Karnal bunt is a fungal disease of wheat ( Triticum aestivum ), durum wheat ( Triticum durum ), and triticale ( Triticum aestivum X Secale cereale ), a hybrid of wheat and rye. Karnal bunt is caused by the smut fungus Tilletia indica (Mitra) Mundkur and is spread primarily through the movement of infected seed. In the absence of measures taken by the U.S. Department of Agriculture (USDA) to prevent its spread, the establishment of Karnal bunt in the United States could have significant consequences with regard to the export of wheat to international markets.

The regulations regarding Karnal bunt are set forth in 7 CFR 301.89-1 through 301.89-16 (referred to below as the regulations). Among other things, the regulations define areas regulated for Karnal bunt and restrict the movement of certain regulated articles, including wheat seed and grain, from the regulated areas. The regulations also provide for the payment of compensation for certain growers, handlers, seed companies, owners of grain storage facilities, flour millers, and participants in the National Karnal Bunt Survey who incurred losses and expenses because of Karnal bunt during certain years. These provisions are in § 301.89-15, “Compensation for growers, handlers, and seed companies in the 1999-2000 and subsequent crop seasons,” and § 301.89-16, “Compensation for grain storage facilities, flour millers, and National Survey participants for the 1999-2000 and subsequent crop seasons.”

On August 6, 2001, the Animal and Plant Health Inspection Service (APHIS) published in the Federal Register a final rule (66 FR 40839-40843, Docket No. 96-016-37) that established the compensation levels for the 1999-2000 crop season and subsequent years and made several other changes to the compensation regulations. One of these changes was that, after the 2000-2001 crop season, compensation would no longer be made available to persons growing or handling host crops that were knowingly planted in previously regulated areas.

On May 1, 2002, APHIS published in the Federal Register an interim rule (67 FR 21561-21566, Docket No. 01-112-1) that amended the regulations governing compensation to address five particular situations in four counties in northern Texas that arose during the 2000-2001 crop season. In Archer, Baylor, Throckmorton, and Young Counties, certain wheat growers, handlers, and other parties covered by the compensation regulations appeared to be ineligible to receive compensation for grain or seed affected by Karnal bunt due to restrictive language in the regulations that did not anticipate certain complications in the harvest and storage of grain that arose following discovery of Karnal bunt in those counties. Due to the need to quickly declare these counties as regulated areas, we were unable to modify the compensation regulations at that time to address certain relevant aspects of the way seed and grain were moved, stored, and used in the newly regulated areas. The May 2002 interim rule amended the compensation provisions of the regulations to allow persons included in these five situations to apply for compensation.

We solicited comments concerning the interim rule for 60 days ending July 1, 2002. We received 86 comments by that date. They were from producers, representatives of industry groups, and representatives of State and foreign governments. In this document, we address the comments we received regarding the payment of compensation to custom harvesters and owners or lessees of other equipment in the four Texas counties during the 2000-2001 crop season. The other comments we received in response to the interim rule will be addressed in a subsequent document.

Seventy-eight commenters urged APHIS to provide for the payment of compensation to custom harvesters who operate in areas regulated for Karnal bunt, in addition to the compensation for growers, handlers, and other affected individuals provided by the interim rule. Some commenters stated that the cost of cleaning and disinfecting mechanized harvesting equipment after it has been used to harvest Karnal bunt-positive host crops prior to movement from a regulated area, as required by § 301.89-12(a), would either be absorbed by custom harvesters, causing them significant economic losses, or passed on to growers, already suffering losses from restrictions on the movement of their crops, in the form of higher rates.

Some custom harvesters, other commenters argued, might choose to avoid harvesting in regulated areas altogether; this would increase the economic losses suffered by growers in regulated areas, since the demand for custom harvesting services in regulated areas would exceed the supply, and growers would likely have to pay higher fees to have their crop harvested. If custom harvesters that normally operate in regulated areas chose to avoid harvesting in such areas, this would also drive down the incomes of custom harvesters that normally harvest outside regulated areas, due to increased competition.

Finally, many commenters noted that encouraging growers to participate in the Karnal bunt eradication program is a stated goal of the compensation program currently in place; without similar incentives for custom harvesters, they might not clean their mechanized harvesting equipment in accordance with the regulations when moving from a regulated area to an area not affected by Karnal bunt, possibly leading to further spread of Karnal bunt.

Most commenters favored compensating custom harvesters for the cost of cleaning their equipment if it is used to harvest Karnal bunt-positive host crops in a regulated area. The commenters also noted that custom harvesters typically set their schedules months in advance, meaning that custom harvesters could lose harvesting contracts due to the downtime (typically 8 hours) necessitated by cleaning and disinfecting mechanized harvesting equipment after it had been used to harvest Karnal bunt-positive host crops in a regulated area; compensation for contracts lost for this reason was also requested.

We agree that custom harvesters who operated in the four affected Texas counties suffered economic losses due to the designation of these counties as areas quarantined for Karnal bunt during the 2000-2001 crop season. Furthermore, because these counties became regulated areas late in the crop season, custom harvesters operating in those counties could not have been aware that they were harvesting crops that may have tested positive for Karnal bunt. Therefore, in this interim rule, we are providing for the payment of compensation to custom harvesters who harvested Karnal bunt-positive host crops in Archer, Baylor, Throckmorton, and Young Counties, TX, during the 2000-2001 crop season. This compensation is intended to reimburse custom harvesters for the cost of cleaning and disinfecting their mechanized harvesting equipment. We are also providing for the payment of compensation equivalent to the value of one contract that an eligible custom harvester lost due to the downtime necessitated by cleaning and disinfection. If an eligible custom harvester did not lose a contract due to this downtime, we are providing compensation for the fixed costs he or she incurred during the time the machine was being cleaned and disinfected. We are also providing for the payment of compensation for the expenses associated with the cleaning and disinfection of other types of equipment used in the four affected counties. The specific provisions of these compensation provisions are discussed below.

In all cases, claims for the compensation provided for by this interim rule must be received by APHIS on or before September 2, 2004. The Administrator may extend this deadline upon written request in specific cases, when unusual and unforeseen circumstances occur that prevent or hinder a claimant from requesting compensation on or before this date. If comments we receive in response to this interim rule cause us to change the rule, we will provide an additional 120-day period after the effective date of the final rule during which affected persons may submit claims for compensation.

During the 2000-2001 crop season, the regulations in § 301.89-12(a) required that mechanized harvesting equipment that has been used to harvest host crops that test positive for Karnal bunt must be cleaned and disinfected in accordance with § 301.89-13(a) prior to movement from a regulated area. (As noted previously, § 301.89-12 has since been amended.) In § 301.89-13, paragraph (a) described four acceptable methods for cleaning and disinfection.

APHIS has estimated that cleaning and disinfection costs for mechanized custom harvesting equipment are typically $750 per harvesting machine. Therefore, under this interim rule, custom harvesters who harvested Karnal bunt-positive host crops in Archer, Baylor, Throckmorton, or Young Counties during the 2000-2001 crop season and whose mechanized harvesting equipment was then required to be cleaned and disinfected will be eligible to receive either compensation for the actual cost of the cleaning and disinfection or $750 per harvesting machine cleaned, whichever amount is lower.

To receive compensation for the cost of cleaning and disinfecting mechanized harvesting equipment, custom harvesters must provide copies of a contract or other signed agreement for harvesting in Archer, Baylor, Throckmorton, or Young County during the 2000-2001 crop season, signed on a date prior to the designation of the county as a regulated area for Karnal bunt, or an affidavit stating that the custom harvester entered into an agreement to harvest in Archer, Baylor, Throckmorton, or Young County during the 2000-2001 crop season prior to the designation of the county as a regulated area for Karnal bunt; a copy of the PPQ-540 certificate issued to allow the movement of mechanized harvesting equipment from a regulated area after it had been used to harvest Karnal bunt-positive host crops and had been subsequently cleaned and disinfected; and a receipt showing the cost of the cleaning and disinfection. (Throckmorton and Young Counties, TX, were declared regulated areas in an interim rule effective on June 8, 2001 and published in the Federal Register on June 14, 2001 [66 FR 32209-32210, Docket No. 01-058-1]; Archer and Baylor Counties, TX, were declared regulated areas in an interim rule effective on July 13, 2001 and published in the Federal Register on July 19, 2001 [66 FR 37575-37576, Docket No. 01-063-1].)

The process of cleaning and disinfecting mechanized harvesting equipment takes approximately 8 hours, meaning that the custom harvesting equipment is unusable for one workday while it is being cleaned and disinfected. Custom harvesters typically schedule their harvesting contracts months in advance. Therefore, the downtime necessitated by cleaning and disinfecting mechanized harvesting equipment after it was used to harvest Karnal bunt-positive host crops in Archer, Baylor, Throckmorton, and Young Counties during the 2000-2001 crop season caused some custom harvesters to be unable to fulfill previously scheduled harvesting contracts.

In this interim rule, we are providing for the payment of compensation to custom harvesters who operated in Archer, Baylor, Throckmorton, or Young Counties during the 2000-2001 crop season and whose mechanized harvesting equipment was required to be cleaned and disinfected for the full value of one contract that was lost due to downtime necessitated by cleaning and disinfection. Compensation will only be provided for one contract lost due to cleaning and disinfection. The maximum value of compensation for this contract is $23.48 per acre that was to be harvested. This figure is APHIS' calculation of the average cost per acre of harvesting wheat; it was derived from data provided by U.S. Custom Harvesters, an industry trade group. APHIS will pay $23.48 per acre that was to be harvested or the full value of the contract, whichever is less.

To receive compensation for the value of a contract lost due to downtime necessitated by cleaning and disinfection, custom harvesters must provide copies of a contract or other signed agreement for harvesting in Archer, Baylor, Throckmorton, or Young County during the 2000-2001 crop season, signed on a date prior to the designation of the county as a regulated area for Karnal bunt, or an affidavit stating that the custom harvester entered into an agreement to harvest in Archer, Baylor, Throckmorton, or Young County during the 2000-2001 crop season prior to the designation of the county as a regulated area for Karnal bunt; a copy of the PPQ-540 certificate issued to allow the movement of mechanized harvesting equipment from a regulated area after it had been used to harvest Karnal bunt-positive host crops and had been subsequently cleaned and disinfected; and the contract for harvesting in an area not regulated for Karnal bunt that was lost due to downtime necessitated by cleaning and disinfection of mechanized harvesting equipment, signed on a date prior to the designation of the relevant county as a regulated area for Karnal bunt, for which the custom harvester will receive compensation.

Custom harvesters who did not lose contracts due to downtime necessitated by cleaning and disinfection nevertheless had to pay fixed costs associated with custom harvesting while their equipment was being cleaned and disinfected; they could not recoup these costs by using their equipment during this time. Fixed costs associated with custom harvesting include labor costs, travel costs, insurance, telephone and utility costs, and interest. According to U.S. Custom Harvesters, such fixed costs typically total $250 per hour. Custom harvesters whose mechanized harvesting equipment was required to be cleaned and disinfected thus typically incurred $2,000 in unavoidable fixed costs because their equipment was idle for 8 hours. Therefore, we are providing for the payment of $2,000 in compensation to each custom harvester who harvested Karnal bunt-positive host crops in Archer, Baylor, Throckmorton, and Young Counties during the 2000-2001 crop season and who does not apply for compensation for a contract lost due to time lost to cleaning and disinfection. This compensation will ensure that all custom harvesters are compensated for economic losses associated with the cleaning and disinfection of their equipment.

To receive compensation for fixed costs incurred during cleaning and disinfection, custom harvesters must provide copies of a contract or other signed agreement for harvesting in Archer, Baylor, Throckmorton, or Young County during the 2000-2001 crop season, signed on a date prior to the designation of the county as a regulated area for Karnal bunt, or an affidavit stating that the custom harvester entered into an agreement to harvest in Archer, Baylor, Throckmorton, or Young County during the 2000-2001 crop season prior to the designation of the county as a regulated area for Karnal bunt; and a copy of the PPQ-540 certificate issued to allow the movement of mechanized harvesting equipment from a regulated area after it had been used to harvest Karnal bunt-positive host crops and had been subsequently cleaned and disinfected.

In the event that a custom harvester who harvested Karnal bunt-positive host crops in Archer, Baylor, Throckmorton, or Young County during the 2000-2001 crop season had to cancel a contract due to time lost to cleaning and disinfection that was valued at less than $2,000, that custom harvester may request the compensation for fixed costs incurred during cleaning and disinfection and receive $2,000 under this interim rule. Because the compensation for fixed costs does not address the variable costs that must be accounted for in the total cost of a contract, we believe that this situation is extremely unlikely to have occurred; in fact, APHIS currently estimates the average value of contracts lost due to downtime necessitated by cleaning and disinfection at $25,000. However, we believe it would not encourage participation in the Karnal bunt eradication program if we required that a custom harvester with documented losses of under $2,000 due to cleaning and disinfection receive less compensation than a custom harvester without documented losses receives as a generic valuation of his or her fixed costs.

During the 2000-2001 crop season, § 301.89-12 of the regulations required that mechanized harvesting equipment that had been used to harvest host crops that test positive for Karnal bunt and seed conditioning equipment that had been used in the production of any host crops in a regulated area be cleaned and disinfected in accordance with § 301.89-13(a) prior to movement from a regulated area. Mechanized harvesting equipment that has been used to harvest Karnal bunt-positive host crops and seed conditioning equipment that has been used in the production of host crops are the only types of equipment required to be treated prior to movement from a regulated area. However, § 301.89-6 allows an inspector or a person operating under a compliance agreement to issue a certificate or limited permit for the movement within or outside a regulated area of a regulated article if the inspector determines that the regulated article, among other possibilities, is to be moved in compliance with any additional conditions the Administrator may impose to prevent the artificial spread of Karnal bunt. These additional conditions may include cleaning and disinfection.

In Archer, Baylor, Throckmorton, and Young Counties during the 2000-2001 crop season, several pieces of equipment other than mechanized harvesting equipment and seed conditioning equipment that had come into contact with Karnal bunt-positive wheat were found by inspectors to require cleaning and disinfection so that they could be moved from the quarantined area without spreading Karnal bunt. The owners or lessees of these pieces of equipment had scheduled the movement of the equipment from the quarantined area prior to the declaration of these counties as regulated areas and needed to move the equipment out of the regulated areas to continue their harvesting. APHIS estimates that these pieces of equipment cost $100 each to clean and disinfect.

Therefore, we are providing for the payment of compensation in the amount of $100 for each piece of equipment to owners or lessees of equipment that was required by an inspector to be cleaned and disinfected during the 2000-2001 crop season after the equipment came into contact with Karnal bunt-positive wheat in Archer, Baylor, Throckmorton, and Young Counties. To receive this compensation, owners or lessees must submit a copy of the PPQ-540 certificate issued to allow the movement of the equipment from a regulated area after it had been in contact with Karnal bunt-positive host crops and had been subsequently cleaned and disinfected.

We are adding the provisions described above as a new paragraph § 301.89-16(d), “Special allowances for custom harvesters and equipment owners or lessees for costs related to cleaning and disinfection of mechanized harvesting and other equipment in Archer, Baylor, Throckmorton, and Young Counties, TX, in the 2000-2001 crop season.” This new paragraph describes the circumstances under which custom harvesters and owners or lessees of equipment that were required to be cleaned and disinfected may receive compensation and the process by which they may apply for compensation.

We plan to initiate rulemaking to amend the regulations to provide for the payment of similar compensation to custom harvesters who harvest host crops that test positive for Karnal bunt and owners or lessees of other equipment that is exposed to host crops that test positive for Karnal bunt in any areas not previously regulated for Karnal bunt. That proposed rule, which would apply to the 2002-2003 through 2005-2006 crop seasons, is being prepared, in part, in response to other comments we received on our May 2002 interim rule.

Immediate action is necessary to relieve the economic burden placed on small entities by the domestic quarantine regulations for Karnal bunt. 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 action 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. The rule has been determined to be not significant for the purposes of Executive Order 12866 and, therefore, has not been reviewed by the Office of Management and Budget.

Karnal bunt is a fungal disease of wheat, durum wheat, and triticale (a hybrid of wheat and rye). Upon detection of Karnal bunt in Arizona in March 1996, Federal quarantine and emergency actions were imposed to prevent the interstate spread of the disease to other wheat producing areas in the United States. The spread of the disease in the United States would have significant adverse economic consequences, since many U.S. wheat export markets require that wheat from the United States be from areas where Karnal bunt is not known to occur. By certifying that U.S. wheat is from such areas, APHIS facilitates exports to some markets that otherwise would likely be closed. It has been estimated that termination of the certification program would result in a cumulative reduction of national net farm income of $5.3 billion from 2003 to 2007.

The unexpected discovery of Karnal bunt and subsequent Federal emergency actions have disrupted the production and marketing flows of wheat in the quarantined areas, causing economic hardship for a number of persons. 1 In order to mitigate that hardship, and to help ensure full and effective compliance with the quarantine program, the USDA has offered compensation to certain growers, handlers and others. Compensation has been offered to mitigate losses incurred in the 1995-1996, 1996-1997, 1997-1998, and 1999-2000 and subsequent crop seasons.

This interim rule provides for custom harvesters and other equipment owners or lessees in Archer, Baylor, Throckmorton, and Young counties in northern Texas to receive compensation for certain disease-related losses and expenses that they had not been eligible for under the previous regulations. Specifically, custom harvesters are offered compensation for: (1) The cost of required cleaning and disinfection of mechanized harvesting equipment; and (2) lost harvesting contracts due to downtime necessitated by cleaning and disinfection of mechanized harvesting equipment or fixed costs incurred when mechanized harvesting equipment is idled for required cleaning and disinfection. Compensation is also offered, in specific cases, for the cost of required cleaning and disinfection of equipment other than mechanized harvesting equipment. Compensation would be offered only in connection with APHIS-required cleaning and disinfection stemming from the use of equipment in those four counties in northern Texas during the 2000-2001 crop season.

The four counties named above became regulated for Karnal bunt late in the 2000-2001 crop season, after much of the wheat in those counties had already been harvested. Because they had no prior knowledge that their equipment would be used in a Karnal bunt-infested area, custom harvesters operating in the four counties during the 2000-2001 crop season did not have an opportunity to avoid the area.

The compensation provided by this interim rule is designed to reduce the economic impact of the Karnal bunt regulations on custom harvesters and other equipment owners and to help obtain cooperation from affected individuals in efforts to contain and reduce the prevalence of Karnal bunt. As an alternative, APHIS could elect to make no changes to the regulations, but that alternative would not encourage cooperation by custom harvesters and others subject to the cleaning and disinfection requirements of the regulations and other efforts designed to prevent the spread of the disease.

The regulations for Karnal bunt in place during the 2000-2001 crop season required that mechanized harvesting equipment be cleaned and disinfected prior to being moved from a regulated area if it was used to harvest Karnal bunt-positive host crops.

This interim rule offers harvesters compensation for the actual cost of cleaning and disinfection, up to a maximum of $750 per cleaning and disinfection. 2

USDA's compensation liability under this aspect of the interim rule is estimated at $37,500. This estimate assumes 50 machine cleanings (50 combines and associated equipment) at $750 per cleaning. 3 Although the estimate is based on 50 combines, fewer than 40 harvesters are expected to be affected by the interim rule, as some harvesters own more than one combine.

Custom harvesters typically negotiate their combining contracts well in advance of the harvest season. In addition, they set rigorous schedules for harvesting, so as to get maximum utilization from their equipment. Contracts are specific for reporting dates at a given location.

Because cleaning and disinfection delays the movement of their equipment to a subsequent location under contract, cleaning and disinfection may cause custom harvesters to default on contracts or to subcontract with other harvesters to fulfill the contracts. This interim rule offers custom harvesters compensation for the full value of one contract lost due to downtime necessitated by cleaning and disinfection, up to a maximum of $23.48 per acre of land to be harvested under the contract. 4 (Custom harvesters would be able to apply for this compensation or the compensation for downtime costs discussed above, but not both.)

USDA's compensation liability under this aspect of the interim rule is estimated at $250,000, assuming 10 lost contracts at an average of $25,000 per contract. No more than 10 harvesters are likely to be affected.

In addition to the cost of cleaning and disinfection itself, harvesters incur other costs during the time their machines are cleaned and disinfected. These fixed costs ( e.g. , for labor, travel, insurance, telephone, utilities, and interest) are distinct from variable costs ( e.g. , for fuel and lubrication). This rule will provide custom harvesters compensation for fixed costs incurred during cleaning and disinfection at a rate of $2,000 per machine cleaning. The rate of $2,000 assumes fixed costs of $250 per hour for 8 hours, the typical time required for cleaning and disinfection of a combine. 5

USDA's compensation liability under this aspect of the interim rule is estimated at $80,000. This estimate assumes 40 combine cleanings for which the combines' owners are compensated at $2,000 per cleaning. Fewer than 30 harvesters are expected to be affected by this aspect of the interim rule, since some harvesters own more than one combine.

Harvesters would be able to apply for this compensation or the compensation for lost harvesting contracts discussed above, but not both. This is why the compensation estimate of $80,000 is based on only 40 combines, 10 fewer than the 50 combines assumed to require cleaning earlier in this analysis under the heading “Cleaning and Disinfection of Mechanized Harvesting Equipment.”

Under the regulations, owners or lessees of equipment other than mechanized harvesting equipment may be required to clean and disinfect their equipment ( e.g. , hay wagons, balers, grain carts, and trailers) prior to moving it from a regulated area. This rule offers equipment owners or lessees compensation for the cost of cleaning and disinfection, at a rate of $100 per cleaning. 6

USDA's compensation liability under this aspect of the interim rule is estimated at $1,000. This estimate assumes compensation for 10 pieces of equipment (10 × $100). No more than 10 owners or lessees are likely to be affected.

The Regulatory Flexibility Act requires that agencies consider the economic effects of their rules on small businesses, organizations, and governmental jurisdictions. This interim rule affects certain wheat harvesters and other equipment owners or lessees in northern Texas. Affected entities will benefit, because the interim rule will allow them to receive compensation for certain disease-related losses and expenses that they are not now eligible for under the current regulations.

Most entities that are affected are likely to be small in size, when judged by the U.S. Small Business Administration's (SBA) standards. 7 Composite data for wheat growers offers an example. In 1997, there were a total of 50,176 U.S. farms in North American Industry Classification System (NAICS) category 11114, a classification category comprised of establishments primarily engaged in growing wheat and/or producing wheat seeds. The per-farm average sales for those farms that year was $78,260, well below the SBA's small entity threshold of $750,000 in annual sales for farms in that NAICS category. 8 Affected harvesters are also likely to be small in size. In 2000, there were 338 firms in NAICS category 115113, classification comprised of establishments primarily engaged in mechanical harvesting, picking, and combining of crops. Of the 338 firms, 306, or 91 percent, had fewer than 20 employees, thus falling below the SBA's small entity threshold. 9

The interim rule is not expected to have a significant economic impact on a substantial number of entities, large or small. This is because no more than about 40 harvesters and equipment owners or lessees are likely to be affected by the rule. For some harvesters, especially those whose profit margins are small, the receipt of $25,000 in compensation for a contract lost due to downtime necessitated by cleaning and disinfection could be considered significant. It is possible that a small number of harvesters, no more than about 10, could experience substantial economic benefits from compensation for lost harvesting contracts, assuming average per-contract compensation of $25,000.

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.

In accordance with section 3507(j) of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ), the information collection and recordkeeping requirements included in this interim rule have been submitted for emergency approval to the Office of Management and Budget (OMB). OMB has assigned control number 0579-0248 to the information collection and recordkeeping requirements.

We plan to request continuation of that approval for 3 years. Please send written comments on the 3-year approval request to the following addresses: (1) Office of Information and Regulatory Affairs, OMB, Attention: Desk Officer for APHIS, Washington, DC 20503; and (2) Docket No. 03-052-1, Regulatory Analysis and Development, PPD, APHIS, Station 3C71, 4700 River Road Unit 118, Riverdale, MD 20737-1238. Please state that your comments refer to Docket No. 03-052-1 and send your comments within 60 days of publication of this rule.

This interim rule provides for the payment of compensation to custom harvesters for losses they incurred due to the requirement that their equipment be cleaned and disinfected after four counties in northern Texas were declared regulated areas for Karnal bunt during the 2000-2001 crop season and for the payment of compensation to owners of other equipment that came into contact with Karnal bunt-positive host crops in those counties and was required to be cleaned and disinfected during the 2000-2001 crop season. In order to receive compensation for the cost of cleaning and disinfection of mechanized harvesting equipment and for fixed costs incurred during cleaning and disinfection, custom harvesters must provide copies of a contract or other signed agreement for harvesting in Archer, Baylor, Throckmorton, or Young County during the 2000-2001 crop season, signed on a date prior to the designation of the county as a regulated area for Karnal bunt, or an affidavit stating that the custom harvester entered into an agreement to harvest in Archer, Baylor, Throckmorton, or Young County during the 2000-2001 crop season prior to the designation of the county as a regulated area for Karnal bunt; a copy of the PPQ-540 certificate issued to allow the movement of mechanized harvesting equipment from a regulated area after it had been used to harvest Karnal bunt-positive host crops and had been subsequently cleaned and disinfected; and a receipt showing the cost of the cleaning and disinfection. Custom harvesters seeking compensation for a lost contract must additionally provide a copy of the contract for which they are seeking compensation. Owners of other equipment seeking compensation must provide a copy of the PPQ-540 certificate allowing the movement of the equipment. We are soliciting comments from the public ( as well as affected agencies) concerning our information collection and recordkeeping requirements. These comments will help us:

(1) Evaluate whether the information collection is necessary for the proper performance of our agency's functions, including whether the information will have practical utility;

(2) Evaluate the accuracy of our estimate of the burden of the information collection, including the validity of the methodology and assumptions used;

(3) Enhance the quality, utility, and clarity of the information to be collected; and

(4) Minimize the burden of the information collection on those who are to respond (such as through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology; e.g. , permitting electronic submission of responses).

Estimate of burden: Public reporting burden for this collection of information is estimated to average 0.2 hours per response.

Respondents: Custom harvesters, owners of other equipment, lessees of other equipment.

Estimated annual number of respondents: 40.

Estimated annual number of responses per respondent: 1.

Estimated annual number of responses: 40.

Estimated total annual burden on respondents: 8 hours. (Due to averaging, the total annual burden hours may not equal the product of the annual number of responses multiplied by the reporting burden per response.)

Copies of this information collection can be obtained from Mrs. Celeste Sickles, APHIS' Information Collection Coordinator, at (301) 734-7477.

The Animal and Plant Health Inspection Service is committed to compliance with the Government Paperwork Elimination Act (GPEA), which requires Government agencies in general to provide the public the option of submitting information or transacting business electronically to the maximum extent possible. For information pertinent to GPEA compliance related to this interim rule, please contact Mrs. Celeste Sickles, APHIS' Information Collection Coordinator, at (301) 734-7477.

Background

The regulations in 7 CFR part 319 prohibit or restrict the importation into the United States of certain plants and plant products to prevent the introduction of plant pests and noxious weeds. The regulations in “Subpart—Nursery Stock, Plants, Roots, Bulbs, Seeds, and Other Plant Products,” §§ 319.37 through 319.37-14 (referred to below as the regulations or Quarantine 37) contain, among other things, prohibitions and restrictions on the importation of plants, plant parts, and seeds for propagation.

The regulations in Quarantine 37 currently allow the importation of orchids from all countries of the world, provided that the plants are (1) free of sand, soil, earth, and other growing media, (2) accompanied by phytosanitary certificate of inspection, (3) imported under a permit issued by the Animal and Plant Health Inspection Service (APHIS), and (4) imported into a Federal plant inspection station listed in § 319.37-14(b), where they are subject to inspection by APHIS. Such plants are imported bare-rooted into the United States, and are rooted and potted for sale by U.S. nurseries.

On September 1, 1998, we published in the Federal Register (63 FR 46403-46406, Docket No. 98-035-1) a proposal to amend the regulations by allowing the importation of orchids of the genus Phalaenopsis established in an approved growing medium, subject to specified growing, inspection, and certification requirements. We proposed this action in response to a request from Taiwan and after determining that the degree of pest risk posed by these plants is no greater than the pest risk associated with the importation of bare-rooted Phalaenopsis spp. orchids, which may already be imported under the regulations. We accepted comments on our proposal for a total of 90 days, ending December 1, 1998. 1

In response to comments received on the proposed rule (discussed in detail later in this document), APHIS narrowed the application of the rule to Phalaenopsis spp. orchids from Taiwan and entered into consultation with the U.S. Fish and Wildlife Service (FWS) to assess the potential effects of the proposed action on endangered or threatened species, as required under section 7 of the Endangered Species Act of 1973, as amended (16 U.S.C. 1531 et seq. ). On April 7, 2003, FWS concluded the section 7 consultation process by concurring with APHIS's determination that the importation of Phalaenopsis spp. orchids from Taiwan in growing media will not adversely affect federally listed or proposed endangered or threatened species or their habitats. The section 7 consultation for this rule is described later in this document.

Upon receiving concurrence from FWS, APHIS completed an environmental assessment in accordance with: (1) The National Environmental Policy Act of 1969, as amended (NEPA) (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's NEPA Implementing Procedures (7 CFR part 372). On May 9, 2003, we published in the Federal Register (68 FR 24915, Docket No. 98-035-3) a notice announcing the availability of the environmental assessment, and solicited comments on the environmental assessment for 30 days ending June 9, 2003. On June 11, 2003, we published in the Federal Register (68 FR 34898-37899, Docket No. 98-035-4) another notice that extended the comment period on the environmental assessment for an additional 30 days ending July 9, 2003.

Also in response to public comments, APHIS updated the risk assessment that was prepared in support of this rulemaking action. The original risk assessment, referred to elsewhere in this document as the 1997 risk assessment, identified pests that are known to be associated with Phalaenopsis spp. plants in Taiwan and assessed the risk posed by those pests in the absence of the mitigative effects of the requirements of § 319.37-8(e), which are designed to establish and maintain a pest-free production environment and ensure the use of pest-free seeds or parent plants. However, as noted by commenters, the 1997 risk assessment did not contain a thorough description of how the mitigation measures required under the regulations in § 319.37-8(e) reduce the risk posed by the specific quarantine pests of Phalaenopsis spp. orchids that were identified in the risk assessment. Because the original risk assessment was prepared in April 1997, APHIS believes it was appropriate to update the risk document that supported this rule in several ways in order to address commenters' concerns regarding its adequacy. These changes were necessary to provide the most transparent communication of risk possible at this time.

First, we revised the 1997 risk assessment to bring it up to date with current APHIS guidelines for pathway-initiated risk assessments. As a result of this update, some of the risk ratings that were identified in the 1997 risk assessment have changed. 2 These changes are a result of the fact that the new risk assessment guidelines employ the use of a different risk rating system that was not used by APHIS at the time the 1997 risk assessment was drafted. Using the current guidelines, the individual risk elements that compose the overall estimated consequences and likelihood of introduction associated with the importation of the commodity are assigned a rating of low (1 point), medium (2 points), or high (3 points) for each known quarantine pest. Cumulative risk values for consequences and likelihood of introduction are then calculated by a summation of their component risk estimates, and the overall pest risk potential posed by the identified pests is calculated by adding together the ratings for consequences and likelihood of introduction for each pest. The interpretation scale was modified based on agency experience with other importations, and a “risk score” is no longer used. Instead, descriptions of pest biology augment the presentation of the risk ratings. For a detailed description of the current process, please refer to APHIS's Guidelines for Pathway-Initiated Risk Assessments. 3

Next, we searched for any additional research and data published since the 1997 risk assessment was prepared that could have a bearing on the findings of the risk assessment and updated the document accordingly. Specifically, the fungus Colletotrichum phalaenopsidis, which was listed in the 1997 assessment as a quarantine significant pest that could follow the Phalaenopsis spp. orchid import pathway, was removed from further consideration because it has been synonymized with (considered to be the same species as) C. gloeosporioides (Penz.), which is widely distributed in the United States.

Finally, we added a substantial discussion of how the risk mitigation measures contained in § 319.37-8(e) mitigate the risks posed by the six quarantine pests that were identified as likely to follow the commodity import pathway. This part of the analysis is referred to as “risk management,” and is contained in part III of the revised risk document. Note that, due to the addition of risk management to the risk document, we now refer to the document as a “risk analysis.” Risk analysis is the combined product of risk assessment (an analysis of pests associated with the commodity) and risk management (an analysis of the effectiveness of the measures chosen in mitigating the risk posed by the pests identified in the risk assessment). The revised risk analysis, “Risk Analysis of the Importation of Moth Orchid, Phalaenopsis spp. Plants in Approved Growing Media From Taiwan into the United States,” was completed May 6, 2003. The revised risk analysis is referred to throughout this document as the 2003 risk analysis, and is available on the Internet at http://www.aphis.usda.gov/ppq/pim/.

In this document, APHIS is adopting its proposal to allow the importation of orchids of the genus Phalaenopsis established in an approved growing medium as a final rule, with the changes discussed in this document. Specifically, we are allowing the importation of Phalaenopsis spp. plants in growing media from Taiwan only.

Under § 412(a) of the Plant Protection Act, the Secretary of Agriculture may prohibit or restrict the importation and entry of any plant or plant product if the Secretary determines that the prohibition or restriction is necessary to prevent the introduction into the United States or the dissemination within the United States of a plant pest or noxious weed.

The Secretary has determined that it is not necessary to prohibit the importation of orchids of the genus Phalaenopsis from Taiwan that are established in an approved growing medium in order to prevent the introduction into the United States or the dissemination within the United States of a plant pest or noxious weed. This determination is based on the findings of the risk documents referred to earlier in this document, and the Secretary's judgment that the application of the measures required under § 319.37-8(e) will prevent the introduction or dissemination of plant pests into the United States.

Under this final rule, Phalaenopsis spp. plants imported in growing media are subject to the requirements of § 319.37-8(e), which:

• Specifies the types of growing media that may be used;

• Requires plants to be grown in accordance with written agreements between APHIS and the plant protection service of the country where the plants are grown and between the foreign plant protection service and the grower;

• Requires the plants to be rooted and grown in a greenhouse that meets certain requirements for pest exclusion and that is used only for plants being grown in compliance with § 319.37-8(e);

• Restricts the source of the seeds or parent plants used to produce the plants, and requires grow-out or treatment of parent plants imported into the exporting country from another country;

• Specifies the sources of water that may be used on the plants, the height of the benches on which the plants must be grown, and the conditions under which the plants must be stored and packaged; and

• Requires that the plants be inspected in the greenhouse and found free of evidence of plant pests no more than 30 days prior to the exportation of the plants.

A phytosanitary certificate issued by the plant protection service of the country in which the plants were grown that declares that the above conditions have been met must accompany the plants at the time of importation. These conditions have been used successfully to mitigate the risk of pest introduction associated with the importation into the United States of approved plants established in growing media.

We received 40 comments on the proposed rule by the close of the comment period. The comments were from orchid growers and sellers, Members of Congress, farm bureaus, Federal and State government agency representatives, university researchers, agricultural research scientists, and orchid, nursery, landscape, and floriculture associations and societies. Thirty-five of the commenters opposed some aspect of the rule, and the remaining five requested that APHIS extend the comment period on the proposal, which we did, for 30 days ( see 63 FR 57932). The comments are discussed below, by topic.

We also received a letter from the Small Business Administration (SBA) regarding our proposal, which we considered along with public comments received by the close of the comment period. Several issues raised by SBA were also raised by other commenters; therefore, we discuss all comments, including the SBA letter, below.

We also received 19 comments in response to our May 2003 notice of the availability of the environmental assessment. Many of those comments pertain to the 2003 risk analysis or to the proposed rule for this action. Comments that pertained to the environmental assessment are addressed in the final environmental assessment, and the accompanying finding of no significant impact, which may be viewed on the Internet at http://www.aphis.usda.gov/ppd/es/ppqdocs.html. Comments that pertained to the 2003 risk analysis or the proposed rule are addressed below, along with comments submitted during the comment period for the proposed rule.

One commenter stated that due to budget cuts and downsizing in Federal agencies, it is unclear whether APHIS can continue to conduct adequate inspections, especially in the face of an increase in the amount of plant material entering the United States.

While some Federal agencies have been subject to budget cuts and downsizing, APHIS's appropriated funding for Agricultural Quarantine Inspection (AQI) Programs has doubled since 1998, from approximately $27.2 million to $55 million in 2002. Funds collected via AQI user fees have increased from $140.5 million in 1998 to $260 million in 2002. The inspections required under this rule will not be affected by the transfer of APHIS personnel to the Department of Homeland Security (DHS). All plants imported under this rule are required to be imported into Federal plant inspection stations, 4 which continue to be staffed by APHIS, not DHS, inspectors. APHIS has reviewed its resources and believes it has adequate resources available to ensure compliance with the conditions of the final rule.

One commenter stated that the conditions imposed by § 319.37-8 cannot be verified by APHIS because the cost of attempting to verify compliance is a significant expense and would require an unprecedented level of cooperation from other governments and their agencies, many of whom are ill-equipped to do their jobs or may be influenced by corrupt elements. The commenters stated that if APHIS does not physically conduct the reviews required by the regulations, the Agency must demand, receive, and review documentation from the exporting country and its growers that is sufficient to satisfy the Agency that the conditions of § 319.37-8 have been complied with.

Under the regulations in § 319.37-8, there must be an agreement between APHIS and a foreign entity for enforcement of the regulations in that section. In this case, the agreement will technically be between the American Institute in Taiwan and the Taiwanese Economic and Cultural Representative's Office, and will involve the plant protection organization of Taiwan and APHIS (this agreement is referred to elsewhere in this document as “U.S.-Taiwan agreement”). Each grower who wishes to export to the United States under the regulations must enter into an agreement with the plant protection organization of Taiwan whereby he or she must agree to comply with the provisions of the regulations in § 319.37-8 and to allow APHIS inspectors, and representatives of Taiwan's plant protection organization, access to the growing facility as necessary to monitor compliance with the provisions of that section. Taiwan's plant protection organization is responsible for ongoing oversight of the program. APHIS inspectors will monitor for compliance with the regulations by making periodic visits to production sites, as is the case with current and past plants in growing media programs, such as the following:

• In the Netherlands, two to four greenhouses (companies) have participated in the plants in growing media program each year since 1990. Both ferns and Anthurium have been grown and exported to the United States. Currently, three greenhouses are in the program. APHIS plant health specialists inspect the greenhouses 4 to 12 times a year for noncompliance with program requirements, including the absence of plant pests. No greenhouses have been found to be noncompliant and no plant pests have been found on any of these visits.

• In Israel, one greenhouse growing ferns and African violets participated in the plants in growing media program between 1990 and 1994. This facility was inspected by APHIS plant health specialists three to five times a year. Again, no greenhouses were found to be noncompliant and no plant pests were found.

Based on our experience with these programs, we are confident that the safeguards work, and that we can verify compliance regularly.

One commenter stated that, under § 319.37-8(g)(4)(ii), sufficient APHIS resources must be available to implement or ensure implementation of appropriate mitigation measures. The commenter cited a report by the U.S. General Accounting Office (GAO) that APHIS is unable to determine the extent to which its inspection programs actually work. The commenter posited that, given the GAO report, APHIS is unable to determine the extent to which its inspection programs actually work, and therefore, cannot determine that sufficient APHIS resources are available to implement or ensure implementation of the appropriate mitigation measures.

The portion of the GAO report cited by the commenter (GAO report RCED-97-102) deals primarily with issues surrounding the allocation of APHIS inspectors at ports in the United States according to risk-based criteria. The report acknowledges that “APHIS faces a difficult mission” in ensuring that tons of cargo and millions of passengers entering the United States do not bring in harmful pests or diseases, and found that APHIS should “allocate its limited inspection resources to the ports of entry with the highest risks of pest and disease introduction.” These findings should not be construed to mean that APHIS “is unable to determine the extent to which its inspection programs actually work.” As stated earlier in this document, APHIS has reviewed its resources and believes it has adequate resources available to ensure compliance with the conditions of the final rule.

One commenter expressed concern that Taiwan will receive plants moved from China, relabel them, and ship them directly to the United States.

The regulations require that the plant protection organization of Taiwan ensure that the plants exported to the United States meet the requirements contained in § 319.37-8(e). It is in an exporting country's interest to ensure that the requirements of importing countries are strictly followed. If falsified documentation is discovered, it could impact severely on the exporter, and possibly the exporting country's plant protection service, and could result in the loss of export markets.

One commenter questioned what will happen if parties are caught out of compliance, including in the event of pest-or disease-infested shipments.

If APHIS determines that Phalaenopsis spp. orchids imported from Taiwan in growing media contain quarantine or actionable pests, APHIS may hold all imports until an investigation can be completed and appropriate measures initiated, including stopping imports from a specific producer or shutting down the entire program, if the circumstances show that such an action is warranted.

One commenter expressed concern that APHIS's pest prevention mission is being compromised in favor of trade facilitation, and stated that the proposed action appears to be linked in trade negotiations that resulted in agreements for U.S. exports of other commodities.

APHIS makes decisions as to whether to allow the importation of agricultural products and commodities based on an evaluation of facts, data, and available scientific evidence. While the order of processing particular requests may be influenced by trade considerations, and the components of a risk management program may be a product of negotiations between APHIS and its foreign counterparts, the ultimate determination as to whether a commodity can be safely imported is based on a determination that the product can be imported without introducing a plant pest or noxious weed into the United States.

One commenter stated that U.S. producers should have equivalent access to the export market, and claimed that producers have considerable difficulty exporting, even within the NAFTA region. The commenter claimed that adoption of the proposed rule would make the “playing field” even less level. Another commenter stated that there is no indication whatsoever that reciprocal arrangements with Taiwan or any other country are anticipated, and that no nation should be allowed to export to the United States without U.S. growers being able to export plants back under the same conditions.

Other countries make decisions as to whether to allow the importation of U.S. products only when formally requested. If U.S. producers of orchids wish to export to other countries, those persons may submit a request to APHIS, and APHIS will take that request to the appropriate country's plant protection organization for their consideration. Upon receipt of a request, APHIS may contact the requestor and ask for additional information prior to making a proposal to the designated export country.

In any case, measures applied to mitigate the risk posed by a particular plant or plant part exported from one country to another are determined by the particular risks posed in each case. Because of climatic conditions and other factors, the risks posed to Taiwan by Phalaenopsis spp. orchid imports from the United States are not likely the same risks posed by imports of Taiwan-grown Phalaenopsis spp. orchids into the United States. The risk posed by imported plants is dependent on the pests associated with the commodity in the country of origin and the pests' potential impact on the importing country. As such, reciprocal trade could occur under the same phytosanitary conditions if the pest dynamics in each country are the same.

One commenter questioned whether other countries could make a similar request to import other potted orchids that are now grown in the United States, provided the countries meet APHIS's sanitary and certification standards.

Any country may request that APHIS consider allowing the importation of a new commodity. Whether APHIS grants that request is tied to the findings of a risk analysis and a determination by the Secretary of Agriculture as to whether the commodity can be imported without resulting in the introduction into the United States or the dissemination within the United States of a plant pest or noxious weed.

One commenter questioned whether APHIS is obliged to grant every request to import an agricultural commodity into the United States as long as it is pest-free and will benefit the American consumer, without regard to the effects on small, minority- or family-operated businesses in the United States.

APHIS is bound by Federal statutes and executive orders that require us to consider the economic effects of our actions, as well as to identify and assess the costs and benefits of regulatory alternatives, including alternatives that reduce economic effects on small entities. However, pursuant to § 7701(3) of the PPA, APHIS regulates exports, imports, and interstate commerce in agricultural products and other commodities that pose a risk of harboring plant pests or noxious weeds in ways that will reduce, to the extent practicable, as determined by the Secretary, the risk of dissemination of plant pests or noxious weeds. The determination to allow an import under the PPA is based on the Secretary's determination that the importation of a commodity will not result in the introduction into or dissemination within the United States of a plant pest or noxious weed.

One commenter stated that APHIS is not acting in accordance with its mission by “enhancing the competitive positions of the countries currently exporting orchids to the United States.” The commenter stated that, instead of being concerned for the well-being of foreign interests, APHIS should work to enhance the competitiveness of U.S. businesses.

The quote cited by the commenter is taken from APHIS's initial regulatory flexibility analysis (IRFA), which is contained in the proposed rule. The IRFA identifies the economic effects that could be associated with adoption of the proposed rule, but the text cited is not part of APHIS's rationale for making the proposal; rather, it was considered as a possible consequence of adopting this rule. As stated earlier in this document, the Secretary considers many factors in making a determination to allow the import of a previously prohibited article, such as potential environmental effects and the economic effects associated with the introduction of a plant pest or noxious weed. The determination to allow an import under the PPA, however, is ultimately based on the Secretary's determination that the importation of a commodity will not result in the introduction into or dissemination within the United States of a plant pest or noxious weed. This approach is consistent with APHIS's obligations under the PPA and international trade agreements.

Part of APHIS's mission is to facilitate exports, and we strive to do so. Success in this area is somewhat tied to factors out of our control, but we make every effort to assist domestic industry in securing access to export markets.

One commenter stated that imports should have to meet the same standards as U.S. products, including growing conditions, pest freedom, pesticides applied, etc. The commenter stated that the proposed rule would allow the importation of orchid plants subject to fewer restrictions than apply to interstate shipments.

We are unclear as to what standards the commenter refers. There are no Federal restrictions on the interstate movement of orchids, and as such, there are no specific “standards” that apply to how they are grown or shipped. Phalaenopsis spp. plants imported from Taiwan in growing media would have to meet the strict phytosanitary conditions contained in § 319.37-8(e), while domestically produced orchids are not subject to any Federal regulation whatsoever. While individual producers may adopt specific standards for how their plants are produced, and individual States may impose requirements that apply to the intrastate movement of plants, those standards are not Federal standards, are not applicable in every State, and cannot be applied to plants being imported into the United States.

Several commenters stated that because the 1997 risk assessment only considered the importation of orchids from Taiwan, it cannot be used to evaluate the risks associated with importation of orchids from any other area, as APHIS proposed. The commenters noted that pests and pathogens are not the same from country to country, and that a pest risk assessment and management strategy for Phalaenopsis spp. orchids is needed for each exporting country.

We agree with the commenter's statement. In this final rule, we are only authorizing the importation of Phalaenopsis spp. orchids in approved growing media from Taiwan—the region considered in the 1997 risk assessment and the 2003 risk analysis.

One commenter stated that APHIS should reexamine its 1997 pest risk assessment, analysis procedures, and policies to ensure that they are consistent with current levels of scientific knowledge and standards. The commenter stated that the 1997 risk assessment should form “a link between scientific data and decision makers,” but also that decisionmakers must have accurate and adequate scientific data upon which to base their decisions—which, the commenter argued, is not the case in this rulemaking. The commenter further claimed that the risk assessors' conclusion is simply an opinion—one not supported by any scientific rigor—and does not even appear to have been used by the decisionmakers.

As noted elsewhere in this document, we have updated the 1997 risk assessment to bring it up to current standards. This update included (1) inserting the data from the 1997 risk assessment into the risk assessment document format currently used by APHIS, (2) searching for additional research and data published since the 1997 risk assessment was prepared that could have a bearing on the findings of the risk analysis, and (3) adding a substantial discussion of how the risk mitigation measures selected reduce the risk posed by quarantine pests of Phalaenopsis spp. orchids that can be expected to follow the import pathway. We believe that by making the link between the identified quarantine pests and the mitigation measures more apparent, we have addressed the commenter's concern about the need for a link between scientific data and decisionmakers. The 2003 risk analysis is based on the best data available to us at the time the analysis was drafted, and it provides a clear and rational basis as to why Phalaenopsis spp. orchids imported from Taiwan in growing media will not result in the introduction of plant pests or noxious weeds into the United States.

Several commenters stated that the 1997 risk assessment should incorporate a rigorous study of conditions and practices at foreign nurseries and all existing inspection reports of imported bare-root orchid plants. The commenters expressed concern that imports of Phalaenopsis spp. orchids in growing media could result in the introduction of new insects and diseases into the United States, and stated that such pests would pose a grave threat to both indigenous species and commercially cultivated plants.

The 1997 risk assessment and the risk assessment portion of the 2003 risk analysis are based on (1) a search of all available scientific literature and (2) APHIS's pest interception records for imported plants of the genus Phalaenopsis and the plant family Orchidaceae. As such, we examined data on prior bare-root orchid imports and visited some of the production sites that would export as a result of the final rule. Furthermore, any exports of Phalaenopsis spp. orchids by Taiwan would be contingent on an inspection of the production sites by APHIS and the execution of the U.S-Taiwan agreement described earlier in this document. We believe our 2003 risk analysis provides an adequate analysis of the risks posed by quarantine pests, and documents how the measures in § 319.37-8(e) remove those pests from the import pathway.

Several commenters stated that basing a risk assessment on a literature search has some inherent weaknesses. One of the commenters stated that literature searches do not catch all pests due to the fact that pests have different common names, and because only the title words of literature are searched. Several commenters also stated that insufficient scientific literature and biological information regarding orchid pests exists to justify reliance upon a literature search, as orchids are not a major agricultural commodity and research has not been conducted to the necessary depth for every pest on every orchid species. Several commenters noted that orchids are a niche crop, and that as such, have not had the extensive research that more widely produced crops typically endure. One commenter stated that APHIS should conduct field tests and preclearance surveys on the imported plants in addition to a literature search. Another commenter claimed that the risk potential for all the pest species identified may be high, yet due to a lack of information, the potential effects of orchid importation cannot be adequately addressed at this time. Another commenter stated that the 1997 risk assessment may not consider all potential pests, and therefore, the mitigation measures would also have to mitigate any risk posed by unknown organisms. The commenter stated that the risk mitigations are not designed to protect against all potential unidentified pests.

The purpose of conducting an analysis of the risk posed by imported agricultural commodities is to evaluate available scientific evidence and to provide an evaluation of the risk associated with the importation of those commodities. As such, APHIS can only make the determination to allow the importation of the commodity based on the current state of scientific knowledge. In developing the list of pests that are analyzed in the 1997 risk assessment and 2003 risk analysis, we began with a list of pests provided to us by Taiwan. We then consulted applicable scientific literature (including field surveys done to date) and reviewed APHIS's records to determine what pests were intercepted on imported plants of the genus Phalaenopsis. Literature searches are unique to each risk analysis, and typically begin with broad searches of both abstracts of publications and the entire text of publications, depending on the database being searched. These initial searches typically use scientific species, genus, and family names, as well as known common names of plants. As analysts learn more about the pests involved and their nomenclature, additional pest-specific searches are conducted.

We believe these sources provide an adequate means to identify and assess pests of concern. Further, we disagree with commenters' contentions that orchids are niche crops. While orchids may not be one of the top-selling products in the entire floriculture industry, they rate highly among other potted flowering plants, according to data collected by the National Agricultural Statistics Service. ( See http://www.usda.gov/nass/ for more information.)

While we do not believe there is a shortage of appropriate scientific information in this specific case, if APHIS were to regulate the trade of agricultural commodities based on the risk posed by unknown factors, such an action could be viewed as highly arbitrary, which could potentially affect the export markets for our own domestically produced commodities. Under the PPA, APHIS protects American agriculture while facilitating the trade of agricultural commodities. There is always some uncertainty associated with the risk posed by imported agricultural products, and if zero risk were the standard applied, there would be no international trade in agricultural products. While we can never be certain that our methods, regulations, and policies will exclude pests 100 percent of the time, our goal is to do just that, to the extent practicable. We are confident that the measures required under this rule will reduce the risk posed by Phalaenopsis spp. plants imported from Taiwan in approved growing media. Our judgment is supported by the fact that bare-rooted Phalaenopsis spp. plants and the growing media in which they will be imported have separately been imported from throughout the world for many years with no known associated pest problems. Given that the plants in growing media will be subject to a number of additional requirements (the effects of which are considered and evaluated in the risk management section of the 2003 risk analysis) that do not apply to bare-rooted plants, we believe that the risk posed by known and unknown pests is appropriately reduced, to the extent practicable, by the measures in § 319.37-8(e).

One commenter claimed that a pest should have been included in the pest list, but was not because it has multiple common names, including “spiraling whitefly,” “keys whitefly,” and “spiral whitefly.”

While the commenter did not specify the scientific name of the pest, we assume he is referring to Aleurodicus dispersus . There is no available evidence to show that this pest attacks orchids in Taiwan. Our process for searching for pests associated with a given commodity is described earlier in this document.

One commenter stated that APHIS should reassess the role that the propagative material pathway is playing in new pest introductions, claiming that the U.S. nursery and greenhouse industry has suffered from continuing pest incursions associated with plant material imports. The commenter claimed that the current system associated with imported propagative material is failing and that expanding the list of plant material allowed entry established in growing media using as a baseline the risk associated with bare-root materials—regardless of the acceptability of that current risk—is reckless.

APHIS recognizes that the underlying structure of the regulations for nursery stock and other propagative material are different from the corresponding regulations for fruits and vegetables. Fruits and vegetables are prohibited entry into the United States unless the regulations specifically provide otherwise. In contrast, nursery stock and other propagative plant material (except plants imported in growing media) are allowed importation subject to inspection at a plant inspection station unless the regulations specifically provide otherwise. While APHIS conducts risk analyses in each case where the importation of a new fruit or vegetable is proposed, risk analyses are only conducted for nursery stock and propagative material in response to a demonstrated pest problem or in response to a new request to import plants in growing media. The regulations in § 319.37-8(g) currently provide that APHIS will allow the importation of plants in growing media if it determines, using risk analysis, that the plants pose the same or less risk than bare-rooted plants which are already allowed importation under the current regulations in Quarantine 37. In this case, restricting the entry of Phalaenopsis spp. orchids in growing media is not necessary because the measures in § 319.37-8(e) reduce the risk posed by those plants to a level at or below that of bare-root plants.

APHIS recognizes that there is a need to reconsider the underlying structure of the nursery stock regulations in order to better address the risk posed by propagative material and has been considering ways to approach the issue for several years. We are in the process of drafting an advanced notice of proposed rulemaking on the subject of revising Quarantine 37; however, we are not able to provide a projected publication date at this point.

One commenter expressed confusion as to why the title of the 1997 risk assessment indicates that seedlings are under consideration, yet neither the body of the 1997 risk assessment nor proposed rule address the distinction between seedlings and adult plants.

The reference to seedlings in the title of the 1997 risk assessment was made in error. While Taiwan requested that we allow the importation of Phalaenopsis spp. seedlings in growing media, the 1997 risk assessment and 2003 risk analysis actually consider the risk posed by all plants regardless of whether they were grown from seed or whether they are a specific size or age.

One commenter stated that some of the pests identified in the 1997 risk assessment could affect other plants besides orchids and that APHIS should have discussed potential effects on those species in the proposed rule.

Risk analyses conducted by APHIS are designed to assess the risk of introducing quarantine pests into the United States, regardless of the domestic plants that can serve as hosts for those pests. The 1997 risk assessment considered potential effects on other plants in its estimates of consequences of introduction, as does the 2003 risk analysis. We acknowledge that some pests attack other hosts besides orchids; however, the Secretary's determination to allow the importation of Phalaenopsis spp. orchids from Taiwan in growing media was derived from the conclusions of the 2003 risk analysis, which shows that importations of those plants will not result in the introduction of pests into the United States.

One commenter stated that the importation of propagative material presents different levels of risk than does trade in major food commodity crops, which are well-studied. The commenter stated that more is known about the pests associated with fruits and vegetables, including those that are incidental, but that little is known about crops such as orchids, and therefore, informed decisionmaking is not possible. The commenter claimed that if a pest is allowed to enter and become established, there may not be enough knowledge about its background, enemies, physiology, hosts, and so on, to enable us to control it quickly.

We agree with the commenter's statement that propagative material presents different risks than do food commodities, primarily because of the nature of the commodity. Pests associated with fruits and vegetables can be the same species as those associated with propagative plants. Nevertheless, as stated elsewhere in this document, we believe there are sufficient data available to conclude that the importation of Phalaenopsis spp. orchids in growing media from Taiwan will not result in the introduction of plant pests into the United States.

One commenter stated that the 1997 risk assessment should consider the risk posed by microbial species that may inhabit the growing media. The commenter also claimed that all risk assessments must include experiments on the genetic consequences on “founder populations” of these alien species, as genetic changes and the evolution of new recombinants as a result of small population size can be extremely important in the ability of alien species to adapt to new habitats.

The 1997 risk assessment and 2003 risk analysis for this action take into account all pests that are known to be associated with Phalaenopsis spp. orchids, and consider the unique risk posed by the plant imported in growing media. As stated elsewhere in this document, determinations as to whether a new agricultural commodity can be safely imported are based on the current state of knowledge and based on the information available, there is no reason to believe that the importation of Phalaenopsis spp. orchids in growing media from Taiwan will result in the introduction of plant pests such as the commenter has suggested (including microbial species). As such, we do not believe the experiments suggested by the commenter are necessary.

One commenter stated that if pests are excluded from risk mitigation because they are not expected to remain with the commodity during harvest and shipping, according to APHIS guidelines, references must be cited to support the pest's inability to follow the pathway.

The risk assessments (1997 and 2003) for this action assume that all known pests are expected to follow the pathway if risk mitigation measures are not applied. However, most of the pests listed in table 2 of the 2003 risk analysis (table 1 of the 1997 risk assessment) are excluded from further consideration because of two factors: (1) The pests do not meet the Food and Agriculture Organization of United Nations (FAO) definition of a “quarantine pest” for the United States, or (2) the pests have not been specifically linked in scientific literature or APHIS interception records with orchids of the genus Phalaenopsis. This winnowing of the list of pests is documented in detail in section E, “Analysis of Quarantine Pests” in the 2003 risk analysis.

One commenter stated that none of the conditions required by § 319.37-8(e) address the risks presented by Phalaenopsis spp. orchids that have flower spikes. The commenter noted that flower spikes increase pest risk because they provide a habitat for thrips, blossom mites, blossom midges, and other blossom-infesting organisms.

There are no quarantine pests of the types cited by the commenter that have been specifically linked in scientific literature or APHIS pest interception records with orchids of the genus Phalaenopsis. Further, the operators of greenhouses in which plants imported under the regulations in § 319.37-8(e) are required to apply measures necessary to eliminate pest infestation of plants being grown in an approved greenhouse, including infestations by pests such as those cited by the commenter. In the event that any such quarantine pests are confirmed to be associated with Phalaenopsis spp. plants in the future either in program greenhouses, in scientific literature, or via inspections by APHIS, we would adopt revised conditions that address the risk posed by those pests.

One commenter stated that the World Trade Organization's Sanitary and Phytosanitary Agreement provides that members shall take into account relevant ecological and environmental conditions and quarantine or other treatment, and claimed that APHIS's 1997 risk assessment does not consider relevant ecological and environmental conditions. Specifically, the commenter noted that (1) pesticide use in other countries is less restrictive, (2) there are more chemical pesticides available, and (3) due to the long U.S. pesticide registration process, new pesticides in other countries are years ahead of sales in the United States. The commenter claimed that because of these factors, the presence of serious pathogens is masked and pests rapidly become resistant to pesticides. The commenter claimed that the risk assessment should provide for consideration as to whether introduced plant pests will arrive as resistant strains, since control of such strains is difficult, if not impossible.

There is no specific scientific evidence that any of the quarantine pests affecting Phalaenopsis spp. are resistant to pesticides. Furthermore, APHIS has taken into account relevant ecological and environmental conditions in its risk analysis. We are confident that the measures required under the regulations in § 319.37-8(e) will reduce the risk posed by Phalaenopsis spp. plants imported from Taiwan in growing media, regardless of whether or not the pests are resistant to pesticides. Our judgment is supported by the fact that these plants have been imported bare-rooted for many years, with no known associated pest problems. Given that the plants in growing media will be subject to a number of additional requirements that do not apply to bare-rooted plants, we believe that the risk posed by all plant pests is appropriately reduced by the measures in § 319.37-8(e).

One commenter claimed that the establishment of introduced pest species is far more likely in Hawaii than in other States, as Hawaii's climate and ecology are very similar to the proposed point of origin for this plant material, Taiwan. The commenter stated that, for this reason, Hawaii's State quarantine measures have historically focused on plants coming from within the 30° parallels, yet the 1997 risk assessment for the proposed rule does not account for this. The commenter claimed that failure to address this point results in APHIS treating Hawaii's verdant ecosystems the same as those of urban environments without suitable hosts.

APHIS's 2003 risk analysis is designed to assess the risk posed by all known pests that could be introduced into the United States via Phalaenopsis spp. plants imported from Taiwan in growing media. The intent of the regulatory approach chosen is to ensure that pests are not introduced into the United States, regardless of the destination of the plants. Specifically, in this case, the risk assessment identifies the climatological conditions in which identified pests could survive and the estimates of consequences of introduction of those pests reflect what is known about climate-host interaction and host range for the pests. While the consequences of the introduction of the identified pests into Hawaii differ from the consequences associated with introductions into urban environments, the risk assessment also considers introductions into a suitable habitat and introductions near suitable hosts. Nonetheless, given the application of mitigation measures that will be required under this final rule, there is a very low likelihood that an identified pest would be introduced into Hawaii via Phalaenopsis spp. plants imported in growing media from Taiwan.

Two commenters argued that the risk rating for climate-host interaction should be assessed as high for all pest species because plant hardiness zone 11 includes more than just the southern part of Florida, which is the only area cited in the risk assessment. The commenters noted that plant hardiness zone 11 also includes Hawaii, Guam, American Samoa, Northern Mariana Islands, U.S. Virgin Islands, Federated States of Micronesia, and Puerto Rico, and stated that given this error the 2003 risk analysis does not adequately address the potential risks posed to these States and territories.

We have corrected the 2003 risk analysis to show that plant hardiness zone 11 includes other States and territories besides Florida. However, this does not affect the risk ratings for climate-host interaction  5 in the 2003 risk analysis. As described in APHIS's “Guidelines for Pathway-Initiated Pest Risk Assessments” (available on the Internet at http://www.aphis.usda.gov/ppq/pra/commodity/cpraguide.pdf ), risk ratings for climate-host interaction are based on the number of plant hardiness zones where a pest can establish, not the number of States that are contained within a specific plant hardiness zone. If a pest can establish in a specific U.S. plant hardiness zone, the risk assessment takes that into consideration, regardless of the number of States and territories that fall within the particular plant hardiness zone.

For the purposes of commodity risk assessments, if a pest can establish in a single plant hardiness zone ( e.g. , zone 11, which occurs in parts of more than one State), the risk rating for climate host-interaction is “low.” If a pest can establish in two or three plant hardiness zones ( e.g. , zones 9, 10, and 11), the risk rating for climate-host interaction is medium. If a pest can establish in four or more plant hardiness zones, the risk rating for climate-host interaction is high. Given these facts, the risk ratings for climate-host interaction for each identified pest in the 2003 risk analysis are appropriate.

One commenter stated that the information given in the 2003 risk analysis does not accurately reflect the potential host range of the quarantine mealybug pest Planococcus minor. The commenter pointed out that the 2003 risk analysis characterizes the host range of P. minor (according to Cox, 1989) as including more than 30 species in over 10 families, but that according to ScaleNet ( http://www.sel.barc.usda.gov /scalenet/scalenet.htm ), the host range of P. minor includes more than 100 species in over 60 families, with many hosts being genera grown in the ornamental industry.

APHIS agrees that the host range of Planococcus minor includes many hosts, but the mitigation measures are designed to reduce or eliminate this pest from production facilities and remove it from the pathway of the importation. Given that the risk rating for host range of Planococcus minor is already high, we do not see any need to revise our risk analysis based on this comment, since making such a change would not affect the estimates of risk or the overall conclusions of the risk analysis.

One commenter noted that the host range for pathogens Cylindrosporium phalaenopsis and Sphaerulina phalaenopsis was assumed to be only Phalaenopsis. The commenter claimed that host range, if not known, should not be assumed to be restricted to orchids. The commenter stated that if only one host is known it may be because plant pathologists do not have the time or funds to undertake costly cross-inoculation studies.

As stated elsewhere in this document, APHIS makes determinations as to whether a new agricultural commodity can be safely imported based on data and research available to us. There is no evidence to suggest that the host range of the pests cited by the commenter is incorrectly rated in the risk assessment. Furthermore, “cross-inoculation” is not sufficient in this case. A complete demonstration of Koch's Postulates to establish pathogenicity is the standard for host range testing that plant pathologists have relied on since the start of modern plant pathology.

One commenter stated that the host range of Phomopsis orchidolphila is nothing more than the extent of scientific observations and not a biological limit. The commenter noted that not all species of orchids have been tested and not found to be a host of this pathogen, and claimed that, contrary to the 2003 risk analysis, it is very likely that other orchid genera will be hosts of P. orchidophila but have not been observed yet.

While APHIS agrees that many orchid genera are closely related, hybrids are common, and members of the Orchidaceae may be susceptible to a variety of pests, APHIS makes determinations as to whether a new agricultural commodity can be safely imported based on data and research available to us. There is no evidence to suggest that the host range of the pest cited by the commenter is incorrectly rated in the risk assessment. We are aware of no evidence that the importation of bare-rooted plants has led to the introduction of Phomopsis orchidolphila, so there is no reason to suspect that the lower-risk plants produced under this system are likely to be infected.

One commenter stated that the dispersal potential of mollusks should be rated high in the 2003 risk analysis because of difficulty of finding them on the roots of orchid plants.

APHIS acknowledges that mollusks may be difficult to detect on orchid plants, which is why the overall risk rating for the mollusks Acusta (= Bradybaena ) tourranensis and Bradybaena spp. is “medium.” The overall rating would not change if the rating for dispersal potential was changed to medium or high, and, in any event, the risk management measures contained in § 319.37-8(e) would appropriately reduce the risk posed by mollusks including Acusta (= Bradybaena ) tourranensis and Bradybaena spp. regardless of whether the overall risk rating is “medium” or “high.” The ability of the measures to reduce the risk posed by mollusks, including A. tourranensis, is discussed in detail in the risk management section of the 2003 pest risk analysis.

One commenter stated that the dispersal potential of Planococcus minor should be rated as high because finished, flowering orchids have not previously moved in international commerce, and that a lack of interceptions on bare-root plants is proof of nothing. The commenter claimed that the presence of mealybugs is a major cause of rejections of potted flowering orchid plants.

Determinations as to whether a new agricultural commodity can be safely imported are based on data and research available to us. There is no evidence to suggest that the dispersal potential of the pest cited by the commenter is incorrectly rated in the risk assessment, and the commenter provided no data to suggest otherwise. Further, potted orchids plants have not been previously allowed importation into the United States from any location. The commenter's claim that “mealybugs are a major cause of rejections of potted flowering orchid plants,” pertains to interstate movements of potted plants that are not subject to the same measures as Phalaenopsis spp. imported from Taiwan. There are no Federal regulations governing the interstate movement of Phalaenopsis spp. plants.

One commenter stated that it is incorrect to assume that the spores of S. phalaenopsis, P. orchidophila, and C. phalaenopsis are not dispersed over long distances since spores are carried by rain splashes. The commenter stated that observation of the roadsides in Hawaii shows that spores are likely to be widely dispersed, either by rain splashes, or in the air, and claimed that the dispersal rating for these pathogens should be rated as high.

Our risk rating for the dispersal potential of S. phalaenopsis, P. orchidophila, and C. phalaenopsis is based on the need for both adequate rain and wind to disseminate these spores. While the anecdotal observation cited by the commenter suggests that these combined conditions occur in native U.S. habitats, the dispersal potential rating in the risk analysis also considers the dispersal potential derived from plants within greenhouses, production facilities, and interiorscapes where proper watering practices and reduced airflow are expected to limit the conditions that favor spore dispersal.

One commenter claimed the 2003 risk analysis' prediction that no more than 10 shipping containers per year are expected to be imported from Taiwan is an understatement, as permission to import this commodity into the United States is likely to be linked with an increase in production and subsequent increases in volume of imports. The commenter claimed that the pest risk concerning the quantity of product should be properly assessed as high, not low.

Our estimate that no more than 10 shipping containers per year are expected to be imported from Taiwan is based on information provided to us by Taiwan. We believe this estimate and the risk rating for “quantity imported annually” contained in 2003 risk analysis are appropriate.

Two commenters stated that, in the 1997 risk assessment, 18 of the 26 mollusk and arthropod quarantine pests do not have species identification and are identified to family or genus level only. The commenters claimed that the risk assessment, therefore, does not comply with APHIS's own regulatory requirement that all quarantine pests be catalogued. One of the commenters also claimed that APHIS regulations require that an evaluation be made of the history of past plant pest interceptions or introductions, but that the 1997 risk assessment does not contain such an evaluation.

The 2003 risk analysis catalogues all known pests that have been documented as being associated with Phalaenopsis spp. plants, and identifies all pests that are of quarantine significance. Contrary to one of the commenters' statements, the pests that were identified to family or genus level were selected because they appear in APHIS interception records for orchids; however, for the purposes of this action, APHIS did not select pests for further consideration in the risk assessment unless those specific pests were directly linked by scientific literature or pest interception records with the particular host species being imported. In this case, there is no evidence available to clearly establish that the pests identified to family or genus level are pests of Phalaenopsis spp. orchids.

Several commenters stated that the 1997 risk assessment is based on an incomplete catalog of quarantine pests, and a few commenters identified specific pests that they claimed APHIS should consider in its risk assessment. Another commenter submitted a list of pests of orchids that were found during Hawaiian State plant inspections.

As stated elsewhere in this document, APHIS is confident that the 2003 risk analysis considers all pests known to be associated with Phalaenopsis spp. orchids. We reviewed lists of pests provided by commenters and found that our list of pests is complete. The lists provided did not contribute any new quarantine pests of Phalaenopsis spp. orchids from Taiwan.

Several commenters claimed that only two mollusk taxa are discussed in the 2003 risk analysis, but many other species have potential to be imported with growing media, including Achatinidae ( e.g., Achatina fulica, the giant African snail), species of Succinea (family Succineidae), Meghimatium species (slugs in the family Philomycidae), as well as various species of Subulinidae (especially species in the genus Opeas ), Veronicellidae, Camaenidae, Helicarionidae, and Ariophantidae. The commenter claimed that many of these species are actionable by APHIS.

There is no scientific evidence that any mollusks of quarantine significance are associated with Phalaenopsis spp. orchids in Taiwan besides those considered in the 2003 risk analysis. Further, even if one of the mollusks cited by the commenter was associated with Phaelanopsis spp. orchids in Taiwan, the mitigation measures required under this final rule would be sufficient to mitigate the risk posed by the pest.

One commenter stated the 1997 pest risk assessment omits pathogenic roundworms, nematodes, phytopathogenic bacteria, and plant viruses vectored by insects, and stated that the pest risk assessment is focused only on “the organisms for which biological information is available.” The commenter claimed that the 1997 risk assessment does not comply with the requirement in § 319.37-8(g)(2)(v) that any nonindigenous or native plant pest that may be able to vector another plant pest be identified and assessed. The commenter stated that undetected bacteria contained within orchids established in growing media or orchids serving as symptomless carriers of viruses are possibilities that must be addressed in the risk assessment.

As stated earlier in this document, APHIS is confident that our 1997 risk assessment and our 2003 risk analysis consider all pests known to be associated with Phalaenopsis spp. orchids. The commenter did not identify any specific pests for APHIS to evaluate. Further, based on the findings of our risk analysis, we believe that the measures contained in § 319.37-8(e) will effectively remove all known quarantine pests from the import pathway. APHIS does not currently have any evidence to support the conclusion that any of the pests identified in the risk analysis are vectors of animal or plant diseases, therefore, we would not be justified in regulating the importation of Phalaenopsis spp. plants in growing media as if they posed a risk of introducing pests that serve as vectors of animal or plant diseases.

One commenter stated that the species identifications for four fungal pathogens ( Colletotrichum phalaenopsis, Cylindrosporium phalaenopsis, Phomopsis orchidophila, and Sphaerulina phalaenopsis ) are incorrect, and therefore, the risk ratings for those pests are incorrect. The commenter stated that none of the species were found in the Permuterm Subject Index for 1985 to 1998 (January and February for 1998), published by the Institute for Scientific Information, and questioned how the four fungal pathogens were identified to the species level in the 1997 risk assessment when there has been no species identification of these four fungal pathogens in the last 13 years. The commenter claimed that the four fungal pathogens should properly have been identified only to genus, the host range of these four genera should have been appraised as high, and, as a consequence, the risk rating for these four fungal pathogens should be assessed as high.

To produce the pest list for the risk assessments on Phalaenopsis spp. orchids from Taiwan, the risk assessors relied on published scientific literature on pests of quarantine significance from that area. The references that supported the inclusion on the list of the four fungi  6 were from periodicals listing fungal taxa (genus, species, and author), hosts (scientific names), and their geographical distributions. One of the references was a book which was a list of plant pests reported in Taiwan (published by Taiwan's plant protection organization). Another reference was the scientific journal Mycologia. Fungus names and host names were provided to the species level. Fungus names and authors of names were verified by using USDA-ARS National Fungus Collection's Database on Fungi operated from Beltsville, MD. Even if the pests were not reported or intercepted recently ( i.e., in the last 13 years) APHIS would still consider that they occur in that area unless official notification by Taiwan was made declaring “eradication.”

One commenter stated that the mealybugs Pseudococcus importatus McKenzie and Pseudococcus microcirculus McKenzie are host specific to orchids and that Pseudococcus orchidicola Takahashi has a wide host range and could become a pest on many other plant species if established.

The mealybugs cited by the commenter have not been linked specifically with Phalaenopsis spp. orchids in any scientific literature or by interception records. For this reason, they were not specifically considered in the 1997 risk assessment or 2003 risk analysis.

One commenter stated that it is critical that risk analysis be conducted at the species level, and claimed that the extrapolation of data regarding one species across an entire genus is not acceptable. The commenter noted that, for an expert to accurately predict the potential impact of an exotic pest in the United States, we must know what factors are responsible for its impact (or lack of impact) in the country of origin. The commenter stated that adding species of plants within the requested genus further complicates and reduces the probability of successful prediction of risk.

In conducting the risk analysis for this action, we searched for information that linked specific pests with any plant in the genus Phalaenopsis in Taiwan, and we assumed that those pests found could affect any plants in the genus. We disagree that analysis needs to be conducted at the species level, since an analysis at the species level would have likely yielded far fewer pests, and a less-accurate prediction of the risk. In fact, our risk analysis would yield similar results if it were composed of a series of species-specific risk analyses; the same pests we have identified would have been cited in a series of documents, rather than in one document. If anything, the approach we have chosen may overestimate the risk posed by imports of certain species of Phalaenopsis spp. orchids in growing media, as identified pests may not actually be associated with the specific species and varieties of Phalaenopsis that may be imported under this final rule.

One commenter stated that imported orchids pose a risk of introducing an unknown virus, which has no symptoms of infection until potted Phalaenopsis spp. orchids are mature and stressed. The commenter claimed that a major outbreak of this virus has occurred in Japan from potted Phalaenopsis spp. orchids imported from Taiwan, and that the virus is well established in Taiwan. The commenter also claimed that it is likely that the virus has arrived on the mainland and in Hawaii on bare-rooted Phalaenopsis spp. orchids shipped from Taiwan.

As stated elsewhere in this document, we can only make determinations as to whether a new agricultural commodity can be safely imported based on available scientific evidence, and we are not aware of any evidence that supports the commenter's suggestion that a previously unknown disease or virus has been documented to affect Phalaenopsis spp. orchids. Given that the commenter did not identify the disease in question, we have no basis to revise our risk analysis in response to this comment.

One commenter expressed concern as to why APHIS proposed this action given the fact that the 1997 risk assessment found that seven quarantine pests could be expected to follow the import pathway, and that the risk posed by each pest was rated “high.” The commenter stated that it would take an unwise “leap of faith” to assume that the mitigation measures will reduce identified high risks to acceptable levels.

First, as explained earlier in this document, through the process of updating the risk assessment to bring it up to current standards, the baseline pest risk potential for five of the identified pests has been reassessed as “medium.” Only one ( Spodoptera litura ) of the original seven identified quarantine pests remains rated as “high;” the other pest ( Colletotrichum phalaenopsidis ) listed in the 1997 risk assessment was removed from further consideration because it was synonymized with C. gloeosporioides (Penz.), which is widely distributed in the United States. Second, as stated elsewhere in this document, in response to commenters' concerns that the measures chosen may not mitigate the risk posed by the pests identified, we have updated the 1997 risk assessment to include a thorough discussion of how the risks posed by the pests of concern, including the risk posed by Spodoptera litura, are mitigated by the measures in § 319.37-8(e).

Several commenters stated that no manner of risk mitigation can be completely effective, nor can there be any guarantees that a surreptitious pest in an imported Phalaenopsis plant or its growing medium will not spread to other plants, including food crops and indigenous flora. One commenter questioned whether APHIS will be held accountable for any introduction of new pests that occur if the proposed rule is adopted.

As stated elsewhere in this document, while we can never be certain that our methods, regulations, and policies will exclude pests 100 percent of the time, our goal is to do just that, to the extent practicable. We are confident that the measures required under this rule will effectively remove all identified quarantine pests from the import pathway. Again, if zero tolerance for pest risk were the standard applied to international trade in agricultural products, it is likely that no country would ever be able to export an agricultural commodity to any other country. There will always be some degree of pest risk associated with the movement of agricultural products; however, as stated in the PPA, APHIS will “facilitate exports, imports, and interstate commerce in agricultural products and other commodities that pose a risk of harboring plant pests or noxious weeds in ways that will reduce, to the extent practicable, as determined by the Secretary, the risk of dissemination of plant pests or noxious weeds.”

In the highly unlikely event that a new pest is introduced into the United States as a result of the importation of Phalaenopsis spp. orchids from Taiwan in growing media, responsibility for managing that situation would reside with APHIS, in cooperation with States and industry.

One commenter stated that mitigation measures to control the growing environment can only be effective if enough is known about the specific diseases and pest species associated with the import in the country of origin. The commenter claimed that, in this case, the lack of available biological information raises doubts as to how effective any mitigation efforts will be.

As stated elsewhere in this document, we identified all known quarantine pests of Phalaenopsis spp. orchids and evaluated the ability of the mitigation measures to mitigate the risk posed by those particular pests. We believe sufficient biological information is available to determine that these plants can be safely imported into the United States.

One commenter stated that monitoring reduces pest risk by lowering the level of pest infestation, which does not negate the presence of pests. The commenter claimed that lowered pest levels are more difficult to detect upon inspection at the nursery and at the port of entry, yet the pest still has the capability to be introduced and established in a new environment.

While it is true that the mitigation measures required under this rule are intended to reduce pest introduction into the United States, the level of pest infestation of all imported plants is generally very low to begin with. While very low levels of pest infestation are harder to detect than high levels of pest infestation, we believe that the reductions in pest levels resulting from the application of the measures specified in § 319.37-8(e) will not affect our ability to prevent the introduction of plant pests into the United States. As with other systems approaches, the measures in § 319.37-8(e) provide an overlapping series of safeguards which, even if one of the measures fails, still ensures that the risk of pest introduction is reduced to the extent practicable.

One commenter stated that the mitigative effects of the requirements in § 319.37-8(e) are not sufficient to reduce the risk posed by plants imported in growing media to the same level as that posed by bare-rooted plants or plants imported on other approved epiphytic growing media.

As stated in our proposed rule, and based on the findings of the 2003 risk analysis, we believe the mitigation measures required under this rule are sufficient to reduce the risk posed by Phalaenopsis spp. orchids imported in growing media to the same level, or a lower level, than that posed by bare-rooted plants. Plants that are currently allowed to be imported with bare roots are subject only to inspection at the port of entry, while plants imported in media under the conditions of § 319.37-8(e) are subject to additional conditions that reduce the risk that those plants could become infested with pests prior to export to the United States or introduce pests into the United States.

One commenter claimed that the success of the proposed rule depends upon the cooperation and enforcement of the exporting country, which in many cases simply are inadequate or underfunded. The commenter claimed that compliance with the conditions spelled out in § 319.37-8(e) could only be assured if an inspector were on-site every hour of every day in every “certified” greenhouse—and perhaps not even then—and stated that signing an agreement does not guarantee that it will be followed. The commenter stated that APHIS should take extra precautions to enter only into agreements that have a high likelihood of compliance and claimed that there is no such assurance in this case.

The regulations in § 319.37-8 require that for orchid producers of Taiwan to export Phalaenopsis spp. orchids to the United States, there must be an agreement in place that stipulates provisions for how the regulations will be enforced. Furthermore, each grower who wishes to export to the United States under the regulations must enter into an agreement with the plant protection organization of Taiwan whereby he or she must agree to comply with the provisions of the regulations in § 319.37-8 and to allow APHIS inspectors, and representatives of Taiwan's plant protection service, access to the growing facility as necessary to monitor compliance with the provisions of this section.

We disagree with the commenter that these agreements do not provide for verification that the conditions specified in the regulations will be followed. As noted elsewhere in this document, APHIS monitors production sites to ensure compliance with the regulations. If the regulations are not followed, inspections of the production sites and inspections of the imported plants at the ports of entry in the United States will reveal as much, and APHIS may hold all imports until an investigation can be completed and appropriate measures initiated, including stopping imports from a specific producer or shutting down the entire program, if the circumstances show that such an action is warranted. For this reason, the plant protection organization of Taiwan and growers have an economic incentive to follow the regulations.

Two commenters stated that none of the conditions required by § 319.37-8(e) mitigates the risk of contamination of plants in growing media by fungal spores. The commenters stated that while the 1997 risk assessment identifies 12 fungal pests of Phalaenopsis spp. orchids, 3 of these fungi have teleomorphic or sexual stages, which produce spores that will contaminate growing media, be discharged into air currents, and quickly travel throughout a greenhouse. The commenter stated that since fungal spores are microscopic in size, they cannot be detected via inspection.

The fact that plants will be required to be grown in greenhouses for a minimum of 4 months, propagated from clean mother stock, and watered with clean water sources reduces the risk that undetected infections will occur. Many fungal spores are able to travel by air and water, but it is unlikely that the spores will gain entry into a greenhouse, spread to plants intended for export, and infect the plants, and that the subsequent symptoms of infection will escape detection during both the 4-month pre-export quarantine period and port of entry inspection. APHIS agrees that unlike leaf-spot symptoms, microscopic fungal spores are not likely to be detected via inspection, but the risk analysis accounts for this within its risk element rating for the ability of the pest to evade detection. If greenhouses are contaminated by fungal spores, plants are likely to show symptoms or signs of infection prior to export to the United States, or at an inspection station in the United States. If fungal infection is detected in the greenhouse, surrounding plants would be removed from the greenhouse and remedial measures would be applied to ensure that the fungal spores do not reinfest clean plants. If fungal infection is detected at the port of entry into the United States, the plants would be refused entry, and APHIS may hold all imports until an investigation can be completed and appropriate measures initiated, including stopping imports from a specific producer or shutting down the entire program, if the circumstances show that such an action is warranted.

Furthermore, Phalaenopsis spp. plants have been imported bare-rooted for years, subject simply to inspection at a port of entry. Bare-rooted plants are more likely to be infected with a fungal pest than plants grown under the stringent conditions of § 319.37-8(e), yet there have been no major problems with Phalaenopsis spp. plants imported with bare roots.

One commenter stated that APHIS should employ postentry risk management to reduce the risk posed by Phalaenopsis imported in growing media. The commenter claimed that in this case, an effective post-harvest disinfestation treatment is needed for Thrips palmi.

As stated elsewhere in this document, we are confident that the measures contained in § 319.37-8(e) will mitigate the risk posed by orchids of the genus Phalaenopsis imported in growing media from Taiwan. The effectiveness of these measures renders postentry risk management other than inspection unnecessary. Thrips palmi has not been documented as being specifically associated with Phalaenopsis spp. plants. Should Thrips palmi or any other quarantine-significant pest be detected in shipments of Phalaenopsis spp. plants in the future, or in the event that such a pest is linked to Phalaenopsis in scientific literature, we may reevaluate whether the measures we have chosen mitigate the risk posed by the particular pests discovered.

One commenter claimed that there is a lack of plant virus control by growers in Taiwan because they do not sterilize tools between plants.

Our 2003 risk analysis did not identify any quarantine-significant viruses that are associated with Phalaenopsis spp. orchids in Taiwan. Nonetheless, growers will be required to perform specific sanitary measures under the requirements of the rule and the bilateral workplan that APHIS enters into with the plant protection organization of Taiwan. 7 Greenhouse operating procedures will specify that sterilization of tools between plants must occur.

One commenter stated that laboratory testing is necessary to confirm the absence of pests such as latent viruses and nematodes, and that it is necessary to keep a log of pesticide applications that indicates pesticides used, dosage, and date of application.

Based on the findings of the 2003 risk analysis, we believe there is no basis to require laboratory testing of plants intended for export to the United States. We are confident that the measures required under the regulations are sufficient to address the risk posed by Phalaenopsis spp. orchids from Taiwan. Further, the bilateral workplan for the export program will require growers to keep a log of pesticide applications as suggested by the commenter. This type of requirement is standard in APHIS's plants in growing media import programs.

Two commenters claimed that pest control during the growing period and an efficacious disinfestation treatment prior to shipment are necessary to ensure pest-free orchid plants. The commenters claimed that the systems approach should include an effective postproduction treatment.

Based on the findings of the 2003 risk analysis, we believe there is no basis to require plants intended for export to the United States to be subjected to a specific post-harvest treatment regimen. Further, it is the responsibility of the growers of these plants in the exporting country to apply pesticides and fungicides as necessary to ensure that plants are pest-free.

One commenter claimed that the program requirements will not address the dispersal potential of identified mollusk pests, and claimed that 46 cm benches are not high enough. The commenter claimed that, in Hawaii, slugs and snails easily travel 90 cm to infest plants on benches of that height.

If the height of benches were the only risk-mitigating factor to protect against the infestation of Phalaenopsis spp. orchids by mollusks ( i.e. , if plants were not grown in greenhouses subject to the requirements of § 319.37-8(e)), then we would agree with the commenter that the risk posed by those pests may have been too great. However, plants are subject to a series of mitigation measures intended to keep mollusks out of the greenhouse, and, in the unlikely event that they enter the greenhouse, they are subject to additional control measures. Should we find evidence that mollusks are present in program greenhouses, we may require additional risk mitigation for those pests, such as attaching copper flashing to vertical structural components.

One commenter claimed that the regulations should include explicit requirements for greenhouse sanitation such as those imposed on imported geraniums.

The regulations do require that plants be grown in a greenhouse in which sanitary procedures sufficient to exclude plant pests and diseases are always applied. The bilateral workplan for the program will specify measures that are believed by APHIS to be necessary to meet this requirement.

One commenter stated that the regulations should include a requirement that prohibits packing at night under lights and packing outside of the pest exclusionary greenhouse.

The bilateral workplan will require plants to be packed inside the greenhouse. We see no need to require that plants not be packed at night since plants will be packed in greenhouses that exclude quarantine pests.

One commenter stated that inspection should be considered the first line of defense, and not considered to be a “catch all” for pests that are able to exist on the plant in potting media despite proposed safeguards. The commenter stated that Hawaii's pest interceptions on orchid plants from 1988 to 1998 indicate that it is difficult to intercept pests on orchid plants, as evidenced by the fact that, only later, while under Hawaii's mandatory 60-day quarantine in secure quarantine facilities, did pests develop into larger populations that became observable, or develop to a detectable state, or produce signs ( i.e. , exit holes) that could be detected. The commenter stated that the Hawaii Department of Agriculture has intercepted a large number of pests on bare-rooted orchids, and expressed concern as to whether those pests could be found on potted materials when inspectors from two separate agencies (foreign and APHIS) could not find these pests on bare-rooted materials.

It is significant to note that inspection is the last in a series of safeguards required under this final rule to ensure that Phalaenopsis spp. orchids imported in growing media do not introduce plant pests into the United States, including Hawaii. It is also significant to note that the pests detected by Hawaii's inspectors were found on bare-rooted plants, which, in contrast to plants imported under this final rule, are allowed importation subject only to inspection. As a practical matter, under this rule, inspection at the port of entry is not the “first line of defense,” since it is the last phytosanitary measure applied to Phalaenopsis spp. from Taiwan. As such, it is the last remaining means by which to ensure, to the extent possible, that plants are pest-free prior to release into domestic commerce. The various other measures required under § 319.37-8(e) are intended to ensure that the plants are free of pests prior to arrival at a port of entry into the United States.

One commenter stated that inspection at the port of entry is not an effective mitigation measure, especially given the list of pests that have become established in the United States in recent years, apparently associated with the living plant or cut flower/decorative plant material pathways.

APHIS believes that inspection, as a mitigation measure, is more effective in some cases than others. For instance, if a pest associated with a commodity is large and not mobile, we would likely consider inspection sufficient mitigation for the risk posed by the pest. In a case where a pest is difficult to detect via inspection, we would employ inspection in combination with other measures that reduce the likelihood that the plants being inspected are infested with the pest. In this case, the regulations in § 319.37-8(e) place several restrictions on plants imported under this final rule. Inspection is just one in a series of measures that, taken together, reduce the likelihood that plants released into U.S. commerce will contain pests that could harm U.S. agriculture or the natural environment.

One commenter questioned at what rate orchids would be inspected upon arrival at U.S. ports of entry.

For at least the first year of the program, APHIS would inspect a large percentage (greater than 50 percent) of each shipment of Phalaenopsis spp. orchids imported in growing media from Taiwan. In subsequent years, the rate of sampling may increase or decrease depending on the results of previous inspections ( i.e., based on how well the program appears to be working). In the event that pests are found, APHIS may hold all imports until an investigation can be completed and appropriate measures initiated, including stopping imports from a specific producer or shutting down the entire program, if the circumstances show that such an action is warranted.

Three commenters stated that screens of 0.6 mm mesh are inadequate to keep out certain important pests. One of the commenters claimed that the melon aphid and the silverleaf whitefly will pass through screens with mesh sizes of 0.281 mm, and that quarantine pests of Phalaenopsis spp. orchids, including Dichromothrips spp., Frankliniella intonsa, Frankliniella schultezi, and Thrips palmi will not be excluded with hole sizes as small as 0.073 mm. The commenter also stated that the required 0.6 mm opening will not exclude aphids, whiteflies, thrips, and crawlers of mealybug, including Planococcus minor, soft scales, and armored scales, including Parlatoria spp., as well as young nymphal stages of leafhoppers. The commenter noted that Dichromothrips spp., Frankliniella intonsa, Frankliniella schultezi, Planococcus minor, Parlatoria spp., and Thrips palmi are identified quarantine pests of Phalaenopsis spp. orchids, and that Planococcus minor is one of the identified quarantine pests of Phalaenopsis spp. orchids that is most likely to travel with the plant and has the greatest potential for economic damage.

The screen mesh size required under the regulations in § 319.37-8(e) is sufficient to exclude all life stages of all quarantine pests of Phalaenopsis spp. orchids identified in our risk analysis, except for the crawler stage of Planococcus minor. That said, the likelihood that P. minor could invade a greenhouse and infest Phalaenopsis grown in media is very low. The crawler, which is not highly mobile, would have to either crawl through a screen, up a bench, and onto plants'—or be blown in the air through a screen and fall directly on a plant below. Nonetheless, even if P. minor invaded a greenhouse, it would likely be detected during greenhouse or port of entry inspections, thus greatly reducing the chance that it could be introduced into the United States via imported Phalaenopsis spp. plants.

One commenter stated that equipping entryways with automatic closing doors is of little protection, unless double door systems are used and the production areas are under positive pressure. Another commenter stated that during the short period when a door is opened, flying insects, such as adults of the nocturnal, high-risk pest cluster caterpillar ( Spodoptera litura ) are capable of entering the greenhouse, especially if it is lighted. The commenter claimed that if a mated female moth entered the greenhouse, she would be capable of laying fertile eggs on potted orchids.

APHIS acknowledges that pests may be able to gain access to greenhouses, but it is the responsibility of the person growing the plants to ensure that does not happen. Regular inspections of growing premises are intended to ensure that plants are grown in a pest-free environment, and our past experience with this type of program provides evidence that this approach is successful.

Regarding Spodoptera litura specifically: If a mated adult female entered the greenhouse and laid eggs on plants, given that those eggs are relatively large and are typically laid in one location, the eggs would likely be detected by a simple visual inspection. If the eggs went undetected and hatched, the damage caused by the larvae would be detectable during the growing period or at the port of entry.

One commenter stated that ants and other pests that move underground will not be excluded by mesh screens and automatic doors. The commenter stated that ants intercepted on bare-root orchids in the past are generalist predators and, if established, some species would most certainly become pests in urban, agricultural, and natural environments. The commenter cited, as an example, the introduced ant Linepithema humile (Mayr), which has had a devastating effect on many native and endangered plant and animal species in Hawaii.

We are not aware of how the ant Linepithema humile (Mayr) was introduced into Hawaii, but we have no reason to believe that its introduction had anything to do with imports of plants in growing media, or imports of orchids specifically. Ants that are associated with vegetation are worker ants, which are not generally reproductive, and which therefore present little risk of establishment if imported into the United States. Ants generally only pose a risk of becoming established in the United States if a queen were imported in a plant in growing media. Given the fact that signs of ant infestation of Phalaenopsis spp. plants in growing media would be relatively obvious in the greenhouse in Taiwan and at the port of entry into the United States, and given the fact that media must be safeguarded against pest introduction prior to entry into the greenhouse, we do not believe the risks posed by ants require additional risk mitigation. Again, if pests, including ants, are detected in a program greenhouse, remedial measures must be applied, and the infestation must be eliminated.

One commenter stated that rusts, such as Coleosporium merillii, Uromyces spp., Puccinia spp., and Uredo spp. have spores able to penetrate through mesh screens.

The commenter is correct that rust fungi have spores that could penetrate mesh screens, however, according to our risk analysis, there are no known quarantine significant rusts that are associated with Phalaenopsis spp. orchids in Taiwan. In general, greenhouse mesh screens are not intended to prevent the entry of fungal spores, although the decrease in air flow associated with screening may provide some benefits. The exclusion of diseases begins with the use of only clean stock plants and media, and continues via the rapid detection and removal of symptomatic plant tissues. Other mitigation measures that are part of good plant production practices, such as sanitation and proper watering, are expected to be more effective in reducing or eliminating diseases than manipulation of the mesh screen size.

One commenter questioned whether 0.8 mm mesh size screens would be sufficient, rather than 0.6 mm screens.

Given the pests known to be associated with Phalaenopsis spp. plants in Taiwan, and the fact that other APHIS plants in growing media programs have been successful in keeping plants pest-free using 0.6 mm screens, we believe that size mesh is necessary.

One commenter stated that the requirement that a greenhouse be “found free from evidence of plant pests and diseases * * * no more than 30 days prior to the date of export to the United States” is inadequate. The commenter stated that, during that period of time, any number of pests could become established and develop in the greenhouse, and then be imported into the United States.

The requirement that plants be inspected no more than 30 days prior to export grew out of the practical reality of inspecting the plants. Greenhouses ship plants periodically—sometimes several different shipments in one month—and it is often not feasible for inspectors to visit greenhouses and perform inspections for each shipment of plants during the day or week they are shipped. Rather, the inspectors inspect and approve plants for export within the next 30 days, which allows the owner of the plants to ship certified plants as needed during that time frame. If plants that are inspected and certified are not shipped within 30 days, they must be reinspected. While it is possible that plants could become infested with a pest during the short time between inspection and shipment from the greenhouse, it is highly unlikely, as shown by our years of experience in allowing imports of plants in growing media under the regulations in § 319.37-8(e). Furthermore, as noted earlier in this document, it is in the interest of producers to ship only pest-free plants, or else risk that the plants be refused entry into the United States upon inspection at a plant inspection station.

Two commenters stated that even under near-optimal conditions of chemical pest control, it is unlikely that a greenhouse can be kept pest-free over extended periods of time.

In section D of the risk management portion of the 2003 risk analysis, we describe the historical performance of existing programs for the export to the United States of plants in growing media. Our review of those programs found that during the approximately 200 inspectional site visits made to greenhouses participating in plants in growing media programs, no pests were found. While it is possible that pests could infest program greenhouses, the regulations in § 319.37-8(e) and the bilateral workplans for such export programs are designed to ensure that plants are not infested with pests of quarantine significance.

One commenter questioned how often greenhouses would be inspected in Taiwan.

Approved greenhouses will be inspected at least monthly by officials of Taiwan's plant protection organization to monitor for compliance with the regulations, and APHIS personnel will make multiple inspections during the first year of the program, followed by at least one inspection per year in subsequent years.

One commenter stated that fungal plant pathogens of Phalaenopsis orchids, including Colletotrichum phalaenopsis, Cylindrosporium phalaenopsis, Phomopsis orchidophila, and Sphaerulina phalaenopsis, could be introduced into the United States unless the media and pots were removed to expose roots.

We disagree that it will be necessary to remove growing media from plants to detect these fungal diseases, 8 which can cause leaf-spotting or canker symptoms on affected plant parts. These are not primarily root-affecting fungi. Orchids routinely produce roots that protrude from associated media, and these will be visible to inspectors. Furthermore, inspectors at APHIS's plant inspection stations (into which all plants in growing media must be imported) do remove growing media from plants to inspect their root systems for soil or other pests.

One commenter stated that the proposal, if adopted, will create another avenue for the illegal importation of wild-collected plants, because it will inhibit inspection of the root systems of imported plants. The commenter stated that one of the major factors in determining whether a plant is wild-collected instead of artificially propagated is the nature and condition of the root system.

As stated elsewhere in this document, it is in the interest of the exporting country to ensure that the conditions of the regulations are met. Failure to abide by the conditions could result in rejection of shipments of plants, as well as suspension of the program. As such, Taiwan's plant protection organization is responsible for verifying that plants are artificially propagated and in compliance with the program—otherwise Taiwan risks suspension of the program. If APHIS finds one quarantine pest in a shipment of imported plants, we may hold all imports until an investigation can be completed and appropriate measures initiated, including stopping imports from a specific producer or shutting down the entire program, if the circumstances show that such an action is warranted. We wish to make it clear that we will accept certifications made by the plant protection organization of Taiwan as true unless there is a reason to believe that certifications are being made improperly. Regardless, as stated in response to the previous comment, inspectors at APHIS's plant inspection stations (into which all plants in growing media must be imported) do remove growing media from plants to inspect their root systems.

Several commenters stated that increased risk of pest introduction comes not from Phalaenopsis spp. plants but from the medium in which they are shipped, which, they alleged, the 1997 risk assessment did not consider. The commenters stated that the likelihood of importing pests and diseases is greatly increased where plants are already established in sphagnum, or any other growing medium, as bare root plants allow a more thorough inspection of plant roots and easier detection of any pests or diseases which may be present. One commenter stated that the mounding of media around the bases of plants obscures not only the roots but also the lower leaf axils where additional pests occur. The commenter stated that the medium also provides harborage for dormant pest stages and may delay pest and disease symptoms. One commenter stated that insects and other pests that feed on roots are found in substrates during part of their life cycle may not be noticed by the APHIS inspector during inspection. The commenters also stated that there may be an unacceptable risk of pest introduction associated with even bare-root orchids.

The 1997 risk assessment and 2003 risk analysis take into account the fact that growing media has an effect on pests' ability to find suitable shelter and an effect on the ability of inspectors to detect certain pests that may be obscured by growing media. Specifically, the risk assessment took these factors into consideration in its estimates of the likelihood of introduction ( see table 6 and preceding text in the 2003 risk analysis). The risk posed by growing media in and of itself was not considered in the risk assessment, because the specific types of growing media are already approved and listed in § 319.37-8(e)(1) of the regulations, and have been successfully imported into the United States for years. 9 Such media does not present a risk of pest introduction into the United States. In particular, sphagnum moss, which APHIS expects to be the growing medium of choice for growers in Taiwan, is exported in bulk and in association with plants imported under the regulations in § 319.37-8(e) from countries all over the world.

Based on many years of inspections of bare-rooted Phalaenopsis spp. orchids, we do not believe that it is necessary to impose any additional restrictions on their entry. Our interception records shows that, since 1988, there have been fewer than 50 interceptions of quarantine significant pests on orchids of the genus Phalaenopsis from Taiwan. This number compares favorably with numbers of interceptions for other imported plants. It suggests that the risk posed by these plants is low, and that pests are generally not associated with Phalaenopsis spp. orchids

Several commenters claimed that the importation of Phyllosticta or Guignardia species in vandaceous orchids imported from southeast Asia is already happening, and that potting media will only make it worse.

There is no interception evidence that either of the pests cited by the commenter is associated with Phalaenopsis spp. orchids in Taiwan or would be associated with imports of those plants in growing media. Furthermore, there is no evidence that the unidentified Phyllosticta and Guignardia species are even of quarantine concern on vandaceous orchids.

Several commenters claimed that immature stages of biting midges (Ceratopoginidae = Culicoides spp., Forcipomyia spp.) that are present in Taiwan could be imported in sphagnum moss. The commenters claimed that given the size of the midges, the mitigation measures required by the rule cannot prevent them from entering greenhouses where plants intended for export to the United States are grown. The commenters claimed the midges can vector arboviruses, filarial worms, other parasites, and in addition, could be major pests to humans in areas such as Hawaii which have climatic conditions to support their survival.

APHIS believes that there is a very low likelihood that biting midges that can vector animal diseases will be imported in Phalaenopsis spp. plants from Taiwan. First, the growing medium in which the plants are potted is very unlikely to contain midges when it enters the greenhouse, and even if it did, under the regulations, in § 319.37-8(e)(2)(ii) measures must be applied to ensure that pests are excluded from the greenhouse, and that action is taken against pests that do enter the greenhouse. While the regulations do not require any specific pest-control measures such as pesticide applications to be applied in the greenhouse, it is the responsibility of the greenhouse owner to ensure that plants exported to the United States are free of all pests, including biting midges. Furthermore, it is the responsibility of Taiwan's plant protection organization to verify that growers follow the conditions of the regulations. This involves ensuring that the growing media (likely sphagnum moss imported from another country) is safeguarded against pest infestation at all times prior to entry of the media into the greenhouse, and that, in the highly unlikely event that pests enter the greenhouse, they are dealt with accordingly.

Furthermore, sphagnum moss has been imported into the United States for years, and there is no evidence to suggest that media used for commercial plant production has been or will be a pathway for entry of biting midges into the United States.

One commenter questioned whether sphagnum moss must be sterilized or pasteurized, and claimed that the regulations should include such a requirement.

Based on years of importations and inspections of various types of approved growing media, including sphagnum moss, we are confident that approved media, by virtue of their natural composition, are inhospitable to most pest species. Further, under the conditions of the bilateral workplan for this program, media will have to be safeguarded against pest infestation prior to entry into the greenhouse.

One commenter claimed that snail eggs may be laid in growing media and are not visible to inspectors.

While it is possible to detect the presence of snail eggs visually under certain circumstances, it is highly unlikely, given the measures required under § 319.37-8(e), that quarantine significant snails will have access to plants.

Several commenters expressed confusion over what type of growing medium will be used. The commenters stated that the proposed rule discusses sphagnum moss in several places but speaks of “other approved media” such as coconut fiber and tree fern. The commenters claimed that the pest risk associated with each medium will vary based on various factors, including the source of the medium, its age, and state of decomposition, among others.

Under this final rule, plants may be imported in any approved growing medium listed in § 319.37-8(e)(1), although sphagnum moss will likely be the most commonly used type. The following growing media are also approved: Baked expanded clay pellets, cork, glass wool, organic and inorganic fibers, peat, perlite, polymer stabilized starch, plastic particles, phenol formaldehyde, polyethylene, polystyrene, polyurethane, rock wool, sphagnum moss, ureaformaldehyde, vermiculite, or volcanic rock, or any combination of these media. Growing media must not have been previously used.

Several commenters expressed concern that the importation of Phalaenopsis spp. orchids in sphagnum moss could have serious ecological consequences in Hawaii. One commenter stated that scientists have found that one transplanted Sphagnum species that is native to Hawaii has spread vigorously when moved out of its natural habitat. The commenter expressed concern that this could happen with imported species of sphagnum as well. Another commenter stated that sphagnum moss used domestically as a growing medium consistently contains damaging insects and noxious weeds.

Sphagnum moss is an approved growing medium and is listed in § 319.37-8(e)(1). There are already nine genera and one order of plants that may be imported into any U.S. State (including Hawaii) in sphagnum moss. Ferns from Taiwan are known to be imported in sphagnum moss, and are already eligible for importation into Hawaii. At present, we have no reason to believe that unused sphagnum moss that is produced according to standard industry practice presents any risk of pest introduction in and of itself, nor does it behave as a weed. Nonetheless, growing media are subject to inspection at any point in the production process, from rooting to importation into the United States, to ensure against pest infestation.

One commenter stated that when sphagnum is of low quality or advancing age, it proves to be an attractive home for all manner of insect and arthropod life as well as fungi, algae, etc. The commenter stated that, while these plants would not be coming from the wild, it is disingenuous to suggest that the addition of a growing medium will not increase the risk of pest introduction.

As stated elsewhere in this document, the regulations require that sphagnum moss used as growing media must not have been previously used. We do not deny that the pest risk posed by bare-rooted Phalaenopsis plants would be lower than that posed by Phalaenopsis imported in growing media if the plants in media were not subject to the mitigation measures in § 319.37-8(e). However, when the mitigation measures are applied to such plants, the risk they pose drops to a level equal to or below that posed by bare-rooted plants. Plants imported in growing media are subject to many additional requirements that do not apply to bare-rooted plants. These requirements are designed to mitigate the added risk posed by the addition of growing media. As stated elsewhere in this document, the risk management section of the 2003 risk analysis provides a detailed discussion of how the measures ensure that pests are removed from the import pathway.

One commenter stated that the current plants in growing media program is very limited as to country of origin, and that plants grown under the existing program have failed to guard against pest intrusion. The commenter stated that citing the debatable success of the existing program is misleading. The commenter stated that APHIS failed to consider that the first five genera approved for importation in growing media are all short term crops compared to the genera proposed in 1993 ( Alstroemeria, Ananas, Anthurium, and Nidularium ) and claimed that APHIS also did not consider that the first five genera came from countries north of 30° north latitude while noting that the genera proposed in 1993 and Phalaenopsis (as proposed) may be imported from any foreign country. The commenter stated that short term crops grown in northern areas present a lower pest risk than what was proposed in 1993 or what is being considered in the proposed rule.

As stated elsewhere in this document, the risk analysis conducted in support of this rulemaking action assesses the risk posed by known quarantine pests of Phalaenopsis spp. orchids that are present in Taiwan. The findings of the risk analysis have led the Secretary to determine that Phalaenopsis spp. orchids imported in growing media from Taiwan can be safely imported into the United States. Furthermore, the risk analysis is independent of previous analyses of other plants in growing media, though we do cite the success of the program as evidence that the program is effective in producing pest-free plants for export to the United States.

One commenter stated that a potted plant is difficult to inspect because unlike bare-root plants, a potted plant cannot be turned upside down or turned in such a way to make it easier for the inspector to see tiny signs of infestations, such as entry holes on the plant's stems. The commenter stated that entry holes of weevils and other internal feeders are difficult to detect because the holes are generally small and may be hidden in protected areas of the plants, such as where the leaf and stem meet, or on the stem near the media level.

A plant potted in growing media can be removed from media such that the roots can be inspected for signs of pest infestation. This is common practice in APHIS's plant inspection stations, and will be practiced as part of the inspection of plants imported under this final rule. Additionally, inspectors do inspect all accessible parts of the plant, including the leaf and root interface. Furthermore, while inspection at the port of entry is the last mitigation measure employed under the growing media program, it is only one in a series of measures that are collectively designed to reduce the risk that quarantine pests that are known to infest Phalaenopsis spp. orchids could be introduced into the United States.

One commenter stated that, in the 1997 risk assessment for the proposed rule, only the weediness potential of Phalaenopsis spp. orchids was assessed, and that there was no assessment of the weediness potential of sphagnum moss. The commenter stated that this oversight renders the proposal arbitrary, capricious, and an abuse of discretion, because sphagnum moss can contain viable weed seeds which may sprout and grow after the orchids are potted.

The commenter is correct that the 1997 risk assessment did not assess the weediness potential of sphagnum moss itself, as sphagnum moss is allowed to be imported without restriction from all parts of the world, as is the case with bare-rooted Phalaenopsis plants. As such, we conducted the 1997 risk assessment in accordance with our regulations to specifically address the unique risk posed by Phalaenopsis plants imported in growing media—that is, the risk caused by the interaction of plant and the media'which, in this case, is tied to the fact that growing media increases the risk posed by an imported plant by providing harborage for pests that would not likely be present on bare-root plants, or that would be easier to inspect for if the plants were imported with bare roots. The measures contained in § 319.37-8(e) are designed to mitigate the risk posed by those pests, as described and evaluated in the risk management portion of the 2003 risk analysis.

One commenter stated that inspection of growing media is necessary to ensure that snails are not present in imported orchids, and alleged the current regulations do not provide for such inspection. The commenter stated that snails, including the quarantine pest Bradybaena spp., are known to occur on roots of potted orchids, and that others have observed Sublina octona and the bush snail, Bradybena similaris, occurring on orchids in Hawaii and stunting potted orchid plants. The commenter stated that interception records from the Hawaii Department of Agriculture report snails even on bare-rooted Phalaenopsis spp. orchids from Taiwan.

The risk analysis identified only one quarantine pest of Phalaenopsis spp. orchids in Taiwan that is a mollusk: Acusta tourranensis. 10 The risk posed by this snail and related pests is mitigated by the measures contained in § 319.37-8(e), as explained in detail in the risk management portion of the 2003 risk analysis.

One commenter stated that the greenhouses in which Phalaenopsis spp. orchids would be grown are likely to be invaded by Frankliniella schultezi, Spodoptera litura, Thrips palmi, and other quarantine pests, and that Phalaenopsis spp. orchids potted in sphagnum moss provide an excellent habitat for the pupal or resting stage of those pests, which could pupate in the growing media, thereby infesting it.

There are no quarantine significant thrips that have been confirmed to be associated with Phalaenopsis spp. plants in Taiwan. We have responded to the commenter's concern regarding the risk posed by S. litura earlier in this document.

Several commenters expressed concern or confusion as to whether the proposed regulations would preempt Hawaiian quarantine restrictions on the importation of Phalaenopsis spp. orchids from Taiwan. One commenter requested that the rule include a special exemption for Hawaii and stated that all orchid plants imported into Hawaii should still be subject to the mandatory 60-day quarantine. Two commenters stated that such an exemption would not suffice, as plants which contain pests could be imported into the mainland and then be moved interstate into Hawaii. The Department of Agriculture of the State of Hawaii (HDOA) commented on the proposal, and specifically objected to the adoption of the rule, which it believes would increase the risk of introducing more plant pests in the State. HDOA stated that a number of the pests do not yet occur in Hawaii, but have been documented to have passed through APHIS inspection in Hawaii only to be stopped by a more thorough Hawaii Department of Agriculture quarantine requirement.

This final rule preempts applicable State regulations, as the Federal Government is responsible for regulating foreign and interstate commerce. States have authority to regulate intrastate commerce. In this case, we do not believe it is necessary to provide an exception for the rule for Hawaii, given the fact that plants imported in growing media are subject to the requirements of § 319.37-8(e), these plants present a level of pest risk equal to or below that posed by bare-rooted plants.

HDOA also stated that Federal preemption limits States' ability to protect themselves from risks that the Federal government does not acknowledge. HDOA expressed concern as to whether APHIS is facilitating international trade at the expense of its mission to prevent the introduction or dissemination of pests.

APHIS is charged with regulating the importation and interstate movement of plants and plant products according to the best available science. Our authority does not allow us to make exceptions to our regulatory policy unless they are science-based. In this case, we are confident that this final rule is based on sound scientific data.

One commenter stated that plants imported into Hawaii should be subject to a mandatory 60-day quarantine.

APHIS disagrees with the commenter that any further risk management is necessary beyond what we originally proposed. The 2003 risk analysis shows that the risks posed by the identified pests are mitigated by the measures contained in § 319.37-8(e).

One commenter noted that at the time comments were being accepted on the proposed rule, the National Plant Board and APHIS were initiating a review of U.S. pest safeguarding systems. The commenter stated that it would be premature to make further modifications to Quarantine 37 pending the results of that review, and suggested that APHIS withdraw the proposal pending completion of that review, and re-propose it in light of future results.

The “Safeguarding American Plant Resources” report was completed in July 1999, and efforts to implement its recommendations are ongoing. The report is posted on the Internet at http://www.safeguarding.org/. The report did not contain any recommendations specific to the importation of plants in growing media, though it did recommend that APHIS consider revisions to Quarantine 37 under which decisions to allow the importation of propagative material would be made based on risk analysis as is the case with Quarantine 56 (7 CFR 319.56 through 319.56-8). Given that plants in growing media are the only propagative materials that are always subject to risk analysis as a condition of determining their enterability, we see no reason to further delay modifications to the regulations in § 319.37-8.

One commenter stated that the proposed rule would result in increased inspection and regulatory activity by APHIS and that the conclusion that the rule is “not significant for the purposes of Executive Order 12866” is incorrect. The commenter claimed that review by the Office of Management and Budget (OMB) is necessary.

The determination that the proposed rule was “not significant for the purposes of Executive Order 12866” was made by OMB. This final rule has been determined to be significant for the purposes of Executive Order 12866 and, therefore, has been reviewed by OMB.

Several commenters claimed that adoption of this rule would result in unfair “dumping” of cheap imports in the United States and that there must be assurances that such dumping will not occur.

As stated elsewhere in this document, determinations as to whether a new agricultural commodity can be safely imported are based on the findings of risk analysis. The regulation of “dumping” is administered by (1) the U.S. Department of Commerce (with respect to the determination of dumping margins), and (2) the International Trade Commission (with respect to determinations of injury). APHIS has no authority to adopt regulations to guard against “dumping” of imported plants.

Several commenters claimed that Phalaenopsis spp. orchids shipped specifically from Taiwan would have an unfair marketing advantage over domestically grown plants due to growers being subsidized and the plants may be shipped on subsidized airlines.

APHIS has no reason to believe that Phalaenopsis producers or shippers are subsidized by Taiwan. However, even if they were, as stated elsewhere in this document, APHIS's determinations as to whether a new agricultural commodity can be safely imported are not affected by factors such as economic competitiveness.

One commenter claimed that this rule is unnecessary because Hawaiian orchid growers can supply the epiphytic orchids needed by Hawaiian citizens and the Hawaiian visitor industry. Another commenter stated that because imported plants would spend an extended period of time in transit and would require shorter acclimation time, plants offered for sale will be in a stressed condition resulting in shorter bloom life and reduced overall quality, which would be a disservice to consumers. The commenter claimed that since the plants may not appear stressed at the time of sale, the latent damage would lead to overall dissatisfaction of the consumer, which in turn would be damaging to the Phalaenopsis industry.

APHIS is bound under international trade agreements to remove technical barriers to trade in the event that such barriers are found by scientific analysis to be unnecessary. In this case, we have conducted a risk analysis that found that all quarantine pests associated with Phalaenopsis spp. orchids in Taiwan are effectively removed from the import pathway by the measures required under § 319.37-8(e). As such, the Secretary of Agriculture has determined that it is not necessary to prohibit the importation of orchids of the genus Phalaenopsis from Taiwan in approved growing media. Considerations such as quality and consumer preference are not factors considered by APHIS or USDA in general when authorizing the importation of new commodities. These considerations are addressed by retailers and consumers who purchase plants in a free market; if imported plants are of insufficient quality or are perceived in a particular light due to their origin, the need for those imports will be dictated by the marketplace.

Several commenters claimed that, contrary to the initial regulatory flexibility analysis that APHIS has prepared and published, the proposed rule will have a significant economic impact on a substantial number of small entities, and the economic analysis for the proposal greatly underestimates the consequences that will be associated with adoption of the proposal. The commenters claimed that adoption of the proposed rule would harm or perhaps destroy the domestic orchid industry, especially the industry in Hawaii, which will be unable to compete with new, cheaper imports. Commenters stated that the economic effect of the rule on small and family operated nurseries needs study and claimed that those types of businesses should be nurtured, not threatened, by government policies, especially in economically depressed areas.

Our initial regulatory flexibility analysis did not make a determination as to whether adoption of the proposed rule would have a significant economic effect on a substantial number of small entities. Our final regulatory analysis, however, found this final rule will likely have a significant adverse economic impact on many U.S. growers of potted Phalaenopsis plants, many of whom are probably small entities. Our analysis also found that an adverse impact on U.S. growers of orchids other than Phalaenopsis spp. orchids, many of whom are also probably small in size, is possible, but less certain. As noted elsewhere in this document, determinations as to whether a new agricultural commodity can be safely imported are not affected by factors such as economic competitiveness.

One commenter stated that the intent of the Regulatory Flexibility Act is not to limit regulations having adverse economic impacts on small entities; rather the intent is to have agencies (1) focus special attention on the effects their proposed actions would have on small entities, (2) disclose to the public which alternatives they considered to lessen adverse impacts, (3) consider public comments on impacts and alternatives, and (4) state reasons for not adopting an alternative that has less of an adverse impact on small entities. The commenter stated that APHIS must fully comply with the Regulatory Flexibility Act, and must consider the impact of “inevitable proposals” for importing flowering potted orchids from other orchid genera. The commenter claimed that if APHIS issues a final rule for this action, the Agency must state in detail all of the reasons it has for making no changes in the regulations, the only alternative that can “minimize the significant economic impact on small entities.”

APHIS believes that it has complied with the requirements of the Regulatory Flexibility Act. In our proposed rule, APHIS proposed to allow the importation of Phalaenopsis in growing media from all countries of the world. We also explained that we considered two alternatives to the proposed rule: (1) to make no changes to the regulations; and (2) to limit the scope of the rule to potted Phalaenopsis plants from Taiwan only, not all countries. In light of the comments we received on the proposed rule, we reconsidered the selection of alternatives for our final rule. As such, we are adopting the second alternative to our proposal as a final rule because our risk analysis for this action applies only to imports of Phalaenopsis from Taiwan, and as such should not be used as a technical justification for imports of Phalaenopsis from other countries. We rejected the first alternative because, given APHIS's obligations under the Plant Protection Act and international trade agreements, we do not believe continuing to prohibit the importation of Phalaenopsis in growing media from Taiwan is justified, since we have determined that Phalaenopsis from Taiwan can be imported in growing media without introducing plant pests or noxious weeds into the United States.

Regarding the “inevitable proposals” referred to by the commenter, we have considered the potential effects associated with importing Phalaenopsis in growing media from Taiwan. An analysis of future revisions and potential imports from other countries is not appropriate at this time, as any such changes to the regulations would have to be the subject of a future rulemaking action.

One commenter stated that there is a mass-market domestic trade that establishes Phalaenopsis spp. orchids, and other epiphytic orchids, in pots, and then sells these potted epiphytic orchids, primarily at wholesale. The commenter claimed that adoption of the proposed rule will severely compromise, even devastate, domestic orchid growers' participation in this mass-market trade, noting that Hawaiian orchid growers import about half of the orchid plants that they use to establish potted epiphytic orchids.

Our regulatory impact analysis and final regulatory flexibility analysis consider the potential economic effects of the adoption of this rule on persons who import orchid plants into Hawaii and pot them for sale in the domestic market. As noted earlier in this document, our final regulatory analysis found this final rule will likely have a significant adverse economic impact on many U.S. growers of potted Phalaenopsis plants, many of whom are probably small entities. Our analysis also found that an adverse impact on U.S. growers of orchids other than Phalaenopsis spp. orchids, many of whom are also probably small in size, is possible, but less certain.

One commenter stated that APHIS has failed to comply with the Regulatory Flexibility Act, as amended by the Small Business Regulatory Enforcement Fairness Act, because its economic analysis is rudimentary and superficial. The commenter claimed that the economic analysis ignores or diminishes the value of statistics that are available about the orchid industry in the United States, and that it makes an assumption that “cheaper foreign imports would likely benefit plant retailers and importers” without examining whether or not the statement might actually be true, or, for that matter, whether or not more “cheap foreign imports” would result from adoption of the proposal.

We believe our final regulatory flexibility analysis complies with the requirements of the Regulatory Flexibility Act, as amended. Further, our analysis makes use of all the relevant data that we could locate, including information provided to us by commenters.

We believe it is reasonable in this case to assume that the expected low prices of imported Phalaenopsis plants from Taiwan will lead to an expanded market for those plants, at the expense of more expensive domestically produced plants. While cheaper imports may not benefit retailers if importers do not pass on savings, it is certain that importers will benefit from adoption of this rule.

One commenter stated that APHIS's economic analysis should not attempt to draw conclusions and inferences regarding the proposed action, given that data on potted orchids are “scarce” and data on potted Phalaenopsis “are virtually nonexistent.” The commenter claimed that the limitations on the data used in the analysis are significant; there are far more growers, far more space devoted to production, and greater gross sales than APHIS acknowledges in its analysis. The commenter noted that there is no industry sharing of data at present, and as a result, no accurate information on the state of the industry.

While economic data on potted orchids may be scarce, we have considered the data that are available. In any event, APHIS cannot prohibit imports of plants and plant products based on a lack of information regarding domestic production of those plants and plant products.

One commenter stated that the American Orchid Society's (AOS) estimate (cited in the proposed rule's economic analysis) that half of all orchids grown in the United States are Phalaenopsis is incorrect. The commenter claimed that while the percentage is significant, the AOS figure overstates the importance of the genus.

For the purposes of our analysis, we make the assumption that this estimate is appropriate, as the basis for the assumption is based on the judgment of an expert on the domestic orchid industry, and there is no substantive evidence to suggest that the expert's opinion is incorrect.

One commenter stated that, contrary to what was said in the economic analysis for the proposed rule, the majority of domestic orchids growers do not sell their plants primarily wholesale to general merchandise retailers and specialty stores.

The commenter did not provide any evidence to support his claim, and since revisions to the economic analysis for the rule based on this comment would not affect the overall conclusions of the analysis, we are making no changes in response to this comment.

One commenter stated that APHIS's economic analysis should consider the impact of the proposed rule on other orchids grown domestically such as dendrobium, cattleya, vanda, etc., since orchid buyers do not always distinguish what kind of orchid they are buying, as long they are cheap and attractive. Another commenter stated that potted Phalaenopsis spp. orchids imported from Taiwan will compete against all other potted plants as well—although to a lesser degree.

In our final regulatory flexibility analysis, we acknowledge that adoption of this final rule may have adverse economic effects on producers of other plants besides Phalaenopsis spp. orchids; however, the extent of the effect on those producers could not be determined.

One commenter stated that the economic analysis failed to analyze or consider extra costs that growers, importers, or retailers might face in case a pest is introduced into the United States via these imports.

Our regulatory impact analysis does not consider potential economic impacts associated with the introduction of a new pest into the United States because, based on the findings of our risk analysis, we believe such an occurrence to be highly unlikely. If we expected pest introductions to occur in association with this proposal, an assessment of the associated costs would be appropriate—but we would never have formally proposed the action in the first place.

One commenter stated that importers of potted orchids will benefit from adoption of the proposed rule, but it is a leap of faith to suppose that the rule will lead to increased sales volume benefitting retailers and consumers. The commenter claimed that, at retail flower shops and other mass marketers of floriculture products, the competition for shelf space is fierce and that orchids are minor items for most retail outlets. The commenter stated that owners might be inclined to pocket the savings from lower prices and earn a greater margin per square foot of shelf space devoted to potted orchids. The commenter claimed that it is naive to suggest that retail sales volume will increase or that retailers will pass their lower costs on to consumers.

As noted in our regulatory impact analysis, the availability of cheaper foreign imports would benefit plant importers in the United States. Importers would benefit from the income that the increased business activity would produce. U.S. retailers would also benefit if they kept the savings from lower wholesale prices for themselves instead of passing those savings on to their customers in the form of lower retail prices. Even if retailers did pass the savings on to their customers, they may still benefit, because the lower retail prices on potted plants may create an environment that leads to increased sales volume and revenue elsewhere. Consumers would benefit if retailers passed the savings on to them.

When a lower priced import is introduced, both consumer and producer surplus, as well as total surplus, are affected; consumers are better off because they pay a lower price for the good, and producers are hurt because they get a lower price. However, trade in the product always increases total surplus. In this case, the lack of information and uncertainties regarding certain data ( e.g. , the volume of Phalaenopsis spp. orchid imports from Taiwan) has precluded a monetary quantification of the gains and losses for U.S. producers and consumers, and the net welfare effect to U.S. society. However, regardless of the specific dollar amounts, the net welfare effect of imports of Phalaenopsis from Taiwan to U.S. society will be positive.

One commenter stated that, given this rule's potential negative economic effects on small entities, APHIS should consider employing quotas on the number of imported plants it will allow from Taiwan to protect the domestic orchid industry from competition.

APHIS regulates the importation of agricultural products based on risk, and has no authority to issue quotas on the importation of agricultural products, since such quotas would be based on economic considerations.

One commenter stated that there would be a negative impact on Hawaii's tourism industry if biting fly Forcipomyia taiwana or other non-native biting flies were to become established in Hawaii.

We do not believe this action will have an impact on Hawaii's tourism industry because there is no evidence to suggest that the pests cited by the commenter will enter the United States in association with Phalaenopsis spp. plants imported in approved growing media from Taiwan.

Several commenters stated that APHIS must enter into formal consultation with the U.S. Fish and Wildlife Service (FWS), as required by section 7 of the Endangered Species Act (ESA) for all Federal actions that may affect species listed under the ESA. The commenters stated that the importation of orchids in growing media may affect species of native Hawaiian orchids listed as threatened or endangered under the ESA and that the importation of sphagnum moss could be detrimental to these orchid species by altering the critical conditions required by Hawaiian orchids for successful germination, growth, and reproduction. This could come about through the introduction of the alien arthropods, snails, and fungi that have been identified in the 1997 risk assessment conducted by APHIS and summarized in the proposed rule.

In response to comments received on the proposed rule, APHIS narrowed the application of the rule to Phalaenopsis spp. orchids from Taiwan as the only point of origin and entered into informal section 7 consultation with FWS, as required under the ESA, to seek its concurrence with APHIS's determination that the proposed rule may affect, but is not likely to adversely affect, species proposed or listed by FWS as endangered or threatened. On April 7, 2003, FWS concluded the section 7 consultation process by concurring with APHIS's determination that the importation of Phalaenopsis spp. orchids from Taiwan in approved growing media will not adversely affect federally listed or proposed endangered or threatened species or their habitats.

One commenter claimed that APHIS did not provide FWS with sufficient information to make a valid determination of the impact of the rule on endangered or threatened species. The commenter noted that comments made by Hawaii's Department of Agriculture were not mentioned in the Biological Evaluation provided to FWS in support of the rule, and claimed that, since the Biological Evaluation was the document used by FWS to concur with APHIS's finding of “not likely to adversely affect,” APHIS should reconsider its findings.

APHIS provided FWS with all of the information that we had related to imports of Phalaenopsis spp. orchids in growing media from Taiwan. FWS concluded that the information that we gave them was sufficient to produce a finding that the importation of Phalaenopsis spp. orchids from Taiwan in approved growing media will not adversely affect federally listed or proposed endangered or threatened species or their habitats.

Therefore, for the reasons given in the proposed rule and in this document, we are adopting the proposed rule as a final rule, with the changes discussed in this document.

This rule has been reviewed under Executive Order 12866. The rule has been determined to be significant for the purposes of Executive Order 12866 and, therefore, has been reviewed by the Office of Management and Budget.

We have prepared an economic analysis for this rule. The economic analysis provides a cost-benefit analysis, as required by Executive Order 12866, and an analysis of the potential economic effects of this final rule on small entities, as required by the Regulatory Flexibility Act. The economic analysis is summarized below. Copies of the full analysis are available by contacting the person listed under FOR FURTHER INFORMATION CONTACT , or on the Internet at http://www.aphis.usda.gov/ppd/rad/98-035-5_final_economic_analysis.pdf.

Under the Plant Protection Act (7 U.S.C. 7701-7772), the Secretary of Agriculture is authorized to regulate the importation of plants, plant products, and other articles to prevent the introduction of injurious plant pests.

The regulations in 7 CFR part 319 prohibit or restrict the importation into the United States of certain plants and plant products to prevent the introduction of plant pests. The current regulations allow the importation of orchids from all countries of the world, but only under certain conditions, including the condition that the plants be free of sand, soil, earth, and other growing media.

We are amending the regulations to add orchids of the genus Phalaenopsis from Taiwan to the list of plants that may be imported in an approved growing medium, subject to specified growing, inspection, and certification requirements. We are taking this action in response to a request by Taiwan, and after determining that Phalaenopsis spp. plants established in growing media can be imported without resulting in the introduction into, or dissemination within, the United States of plant pests or noxious weeds.

Our economic analysis examines this final rule's economic impacts, as required by Executive Order 12866, and considers the potential economic effects of the rule on small entities, as required by section 604 of the Regulatory Flexibility Act. The analysis takes into account public comments received in response to the proposal. Comments were received primarily from Hawaiian orchid growers and organizations representing those growers.

The economic impact of potted plant imports from Taiwan on Hawaiian and other domestic growers is uncertain because information on relative costs of production and transportation costs is unknown. However, Taiwan's interest in access to the potted plant markets, as well as certain other information, suggest that imports will displace sales by at least some domestic growers. Accordingly, it is very possible that domestic growers would lose sales to Taiwanese producers if the rule is adopted.

The percentage of all potted orchid plants produced in the United States that fall within the Phalaenopsis genus is unknown but it is estimated to be significant, perhaps as high as 90 percent. In Hawaii, unlike the situation on the U.S. mainland, potted plants of Phalaenopsis spp. are only a small segment of the overall potted orchid plant market. ( Phalaenopsis spp. plants are produced primarily by the larger growers, and many Hawaiian growers are small-scale producers that tend to grow primarily specialty orchids.) The data suggest that, on average, Hawaiian growers of Phalaenopsis spp. would not be price competitive with imports from Taiwan. However, the rule's impact on Hawaii's small scale producers, given their niche in the specialty market, is unclear.

The data suggest that growers of Phalaenopsis spp. in California and Florida would also not be price competitive with the Taiwanese imports. The number of producers of potted Phalaenopsis spp. plants in those two States is unknown, but it is believed to be significant. In California in 2002, there were 41 producers of potted orchid plants of all genera, including Phalaenopsis spp.; Florida also had 41 producers of all genera that year.

Excluding Hawaii, California, and Florida, there were 101 large growers of potted orchid plants in all of the other States in 2002, with no one State accounting for more than 10 producers. The number of producers of potted Phalaenopsis spp. plants in those States is unknown but they, too, stand to be undercut in price by the Taiwanese imports.

The data are less conclusive on whether growers of all potted orchid plants—not just Phalaenopsis spp.—would be affected. Most U.S. growers of potted orchid plants are small entities.

The impact on producers is unclear. The rule is expected to provide net social benefits to consumers (domestic importers, wholesalers, retailers, as well as final consumers) that would exceed potential losses to domestic growers. The rule is expected to increase net social welfare.

This final rule allows plants of the genus Phalaenopsis to be imported in approved growing media into the United States from Taiwan. State and local laws and regulations regarding Phalaenopsis spp. plants imported under this rule will be preempted while the plants are in foreign commerce. Potted plants are generally imported for immediate distribution and sale to the consuming public, and remain in foreign commerce until sold to the ultimate consumer. The question of when foreign commerce ceases in other cases must be addressed on a case-by-case basis. No retroactive effect will be given to this rule, and this rule will 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 final rule. The assessment provides a basis for the conclusion that the importation of orchids of the genus Phalaenopsis will not have a significant impact on the quality of the human 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's NEPA Implementing Procedures (7 CFR part 372).

The environmental assessment may be viewed on the Internet at http://www.aphis.usda.gov/ppd/es/ppqdocs.html. You may request paper copies of the environmental assessment from the person listed under FOR FURTHER INFORMATION CONTACT . Please refer to the title of the environmental assessment when requesting copies. The environmental assessment is also available for review in our reading room, which is located in room 1141 of the USDA South Building, 14th Street and Independence Avenue, SW., Washington, DC. Normal reading room hours are 8 a.m. to 4:30 p.m., Monday through Friday, except holidays. To be sure someone is there to help you, please call (202) 690-2817 before coming.

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

The FAA has determined that notice and opportunity for prior public comment are impracticable, because these procedures would significantly delay certification of the airplane and thus delivery of the affected aircraft. In addition, the substance of these special conditions has been subject to the public comment process in several prior instances with no substantive comments received. The FAA, therefore, finds that good cause exists for making these special conditions effective upon issuance; however, the FAA invites interested persons to participate in this rulemaking by submitting written comments, data, or views. The most helpful comments reference a specific portion of the special conditions, explain the reason for any recommended change, and include supporting data. We ask that you send us two copies of written comments.

We will file in the docket all comments we receive as well as a report summarizing each substantive public contact with FAA personnel concerning these special conditions. The docket is available for public inspection before and after the comment closing date. If you wish to review the docket in person, go to the address in the ADDRESSES section of this preamble between 7:30 a.m. and 4 p.m., Monday through Friday, except Federal holidays.

We will consider all comments we receive on or before the closing date for comments. We will consider comments filed late if it is possible to do so without incurring expense or delay. We may change these special conditions based on the comments we receive.

If you want the FAA to acknowledge receipt of your comments on these special conditions, include with your comments a pre-addressed, stamped postcard on which the docket number appears. We will stamp the date on the postcard and mail it back to you.

On March 1, 2004, Shadin Company, Inc. applied for a supplemental type certificate (STC) to modify Cessna Models 500, 550 and S550 airplanes. Cessna Model 500, 550 and S550 airplanes are currently approved under Type Certificate A22CE. The modification incorporates the installation of the Innovative Solutions & Support (IS & S) Duplex Reduced Vertical Separation Minimum (RVSM) system which will allow for the removal of the existing altitude alerter, encoding altimeters, air data computer, and standby altimeter. This system uses two air data computer ADC-6000s and interfaces to existing BA-141 altimeters. These ADCs can be susceptible to disruption to both command and response signals as a result of electrical and magnetic interference. This disruption of signals could result in the loss of all critical flight information displays and annunciations or the presentation of misleading information to the pilot.

Under the provisions of 14 CFR 21.101, Shadin Company, Inc. must show that Cessna Model 500, 550 and S550 airplanes, as changed, continue to meet the applicable provisions of the regulations incorporated by reference in Type Certificate A22CE or the applicable regulations in effect on the date of application for the change. The regulations incorporated by reference in the type certificate are commonly referred to as the “original type certification basis.” The certification basis for the modified Cessna Models 500, 550 and S550 airplanes includes 14 CFR 25, effective February 1, 1965 as described in Type Certificate A22CE.

If the Administrator finds that the applicable airworthiness regulations ( i.e. , 14 CFR 25, as amended) do not contain adequate or appropriate safety standards for the Cessna Model 500, 550 and S550 airplanes because of novel or unusual design features, special conditions are prescribed under the provisions of § 21.16.

Special conditions, as defined in 14 CFR 11.19, are issued in accordance with § 11.38 and become part of the type certification basis in accordance with § 21.101.

Special conditions are initially applicable to the models for which they are issued. Should the applicant apply for a supplemental type certificate to modify any other model included on Type Certificate A22CE to incorporate the same novel or unusual design feature, the special conditions would also apply to the other models under the provisions of § 21.101.

The modified Cessna Model 500, 550 and S550 airplanes will incorporate a new altitude display system, the Shadin Company ADC-6000 system, which will perform critical functions. This system may be vulnerable to high-intensity radiated fields (HIRF) external to the airplane. The current airworthiness standards of part 25 do not contain adequate or appropriate safety standards for the protection of this equipment from the adverse effects of HIRF. Accordingly, this system is considered to be a novel or unusual design feature.

There is no specific regulation that addresses protection requirements for electrical and electronic systems from HIRF. Increased power levels from ground-based radio transmitters and the growing use of sensitive electrical and electronic systems to command and control airplanes have made it necessary to provide adequate protection.

To ensure that a level of safety is achieved equivalent to that intended by the regulations incorporated by reference, special conditions are needed for the Cessna Models 500, 550 and S550 airplanes modified by the Shadin Company, Inc. These special conditions require that new electrical and electronic systems that perform critical functions, such as the ADC-6000, be designed and installed to preclude component damage and interruption of function due to both the direct and indirect effects of HIRF.

With the trend toward increased power levels from ground-based transmitters and the advent of space and satellite communications, coupled with electronic command and control of the airplane, the immunity of critical digital avionic/electronics and electrical systems to HIRF must be established.

It is not possible to precisely define the HIRF to which the airplane will be exposed in service. There is also uncertainty concerning the effectiveness of airframe shielding for HIRF. Furthermore, coupling of electromagnetic energy to cockpit-installed equipment through the cockpit window apertures is undefined. Based on surveys and analysis of existing HIRF emitters, an adequate level of protection exists when compliance with the HIRF protection special condition is shown in accordance with either paragraph 1 OR 2 below:

1. A minimum threat of 100 volts rms (root-mean-square) per meter electric field strength from 10 KHz to 18 GHz.

a. The threat must be applied to the system elements and their associated wiring harnesses without the benefit of airframe shielding.

b. Demonstration of this level of protection is established through system tests and analysis.

2. A threat external to the airframe of the field strengths indicated in the table below for the frequency ranges indicated. Both peak and average field strength components from the table below are to be demonstrated.

The threat levels identified above are the result of an FAA review of existing studies on the subject of HIRF, in light of the ongoing work of the Electromagnetic Effects Harmonization Working Group of the Aviation Rulemaking Advisory Committee.

As discussed above, these special conditions are applicable Cessna Model 500, 550 and S550 airplanes modified by Shadin Company, Inc. Should Shadin Company, Inc. apply at a later date for design change approval to modify any other model included on the same type certificate to incorporate the same or similar novel or unusual design feature, these special conditions would apply to that model as well under the provisions of § 21.101.

This action affects only certain novel or unusual design features on Cessna Model 500, 550 and S550 airplanes modified by Shadin Company, Inc. It is not a rule of general applicability and affects only the applicant which applied to the FAA for approval of these features on these airplanes.

The substance of the special conditions for this airplane has been subjected to the notice and comment procedure in several prior instances and has been derived without substantive change from those previously issued. Because a delay would significantly affect the certification of the airplane, which is imminent, the FAA has determined that prior public notice and comment are unnecessary and impracticable and good cause exists for adopting these special conditions upon issuance. The FAA is requesting comments to allow interested persons to submit views that may not have been submitted in response to the prior opportunities for comment described above.

The authority citation for these special conditions is as follows:

Airworthiness Directive (AD) 2004-05-10, amendment 39-13505, applicable to certain Boeing Model 767 series airplanes, was published in the Federal Register on March 5, 2004 (69 FR 10321). That AD requires repetitive detailed visual inspections of the aft pressure bulkhead for damage and cracking, and repair if necessary. That AD also requires eddy current inspections prior to the airplane accumulating 25,000 flight cycles.

As published, the restatement heading on page 10323 specified that certain paragraphs were a “restatement of AD 88-09-03 R1.” In paragraph (a) the compliance time was specified as, “Prior to the accumulation of 6,000 flight cycles or within the next 1,000 flight cycles after September 26, 1988 (effective date of AD 88-09-03 R1, amendment 39-6001). * * *” However, the preamble to that AD discusses and specifies in several places the correct referenced AD number as AD 88-19-03 R1.

Since no other part of the regulatory information has been changed, the final rule is not being republished in the Federal Register .

The effective date of this AD remains March 22, 2004.

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an airworthiness directive (AD) that is applicable to certain Airbus Model A319 and A320 series airplanes was published in the Federal Register on February 6, 2004 (69 FR 5794). That action proposed to require modifying the electrical bonding of the fuel return line in each wing between ribs 7 and 8.

Interested persons have been afforded an opportunity to participate in the making of this amendment. The FAA has duly considered the single comment received.

The commenter supports the proposed rule.

The proposed AD states that the subject of the proposed AD is addressed in French airworthiness directive 2002-476(B), dated September 18, 2002. Since the preparation of the proposed AD, the Direction Ge ne rale de l'Aviation Civile (DGAC), which is the airworthiness authority for France, has issued French airworthiness directive F-2002-476 R1, dated January 21, 2004. This French airworthiness directive clarifies the applicability for one subject airplane.

The new French airworthiness directive does not affect the content of the proposed AD. Thus, the only change to this final rule as a result of the issuance of the new French airworthiness directive is that we have revised Note 1 of this final rule to refer to French airworthiness directive F-2002-476 R1.

The applicability of French airworthiness directive F-2002-476 R1 excludes airplanes on which Airbus Service Bulletin A320-28-1103 has been accomplished in service. However, we have not excluded those airplanes from the applicability of this AD. Rather, this AD includes a requirement to accomplish the actions specified in that service bulletin. Such a requirement ensures that the actions specified in the service bulletin and required by this AD are accomplished on all affected airplanes. Operators must continue to operate the airplane in the configuration required by this AD unless an alternative method of compliance is approved.

After careful review of the available data, including the comment noted above, we have determined that air safety and the public interest require the adoption of the rule with the change described previously. We have determined that this change will neither increase the economic burden on any operator nor increase the scope of the AD.

We estimate that 534 airplanes of U.S. registry will be affected by this AD, that it will take approximately 3 work hours per airplane to accomplish the required actions, and that the average labor rate is $65 per work hour. Required parts will cost approximately $100 per airplane. Based on these figures, the cost impact of this AD on U.S. operators is estimated to be $157,530, or $295 per airplane.

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

The regulations 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.

For the reasons discussed above, I certify that this action (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES.

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an airworthiness directive (AD) that is applicable to certain EMBRAER Model EMB-135 and EMB-145 series airplanes was published in the Federal Register on January 5, 2004 (69 FR 282). That action proposed to require replacement of the nose landing gear wheel nuts and associated inner and outer seals; and reidentification of the landing gear strut.

Interested persons have been afforded an opportunity to participate in the making of this amendment. Due consideration has been given to the comment received.

One commenter requests that replacement seal assembly part number (P/N) AEC-68-1498 be added to paragraph (a) of the proposed AD. The commenter states that Aviation Engineering Consultants, Inc. (AECI) has introduced an approved replacement seal assembly P/N AEC-68-1498 per Parts Manufacturer Approval (PMA) No. PQ1685CE, dated September 30, 2002. The commenter notes that P/N AEC-68-1498 is an FAA approved alternative to the P/N 68-1498 seal assembly. The commenter contends that P/N AEC-68-1498 should either be included in paragraph (a) of the proposed AD or be considered an alternative method of compliance (AMOC) for the proposed AD.

The FAA does not agree to add replacement seal assembly P/N AEC-68-1498 to paragraph (a) of the final rule. We recognize that there may be acceptable alternative parts to the manufacturer's specified part ( i.e., P/N 68-1498). We consider that the appropriate process for authorizing the use of an alternative replacement part to correct an unsafe condition to be per the provisions of paragraph (d) of the final rule. As stated in paragraph (d) of the final rule, an individual may submit a request for approval of the installation of a replacement seal assembly, such as the one to which the commenter refers, as an AMOC to the final rule. The request should include adequate data to justify that installation of a replacement seal assembly will provide an acceptable level of safety. No change to the final rule is necessary in this regard.

The title of Table 1 in paragraph (b) of the final rule has also been revised to indicate the content of the table: “Table 1—Service Bulletins Considered Acceptable for Compliance.”

After careful review of the available data, including the comment noted above, the FAA has determined that air safety and the public interest require the adoption of the rule with the changes described previously. The FAA has determined that these changes will neither increase the economic burden on any operator nor increase the scope of the AD.

The FAA estimates that 365 airplanes of U.S. registry will be affected by this AD, that it will take approximately 1 work hour per airplane to accomplish the required actions, and that the average labor rate is $65 per work hour. Required parts will be provided free of charge by the airplane manufacturer. Based on these figures, the cost impact of the AD on U.S. operators is estimated to be $23,725, or $65 per airplane.

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

The regulations 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.

For the reasons discussed above, I certify that this action (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES.

What events have caused this AD? We have received numerous reports of multi-site cracks in the canted bulkhead at Fuselage Station (FS) 558.10 on Raytheon 1900 Series airplanes. Cracks were found at the outer flange radius, the outer flange stringer cutouts, and at the flight control system support brackets of the canted bulkhead.

Has FAA taken any action to this point? We issued a proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an AD that would apply to certain Raytheon Aircraft Company Model 1900, 1900C, 1900C (C-12J), and 1900D airplanes that do not have canted bulkhead Kit No. 129-4005-1 S incorporated. This proposal was published in the Federal Register as a supplemental notice of proposed rulemaking (NPRM) on November 18, 2003 (68 FR 64996). The supplemental NPRM was proposed to require you to:

What is the potential impact if FAA took no action? This condition, if not detected and corrected, could prevent the bulkhead from carrying its limit and ultimate design load because of cracks in the canted bulkhead. Failure of the bulkhead could affect the rudder cable tension and result in loss of elevator and rudder control, which could result in loss of control of the airplane.

Was the public invited to comment? We provided the public the opportunity to participate in developing this AD. We received no comments on the proposal or on the determination of the cost to the public.

What is FAA's final determination on this issue? We have carefully reviewed the available data and determined that air safety and the public interest require adopting the AD as proposed except for minor editorial corrections. We have determined that these minor corrections:

How does the revision to 14 CFR part 39 affect this AD? On July 10, 2002, the FAA published a new version of 14 CFR part 39 (67 FR 47997, July 22, 2002), which governs the FAA's AD system. This regulation now includes material that relates to altered products, special flight permits, and alternative methods of compliance. This material previously was included in each individual AD. Since this material is included in 14 CFR part 39, we will not include it in future AD actions.

How many airplanes does this AD impact? We estimate that this AD affects 364 airplanes in the U.S. registry.

What is the cost impact of this AD on owners/operators of the affected airplanes? We estimate the following costs to accomplish the inspection:

We estimate the following costs to accomplish any necessary modification that will be required based on the results of the inspection(s). We have no way of determining the number of airplanes that may need this modification:

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an airworthiness directive (AD) that is applicable to certain Dornier Model 328-100 and Model 328-300 series airplanes was published in the Federal Register on March 5, 2004 (69 FR 10372). That action proposed to require repetitive detailed inspections of all attach caps of the passenger seats for cracks or defects; and replacement of the caps with new caps, if necessary.

Interested persons have been afforded an opportunity to participate in the making of this amendment. No comments were submitted in response to the proposal or the FAA's determination of the cost to the public.

The FAA has determined that air safety and the public interest require the adoption of the rule as proposed.

The FAA estimates that 101 airplanes of U.S. registry will be affected by this AD, that it will take approximately 3 work hours to accomplish the required inspection, and that the average labor rate is $65 per work hour. Based on these figures, the cost impact of the AD on U.S. operators is estimated to be $19,695, or $195 per airplane, per inspection cycle.

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

The regulations 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.

For the reasons discussed above, I certify that this action (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES.

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an airworthiness directive (AD) that is applicable to certain EMBRAER Model EMB-135BJ and EMB-145XR series airplanes was published in the Federal Register on March 5, 2004 (69 FR 10362). That action proposed to require repetitive inspections for cracking in the firewall of the auxiliary power unit, and repair of the firewall if necessary. That action also provided an optional terminating action for the repetitive inspections.

Interested persons have been afforded an opportunity to participate in the making of this amendment. No comments were submitted in response to the proposal or the FAA's determination of the cost to the public.

The FAA has determined that air safety and the public interest require the adoption of the rule as proposed.

We estimate that 40 airplanes of U.S. registry will be affected by this proposed AD.

It will take approximately 1 work hour per airplane to accomplish the repetitive inspections, at an average labor rate of $65 per work hour. Based on these figures, the cost impact of the repetitive inspections on U.S. operators is estimated to be $2,600, or $65 per airplane, per inspection cycle.

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

The regulations 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.

For the reasons discussed above, I certify that this action (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES.

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) by superseding AD 2001-07-05, amendment 39-12170 (66 FR 18523, April 10, 2001), which is applicable to certain Boeing Model 767 series airplanes powered by General Electric or Pratt & Whitney engines, was published in the Federal Register on December 8, 2003 (68 FR 68308). The action proposed to continue to require repetitive inspections to detect discrepancies of the four aft-most fastener holes in the horizontal tangs of the midspar fitting of the strut, and corrective actions, if necessary. The action also proposed to continue to provide an optional terminating action for repetitive inspections. In addition, the action proposed expanding the area on which the inspections are required.

Interested persons have been afforded an opportunity to participate in the making of this amendment. Due consideration has been given to the comments received.

One commenter concurs with the contents of the proposed AD.

One commenter requests clarification of the difference between the proposed AD and the service bulletin. The commenter's understanding of the intent of the “Difference Between Proposed Rule and Service Bulletin” paragraph of the proposed AD is that operators are allowed to inspect the four forward fastener holes not inspected per paragraph (a)(1), (a)(2), or (b) of the proposed AD at the next repetitive inspection specified in Table 1 of the proposed AD for all eight fastener holes. However, the commenter notes that paragraph (e) of the proposed AD requires, within 10,000 total flight cycles or 600 flight cycles after the effective date of this AD, whichever occurs later, inspection of all eight aft-most fastener holes or the four forward fastener holes not inspected per paragraph (a)(1), (a)(2), or (b) of the proposed AD. The commenter states that paragraph (e) appears to contradict the “Difference Between Proposed Rule and Service Bulletin” paragraph in that the compliance time of within 600 flight cycles specified by paragraph (e) would require the inspection of the four fastener holes not inspected per paragraph (a)(1), (a)(2), or (b) prior to the next repetitive inspection specified in Table 1 of the proposed AD.

The FAA agrees that clarification of the difference between the proposed AD and the service bulletin is necessary in the final rule. The commenter is correct in its understanding of paragraph (e) that the compliance time of within 600 flight cycles would require the inspection of the four fastener holes not inspected per paragraph (a)(1), (a)(2), or (b) prior to the next repetitive inspection specified in Table 1 of the proposed AD. Our intention in the “Difference Between Proposed Rule and Service Bulletin” paragraph was to allow operators to inspect the four forward fastener holes inspected per paragraph (a)(1), (a)(2), or (b) of the proposed AD at the next repetitive inspection specified in Table 1 of the proposed AD. In our explanation in that paragraph, we did not include the phrase “not inspected per paragraph (a)(1), (a)(2), or (b)” when we stated, “during the first detailed inspection, this proposed AD allows for the inspection of only four of the aft most fastener holes.” However, no change to the final rule is necessary in this regard, since the “Difference Between Proposed Rule and Service Bulletin” paragraph is not restated in the final rule.

One commenter requests that the wording in paragraph (f) of the proposed AD be revised to “Perform the follow-on actions specified in paragraph (a)(1) or (a)(2) of this AD.” The commenter states that if no cracking or discrepancy is detected during the inspections required by paragraph (e) of the proposed AD, paragraph (f) requires operators to “Perform the follow-on actions specified in paragraph (a)(2)(i) or (a)(2)(ii) of this AD * * * and repeat the inspections of all eight aft-most fastener holes thereafter at the applicable intervals specified in Table 1 of this AD.” The commenter contends this implies that the detailed inspection required by paragraph (a)(1) of the proposed AD is not allowed as an option for repeat inspections. However, the commenter points out that Table 1 of the proposed AD implies that detail inspections are an option. Revising the wording to “Perform the follow-on actions specified in paragraph (a)(2)(i) or (a)(2)(ii) of this AD” would allow either detailed inspections or high frequency eddy current (HFEC) inspections for the repeat inspections.

We agree with the commenter that paragraph (f) needs to be revised. Either detailed inspections or HFEC inspections are allowed for the repeat inspections. However, we do not agree with the wording suggested by the commenter. Follow-on actions specified in paragraphs (a)(2)(i) and (a)(2)(ii), as applicable, are required if operators did the HFEC inspections required by paragraph (a)(2). There are no follow-on actions if operators did the detailed inspection required by paragraph (a)(1). Repeat inspections are required for operators that did either the detailed inspection or the HFEC inspections. We have revised paragraph (f) of the final rule and added paragraph (g) to the final rule to clarify this issue. Also, we have revised the paragraph numbering for the remainder of the final rule accordingly.

One commenter requests that part number (P/N) RTV108 be allowed as an alternate sealant to P/N BMS 5-95 for actions required by paragraph (d) of the proposed AD. The commenter did not submit justification for this request. The commenter did refer to Boeing's concurrence with this substitution via a telex but the telex was not submitted.

We do not agree with the request to allow P/N RTV108 as an alternate sealant. However, under the provisions of paragraph (k) of the final rule, we may consider requests for approval of an alternative method of compliance if sufficient data are submitted to substantiate that such a design change would provide an acceptable level of safety.

The corrective actions specified in paragraph (h) of the proposed AD are to be accomplished “if any cracking or discrepancy is detected during any inspection required by paragraph (e) of this AD.” Since paragraphs (f) and (g) of the final rule require the repetitive inspections specified in paragraph (e), we determined that adding paragraphs (f) and (g) to paragraph (h) of the final rule would clarify the corrective action requirements. Accordingly, we have revised paragraph (h) of the final rule: “If any cracking or discrepancy is detected during any inspection required by paragraphs (e), (f), or (g) of this AD * * *”

After careful review of the available data, including the comments noted above, the FAA has determined that air safety and the public interest require the adoption of the rule with the changes previously described. The FAA has determined that these changes will neither increase the economic burden on any operator nor increase the scope of the AD.

There are approximately 625 airplanes of the affected design in the worldwide fleet. The FAA estimates that 263 airplanes of U.S. registry will be affected by this AD.

The detailed inspection that is required in this AD action will take approximately 1 work hour per airplane to accomplish, at an average labor rate of $65 per work hour. Based on these figures, the cost impact of the required inspection on U.S. operators is estimated to be $17,095, or $65 per airplane, per inspection cycle.

The eddy current inspection that is required by the AD action will take approximately 3 work hours per airplane to accomplish, at an average labor rate of $65 per work hour. Based on these figures, the cost impact of the required inspection on U.S. operators is estimated to be $51,285, or $195 per airplane, per inspection cycle.

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

The regulations 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.

For the reasons discussed above, I certify that this action (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES.

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an airworthiness directive (AD) that is applicable to all BAE Systems (Operations) Limited (Jetstream) Model 4101 airplanes was published in the Federal Register on September 25, 2003 (68 FR 55321). That action proposed to require repetitively inspecting the seat rails located in the passenger cabin for evidence of damage and corrosion, repairing any damage or corrosion, and replacing any floor panels found to be “soft” due to ingress of moisture.

Interested persons have been afforded an opportunity to participate in the making of this amendment. Due consideration has been given to the comments received from a single commenter.

The commenter, an operator, states that the proposed AD is an unnecessary burden to operators. The commenter suggests that instead of an issuing an AD, the maintenance review board (MRB) report be revised to include the actions required by the proposed AD. The commenter states that it currently performs numerous corrosion inspections on its fleet of Jetstream Model 4101 airplanes using procedures specified in the commenter's maintenance programs. The commenter also notes that BAE Systems (Operations) Limited Service Bulletin J41-53-050, dated January 25, 2002, specifies that when the inspection and procedure recommended in the service bulletin are published in the MRB report and the maintenance planning document (MPD), the service bulletin will be canceled.

The FAA infers that the commenter is requesting that the proposed AD be withdrawn. We do not agree. The procedures specified in MRB reports are not mandatory. Therefore, we must issue an AD to ensure that the identified unsafe condition is properly addressed. We acknowledge that some operators may currently have maintenance programs which address the unsafe condition. If a program is adequate, an operator would already be in compliance with the AD, or would be in a position to obtain approval for an alternative method of compliance with the AD (i.e., to follow the operator's current program rather than revise it to comply with the AD). Our obligation to issue the AD and address an unsafe condition remains, however; the rule must apply to everyone to ensure that all affected airplanes are covered, regardless of who operates them. Furthermore, the airworthiness authority for the state of design issued an airworthiness directive mandating the same actions required by this AD.

The commenter notes that the figure in the cost impact section of the proposed AD does not include incidental costs, such as the time required to gain access and close up an airplane. The commenter states that these costs are not incidental, and that the majority of time required to perform the detailed inspection required by the proposed AD involves removing and reinstalling the lavatory, galley, passenger cabin seats, carpets, and cabin floor panels, to gain access to and close up the areas to be inspected. The commenter also states that 30 work hours to perform the detailed inspection is not a true depiction of the required man hours, and that 300 work hours would be more accurate.

We infer that the commenter is requesting that the cost impact section of the proposed AD be revised. We do not agree. As stated in the proposed AD, “the figures discussed in AD rulemaking actions represent only the time necessary to perform the specific actions actually required by the AD. These figures typically do not include incidental costs, such as the time required to gain access and close up, planning time, or time necessitated by other administrative actions.” The specific action required by the proposed AD is a repetitive detailed inspection of the seat rails located in the passenger cabin. The time necessary for gaining access to and closing the inspection area is incidental. The final rule has not been changed regarding this issue.

After careful review of the available data, including the comments noted above, we have determined that air safety and the public interest require the adoption of the rule as proposed.

The FAA estimates that 57 airplanes of U.S. registry will be affected by this AD, that it will take approximately 30 work hours per airplane to accomplish the required inspection, and that the average labor rate is $65 per work hour. Based on these figures, the cost impact of the AD on U.S. operators is estimated to be $111,150, or $1,950 per airplane, per inspection cycle.

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

The regulations 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.

For the reasons discussed above, I certify that this action (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES.

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an airworthiness directive (AD) that is applicable to all Dornier Model 328-100 and -300 series airplanes was published in the Federal Register on March 5, 2004 (69 FR 10379). That action proposed to require a one-time inspection for fracture and/or breakage of the hinge bolt of the output rod of the rudder spring tab lever assembly, and corrective action if necessary. That action also proposed to require modification of the hinge bolt.

We provided the public the opportunity to participate in the development of this AD. No comments have been submitted on the proposed AD or on the determination of the cost to the public.

We have carefully reviewed the available data and determined that air safety and the public interest require adopting the AD as proposed.

We estimate that 112 airplanes of U.S. registry will be affected by this AD, that it will take about 1 work hour per airplane to accomplish the inspection and modification, and that the average labor rate is $65 per work hour. Required parts will cost about $205 per airplane. Based on these figures, the cost impact of the AD on U.S. operators is estimated to be $30,240, or $270 per airplane.

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

The regulations 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.

For the reasons discussed above, I certify that this action (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES.

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an airworthiness directive (AD) that is applicable to all Dornier Model 328-100 and -300 series airplanes was published in the Federal Register on March 5, 2004 (69 FR 10381). That action proposed to require repetitive inspections of the bearing lugs of the rudder spring tab lever assembly for cracking, and corrective action if necessary.

We provided the public the opportunity to participate in the development of this AD. No comments have been submitted on the proposed AD or on the determination of the cost to the public.

We have carefully reviewed the available data and determined that air safety and the public interest require adopting the AD as proposed.

We estimate that 112 airplanes of U.S. registry will be affected by this AD, that it will take about 1 work hour per airplane to do the inspections, and that the average labor rate is $65 per work hour. Based on these figures, the cost impact of the AD on U.S. operators is estimated to be $7,280, or $65 per airplane, per inspection cycle.

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

The regulations 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.

For the reasons discussed above, I certify that this action (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES .

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an airworthiness directive (AD) that is applicable to all Fokker Model F27 Mark 100, 200, 300, 400, 500, 600, and 700 series airplanes was published in the Federal Register on July 29, 2003 (68 FR 44493). That action proposed to require repetitive inspections of the control panel of the direct current (DC) generator for discrepancies, and replacement of any discrepant part.

Interested persons have been afforded an opportunity to participate in the making of this amendment. Due consideration has been given to the comment received.

The commenter asks that the wording specified in paragraph (b) of the proposed AD that states, “* * * prior to further flight, replace any discrepant part with a new part having the same part number * * *” be changed due to limited availability of new parts. The commenter suggests the following wording: “* * * prior to further flight, replace any discrepant part with a serviceable part having the same part number. * * *” The commenter states that finding new internal parts for this unit may cause unnecessary delays in returning the airplane to service, when a serviceable part is acceptable for the replacement.

The FAA agrees with the intent of the commenter's request. We have changed paragraph (b) of this final rule to allow for installation of either new or serviceable parts.

After careful review of the available data, including the comment noted above, we have determined that air safety and the public interest require the adoption of the rule with the change described previously. We have determined that this change will neither increase the economic burden on any operator nor increase the scope of the AD.

The FAA estimates that 39 airplanes of U.S. registry will be affected by this AD, that it will take about 4 work hours per airplane to accomplish the inspection, and that the average labor rate is $65 per work hour. Based on these figures, the cost impact of the AD on U.S. operators is estimated to be $10,140, or $260 per inspection cycle.

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

The regulations 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.

For the reasons discussed above, I certify that this action (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES .

This amendment to part 95 of the Federal Aviation Regulations (14 CFR part 95) amends, suspends, or revokes IFR altitudes governing the operation of all aircraft in flight over a specified route or any portion of that route, as well as the changeover points (COPs) for Federal airways, jet routes, or direct routes as prescribed in part 95.

The specified IFR altitudes, when used in conjunction with the prescribed changeover points for those routes, ensure navigation aid coverage that is adequate for safe flight operations and free of frequency interference. The reasons and circumstances that create the need for this amendment involve matters of flight safety and operational efficiency in the National Airspace System, are related to published aeronautical charts that are essential to the user, and provide for the safe and efficient use of the navigable airspace. In addition, those various reasons or circumstances require making this amendment effective before the next scheduled charting and publication date of the flight information to assure its timely availability to the user. The effective date of this amendment reflects those considerations. In view of the close and immediate relationship between these regulatory changes and safety in air commerce, I find that notice and public procedure before adopting this amendment are impracticable and contrary to the public interest and that good cause exists for making the amendment effective in less than 30 days.

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

Veterinary Laboratories, Inc., 12340 Santa Fe Dr., Lenexa, KS 66215, filed ANADA 200-341 that provides for oral use of SPARMECTIN-E (ivermectin) Liquid for Horses for the treatment and control of various species of internal and cutaneous parasites. Veterinary Laboratories' SPARMECTIN-E Liquid for Horses is approved as a generic copy of Merial Ltd.'s EQVALAN (ivermectin) Oral Liquid for Horses, approved under NADA 140-439. The ANADA is approved as of March 8, 2004, and the regulations are amended in 21 CFR 520.1195 to reflect the approval. The basis of approval is discussed in the freedom of information summary.

In accordance with the freedom of information provisions of 21 CFR part 20 and 21 CFR 514.11(e)(2)(ii), a summary of safety and effectiveness data and information submitted to support approval of this application may be seen in the Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852, between 9 a.m. and 4 p.m., Monday through Friday.

The agency has determined under 21 CFR 25.33(a)(1) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

This rule does not meet the definition of “rule” in 5 U.S.C. 804(3)(A) because it is a rule of “particular applicability.” Therefore, it is not subject to the congressional review requirements in 5 U.S.C. 801-808.

Fort Dodge Animal Health, Division of Wyeth, 800 Fifth St. NW., Fort Dodge, IA 50501, filed a supplement to NADA 141-087 for QUEST (moxidectin 2.0%) Gel, used for the treatment and control of various species of internal parasites in horses and ponies. The supplemental NADA provides for the addition of one new species of adult small strongyle and for the speciation of adult small strongyles in product labeling. The supplemental NADA is approved as of March 17, 2004, and 21 CFR 520.1452 is amended to reflect the approval.

In accordance with the freedom of information provisions of 21 CFR part 20 and 21 CFR 514.11(e)(2)(ii), a summary of safety and effectiveness data and information submitted to support approval of this application may be seen in the Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852, between 9 a.m. and 4 p.m., Monday through Friday.

Under section 512(c)(2)(F)(iii) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 360b(c)(2)(F)(iii)), this approval qualifies for 3 years of marketing exclusivity beginning March 17, 2004. Exclusivity applies only to the new effectiveness claim for adult Coronocyclus labratus for which new data were required.

The agency has determined under 21 CFR 25.33(d)(1) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

This rule does not meet the definition of “rule” in 5 U.S.C. 804(3)(A) because it is a rule of “particular applicability.” Therefore, it is not subject to the congressional review requirements in 5 U.S.C. 801-808.

The MMS is amending the existing regulations at 30 CFR 206.100 et seq. , governing the valuation of crude oil produced from Federal leases for royalty purposes, and related provisions governing the reporting thereof. The current regulations became effective on June 1, 2000 (June 2000 Rule).

After conducting several public workshops, MMS issued a proposed rule that was published in the Federal Register on August 20, 2003 (64 FR 50088). The original comment period for this proposed rule closed on September 19, 2003. However, MMS received requests to extend the comment period and on September 26, 2003, MMS reopened the comment period until November 10, 2003 (68 FR 55556).

The amendments do not alter the basic structure or underlying principles of the June 2000 Rule. In proposing these amendments, the Department of the Interior reaffirmed that the value for royalty purposes of crude oil produced from Federal leases is the value at or near the lease. However, in determining value at the lease of production not sold under an arm's-length contract, MMS is not restricted to a comparison to arm's-length sales of other production occurring in the field or area. MMS may begin with a “downstream” price or value, and determine value at the lease by deducting the costs of transporting oil to downstream sales points or markets, or by making appropriate adjustments for location and quality.

Federal lessees are not obligated to sell crude oil downstream of the lease. Lessees are at liberty to sell production at or near the lease, even if selling downstream might have resulted in a higher royalty value for the production than selling it at the lease. If lessees do choose to sell downstream, the choice to sell downstream does not make otherwise non-deductible costs deductible (for example, marketing costs). See Independent Petroleum Association of America, et al. v. DeWitt, 279 F.3d 1036 (DC Cir. 2002), cert. denied sub nom., Independent Petroleum Association of America, et al. v. Watson, 537 U.S. 1105 (2003). In addition, MMS may choose to use downstream values when a lessee sells to an affiliate at or near the lease.

Public comments received in response to the proposed rule favored most of the proposed changes. MMS received some negative comments regarding the proposed method for valuing California and Alaska crude oil, some of the specifications of allowable transportation costs, and changing the rate of return on undepreciated capital investments in calculating non-arms-length transportation allowances. We will group the comments received and the MMS responses generally according to the order of the substantive provisions of the rule (with related changes to definitions), with discussion of miscellaneous technical changes thereafter. MMS received comments on the proposed rule from 27 respondents.

MMS proposed using New York Mercantile Exchange (NYMEX)-based value with a roll as one of the measures of value for production not sold at arm's length in all areas except for California, Alaska, and the Rocky Mountain Region where MMS proposed to use NYMEX-based value without the roll. In the Rocky Mountain Region, NYMEX-based value without the roll would be used as the revised third benchmark (proposed to be redesignated as § 206.103(b)(3)). The base NYMEX price would be adjusted for location and quality differentials and actual transportation costs back to the lease.

Summary of Comments: Fifteen respondents submitted comments on the use of NYMEX pricing. There were several comments about our rationale for changing from a spot market index price to NYMEX and adjusting for location and quality differentials. Industry commenters generally supported using NYMEX, although they believe that spot market index prices are a workable starting point for valuation of oil not sold at arm's length. Some industry commenters believe that the NYMEX calendar month average is closer to the actual value of oil produced in the Rocky Mountain Region than the West Texas Intermediate (WTI) (Cushing, Oklahoma) spot prices prescribed as the third benchmark value in the June 2000 Rule. Industry comments were not opposed to retaining Alaska North Slope (ANS) spot prices as the basis for valuing oil produced in California and Alaska.

Industry commenters generally believe that the roll should not apply to oil produced in California, Alaska, or the Rocky Mountain Region. One industry group further suggested that the roll should not apply to oil produced in the Western Gulf of Mexico, or the San Juan Basin, or any other area that does not have a market center where physical exchanges occur between that market center and Cushing.

Industry believes that MMS should choose whether to include weekends and holidays in the calculation of the average NYMEX price, and is comfortable with MMS's choice to exclude them. Industry suggested that the three benchmarks and the alternative valuation provision for the Rocky Mountain Region are adequate.

State comments on the use of NYMEX were mixed. Two States supported the use of NYMEX. One State does not agree with using NYMEX as the third benchmark for the Rocky Mountain Region, and believes that non-arm's-length royalties should be determined by the affiliate's downstream sales price. The California State Controller's Office (SCO) strongly objected to using the adjusted NYMEX price for California and suggested retaining ANS spot prices. Several members of the California congressional delegation concurred with the California SCO comments.

MMS Response: MMS believes that, at this time, NYMEX futures prices probably represent a more reliable and better assessment of current oil values than spot prices. Use of the NYMEX price as the basis for royalty value has several advantages, not the least of which is the fact that the volume of transactions and the number of participants is so large that, at least theoretically, no one entity could manipulate the resultant price. This is an issue partly because of the recent publicity and questions about the information provided to spot price reporting services and the effect such potentially inaccurate information has on spot prices in general. In addition, there is only one NYMEX price, and it is available from any number of sources. There would be no question about the correct publication to use to obtain the applicable index price.

Further, various questions have arisen about the timing of application of index prices. Published spot prices for specific months generally represent the market's assessment of prices for crude oil delivered during that month, but determined between the 26th day of the month 2 months prior to the delivery month and the 25th day of the month immediately preceding the delivery month. MMS has reviewed the correlation between several public indicia of crude oil prices ( e.g. , trading month spot prices, NYMEX prices, etc.) and the values actually used in paying royalties to MMS on crude oil sold at arm's length. This review demonstrated that calendar-month NYMEX prices (applying the roll, as discussed below, to production from areas outside the Rocky Mountain Region, California, and Alaska) have the highest correlation to reported arm's-length sales values of any publicly-available indices.

The June 2000 Rule used spot market index prices determined for the trading period that is closest to concurrent with the production month. However, this period is not consistent with the way industry does business. First, as explained above, the published spot market index price relevant to spot market deliveries during the production month is actually the price published the month before the month used to value the current month's production in the existing rule. For example, while the price determined in the period January 26 to February 25 may be the correct timing for spot sales at the market center for deliveries in March, that price may not reflect prices received in March for actual arm's-length sales by producers that are often made more contemporaneously with production. Second, the spot price used in the existing rule is not the price used for spot sales, but occurs 1 month later. It overlaps, but is not the same as, the production month. A price for production in March should be the most current and accurate information that a purchaser or seller would have at the time of production. The NYMEX prices are available on a real time basis to traders and, therefore, are the ones used most commonly to determine the base price of oil during the month of production. Comments received concur with the proposition that using the calendar month average of the daily NYMEX settlement prices will correlate more closely to prices received in the current production month than the index prices used in the existing rule.

A recent MMS review compared valuation of a common crude oil grade (Eugene Island) produced in the Gulf of Mexico using both the calendar month NYMEX price, with a roll (discussed below), and the spot market index price provisions of the existing crude oil valuation rule that became effective on June 1, 2000. The review found that the calendar month NYMEX price (with the roll) is advantageous to the public when futures prices in the out months are lower going forward (when the market is in “backwardation”). Existing spot market index price provisions, or the use of NYMEX without the roll, are advantageous to the public when futures prices in the out months are higher going forward (when the market is in “contango”). Using historical NYMEX data since the NYMEX oil market began in 1986, prices in the out months have been lower going forward approximately 60 percent of the time. Thus, taking a conservative and long-term approach to royalty valuation supports use of the NYMEX price with the roll.

MMS proposed to exclude weekends and holidays from the calculation of the average NYMEX price because NYMEX does not publish prices on those days. Commenters generally supported that choice and said that the agency should clearly choose either exclusion or inclusion. In addition, the WTI differential (based on WTI spot market prices) excludes weekends and holidays. In the final rule, MMS is adopting the proposal, and the rule excludes weekends and holidays from the calculation of the average NYMEX price.

MMS proposed the average NYMEX price as the basis for valuing oil produced in California and Alaska that is not sold at arm's length. MMS believes that choosing either ANS spot prices or NYMEX prices would lead to substantively the same result in royalty valuation over time. Publications that publish ANS spot prices also publish differentials between ANS and WTI crude oil at Cushing. The spot price for WTI at Cushing is similar to the NYMEX price. Thus, the NYMEX price adjusted by the differential between ANS and WTI at Cushing would yield a result very similar to ANS spot prices. After consideration of comments from the California SCO and related congressional comments, and because using ANS spot prices will be somewhat simpler than using NYMEX prices minus the WTI-ANS differential, MMS has decided to retain adjusted ANS spot pricing for valuing crude oil produced from Federal leases in California and Alaska.

As a result of moving to NYMEX pricing generally but retaining ANS spot pricing for oil produced in California and Alaska, the references to “index price” in several sections of the existing rule are replaced by a reference to “ANS spot price.”

The comments received supported MMS's proposal to use NYMEX prices as the third benchmark for valuing oil produced from leases in the Rocky Mountain Region that is not sold at arm's length if the lessee does not have an approved tendering program. As in the proposed rule, the final rule retains the other three benchmarks for the Rocky Mountain Region from the existing rule.

MMS proposed applying a roll as an adjustment to the initial NYMEX prices for oil produced from leases outside the Rocky Mountain Region, California, and Alaska. One of the reasons that MMS proposed use of the roll was its own experience in selling crude oil taken as royalty in kind in the Gulf of Mexico under 43 U.S.C. 1353 and sold competitively to small refiners. MMS found that a substantial portion of the crude oil produced in the Gulf, and sold at arm's length was sold on the basis of a NYMEX price methodology, including the roll. MMS found that use of the roll resulted in increased return to the public on oil taken in kind and sold.

The roll is a commonly used measure of the trend of NYMEX prices for future deliveries in those areas. Prices reported for futures contracts on the NYMEX are not limited to deliveries in the prompt month as defined in this rule. Rather, trades could be made in March 2003 for deliveries in April 2003 or in several subsequent months. Due to the fact that the NYMEX prices are future price estimates and, therefore, inherently reflect increases or decreases in prices based upon expected trends, an adjustment to such estimates may be appropriate to extrapolate back to current price estimates, upon which royalty calculations are based. This adjustment factor is the roll, which is added to the initial NYMEX price when prices for the out months are in backwardation (to correct for the fact that the current price should be higher than the future price in this circumstance), and subtracted from the initial NYMEX price when prices for the out months are in contango (to correct for the fact that the current price should be lower than the future price in this circumstance). MMS proposed to add the roll to the initial NYMEX price used as the basis for royalty valuation, except for leases in the Rocky Mountain Region, California, and Alaska. As explained in the preamble to the proposed rule, the roll is not commonly used in transactions involving oil produced in the Rocky Mountain Region, California, or Alaska. For California and Alaska, the roll is irrelevant in the final rule because MMS is retaining ANS spot prices as the basis for royalty value. Commenters generally agreed that the roll should not be applied to oil produced in the Rocky Mountain Region, California, or Alaska.

MMS does not agree with the suggestion of one commenter to apply the roll to production from the Gulf of Mexico that goes to market centers from which there are trades to Cushing, but not to production that goes to market centers from which there are not trades to Cushing. Determining which production from which leases goes to which market centers, and whether it is common for those market centers to have trades to Cushing, would add substantial administrative burden and cost to both royalty payors and the Government. Further, there was no explanation of why this alleged difference was relevant to applying the roll.

The proposed use of the roll also necessitated a corresponding proposed change to the definition of “trading month.” In § 206.101 of the existing rule, “trading month” is defined in terms of spot market sales. MMS proposed to change the definition of “trading month” to conform with NYMEX definitions and practice. It will be used only to calculate the roll. MMS received no comments opposing that change, and is adopting it in the final rule.

Based on the comments received, the final rule prescribes the NYMEX price with a roll as the royalty valuation basis for production from areas outside of the Rocky Mountain Region, California, and Alaska that is not sold at arm's length, and NYMEX with no roll as the third benchmark for production from the Rocky Mountain Region.

Additionally, in § 206.103(b), the paragraphs for the four benchmarks in the Rocky Mountain Region are renumbered (b)(1) through (b)(4) to correspond with the benchmark numbers as proposed. Industry supported the clarification.

While MMS expects the basic operation of the NYMEX market to be the same for the foreseeable future, it is not so clear that the roll will be a permanent feature of the marketplace. When MMS believes that using the roll is no longer a common industry practice, the MMS Director may terminate the use of the roll. However, the MMS Director may terminate the use of the roll only at the end of each 2-year period following the effective date of this rule, through notice published in the Federal Register no later than 60 days before the end of such 2-year period. Further, MMS also will have the option to redefine how the roll is calculated to comport with changes in industry practice, through notice published in the Federal Register no later than 60 days before the end of each 2-year period. MMS will explain its rationale when it publishes the notice. MMS believes that this flexibility is appropriate so that the valuation standards more closely reflect market developments. As proposed, MMS is adding at § 206.103(c)(2) the option to terminate or modify the roll at the end of each 2-year period after the effective date of this rule.

MMS sought comments in the proposed rule on allowing the use of the NYMEX price to value oil sold at arm's length in multiple sales downstream of the lease where the lessee does not first transfer to an affiliate and where “tracing” the production from the lease or unit to the specific sale is burdensome. MMS received positive comments from industry concerning the option to use an index-based value when a producer has numerous arm's-length sales downstream of the lease. Allowing producers to use NYMEX prices for these transactions might alleviate some administrative burden. However, we believe that royalty payments should be based on actual sale prices whenever possible. Also, under the existing regulations, producers have the option of petitioning MMS for alternative valuation procedures if they believe the administrative burden of tracing sales is excessive. In fact, MMS received requests for alternative valuation approvals to alleviate the tracing burden and is in the process of finalizing the requests. Based on these facts, MMS believes the existing regulations are working and do not need to be modified.

MMS proposed to adjust the base NYMEX price for location and quality differentials and actual transportation costs back to the lease. Using NYMEX prices necessitates adjusting values between market centers and Cushing (the location of the NYMEX price), because the value of the commodity (oil) varies by location and quality. Crude oil will be worth more the closer it is to 40 degrees API gravity, and the nearer it is located to markets or refineries. To adjust for the differences in location and quality, MMS proposed to use actual arm's-length exchange agreements, which are the market's valuation of the difference. MMS also proposed to allow the use of published differentials between the market center and Cushing when lessees do not actually exchange oil to Cushing at arm's length. In that connection, MMS proposed to add a definition of a new term, “WTI differential,” which is the term for that published differential. MMS also proposed to amend the definition of “MMS-approved publication” to include the WTI differential.

Summary of Comments: Ten respondents provided comments on adjusting the NYMEX price for transportation costs and location and quality differentials. The California SCO objected to adjusting the NYMEX price for quality and location in California by using the difference between the WTI spot price and the market center spot prices for crude oil. Additionally, the California SCO asserted that using a WTI differential fails to account for uplift in value due to location and gives industry a lower price. Another State believes that differentials should be allowed only if they are reasonable and actually incurred.

Industry commenters believe that requiring lessees to calculate a weighted-average arm's-length differential between a market center and Cushing could result in an unnecessary administrative burden and suggested that lessees should be allowed to use published WTI differentials in lieu of calculating their own location and quality differentials. Comments received from one trade publication indicated that restricting to a 2-year period the ability of lessees to change from one approved publication for WTI differentials to another is fundamentally anti-competitive. The commenter suggested allowing companies to choose a new publication every 90 days.

One commenter observed that there is a difference between the basis on which the WTI differential is calculated and the basis on which the NYMEX price is calculated. The commenter believed that this would lead to an inaccuracy in the adjustments to the NYMEX price. The concern arose principally because the WTI differential is the basis for adjusting the NYMEX price between the market center and Cushing (the location of the NYMEX price) if the lessee does not have an exchange agreement between the market center and Cushing. Additionally, the same commenter expressed concern that this difference would affect the use of the roll, because the prices incorporated in the roll calculation would all be determined on different basis months from the WTI differential that is used to adjust the NYMEX price.

MMS Response: As explained above, adopting the NYMEX price as the basis (or, in the Rocky Mountain Region, an alternative basis) for royalty valuation for oil produced from leases in areas other than California and Alaska and not sold at arm's length requires an additional adjustment beyond those in the current rule because the NYMEX price is defined only at Cushing for light sweet crude oil. Therefore, differentials from Cushing to other market centers are necessary. These differentials can be both positive and negative, depending on the quality and location of the alternative crude oil. They will also vary from month to month depending on relative market forces, e.g. tanker shortages in the Gulf, pipeline problems in Cushing, etc.

Under the final rule, the average of the daily NYMEX settlement prices published during the calendar month of production (including the roll, if applicable) at Cushing is adjusted to the market center by the differentials derived from the lessee's actual arm's-length exchange agreements between the market center and Cushing applicable to production during the production month. However, MMS believes that many lessees do not have arm's-length exchange agreements, for significant volumes of the oil they own at market centers, between Cushing and each market center to which they transport or exchange crude oil. If the lessee does not have arm's-length exchange agreements between a particular market center and Cushing for at least 20 percent of the oil it owns at that market center (as discussed further below), the adjustment to Cushing for the oil that is not exchanged at arms-length between that market center and Cushing would be the WTI published differential. (For the less than 20 percent of the lessee's oil that is exchanged at arm's-length between that market center and Cushing, the lessee will use the differential derived from the arm's-length exchange agreement(s).) If the lessee has arm's-length exchange agreements for more than 20 percent of the oil it owns at that market center, it may use the arm's-length differential for all of its oil at that market center. The lessee would then calculate a further adjustment from the market center to the lease.

MMS does not believe that it would be the best choice to allow lessees to use WTI differentials in lieu of calculating their own location and quality differentials when they have significant arm's-length exchanges. If actual arm's-length data is available, MMS believes that is preferable to using a published differential and more accurately represents the actual value of the lessee's oil.

With respect to the comment regarding the difference between the basis on which the WTI differential is calculated and the basis on which the NYMEX price is calculated, we recognize that the WTI differential is the average of the daily high and low differentials published for each day for which price publications perform surveys for deliveries during the production month, calculated over the number of days on which those differentials are published (excluding weekends and holidays). For a given delivery month, the industry trade publications perform their price surveys for the WTI spot market price and determine differentials from the 26th day of the second month before the delivery month to the 25th day of the month preceding the delivery month. For the same delivery month, the NYMEX price, in contrast, is calculated on a different basis. As defined in the final rule, the NYMEX price is the calendar month of production average of the daily NYMEX settlement prices. MMS knows of no more contemporaneous published value that it could use that might give more accurate market differences.

MMS understands that the bases for calculating the WTI differential and the NYMEX price (and the roll) are not identical. However, as explained above, MMS believes that using the calendar month average NYMEX price is the most accurate measure of the base price of oil because it accounts for all the contemporaneous information available to traders during the production month. MMS also believes that using the WTI differential applicable to deliveries in the production month is the most accurate market measure of the expected difference in value between the market centers and Cushing.

MMS believes that over time, marginal losses from adjustments to the NYMEX price due to the difference in basis between the NYMEX price and the WTI spot market price (and, therefore, the WTI differentials) will be offset by marginal gains from those adjustments, and that the net effect should be immaterial. MMS believes these differences are not as important as the gain in public confidence from the use of NYMEX prices, which are less likely to be manipulated than index prices and are more easily obtained from a number of non-proprietary sources. Additionally, WTI differentials are not the preferred method of calculating the adjustment from Cushing to a market center; under the regulation they are to be used only when a lessee does not have significant actual arm's-length exchanges.

Changing from spot market index price-based valuation to NYMEX-based valuation and adding a definition for “WTI differential” also require a revision in the definition of “MMS-approved publication.” Under the existing rule, the term “MMS-approved publication” referred to which publications of spot market index price MMS would accept. Under the final rule, the term now refers to the publications MMS approves for determining WTI differentials and ANS spot prices (because ANS spot market pricing is retained for production from leases in California and Alaska).

MMS does not agree with the comment that lessees should be able to choose a new publication once every 90 days. In the final rule, §§ 206.103(a)(4) and 206.112(b)(2) do not permit lessees to choose an MMS-approved publication for ANS spot market prices or WTI differentials for any period less than 2 years, which is consistent with current practice. Using any period less than 2 years may be viewed as being more prone to market manipulation to the benefit of the lessee.

MMS proposed adding a market center at Guernsey, Wyoming, for sweet crude oil produced from Federal leases in Wyoming, and requested comments regarding alternative valuation procedures, including differentials, in valuing sour crude produced from Federal leases in Wyoming. With regard to Wyoming sour grades, MMS asked whether it would be useful to include a market center for valuation of sour crude produced in the Rocky Mountain Region at Hardisty, Alberta, Canada (at which spot market prices for sour crude are published in trade publications), and adjust the Hardisty price for the cost of transportation from Casper, Wyoming (a typical delivery point) to Hardisty and from the lease to Casper. MMS also proposed adding possible market centers at Kern River for valuing San Joaquin Heavy produced from Federal leases in California and at Hynes Station on Line 63 for San Joaquin Light produced from Federal leases in California.

Summary of Comments: Wyoming opposed the suggested use of spot prices from Hardisty, Alberta, Canada, stating that Hardisty prices would be less accurate than using NYMEX prices at Cushing. The State also believed that the use of WTI differentials in general is not appropriate because they (like spot prices) potentially are susceptible to manipulation. The California SCO believed that the use of Hynes Station and Kern River as market centers would not increase accuracy in valuing production from Federal leases in California for Federal royalties.

Industry appeared to agree that there was no need to add Hardisty or Guernsey as new market centers. The two industry publications that submitted responses suggested that should MMS decide to use prices from Hardisty, Alberta, Canada, then their publications be utilized. Industry further recommended that MMS consider application of market center differentials such as Kern River and Line 63 to the ANS spot price to establish location and quality differentials between Long Beach and other market centers, should MMS decide to retain ANS pricing for Alaska and California production.

MMS Response: MMS agrees with the comments regarding the use of prices from Hardisty, Alberta, Canada, and Guernsey, Wyoming, and is not including either Hardisty or Guernsey as a market center at the present time. Using Hardisty as a market center would create a number of difficulties involved in making the adjustments back to the leases. MMS also agrees with the California SCO that the use of Kern River and Line 63 will not lead to improved accuracy at this time because of the apparently continued small volumes reported at those locations. Lessees who do not have their own exchanges of production from leases in the Rocky Mountain Region to Cushing, or of production from leases in California to Long Beach or San Francisco, may make proposals to MMS for adjustments.

The proposed rule retained the basic principles in the existing rule of adjusting value between the market center and the lease for location and quality and actual transportation costs. The proposed rule included two changes. First, the proposed rule (at § 206.112(b)) included a provision that if you transport or exchange (or both transport and exchange) at least 20 percent, but not all, of your oil produced from a lease to a market center, you must use the weighted average of the adjusted values of that oil to value oil not transported or exchanged to the market center. Second, the proposed rule deleted the provision (at existing § 206.112(c)) that allowed lessees to use market center values at locations other than market centers (primarily refineries).

MMS also proposed that if you transport your oil from the lease to a market center, and your oil has a higher or lower gravity and a higher or lower sulfur content than the crude oil for which a price is published at the market center, you should make an adjustment for quality even though you have no existing exchange agreements or quality banks. MMS proposed that in such circumstances, you would use appropriate posted price gravity tables to adjust the value of your produced crude for gravity differences from the market center benchmark crude, and use a factor of 2.5 cents per one-tenth percent difference in sulfur content to adjust for quality when you have neither exchange agreements nor quality banks to fully adjust the quality of your oil at the market center. MMS based this factor on our understanding of common sulfur bank adjustments for California.

Summary of Comments: Three respondents submitted comments on what adjustments and transportation allowances apply when valuing production using index pricing. An industry respondent agreed with the proposal to have a lessee base its adjustment for the portion of its production that does not go to the market center ( e.g. , goes to a refinery) on the portion that goes to the market center, when it amounts to at least 20 percent of production. Industry commenters believed that the proposed sulfur adjustment was inadequate, and that it should be between $.50 and $1.00 per percent.

MMS Response: MMS made extensive changes to this section to clarify how and when to apply location and quality differentials and transportation allowances when calculating royalty value. MMS has changed this section to first show (in § 206.112(a)) how adjustments should be made between the lease and the market center, which applies regardless of whether NYMEX prices or ANS spot prices are used. Section 206.112(b) then shows how differentials should be calculated between the market center and Cushing when the NYMEX price is used as the basis of value.

The basic concepts of the proposed rule have been retained in the final rule. A lessee must use its arm's-length exchange agreements, if it has any, to determine the adjustment between the lease and market center or for any intermediate segments between those points. It may continue to use its actual transportation costs for any portion of the distance between the lease and market center over which oil is actually transported and not exchanged. If the lessee has an exchange agreement that is not at arm's length, the lessee must obtain MMS approval for using it as a location and quality adjustment. Until MMS approves a proposed location and quality differential, the lessee may use the location and quality differential in its non-arm's-length exchange agreement. If MMS prescribes a different differential, the lessee will need to adjust previously reported and paid royalties, together with appropriate interest payments or credits, based on the approved differential. To prevent “double dipping,” the lessee may not take both a transportation allowance and apply a location and quality differential between the same two points.

In the final rule, in § 206.112(a)(3), MMS has decided to retain the provision that requires a lessee to use its arm's-length exchange agreements that cover at least 20 percent of its production from the lease during the production month for the portion of oil from that lease for which the lessee does not have exchange agreements between the lease and the market center (or between some intermediate points). MMS believes that 20 percent is appropriate because it is greater than the royalty percentage under a typical onshore lease (12 1/2 percent) or offshore lease (16 2/3 percent).

Section 206.112(a)(4) of the final rule addresses the situation where a lessee does not transport or exchange at least 20 percent of its oil produced from the lease to a market center. In that instance, you would use paragraphs (a)(1) and (a)(2) to value the less than 20 percent portion (if any) that you transport or exchange (or transport and exchange) to a market center. For the remainder of your lease production, you must submit a proposal to MMS for a location and quality differential between the lease and the market center. You may use your proposed differential until MMS disapproves it. If MMS approves a different differential, you will need to adjust the previously reported and paid royalties, together with an interest payment or credit.

Paragraph (c) addresses situations in which an additional quality differential is appropriate. For instance, MMS understands from our royalty-in-kind program that the All America Pipeline uses a sulfur adjustment of 50 cents per full percent, after the first percent difference in sulfur. MMS believes that the typical sulfur content of oil produced from Federal leases is in the 1 to 3 percent range. Therefore, MMS will change its proposed use of a 2.5 cent per 0.1 percent adjustment to 5.0 cents per 0.1 percent sulfur unless MMS approves a higher adjustment. This adjustment would be similar to the factor used by the All America Pipeline and is consistent with the comments received from industry on common industry practice.

Our intent in rewriting § 206.112 was to clarify and simplify the existing rules. Certain technical issues were identified and evaluated to improve the effectiveness and efficiency of the rules by reducing litigation, assuring more contemporaneous compliance, reducing administrative cost to the Federal Government and lessees, and making Federal lands more attractive for development and leasing.

MMS proposed an amendment to the regulations governing calculation of actual transportation costs in non-arm's-length situations by changing the allowed rate of return on undepreciated capital investment from 1.0 times the Standard & Poor's BBB bond rate to 1.5 times the Standard & Poor's BBB bond rate.

Summary of Comments: Two States commented specifically that 1.5 times the Standard & Poor's BBB bond rate is too high and does not reflect actual cost of capital. One State was particularly concerned that increasing the rate of return deduction would negatively impact State royalty income. It also believes the rate is not consistent with either MMS's former practice of rejecting the equity component of capital costs in determining a proper rate of return or with findings of the Energy Information Administration (EIA) that the rates of return are lower in the pipeline segment than in the exploration and production segment of the oil and gas industry. Specifically, the EIA found that the pipeline line of business averaged a return on investment approximately 50 percent of the return in the exploration line of business, and approximately 60 percent of the return in the oil and gas industry as a whole. This return was also slightly less than the Standard & Poor's BBB bond rate. Another State suggested a possible alternative to the proposal by applying the 1.5 times the Standard & Poor's BBB bond rate to pipelines constructed after the passage of the new regulations and retaining the 1.0 times Standard & Poor's BBB bond rate for existing infrastructure. Congressional commenters were concerned that the rate would negatively affect revenues.

Industry commenters asserted that 1.5 times the Standard & Poor's BBB bond rate was not sufficient. Based on a study from the American Petroleum Institute (API), industry argued that although pipelines are not as risky as drilling wells, some risk is involved, and that the cost of rate of return allowable should be between 1.6 and 1.8 times the Standard & Poor's BBB bond rate. Industry further suggests that non-pipeline-based transportation should be dealt with on a case-by-case basis.

MMS Response: MMS has examined some rates of return in the oil industry and believes that some weighted average rate of return considering both equity and debt is appropriate as an actual market-based cost of capital. An investor will choose to have a mix of debt and equity for many reasons, not the least of which is that companies that choose to finance their investments solely by debt will pay a higher interest rate due to the increased risk on the part of the creditor. Both debt and equity costs are actual costs of capital. The choice of Standard & Poor's BBB bond rate in 1988 was made, at least in part, in recognition of some equity component because the majority of companies with non-arm's-length transportation arrangements have debt costs lower than the Standard & Poor's BBB bond rate.

MMS continues to believe that establishing a uniform rate of return on which all parties can rely is preferable to the costs, delays, and uncertainty inherent in attempting to analyze appropriate project-specific or company-specific rates of return on investment. MMS, through its Offshore Minerals Management, Economics Division, has studied several years' worth of data for both non-integrated oil transportation companies and larger oil producers, both integrated and independent, that MMS believes are more likely to invest in oil pipelines. After a thorough review of the MMS and API studies, and consideration of the comments submitted by States and industry, we believe that the allowance for the rate of return on capital should be adjusted to 1.3 times the Standard & Poor's BBB bond rate. This number is the mid-point of the range suggested by the MMS study, which concluded that the range of rates of return appropriate for oil pipelines would be in the range of 1.1 to 1.5 times the Standard & Poor's BBB bond rate. MMS also believes that although there are some very high risks involved with certain oil and gas ventures, such as wildcat drilling, the risk associated with building and developing a pipeline to move oil that has already been discovered is much less and of a different nature. Both the MMS study and the data from EIA demonstrate that the market also perceives that the risk is lower in the transportation lines of business than in the exploration and production lines of business.

MMS believes that the study conducted by its Offshore Minerals Management Economics Division used the most relevant data for a reasonable period and is therefore the best source to decide on the appropriate rate of return. The fact that it also fell between the study cited by industry and the data cited by the State reaffirms our belief in its reasonableness.

In § 206.110, MMS proposed to add new paragraphs (b) and (c) that would specify many of the costs incurred for transporting oil under an arm's-length contract that are allowable deductions and those that are not deductible, respectively. MMS believes some costs are directly related to the movement of crude oil to markets away from the lease. MMS proposed that the rule include specific costs of transportation that are allowable.

MMS also proposed to include specific costs as not being costs of transportation, either because they were costs of placing oil in marketable condition or costs of marketing, or otherwise simply not costs of transportation. They were proposed to be non-allowable as deductions from royalty value.

In § 206.111, MMS proposed to add new paragraphs (b)(6) and (b)(7) that would specify many of the costs incurred for transporting oil under a non-arm's-length contract that are allowable deductions, but only to the extent they have not already been included in the actual cost calculation under paragraphs (d) through (j) of this section. MMS believes these costs are directly related to the movement of crude oil to markets away from the lease. MMS proposed that the rule include specific costs of transportation that are allowable.

MMS also proposed specific costs as not being costs of transportation, either because they were costs of placing oil in marketable condition or costs of marketing, or otherwise simply not costs of transportation. They were proposed to be non-allowable as deductions from royalty value.

We proposed to modify existing § 206.111(h)(5) to delete the words “who owned the system on June 1, 2000” and replace them with the words “from whom you bought the system” to remedy an unintended consequence regarding depreciation when calculating a transportation allowance not involving an arm's-length transportation contract. The language in the June 2000 Rule would allow and require a second purchaser to go back to the depreciation schedule of the original owner, rather than continuing the depreciation of the first purchaser. This could result in either a higher or lower depreciable basis than was intended.

Summary of Comments: States were uniformly opposed to modification of the transportation allowances in the June 2000 Rule and most questioned whether MMS was proposing to designate marketing costs as transportation. One State suggested that MMS is acting contrary to its long-held policy, which does not allow the deduction of direct or indirect marketing costs. The State further suggests that expanding the cost deductions will not serve to streamline the audit process because it believes that the expanded transportation costs will inevitably lead to litigation. Another State commented that MMS has proposed allowing some costs which it traditionally has not allowed as transportation. The commenter requested that MMS insert a provision stating that reimbursements for any or all of these cost elements received by the lessee, its affiliate, or its marketing agent, be included either in gross receipts or included as offsets to the expenses incurred in calculating transportation allowances. No State pointed to a single specific cost listed as allowable in the proposed rule that MMS has ever considered to be marketing or non-transportation related.

Industry strongly supported the inclusion of specific transportation costs in the rule as a powerful tool for averting disputes arising out of lack of clarification of issues, but suggested that gauging and scheduling fees be included as deductible transportation costs.

MMS Response: MMS intends to clarify and simplify the existing rule to reduce litigation, assure more contemporaneous compliance, reduce administrative costs to the Federal Government and lessees, and make Federal lands more attractive for development and leasing. MMS does not believe it can eliminate all disputes, but clarity within the regulatory structure affords the benefits listed above. After clarifying the costs that would be considered to be gas transportation costs and those that would be considered not to be transportation costs in the amendments to the gas valuation regulations promulgated in 1997, one lawsuit resolved whether the lines that MMS had drawn were reasonable. That case, Independent Petroleum Ass'n of America v. DeWitt , 279 F.3d 1036, cert. denied, 537 U.S. 1105 (2003) upheld all of MMS's determinations, except one involving unused firm capacity charges. Regarding unused firm capacity charges, the court held that MMS had not sufficiently explained why they were not related to transportation. MMS believes that by more fully explaining the distinctions, its policy is more likely to be upheld.

In this rule, MMS does not modify its long-standing policy of not allowing as a deduction from gross proceeds the costs of placing production in marketable condition or costs of marketing production, including indirect or internal costs, or any other costs that are not necessary for the lessee to incur in order to move its oil. MMS believes that the costs it lists as transportation costs in the final rule are consistent with the reasoning that it has always followed in determining whether costs are for transportation or for something else.

In § 206.110(b), MMS identifies specific costs as allowable. You may not use any cost as a deduction that duplicates all or part of any other cost that you use under § 206.110(b). The costs are:

(1) The amount that you or your affiliate pay under an arm s-length transportation contract or tariff. This is the base price paid to transport oil at arm's length. It has always been allowable as a transportation expense.

(2) Fees paid (either in volume or in value) for actual or theoretical line losses. Pipeline losses are actual or theoretical reductions in the volume of oil that travels through a pipeline. Pipeline losses are the result of either real, physical losses, or errors in the measurement of the oil. The lessee or its affiliate may incur the cost of a pipeline loss either by a reduction in the volume of oil, resulting in lower gross proceeds received, or by a reduction in the value of oil on which the lessee received payment. Again, this is specifically allowable under existing regulations because these fees must be paid to a pipeline owner if they are part of the fee structure.

(3) Fees paid for administration of a quality bank. Quality banks are the means by which the various shippers compensate each other if their oil is of higher or lower quality than the standard for the pipeline. Those shippers with higher quality oil receive a payment from the quality bank and those with lower quality oil must pay into the bank. Those payments are not usually taken into account to determine the value of the oil for Federal royalty purposes due to the provisions of § 206.119. The fees allowed in this paragraph are fees paid to the person who administers the quality bank, not the payments made or received in adjusting the qualities of the injected oils. These banks are usually administered by pipeline owners, but may be administered by third parties. MMS is changing the final rule language by eliminating the phrase “to a pipeline owner” to acknowledge the fact that sometimes these fees may be paid to other persons who administer the quality bank. These fees are allowable because they are costs that are required to be incurred in order to ship oil through the pipeline to which they apply, and are not costs of placing the oil in marketable condition.

(4) The cost of carrying on your books as inventory a volume of oil that the pipeline operator requires you to maintain, and that you do maintain, in the line as line fill. Some oil pipelines require that shippers leave oil in the pipeline so that the pipeline is full. Oil will not flow through the pipeline unless it is filled. The oil that the shipper (lessee) owns in the pipeline is, in effect, inventory that cannot ever be sold as long as the shipper uses the pipeline to transport its oil. If a shipper is required to maintain inventory, it loses the time value of money on the value of that oil for every month it is maintained in the line. For lines that do not require the shippers to maintain line fill, the pipeline owner will own the oil that fills the line and will charge the shipper as part of the arm's-length price or tariff a cost at least equal to its capitalized costs. In order to treat lessees who ship through pipelines that require shippers to maintain line fill the same as lessees who ship through pipelines in which the owner provides line fill, MMS is allowing a deduction equal to the capitalized costs of the line fill—the monthly value of the oil that the shipper owns that serves as line fill times the rate of return.

(5) Fees paid to a terminal operator for loading and unloading of crude oil into or from a vessel, vehicle, pipeline, or other conveyance.

(6) Fees paid for short-term storage (30 days or less) incidental to transportation as required by a transporter.

(7) Fees paid to pump oil to another carrier's system or vehicles as required under a tariff.

(8) Transfer fees paid to a hub operator associated with physical movement of crude oil through the hub when you do not sell the oil at the hub. These fees do not include title transfer fees. Allowable costs (5) through (8) are all fees paid, as part of the cost of moving oil, to various persons who perform intermediate services associated with physical movement of oil. Specifically, the final rule allows fees paid to terminal operators for loading or unloading oil, fees paid for short-term storage incidental to transportation, fees paid to pump oil from one system or vehicle to another, and fees paid to physically move oil through a hub because they are costs incurred to move oil. Even short-term storage, if it is required by the transporter and not incurred for marketing purposes, is a cost associated with the movement of oil. MMS does not intend to allow any costs associated with marketing to be deducted. Therefore, the regulation limits storage costs to those required by transporters and limits transfer fees to those needed to physically move the oil, but disallows fees that merely transfer title—which is clearly a cost of marketing.

(9) Payments for a volumetric deduction to cover shrinkage when high-gravity petroleum (generally in excess of 51 degrees API) is mixed with lower-gravity crude oil for transportation. These payments account for the fact that when high-gravity oil is mixed with lower-gravity oil, the volume of oil in the pipeline shrinks. If the charge is levied because your oil is of a significantly different quality than the other oil in the system, it is allowable as a transportation deduction because it affects the overall ability of the pipeline to transport oil. You may not deduct charges to adjust the quality of the oil to meet pipeline standards because that would be a cost of placing the oil in marketable condition.

(10) Costs of securing a letter of credit, or other surety, that the pipeline requires you as a shipper to maintain. MMS believes that this is a cost that the lessee or its affiliate must incur to obtain the pipeline's transportation service, and therefore is a cost of moving the oil. It is not incurred for marketing purposes or to put the oil in marketable condition, but is paid solely to procure transportation services. Again, MMS will allow only the capitalized costs, when that is all that is appropriate, or a one-time expense, if that is appropriate. These costs should only include the currently allocable costs applicable to the Federal lease. MMS believes that shippers generally use two different means of assuring creditworthiness. The first involves a deposit or advanced payment in which the shipper incurs only the costs associated with the time value of money because it receives its deposit back. The other involves actual out-of-pocket costs to obtain a letter of credit, guarantee, or surety bond. MMS believes that these two means should be accounted for differently in calculating your transportation allowance.

For example, in the first case, if you make a cash deposit of 2 months of the expected transportation charges (say $50,000), and transport 100,000 barrels per month, of which 75,000 barrels are from a Federal lease, you must calculate the cost as follows:

Multiply the deposit by the monthly rate of return, calculated by dividing the rate of return specified in § 206.111(i)(2) by 12, and multiply that result by the proportion of total production from each Federal lease. In this example, if the Standard & Poor's BBB bond rate was 8 percent, the allowable monthly rate would be

In the second case involving the expense of a letter of credit or other surety, if you pay your bank $5000 as a non-refundable fee for a letter of credit, you can include the proportion allocable to Federal production in the month that fee is paid, and then never again.

MMS does not allow deduction of costs that are not actual costs of transporting oil. A new § 206.110(c) lists the costs that MMS believes are clearly not related to the transportation of oil. These are:

(1) Fees paid for long-term storage (more than 30 days). Fees paid for long-term storage are due to a marketing choice and are not a necessary transportation cost.

(2) Administrative, handling, and accounting fees associated with terminalling. Similarly, administrative fees associated with terminalling are not allowable because MMS believes that they are associated with administrative costs that are the lessee's obligation.

(3) Title and terminal transfer fees.

(4) Fees paid to track and match receipts and deliveries at a market center or to avoid paying title transfer fees. Non-allowable costs for title and terminal transfer fees and fees paid to avoid title and terminal transfer fees are associated with changes in ownership rather than movement and therefore are not costs of transportation.

(5) Fees paid to brokers. Fees paid to brokers are treated similarly to items (3) and (4) above, because they are also costs associated with changes in ownership.

(6) Fees paid to a scheduling service provider.

(7) Internal costs, including salaries and related costs, rent/space costs, office equipment costs, legal fees, and other costs to schedule, nominate, and account for sale or movement of production. Non-allowable costs (6) and (7) relate to scheduling, nominating, and accounting for sale and movement are internal costs that the lessee is required to provide at no cost to the lessor.

(8) Gauging fees. Gauging fees are simply costs of measuring the volume of oil, which have traditionally been the responsibility of the lessee.

Section 206.111 specifies how to calculate non-arm's-length transportation allowances. In § 206.111(b)(6), MMS proposed certain costs as allowable costs of transportation as follows:

(i) Volumetric adjustments for actual (not theoretical) line losses.

(ii) The cost of carrying on your books as inventory a volume of oil that the pipeline operator requires you to maintain, and that you do maintain, in the line as line fill.

(iii) Fees paid to a non-affiliated terminal operator for loading and unloading of crude oil into or from a vessel, vehicle, pipeline, or other conveyance.

(iv) Transfer fees paid to a hub operator associated with physical movement of crude oil through the hub when you do not sell the oil at the hub. These fees do not include title transfer fees.

(v) A volumetric deduction to cover shrinkage when high-gravity petroleum (generally in excess of 51 degrees API) is mixed with lower-gravity crude oil for transportation.

Several of these costs are the same as the costs allowed under § 206.110(b) for arm's-length transportation described above. For example, MMS will allow lessees who transport through a non-arm's-length arrangement to deduct the cost of carrying line fill on their books and will allow fees paid to non-affiliated terminal operators and hub operators associated with physical movement of oil. MMS is also adding a new cost parallel to these costs. If a lessee pays a non-affiliated quality bank administrator, those costs are comparable to those incurred by arm's-length shippers.

MMS will also allow certain costs similar to the costs allowed for arm's-length shippers. For example, MMS will allow volumetric losses, instead of fees, that cover shrinkage when high-gravity petroleum is mixed with low-gravity oil. Similarly, actual volumetric changes in line volume, whether they are losses or gains are allowable (or required to be added) for non-arm's-length shippers, in lieu of allowing fees for actual or theoretical line losses for arm's-length shippers.

The costs identified as not being allowable for arm's-length shippers in § 206.110(c) are also not allowed as transportation costs for shippers that transport their oil through non-arm's-length arrangements. In addition, MMS has specified that theoretical line losses are not allowable, because they are not actual costs to shippers who ship through non-arm's-length arrangements. The following have been designated as non-allowable transportation costs under § 206.111(b)(7):

(i) Fees paid for long-term storage (more than 30 days).

(ii) Administrative, handling, and accounting fees associated with terminalling.

(iii) Title and terminal transfer fees.

(iv) Fees paid to track and match receipts and deliveries at a market center or to avoid paying title transfer fees.

(v) Fees paid to brokers.

(vi) Fees paid to a scheduling service provider.

(vii) Internal costs, including salaries and related costs, rent/space costs, office equipment costs, legal fees, and other costs to schedule, nominate, and account for sale or movement of production.

(viii) Theoretical line losses; and

(ix) Gauging fees.

The final rule retains the lists of allowable and unallowable costs in §§ 206.110 and 206.111 because MMS believes they properly draw the line between those expenses that are needed for the movement of oil and those expenses that are incurred for some other purpose.

The final rule adopts the proposed rule's changes to § 206.111(h)(5) related to redepreciation as proposed. When we amended the rules in March 2000, we intended the revisions regarding depreciation in the current rule to permit, one time only, a new depreciation schedule based on your purchase price when you purchase a transportation system from a previous owner. If a transportation system were sold more than once, subsequent purchasers would have to maintain the then-existing depreciation schedule.

However, existing paragraph (h)(5) says “if you or your affiliate purchase a transportation system at arm's length after June 1, 2000, from anyone other than the original owner, you must assume the depreciation schedule of the person who owned the system on June 1, 2000.” But if A were the original owner and still owned the system on June 1, 2000, and subsequently sold the system to B after June 1, 2000, who in turn sold it to C, the rule as written says that C would have to assume original owner A's depreciation schedule. This was not MMS s intent. To be consistent with the intended result, C should assume B's depreciation schedule in this situation.

Therefore, to reflect the original intent, MMS is modifying § 206.111(h)(5) to delete the words “who owned the system on June 1, 2000” and replace them with the words “from whom you bought the system.” This change will enable C in the example above to assume the depreciation schedule of B based on B's purchase price of the transportation system and subsequent reinvestment.

MMS proposed to remove the presumption that sales to a co-lessee under a joint operating agreement (JOA) are not at arm's length. The proposal required changing the reporting instructions in 30 CFR § 210.53 with respect to sales under JOA to facilitate review and audit of these transactions.

Summary of Comments: A State respondent opposed the treatment of JOAs as arm's-length transactions. The State declared that MMS's treatment in the 2000 preamble was consistent with the practical realities of the “proceeds” received by co-lessees under JOAs. Co- lessees are working interest owners. As such, they share in costs that royalty owners do not incur. The nature of the very lease interests between a royalty owner and a working interest owner differ. Co-lessees, in essence, are given a “deduction” benefit, which they would not receive if their royalty were calculated under the non-arm's-length rules.

The respondent from industry agreed with the proposed changes, but requested that the language under § 210.53(1)(c) be amended from “each working interest owner” to “the working interest owners.” The change in wording would provide for a second reporting line but not more, easing reporting burdens.

MMS Response: MMS does not believe there should be a presumption that transactions under JOAs are sales or not sales. Neither does MMS believe that there should be a presumption that transactions under JOAs are at arm's length or are not at arm's length. When a party to a JOA, who is not the operator, allows the operator to dispose of the non-operator's share of oil production in exchange for the consideration provided under that agreement, MMS recognizes that some of these arrangements may be sales of the production. Holding that a disposition under a JOA is not a sale, while a disposition under a sales contract, with identical terms, is treated as a sale, would be a case of form over function. MMS believes that it is the substance of the transaction, rather than the form, that determines whether a transaction is treated as arm's length or not.

MMS believes that, when a contract of whatever form results in the Federal royalty owner sharing in costs that are not properly sharable, the definition of gross proceeds together with the exceptions in § 206.102(c)(2) provide sufficient tools for MMS to assure that the lessor will not share in costs that are not properly shareable. If the operator is providing marketing services to its co-lessees, the MMS may require that they be provided at no cost to the lessor, regardless of whether the oil is disposed through the JOA or through a sales contract.

MMS's current practice is to include detailed reporting guidance in the “Minerals Revenue Reporter Handbook”. MMS decided that specific reporting guidance for JOA's should not be included in our regulations. MMS agrees with industry that having the designee report a separate line for each working interest owner on the Form MMS-2014, Report of Sales and Royalty Remittance, is not needed. Therefore, MMS is not modifying § 210.53 as proposed but will modify the Minerals Revenue Reporter Handbook to require a designee to report, on the Form MMS-2014, one line for the share of the production the designee purchased from the working interest owners at arm's length and report on separate lines the required information for the remaining shares of the production valued (1) as an arm's-length sale by you or your affiliate under § 206.102; or (2) at an index price under § 206.103.

MMS proposed a technical correction to the regulation at § 206.121 that permitted a grace period for reporting and paying royalties after the June 2000 Rule became effective to give royalty payors adequate time to change their systems. We proposed to end-date the grace period for such adjustments, because we consider 3 years to be sufficient time to have reported and paid royalties under the regulations published in 2000.

Summary of Comments: One State commented that, if MMS decides to add a new grace period in the final rule, it should retain the system change requirement associated with the rule. Industry comments supported the elimination of the grace period associated with the June 2000 Rule, and recommended the implementation of a new grace period for the final rule primarily to account for system changes associated with the potential re-definition of JOAs.

MMS Response: MMS agrees that the grace period from the June 2000 Rule should be discontinued. We consider 3 years to be sufficient time to have reported and paid royalties under the June 2000 Rule. Further, since we received no requests for relief after the June 2000 Rule was published, MMS does not believe that implementation of a new grace period is necessary. This is especially true given the fact that we have modified the treatment of working interest owners under JOAs in the final rule to alleviate reporting of each interest owner's production. Therefore, § 206.121 is removed from the final rule.

In addition, MMS proposed making a technical change to the definition of “affiliate” in § 206.101. MMS proposed changing paragraph (2) of the definition of “affiliate” by striking the words “of between 10 and 50 percent” and substituting therefore the words “10 through 50 percent” because the current definition does not specify the treatment of a situation in which one person owns exactly 50 percent of another person.

Summary of Comments: Industry supported the redefinition of affiliate.

MMS Response: Based on the comment received and the need for clarification, MMS is modifying the definition of “affiliate” in § 206.101(2) as proposed.

Summary of Comments: MMS received comments questioning the following: (1) MMS assumptions used regarding the percentage of arm's-length sales and the percentage of not-at-arm's-length sales in the analysis, and (2) MMS assumptions on allowances. One State and several congressional commenters questioned (3) why revenue impacts published in the proposed rule were ranges instead of single figures.

MMS Response: On the question of assumptions of percentages of arm's-length sales and the percentage of not-at-arm's-length sales in the analysis, MMS provides the following information. At the time of the proposed rulemaking, MMS estimated the percentage of arm's-length sales and the percentage of not-at-arm's-length sales at 50 percent each. MMS did not use “Sales Type Code” data reported by companies on the Form MMS-2014, Report of Sales and Royalty Remittance. We have recently reviewed data reported using the “Sales Type Code” on the Form MMS-2014 from October 2002 to March 2003 and found that 70 percent of crude oil produced from Federal leases was reported as being sold at arm's length and 30 percent was reported as being not sold at arm's length. However, because the “Sales Type Code” is a new reporting requirement and because the reported data has not yet been audited, MMS believes that 50 percent is a better estimate of the actual amount of crude oil that is not sold at arm's-length.

On the question of assumptions on allowances, MMS provides the following information. When MMS was researching the revenue impacts associated with the proposed rule, we considered three variables associated with the transportation-related changes to the existing regulations: (a) Whether allowances are at arm's length or not at arm's length, (b) the range of the cost components, and (c) the amount of production taken in kind.

Regarding the first variable (a), since 1996, MMS has not collected forms which indicate if allowances are at arm's length or not at arm's length. In preparing the proposed rule, certain assumptions were made concerning actual impacts to revenues.

MMS assumed 50 percent of transportation allowance transactions were at arm's length and that 50 percent were not at arm's length. MMS does not collect data on whether allowances are at arm's length. MMS does collect data on whether sales are at arm's length, but there is no relationship between the type of sale and the type of allowance.

Regarding the second variable (b), MMS also assumed that certain costs, such as the cost of a letter of credit, would range from $.02 to $.05 per barrel. Because of uncertainty associated with the exact amount of each deductible cost, MMS chose to publish a range of possible effects rather than an average. This explains why revenue impacts published in the proposed rule were ranges instead of single figures.

Regarding the third variable (c), because production taken in kind is not subject to the transportation regulations in the proposed rule, oil taken in kind has the potential to significantly affect the total of transportation allowances reported. MMS applied high (77 percent) and low (19 percent) range factors for production taken in kind to account for scenarios at either extreme, to demonstrate the potential range of revenue impacts.

Summarized below are the estimated costs and royalty impacts of this rule to all potentially affected groups: industry, the Federal Government, and State and local governments. The costs and the royalty collection impacts are segregated into two categories—those accruing in the first year after implementation of this rule and those accruing on a continuing basis each year thereafter.

(1) Expected Royalty Increase—NYMEX-based valuation applied to oil not sold at arm's length.

Under this rule, industry will value oil based on a market price that more closely represents the true value of the oil. We believe this may result in industry paying additional royalties compared to the Federal oil valuation rule that became effective June 1, 2000. Provided below are estimates of any significant increased royalties.

This rule maintains many of the provisions of the June 2000 Rule including the concept of separate valuation methodologies linked to different production locations. This analysis is divided into the two areas affected by these changes. They include the Rocky Mountain Region, and the “Rest of the Country,” including the Gulf of Mexico. Since we retained the use of ANS spot prices for California and Alaska, we removed the royalty impacts of using NYMEX pricing in California and Alaska from the analysis. This analysis highlights the impacts of modifying the pricing provisions and methodologies. The allowed adjustments for transportation and quality as outlined in the June 2000 Rule also will change somewhat, and some additional corresponding analysis is included.

In valuing production not sold under an arm's-length contract, the June 2000 Rule employed the spot market index price of the oil most closely associated with the production, with appropriate adjustments for location and quality. The timing of the spot market that corresponds with the production month was the quoted average from an MMS-approved publication from the 26th day of the month prior to the current production month to the 25th day of the current production month. For example, December royalty production was valued using the spot quotes for the oil most similar in location and quality from November 26th through December 25th.

The new methodology for the “Rest of the Country,” as discussed earlier, is the NYMEX Calendar Month Average daily settlement price with the roll and a quality and location differential. This method uses a trading month quality and location differential (found in MMS-approved publications and based on spot price quotes) applied to the average of the daily NYMEX prices, excluding weekends and holidays, during the production month for deliveries during the prompt month as defined in this rule. For example, for the month of December, assume a producer seeks to value production whose characteristics are closely related to Light Louisiana Sweet (LLS) crude oil. The grade differential established over the period October 26 through November 25 will be applied to the average of the daily NYMEX prompt month prices published for each day in the month of December. The grade differential is the WTI spot price for the period October 26-November 25 less the LLS spot price for the same period. Assuming the WTI value is $29.00 per barrel and the LLS value is $28.00 per barrel, the differential is $1.00 per barrel.

The forward roll is added to the calendar month average NYMEX value and is determined by adding 2/3 of the difference between the average daily NYMEX settlement prices for deliveries during the prompt month that is the same as the month of production and the average of those prices for deliveries during the next succeeding month plus 1/3 of the difference between the average of the daily NYMEX settlement prices for deliveries during the prompt month that is the same as the month of production and the average of those prices for deliveries during the second month following the month of production as specifically defined in the rule. Assuming the roll calculation results in a value of +$.30 per barrel, the calculated royalty value, assuming the NYMEX calendar month average price is $29.50 per barrel, is $28.80 per barrel (including both the roll and the differential). It is calculated as follows for all royalty production not disposed of at arm's length in the month of December:

We compared prices under NYMEX adjusted for the roll and the grade differential discussed above with prices calculated under the June 2000 Rule based on spot prices at each of the market centers applicable in the “Rest of the Country”— e.g. , Midland, Texas; St. James, Louisiana; and Empire, Louisiana. We found that over the period April 2000 through December 2002, or the period from approximately when the June 2000 Rule became effective through the end of calendar year 2002, the adjusted average monthly NYMEX price with the roll (adjusted from Cushing to each of these market centers) exceeded the monthly average spot prices for these market centers by an average of $.31 per barrel. We also performed this comparison back to the beginning of 1999 and found that the difference is slightly higher over the entire period January 1999 through December 2002. We chose the $.31 per barrel increment as the basis for our royalty impact estimates.

In estimating the impact of a change to NYMEX valuation, we made several assumptions in addition to the $.31 per barrel increment. We assumed that 50 percent of all Federal barrels would be valued under the non-arm's-length provisions, that the offshore royalty rate is one-sixth and the onshore royalty rate is one-eighth, and that volumes taken in kind would vary from 50,000 barrels per day to 180,000 barrels per day.

The 50,000 includes only barrels currently taken in the small refiner program, and the 180,000 includes small refiner volumes plus barrels currently going to the Strategic Petroleum Reserve. We then subtracted the volumes taken in kind and applied the $.31 per barrel figure to the remaining barrels assumed to be valued under the non-arm's-length provisions. We estimate increased costs to industry in the form of higher royalty payments of $4,303,913 to $11,658,663 per year.

Determining the impact of the final rule from the June 2000 Rule methodology for valuing oil not sold at arm's length in the Rocky Mountain Region is difficult. This is largely because there is no prescribed formula currently in place, but rather a series of benchmark procedures that lessees apply on an individual basis. The new methodology for the third benchmark is the NYMEX Calendar Month Average daily settlement price with appropriate differentials, but without the roll discussed above. This method uses a trading month differential (found in MMS-approved publications and based on spot price quotes) applied to the average of the daily NYMEX prices, excluding weekends and holidays, published for each day during the production month for deliveries during the prompt month as defined in this rule. This methodology will apply only if the lessee has no MMS-approved tendering program and elects to value production based on NYMEX prices rather than the volume-weighted average of gross proceeds received under arm's-length contracts. Where the third benchmark applies, valuation of Wyoming Sweet will rely on differentials between WTI at Cushing and the lease. For example, for the month of December, assume a producer seeks to value production for Wyoming Sweet crude oil. The grade differential established over the period October 26 through November 25 will be applied to the average of the daily NYMEX prompt month prices published for each day in the month of December. For December production, the average value of Wyoming Sweet against WTI determined October 26th through November 25th applied to the NYMEX calendar month average becomes the basis of value:

We compared prices under NYMEX adjusted for the grade differential (without the roll) with prices calculated under the existing rule based on spot prices at Cushing. We used the same time period, April 2000 through December 2002, as we did for the “Rest of the Country.” Over this period, the monthly average spot price exceeded the adjusted average monthly NYMEX price by about $.06 per barrel. We also performed this comparison back to the beginning of 1999 and found that the adjusted NYMEX price exceeded the monthly average spot price by about $.02 per barrel over the entire period January 1999 through December 2002. To illustrate the highest potential cost to industry, we chose the $.02 per barrel increment of NYMEX over spot as the basis for our benefit and cost estimates.

In estimating the impact of a change to NYMEX valuation, we made several assumptions in addition to the $.02 per barrel increment. First, we assumed that 50 percent of all Federal barrels would be valued under the non-arm's-length provisions. Then, because there are four non-arm's-length benchmarks in the Rocky Mountain Region and only the third benchmark will rely on NYMEX prices, we assumed that 25 percent of all Federal barrels that are valued under the benchmarks will be valued under each of the benchmarks; therefore, only 25 percent of those barrels will rely on NYMEX prices. (None of the other three benchmarks will change.) Consequently, 12 1/2 percent of all Federal barrels will be valued under the third non-arm's-length benchmark. We also assumed that the royalty rate is one-eighth, and that volumes taken in kind (these are from Wyoming only) would be about 4,000 barrels per day. We then subtracted the volumes taken in kind and applied the $.02 per barrel figure to the remaining barrels assumed to be valued under the non-arm's-length provisions. We estimate higher royalty payments to be about $11,738 per year.

(2) Expected Royalty Decrease—Increased Allowable Costs.

(i) Increase Rate of Return in non-arm's-length situations from 1 times the Standard and Poor's BBB bond rate to 1.3 times the Standard and Poor's BBB bond rate.

MMS does not routinely collect detailed allowance information, such as affiliation between the payor and transporter or the cost components used to calculate a non-arm's-length allowance rate. Therefore, we had to make several broad assumptions in order to estimate the impact of this rule. We assumed that 50 percent of all allowances are non-arm's-length. We also assumed that over the life of the pipeline, allowance rates are made up of 1/3 rate of return on undepreciated capital investment, 1/3 depreciation expenses, and 1/3 operation, maintenance and overhead expenses. During FY 2001, royalty payors reported transportation allowance deductions of $45,363,394 for Federal oil production. Based on our assumptions, if 1/3 of the allowance deductions are non-arm's-length, then $22,681,697 of the total allowances fell in this category. If 1/3 of the allowance is made up of the rate of return, this equals $7,560,565. Therefore, we estimate that increasing the basis for the rate of return by 30 percent could result in additional allowance deductions of $2,268,169 ($7,560,565 × .30). Our review of transportation allowances deducted from oil royalties in the States of Wyoming, Colorado, Utah, and New Mexico revealed minimal amounts reported for onshore leases. Therefore, we assumed that virtually this entire increase will impact offshore royalties only.

(ii) Line Loss as a component of a non-arm's-length transportation allowance.

For offshore production, the estimate is based on the total offshore oil royalties for FY 2001 of $2,069,450,791. We assumed that 50 percent of all allowances are non-arm's-length, and that oil pipeline losses are 0.2 percent of the volume of the production. Therefore, before making the further adjustments discussed below, we estimated this change could result in additional transportation allowances of $2,069,451 per year ($2,069,450,791 × .50 × .002). For onshore production, we used total onshore oil royalties for FY 2001 of $252,575,890. We assumed that 50 percent of all allowances are non-arm's-length, and that oil pipeline losses are 0.2 percent of the volume of the production. Therefore, before making the further adjustments discussed below, we estimated this change could result in additional transportation allowances of $252,576 per year ($252,575,890 × .50 × .002).

We also recognize that substantial volumes of offshore production are taken in kind and are not subject to the regulations regarding transportation. We estimated that between 50,000 barrels of oil per day (BOPD) and 180,000 BOPD may be taken in kind. The wide variance in this estimate is caused by the approximately 130,000 BOPD which may be taken in kind and placed into the Strategic Petroleum Reserve. Based on daily offshore Federal royalty share of 222,100 BOPD, the amount of oil transportation subject to these regulations could range from a high of 77 percent of the royalty share of production to a low of 19 percent of the royalty share of production. [(222,100 − 50,000) / 222,100 = 77 percent; (222,100 − 180,000) / 222,100 = 19 percent]. Applying the high and low range factors for oil taken in kind, this could result in additional transportation allowance deductions for offshore leases ranging from $393,196 ($2,069,451 × 19 percent) to $1,593,477 ($2,069,451 × 77 percent) per year.

(iii) Quality Bank Administration Fees as a component of an arm's-length and a non-arm's-length transportation allowance.

For offshore oil production, our estimate is based on the total offshore oil royalty volume for FY 2001 of 81,066,567 barrels. We also estimated that quality bank administrative fees were $.002 per barrel. We estimated that allowing such fees could result in additional offshore transportation allowances of $162,133 (81,066,567 × $.002) per year before considering the effects of oil taken in kind. Applying the high and low range factors for oil taken in kind, this could result in additional transportation allowance deductions ranging from $30,805 ($162,133 × 19 percent) to $124,842 ($162,133 × 77 percent) per year. For onshore production, we used the onshore royalty volume for FY 2001 of 9,496,181 barrels. Allowing such fees could result in additional allowances of $18,992 (9,496,181 × $.002).

(iv) Line Fill as a component of an arm's-length and a non-arm's-length transportation allowance.

For offshore oil production, our estimate is based on the total offshore oil royalty volume for FY 2001 of 81,066,567 barrels. We estimated that line fill costs ranged from $.02 to $.05 per barrel. We then estimated that this factor could result in additional transportation allowances of $1,621,331 (81,066,567 × $.02) to $4,053,328 (81,066,567 × $.05) before considering the effects of oil taken in kind. Applying the high and low range factors for oil taken in kind, this could result in additional offshore transportation allowance deductions ranging from $308,052 ($1,621,331 × 19 percent) to $3,121,062 ($4,053,328 × 77 percent) per year. For onshore production, we estimated that this factor could result in additional transportation allowances of $189,924 (9,496,181 × $.02) to $474,809 (9,496,181 × $.05).

(v) The cost of a Letter of Credit as a component of an arm's-length transportation allowance.

Again, we assumed that 50 percent of allowances are at arm's length. We again based the estimate on the total offshore oil royalty volume for FY 2001 of 81,066,567 barrels. We estimated that letter of credit costs ranged from $.02 to $.05 per barrel. We thus estimated that this could result in additional transportation allowances of $810,666 (81,066,567 × $.02 × .5) to $2,026,664 (81,066,567 × $.05 × .5). Applying the high and low range factors for oil taken in kind, this could result in additional offshore transportation allowance deductions ranging from $154,027 ($810,666 × 19 percent) to $1,560,531 ($2,026,664 × 77 percent) per year. For onshore production, we estimated that this factor could result in additional transportation allowances of $94,962 (9,496,181 × $.02 × .5) to $237,405 (9,496,181 × $.05 × .5).

(vi) Royalty Reduction Summary, items (i)-(v)—Additional Deductions for Allowances.

We estimate that between $3,154,249 and $8,668,081 in additional transportation allowances could be deducted in determining Outer Continental Shelf lease royalties based on an increased rate of return and permissibility of line losses for non-arm's-length allowances; permissibility of quality bank administration fees and line fill costs for both arm's-length and non-arm's-length allowances; and permissibility of letter of credit costs for arm's-length allowances. Also, for these same items, we estimate that between $556,454 and $983,782 of additional transportation allowances may be deducted in determining onshore Federal lease royalties.

(3) Net Expected Change in Royalty Payments from Industry.

We estimate a net expected change in royalty payments from industry of $1,311,743. That amount is calculated by the sum of the Royalty Increase for the Rocky Mountain Region ($11,738) plus the mid point value of the “Rest of the Country” ($7,981,288) plus the mid point value of the Royalty Decrease for Increased Allowable Costs (−$6,681,283).

(4) Expected Range of Royalty Impact on Industry.

We estimate the expected range of the royalty impact on industry is −$5,336,212 to $7,959,698. The low end of that range is the sum of the Royalty Increase for the Rocky Mountain Region ($11,738) plus the lowest impact for the “Rest of the Country” ($4,303,913) plus the highest impact of the Royalty Decrease for Increased Allowable Costs (−$9,651,863). The high end of that range is the sum of the Royalty Increase for the Rocky Mountain Region ($11,738) plus the highest impact for the “Rest of the Country” ($11,658,663) plus the lowest impact of the Royalty Decrease for Increased Allowable Costs (−$3,710,703). For example, $11,738 + $4,303,913 −$9,651,863 = −$5,336,212 is the low range impact for Industry.

(5) Cost—Administrative.

(i) System Modifications to reflect NYMEX pricing basis.

We believe that any increases in administrative costs related to the changes in non-arm's-length valuation procedures will be minimal. These procedures involve NYMEX prices, which are readily available at no cost from numerous sources. They also involve determination of spot price differentials at various locations. We believe that anyone who used the non-arm's-length provisions of the June 2000 Rule already has access to the needed publications and exchange agreements. For some lessees, modification of computer programs related to royalty calculation and payment may be needed. We think that only about 50 of the approximately 800 Federal oil royalty payors will use the non-arm's-length provisions and thus might need to do some reprogramming. Using an estimated cost of $5,000 for each such payor to do its reprogramming, the added one-time cost will be $250,000.

(ii) Location Differential under § 206.112(c)(1).

We anticipate that, in a very few cases, companies may request approval of proposed differentials when less than 20 percent of the crude oil is transported or exchanged from the lease. These requests must: (1) Be in writing; (2) identify specifically all leases involved, the record title or operating rights owners of those leases, and the designees for those leases; (3) completely explain all relevant facts, including informing MMS of any changes to relevant facts that occur before MMS responds to a request; (4) include copies of all relevant documents; (5) provide the company's analysis of the issue(s), including citations to all relevant precedents (including adverse precedents); and (6) suggest the proposed differential. We estimate that there will be two such requests annually. We estimate the annual burden for these requests will be 660 hours (2 x 330), including recordkeeping. Based on a per-hour cost of $50, we estimate the cost to industry is $33,000.

This rule will not impose any additional burden on local governments. MMS estimates that States impacted by this rule may experience changes in royalty collections as indicated below:

(1) Expected Royalty Increase—From Use of NYMEX Pricing.

States receiving revenues from offshore OCS Section 8(g) leases will share in a portion of the estimated additional $4,303,913 to $11,658,663 in royalties that will accrue annually from the “Rest of the Country,” under this valuation methodology. Based on each OCS Section 8(g) State's share of total offshore royalties for FY 2001 and their OCS Section 8(g) disbursement percentage, we estimate the States' OCS Section 8(g) share to be between $26,363 and $71,119. Onshore States will receive additional revenue of $317,682.

For the Rocky Mountain Region, we estimate an increase in the States' share of royalty revenues of about $5,869 per year.

(2) Expected Royalty Decrease—Allowable Costs: Increased Rate of Return and Inclusions of Line Loss, Quality Bank Administration Fees, Line Fill and Letters of Credit as components of allowance costs.

(3) Net Expected Change to Royalty Payments to States.

We estimate that the net expected change to royalty payments to the States is −$55,553. That amount is calculated by the sum of the Royalty Increase for the Rocky Mountain Region ($5,869) plus the mid point value of the “Rest of the Country” ($366,423) plus the mid point value of the Royalty Decrease for Increased Allowable Costs (−$42,786 for OCS 8(g) States and −$385,059 for all States).

(4) Expected Range of Royalty Impact on States.

We estimate the expected range of the royalty impact on States would be −$204,773 to $93,628. The low end of the range is the sum of the Royalty Increase for the Rocky Mountain Region ($5,869) plus the lowest impact for the “Rest of the Country” ($344,045) plus the highest impact of the Royalty Decrease for Increased Allowable Costs (−$62,756 and −$491,891). The high end of the range is the sum of the Royalty Increase for the Rocky Mountain Region ($5,869) plus the highest impact for the “Rest of the Country” ($388,801) plus the lowest impact of the Royalty Decrease for Increased Allowable Costs (−$22,815 and −$278,227).

Because many of the changes in this rule are technical clarifications and others are relatively minor changes to the valuation mechanisms, the impacts to the Federal Government should be minimal, especially in administration.

(1) Expected Royalty Increase—from use of NYMEX pricing.

The Federal Government will receive an estimated $4,303,913 to $11,658,663 in royalties each year from the “Rest of the Country,” of which affected States will receive a portion. We estimate the Federal share of offshore royalties to be between $3,642,186 and $10,952,180 and the Federal share of onshore royalties at $317,682. For the Rocky Mountain Region, we estimate an increase in royalty revenues of about $5,869 per year of the estimated additional $11,738 in royalties accruing to production in the affected States.

(2) Expected Royalty Decrease—Allowable Costs: Increased Rate of Return and Inclusions of Line Loss, Quality Bank Administration Fees, Line Fill and Letters of Credit as components of allowance costs.

We estimate that between $3,710,703 and $9,651,863 per year in additional transportation allowances may be deducted in calculating Federal royalties. Of that, between $22,815 and $62,756 is attributed to OCS 8(g) States and between $278,227 and $491,891 per year is attributed to all other States.

(3) Net Expected Change in Royalty Payments to the Federal Government.

We estimate a net expected change in royalty payments to the Federal Government of $1,367,296. That amount is calculated by the sum of the Royalty Increase for the Rocky Mountain Region ($5,869) plus the mid point value of the “Rest of the Country” ($7,614,865) plus the mid point value of the Royalty Decrease for Increased Allowable Costs (−$6,253,438).

(4) Expected Range of Royalty Impact on the Federal Government.

We estimate the expected range of the royalty impact on the Federal Government is −$5,131,479 to $7,866,070. The low end of that range is the sum of the Royalty Increase for the Rocky Mountain Region ($5,869) plus the lowest impact for the “Rest of the Country” ($3,959,868) plus the highest impact of the Royalty Decrease for Increased Allowable Costs (−$9,097,216). The high end of that range is the sum of the Royalty Increase for the Rocky Mountain Region ($5,869) plus the highest impact for the “Rest of the Country” ($11,269,862) plus the lowest impact of the Royalty Decrease for Increased Allowable Costs (−$3,409,661).

(5) Cost—Location Differential under § 206.112(c).

We anticipate that companies may request approval of proposed differentials when they transport or exchange less than 20 percent of the crude oil from the lease. In processing these requests, MMS must: (1) Respond in writing; (2) verify for all leases involved, the record title or operating rights owners of those leases, and the designees for those leases; (3) completely explain all relevant facts; (4) obtain copies of all relevant documents; (5) analyze the issue(s), including citations to all relevant precedents (including adverse precedents); and (6) potentially defend our determination. For the above written requests, we estimate that there will be two responses annually. We estimate that the annual burden for these requests is 660 hours (2 × 330), including recordkeeping. Based on a per-hour cost of $50, we estimate the cost to the Federal Government is $33,000.

In the table, a negative number means a reduction in payment or receipt of royalties or a reduction in costs. A positive number means an increase in payment or receipt of royalties or an increase in costs. For the purpose of calculation of the net expected change in royalty impact, we assumed that the average for royalty increases or decreases will be the midpoint of this range.

Summary of Comments: One State suggested that the revenue impacts that would result constitute a significant regulatory action under Executive Order 12866.

MMS Response: This rule does constitute a significant regulatory action under Executive Order 12866, but not because of the potential revenue impacts. It constitutes a significant regulatory action because it may raise novel legal or policy issues.

In accordance with the criteria in Executive Order 12866, this rule is not an economically significant regulatory action, as it does not exceed the $100 million threshold. The Office of Management and Budget has made the determination under Executive Order 12866 to review this rule because it raises novel legal or policy issues.

1. This rule will not have an annual effect of $100 million or adversely affect an economic sector, productivity, jobs, the environment, or other units of Government. MMS evaluated the costs of this rule, and estimates that industry might incur additional administrative costs of approximately $283,000 in the first year of implementation, and $33,000 in additional administrative costs in subsequent years. The Federal Government might incur $33,000 each year in additional administrative costs.

2. This rule will not create inconsistencies with other agencies' actions.

3. This rule will not materially affect entitlements, grants, user fees, loan programs, or the rights and obligations of their recipients.

4. This rule will raise novel legal or policy issues.

The Department of the Interior certifies this rule will not have a significant economic effect on a substantial number of small entities as defined under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). The rule applies primarily to large, integrated producers who either refine their oil or sell their oil to affiliated marketers. Small producers will continue to pay their royalties based on the proceeds they receive for the sale of their oil to third parties as they have done since 1988.

Your comments are important. The Small Business and Agricultural Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards were established to receive comments from small businesses about Federal agency enforcement actions. The Ombudsman will annually evaluate the enforcement activities and rate each agency's responsiveness to small business. If you wish to comment on the enforcement actions in this rule, call 1-800-734-3247. You may comment to the Small Business Administration without fear of retaliation. Disciplinary action for retaliation by an MMS employee may include suspension or termination from employment with the Department of the Interior.

This rule is not a major rule under 5 U.S.C. 804(2), the Small Business Regulatory Enforcement Fairness Act. This rule:

1. Does not have an annual effect on the economy of $100 million or more. See the above Analysis titled “Summary of Costs and Royalty Impacts.”

2. Will not cause a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions.

3. Does not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises.

In accordance with the Unfunded Mandates Reform Act (2 U.S.C. 1501 et seq. ):

1. This rule will not significantly or uniquely affect small governments. Therefore, a Small Government Agency Plan is not required.

2. This rule will not produce a Federal mandate of $100 million or greater in any year; i.e. , it is not a significant regulatory action under the Unfunded Mandates Reform Act. The analysis prepared for Executive Order 12866 will meet the requirements of the Unfunded Mandates Reform Act. See the above Analysis titled “Summary of Costs and Royalty Impacts.”

In accordance with Executive Order 12630, this rule does not have significant takings implications. A takings implication assessment is not required.

In accordance with Executive Order 13132, this rule does not have federalism implications. A federalism assessment is not required. It will not substantially and directly affect the relationship between the Federal and State governments. The management of Federal leases is the responsibility of the Secretary of the Interior. Royalties collected from Federal leases are shared with State governments on a percentage basis as prescribed by law. This rule will not alter any lease management or royalty sharing provisions. It will determine the value of production for royalty computation purposes only. This rule will not impose costs on States or localities.

In accordance with Executive Order 12988, the Office of the Solicitor has determined that this rule will not unduly burden the judicial system and does not meet the requirements of §§ 3(a) and 3(b)(2) of the Order.

The Office of Management and Budget (OMB) has approved a new collection of information contained in this rule, entitled 30 CFR 206, subpart C, Federal Oil under 44 U.S.C. 3501 et seq. , and assigned control number 1010-0157. The total hour burden currently approved under 1010-0157 is 1,608. The information collection applies only to §§ 206.103(b)(4), 206.112(a)(1)(ii), 206.112(b)(3), and 210.53(a) and (b) of this rule and the burden hours are allocated equally to each section. OMB approval of this collection expires October 31, 2006. We received comments from industry, but there were no changes in the information collection from the proposed rule to the final rule. We will use the information collected to ensure that proper royalty is paid on oil produced from Federal onshore and offshore leases.

Submit your comments on the accuracy of this burden estimate or suggestions on reducing the burden to Sharron L. Gebhardt, Lead Regulatory Specialist, Chief of Staff Office, Minerals Revenue Management, MMS, PO Box 25165, MS 320B2, Denver, Colorado 80225. If you use an overnight courier service, the MMS courier address is Building 85, Room A-614, Denver Federal Center, Denver, Colorado 80225. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.

This rule deals with financial matters and has no direct effect on Minerals Management Service decisions on environmental activities. Pursuant to the Department of the Interior Departmental Manual (DM), 516 DM 2.3A (2), § 1.10 of 516 DM 2, Appendix 1 excludes from documentation in an environmental assessment or impact statement “policies, directives, regulations and guidelines of an administrative, financial, legal, technical or procedural nature; or the environmental effects of which are too broad, speculative or conjectural to lend themselves to meaningful analysis and will be subject later to the NEPA process, either collectively or case-by-case.” Section 1.3 of the same appendix clarifies that royalties and audits are considered to be routine financial transactions that are subject to categorical exclusion from the NEPA process.

In accordance with the President's memorandum of April 29, 1994, “Government-to-Government Relations with Native American Tribal Governments” (59 FR 22951) and DOI DM 512 DM 2, we have evaluated potential effects on federally recognized Indian tribes. This rule does not apply to Indian leases. However, these changes may have an impact on Indian leases. As such, by Federal Register notice (68 FR 7086) dated February 12, 2003, MMS reopened the comment period on the January 2000 supplementary proposed rule for valuing crude oil produced from Indian leases. The comment period closed on April 14, 2003. MMS will determine how to proceed with that rulemaking based on comments received, taking into account our trust responsibilities and safeguarding the competitiveness of Indian leases.

In accordance with Executive Order 13211, this regulation does not have a significant adverse effect on the Nation's energy supply, distribution, or use. The changes better reflect the way industry accounts internally for its oil valuation and provides a number of technical clarifications. None of these changes should impact significantly the way industry does business, and accordingly should not affect their approach to energy development or marketing. Nor does the rule otherwise impact energy supply, distribution, or use.

In accordance with Executive Order 13175, this rule does not have tribal implications that impose substantial direct compliance costs on Indian tribal governments.

Executive Order 12866 requires each agency to write regulations that are easy to understand. We invite your comments on how to make this rule easier to understand, including answers to questions such as the following:

(1) Are the requirements in the rule clearly stated?

(2) Does the rule contain technical language or jargon that interferes with its clarity?

(3) Does the format of the rule (grouping and order of sections, use of headings, paragraphing, etc.) aid or reduce its clarity?

(4) Would the rule be easier to understand if it were divided into more (but shorter) sections? A “section” appears in bold type and is preceded by the symbol “§ ” and a numbered heading; for example, § 204.200.

(5) What is the purpose of this part?

(6) Is the description of the rule in the “Supplementary Information” section of the preamble helpful in understanding this rule?

(7) What else could we do to make the rule easier to understand?

Send a copy of any comments that concern how we could make this rule easier to understand to: Office of Regulatory Affairs, Department of the Interior, Room 7229, 1849 C Street NW., Washington, DC 20240.

Regulatory History

On May 14, 2003, we published a notice of proposed rulemaking (NPRM) entitled “Update of Rules on Aids to Navigation Affecting Buoys, Sound Signals, International Rules at Sea, Communications Procedures, and Large Navigational Buoys” in the Federal Register (68 FR 25855). We also published a correction of a web address on May 22, 2003 (68 FR 28052). We are adopting that proposed rule as final with the exception of changes described in the Discussion of Comments and Changes and Changes not related to comments sections below.

We received two letters commenting on the proposed rule. No public hearing was requested and none was held.

The Coast Guard's Office of Short-Range Aids to Navigation frequently reviews the rules on Aids to Navigation. During our most recent review, we found that many rules do not reflect current technologies and practices. For example, what we formerly called “fog signals,” we now call “sound signals.” Also, we want to inform users that certain safety information, such as “Notice to Mariners” can now be found on the World Wide Web. Therefore, we updated our aids to navigation rules and in the process attempted to eliminate ambiguous, confusing, or gender-specific language.

From 2 individual commenters we received 15 specific comments to this rule. These comments and our responses follow:

Comment 1. Given the number of security zones that have been recently established, and the number of additional security zones that are likely to be established, the Coast Guard should establish a “special mark” or “regulatory mark” with unique coloration and light characteristics for delimiting security zones.

Response: This is already covered under paragraph (a)(2) of § 62.33, Information and regulatory marks. It specifies that vertical diamond-shape marks featuring a centered cross be used to indicate that vessels are excluded from an area. The Coast Guard, however, will not mark security zones as a general practice.

Comment 2. The Coast Guard should establish additional means (telephone, facsimile, e-mail, etc.) for receiving reports of defects or discrepancies in navigational aids and § 62.65(c)(2) should be revised accordingly.

Response: In the preamble of our NPRM, we stated there were many ways to reach the Coast Guard. Indeed, this was our primary reason for removing a collect-call option from § 62.65(c)(2). (68 FR 25856, May 14, 2003). The text of our proposed rule, however, did not convey this message clearly. To make it clear that we invite people to report aids to navigation defects or discrepancies to us by radio, or other means—including telephone, e-mail, or facsimile, we have revised § 62.65(c)(2) and eliminated the use of the undefined “commercial communications facilities.”

Comment 3. We understand that the Coast Guard will be proposing new rules to, among other things, mandate certain vessels be equipped with Automatic Identification Systems (AIS) as aids to navigation. It would appear appropriate to consider allowing certain offshore installations and shore facilities to be equipped to transmit AIS information ( e.g. , temporary, or newly established security zones). When the AIS regulations are proposed, the Coast Guard should consider the need to revise § 66.01-1(d) to allow such installations and facilities to apply for authorization to transmit AIS information.

Response: This suggestion is outside the scope of this rulemaking and therefore we did not change the rule based on this comment. In response to a notice and request for comments published July 1, 2003 (68 FR 39369), the commenter has sent the same comment to an AIS docket (see item number 2003-14878-50) where it will be considered.

Comment 4. The third sentence in § 66.10-15(b) should be revised by removing the word “a” in the phrase “looking upstream or toward the head of a navigation”.

Response: We agree and have revised § 66.10-15(b) accordingly.

Comment 5. Further guidance should be provided in § 67.01-5(a) regarding the applicability of the “structures” requirements to mobile offshore drilling units (MODUs). The list of examples should be expanded to include “self-elevating MODUs elevated on location” and “floating MODUs when attached to the seabed by a marine drilling riser.” While there is consistency in the application of the term “structure” to these units in the Gulf of Mexico, there has been historic inconsistency in other regions. It would be helpful if consistency could be achieved at this time, through rulemaking, while no such units are operating in areas of U.S. jurisdiction outside the Gulf of Mexico.

Response: We agree that the definition of “structures” should include a reference to MODUs and we have revised § 67.01-5(a) accordingly.

Comment 6. The Coast Guard should carefully differentiate between the actual “range” of sound signals and the “approved,” “rated,” or “nominal” range of such signals in its regulatory requirements. The actual range of such devices is dependent upon atmospheric conditions and cannot be assured. Regulations requiring sound signals should do so by referring to an approved, rated, or nominal range. Regulations where this change should be made include §§ 67.10-1(c), 67.10-5(a), 67.10-10(a)(3), 67.10-20, 67.10-25(a)(3), 67.20-10, 67.25-10, and 67.30-10.

Response: With the exception of § 67.10-20, Sound signal tests, we agree. In this final rule, we have changed “range” to “rated range” in §§ 67.10-1(c), 67.10-5(a), 67.10-10(a)(3), 67.10-25(a)(3), 67.20-10, 67.25-10, and 67.30-10. Section 67.10-20, however, dictates how the test will be conducted to verify that the signal performs at the rated range. Thus, we did not change the wording of § 67.10-20 based on this comment.

Comment 7. Section 67.10-5(b) should be revised to read: “Be located on the structure so that the sound signal produced is audible over 360 degrees in a horizontal plane at all distances up to and including the required range.”

Response: We did not make any changes in the rule based on this comment. Wording nearly identical to the proposed language already appears in § 67.10-5(a) and we see no need to change the wording in paragraph (b), which contains a height-requirement for the installation of the sound signal.

Comment 8. Section 67.10-20(a)(2) should be revised to allow the Coast Guard to accept the use of sound level meters other than the ones that it supplies by referencing an appropriate industry specification for a meter that meets or exceeds the standards of the meter used by the Coast Guard.

Response: We appreciate this suggested change in § 67.10-20, but it is beyond the scope of this rulemaking, which is limited to updating existing rules to reflect current practices and making these regulations gender-neutral and easier to understand. Therefore, we did not change the rule based on this comment.

Comment 9. Section 67.10-25(a)(1) should be revised to eliminate “his.”

Response: We agree. In the final rule we have changed “his” in § 67.10-25(a)(1) to “Requestor's”.

Comment 10. Revise § 67.10-25(b) to provide guidance regarding how “all expenses of the U.S. Government in sending a Coast Guard representative to the test” are to be calculated. Does this include pro-rated salaries, or only additional costs of travel, etc.?

Response: We have revised § 67.10-25(b) to indicate that only costs associated with travel and per diem, and not salary, are chargeable.

Comment 11. It appears that the reference to “Subpart 62.25” in § 67.15-10(a) should be revised to refer to §§ 62.23 to 62.33.

Response: We agree. We have changed it from “Subpart 62.25” to “Subpart B.” (Subpart B includes §§ 62.23 to 62.33.)

Comment 12. With regard to §§ 67.20-5 and 67.25-5(a), the regulatory requirement that “lights shall be of sufficient candlepower as to be visible at a distance of at least five nautical miles 90 percent of the nights of the year” is inappropriate. This language should be replaced by a requirement that lights for a specified range meet specific minimum intensity requirements based upon a desired range. As the requirement is written, specialized studies of historic atmospheric conditions for each light would be required and would need to be continuously revalidated.

Response: Because atmospheric conditions vary by locality, the minimum candlepower needed to meet visibility requirements will also vary. Contact your local District Commander for local guidance. Local candlepower requirements are based upon transmissivity data issued by the National Oceanic and Atmospheric Administration (NOAA).

Comment 13. In § 67.20-5, the cross-reference to § 67.05-1(f) should be corrected because § 67.05-1(f) does not address a maximum height for lights.

Response: While not expressly stated in § 67.05-1(f), maximum height is inferred. The maximum height at which a light could be installed and remain visible up until the mariner is within 50 feet of a structure depends on the vertical divergence of the optic for the installed light. We have revised the last sentence of § 67.20-5 to reflect that vertical divergence will dictate the maximum height as opposed to giving an impression the reader will find a specific maximum height in § 67.05-1(f).

Comment 14. The “3” in § 67.25-10(a)(2)'s phrase “less than 3 provisions of paragraph (b) or (c) of this section” appears to be in error and should be corrected.

Response: This portion of § 67.25-10(a)(2) in the CFR is indeed in error. With the exception of changing “fog signal” to “sound signal,” paragraph (a)(2) should read the same as it did in the final rule published in the Federal Register July 8, 1972, (37 FR 13512, 13513): “Operate the fog signal when the visibility in any direction is less than 3 miles, unless the District Commander establishes a greater or lesser distance of visibility, not to exceed 5 miles, under the provisions of paragraph (b) or (c) of this section.” We have included this amendatory instruction in our final rule.

Comment 15. The Coast Guard should remove the term “nun buoy” from its regulations and internal policies and procedures because, the term is not only “gender-specific,” but also it has religious implications. These buoys are also commonly referred to as “conical buoys” and, in some regions, have historically been referred to as “nut buoys.”

Response: Though we do seek to eliminate references in our rules to one gender to the exclusion of the other, this change would create problems for the boating public. We use the term “nun” to refer to tapered, conical-shaped buoys because they appear, to some, to resemble a nun's habit. This term has long been associated with such buoys both domestically and internationally. Unlike changing “his” to “his or her” in a rule, this request would require changes to nautical charts—can (cylindrical) buoys are indicated on charts by the letter “c” and “nun” buoys by the letter “n”. Changing “nun” to “conical” would remove a means of identifying the aid as charted, and the term “nut buoy” is not commonly known.

In addition to revisions based on comments from the public, we made a few other changes. We changed our references to the National Imagery and Mapping Agency in notes to §§ 72.01-10 and 72.05-10 to reflect that agency's new name: the National Geospatial-Intelligence Agency. We also updated the citations for parts 62, 66, 67, and 72.

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 Homeland Security.

We expect the economic impact of this rule to be so minimal that a full Regulatory Evaluation under the regulatory policies and procedures of DHS 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. This rule will update technical information to reflect current practices and to rewrite some sections for clarity.

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

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 rule so that they can better evaluate its effects on them and participate in the rulemaking. If the rule affects your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please consult Dan Andrusiak, Project Manager, Office of Short-Range Aids to Navigation (OPN), Coast Guard, telephone 202-267-0327 (e-mail: dandrusiak@comdt.uscg.mil ). 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).

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Public Law 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.

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). You are not required to respond to a collection of information unless it displays a currently valid OMB control number.

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 an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

This rule will not affect 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. The Administrator of the Office of Information and Regulatory Affairs has not designated it as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211.

We have analyzed this rule under Commandant Instruction M16475.lD, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA)(42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this rule is categorically excluded, under figure 2-1, paragraph (34)(a), of the Instruction, from further environmental documentation because it is editorial in nature—updating rules to reflect current practices, and to make them both gender-neutral and easier to understand. An “Environmental Analysis Check List” and a “Categorical Exclusion Determination” are available in the docket where indicated under ADDRESSES .

The Agency included in the final rule a list of those who may be potentially affected by this action. If you have questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT .

In addition to using EDOCKET ( http://www.epa.gov/edocket/ ), 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 version of 40 CFR part 180 is available at E-CFR Beta Site Two at http://www.gpoaccess.gov/ecfr/.

FR Doc. 04-6933 published in the Federal Register of March 31, 2004 (69 FR 16796) (FRL-7347-7) is corrected as follows:

On page 16798, second column, first full paragraph under Unit VII., paragraph 1., line 17, the compound identified as “hexadecanoic acid” is corrected to read “hydroxydecanoic acid.”

Section 553 of the Administrative Procedure Act (APA), 5 U.S.C. 553(b)(B), provides that, when an Agency for good cause finds that notice and public procedure are impracticable, unnecessary or contrary to the public interest, the agency may issue a final rule without providing notice and an opportunity for public comment. EPA has determined that there is good cause for making today's technical correction final without prior proposal and opportunity for comment, because EPA is merely correcting a typographical error in the previously published final rule. EPA finds that this constitutes good cause under 5 U.S.C. 553(b)(B).

This action implements a technical amendment to a Federal Register document which has no substantive impact on the undelying regulations, and it does not otherwise impose or amend any requirements. As such, the Office of Management and Budget (OMB) has determined that a technical amendment is not a “significant regulatory action” subject to review by OMB under Executive Order 12866, entitled Regulatory Planning and Review (58 FR 51735, October 4, 1993). Because this technical amendment has been exempted from review under Executive Order 12866 due to its lack of significance, this technical amendment is not subject to Executive Order 13211, entitled Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use (66 FR 28355, May 22, 2001). This technical amendment 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 under 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 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). Since the action does not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq .) do not apply. 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 action does not alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of FFDCA section 408(n)(4). For these same reasons, the Agency has determined that this technical amendment 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 technical amendment 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 technical amendment.

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 technical amendment 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 technical amendment in the Federal Register . This final rule is not a “major rule” as defined by 5 U.S.C. 804(2).

I. Background

Following the Clean Air Act Amendments (CAA) of 1977, EPA published a list of areas identified by the States as nonattainment, attainment, or unclassifiable for SO 2 . The 1990 CAA Amendments provided for designations of areas based on their status immediately before enactment of the 1990 Amendments. For example, any area previously designated as not attaining the primary or secondary NAAQS for SO 2 as of the date of enactment of the 1990 Amendments, was designated nonattainment for SO 2 by operation of law upon enactment, pursuant to section 107(d)(1)(C)(i) of the Act. In addition, any area designated as attainment or unclassifiable (or “cannot be classified”) immediately before the enactment of the 1990 Amendments, was also designated as such upon the enactment of the Amendments pursuant to sections 107(d)(1)(C)(ii) and (iii) of the Act.

As described above, EPA is authorized to initiate the redesignation of additional areas or portions of areas as nonattainment for SO 2 pursuant to section 107(d)(3)(D) of the Act on the basis of air quality data, planning and control considerations, or any other air quality-related considerations the Administrator may deem appropriate. On December 21, 1993 (58 FR 67334), EPA redesignated the City of Weirton, including the Clay and Butler Magisterial Districts of Hancock County, West Virginia to nonattainment for SO 2 based upon monitored values in the Weirton, West Virginia area. This action required the State to submit a SIP revision for the Weirton area by July 20, 1995. On July 21, 1995, EPA received a SIP revision submittal for the Weirton area including the Clay and Butler Magisterial Districts of Hancock County, West Virginia. However, no applicable model was available at the time to handle the intricate topography of the area. Another major concern was the lack of comprehensive local meteorological data that was representative of such a complex terrain. Limited local meteorological data was obtained from the Browns Island meteorological tower operated by the State. EPA commented on the SIP submittal asking the West Virginia Department of Environmental Protection (WVDEP) to consider using a refined air quality model utilizing a new meteorological tower. A 60-meter meteorological tower and acoustical Sound Detection and Ranging (SODAR) were installed in Weirton, West Virginia as part of a Supplemental Environmental Project (SEP) between Weirton Steel Corporation and EPA.

Additional air quality monitors were added to the area surrounding Weirton Steel based on “hot spot” modeling locations identified by EPA. Modeling results indicated major contributors of SO 2 in the local area to be sources located within Weirton Steel Corporation and Wheeling-Pittsburgh Steel Corporation. Modeled attainment of the NAAQS required the drafting of a Consent Order (CO) entered into between Weirton Steel Corporation and the WVDEP, and the modification of a permit for Wheeling-Pittsburgh Steel Corporation issued by WVDEP to set enforceable allowable limits on specific units within each of the facilities.

On December 29, 2003, West Virginia submitted a formal SIP revision for the City of Weirton, including the Clay and Butler Magisterial Districts nonattainment area in Hancock County, West Virginia. The SIP revision consists of an enforceable operating permit for the Wheeling-Pittsburgh Steel Corporation, and an individual CO entered into by and between the State of West Virginia and the Weirton Steel Corporation in Hancock County, West Virginia, establishing SO 2 emission limits for numerous emission points at both facilities. The SIP submittal also contains an air quality dispersion modeling demonstration that indicates that the allowable emission limits will provide for the attainment of the NAAQS for SO 2 in the Weirton area including the Clay and Butler Magisterial Districts. A summary of the essential compliance provisions of the consent order and the operating permit are presented below:

Table 1 summarizes the requirements imposed upon the Weirton Steel Corporation facility to reduce SO 2 :

With regard to the Wheeling-Pittsburgh Steel Corporation's revised permit, as specified in Section B, Other Requirements, the permittee shall comply with all the applicable provisions of West Virginia regulations 45CSR4, 45CSR6, 45CSR10, 45CSR13, 45CSR14, and 45CSR30, provided that the permittee shall comply with any more stringent requirements as may be set forth under Section A, Specific Requirements, of the permit.

The specific requirements of Section A of the operating permit issued by the WVDEP to Wheeling-Pittsburgh Steel Corporation (the permittee), are as follows:

1. Maximum emissions to the atmosphere from the Excess Coke Oven Gas (COG) Flare (Emission Point 1EF) shall not exceed the limits listed in Table 2:

2. In order to maintain compliance with the annual emission limit, the daily flow rate of COG to the excess COG flare (emission point 1EF) shall not exceed 7.1 MM standard cubic feet per day over a thirty-day rolling average. The permittee shall keep daily records of the flow rate of COG to the flare and correct the measured flow rate to a standard temperature of 68°F. Compliance shall be determined using a thirty-day rolling average.

3. Maximum SO 2 emissions to the atmosphere from boilers # 6 and # 7 (emission point) shall not exceed the limits listed in Table 3:

4. Boilers #5, 6 and 7 shall only combust COG.

5. In order to maintain compliance with the SO 2 emission limits specified in provisions #1 and #3 of the permit, the hydrogen sulfide concentration level in the COG stream from the by-products plant shall not exceed 50 grains of hydrogen sulfide per one hundred (100) cubic feet of COG except as noted in provision # 6 below. Compliance with the allowable hydrogen sulfide concentration level shall be based on three (3) hour averaging periods.

6. In order to maintain compliance with the SO 2 emission limits specified in provisions #1 and #3 of the permit while the desulfurization unit is down for scheduled maintenance, the permittee shall calculate and record the hourly sulfur dioxide emission rate of the flare and boilers #6 and #7 over a 24-hour period using the recorded mean hydrogen sulfide concentration level and the recorded standard flow rate for the respective day. These records shall be kept on site for a period of at least five years.

7. The permittee shall be limited to a maximum of twenty-eight (28) days in any calendar year for planned maintenance outages of the desulfurization unit in the coke-by-products recovery plant. No single outage period shall extend beyond 336 hours. The start of a planned maintenance shall begin at the time of the first hour of a three-hour average concentration that is greater than 50 grains of H 2 S/100 cubic feet of COG. The planned maintenance shall be concluded at the time of the first hour of a three-hour average concentration that is less than or equal to 50 grains of H 2 S/100 cubic feet of COG.

8. The permittee shall notify the Director in writing thirty (30) days prior to undertaking any planned maintenance outage of the desulfurization unit, which shall include a detailed explanation of each and every maintenance and/or repair activity intended to be undertaken.

9. The permittee shall select the period for the planned maintenance outage that would prevent, to the greatest extent practicable, any violation of the NAAQS for SO 2 using, at a minimum, air quality dispersion modeling to determine what periods represent the most favorable dispersion of excess SO 2 emissions. To ensure maintenance of the 24-hour NAAQS for SO 2 , a modeling target for SO 2 concentrations for the high 24-hour value of 265 μg/m 3 shall be used to provide a margin of 100 μg/m 3 for other source impacts within the immediate vicinity of the facility.

10. Prior to any planned maintenance outage of the desulfurization unit, the permittee shall prepare and submit an SO 2 mitigation plan to the Director outlining what measures the permittee will employ during the outage to ensure continued attainment of the NAAQS. This plan shall include the employment of all feasible control measures and process changes at the Follansbee facility to reduce SO 2 from the facility, including, but not limited to reduction of the coke production rate at Coke Oven Batteries #1, #2, #3, and #8.

11. No later than thirty (30) days after completing a planned maintenance outage of the desulfurization unit, the permittee shall submit a report identifying the SO 2 impacts associated with the planned outage. The report shall include any deviation of the SO 2 mitigation plan that was submitted for the outage period.

12. Visible emissions from the excess COG flare shall not exceed twenty percent opacity except upon the first eight (8) minutes of starting the thermal oxidizer. After this point, visible emissions from this emission point shall not exceed forty percent opacity for this time period. The permittee shall demonstrate compliance with this condition by taking visual observations using EPA Method 22 once a month. If the permittee observes visible emissions from the flare using Method 22, the permittee shall conduct an additional observation within 24 hours using EPA Method 9 to determine the opacity of the visible emissions being emitted from the flare.

13. The Sinter Plant shall not be operated by the permittee unless the proper permit is obtained from the Director prior to restarting the Sinter Plant.

14. The permittee shall operate and maintain a continuous hydrogen sulfide monitor and recorder for the purpose of monitoring the hydrogen sulfide concentration of the sweetened COG before it is routed to any combustion unit or source utilizing COG. This monitor shall be installed and maintained in accordance with Performance Specification 7 of Appendix B of 40 CFR 60.

15. The permittee shall maintain in accordance with the manufacturer's instructions, flow-measuring devices for the purpose of measuring and recording the amount of COG consumed by the excess COG flare and Boilers #6 and #7. The permittee shall keep daily records of the amount of COG consumed by the above mentioned units. These units shall remain on site for a period of at least 5 years.

16. The permittee shall maintain the automatic re-ignition system in accordance with the manufacturer's specifications.

17. The permittee shall not vent any noncombusted COG into the open atmosphere through the excess COG flare. The permittee shall record the date and time of an event when the flare was not in operation and COG was being emitted to the atmosphere through the excess COG flare. The permittee shall submit a report explaining the event and measures taken to prevent a recurrence of the event. These records shall be maintained on site for a period of at least five years.

18. No later than ninety (90) days after issuance of the permit, the permittee shall continuously maintain a system around the facility to prevent public access to the facility.

19. Compliance with the allowable emission limits of this permit shall be calculated using the appropriate amount of COG combustion by the excess COG flare on a volumetric basis, higher heat value of 568 Btu/cu. ft. for COG, and the following factors: Carbon Monoxide (0.37 lb/MM Btu), Nitrogen oxides (0.068 lb/MM Btu), Particulate Matter (0.012 lb/MM Btu), Particulate Matter 10 microns (0.012 lb/MM Btu), Volatile Organic Compounds (0.14 lb/MM Btu). The permittee shall determine the amount of each pollutant emitted on a monthly basis using the above mentioned information and appropriate engineering calculations. The permittee shall keep a 12-month rolling total for each of the above mentioned pollutants.

20. In the event of unforeseen circumstances beyond the control of the permittee during an approved planned maintenance outage, the permittee may exceed the SO 2 emission limit for the flare as stated in provision # 1 of this permit in order to prevent an anticipated excursion of the NAAQS for SO 2 from occurring in the local area, which includes the city of Weirton, West Virginia. The permittee shall document in the Desulfurization System Outage Report, the unforeseen circumstances, the SO 2 emissions rate calculation, and the modeling results, to document the necessity of the temporary increase in the flare's SO 2 allowable emissions rate.

21. Boiler # 5 (emission point 1D S11) shall not be operated unless the permittee obtains the proper permit from the Director prior to restarting the boiler.

22. The permittee shall fire only natural gas at coke plant boiler # 8 (emission point 1D, S11), unless an applicable permit is obtained from the Director.

23. Sulfur dioxide emissions from pushing Coke Oven Batteries #1, #2, and #3 shall not exceed 10.48 pounds SO 2 per hour (emission point SO5).

24. Sulfur dioxide emissions from pushing at Coke Oven Battery #8 shall not exceed 15.72 pounds per hour of SO 2 (emission point SO6).

25. Compliance with the allowable emission limits established in provisions #23 and #24 of the permit shall be calculated using an emission factor of 0.1078 pounds per tons of coal charged and multiplied by the hourly average tons of coal charged to the batteries each month.

The CAA requires States to submit implementation plans that indicate how each State intends to attain and maintain the NAAQS. The 1977 Amendments established specific requirements for implementation plans in nonattainment areas in part D, sections 171-178. The 1990 Amendments did not change these requirements in any significant way with regard to SO 2 nonattainment areas and existing guidance remains valid. On April 16, 1992 (57 FR 13498), EPA issued “General Preamble for the Implementation of Title I of the Clean Air Act Amendments of 1990” describing EPA's preliminary views on how it intends to interpret various provisions of title I, primarily those concerning revisions required for nonattainment areas. In order to approve the SIP revision, each of the part D requirements must be evaluated and the revision must ensure that: (1) The revised allowable emission limitations demonstrate attainment and maintenance of the NAAQS for SO 2 in the nonattainment area, (2) the emission limitations are clearly enforceable, and (3) that all applicable procedural and substantive requirements of 40 CFR part 51 are met.

West Virginia's SIP revision provides for reasonable available control technology (RACT). The definition for RACT for SO 2 is that control technology which is necessary to attain and maintain the NAAQS. The technology must also be reasonably available considering technological and economic feasibility. Furthermore, RACT must be that technology which will provide for the achievement of the NAAQS within the established statutory time frames. The SIP revision indicates that SO 2 emissions are controlled at the Weirton Steel Corporation and the Wheeling-Pittsburgh Steel Corporation through fuel specifications and operations. The revision establishes allowable SO 2 emission limits and also defines allowable fuel usage for a number of processes. Modeling results indicate that major contributors of SO 2 in the area to be blast furnaces and flares, high-pressure boilers, and Foster-Wheeler boilers at the Weirton Steel facility, along with boilers and coke ovens at the Wheeling-Pittsburgh Steel Corporation. The plan complies with the requirements to implement RACT by providing for immediate attainment of the NAAQS for SO 2 through the emission limits and operating restrictions imposed on specific units within each of the facilities by the consent orders and permits. The SIP revision provides a demonstration that these limits will provide for the attainment of the NAAQS in the nonattainment area. Therefore, West Virginia has ensured that reasonably available control technology, fuel specification and operations modification is required, and that the control technology provides for achievement of the NAAQS.

West Virginia's SIP revision provides for reasonable further progress (RFP). Sulfur dioxide emission reductions that provide for attainment in an area are achieved at a limited, readily-defined number of sources, using control measures that immediately improve air quality. Therefore, RFP for SO 2 nonattainment implementation plans is defined simply as the “adherence to an ambitious compliance plan.” The SIP revision provides for RFP due to the immediate effect of the emission limits required by the plan.

West Virginia's SIP revision provides an adequate emissions inventory from Weirton Steel Corporation and Wheeling-Pittsburgh Steel Corporation, as well as from all relevant sources of SO 2 in the nonattainment area. The revision contains an updated 2001 inventory.

This information is unnecessary because the area has not been identified as a zone for which economic development should be targeted.

The Federal requirements for new source review (NSR) in nonattainment areas are contained in section 172(c)(5). Any new or modified source constructed in the area must comply with a state submitted and federally approved New Source Review Program (NSR). No modifications or installations have been made that detrimentally affect the modeling results. Presently, any major sources wishing to construct or make a major modification within the nonattainment area are required to obtain an NSR permit through SIP-approved State Regulation 45CSR19. Subsequent to redesignation of the area to attainment, any source wishing to construct or modify will be required to obtain a Prevention of Significant Deterioration (PSD) permit through SIP-approved State Regulation 45CSR14. The PSD program would require that a modeling demonstration be performed to ensure continued NAAQS attainment and maintenance. These along with requirements of the minor source permit program covered under State Regulation 45CSR13 would assure the maintenance of the NAAQS.

The plan provides for immediate attainment of the NAAQS for SO 2 through the emission limitations, operating requirements, and compliance schedules that are set forth within the permits and consent orders.

This submission complies with section 110(a)(2). All of the applicable provisions of section 110(a)(2) are already met by West Virginia's Federally-approved SIP.

The modeling for this SIP submittal was conducted using EPA's “Guideline on Air Quality Models (Revised)” (GAQM). Two models, AERMOD and CALPUFF are designed to handle complex terrain features. AERMOD was selected as the best performing model for this situation and was chosen as the appropriate model for this SIP demonstration.

West Virginia's SIP revision provides for adequate contingency measures. The State's plan includes the continuous review of air quality monitoring data in the area of concern, the review of local monitored meteorological data, and the assessment of compliance of local targeted facilities to verify continued attainment of the area. The State will review the annual emissions inventory for the Weirton area at a minimum of once every three years. In the event of a certified violation, West Virginia intends to assess all source compliance with existing rules, regulations and permits, and assess fuel switching at fuel burning units. The supporting documentation (ambient air quality data) indicates that the Weirton, West Virginia area has shown attainment of the NAAQS for SO 2 since the fourth quarter of 1994. At such time as West Virginia submits a redesignation request and maintenance plan for this area, the maintenance plan will also include a detailed contingency plan along with triggering indicators.

The SIP revision includes a dispersion modeling analysis which was performed to demonstrate compliance with the NAAQS for SO 2 . The model used in the compliance analysis was the American Meteorological Society (AMS)/EPA Regulatory Model (AERMOD). The AERMOD was proposed to be included as a preferred model in the “Guideline on Air Quality Models” at the 7th Conference on Air Quality Modeling held on June 28-29, 2000, in Washington, DC. Meteorological data collected on-site at Weirton Steel from June 1, 1997 through May 31, 1999, were processed with the AERMET preprocessor and used for the analysis. (AERMET is the meteorological pre-processor for AERMOD). Since the AERMOD model is not currently an approved model under the GAQM, but has been proposed for inclusion and is undergoing the regulatory process for inclusion, WVDEP made a request to EPA for the use of the AERMOD model for the Weirton SO 2 SIP revision in a letter dated May 25, 2001. The use of this model was approved by EPA in a letter dated July 2, 2001.

The modeling inventory included all sources within the Weirton nonattainment area, and all sources within 100 kilometers of the area with a significant impact within the area. A significant impact was defined by the Federal significance criteria of 1 microgram per cubic meter (μg/m 3 ) annually, 5 μg/m 3 on a 24-hour average, and 25 μg/m 3 on a 3-hour average. For Weirton Steel, four operating scenarios were evaluated to provide for flexibility with regard to fuel switching capabilities, fuel consumption rates and sulfur content. The four modeling scenarios are:

a. Firing fuel oil containing 1.29% sulfur at HP Boilers 3, 4, and 5 with Foster Wheeler Boilers 101 & 102 firing Blast Furnace Gas.

b. Firing fuel oil containing 1.29% sulfur at HP Boilers 3, 4, and 5 with Foster Wheeler Boilers 101 & 102 off-line and flaring excess Blast Furnace Gas.

c. Firing fuel oil containing 1.81% sulfur at HP Boilers 3 and 5 with Foster Wheeler Boilers 101 & 102 firing Blast Furnace Gas.

d. Firing fuel oil containing 1.81% sulfur at HP Boilers 3 and 5 with Foster Wheeler Boilers 101 & 102 off-line and flaring excess Blast Furnace Gas.

The final dispersion modeling, based upon the SO 2 emission limits of sources amended through Operating Permits in addition to a representative background, demonstrates that the maximum SO 2 impacts do not violate the NAAQS for SO 2 . The results of the modeling analyses indicate that no exceedances of the NAAQS for SO 2 are expected in the City of Weirton, including the Clay and Butler Magisterial Districts nonattainment area when the Wheeling-Pittsburgh Steel Corporation and the Weirton Steel Company are operating at the emission rates contained in their respective operating permits and consent orders, and the other significant sources comply with their allowable emission rates. The maximum annual modeled SO 2 was 70.82 μg/m 3 , which includes the background of 5.24 μg/m 3 as compared to the 80 μg/m 3 standard. The maximum modeled 24-hour SO 2 value was 360.46 μg/m 3 which includes the background of 31.44 μg/m 3 as compared to the 365 μg/m 3 standard. The maximum modeled 3-hour SO 2 value was 1297.23 μg/m 3 which includes the background of 81.22 μg/m 3 as compared to the 1300 μg/m 3 standard. These modeling results demonstrate attainment with respect to the NAAQS for SO 2 .

The modeled impacts with the maximum Weirton Steel scenarios, including background concentrations, are provided in Table 4.

Federal regulations, 40 CFR 51.112, require nonattainment plans to include a demonstration of the adequacy of the plan's control strategy. This demonstration must include the following information: model selection and descriptions; model application and assumptions made during application of selected models; receptor grids; meteorological data; ambient air monitoring data and background concentration, model source input, and modeling results. This information is described in detail in the Technical Support Document (TSD) prepared for this rulemaking.

The SO 2 monitoring network in the Weirton area consists of six monitors, Oak Street, Summit Circle, Maryland Heights, Williams Country Club, McKims Ridge and Skyview. A number of the monitors were added as a result of EPA modeled hot spots. Data collected and quality-assured in accordance with 40 CFR part 58, and recorded into EPA new ambient air quality data system known as the Air Quality Subsystem (AQS), indicates that there have been no monitored NAAQS violations recorded for a period of time nearing 10 years. These sites have monitored no 24-hour average values above 365 μg/m 3 , no annual average values above 80 μg/m 3 , and no monitored 3-hour average values above 1300 μg/m 3 . Reductions in SO 2 emissions from both the Weirton Steel and Wheeling-Pittsburgh Steel facilities have contributed significantly to these ambient monitored attainment values. Air quality measurements used in this analysis were performed in accordance with appropriate regulations and guidance documents including adherence to EPA quality assurance requirements. Monitoring procedures were determined in accordance with 40 CFR parts 53 and 58.

EPA's review of the entire submittal indicates that West Virginia's SIP revision provides for the attainment of the NAAQS for SO 2 in the City of Weirton, including Clay and Butler Magisterial Districts, Hancock County, and satisfies the requirements of part D of the Clean Air Act. The revision is supported by a modeling analysis which clearly demonstrates the adequacy of emission limits in providing for the attainment and maintenance of the NAAQS for SO 2 in the nonattainment area. The consent order between Weirton Steel Corporation and the permit between West Virginia and Wheeling-Pittsburgh Steel Corporation, at the center of the SIP revision, establish enforceable SO 2 emission limits at these two facilities. The submittal fulfills the procedural and substantive requirements of 40 CFR part 51. Therefore, EPA is approving the West Virginia SIP revision for the City of Weirton, including Clay and Butler Magisterial Districts, Hancock County SO 2 nonattainment area.

EPA is approving the SO 2 SIP revision, including the modeled attainment demonstration, submitted by the State of West Virginia on December 29, 2003, for the City of Weirton, including the Clay and Butler Magisterial Districts nonattainment area in Hancock County. EPA is publishing this rule without prior proposal because the Agency views this as a noncontroversial amendment and anticipates no adverse comment. However, in the “Proposed Rules” section of today's Federal Register , EPA is publishing a separate document that will serve as the proposal to approve the SIP revision if adverse comments are filed. This rule will be effective on July 6, 2004, without further notice unless EPA receives adverse comment by June 4, 2004. If EPA receives adverse comment, EPA will publish a timely withdrawal in the Federal Register informing the public that the rule will not take effect. EPA will address all public comments in a subsequent final rule based on the proposed rule. EPA will not institute a second comment period on this action. Any parties interested in commenting must do so at this time.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). This action merely approves state law as meeting Federal requirements and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). Because this rule approves pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Public Law 104-4). This 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). This action also does not have Federalism implications because it does 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). This action merely approves a state rule implementing a Federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. This rule also is not subject to Executive Order 13045 “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it is not economically significant.

In reviewing SIP submissions, EPA's role is to approve State choices, provided that they meet the criteria of the Clean Air Act. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards (VCS), EPA has no authority to disapprove a SIP submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a SIP submission, to use VCS in place of a SIP submission that otherwise satisfies the provisions of the Clean Air Act. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. This rule 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 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 July 6, 2004.

Filing a petition for reconsideration by the Administrator of this final rule, approving the SO 2 attainment plan for the City of Weirton including the Clay and Butler Magisterial Districts nonattainment area in Hancock County, 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 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 code 111)

• Animal production (NAICS code 112)

• Food manufacturing (NAICS code 311)

• Pesticide manufacturing (NAICS code 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 .

In addition to using EDOCKET (http://www.epa.gov/edocket/) , 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 on E-CFR Beta Site Two at http://www.gpoaccess.gov/ecfr/ .

This is a summary of the Commission's Order, WT Docket No. 04-140, FCC 04-79, adopted March 31, 2004, and released April 15, 2004. The full text of this document is available for inspection and copying during normal business hours at the FCC Reference Information Center, Portals II, 445 12th Street, SW., Room CY-A257, Washington, DC 20554. This document may also be purchased from the Commission's duplicating contractor, Qualex International, Portals II, 445 12th Street SW., Room CY-B402, Washington, DC 20554, telephone (202) 863-2893, facsimile (202) 863-2898, or via e-mail qualexint@aol.com. 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, or at brian.millin@fcc.gov.

1. In the Notice of Proposed Rulemaking and Order (NPRM) the Commission proposed to revise operating privileges for amateur radio service licensees as well as to eliminate obsolete and duplicative rules in the Amateur Radio Service. Additionally, on its own motion, the Commission adopted changes to its part 0 and 97 rules to clarify or eliminate duplicative language, or conform them with other rule sections.

2. The Order does not contain any new or modified information collection.

3. The Regulatory Flexibility Act (RFA) requires that an agency prepare a regulatory flexibility analysis for notice and comment rulemaking proceedings, unless the agency certifies that “the rule will not, if promulgated, have a significant economic impact on a substantial number of small entities.” 5 U.S.C. 605(b). In the NPRM and Order, the Commission certified that the proposed rule amendments, if promulgated, would not have a significant economic impact on a substantial number of small business entities, as defined in section 601(3) of the RFA because the rule amendments do not apply to small business entities. Rather, these rules apply to individuals who are interested in radio technique solely with a personal aim and without pecuniary interest.

4. Parts 0 and 97 of the Commission's rules is amended as specified in rule changes effective June 1, 2004.

5. The Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, shall send a copy of this Order, including the Initial Regulatory Flexibility Certification, to the Chief Counsel for Advocacy of the Small Business Administration.

Incidental take, defined to include the harassing, harming, wounding, trapping and capturing, of threatened sea turtles is not lawful (50 CFR 223.205). On June 17, 2002, based upon the best available information on sea turtle and pound net interactions at the time, NMFS issued an interim final rule that authorized incidental take of threatened sea turtles for pound net fishermen who complied with NMFS′ rule. In the rule, NMFS prohibited the use of all pound net leaders measuring 12 inches (30.5 cm) and greater stretched mesh and all pound net leaders with stringers in the Virginia waters of the mainstem Chesapeake Bay and portions of the Virginia tributaries from May 8 to June 30 each year (67 FR 41196). Included in this interim final rule were a year-round requirement for fishermen to report all interactions with sea turtles in their pound net gear to NMFS within 24 hours of returning from a trip, and a year-round requirement for pound net fishing operations to be observed by a NMFS-approved observer if requested by the Northeast Regional Administrator. The interim final rule also established a framework mechanism by which NMFS may make changes to the restrictions and/or their effective dates on an expedited basis in order to respond to new information and protect sea turtles. Prior to issuance of this rule, takes of threatened sea turtles in pound nets were not authorized, and a fisherman who incidentally took a threatened sea turtle risked criminal penalties and fines.

To better understand the interactions between pound net gear and sea turtles, NMFS conducted pound net monitoring during the spring of 2002 and 2003. This monitoring documented 23 sea turtles either entangled in or impinged on pound net leaders, 18 of which were in leaders with less than 12 inches (30.5 cm) stretched mesh. Nine animals were found entangled in leaders, of which 7 were dead, and 14 animals were found impinged on leaders, of which one was dead. In this situation, impingement refers to a sea turtle being held against the leader by the current, apparently unable to release itself under its own ability. For these purposes, an animal was still considered impinged if it had its head and flipper poking through the mesh. An animal was considered entangled if a body part was tightly wrapped one or more times in the mesh.

The 2002 and 2003 monitoring results represent new information not previously considered in prior assessments of the Virginia pound net fishery, and entanglements in and impingements on these leaders appear to be more of a problem than previously believed. As such, NMFS believes that additional restrictions are warranted to reduce sea turtle entanglement in and impingement on pound net gear.

The documented incidental take of sea turtles in leaders, the ability for sea turtles to continue to become entangled in and impinged on pound net leaders in the future, and the annual high mortality of sea turtles in Virginia during the spring, as evidenced by the high number of dead sea turtles stranding on beaches, are of particular concern because approximately 50 percent of the Chesapeake Bay loggerhead foraging population is composed of the northern subpopulation, a subpopulation that may be declining. In addition, most of the stranded turtles in Virginia are juveniles, a life stage found to be critical to the long term survival of the species. This action is necessary to provide for the conservation of threatened and endangered sea turtles by reducing incidental take in the Virginia pound net fishery during the spring. Details concerning sea turtle and pound net interactions, the potential impact of pound net leaders on sea turtles, and justification for the need for additional pound net leader regulations were provided in the preamble to the proposed rule (69 FR 5810, February 6, 2004).

To conserve sea turtles, NMFS prohibits the use of all offshore pound net leaders from May 6 to July 15 each year in the Virginia waters of the mainstem Chesapeake Bay, south of 37° 19.0′ N. lat. and west of 76° 13.0′ W. long., and all waters south of 37° 13.0′ N. lat. to the Chesapeake Bay Bridge Tunnel (extending from approximately 37° 05′ N. lat., 75° 59′ W. long. to 36° 55′ N. lat., 76° 08′ W. long.) at the mouth of the Chesapeake Bay, and the portion of the James River downstream of the Hampton Roads Bridge Tunnel (I-64; approximately 36° 59.55′ N. lat., 76° 18.64′ W. long.) and the York River downstream of the Coleman Memorial Bridge (Route 17; approximately 37° 14.55′ N. lat, 76° 30.40′ W. long.). Offshore pound nets are defined as those nets set with the inland end of their leader greater than 10 horizontal feet (3 m) from the mean low water line. Additionally, outside this area, NMFS retains the leader mesh size restriction included in the previous interim final rule on the pound net fishery (67 FR 41196, June 17, 2002), which prohibited the use of all leaders with stretched mesh greater than or equal to 12 inches (30.5 cm) and leaders with stringers, from May 6 to July 15 each year in the Virginia waters of the Chesapeake Bay outside the aforementioned closed area, extending from the Maryland-Virginia State line (approximately 37° 55′ N. lat., 75° 55′ W. long.), the Great Wicomico River downstream of the Jessie Dupont Memorial Highway Bridge (Route 200; approximately 37° 50.84′ N. lat, 76° 22.09′ W. long.), the Rappahannock River downstream of the Robert Opie Norris Jr. Bridge (Route 3; approximately 37° 37.44′ N. lat, 76° 25.40′ W. long.), and the Piankatank River downstream of the Route 3 Bridge (approximately 37° 30.62′ N. lat, 76° 25.19′ W. long.), to the COLREGS line at the mouth of the Chesapeake Bay. South of 37° 19.0′ N. lat. and west of 76° 13.0′ W. long., and all waters south of 37° 13.0′ N. lat. to the Chesapeake Bay Bridge Tunnel, the leader restriction applies to those nets set with the inland end of the leader 10 horizontal feet (3 m) or less from the mean low water line. In addition to avoiding applicable penalties for failure to comply with ESA regulations, Virginia pound net fishermen who comply with these restrictions may incidentally take listed sea turtles without being subject to penalties and fines for that take.

This final rule also retains the framework mechanism currently in place (that was included and analyzed in the status quo alternative), by which NMFS may make changes to the restrictions and/or their effective dates on an expedited basis in order to respond to new information and protect sea turtles. Under this framework mechanism, if NMFS believes based on, for example, water temperature and the timing of sea turtles′ migration, that sea turtles may still be vulnerable to entanglement in pound net leaders after July 15, NMFS may extend the effective dates of this regulation. Should an extension be necessary, NMFS would issue a final rule in the Federal Register explicitly stating the duration of the extension. The extension would not last beyond July 30. Additionally, under this framework mechanism, if monitoring of pound net leaders reveals that one sea turtle is entangled alive in a pound net leader or that one sea turtle is entangled dead and NMFS determines that the entanglement contributed to its death, then NMFS may determine that additional restrictions are necessary to conserve sea turtles and prevent entanglements. Such additional restrictions may include reducing the allowable mesh size for pound net leaders or prohibiting all pound net leaders regardless of mesh size in Virginia waters. Should NMFS determine that an additional restriction is warranted, NMFS would expeditiously issue a final rule that would explicitly state any new gear restriction as well as the applicable time period for the restriction, which may be extended through July 30. The area where additional gear restrictions might apply includes the same area as the initial restriction, namely the Virginia waters of the mainstem Chesapeake Bay from the Maryland-Virginia State line (approximately 38° N. lat.) to the COLREGS line at the mouth of the Chesapeake Bay, and portions of the James River, the York River, Piankatank River, the Rappahannock River, and the Great Wicomico River.

The year-round reporting and monitoring requirements for this fishery established by the 2002 interim final rule also remain in effect.

From 12:01 a.m. local time on May 6 through 11:59 p.m. local time on July 15 each year, fishermen are required to stop fishing with and remove from the water pound net leaders altogether or pound net leaders measuring 12 inches (30.5 cm) or greater stretched mesh and pound net leaders with stringers, depending upon the location of their pound net site as indicated above.

On February 6, 2004, NMFS published a proposed rule that would prohibit the use of all pound net leaders south of 37° 19.0′ N. lat. and west of 76° 13.0′ W. long., and all waters south of 37° 13.0′ N. lat. to the Chesapeake Bay Bridge Tunnel at the mouth of the Chesapeake Bay, and the James and York Rivers downstream of the first bridge in each tributary, and all leaders with stretched mesh greater than or equal to 8 inches (20.3 cm) and leaders with stringers outside the aforementioned area, extending to the Maryland-Virginia State line and the Rappahannock River downstream of the first bridge, and from the Chesapeake Bay Bridge Tunnel to the COLREGS line at the mouth of the Chesapeake Bay, from May 6 to July 15 each year. Comments on this proposed action were requested through March 8, 2004. Nineteen comment letters from eighteen different individuals or organizations were received during the public comment period for the proposed rule. Four comment letters provided support for the action, while 14 letters expressed their opposition to the proposed regulations. One comment letter was neither in favor nor against the proposed action. Additionally, a petition signed by 1,077 individuals was received requesting that the proposal be withdrawn and terminated. A public hearing was also held in Virginia Beach, VA on February 19, 2004, and 11 individuals provided spoken comments. Three of the 11 individuals also provided written comments. All of the spoken comments were in opposition to the proposed action. NMFS considered these comments on the proposed rule as part of its decision making process. A complete summary of the comments and NMFS′ responses, grouped according to general subject matter in no particular order, is provided here.

Comment 1: One commenter recommended that the pound net leader prohibitions and restrictions extend throughout the year and that marine sanctuaries be established in Virginia waters.

Response: NMFS considered regulating pound net leaders in Virginia′s Chesapeake Bay during the period of May through November, which would encompass the full time period when sea turtle presence and pound net fishing in the Chesapeake Bay overlap. However, few direct observations of sea turtle impingement on and entanglement in pound net leaders exist after early summer. A pound net characterization study by the Virginia Institute of Marine Science (VIMS) documented the entanglement of one dead juvenile loggerhead sea turtle in a pound net leader (approximately 11 inches (27.9 cm)) in October of 2000 (Mansfield et al. , 2001), and one dead loggerhead was found entangled in a pound net leader in August 2001 (Mansfield et al., 2002). It is not conclusively known if those animals were dead prior to entanglement or if the interaction with the pound net leader resulted in their death. Additionally, the level of sea turtle strandings is substantially diminished during the summer and fall months which indicates a lower mortality rate. With few direct observations of entanglement in and impingement on pound net leaders and without high levels of strandings, similar to those documented in the spring, there is not a sufficient basis at this time to conclude that pound net leaders are responsible for high levels of sea turtle mortality from August through November. Accordingly, NMFS has determined that it will not impose gear restrictions on the Virginia pound net fishery during the full time period of the fishery from May through November.

National marine sanctuaries are designated and managed by NOAA's National Marine Sanctuary Program. The sanctuary designation process takes several years and is not an option that could be implemented currently. NMFS has forwarded the comment to the National Marine Sanctuary Program for its consideration.

Comment 2: One commenter recommended that pound nets be prohibited in high recreational areas due to potential hazards to human personal safety.

Response: Under the ESA, NMFS' authority to implement restrictions on activities is restricted to those activities that affect a species that NMFS manages (e.g., federally endangered and threatened sea turtles). Available information does not indicate that the level of sea turtle interactions with pound nets in high recreational areas necessitates restrictions to protect sea turtles.

Comment 3: One commenter recommended that formal ESA section 7 consultation be initiated on the Virginia pound net fishery to adequately assess the impacts of this fishery on listed species.

Response: A formal consultation, pursuant to section 7 of the ESA, was previously conducted on the operation of the Virginia pound net fishery, as modified by the implementation of the sea turtle conservation measures enacted in 2002. This Biological Opinion, issued on May 14, 2002, concluded the Virginia pound net fishery as conducted under NMFS′ implementation of sea turtle conservation regulations (including the issuance of an interim final rule that restricted the use of pound net leaders in the Virginia Chesapeake Bay from May 8 to June 30, and required year round monitoring and reporting) may adversely affect but is not likely to jeopardize the continued existence of the loggerhead, leatherback, Kemp's ridley, green, or hawksbill sea turtle, or shortnose sturgeon. Consultation on this action has been reinitiated due to the previously unanticipated take of sea turtles in less than 12 inches (30.5 cm) stretched mesh during 2003. Additionally, a formal section 7 consultation has also been completed on the proposed issuance of this new regulation, including review of the operation of the pound net fishery with new sea turtle conservation measures for the Virginia pound net fishery. Due to similarities in the proposed actions and the effects on listed species, the reinitiated 2002 consultation and the new consultation on this final rule have been combined. The Biological Opinion was issued on April 16, 2004, and concluded that the proposed action may adversely affect, but is not likely to jeopardize, the continued existence of the loggerhead, leatherback, Kemp's ridley, green, or hawksbill sea turtle, or shortnose sturgeon. The Incidental Take Statement exempted the anticipated annual take of no more than 505 loggerhead, 101 Kemp′s ridley, and 1 green sea turtle in all pounds set in the action area. These takes are anticipated to be live, uninjured animals. Additionally, no more than 1 loggerhead, 1 Kemp's ridley, 1 green, or 1 leatherback sea turtle are anticipated to be either entangled or impinged in leaders throughout the action area from July 16 to May 5 each year. NMFS further anticipates that, outside the leader prohibited area, 1 loggerhead, 1 Kemp's ridley, 1 green, or 1 leatherback sea turtle will be entangled in leaders with less than 12 inches (30.5 cm) stretched mesh from May 6 to July 15 each year. For the purposes of the analysis in the Biological Opinion, entanglements and impingements are considered to result in sea turtle mortality. No incidental take of hawksbill sea turtles or shortnose sturgeon is anticipated.

Comment 4: Two commenters stated that the authority and experience to regulate state fisheries rests with the Virginia Marine Resources Commission (VMRC) and not NMFS, and, therefore, characterized this action as inappropriate. One additional commenter believed that NMFS regulatory and decision making processes are being dictated by environmental groups.

Response: NMFS agrees that the authority to regulate state fisheries rests with the respective state agency, in this case, the VMRC. However, VMRC cannot authorize incidental take of threatened sea turtles; only NMFS has the authority to do so. NMFS has the authority and obligation to protect and conserve all sea turtles that occur in U.S. waters that are listed as endangered or threatened under the ESA, regardless of whether they occur in Federal or state waters. This action is taken under the authority of the ESA to conserve sea turtles listed as threatened or endangered.

NMFS bases its decision on the best available data and knowledge of the situation; the decision is not dictated by the opinion of any outside entity, be it an environmental group, industry participant, or other stakeholder.

Comment 5: One commenter noted that recent sea turtle mortalities in Virginia hopper dredging operations have been higher than observed takes in the Virginia pound net fishery, and dredging has been allowed to continue. Two additional commenters felt that there was inequity with how NMFS addresses and regulates potential impacts to sea turtles.

Response: Under section 7 of the ESA, Federal agencies must consult with either NMFS or the U.S. Fish and Wildlife Service (USFWS) to ensure their proposed agency actions do not jeopardize the continued existence of listed species. The Norfolk and Baltimore Districts of the Army Corps of Engineers (ACOE) have previously consulted with NMFS on dredging operations in the Virginia Chesapeake Bay. The impacts of hopper dredging on listed species were previously considered via formal section 7 consultations (NMFS NER 2002, NMFS NER 2003), and Incidental Take Statements were prepared to account for the anticipated take in these operations. From July 2000 to October 2003, 54 sea turtles have been taken by Virginia dredge operations. Some of the incidents involved decomposed turtle flippers and/or carapace parts, but most of these takes were fresh dead turtles. Most of these previous sea turtle takes were exempted in the Incidental Take Statements of the Biological Opinions. Efforts are ongoing to work with the ACOE to further minimize this take and enhance existing monitoring programs. NMFS continues to work with the ACOE to reduce sea turtle takes in dredging operations, as well as to research and attempt to minimize sea turtle mortality from other sources (e.g., fisheries, vessels, debris/water quality).

NMFS attempts to consider all of the impacts to sea turtles cumulatively and to reduce threats from all known sources. NMFS and USFWS are in fact working to minimize the impacts to sea turtles from other activities as well (e.g., nesting habitat degradation, marine debris, dredging, power plant impingement). Nevertheless, fishing activities have been recognized as one of the most significant threats to sea turtle survival (Magnuson et al., 1990, Turtle Expert Working Group 2000). To respond to these threats, NMFS is comprehensively evaluating the impacts of fishing gear types on sea turtles throughout the U.S. Atlantic Ocean and Gulf of Mexico, as part of the Strategy for Sea Turtle Conservation and Recovery in Relation to Atlantic Ocean and Gulf of Mexico Fisheries (Strategy) (NMFS 2001). Based on the information developed for the Strategy, NMFS may impose restrictions on or modifications to other activities that put sea turtles at risk.

Comment 6: Eight commenters felt that leaders with greater than or equal to 12 inches (30.5 cm) stretched mesh and leaders with stringers result in the most sea turtle mortalities, and specifically recommended the status quo option. One of the commenters noted that decreasing the allowable mesh size to less than 8 inches (20.3 cm) stretched mesh would not help sea turtles and solve the stranding problem, but, because the problem is with the sea turtles, it would only hurt the fishermen.

Response: Based on historical observations of pound net leaders (Bellmund et al. , 1987) and for the reasons discussed in the preamble to the 2002 rule, NMFS recognizes that the frequency of sea turtle takes in leaders with stretched mesh 12 inches (30.5 cm) and greater and leaders with stringers may be higher than in smaller mesh leaders. However, during 2002 and 2003, NMFS documented sea turtle interactions with mesh leaders ranging from 14 inches (35.6 cm) stretched mesh down to 8 inches (20.3 cm) stretched mesh. All but one of these takes were in the leader prohibited area, as defined in this final rule. Therefore, NMFS has determined to prohibit all leaders in this area to prevent takes in the area with previous high sea turtle/pound net interactions.

The justification for the further leader mesh size restriction included in the proposed rule was based upon the occurrence of sea turtle takes in 8 inch (20.3 cm) and greater stretched mesh leaders. However, based upon additional analysis of impingement to entanglement ratios by NMFS, it appears that restricting mesh size to less than 8 inches (20.3 cm) stretched mesh would not necessarily provide additional conservation benefit to sea turtles, over that provided by restricting mesh size to less than 12 inches. In addition to mesh size, the frequency of sea turtle takes appears to be a function of where the pound nets are set, with pound nets set in certain areas having a higher potential for takes for a variety of possible reasons, such as depth of water, current velocity, and proximity to certain environmental characteristics or optimal foraging grounds. For instance, it is possible that takes may continue to occur on 7.5-inch (19.1-cm) stretched mesh leaders if set in certain geographical areas. Additional analyses, and perhaps data collection, will be completed that may provide insights into the relationship between mesh size and sea turtle interactions. At this time, the mesh size threshold that would prevent sea turtle entanglements has not been determined for mesh size below 12 inches (30.5 cm). As such, NMFS is retaining the mesh size restriction included in the 2002 interim final rule, which is the restriction of leaders with greater than or equal to 12 inches (30.5 cm) stretched mesh and leaders with stringers, in areas outside the leader prohibited area. It should also be noted that during the public comment period, it was recognized that an 8-inch (20.3-cm) stretched mesh leader may in fact be slightly smaller than 8 inches (20.3 cm), after it is coated and hung in the water. For example, NMFS observers measured nets to the nearest 0.125 inches (0.318 cm), so a sea turtle entanglement recorded in an 8-inch (20.3-cm) stretched mesh leader may have in fact been in a leader with 7.95-inches (20.2-cm) stretched mesh. Whenever NMFS mentions that sea turtles have been taken in 8 inch (20.3 cm) stretched mesh leaders, it refers to nets that may have been slightly smaller or larger (within 0.125 inches (0.318 cm)) than 8 inches (20.3 cm).

Comment 7: One commenter continued to be concerned with the potential take in leaders with less than 8 inches (20.3 cm) stretched mesh, particularly as a result of impingement.

Response: NMFS has only documented sea turtles in leaders with 8 inches (20.3 cm) and greater stretched mesh and in leaders with stringers. Given that gillnets with less than 8 inches (20.3 cm) stretched mesh have been found to entangle sea turtles (Gearhart, 2002), NMFS recognizes the possibility that entanglements in leader stretched mesh smaller than 8 inches (20.3 cm) could occur. There are differences between gillnet gear and pound net leaders (e.g., monofilament vs. multifilament material; drift, set, and runaround vs. fixed stationary gear; gilling vs. herding fishing method), which likely factor into the potential for sea turtle interactions and should be considered when conducting any mesh size comparison. NMFS does not expect sea turtle impingements on pound net leaders to occur outside the leader prohibited area, because of the lack of observed impingements on pound net leaders outside of this area. Sea turtles may continue to be entangled in leaders with less than 12 inches (30.5 cm) stretched mesh outside the leader prohibited area. Further, given that only one turtle was found entangled outside the leader prohibited area in two years of monitoring, NMFS has chosen to keep the restriction to leaders with greater than or equal to 12 inches (30.5 cm) stretched mesh. However, NMFS will continue monitoring pound nets for sea turtle interactions and the framework mechanism included in this final rule will enable the enactment of additional management measures if determined necessary.

Comment 8: Sixteen commenters felt that the limited observer data do not support the conclusion that the pound net fishery is a major source of mortality, especially as the spring strandings have been much higher than the observed interactions in pound net gear. Three commenters believed sea turtles will not biologically benefit with the proposed measures given the limited take data. One commenter additionally felt that this regulation, and its supporting justification, establishes a bad precedent for managing Virginia fisheries.

Response: In 2002 and 2003, 23 sea turtles were found either entangled in or impinged on pound net leaders, while in May, June and the first half of July of 2002 and 2003, approximately 563 sea turtles were found stranded on Virginia beaches. NMFS acknowledges that other factors likely contribute to spring sea turtle mortality in Virginia, and NMFS does not assume that all sea turtle strandings are the result of pound net interactions. Sea turtle mortality sources are difficult to detect from evaluating the stranded animal. Few sea turtles strand with evidence of fishery interactions, but the lack of gear on a carcass is not necessarily indicative of a lack of fishery interaction. NMFS has observed other fisheries and investigated other potential causes, such as dredge operations, for the annual spring sea turtle mortality event and determined that natural or non-fishing related anthropogenic causes are not consistent with the nature and timing of most of the strandings (67 FR 15160, March 29, 2002, 69 FR 5810, February 6, 2004). For instance, during the approximate time period of the proposed measures (May 16 to July 31, 2003), a preliminary count of 26 of 375 turtles were found on Virginia beaches with carapace/plastron damage or propeller-like wounds. It is unknown how many of these injuries were pre or post-mortem. Unlike for pound net leaders, the level of sea turtle interactions with other potential mortality sources (e.g., other fisheries) has not yet been conclusively determined as few takes have been documented. As noted above, NMFS has data showing that pound net leaders result in sea turtle entanglement and impingement. NMFS believes that it is likely that pound nets contribute to, but do not cause all of, the high sea turtle strandings documented each spring on Virginia beaches. Under the ESA, NMFS is responsible for protecting sea turtles from various mortality sources.

There are several caveats, ones more likely to result in underestimates, associated with the pound net monitoring studies that should be noted when evaluating the number of animals found in the gear. The sea turtles observed in leaders were found at depths ranging from the surface to approximately 6 feet (1.8 m) under the surface. The ability to observe a turtle below the surface depends on a number of variables, including water clarity, sea state, and weather conditions. Generally, turtles entangled a few feet below the surface cannot be observed due to the poor water clarity in the Chesapeake Bay. In several instances in 2002 and 2003, due to tide state and water clarity, even the top line of the leader was unable to be viewed. Additionally, NMFS' sampling effort was confined to two boats in 2002 and one vessel during 2003, and each net could not be sampled during every tidal cycle, every hour, or even every day. Some impingements, and some entanglements, were undoubtedly missed as a small fraction of the fishing effort was observed. Due to funding and staff constraints, NMFS observers did not monitor pound nets after early June in 2002 and 2003, and did not monitor during the high spring stranding period in 2003. As such, some sea turtle entanglements and/or impingements could have been missed later in the season. Given these caveats, even if pound nets caused every sea turtle mortality in the Virginia Chesapeake Bay, it is not expected that the number of observed sea turtle interactions would equal the number of strandings. It should also be noted that a revised analysis by NMFS found that nets were observed a total of 838 times in 2002 and 2003, not 1463 times as noted in the draft EA. This modification is a factor of discounting the non-active nets and the nets that were not able to be completely observed due to shallow water depth and lack of boat access.

NMFS considers the monitoring information collected in 2002 and 2003 to be noteworthy, given that entanglements were not previously anticipated on leaders with less than 12 inches (30.5 cm) stretched mesh and impingements on leaders were observed, a phenomenon not previously believed to occur with such frequency. NMFS believes that this data represent new information on the interactions between sea turtles and pound net leaders and should be used to further reduce takes in this fishery.

Sea turtles will benefit from this action, as pound net leaders entangle and impinge these animals and this action will reduce these interactions. The exact population benefit cannot be determined, but as sea turtle populations found in the Virginia Chesapeake Bay have not yet recovered, diligence must be used to reduce mortality sources. Loggerheads and Kemp's ridleys have been found interacting with pound net gear and are the most common species found in the Chesapeake Bay. Most loggerheads in U.S. waters come from one of five genetically distinct nesting subpopulations. The largest loggerhead subpopulation occurs from 29° N. lat. on the east coast of Florida to Sarasota on the west coast and shows recent increases in numbers of nesting females based upon an analysis of annual surveys of all nesting beaches. However, a more recent analysis limited to nesting data from the Index Nesting Beach Survey program from 1989 to 2002, a period encompassing index surveys that are more consistent and more accurate than surveys in previous years, has shown no detectable trend (B. Witherington, Florida Fish and Wildlife Conservation Commission, pers. comm., 2002). The northern subpopulation that nests from northeast Florida through North Carolina is much smaller, and nesting numbers are stable or declining. Genetic studies indicate that approximately one-half of the juvenile loggerheads inhabiting Chesapeake Bay during the spring and summer are from the smaller, northern subpopulation (TEWG, 2000; Bass et al. , 1998; Norrgard, 1995).

Kemp's ridleys are considered to be one of the world′s most endangered sea turtle species. The population has been drastically reduced from historical nesting numbers, but the Turtle Expert Working Group (1998, 2000) indicated that the Kemp's ridley population appears to be in the early stage of a recovery trajectory. Nesting data, estimated number of adults, and percentage of first time nesters have all increased from lows experienced in the 1970's and 1980's. From 1985 to 1999, the number of nests observed at Rancho Nuevo and nearby beaches has increased at a mean rate of 11.3 percent per year, allowing cautious optimism that the population is on its way to recovery. Given the vulnerability of these populations to chronic impacts from human-related activities, the high level of spring sea turtle mortality in Virginia must be reduced to help ensure that these populations of loggerheads and Kemp's ridleys recover.

Additionally, most of the turtles found in Virginia waters, as well as found stranded during the spring, are of the juvenile life stage (Mansfield et al. , 2001, Musick et al. , 2000, Musick and Limpus, 1997). Studies have concluded that sea turtles must have high annual survival as juveniles and adults to ensure that sufficient numbers of animals survive to reproductive maturity to maintain stable populations (Crouse et al. , 1987; Crowder et al. , 1994; Crouse, 1999). Given their long maturation period, relatively small decreases in annual survival rates of both juvenile and adult loggerhead sea turtles may destabilize the population, thereby potentially reducing the likelihood of survival and recovery of the population. As such, the historical high level of mortality in Virginia plus the increase in mortality documented during the last several years may negatively affect recovery. Any action that helps reduce sea turtle mortality will biologically benefit these species.

Regardless of whether NMFS issued this final regulation, if NMFS identifies additional sea turtle mortality sources, NMFS would consider additional management actions pursuant to its obligations under the ESA. Therefore, this final rule, or the justification for it, does not set any precedent.

Comment 9: Two commenters expressed their concern with closing a portion of the fishery without a complete understanding of the problem and recommended more research, particularly with respect to impingements.

Response: NMFS is committed to undertaking additional research to not only continue studying the interactions between pound nets and sea turtles, but also to continue monitoring and investigating sea turtle mortality in Virginia during the spring. If any scientific research results or future study plans are available that would provide more information, NMFS would welcome receiving or discussing those studies. However, given the results of the pound net monitoring studies in 2002 and 2003, it is necessary to act on the results at this time to minimize additional sea turtle entanglements and impingements in the future. The data show that sea turtles are entangled in and impinged on leader mesh sizes smaller than what are currently restricted and most of these interactions have occurred in a specific geographical area (i.e., in the leader prohibited area). Note that at this time NMFS chose to retain the leader mesh size restriction as included in the previous action on this fishery (in areas outside the leader prohibited area) in order to complete additional analyses, and perhaps data collection, on the conservation benefit of different mesh size thresholds. NMFS is committed to continuing to explore the issue as well as working with the industry to develop a gear modification solution that would minimize sea turtle takes and retain an acceptable level of target catch.

Comment 10: Two commenters disagreed that most impingements lead to mortality, given the normal diving behavior of sea turtles, the variable strength of the tidal currents, and the lack of observation time for the impinged animals.

Response: NMFS observers documented 14 sea turtles, 13 of these alive, impinged on pound net leaders by the current, during monitoring surveys in 2002 and 2003. When an animal was found impinged on the leader, it was immediately released from the net by the observer. Impinged sea turtles were not observed on the net for any length of time, due to the need to release an air-breathing endangered or threatened species from fishing gear as soon as the animal is found, and the uncertainty surrounding how long the animal had already been impinged and how potentially compromised it was. If an animal was impinged on a leader by the current with its flippers inactive, based on other observations of impinged sea turtles, NMFS believes that without any human intervention the turtle could either swim away alive when slack tide occurred, become entangled in the leader mesh when trying to free itself, or drift away dead if it drowned prior to slack tide. In 2002 and 2003, six of the live impingements occurred near the surface, but seven turtles were found underwater, unable to reach the surface to breathe, with an average of 3 hours until slack tide. It is likely that if a turtle could not breathe from the position where it was impinged on the net, it would have a low likelihood of survival if it remained on the net for longer than approximately one hour.

While a public comment noted that sea turtles in Virginia have been found to remain submerged for durations of 40 minutes under normal conditions, it is unlikely that struggling, physiologically stressed sea turtles in fishing gear could do the same, as forcibly submerged turtles rapidly consume their oxygen stores (Lutcavage and Lutz, 1997). In forcibly submerged loggerhead turtles, blood oxygen was depleted to negligible levels in less than 30 minutes (Lutz and Bentley, 1985 in Lutcavage and Lutz, 1997). The rapidity and extent of internal changes are likely functions of the intensity of underwater struggling and the length of submergence. For instance, oxygen stores were depleted within 15 minutes in tethered green sea turtles diving to escape (Wood et al. , 1984 in Lutcavage and Lutz, 1997). Given that some forcibly submerged sea turtles on pound net leaders have been observed struggling, it is unlikely that the submergence duration of impinged animals would be the same as for non-impinged sea turtles. Besides the one specimen of an unknown species of sea turtle found in June 2003, the turtles observed impinged in 2002 and 2003 were not observed moving vertically on the net, given that in most cases, at least one of their flippers were rendered inactive as they were held against the net. The unidentified sea turtle found in June 2003, that either slipped deeper down the net or escaped before the observer could evaluate it further, had both of its front flippers active. Four impinged sea turtles had their head and/or flipper through the leader mesh, but because the part was not wrapped multiple times in the net, it was not considered entangled. Often the impinged turtles were documented as held against the nets by very slight, almost slack, currents. It is unknown how long those animals were impinged on the net before being observed. It could be that those animals were held against the net for more than approximately an hour and when observed impinged with the slight current, they were already in a compromised state. If a sea turtle remains alive after an impingement and swims freely, it could become impinged on or entangled in another nearby pound net leader. This animal would likely already be in a compromised state, which would further augment the impacts of forced submergence.

Comment 11: Five commenters noted the difference between nearshore and offshore nets along the Eastern shore of Virginia, with respect to the different current strength, water depth and observed turtle takes. Two of these commenters felt that the potential for impingements could not be extrapolated to the entire fishery or to nets in shallower waters with weaker currents.

Response: NMFS observed sea turtles impinged on nets with what appeared to be varying current strengths. NMFS agrees that additional research is necessary on the current strength needed to impinge a sea turtle, and recognizes that there appear to be differences between nearshore and offshore nets with respect to impingement potential and sea turtle interactions. It was NMFS′ previous assumption that all net locations in the leader prohibited area experienced similar conditions, namely relatively high currents regardless of water depth, given that impingements have been documented in those nets set in the Western Bay and along the Eastern shore and NMFS' observations documented swift moving currents in all of those net locations. Information from the public comments suggested that the differences between nearshore and offshore nets are noteworthy, and the difference in impingement potential must be considered. Based on these comments, NMFS re-analyzed the 2002 and 2003 monitoring records and the data do support that there is a statistically significant difference between observed sea turtle takes in nearshore and offshore nets. In 2002 and 2003, offshore nets accounted for all of the observed impingements (n=14) and 8 of the 9 observed entanglements. One dead loggerhead was documented in a nearshore 8 inch (20.3 cm) stretched mesh leader in June 2003. During 2002 and 2003, there were 345 surveys of nearshore nets and 480 surveys of offshore nets. Thirteen surveys did not have a nearshore or offshore designation. Based upon the observations of nearshore nets, it does appear that they pose a significantly lower risk to sea turtles and as such, NMFS has modified the leader prohibited area in this final rule to exclude nearshore nets. Nearshore nets are defined to include those nets with the inland end of their leader 10 horizontal feet (3 m) or less from the mean low water line, and offshore nets include all other nets set in various water depths. The revised leader prohibited area includes all areas where sea turtles were documented impinged on pound net leaders.

Generally, areas close to shore are often shallower and have less current than those areas further from shore, but exceptions may occur because environmental conditions can vary locally. Distance from shore is likely a proxy for other factors (e.g., water depth, current speed) influencing sea turtle interaction rates. For this action, distance from the mean low water line was used as a common characteristic of those nets considered to be nearshore. NMFS will be collecting more data on current strengths in the Virginia Chesapeake Bay, and until additional information may indicate otherwise, NMFS considers distance from shore to be suitable to separate nearshore and offshore nets.

Comment 12: Three commenters disagreed with NMFS' statement that there are unreported sub-surface sea turtle mortalities in pound net leaders, because the previous side scan sonar surveys did not detect any sea turtle takes.

Response: In 2001, 7 days of side scan sonar surveys were completed from May 24 through August 3 (with no surveys completed from June 24 to July 22 due to weather), for a total of 825 images for the 55 active pound net leaders surveyed (Mansfield et al. , 2002a). In 2002, 9 days of surveys were conducted from May 22 to June 27, for a total of 1,848 images for the 61 active pound net leaders surveyed (Mansfield et al., 2002b). In 2001 and 2002, surveys were conducted almost equally in the Western Bay and along the Eastern shore. No sub-surface acoustical signatures were noted during these surveys. The use of side scan sonar as a means to detect sub-surface sea turtle entanglements may have potential, but additional research on sub-surface interactions is needed. Mansfield et al. (2002a, 2002b) state that a number of factors may influence the use of side scan sonar, including weather, sea conditions, water turbidity, the size and decomposition state of the animal, and the orientation of the turtle in the net. NMFS recognizes that survey scheduling is limited by weather and sea conditions, but considers that side scan survey results may continue to be affected by water turbidity, the size and decomposition state of the animal, and the orientation of the turtle in the net. These issues must be addressed in future surveys before conclusively determining that sea turtles are not found in pound net leaders sub-surface. NMFS conducted forward searching sonar testing in April 2003 to further explore the issue, but due to technical difficulties (e.g., narrow band width, time needed to familiarize staff with equipment and image interpretation, scheduling), testing had to be curtailed while visual monitoring was conducted. Additional sonar testing is anticipated to be conducted in the spring of 2004.

However, because sea turtles can be present throughout the water column, it is possible that subsurface entanglements and impingements occur. Data indicate that while the spring water column temperatures are stratified and sea turtles may prefer warmer surface waters, sea turtles may also be found at depth. Sea turtles generally inhabit water temperatures greater than 11° C (Epperly et al. , 1995), and loggerheads and Kemp's ridleys in Virginia waters forage on benthic species. As sea turtles use the Chesapeake Bay as developmental foraging grounds (Byles, 1988, Lutcavage and Musick, 1985, Musick and Limpus, 1997), they will be periodically near the bottom if they are foraging and may come in contact with pound net leaders at depth. Musick et al. (1984) found that crustaceans aggregate on large epibiotic loads that grow on the pound net stakes and horseshoe crabs (a preferred prey for loggerheads) become concentrated at the bottom of the net. Additionally, Mansfield and Musick (2003) found that seven sea turtles (six loggerheads and one Kemp's ridley) tracked in the Virginia Chesapeake Bay from May 22 to July 17, 2002, dove to maximum depths ranging from approximately 13.1 ft (4 m) to 41 ft (12.5 m). Further, Byles (1988) and Mansfield and Musick (2003, 2004) found that sea turtles in the lower Chesapeake Bay commonly make dives of over 40 minutes during the day. While the percentage of time spent at each depth range needs to be clarified, it is improbable that turtles, during a 40 minute period, are never found at depths deeper than the depth at which sea turtles were observed entangled and impinged (e.g., approximately 6 feet (1.8 m)). This information suggests that sea turtles will be found through the water column, even though they may prefer warmer surface waters. While side scan sonar survey results have not documented the sub-surface entanglement of sea turtles in two years of surveys, NMFS believes these results should be treated cautiously, recognizing the potential limitations of this technique and known sea turtle behavior patterns.

Comment 13: One commenter disagreed with NMFS′ statement that the mesh size characteristics are generally consistent from the top to bottom of the leader.

Response: It is possible that different nets in different areas of the Chesapeake Bay are set with different mesh sizes from top to bottom. The statement in the proposed rule was that pound net leader characteristics are generally consistent from top to bottom. NMFS conducted pound net leader observations during 2002 and 2003 for a total of 126 individual active nets observed, and documented different mesh sizes in the top and bottom of the leader in only one or two nets, but notes that nets were not routinely monitored from top to bottom. In 2002 and 2003 combined, there were approximately 26 nets that did change mesh sizes from the shallower end to the deeper end of the leader (moving horizontally along the leader), but that is not what was referred to in NMFS′ original statement. Additionally, NMFS discussed this issue with four pound net fishermen and this subset of fishermen indicated that they used one mesh size in their leaders.

Comment 14: One commenter disagreed with NMFS′ statement that pound net leaders in the Virginia Chesapeake Bay are one mile (1,609 m) long.

Response: The Economic and Social Environment section (Section 4.3) of the draft EA stated that “...fish swimming along the shore are turned towards the pound by the leader (sometimes a mile long), guided into the heart, and then into the pound...” The purpose of this paragraph was to provide background information on the configuration of pound net gear, and it is NMFS' understanding that in certain areas pound net leaders can be one mile (1,609 m) long (Dumont and Sundstron, 1961). Based upon field observations in Virginia however, NMFS agrees with the comment that pound net leaders in Virginia do not reach one mile (1,609 m) long. In fact, Section 28.2-307 of the Code of Virginia restricts the total length of a single fixed fishing device to 1,200 feet (365.8 m) or less. The reference to the leader length of one mile (1,609 m) was deleted in the final EA.

Comment 15: One commenter noted that pound net operations are critical sources of food for birds, protected under the Migratory Bird Treaty Act, in the Virginia Chesapeake Bay, and NMFS failed to consider this biological benefit in its analysis. Further, this commenter felt that pound net operations are beneficial for sea turtles, as important sources of food from the discards of the pound nets.

Response: NMFS recognizes that a variety of birds feed on the catch and discards from the pound net fishery. That potential benefit to avian species was analyzed in the final EA. However, birds have also been documented entangled, dead and alive, in the leaders and have been documented entangled and entrapped in the pounds and hearts, both dead and alive. Monitoring efforts in 2002 and 2003 documented several dead birds entangled in leaders, hearts, or pounds with varying mesh sizes, including 12 pelicans, 10 cormorants, 6 gulls, 2 gannets, 2 common loons, 1 royal tern, and 130 birds of unidentified species. Since individual nets were surveyed multiple times, and since it is difficult to identify decomposing birds, some birds may have been counted multiple times. Regardless, the avian mortality documented during 2002 and 2003 does not represent total mortality to these species, as surveys documented only a portion of total fishing effort. Birds foraging in Chesapeake Bay may exploit pound nets for prey but they are not dependent on this source of forage. NMFS believes that the risk of mortality, disruption of normal feeding behaviors, and other unknown ecological effects to avian species resulting from pound nets outweighs any perceived benefit of concentrating prey resources.

Sea turtles have been found alive and uninjured in the pounds of pound net gear, and are assumed to be foraging on the entrapped species. Tagging data collected by VIMS suggest that some sea turtles exhibit strong site fidelity to certain pound nets (Mansfield and Musick, in press). Turtles may also feed on the discards of pound net gear outside the pound, but the harm or benefit of this foraging resource are unknown. Turtles′ proximity to the gear may in fact increase the potential for interactions with the leaders. NMFS believes the negative impact from interactions with the leaders outweighs any potential benefit from the concentration of prey items or availability of discards. It is also unknown what impact pound nets have on the behavior and development of sea turtles in the Chesapeake Bay.

Comment 16: Thirteen commenters stated that the proposed pound net restrictions will not solve the high spring sea turtle stranding problem in Virginia waters, and NMFS should continue to explore other sources of sea turtle mortality (e.g., vessel impacts, habitat degradation, water quality, lack of prey items, other fisheries). One of the commenters recommended that the menhaden fishery be regulated so there would be more food and better water quality for marine species, sea turtles included. Observer coverage on other spring fisheries in Virginia, as well as continued observer coverage on the pound net fishery, was recommended by four of the commenters.

Response: As discussed in Comment 8, NMFS does not believe that pound nets are the sole source of spring turtle mortalities in Virginia. NMFS does believe that pound nets play a role in the annual spring stranding event. Prohibiting a gear type known to entangle and impinge sea turtles in an area with documented takes will protect sea turtles from potential mortality associated with these pound net leaders, and reduce the strandings that occur from this gear type.

Since 2001, several fisheries have been observed in Virginia with few documented sea turtle takes. However, NMFS recognizes that variations in fishery-turtle interactions may occur between years, and is committed to continued monitoring of fisheries in and around Virginia. The NMFS 2004 monitoring program is anticipated to include observer coverage of the gillnet fisheries in offshore and nearshore Virginia and Chesapeake Bay waters; alternative platform observer coverage of the large mesh gillnet black drum fishery; observer coverage of the trawl and scallop dredge fisheries in offshore Virginia waters; investigations into sea turtle interactions with the whelk and crab pot fisheries; and pound net monitoring. NMFS is also working to place observers on board the menhaden purse seine fishery in the Chesapeake Bay. NMFS will also be providing funding for professional necropsies and associated lab costs on fresh dead sea turtles in Virginia to get a better picture of the health of a subset of stranded sea turtles, and working with Virginia organizations to institute an educational campaign aimed at reducing sea turtle interactions with recreational fishermen and boaters. NMFS will continue to closely monitor sea turtle stranding levels and to evaluate interactions with other mortality sources not previously considered that may contribute to sea turtle strandings.

NMFS recognizes that water quality and habitat degradation from many sources can influence sea turtle distribution, prey availability, foraging ability, reproduction, and survival. Sea turtles are not very easily directly affected by changes in water quality or increased suspended sediments, but if these alterations make habitat less suitable for turtles and hinder their capability to forage, eventually they might tend to leave or avoid these less desirable areas (Ruben and Morreale, 1999). The Chesapeake Bay watershed is highly developed and may contribute to impaired water quality via stormwater runoff or point sources. However, due to the volume of water in the mainstem Chesapeake Bay, the impacts of pollutants may be slightly reduced compared to certain tributaries. In a characterization of the chemical contaminant effects on living resources in the Chesapeake Bay's tidal rivers, the mainstem Bay was not characterized due to the historically low levels of chemical contamination, but the James River was characterized as an area with potential adverse chemical contaminant effects to living resources (Chesapeake Bay Program Office 1999). NMFS, USFWS, and the Environmental Protection Agency (EPA) are currently engaged in ESA section 7 consultations on EPA's water quality standards and aquatic life criteria. Through those consultations, the effects of EPA's water quality standards will be evaluated with respect to potential impacts to listed species.

NMFS recognizes that the blue crab population in the Chesapeake Bay has declined from previous levels (Seney, 2003). A diet analysis of stranded loggerhead and Kemp's ridley sea turtles in Virginia found that the diet of loggerheads appears to have shifted to a fish dominated diet in the mid-1990s and in 2001 to 2002, from horseshoe crab dominance during the early to mid-1980s and blue crab dominance in the late 1980s and early 1990s (Seney, 2003). Menhaden, croaker, seatrout, striped bass and bluefish were the fish species most frequently found in the recent loggerhead samples, with all of these fish species being commercially important in Virginia's gillnet and pound net fisheries (Mansfield et al. , 2001, 2002a in Seney, 2003). Seney (2003) stated the fish species composition and the fact that few turtles had consumed both fish and scavenging mud snails suggests that the turtles examined were feeding on primarily live and fresh dead fish from nets. It remains uncertain whether these results are biased because sampling was conducted on only stranded animals and it could be that more fish was found in the stomachs of stranded loggerheads because some were interacting with fishing gear, which contributed to their demise. Based upon these results however, it does appear that loggerheads are shifting their diet and the decline of the horseshoe and blue crab populations may be increasing loggerheads' interaction rate with fishing gear. The future ramifications of this are unclear and it warrants further research. A small subset of Kemp's ridleys was sampled and data suggest that blue crabs and spider crabs were key components of the Virginia Kemp's ridley diet from 1987 to 2002. However, based on the body condition of the majority of stranded turtles, sea turtles in the Chesapeake Bay do not appear to be compromised by a lack of food. The decline of the horseshoe and blue crab populations may result in a diet shift to different species (e.g., different species of crab) or potential move to a different foraging area.

Again, it should be stressed that NMFS believes that high spring strandings may be a result of an accumulation of factors, most notably fishery interactions, but pound net leaders are known to take sea turtles and NMFS believes that interactions with pound net leaders likely contribute to the overall strandings.

Comment 17: Twelve commenters noted that the number of active pound nets (large mesh and stringer leaders in particular) have decreased since the 1980s while the number of strandings have increased in recent years.

Response: NMFS agrees that there are currently fewer pound net leaders, in particular those utilizing large mesh and stringer leaders, in the Virginia Chesapeake Bay in comparison to the 1980s. It is unclear whether the reduction in pound nets has been consistent throughout the Virginia Chesapeake Bay, or whether the number of pound nets in one area has decreased significantly and the number in another area has remained relatively the same or potentially increased. The number of pound net licenses issued in Virginia has remained the same since 1994, due to a limited entry program, and one license is assigned to each pound net. So while the number of pound nets has apparently decreased since the 1980s, the number of licenses issued (n=161) has been approximately the same since 1994. This suggests that the number of pound nets in the Virginia Chesapeake Bay has been approximately the same since 1994, but NMFS recognizes that the number of active nets in any given season may vary among years. Also, NMFS notes that pound net landings from 1990 to 1999 have increased at an annual rate of 8.33 percent, while the annual revenues from pound net landings have increased by 17.31 percent (Kirkley et al. , 2001).

Regardless, NMFS disagrees with the conclusion that some turtle strandings cannot be attributed to pound net leaders because strandings have increased while the number of leaders have decreased. NMFS recognizes that the increase in documented sea turtle mortalities could be a function of the increase and improvement in the level of stranding effort, coverage, and reporting that has occurred, especially along the Eastern shore, and perhaps a function of the apparent increase in abundance of the southern population of loggerheads, which make up approximately 50 percent of the loggerheads found in the Virginia Chesapeake Bay. Pound net leaders (regardless of how many are in the Chesapeake Bay) still entangle and impinge sea turtles and the ESA requires NMFS to use the best available scientific information to protect the species. There have been documented sea turtle entanglements in leaders that were determined to have caused mortality by drowning. Impingements represent a take under the ESA that may lead to mortality.

Comment 18: Four commenters acknowledged that elevated strandings abate by the end of June or early July and the pound net fishery operates throughout the turtle residency period in the Chesapeake Bay. They noted that if pound nets were the problem, one would expect strandings to remain at elevated levels throughout the season. One of the commenters noted that there have been no documented takes after June 15, 2003, to the present.

Response: From 1995 to 2002, the average monthly sea turtle strandings for Virginia (oceanside and Chesapeake Bay combined) were the highest in June (117), followed by May (39), July (28), August (26), October (18), and September (17). Strandings do continue throughout the sea turtle residency period, but not at the elevated levels seen in the spring. As noted in Comment 1, to NMFS' knowledge, there have been 2 observed turtles in pound net leaders after the spring, but there also has been very limited observer coverage during that time. It is possible that entanglements and impingements are occurring in pound net leaders after the spring, and contributing to stranding levels, but there are no notable observations to suggest that, or that the frequency of takes is the same as in the spring. It is also possible that sea turtles are more vulnerable to pound net entanglement and impingement in the spring, as they are moving into the Chesapeake Bay, migrating through a concentration of pound nets set near the mouth of the Chesapeake Bay. NMFS acknowledges that additional information would be beneficial to adequately assess the risk of entanglement/impingements in pound net leaders after the spring, and to determine why sea turtles may not be interacting as frequently with leaders during this time. The only directed study on temporal entanglements dates back to the 1980s, and the sampling area was concentrated in the western Chesapeake Bay. Bellmund et al. , (1987) stated that entanglements in pound net leaders began in mid-May, increased in early June, and reached a plateau in late June. In 1984, surveys were conducted through September, and no entanglements were observed after late June. Bellmund et al. (1987) further stated that these data suggest pound nets pose mortality threats to sea turtles in the Chesapeake Bay for a relatively short period of the year even though most sea turtles reside in the Chesapeake Bay from May through October. Additionally, from 1981 to 1984, 14 loggerheads and 2 Kemp's ridleys were monitored via radio tracking (Byles, 1988). Three of the animals became entangled in leaders; the other animals tracked in the summer and fall were able to forage around the nets with little apparent entanglement threat (Byles, 1988, Musick et al. , 1994, Mansfield et al. , 2002b).

NMFS acknowledges that there are few documented sea turtle interactions with pound net leaders after mid-June. However, there also have not been any directed monitoring efforts during this time; NMFS monitoring in 2003 ended on June 11 due to funding and logistical constraints. Monitoring was not conducted during the peak of the 2003 stranding period and it is possible that many more sea turtles would have been observed entangled in or impinged on leaders during that time. As stated in the responses to Comments 8 and 16, NMFS does not believe pound nets cause all of the strandings in Virginia, and as noted in the proposed rule, a cause and effect relationship between pound net interactions and high spring strandings cannot be statistically derived based on the available data, even though a concentration of strandings has been consistently found in the vicinity of pound nets and a number of dead floating sea turtles were documented around pound nets in recent years. The facts remain that turtles have been observed entangled in and impinged on pound net leaders during the spring.

Comment 19: Two commenters noted that the proposed rule failed to identify what action NMFS would take if the final rule is implemented as proposed and high strandings continue in the spring.

Response: Monitoring of potential mortality sources will continue to occur this spring, and the information gathered from these monitoring initiatives would inform what action NMFS would take if strandings continue. It is possible that additional mortality sources may be identified and appropriate actions taken. NMFS believes this final rule will result in reduced sea turtle mortality associated with pound net gear in the Chesapeake Bay. The final rule includes the framework mechanism that enables NMFS to make changes to the restrictions and/or their effective dates on an expedited basis in order to respond to new information and protect sea turtles.

Comment 20: Two commenters felt that healthy sea turtles can forage around the pound nets without being entangled or impinged, and the animals observed in pound net gear, and found stranded on Virginia′s beaches, are sick, diseased (like some of those found in Florida), cold stunned, and tired. One additional commenter felt that strandings are a result of natural selection, and that NMFS should not interfere with lack of recovery of those animals with weak genes.

Response: The ESA's prohibition against take applies to all endangered or threatened animals. A capture in fishing gear is still a take, regardless of the animal's condition and whether it is weak, sick, or in any other way compromised. Unless the take is authorized pursuant to a regulation, a permit, or in the Incidental Take Statement of a Biological Opinion, the person who incidentally takes a listed animal is subject to criminal penalties and fines. The condition of sea turtles is therefore not relevant to NMFS′ determination to permit an additional exception to the take prohibitions.

In any event, NMFS has no information to suggest that the animals found entangled or impinged on leaders during the spring of 2002 and 2003 were unhealthy before their capture. The animals observed by NMFS as entangled and impinged have visually appeared healthy (e.g., not emaciated, not externally compromised). Granted, the live turtles and the dead turtles not necropsied may have had other problems besides those that are able to be visually observed. Necropsies were performed on 4 of the 7 dead entangled turtles found in pound net leaders in 2002 and 2003. One additional Kemp's ridley sea turtle is anticipated to be necropsied (found in May 2003); NMFS is waiting for the necropsy results from this animal. The other two dead animals were left in situ to monitor their status. Necropsy results from 2 of the 7 dead entangled turtles showed that the turtles had adequate fat stores, full stomach and/or intestines, and no evidence of disease. A necropsy by the Armed Forces Institute of Pathology on one of the dead Kemp's ridleys recovered from a leader found that “the animal was active and in good nutritional condition at the time of death” and concluded that entrapment in fishing gear was the cause of death. One of the 4 necropsy reports only stated that the turtle was female with nematodes and digested tissue in its digestive tract.

Most of the turtles stranded in Virginia have been moderately to severely decomposed (e.g., 85 percent in 2003). The ability to conduct necropsies is limited by the condition of the stranded animals, and severely decomposed turtles are not usually necropsied. The majority of the stranded turtles that were examined by necropsy in the spring of previous years had relatively good fat stores and full stomachs/digestive tracts, suggesting that they were in good health prior to their death. NMFS has no evidence to suggest that sea turtles found in the Chesapeake Bay during the spring are weakened from their seasonal migration. There is also no evidence of widespread disease in these stranded animals. As referred to in a public comment, a Florida epizootic occurred from October 2000 through March 2001, although a few cases a year have been seen since then. The epizootic appears to have been limited to south Florida. The hallmark symptom was a varying degree of paralysis which affected voluntarily movements and certain reflexes. Forty-nine alive stranded loggerheads were confirmed to have been caused by the epizootic. However, a living animal was necessary to make the diagnosis. Many of the dead loggerheads found during that period may have also died from the same disease, but it was not possible to determine their cause of death. The animals that have stranded in Virginia have not exhibited the same symptoms as those found in the Florida stranding event that was associated with an epizootic, nor has the epizootic continued in any significant way beyond early 2001. In the early 1990s, four live stranded animals in Virginia exhibited signs of a central nervous system disturbance, later determined to be a bacterial encephalitis (George et al., 1995). These animals were dull and listless when undisturbed, but when handled, they moved their flippers spastically and showed a hyperflexion of the neck. At this time, NMFS has no data indicating that the sea turtles found in Virginia pound nets have a central nervous system problem. As mentioned, NMFS is providing funding to conduct necropsies and lab analyses on fresh dead sea turtles this spring, which will hopefully provide additional information on the health of some of these stranded animals.

It is unlikely that the spring stranded animals in Virginia were cold stunned. The average water temperature on May 6 at the NOAA National Ocean Service Kiptopeke, Virginia station was 16.1 C from 1999 to 2002, 16.6 C on May 7, and 17.2 C on May 8. Average water temperatures in 2003 were 14.3 C, 15.1 C, and 17.1 C on May 6, 7, and 8, respectively, not notably different from the most recent 4-year average. Water temperatures generally increase gradually over the spring and summer, and in 2003, most of the sea turtle strandings occurred during the last two weeks of June, when water temperatures were warmer. For example, on June 22, the average water temperature at the Kiptopeke station was 21° C. Mansfield et al. , (2001) and Mansfield and Musick (2003) state that analyses by VIMS have estimated that sea turtles migrate into the Chesapeake Bay when water temperatures warm to approximately 16 to 18° C. However, sea turtles do frequent waters as cool as 11° C (Epperly et al. , 1995). Cold stunning typically occurs during the time of the year when water temperatures are decreasing, not increasing, and is well documented in other areas. Sea turtles, the majority of them Kemp′s ridleys, wash ashore cold stunned each fall/winter along the beaches of Cape Cod Bay, Massachusetts, beginning with the first sustained storm front after the Cape Cod Bay water temperatures have dropped to or below 10° C. From the available data on cold stunning and sea turtle preferences for water temperature, it is unlikely that the sea turtles found stranded and in pound net gear in Virginia during May and June are cold stunned.

Determining the cause of death in stranded sea turtles is difficult, given the level of decomposition of most stranded turtles and the lack of evidence, due in part to sea turtles' anatomy (e.g., hard carapace, scaly skin). However, the circumstances surrounding the spring strandings in Virginia are consistent with fishery interactions as a likely cause of mortality and, therefore, strandings. These circumstances include relatively healthy turtles prior to the time of their death, a large number of strandings in a short time period, no external wounds on the majority of the turtles, no common characteristic among stranded turtles that would suggest disease as the main cause of death, and turtles with finfish in their stomachs (which suggests interactions with fishing gear (Bellmund et al. , 1987) or bycatch discarded from vessels (Shoop and Ruckdeschel, 1982)).

As to whether these turtle mortalities may be the result of natural selection, anthropogenic impacts have impeded sea turtle recovery, significantly contributing to their endangered and threatened status. Anthropogenic mortality sources are considered to far outweigh natural mortality sources. There is no evidence to support the notion that turtles interacting with pound nets (or other fisheries gear) are genetically weakened and predisposed to incidental capture. As direct and indirect impacts to sea turtles continue through, for example, habitat destruction, marine debris and pollution, and incidental take in fisheries, dredging, and power plant operations, it remains necessary to attempt to recover and rehabilitate those sea turtles that may be able to be saved. Sea turtle populations have not yet recovered, and as such, NMFS has a statutory obligation to manage and protect these species. Reduction of mortality from anthropogenic sources is necessary to achieve recovery of these species.

Comment 21: Eleven comments were received recommending that NMFS work with the industry on this issue and develop and test pound net leader modifications.

Response: On September 3, 2003, VMRC convened a meeting with NMFS, representatives from the pound net industry, VIMS, the Virginia Marine Science Museum, and the Virginia Department of Game and Inland Fisheries, to discuss the 2002 and 2003 pound net leader monitoring results, high spring sea turtle strandings, and potential measures to reduce sea turtle interactions with pound net gear. At this meeting, NMFS expressed its desire to work with the industry to develop gear modification solutions and requested ideas on potential leader configurations.

NMFS has an effort underway, in conjunction with industry participants, to develop and test an alternative leader design along the Eastern shore during the spring of 2004. This alternative leader design is the non-preferred alternative 5 considered in the EA, but was not able to be fully analyzed with respect to benefits to sea turtles because of the lack of data. After monitoring and analyzing the results of this study, it will be determined if the modification is effective at reducing sea turtle capture, while retaining an acceptable level of target catch, or if additional research is necessary.

Additionally, NMFS has partnered with the National Fish and Wildlife Foundation to establish a fishing gear mini-grant program for sea turtles that is aimed at working with industry (and other interested public stakeholders) to promote research, development, and testing for alternative leader designs in the Virginia pound net fishery. Proposals were due on April 15 and funding decisions are expected to be made by July 15, 2004.

While research is ongoing and NMFS is committed to pursuing a gear modification solution for this fishery, it remains necessary to implement additional restrictions on the Virginia pound net fishery at this time due to the documented takes in leaders in compliance with the 2002 interim final rule and continuing levels of sea turtle mortality in Virginia waters.

Comment 22: Thirteen commenters expressed their concern with the high economic impacts to fishermen from this proposed action, and one of these commenters believed that the economic impacts were underestimated and that economic burden from the proposed action would prohibit fishermen from fishing pound nets year round. Four of the 13 commenters recommended compensation to the fishermen that do not fish this season.

Response: NMFS used the best available information to estimate the economic costs to the pound net fishery. The overall economic impact may be considered underestimated since indirect economic impacts were not assessed. For example, processing plants or fish houses may be affected indirectly by the management measures imposed on this fishery.

NMFS only estimated the direct economic impacts, which are the impacts on the harvester. In the economic analysis of direct impacts, averages are reported, and an average may not reflect an individual's actual position. That is, what an individual actually earned in revenues may be less or more than the reported average. Also note the reported coefficient of variation (CV) for the anticipated revenue loss of $40,474 under the proposed rule was 1.08 percent (See Table 5.1.2.6 in the EA). The CV is equal to the standard deviation divided by the mean (i.e., 1.08 percent = [$43,712/$40,474]). That is, given a standard deviation of $43,712, some harvesters may have earned as much as $127,024 (=mean+2*standard deviation=$40,474+2*($43,712)) in the same area and during the same time period. It is the average revenue per harvester NMFS reports along with the statistical variation (reported in a CV).

Industry losses were overestimated. The total number of harvesters in the lower portion of the Virginia Chesapeake Bay was biased up by two to three harvesters. That is, these two or three harvesters can modify their leader mesh size versus remove their leaders. This results in industry losses being overestimated.

In summary, total economic impacts may be underestimated since indirect economic impacts were not included. Direct impacts on the individual were not over or underestimated, as averages were reported. Direct industry impacts were overestimated. This response refers to the economic impacts associated with the proposed rule, as the proposed rule is what was commented upon. However, with this final rule, the economic impacts to the pound net fishery are reduced as compared to the proposed rule. The economic impacts of this final rule are smaller than those evaluated for the proposed rule. Fewer nets are affected due to the smaller closure area and leader mesh size outside the leader prohibited area is not further restricted. With this final rule, annual revenues per harvester would be reduced by 14.7 percent to 29.4 percent, depending on how many nets the harvesters set. Industry revenues would be reduced by 7.3 percent (=$0.19M/$2.6M). Without authorization from Congress, NMFS cannot provide compensation to industry. For details on how the reductions in revenues were calculated, refer to Sections 5.1.2 and 5.8.2 in the EA. Virginia′s 2002 landings data indicated 31 harvesters (Table 5.1.2.3 in EA) landed fish from May 6 to July 15, and there were 53 harvesters that fished year round. Excluding the May 6 to July 15 time period in 2002, 16 harvesters fished in the lower bay and earned revenues of $48,126 (CV=1.22). This implies there were six harvesters in the lower bay that did not fish from May 6 to July 15 in 2002. Therefore, some harvesters fishing pound nets do survive from an economic perspective by harvesting outside the proposed rule time period. However, NMFS does not have any information as to whether these six harvesters have alternative supplementary sources of income.

Comment 23: Six commenters expressed concern with the delay in publishing the proposed regulations, especially as the industry begins planning for the next fishing season early in the calendar year.

Response: NMFS has been working to alleviate the impacts of the Virginia pound net fishery on sea turtles as expeditiously as possible, in order to give the fishermen advance notification and ensure measures are in place before the historical period of high strandings. NMFS recognizes that the industry begins planning for the next fishing season in approximately December or January and is sensitive to fishermen's time constraints required to outfit their gear with mesh in compliance with required measures. NMFS issued the proposed rule as soon as possible after taking the necessary time to acquire and analyze the available data, explore the management alternatives, and prepare and review the necessary documents. Similarly, NMFS issued this final rule as soon as possible after thoroughly reviewing and considering public comments and determining if modifications to the proposed rule were necessary.

Comment 24: One commenter felt that the timeframe of the restrictions was too long and that fishing would be inappropriately curtailed when water temperatures were too cold for sea turtles.

Response: NMFS believes that, given the available information, the time period for the pound net restrictions is appropriate. From 1994 to 2003, the average date of the first reported stranding in Virginia was May 13. However, sea turtle mortality would have occurred before the animals stranded on Virginia beaches. In order for the proposed pound net restrictions to reduce sea turtle interactions with pound net leaders, the proposed measures should go into effect at least 1 week prior to the stranding commencement date, or on May 6 each year. Implementing protective measures by May 6 would ensure they are in place at the time when sea turtles are expected to be in the Chesapeake Bay and are becoming vulnerable to mortality sources.

Based on historical Sea Turtle Stranding and Salvage Network (STSSN) stranding data, typically the peak of Virginia strandings has been from mid-May to mid-June. However, the stranding data show that the peak can occur earlier and later. For instance, in 2003, the stranding peak occurred during the last two weeks of June and strandings remained consistent through the second week of July (e.g., 48 sea turtles stranded from July 1-15, 2003). The 2003 stranding peak was 10-15 days later than in 2001 and 2002 (Swingle and Barco, 2003). Given that sea turtle presence in the Chesapeake Bay is dependent upon water temperature, which makes the stranding peak somewhat variable, it is important to ensure sea turtles are protected during the period of apparent vulnerability (as indicated by elevated strandings). While there is some concern that entanglements could continue until the end of July or throughout the sea turtle residency period in the Chesapeake Bay, based upon the available data on sea turtle entanglements, impingements, and stranding patterns, the greatest potential for sea turtles to interact with pound net leaders occurs during May and June, and extends into the first half of July. In some years the peak period of high strandings may be shorter than the time period addressed by this final rule, but historically, high sea turtle strandings have been documented throughout the proposed time period of the leader restrictions. Implementation of the gear restrictions from May 6 to July 15 will account for stranding peak variability among years and is expected to minimize the occurrence of sea turtle takes in the pound net fishery in the spring and, thus, reduce the strandings that occur from this gear type.

While monitoring surface water temperature and implementing restrictions based on reaching a pre-designated water temperature may account for seasonal variability, enacting regulations based upon real time water temperature is impractical due to the amount of time required for the agency to implement and for fishermen to comply with the regulations, and the potential variability of water temperature within different locations in the Chesapeake Bay and within the water column. NMFS has considered historical surface water temperatures (not real time monitoring) in establishing previous area closures. Real time monitoring of water temperature as a trigger for regulations is not practical for this situation, nor is it appropriate given the predictable time period of annual spring strandings in Virginia. Further, NMFS believes that a consistent effective date better enables industry to plan its fishing activities, as fishermen would know in advance specifically when the restrictions would apply.

Based upon public comments received, NMFS has determined that several modifications to the measures included in the proposed rule are warranted. Specifically, the area in the southern portion of the Chesapeake Bay where all pound net leaders are prohibited has been reduced, and the nearshore boundary to which the prohibition applies has been moved from the beach to offshore, excluding those nets set with the inland end of the leader 10 horizontal feet (3 m) or less from the mean low water line. This modification was deemed appropriate given public comments noting that there is a difference between the nearshore and offshore nets, and that this difference may impact sea turtle interaction rates, in particular the occurrence of impingements. As noted in the response to Comment 11, NMFS had originally considered the environmental conditions in the locations where the offshore and nearshore nets are set to be similar, based upon reports from NMFS observers and general understanding of the currents in the Chesapeake Bay (e.g., strong along the Eastern shore near the mouth of the Chesapeake Bay). Given the public comments indicating that the currents and take conditions are different between offshore and nearshore nets, NMFS considered those potential differences when reanalyzing the take information. The data support this modification, in that in 2002 and 2003, offshore nets accounted for all of the observed impingements (n=14) and eight of the nine observed entanglements. One dead sea turtle was observed entangled in a nearshore 8-inch (20.3-cm) stretched mesh leader along the Eastern shore. The difference in takes between the offshore and nearshore nets is statistically significant with a chi-square value of 3.841 and p<0.01. In the lower Chesapeake Bay (encompassing the proposed leader prohibited area), approximately 60 percent (13 of 22) of the active pound nets surveyed in 2003 were nearshore nets. In 2002 and 2003, there were 345 surveys of nearshore nets and 480 surveys of offshore nets throughout the Virginia Chesapeake Bay, and 13 surveys did not specify the location. NMFS recognizes that the best available information suggests that the boundary of the leader prohibited area should be modified to account for this distinction between the effects of offshore and nearshore nets on listed sea turtles.

Additionally, NMFS has determined that this final rule should not change the restricted leader mesh size outside the leader prohibited area from 12 inches (30.5 cm) to 8 inches (20.3 cm) stretched mesh. Based upon additional analysis on impingement to entanglement ratios by NMFS, it appears that restricting mesh size to less than 8 inches (20.3 cm) stretched mesh would not necessarily provide the anticipated conservation benefit to sea turtles. In addition to mesh size, the frequency of sea turtle takes may be a function of where the pound nets are set, with pound nets set in certain areas having a higher potential of takes for a variety of reasons, such as depth of water, current velocity, and proximity to certain environmental characteristics or optimal foraging grounds. Additional analyses, and perhaps data collection, is planned to be completed that may provide insights into the relationship between mesh size and sea turtle interactions. At this time, the mesh size threshold that would prevent sea turtle entanglements cannot be determined for mesh sizes below 12 inches (30.5 cm). Hence, at this time NMFS is not making an additional modification to leader mesh size and is retaining the mesh size restriction included in the 2002 interim final rule, specifically the restriction of leaders with greater than or equal to 12 inches (30.5 cm) stretched mesh (as well as leaders with stringers), outside the leader prohibited area. While some takes may still occur in less than 12 inches (30.5 cm) stretched mesh, retaining this mesh size restriction should still provide a conservation benefit to sea turtles (Bellmund et al. , 1987).

This final rule also includes the contains the framework mechanism that was a component of the 2002 interim final rule, and of the status quo alternative included and analyzed in the EA. This mechanism enables NMFS to make changes to the restrictions based upon new information, and extend the effective date of the restrictions until July 30 on an expedited basis. This final rule does not reduce the allowable leader stretched mesh size to less than 8 inches (20.3 cm) as proposed, for reasons identified previously. NMFS intends to continue to monitor fisheries active in the Virginia Chesapeake Bay and ocean waters, including pound net leaders with a stretched mesh size measuring less than 12 inches (30.5 cm) outside the leader prohibited area. Retaining this framework mechanism is necessary to respond to any new information on the interactions between sea turtles and pound nets and ensure that sea turtles can be protected from additional take should monitoring document the entanglement of a live or dead sea turtle outside the leader prohibited area. The framework mechanism was excluded from the proposed rule due to difficulties experienced with enacting regulations on a real time basis. NMFS recognizes that delays have been experienced with the framework mechanism, as observed in 2003. To alleviate some of the temporal delays associated with the issuance of a framework measure, NMFS will prepare portions of the required documents ahead of time, in the event that a mid-season framework action is necessary.

In the proposed rule, NMFS stated that the purpose of the action was to prevent sea turtle entanglement in and impingement on pound net gear. NMFS continues to believe that sea turtles will be protected by this final rule, and that sea turtle entanglements in and impingements on pound net leaders will be reduced. However, this discussion of the final rule has noted that the goal of the action is to minimize or reduce sea turtle interactions with pound net gear, because sea turtle entanglements, and possibly impingements, may still occur in leaders outside the leader prohibited area. As noted previously, all documented sea turtle interactions, except one entanglement in an 8-inch (20.3-cm) stretched mesh leader, have occurred inside the leader prohibited area. It is believed that the measures in the final rule will be protective of sea turtles and reduce takes in this fishery, given that leaders are prohibited in the area with most of the documented sea turtle takes. Given this information, with the recognition that NMFS is continuing to collect information on sea turtle and pound net interactions, the purpose of this action is to reduce future sea turtle entanglements in and impingements on pound net gear.

This final rule corrects an item related to year-round reporting that was inadvertently deleted in the proposed rule. The preamble to the proposed rule noted that all Virginia pound net fishermen would still be required to report all sea turtle interactions (e.g., dead or alive; entangled, impinged, or floated into their net) in any part of their pound net gear (e.g., pound, heart, or leader) to NMFS within 24 hours of returning from the trip in which the take was documented. However, the proposed regulatory text relating to the reporting of captured dead or injured sea turtles was inadvertently deleted and must be reinserted.

NMFS has also included in this final rule geographical boundaries for the leader mesh size restrictions in the Great Wicomico River and the Piankatank River, based upon a public comment requesting that the geographical areas in those Western Chesapeake Bay tributaries be better defined. This modification is for clarification purposes only and does not change the biological, economic, or social analysis included in the EA.

The final rule clarifies that this action adds a new exception to prohibitions on the take of threatened sea turtles, something that was not explicitly noted in the title of the proposed rule. The prohibitions against taking in 50 CFR 223.205(a) do not apply to the incidental take of any member of a threatened species of sea turtle during fishing or scientific research activities, to the extent that those involved are in compliance with all applicable requirements of 50 CFR 223.206(d). By adding the prohibitions and restrictions on leaders in the Virginia Chesapeake Bay to 50 CFR 223.206(d), this final rule adds a new exception and modifies the previous pound net related exception to the prohibitions on take of threatened sea turtles. NMFS has changed the title of this final rule to more accurately reflect what this rule entails, including the exception to the prohibitions on take.

This final rule has been determined to be not significant for purposes of Executive Order 12866.

The AA finds good cause under 5 U.S.C. 553(d)(3) to waive the 30-day delay in effective date of this final rule. Such a delay would be contrary to the public interest because sea turtles are anticipated to occur in Virginia waters in May, during the 30-day delay period. Sea turtles are found to occur in water temperatures of 11° C and warmer. Analysis conducted by the NMFS Southeast Fisheries Science Center found that in week 17 (April 23 to April 29), week 18 (April 30 to May 6), and week 19 (May 7 to May 13), approximately 80 percent, 85 percent, and 90 percent, respectively, of the area encompassing the mouth of the Chesapeake Bay (from the COLREGS line to the 20-m (65.6-ft) depth contour) contained sea surface temperatures of 11° C and warmer (NOAA Fisheries, unpub. data, 2003). Data from 1993 to 2002 were included in the analysis. This indicates that water temperatures around the mouth of the Chesapeake Bay are well within sea turtles' preferred temperature range in late April and early May. There is no information to suggest that the water temperatures this year would be notably different than in previous years. As such, sea turtles are likely to be present in the Virginia Chesapeake Bay during the 30-day delay period, and at this time, these turtles would likely be subject to entanglement and impingement in pound net leaders and potential subsequent mortality.

NMFS has prepared a final regulatory flexibility analysis that describes the economic impact this final rule would have on small entities. A summary of the analysis follows:

The fishery affected by this final rule is the Virginia pound net fishery in the Chesapeake Bay. The final rule prohibits all offshore pound net leaders in a portion of the southern Chesapeake Bay, and retains the prohibition of leaders with stretched mesh greater than or equal to 12 inches (30.5 cm) and leaders with stringers in the remainder of the Virginia Chesapeake Bay, from May 6 to July 15 each year. Non-preferred alternative 1 would prohibit all pound net leaders in a portion of the southern Chesapeake Bay, and prohibit leaders with stretched mesh greater than or equal to 8 inches (20.3 cm) and leaders with stringers in the remainder of the Virginia Chesapeake Bay, from May 6 to June 30. Non-preferred alternative 2 would prohibit pound net leaders with 8 inches (20.3 cm) and greater stretched mesh, as well as leaders with stringers, in the Virginia Chesapeake Bay from May 6 to July 15. Non-preferred alternative 3 is similar to the non-preferred alternative 1, except that the pound and heart, in addition to the leader, must also be removed in a portion of the southern Chesapeake Bay, and the time frame of the restrictions would be from May 6 to July 15 each year. Non-preferred alternative 4 would prohibit all pound net leaders from May 6 to July 15 in the Virginia Chesapeake Bay. In addition to the 8 inches (20.3 cm) and greater mesh size restrictions in a portion of the Virginia Chesapeake Bay, non-preferred alternative 5 would modify the pound net leader configuration in a portion of the southern Chesapeake Bay so that the mesh height would be restricted to one-third the depth of the water, the mesh would be required to be less than 8 inches (20.3 cm) and held with ropes 3/8 inches (0.95 cm) or greater in diameter strung vertically a minimum of every 2 feet (61 cm) and attached to a top line. Non-preferred alternative 6 includes the measures in the proposed rule, namely a prohibition of all pound net leaders in a portion of the southern Chesapeake Bay, and a prohibition of leaders with stretched mesh greater than or equal to 8 inches (20.3 cm) and leaders with stringers in the remainder of the Virginia Chesapeake Bay, from May 6 to July 15.

According to the 2002 VMRC data, there are 31 harvesters actively fishing pound nets from May 6 to July 15, with 10 harvesters located in the lower portion of the Virginia Chesapeake Bay and 21 harvesters located in the upper portion of the Virginia Chesapeake Bay. These 31 harvesters fish approximately 40 pound nets in the upper portion of the Virginia Chesapeake Bay (=21 harvesters x 1.9 pound nets/harvester) and 30 pound nets in the lower portion of the Virginia Chesapeake Bay (=10 harvesters x 3.0 pound nets/harvester). Based on 2000 to 2002 data, annual landings per harvester were 280,996 pounds (127,457 kg) in the upper portion of the Virginia Chesapeake Bay and 257,491 pounds (116,795 kg) in the lower portion of the Virginia Chesapeake Bay. Annual average revenues per harvester were $64,483 (CV=0.73) and $105,298 (CV=0.91) in the upper and lower region, respectively. From May 6 to July 15, landings per harvester were 96,946 pounds (43,973 kg) in the upper region and 95,380 pounds (43,263 kg) in the lower region. Estimated revenues per harvester were $18,102 (CV=0.88) and $40,474 (CV=1.08) in the upper and lower region, respectively.

Of the 31 harvesters, 33 percent of the harvesters (=[0 located in the upper region +10 located in the lower region]/31 total harvesters) fishing from May 6 to July 15 would be affected by this action. Approximately 12 pound nets in total would be affected by this action, all found in the lower portion of the Virginia Chesapeake Bay.

In the upper bay region, five of the seven alternatives, not counting the “no action” alternative, are the same. This final rule does not impose additional requirements on those leaders found in the upper bay region, so the revenue reductions would be zero. The non-preferred alternatives 1, 2, 3, 5, and 6 would require the leader mesh to be less than 8 inches (20.3 cm). In the upper portion of the Virginia Chesapeake Bay, two potential responses to the leader mesh size restrictions would be either choosing to not fish or switching to a smaller leader mesh size during the restricted period. If harvesters choose not to fish, their revenues decrease by 15.1 percent to 17.1 percent (depending on the time frame of the restrictions), since they incur revenue losses and the cost of removing their gear from the water. If a harvester switches to a smaller mesh leader, his or her revenues would be reduced by 8.4 percent. For purposes of this analysis, we assumed the harvesters will modify their gear since they want to minimize their economic loss. Therefore, in the upper bay region, annual revenues may be reduced by a low of 8.4 percent per harvester under non-preferred alternatives 1, 2, 3, 5, and 6, and 4 harvesters would be affected. Under non-preferred alternative 4, all leaders must be removed from the Virginia Chesapeake Bay. This alternative would impact all 21 harvesters in the upper region, and annual revenues per harvester would be reduced by 33.5 percent.

In the lower portion of the Virginia Chesapeake Bay where all offshore leaders are prohibited under the final rule, management actions vary between alternatives. Under all of the alternatives, all 10 harvesters would be impacted. With this final rule, annual revenues per harvester would be reduced by 14.7 percent to 29.4 percent, depending on how many nets the harvesters set. The economic impact under non-preferred alternative 1 would be more compared to the final action (34.5 percent reduction in annual revenues versus a maximum of 29.4 percent), because more nets would be impacted. The impact under the non-preferred alternative 3 would be greater than this final rule (50.3 percent reduction in annual revenues versus a maximum of 29.4 percent), because additional labor costs would be incurred to remove the heart and pound in addition to the leader and more nets would be affected. The impacts of non-preferred alternative 4 and non-preferred alternative 6 are the same, and annual revenues per harvester would be reduced by 43.2 percent. Reductions in annual revenues per harvester would be less under non-preferred alternatives 2 and 5 in comparison to the final rule, since these non-preferred alternatives would allow harvesters to modify their gear and continue to fish. In the lower bay area, the non-preferred alternative 2 would reduce annual revenues per harvester by 8.6 percent to 12.1 percent, depending on how many nets they set. Under non-preferred alternative 5, annual revenues per harvester would be reduced by 12.1 percent. The status quo would not have economic consequences, at least in the short term.

Annual industry revenues are $2.6 million for the pound net fishery. Under the final rule, industry revenues would be reduced by 7.3 percent (=$0.19M/$2.6M). Under non-preferred alternatives 1, 2, 3, 5, and 6, industry revenues would be reduced by 14.8 percent, 4.9 percent, 21.2 percent, 5.8 percent, and 18.3 percent, respectively. With the preceding five alternatives, 14 of 31 harvesters would be affected by the management actions. Under non-preferred alternative 4, all harvesters would be affected and forgone industry revenues would be reduced by 34.9 percent. Again, these numbers assume fishermen would switch to a smaller mesh leader and continue to fish in those areas with leader mesh size restrictions, instead of removing their leaders entirely. Non-preferred alternatives 2 and 5, although less costly to the industry, were not chosen as the preferred alternative because they cannot be evaluated for benefit to conservation of sea turtles. At this point in time, we are unable to determine whether leader mesh sizes less than 8 inches (20.3 cm) have a different catch rate than leaders with mesh between 8 and 12 inches (20.3 and 30.5 cm). As such, looking strictly at a mesh size restriction, non-preferred alternative 2 would not necessarily afford adequate protection for sea turtles in the lower Chesapeake Bay area where observed sea turtle interactions have been the highest. Non-preferred alternative 5 was rejected because it consisted of a gear modification that is currently untested as a means to reduce sea turtle interactions.

This action does not contain new reporting or record keeping requirements.

This final rule does not duplicate, overlap or conflict with other Federal rules.

Thirteen comments were received and addressed (see Comments Related to Economic and Social Impact Assessment ) on the initial regulatory flexibility analysis.

A formal consultation pursuant to section 7 of the ESA was conducted on this action. The Biological Opinion on this action concluded that the operation of the Virginia pound net fishery with NMFS' sea turtle conservation measures may adversely affect but is not likely to jeopardize the continued existence of the loggerhead, leatherback, Kemp's ridley, green, or hawksbill sea turtle, or shortnose sturgeon. An incidental take statement was issued for this action. Copies of this Biological Opinion are available by contacting (978) 281-9328 or FAX (978) 281-9394.

This final rule contains policies with federalism implications that were sufficient to warrant preparation of a federalism assessment under Executive Order 13132. Accordingly, the Acting Assistant Secretary for Legislative and Intergovernmental Affairs provided notice of the proposed action to the Governor of Virginia on March 3, 2004. No comments on the federalism implications of the proposed action were received in response to the March 2004 letter.

Administrative practice and procedure, Endangered and threatened species, Exports, Imports, Reporting and recordkeeping requirements.

Administrative practice and procedure, Endangered and threatened species, Exports, Imports, Reporting and recordkeeping requirements.

This Federal Register document is available on the Government Printing Office's website at: www.gpoaccess.gov/fr/index.html .

Background information and documents are available at the NMFS Northwest Region website at: www.nwr.noaa.gov/1sustfsh/gdfsh01.htm and at the Pacific Fishery Management Council's website at: www.pcouncil.org .

The Pacific Coast Groundfish FMP and its implementing regulations at 50 CFR part 660, subpart G, regulate fishing for over 80 species of groundfish off the coasts of Washington, Oregon, and California. Groundfish specifications and management measures are developed by the Pacific Fishery Management Council (Pacific Council), and are implemented by NMFS. The specifications and management measures for the 2004 fishing year (January 1-December 31, 2004) were initially published in the Federal Register as an emergency rule for January 1-February 29, 2004 (69 FR 1322, January 8, 2004) and as a proposed rule for March 1-December 31, 2004 (69 FR 1380, January 8, 2004). The emergency rule was amended at 69 FR 4084, January 28, 2004. The final rule for March 1-December 31, 2004 was published in the Federal Register on March 9, 2004 (69 FR 11064) and amended at 69 FR 23440, April 29, 2004.

The Northern Pacific Halibut Act of 1982 (16 U.S.C. 773-773k) (Halibut Act) and its implementing regulations at 50 CFR part 300, subpart E, regulate fishing for Pacific Halibut in U.S. Convention waters. The Halibut Act also authorizes the Pacific Council to develop regulations governing the Pacific halibut catch in waters off of Washington, Oregon, and California that are in addition to, but not in conflict with, regulations of the International Pacific Halibut Commission (IPHC). Accordingly, the Pacific Council has developed, and NMFS has approved, a catch sharing plan (CSP) to allocate the total allowable catch (TAC) of Pacific halibut between treaty Indian and non-Indian harvesters, and among non-Indian commercial and sport fisheries in IPHC statistical Area 2A (off Washington, Oregon, and California). The CSP, as implemented at 50 CFR part 300, provides for retention of halibut landed incidentally in the limited entry, longline primary sablefish fishery north of Pt. Chehalis, WA (46°53′18″ N. lat.) in years when the Area 2A TAC is above 900,000 lb (408.2 mt). Because the Area 2A TAC is above 900,000 lb (408.2 mt) in 2004, NMFS is establishing an allowance for incidental halibut retention in the primary sablefish fishery in 2004.

The following changes to current groundfish management measures were recommended by the Pacific Council, in consultation with Pacific Coast Treaty Tribes and the States of Washington, Oregon, and California, at its April 4-9, 2004, meeting in Sacramento, CA. Inseason adjustments to management measures are in response to several factors influencing projected catch of groundfish during 2004. These factors include (1) inseason adjustments to the Pacific Coast commercial and recreational groundfish fisheries published at 69 FR 23440, April 29, 2004,(2) projected catch in the limited entry trawl and fixed gear fisheries based on new observer data and bycatch model adjustments, (3) projected catch in the recreational fisheries off Washington, Oregon, and California based on 2003 catch, and (4) a reduction in limited entry trawl fleet effort due to the trawl buyback program. Pacific Coast groundfish landings will be monitored throughout the year, and further adjustments to trip limits or management measures will be made as necessary to allow achievement of or avoid exceeding the 2004 optimum yields (OYs).

The trawl bycatch model, used to calculate total catch, discard, and incidental catch rates of groundfish species in the limited entry trawl fisheries, was updated during the winter of 2004. Major changes to the model included a revision of the trawl participation and catch database as well as changes to the incidental catch rates of overfished groundfish species. The trawl participation and catch database is used as an indicator of past limited entry trawl permit participation and landed catch. This database tracks a weighted average (based on activity during the last several years) of landed catch per limited entry trawl permit, bimonthly period, subarea, and depth. Because this database is one of the basic foundations of the trawl bycatch model, the model operates under the assumption that past performance is a reasonable proxy for what level of effort may occur in the future. The trawl bycatch model was updated to reflect changes in fleet structure as a result of the limited entry trawl permit and vessel buyback program conducted in late 2003. However, because buyback related fleet structure changes are continuing to occur, higher levels of uncertainty are associated with the trawl bycatch model's predictions of projected catch during 2004 than in previous years.

The incidental catch rates of overfished groundfish species used in the trawl bycatch model were updated by stratifying them by depth, subarea, and cumulative limit period. This is a change from the previous trawl bycatch model that only stratified incidental catch rates by depth and subarea. In early 2004, new West Coast Groundfish Observer Program (Observer Program) data were available and incorporated in the trawl bycatch model. With two years of data being used in the model, the Pacific Council sought the guidance of the Scientific and Statistical Committee's (SSC) about how to treat each year of data. Because more recent information is more likely to be representative of fishing behavior and catch data in the upcoming year, the SSC recommended a weighting scheme for observer data wherein the most recent data are weighted more heavily than older data. Therefore, NMFS weighted the 2003 observer data at two-thirds and the 2002 observer data at one third, then combined that weighted data from the two years to derive incidental catch rates for overfished species.

Following the 2004 updates to the trawl bycatch model, catch projections generated by the model were compared to landings data reported in the Pacific Coast Fisheries Information Network (PacFIN). The landed catch of DTS (Dover sole, thornyheads, sablefish) species was predicted to be higher than that reported in PacFIN and the landed catch of Petrale sole and “other flatfish” species were predicted to be lower than that reported in PacFIN. Therefore, model predictions were scaled to account for these differences based on PacFIN landed catch estimates from January through February 2004 and landed catch estimates during the same period in 2003.

In order to provide additional fishing opportunity for the northern limited entry trawl fleet, which has been severely restricted to reduce the incidental catch of canary rockfish, the size of the trawl rockfish conservation area (the area closed to fishing for groundfish with trawl gear) or RCA, between the U.S. border with Canada and 40°10′ N. lat., is being decreased for the remainder of 2004. The western boundary of the trawl RCA is being moved from specific latitude and longitude coordinates approximating the 200-fm (366-m) depth contour to specific latitude and longitude coordinates approximating the 150-fm (274-m) depth contour. As a result, in the area between the U.S. border with Canada and 40°10′ N. lat. the trawl RCA will be located between specific latitude and longitude coordinates approximating the 150-fm (274-m) and 60-fm (110-m) depth contours during May-June and between specific latitude and longitude coordinates approximating the 150-fm (274-m) and 75-fm (137-m) depth contours during July-December. Reducing the size of the trawl RCA for the remainder of the year is possible because new observer data indicate that the catch of overfished species, specifically darkblotched rockfish, is lower than predicted in this area. Additionally, canary rockfish are most commonly found in waters 50 fm (91 m) to 150 fm (274 m) in depth. Therefore, this reduction in the size of the trawl RCA is not predicted to result in increased catch of canary rockfish nor is it predicted to cause any overfished groundfish species OY to be exceeded.

Because of updated trawl bycatch model results, incorporating new observer data and following the trawl buyback, and landed catch data through the end of February 2004, limited entry trawl trip limits for certain deepwater, slope species can be increased for the remainder of the year. Therefore, in the area between the U.S. border with Canada and 40°10′ N. lat., the limited entry trawl trip limit for minor slope rockfish will be increased from 4,000 lb (18,144 kg) per two months to 8,000 lb (3,629 kg) per two months for May through December. In the area between 40°10′ N. lat. and the U.S. border with Mexico, the limited entry trawl large footrope limit for chilipepper rockfish will be increased from 2,000 lb (907 kg) per two months to 12,000 lb (5,443 kg) per two months during May through August and to 8,000 lb (3,629 kg) per two months during September through December. Increases to trip limits for chilipepper in 2004 are possible, in part, due to the increase in the bocaccio OY (≤ 20 mt in 2003 to 250 mt in 2004). The low bocaccio OY in 2003 limited the allowable harvest of chilipepper rockfish, as chilipepper rockfish and bocaccio rockfish are known to co-occur. However, this inseason action's trip limit increases for chilipepper are not predicted to exceed the bocaccio rockfish OY. Additionally, in the area between 40°10′ N. lat. and 38°00′ N. lat., limited entry trawl limits for minor slope rockfish and splitnose rockfish will each be increased from 7,000 lb (3,175 kg) per two months to 50,000 lb (22,680 kg) per two months during May through December. Trip limits had been set at a precautionary level at the beginning of 2004, pending the release of new observer data. Because the new observer data indicate that the incidental catch of overfished species, specifically darkblotched rockfish, is lower than expected, target limits may be increased. In the area between 38°00′ N. lat. and the U.S. border with Mexico, limited entry trawl limits for minor slope rockfish and splitnose rockfish will each be increased from 40,000 lb (18,144 kg) per two months to 50,000 lb (22,680 kg) per two months during May through December. A limiting factor to increasing minor slope rockfish and splitnose rockfish trip limits in this area is the catch of blackgill rockfish. However, the allowable harvest of blackgill rockfish can support the Pacific Council's recommended trip limit increase of 40,000 lb (18,144 kg) per two months to 50,000 lb (22,680 kg) per two months during May through December.

In summary, a reduction in the size of the trawl RCA and increased trip limits for deepwater, slope species are possible because the trawl bycatch model, updated with new observer data and the results of the trawl buyback program, found the incidental catch of overfished species to be lower than previously estimated in the areas affected by these inseason adjustments. The incidental catch of overfished species will continue to be minimized by the trawl RCA in areas and during seasons when the incidental catch of overfished species is high, as well as conservative trip limits for target species known to co-occur with overfished species.

NMFS began modeling discard rates of sablefish and incidental catch rates of overfished species in the primary sablefish fishery in late 2003 and early 2004. The approach for modeling discard and incidental catch in the 2004 sablefish fishery is to use fleetwide, season-long estimates of discard and incidental catch and apply those rates to the allowable harvest in the primary sablefish fishery. Using this method and incorporating observer data from 2001 through 2003, the discard of sablefish and the incidental catch of overfished species projected for the primary sablefish fishery in 2004 is lower than previously assumed. In the past, the assumed discard mortality of sablefish was eight percent. Based on new observer data, the discard mortality of sablefish in the primary sablefish fishery is now predicted to be approximately 3.5 percent. This means that the updated discard mortality of sablefish is now less than half the amount that was used to develop sablefish tier limits in September 2003. By incorporating the new sablefish discard rate into the fixed gear bycatch model, sablefish tier limits can be increased to help achieve, but not exceed, the sablefish OY. Therefore, the Pacific Council recommended that the 2004 sablefish tier limits be increased. The revised tier limits for the 2004 primary sablefish fishery are increased by approximately 12 - 13 percent and they are as follows: Tier 1 - 69,600 lb (31,570 kg), Tier 2 - 31,600 lb (14,334 kg), and Tier 3 - 18,100 lb (8,210 kg).

In keeping with trip limit increases for deepwater, slope species in the limited entry trawl fishery, the Pacific Council also recommended increasing the minor slope rockfish and splitnose rockfish trip limits for the limited entry fixed gear fishery. Therefore, in the area between 40°10′ N. lat. and 38°00′ N. lat., limited entry fixed gear limits for minor slope rockfish and splitnose rockfish will each be increased from 7,000 lb (3,175 kg) per two months to 50,000 lb (22,680 kg) per two months during May through December. Similarly, in the area between 38°00′ N. lat. and the U.S. border with Mexico, limited entry fixed gear limits for minor slope rockfish and splitnose rockfish will each be increased from 40,000 lb (18,138 kg) per two months to 50,000 lb (22,680 kg) per two months during May through December. Much like the trip limit increases in the limited entry trawl fishery, increasing tier limits in the primary sablefish fishery and trip limits for deepwater, slope species in the limited entry fixed gear fishery will provide access to healthy groundfish stocks while protecting depleted and overfished groundfish species. The non-trawl RCA will continue to protect overfished species in areas and during seasons when the incidental catch of overfished species is high.

The Pacific halibut CSP and implementing regulations at 50 CFR 300.63(a)(3) provide for retention of halibut landed incidentally in the limited entry, longline primary sablefish fishery north of Pt. Chehalis, WA (46°53′18″ N. lat.) in years when the Area 2A TAC is above 900,000 lb (408.2 mt). The 2004 Area 2A TAC is 1,480,000 lb (671.3 mt).

According to IPHC and Federal regulations, Pacific halibut may not be taken by gear other than hook-and-line gear. Only vessels registered for use with sablefish-endorsed limited entry permits may participate in the primary fixed gear sablefish fishery specified for halibut retention in the CSP. Vessels must also carry IPHC commercial halibut licenses in order to retain and land halibut. Incidental halibut retention in the primary sablefish fishery is only available to vessels operating north of Pt. Chehalis, WA (46°53′18″ N. lat.). Under Pacific halibut regulations at 50 CFR 300.63, halibut taken and retained in the primary sablefish fishery may not be possessed or landed south of Pt. Chehalis, WA (46°53′18′ N. lat.).

Similar to 2003, halibut caught incidentally in the primary sablefish fishery may be retained by appropriately licensed longline vessels. In 2004, the amount of incidental halibut retained in the primary sablefish fishery is capped at 70,000 lb (31.8 mt), to ensure that the fishery is maintained as an incidental and not a directed fishery. Beginning May 1, 2004, and continuing until the halibut quota (70,000 lbs or 31.8 mt) is taken: longliners participating in the primary sablefish fishery north of Pt. Chehalis, WA (46°53′18′ N. lat.) with appropriate IPHC licenses may retain incidental halibut landings up to 100 lbs (45 kg) (dressed weight) of halibut for every 1,000 lbs (454 kg) (dressed weight) of sablefish landed and up to two additional halibut in excess of the 100 lb (45 kg) per 1,000 lb (454 kg) ratio per landing. Halibut may not be on board a vessel that has any gear other than longline gear on board (e.g., pot or trawl gear).

In 2004, the Washington Department of Fish and Wildlife recommended and NMFS implemented a “C-shaped” Yelloweye Rockfish Conservation Area (YRCA) to protect yelloweye rockfish, an overfished species (see 50 CFR 660.304 (d)). For 2004, the “C-shaped” YRCA is a mandatory closed area for recreational groundfish and Pacific halibut fishing. To further protect yelloweye rockfish, the Pacific Council has recommended that the “C-shaped” YRCA in the North Coast subarea (Washington Marine Area 3) also be designated as an area to be avoided (a voluntary closure) by commercial fixed gear (longline) sablefish fishermen and salmon trollers to protect yelloweye rockfish. Much of the YRCA is already closed to commercial groundfish hook-and-line access, including the fixed gear sablefish fishery, by the non-trawl RCA, which extends from the Washington shoreline to specific latitude and longitude coordinates that approximate the 100-fm (183-m) depth contour.

At the Pacific Council's April 4-9, 2004, meeting in Sacramento, CA, the projected catch in the Pacific Coast recreational fisheries was updated for 2004. The states of Washington and Oregon updated their projected catch for 2004 with recreational catch data from 2003. Because 2003 was a year of unusually high effort and catch in California's recreational fisheries, the California Department of Fish and Game (CDFG) did not think it would be accurate to use 2003 catch data as a basis for projecting catch in 2004. In an effort to reduce the catch of overfished rockfish species, specifically canary rockfish and lingcod, California's recreational fisheries were closed for the first six months of 2003 (January-June). When California's recreational fishery opened in July 2003, the closure earlier in the year is thought to have resulted in a “derby” style fishery with above average effort and catch reported by MRFSS (Marine Recreational Fishery Statistical Survey) Wave Four (July-August) data. In comparison to Wave Four data, MRFSS Wave Five data (September-October) were more reflective of historical effort and catch during California's recreational fisheries and was not affected by the “derby” fishery. Therefore, in order to model projected catch for their 2004 recreational fishery, CDFG created an adjusted 2003 dataset. This adjusted 2003 dataset used the effort estimates from MRFSS′ Wave Five data to adjust catches for all waves in 2003. Because this adjusted 2003 dataset accounted for the “derby” response to the closure during January-June 2003 and added projected catches for closed periods during 2003, it provides a better estimate of catch in 2004 than an unadjusted 2003 dataset.

The ocean salmon fisheries in the EEZ off Washington, Oregon, and California are managed under a “framework” fishery management plan entitled the Pacific Coast Salmon Plan (Salmon FMP). Regulations at 50 CFR part 660, subpart H, provide the mechanism for making preseason and inseason adjustments to the management measures, within limits set by the Salmon FMP, by notification in the Federal Register .

These management measures for the 2004 and pre-May 2005 ocean salmon fisheries were recommended by the Pacific Fishery Management Council (Council) at its April 5 to 9, 2004, meeting.

The Council announced its annual preseason management process for the 2004 ocean salmon fisheries in the Federal Register on January 6, 2004 (69 FR 629). This notice announced the availability of Council documents as well as the dates and locations of Council meetings and public hearings comprising the Council's complete schedule of events for determining the annual proposed and final modifications to ocean salmon fishery management measures. The agendas for the March and April Council meetings were published in subsequent Federal Register documents prior to the actual meetings.

In accordance with the Salmon FMP, the Council's Salmon Technical Team (STT) and staff economist prepared a series of reports for the Council, its advisors, and the public. The first of the reports was prepared in February when the scientific information first necessary for crafting management measures for the 2004 and pre-May 2005 ocean salmon fishery became available. The first report, “Review of 2003 Ocean Salmon Fisheries” (REVIEW), summarizes biological and socio-economic data for the 2003 ocean salmon fisheries and assesses how well the Council's 2003 management objectives were met. The second report, “Preseason Report I Stock Abundance Analysis for 2004 Ocean Salmon Fisheries” (PRE I), provides the 2004 salmon stock abundance projections and analyzes the impacts on the stocks and Council management goals if the 2003 regulations and regulatory procedures were applied to the projected 2004 stock abundances. The completion of PRE I is the initial step in the evaluating the full suite of preseason options.

The Council met in Tacoma, WA from March 8 to 12, 2004, to develop 2004 management options for proposal to the public. The Council proposed three options of commercial and recreational fisheries management for analysis and public comment. These options consisted of various combinations of management measures designed to protect weak stocks of coho and chinook salmon and to provide for ocean harvests of more abundant stocks. After the March Council meeting, the Council's STT and staff economist prepared a third report, “Preseason Report II Analysis of Proposed Regulatory Options for 2004 Ocean Salmon Fisheries,” which analyzes the effects of the proposed 2004 management options. This report was made available to the Council, its advisors, and the public.

Public hearings, sponsored by the Council, to receive testimony on the proposed options were held on: March 29, 2004, in Westport, WA and Coos Bay, OR; and March 30, 2004, in Fort Bragg, CA. The States of Washington, Oregon, and California sponsored meetings in various forums that also collected public testimony, which was then presented to the Council by each state's Council representative. The Council also received public testimony at both the March and April meetings and received written comments at the Council office.

The Council met from April 5 to 9, 2004, in Sacramento, CA, to adopt its final 2004 recommendations. Following the April Council meeting, the Council's STT and staff economist prepared a fourth report, “Preseason Report III Analysis of Council-Adopted Management Measures for 2004 Ocean Salmon Fisheries,” which analyzes the environmental and socio-economic effects of the Council's final recommendations. This report was also made available to the Council, its advisors, and the public. After the Council took final action on the annual ocean salmon specifications in April, it published the recommended management measures in its newsletter and also posted them on the Council website ( www.pcouncil.org ).

Since 1989, NMFS has listed under the Endangered Species Act (ESA) 16 evolutionarily significant units (ESUs) of salmon on the West Coast. As the listing have occurred, NMFS has conducted formal ESA section 7 consultations, issued biological opinions, and made determinations under section 4(d) of the ESA that consider the impacts to listed salmonid species resulting from proposed implementation of the Salmon FMP, or in some cases, from proposed implementation of the annual management measures. Associated with the biological opinions are incidental take statements that specify the level of take exempted from the section 9 prohibitions of the ESA. Some of the biological opinions have concluded that implementation of the Salmon FMP is not likely to jeopardize the continued existence of certain listed ESUs and have provided incidental take statements. Other biological opinions have found that implementation of the Salmon FMP is likely to jeopardize certain listed ESUs and have identified reasonable and prudent alternatives (consultation standards) that would avoid the likelihood of jeopardizing the continued existence of the ESU under consideration. In a March 5, 2004, letter to the Council, NMFS provided the Council with ESA consultation standards and guidance for the management of stocks listed under the ESA in preparation for the 2004 management season in order to ensure that the Council recommendations comply with the ESA.

Estimates of the 2003 spawning escapements for key stocks managed under the Salmon FMP and preseason estimates of 2004 ocean abundance are provided in the Council's REVIEW and PRE I documents. The primary resource and management concerns are for salmon stocks listed under the ESA.

Snake River wild fall chinook are listed under the ESA as a threatened species. Direct information on the stock's ocean distribution and on fishery impacts is not available. Fishery impacts on Snake River fall chinook are evaluated using the Lyons Ferry Hatchery stock as an indicator. The Lyons Ferry stock is widely distributed and harvested by ocean fisheries from southern California to Alaska. NMFS' ESA consultation standard requires that Council fisheries be managed to ensure that the Adult Equivalent (AEQ) exploitation rate on age-3 and age-4 adults for the combined Southeast Alaska, Canadian, and Council fisheries is not greater than 70 percent of that observed during the 1988-1993 base period. The Council's 2004 recommended fisheries, combined with expected impacts in Southeast Alaska and Canada fisheries, have an estimated age 3/4 AEQ exploitation rate that is 70 percent of that observed during the 1988-1993 base period. In the last few years Snake River wild fall chinook have not been a limiting factor in formulating Council fisheries, primarily because of low anticipated Canadian impacts. However, with some West Coast chinook stocks increasing in abundance, Canadian catch restrictions, especially in troll fisheries, have eased. The 2003 Canadian fisheries caught twice as many chinook as was anticipated preseason. In 2004, the major Canadian troll fisheries are anticipated to land their Total Allowable Catch as allowed under the Pacific Salmon Treaty. As a result, the Canadian portion of the Snake River fall chinook age 3/4 AEQ exploitation rate is predicted to increase substantially. This increase in impact on Snake River fall chinook was a major constraint on fisheries north of Cape Falcon, OR.

This is the fifth year that NMFS provided guidance to the Council related to the Puget Sound chinook ESU. NMFS' guidance for Puget Sound chinook stocks is expressed in terms of total or southern U.S. fishery exploitation rate ceilings or of terminal escapement objectives. Under the current management structure, Council fisheries are included as part of the suite of fisheries that comprise the fishing regime negotiated each year by the co-managers under U.S. v. Washington , Civ. N. 70-9213 (W.D. Wash.) to meet management objectives for Puget Sound and Washington Coastal salmon stocks. Because these management objectives and the management planning structure address fisheries wherever they occur, Council and Puget Sound fisheries are interconnected. Therefore, in adopting its regulations, the Council must recommend fisheries in the ocean that satisfy the requirement that the combined fisheries not appreciably reduce the likelihood of survival and recovery of the ESU. NMFS estimated that the exploitation rates from Council-managed fisheries on Puget Sound chinook populations will range from zero to 3 percent. Management actions taken to meet exploitation rate targets will, therefore, occur primarily in the Puget Sound fisheries, but the nature of the existing process is such that ocean fishery impacts must be accounted for as part of an overall review.

In May 2003, NMFS exempted fishery activities conducted in accordance with a Resource Management Plan (RMP) submitted under Limit 6 of the 4(d) rule (65 FR 42422, 66 FR 31603) from ESA section 9 take prohibitions. This RMP will expire on May 1 of this year. NMFS is currently evaluating another RMP provided by the Washington Department of Fish and Wildlife and the Puget Sound Treaty tribes for the 2004-2009 fishing years. NMFS has concluded, preliminarily, that the RMP poses no jeopardy to the Puget Sound chinook ESU. NMFS' preliminary conclusions regarding the proposed RMP have been released and are currently available for public review. A biological opinion was issued on April 29, 2004, that covers the effects of the 2004 Council area fisheries on Puget Sound chinook salmon. The biological opinion concludes that the ocean salmon fishery is not likely to jeopardize the Puget Sound chinook ESU.

Sacramento River winter chinook are listed as endangered under the ESA. The Council's recommended management measures meet NMFS' requirements for the stock established through the ESA section 7 consultation process.

Although management concerns for ESA listed stocks were a primary consideration in preseason planning, the conservation objectives of other stocks also constrained fishing in certain areas. The forecast September 1, 2003 (preseason) ocean abundance of Klamath River fall chinook salmon is 72,100 age-3 fish, 134,500 age-4 fish, and 9,700 age-5 fish. The forecast abundance requires certain reductions in 2004 commercial fishing opportunity south of Cape Falcon, OR, relative to the 2003 seasons, in order to achieve the conservation objective of 35,000 natural Klamath River fall chinook adult spawners.

The Canadian Department of Fisheries and Oceans forecast that the abundance of Interior Fraser (Thompson River) coho in Canada for 2004 to be in the low status category. As a result, U.S. fisheries under the Southern Coho Management Plan, adopted by the Pacific Salmon Commission in February 2002, were constrained to an exploitation rate no greater than 10 percent. The development of coho fisheries north of Cape Falcon, OR was greatly influenced by the need to meet this obligation of the Pacific Salmon Treaty.

The Council recommended ocean harvest levels and management measures for 2004 fisheries are designed to apportion the burden of protecting the weak stocks identified and discussed in PRE I equitably among ocean fisheries and to allow maximum harvest of natural and hatchery runs surplus to inside fishery and spawning needs. NMFS finds the Council's recommendations responsive to the goals of the Salmon FMP, the requirements of the resource, and the socio-economic factors affecting resource users. The recommendations are consistent with the requirements of the Magnuson-Stevens Fishery Conservation and Management Act and U.S. obligations to Indian tribes with Federally recognized fishing rights, and U.S. international obligations regarding Pacific salmon. Accordingly, NMFS has adopted them.

North of Cape Falcon the 2004 management measures have a substantially lower chinook quota and slightly lower coho quota relative to the 2003 season. The total allowable catch for 2004 is 89,000 chinook and 270,000 coho; these fisheries are restricted to protect depressed Lower Columbia River wild coho, Washington coastal coho, Puget Sound coho, Oregon Coastal Natural (OCN) coho, Interior Fraser coho, and Snake River fall chinook. Washington coastal and Puget Sound chinook generally migrate to the far north and are affected insignificantly by ocean harvests from Cape Falcon, OR to the U.S.-Canada border. North of Cape Alava, WA, the Council recommends a provision prohibiting retention of chum salmon during August and September to protect ESA listed Hood Canal summer chum. The Council has recommended such a prohibition for the last three years.

South of Cape Falcon, OR the retention of coho is prohibited, except for a recreational selective fishery off Oregon with a 75,000-fish quota of marked hatchery coho. This year's selective fishery includes the southern coastal area of Oregon, which has not had any directed coho fishery since 1993. The Council's recommendations are below the 15-percent exploitation rate permitted under Amendment 13 to protect OCN coho stocks, with an expected 14.7-percent OCN coho exploitation rate. The expected ocean exploitation rate for Rogue/Klamath coho is 8.6 percent, and is also below its exploitation rate limit of 13 percent. Chinook fisheries off Oregon and California are constrained to meet the conservation objective of Klamath River fall chinook and the ESA consultation standards for Sacramento River winter chinook.

The 2004 management measures have a new definition that describes ocean “boat limits” in the recreational fishery. The provision allows each fisher aboard a vessel off the coast of Washington, Oregon, and California to continue to use angling gear until the combined daily limits of salmon for all licensed and juvenile anglers aboard has been attained. The purpose of this provision is to make Federal regulations consistent with the regulations of the above states. Washington has had a boat limit provision in place for a number of years, but Oregon and California have recently adopted such limits. The specific requirements are different in each state, but the intent is similar. Anglers should be aware that additional state restrictions may apply, in addition to the Federal regulation. Therefore, anglers should consult the specific regulations of their state for the exact language.

The treaty-Indian commercial troll fishery quota is 49,000 chinook in ocean management areas and Washington State Statistical Area 4B combined. This quota is lower than the 60,000 chinook quota in 2003. The fisheries include a chinook-directed fishery in May and June (under a quota of 22,500 chinook) and an all-salmon season beginning in July with a 26,500 chinook sub-quota. The coho quota for the treaty-Indian troll fishery in ocean management areas, including Washington State Statistical Area 4B for the July-September period is 75,000 coho, a decrease from the 90,000 coho quota in 2003.

The timing of the March and April Council meetings makes it impracticable for the Council to recommend fishing seasons that begin before May 1 of the same year. Therefore, the 2005 fishing seasons opening earlier than May 1 are also established in this action. The Council recommended, and NMFS concurs, that the recreational seasons off California from Horse Mountain, CA to the U.S.-Mexico Border and the commercial troll seasons from Cape Falcon, OR to the Oregon-California Border will open in 2005 as indicated in the Season Description section. At the November 2004 meeting, the Council may consider inseason recommendations to adjust commercial and recreational salmon seasons prior to May 1 in areas off Oregon south of Cape Falcon. At the March 2005 meeting, the Council may consider inseason recommendations to open commercial seasons for all salmon, except for coho, prior to May 1 in areas off California between Horse Mountain and Point Arena, CA and identify the areas, season, quota, and special regulations for any experimental April fisheries, which may be proposed at the Council's November 2004 meeting.

The following sections set out the management regime for the salmon fishery. Open seasons and days are described in Sections 1, 2, and 3 of the 2004 management measures. Inseason closures in the commercial and recreational fisheries are announced on the NMFS hotline and through the U.S. Coast Guard Notice to Mariners as described in Section 7. Other inseason adjustments to management measures are also announced on the hotline and through the Notice to Mariners. Inseason actions will also be filed with the Federal Register as soon as practicable.

The following are the management measures recommended by the Council and approved and implemented here for 2004 and, as specified, for 2005.