)(D), acquisitions from non-affiliates, if conducted on a sole source basis, must still be justified and approved. Acquisitions for hospital care, medical services, or other health-care services would usually be conducted on a sole source basis only if there was an emergency need for such services. Otherwise, the acquisitions would likely be conducted competitively, if not acquired from an affiliate. The FAR provides an exemption from synopsis in the GPE under conditions of unusual or compelling urgency and where the Government would be seriously injured by any delay due to the publication requirement. We expect that most of the sole source acquisitions of hospital care, medical services, and other health-care services covered by this provision will be conducted under conditions of unusual or compelling urgency. Such acquisitions would include emergency hospital care for a veteran in an area not served by a nearby VA medical center. Even under the FAR, this type of acquisition is exempt from synopsis in the GPE by virtue of its being an urgent and compelling acquisition. This provision of the rule will simplify the acquisition process by freeing the contracting officer from having to make individual determinations regarding publication for each sole source acquisition of hospital care, medical services, and other health-care services. Since we expect most such acquisitions to already be exempt under the FAR, we believe this provision will have little, if any, impact on competition or on awards to small businesses.

Third, the rule at section 873.108(c) exempts acquisitions below the SAT from the requirement for public announcement, including synopsis in the GPE. However, the rule at section 873.104 requires the contracting officer to seek competition to the maximum extent practicable and to permit all responsible sources, as appropriate, to submit a bid, proposal, or quotation. In addition, for acquisitions below the SAT, section 873.111 states that contracting officers should solicit a sufficient number of sources to promote competition to the maximum extent practicable. Section 873.107 requires that acquisitions be set aside for small business. These provisions tend to mitigate any negative impact that section 873.108(c) may have on small businesses.

The alternatives to the above provisions regarding public announcements in the GPE that were considered were to eliminate these provisions and follow the provisions of the FAR or to limit the exemptions to specific categories of acquisitions, such as acquisitions for medical services. The objectives of the rule are to allow VA to become more efficient in procuring health-care resources. The intent of this rule is to provide procurement processes that are simpler and less time consuming than those of the FAR. As discussed above, we believe that the flexibility to select the public medium that best captures the awareness of interested sources will enable the Department to maximize the effective distribution of information on VA solicitations and more efficiently take advantage of competition without decreasing competition. For this reason, the provisions regarding publicizing contract actions have been retained without change.