The emerald ash borer (EAB) ( Agrilus planipennis ) is a destructive wood-boring insect that attacks ash trees ( Fraxinus spp., including green ash, white ash, black ash, and several horticultural varieties of ash). The insect, which is indigenous to Asia and known to occur in China, Korea, Japan, Mongolia, the Russian Far East, Taiwan, and Canada, eventually kills healthy ash trees after it bores beneath their bark and disrupts their vascular tissues.

In an interim rule effective on October 8, 2003, and published in the Federal Register on October 14, 2003 (68 FR 59082-59091, Docket No. 02-125-1), we amended the Domestic Quarantine Notices in 7 CFR part 301 by adding a new “Subpart—Emerald Ash Borer” (§§ 301.53-1 through 301.53-9, referred to below as the regulations). The regulations designated 13 counties in the southeastern portion of the State of Michigan as quarantined areas because of EAB and restricted the interstate movement of regulated articles from the quarantined areas.

Recent surveys conducted by inspectors of State, county, and city agencies and by inspectors of the Animal and Plant Health Inspection Service (APHIS) have revealed that infestations of EAB have occurred outside the 13-county quarantined area in Michigan. Specifically, infestations of EAB have been detected in Berrien, Branch, Calhoun, Eaton, Kent, Roscommon, and Saginaw Counties, MI; LaGrange and Steuben Counties, IN; and Defiance, Fulton, Henry, and Lucas Counties, OH. Officials of the U.S. Department of Agriculture (USDA) and officials of State, county, and city agencies in Indiana, Michigan, and Ohio are conducting intensive survey and eradication programs in the infested areas. Indiana, Michigan, and Ohio have quarantined the infested areas and have restricted the intrastate movement of regulated articles from the quarantined areas to prevent the spread of EAB within each State. However, Federal regulations are necessary to restrict the interstate movement of regulated articles from the quarantined areas to prevent the spread of EAB to other States and other countries.

The regulations in § 301.53-3(a) provide that the Administrator of APHIS will list as a quarantined area each State, or each portion of a State, where EAB has been found by an inspector, where the Administrator has reason to believe that EAB is present, or where the Administrator considers regulation necessary because of its inseparability for quarantine enforcement purposes from localities where EAB has been found.

Less than an entire State will be designated as a quarantined area only under certain conditions. Such a designation may be made if the Administrator determines that: (1) The State has adopted and is enforcing restrictions on the intrastate movement of regulated articles that are equivalent to those imposed by the regulations on the interstate movement of regulated articles; and (2) the designation of less than an entire State as a quarantined area will be adequate to prevent the artificial spread of the EAB.

In accordance with these criteria and the recent EAB findings described above, we are amending § 301.53-3(c) to add portions of Berrien, Branch, Calhoun, Eaton, Kent, Roscommon, and Saginaw Counties, MI; LaGrange and Steuben Counties, IN; and Defiance, Fulton, Henry, and Lucas Counties, OH, to the list of quarantined areas. An exact description of the quarantined areas can be found in the rule portion of this document.

In the October 2003 interim rule in which we established the EAB quarantine and regulations, we designated, among other things, firewood of all hardwood species as regulated articles. In that interim rule, we explained that we were designating all hardwood species as regulated articles because as hardwood is dried and cut into firewood, it is difficult to identify the species of the tree from which the firewood was derived.

In its State quarantine, Indiana refers to firewood of any non-coniferous species, rather than hardwood species, as a regulated article. While we consider the two terms to be essentially synonymous, we are adding the word “(non-coniferous)” after the word “hardwood” in the list of regulated articles in § 301.53-2(a) in response to a request from plant health officials in Indiana.

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

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

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

We are amending the EAB regulations by adding areas in Indiana, Michigan, and Ohio to the list of quarantined areas. As a result of this action, the interstate movement of regulated articles from those areas is restricted. This action is necessary to prevent the artificial spread of this plant pest into noninfested areas of the United States.

While most information about the effects of EAB are based on what has happened in Michigan where the initial U.S. outbreak occurred, similar effects can be expected anywhere the pest occurs.

EAB is a highly destructive, wood-boring insect pest that attacks several species of ash ( Fraxinus spp.). White ash ( Fraxinus americana L.), black ash ( Fraxinus nigra Marsh.), and green ash ( Fraxinus pennsylvanica Marshall.) are known to be susceptible in the United States; however, there are indications that other varieties of ash may also be at risk. Therefore, the regulations place restrictions on certain articles of the genus Fraxinus. If the EAB spreads from infested areas to the surrounding forests of the northeastern United States, where nursery, landscaping, and timber industries and forest-based recreation and tourism industries play a vital economic role, its impact would be severe.

The pest has the potential to destroy entire stands of ash, and any incursion of the pest can result in substantial losses to forest ecosystems, urban trees, and the timber industry. Adults bore D-shaped holes up to a diameter of 1 centimeter into sapwood, and these holes create pathways for pathogens and insect vectors. Domestically, black, green, and white ash serve as an important component in the forests of the northeast. Further, the wood is used for a variety of applications that require a strong, hard wood with less rigidity than maple.

White ash is one of the primary commercial hardwoods used for the production of tool handles, baseball bats, furniture, antique vehicle parts, containers, railroad cars and ties, canoe paddles, snowshoes, boats, doors, and cabinets. Green ash is a valued species for solid wood products, pulp and paper requiring hardwood fibers, crating, boxing, handle stock, and rough lumber. Black ash, while not as strong as other varieties, is regularly used for interior furnishings, furniture, and cabinets. Damage left by the EAB reduces the quality and market value of wood products, and dying and dead trees are useless for manufacturers.

Beyond manufacturing, ash trees play an important role in the urban landscape. Ash is known for its natural resistance to many other trees' pests and its hardiness in cities. Many of the ash trees that now serve as ornamental, street, shade, and landscape beautification trees were planted to replace elm trees destroyed because of Dutch elm disease. Ash trees are vital sources of food and shelter for wildlife and livestock, and they have been planted in the rehabilitation of damaged natural areas. Because of the EAB, these natural and aesthetic values are at risk in affected regions.

Damage to ash trees in the lots owned by the landscape industry and wood lots in southeast Michigan over the past 5 years is estimated at $11.6 million. In Michigan and Canada, we estimate that between 250,000 and 2 million trees are already affected by the pest. In the six counties originally quarantined by the State of Michigan, 26.1 million trees are at risk, and the replacement value of those trees is estimated to be $11.7 billion; this figure, of course, excludes their aesthetic, oxygen-producing, and habitat-providing values. Already, because of EAB infestation and subsequent damage and the effects of the quarantine placed by the State of Michigan, producers have lost approximately $2 million in nursery stock sales. While ash species other than black, green, and white ash have not been attacked in North America, we believe the remaining 13 species may also be susceptible, and in 2002 the Canadian Food Inspection Agency confirmed that theory in the results of an EAB pest risk assessment. In Japan, EAB has also affected trees in the genera Ulmus (elms), Juglans (walnuts and butternuts), and Pterocarya (wingnuts).

The pattern and significant numbers of trees harmed or destroyed because of the pest suggest that EAB has been established in Michigan for at least 5 years, though it was definitively identified only in July 2002. We are not aware of the capability for EAB's natural spread in North America, and information on EAB biology in Asia is scarce. Studies on the pest in both North America and Asia are underway.

Current research suggests that EAB typically completes one generation per year in northeastern China and that females lay 68 to 90 eggs in their lifetime. Usually, trees die 2 to 4 years after an EAB attack. We know that adult beetles are capable of dispersing by flight in 8 to 12 meter bursts, and we are aware of EAB “bursting” distances of several kilometers in search of new ash host material. Since EAB appears to survive well in North American climatic conditions, it is probable that EAB could continue to disperse among various contiguous corridors of host material in natural and urban environments. In northeastern China, EAB has successfully built severely damaging populations and traveled great distances in search of new hosts. Especially troubling in North America is the apparent lack of natural predators and other biological factors that would contribute to EAB mortality. A relative of EAB, the bronze birch borer ( Agrilus axius ), is capable of a natural spread of 10 to 20 miles per year, and this might be a possible estimate of EAB's spreading capability.

The spread of EAB can be accelerated through human-assisted movement and trade of nursery stock, lumber, and logs. Solid wood packing materials (SWPM), especially if those materials include bark, pose a special concern. From 1985 to 2000, APHIS personnel reported 38 interceptions of species of the genus Agrilus in shipments of SWPM at ports of entry in 11 different States, and those shipments originated in at least 11 countries. Since EAB larvae can overwinter in the sapwood they burrow into, it is uncertain whether debarking of lumber is an effective way to destroy the pest.

Urban areas of the United States cover approximately 3.5 percent of the total land area of the country, contain more than 75 percent of the population, and support an estimated 3.8 billion trees valued at $2.4 trillion. Michigan's total urban tree population is estimated at 110,858,000 trees, and ash is a vital component of this urban forest. Trees in urban Michigan, like trees in any city, sequester gaseous air pollutants and particulate matter, help people conserve energy through the shade they provide, assist in the dispersal of storm water, provide protective shelter belts for urban fauna, and contribute aesthetic pleasure to the lives of city-dwellers and tourists. Field data from eight cities suggests that ash trees comprise up to 14 percent of the total leaf area of those cities.

Within Michigan, there are 693 million EAB-susceptible trees grown on timberland, with an undiscounted compensatory value estimated at $18.92 billion. In the 6 counties first quarantined by the State of Michigan, there are more than 31 million ash trees at risk. We are investigating possible monetary losses to forestry interests based on stumpage  1 value. These losses are likely to be less than monetary losses based on compensatory value, since stumpage values are usually applied to older trees that are greater than 5 inches in diameter, and compensatory values are applied for trees greater than 1 inch in diameter. Should the EAB continue to spread or be artificially introduced to areas outside of Michigan, monetary losses could grow significantly. Ash trees for timber products are predominantly concentrated in the East, and available data on production volumes for ash were available only for this region.

In 1996, a net volume of 113,916 million board feet of ash sawtimber was grown in the Eastern region, comprising 7.5 percent of the volume of all hardwoods. The average stumpage price for sawtimber sold from national forests in 2000 was $220.30 per 1,000 board feet for all eastern hardwoods.

Based on the establishment of the EAB in Michigan and its range in Asia, it should be able to survive in most of the eastern United States. In Michigan, an estimated 7.7 billion board feet of ash timber is harvested annually. A widespread outbreak in Michigan alone could see a loss of $1.7 billion in timber trees.

We must also consider the value of ash trees as important environmental and recreational resources. The recreational use of national forest lands amounted to 341.2 million visitor days  2 in 1996, the most recent year for which data were available. In Michigan, 4.87 million visitor days were spent in the national forests in 1997. While not specifically attributable to the presence of ash trees, these statistics illustrate the importance of forest-based recreation in the United States. Ash trees are important components of U.S. forests; in addition to their aesthetic value, they provide food and shelter for wildlife. Citizens may also be affected by the presence of EAB in their own yards and neighborhoods. Removing dead or infested trees is costly and inconvenient, and replacement trees may have to grow for years before they offer the same amount of shade and ornamental value. Further, the quarantine restricts people from freely moving firewood and ash products through Michigan.

Ash wood is used for all traditional applications of hardwood from flooring and cabinets to baseball bats. A viable portion of the market for ash in Ohio is centered around the tool handle market. Ohio has two major tool handle plants which receive approximately 25 percent of its ash from Ohio.

Ohio has approximately 2.1 billion board feet (the usable lumber within a log) of standing ash timber (between 11 and 29 inches in diameter) that is worth almost $1 billion at the sawmill (USDA Forest Service).

An estimated $2 million in annual nursery stock sales were lost in the six Michigan counties first quarantined by the State. The Michigan Nursery and Landscape Association reports that nursery, plant production, and landscaping industries employ 347,000 individuals and contribute $3.7 billion to the State's economy. Michigan's nursery producers generate about $711 million in annual sales and distribute their products to 35 U.S. States, Mexico, and Canada; these producers are the second largest agricultural group in Michigan and the fifth largest nursery industry in the United States. Losses could be larger if the EAB were allowed to spread to other areas of the country. We now know that EAB is capable of infesting small diameter nursery stock.

In Ohio, the nursery/horticulture and the wood/paper/furniture manufacturing industries contribute a combined $15.5 billion to the State's economy. The horticulture and nursery segment employs 96,000 individuals according to the Ohio Nursery and Landscape Association. According to an Ohio State University estimate, 81,680 people are employed in wood, paper, and furniture manufacturing in Ohio. Ohio's nursery growers in 2003 estimated that ash trees contribute $20 million (wholesale value) to Ohio's economy each year. According to the 2003-2004 Nursery Stock Survey, 17 different varieties of ash trees are currently in production in the State ( http://www.ohioagriculture.gov/pubs/divs/plnt/curr/eab/plnt-eab-economic.stm ).

The Regulatory Flexibility Act requires that agencies specifically consider the economic effects of their rules on small entities. The Small Business Administration (SBA) has established size criteria based on the North American Industry Classification (NAICS) for determining which economic entities meet the definition of a small firm. The small entity size standard for nursery and tree production (NAICS code 111421) is $750,000 or less in annual receipts, and $5 million or less in annual receipts for forest nurseries and gathering of forest products (NAICS code 113210). The SBA classifies logging operations (NAICS code 113310), sawmills (NAICS code 321113), and wood product manufacturers generally (NAICS subsector 321) as small entities if fewer than 500 people are employed.

The number of firms considered small entities by the SBA that are affected within the counties or portions of counties quarantined for EAB is not known. These entities must meet certain requirements before moving regulated articles from the quarantined areas. Regulated entities may incur additional costs to dispose of articles such as wood debris from tree pruning and removal. Nurseries are currently prohibited from moving ash trees under State quarantines. Of the nurseries within the 6 counties originally quarantined in Michigan, only 10 to 20 operations having a substantial amount of ash nursery stock in the ground are expected to be significantly affected. These entities represent only 0.2 to 0.5 percent of the number of nurseries in the six counties first quarantined. Counties added to the quarantine by this rule are expected to have similar effects. Very few nursery operations having a substantial amount of ash nursery stock in the ground are expected to be significantly affected.

Damage caused to EAB-affected ash trees in the landscape and woodlots in southeast Michigan over the past 5 years is estimated at $11.6 million. In addition, $2 million of nursery stock was restricted from sale due to the infestation. Similarly, estimates of the value of nursery stock in Ohio exceed $15 billion. The monetary values at risk are $11.7 billion in replacement costs in 6 counties first quarantined for EAB in Michigan; similar effects are expected for the newly quarantined areas.

Overall, this rule will help safeguard United States ash trees from the EAB by restricting the interstate movement of the nursery stock, logs, and lumber that can serve as its vectors. Although, at this time, we are not able to evaluate the specific effects of this rule on the counties most recently added to the EAB quarantine, we expect that those counties contain entities similar to those we have considered in this analysis. Therefore, we believe any economic effects on small entities will be small and are outweighed by the benefits associated with preventing a larger U.S. EAB infestation.

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.

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

This rule is issued in conformance with Executive Order 12866. It has been determined that this final rule will not have an annual economic effect in excess of $100 million; will not cause a major cost increase in costs to consumers, individual industries, Federal, State or local government agencies, or geographic regions; and will not have an adverse effect on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises in domestic or foreign markets.

This rule has been reviewed in accordance with Executive Order 12988, Civil Justice Reform. The rule would have preemptive effect with respect to any State or local laws, regulations or policies which conflict with such provisions or which otherwise impede their full implementation; would not have retroactive effect; and would require administrative proceedings before suit may be filed.

This program is not subject to the provisions of Executive Order 12372, which requires intergovernmental consultation with State and local officials (see the Notice related to 7 CFR part 3015, subpart V, published at 48 FR 29115).

It has been determined that the Regulatory Flexibility Act is not applicable to this rule because the Commodity Credit Corporation (CCC) is not required by any provision of law to publish a notice of proposed rulemaking with respect to the subject matter of this rule.

This rule contains no Federal mandates under the regulatory provisions of Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) for State, local, and tribal governments or the private sector. Thus, this rule is not subject to the requirements of sections 202 and 204 of the UMRA.

It has been determined that this rule does not have sufficient Federalism implications to warrant the preparation of a Federalism impact statement. The provisions contained in this rule will not have a substantial direct effect on States or their political subdivisions, or on the distribution of power and responsibilities among the various levels of government.

In accordance with provisions of the Paperwork Reduction Act of 1995, the Foreign Agricultural Service (FAS) submitted an information collection package to the Office of Management and Budget (OMB). OMB assigned control number 0551-0043 to the information collection and record keeping requirements. Copies of the information collection may be obtained from Kimberly Chisley, the Agency Information Collection Coordinator, on (202) 720-2568 or by e-mail to Kimberly.Chisley@fas.usda.gov.

The Foreign Agricultural 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. Accordingly, applications for participation in the Emerging Markets Program may be submitted online. Payment transactions will be handled both electronically and in paper form.

The EMP is authorized by Section 1542(d) of the Food, Agriculture, Conservation, and Trade Act of 1990. The Act directs the Secretary to make available to emerging markets the expertise of the United States to “identify and carry out specific opportunities and projects,” including potential reductions in trade barriers, “in order to develop, maintain, or expand markets for United States agricultural exports.” The EMP provides funding for technical assistance activities that develop, maintain, or expand the export of U.S. agricultural commodities to overseas emerging markets, and which benefit primarily U.S. industry as a whole.

The EMP is administered by personnel of the Foreign Agricultural Service. FAS implements this provision by providing CCC funds for specific projects to various entities, including government agencies and U.S. private entities, representing a wide range of agricultural commodities and products.

On June 22, 2004, CCC published a rule in the Federal Register (69 FR 34616) proposing to establish regulations for the Emerging Markets Program. That rule also requested interested parties to submit comments by July 22, 2004. CCC received 10 comments on the proposed rule. Following is a summary of the comments that specifically address the proposed rule and CCC's responses to these comments. General comments relating to the value of the program, editorial suggestions, and non-substantive comments have been omitted.

Comment: Does the Emerging Markets Program support both public and private applications equally?

Response: While the EMP is available to assist both public and private entities, its primary purpose is to support the market development efforts of the U.S. private sector. CCC has clarified this point in section 1486.100.

Comment: Under what conditions may “profit-making” entities (section 1486.200) apply for program funding? Section 1486.201 references research and consulting firms, but does not discuss other for-profits.

Response: CCC has revised section 1486.201 to include other for-profit entities. CCC also clarified that such entities must justify the use and need for federal funding assistance and that the use of program funds to supplement the costs of normal day-to-day operations is prohibited.

Comment: If the basic objective of the EMP is the expanded export of value-added foods, why does section 1468.100 refer to agricultural commodities which is more inclusive?

Response: CCC assumes reference is to section 1486.100, not 1468.100.

The first sentence under section 1486.100 clearly states that the EMP is not limited to value-added products, but to assist in the export of all U.S. agricultural commodities and products except tobacco.

Comment: No foreign involvement should be tolerated.

Response: Foreign organizations, government or private, may participate as third parties in activities carried out by U.S. entities. Their participation is often critical to the success of a given project. Foreign entities are not, however, eligible for funding assistance from the program.

Comment: Will the Emerging Markets Program pay for the cost of commodity samples for an Emerging Markets funded project?

Response: The EMP will reimburse the cost of commodity samples for an approved project assuming that the expense is reasonable and it is included in the application budget. However, the shipping costs for commodity samples are not eligible for reimbursement, but can be included as a contribution to the project. CCC has revised section 1486.403 by adding paragraph (b) (8) to clarify this point.

Comment: There should never be advance payments.

Response: The EMP is primarily intended to assist small- and medium-sized agricultural entities that may not have the available funds to implement a project without assistance from the EMP. Therefore, while the majority of the program's funds are disbursed on a reimbursement basis, the program allows advances on a limited basis and for short periods of time. CCC is adopting the rule as proposed.

Comment: There is a need for a repository for the conclusions and outcome of these completed projects.

Response: Reporting is required for each project, and final performance reports must contain a description of the findings and evaluations resulting from completed projects. Final reports are made available to the public on the program's Web site accessed through http://www.fas.usda.gov.

Comment: Performance reports should be closely monitored. Reports last audited by Government Accountability Office (GAO) show severe fraud irregularities. GAO should audit this program every three (3) months for several years.

Response: Approved projects are monitored regularly by EMP staff for the full duration. In addition, the Foreign Agricultural Service's Compliance Review Staff conducts regular reviews of EMP-funded projects to ensure compliance with all applicable federal regulations, requirements and terms of the agreements including financial integrity and accountability. CCC is not aware of any GAO report that cites findings related to fraud or other irregularities under the EMP. Therefore, CCC is adopting the rule as proposed.

This rule includes other clarifying changes to accompany the substantive changes discussed herein.

The FAA proposed to amend 14 CFR part 39 with a proposed airworthiness directive (AD). The proposed AD applies to RRC 250-B and 250-C series turboprop and turboshaft engines with certain P/Ns of compressor adaptor couplings manufactured by Alcor, EXTEX, RRC, and SAP installed. We published the proposed AD in the Federal Register on July 1, 2004 (69 FR 39877). That action proposed to require operators to remove from service affected couplings. That proposal results from nine reports of engine shutdown caused by compressor adaptor coupling failure.

You may examine the docket that contains the AD, any comments received, and any final disposition in person at the DMS Docket Offices between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Office (telephone (800) 647-5227) is located on the plaza level of the Department of Transportation Nassif Building at the street address stated in ADDRESSES. Comments will be available in the AD docket shortly after the DMS receives them.

We provided the public the opportunity to participate in the development of this AD. We have considered the comments received.

One commenter, RRC, requests that we change the fit between the compressor impeller and the coupling from 0.0000 to −0.0018 inch, to 0.0000 to −0.0013 inch in the final rule. Based upon rig tests, RRC has changed their recommended fit between the impeller and coupling. We agree. We have changed paragraph (i)(4) and Table 3 of the final rule to reflect these new fit values.

The same commenter, RRC, requests the following wording changes to the AD to clarify the compliance section:

Change Table 3 in the AD by deleting the column titled Impeller ID. There is no need to specify the impeller ID in Table 3. The key dimension is the fit between the impeller and the coupling and the column listing the impeller ID is unnecessary and only adds confusion.

Change paragraph (h) from “Remove RRC compressor adaptor couplings, P/Ns 23039791-1, -2, and -3 from service at next access but not later than March 1, 2012” to “Remove RRC compressor adaptor couplings, P/Ns 23039791-1, -2, and -3 from service next time the compressor rotor is disassembled for any reason but not later than March 1, 2012.” This change more precisely defines the circumstances when the coupling must be replaced.

Change paragraph (i)(1) from “Machine the inside diameter (ID) to accept the next larger size outside diameter (OD) compressor adapter coupling” to “Select and measure pilot OD of a new larger dash size coupling.”

Change paragraph (i)(4) from “A fit of 0.0000 to −0.0018 inch must be achieved. No fretting is allowed on the impeller after machining” to “Machine inside diameter (ID) of impeller to achieve a fit of 0.000 to −0.0013 inch. No fretting is allowed on the impeller after machining.”

Add a paragraph under (i) that states “A new coupling must never be installed into a worn impeller.” These changes to paragraph (i) would clarify what should be done when the impeller and coupling are serviced.

We agree with the intent of these requested changes and have incorporated them in the final rule. We have added paragraph (i)(10) that states the mating surfaces of the impeller and coupling must not have any fretting, and states, do not install a -1 coupling into a used impeller, to address the commenter's concerns to add a paragraph (i).

One commenter requests that the economic evaluation be revised to better reflect the actual costs of the action. The commenter states that the FAA's economic impact estimate didn't consider engine and compressor removal, and shipping and out-of-service time if compliance doesn't coincide with a scheduled maintenance event.

We do not agree. The costs are for replacing the coupling. We do not include any other costs.

One commenter states that the improved couplings may not be available in sufficient quantities to support the proposed compliance schedule for the parts manufacturer approval (PMA) parts.

We partially agree. The improved couplings may be unavailable in sufficient quantities to support the compliance schedule for the engines with EXTEX, SAP, and ALCOR PMA couplings. However, the compliance schedules are based primarily on our evaluation of field management plans developed by those PMA manufacturers.

EXTEX states that although it has agreed to include SAP couplings in the EXTEX service documents, for clarification, EXTEX requests we note that it is not responsible for the field management of the SAP produced couplings, nor is EXTEX responsible for any costs and liabilities associated with parts produced by SAP.

We agree to note EXTEX's comment.

One commenter requests that all removed, failed, cracked or fretted couplings of any part number should be returned to the manufacturer for analysis and reported to the FAA of any significant findings. This would help to gain more knowledge of the failure mode of couplings.

We do not agree. We have a good understanding of the failure mode of the coupling and the marginal benefit of additional data does not justify the cost burden on the operators to return these couplings.

One commenter requests an explanation of the year 2012 compliance time for the RRC couplings. The commenter states there may be less attention given to this problem if there is a 7.5 year compliance period.

We do not agree. As stated in the proposal, each manufacturer is responsible for their independent component design, design substantiation, component manufacture, and development of a field management plan for its fleet. An important element of the field management plans is the risk assessment. The varying outcomes of those independent risk assessments lead to differing compliance intervals. The compliance time for Rolls-Royce couplings is not intended to convey the message that there is little risk. Operators are expected to use the compliance time to schedule the maintenance actions required by this AD.

One commenter requests we add a comment on how the press fit for the compressor adaptor coupling has changed, and requests we add a requirement for the correct surface finish for the impeller surface. The commenter states that the fit between the compressor adaptor coupling and the impeller is critical.

We partially agree. We specified the change to the press fit for the compressor adaptor coupling in the compliance section of the final rule. Since the surface finish is specified in the Overhaul Manual, we will not include the surface finish of 40 microinches for the machined impeller in the final rule.

One commenter states the costs of compliance could be mitigated by stating the costs occur over 7 years. The commenter gave no specific justification.

We do not agree. The estimated costs of compliance for this AD already takes into account the 6,000 engines affected, without basing estimates over 7 years.

One commenter requests that we explain the physical difference between the RRC P/N 23076559-1 and RRC P/N 23039791. The physical difference is that RRC P/N 23076559 has a coating that is more resistant to fretting compared to P/N 23039791.

The commenter also asks why the -1 version of the P/N 23036559 compressor adapter coupling is installed only when a new impeller is installed.

The -1 coupling is the smallest size and will only fit correctly into a new impeller. As stated in the proposal, a used impeller must be machined before a new compressor adaptor coupling can be installed. This action is required to clean all fretting damage from the surface of the impeller that mates with the coupling. Once an impeller has been machined, a larger (-2 or -3) coupling is required.

Also, the commenter requests to allow installation of a “1 coupling into a used impeller, if the fit is correct.

We do not agree. A -1 coupling cannot be installed in a used impeller even if the fit is correct. The surface of a used impeller that mates to the coupling must be cleaned by machining. After machining, a larger coupling is required.

We have carefully reviewed the available data, including the comments received, and determined that air safety and the public interest require adopting the AD with the changes described previously. We have determined that these changes will neither increase the economic burden on any operator nor increase the scope of the AD.

There are about 9,000 RRC 250-B and 250-C series turboprop and turboshaft engines of the affected design in the worldwide fleet. We estimate that 6,000 engines installed on helicopters and airplanes of U.S. registry will be affected by this AD. We also estimate that it would take about 3 work hours per engine to perform the actions when done at time of rotor disassembly, and that the average labor rate is $65 per work hour. Required parts will cost about $1,601 per engine. Based on these figures, we estimate the total cost of the AD to U.S. operators to be $10,776,000.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

We have determined that this AD will not have federalism implications under Executive Order 13132. This AD 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.

For the reasons discussed above, I certify that this AD:

(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.

We prepared a summary of the costs to comply with this AD and placed it in the AD Docket. You may get a copy of this summary at the address listed under ADDRESSES.

On November 30, 2004, the FAA issued AD 2004-25-12, amendment 39-13900 (69 FR 71339, December 9, 2004), for all EMBRAER Model EMB-135 and -145 series airplanes. The AD requires a one-time inspection of each passenger service unit (PSU) to determine the serial number of the printed circuit board (PCB) installed in each PSU, replacement of the PCB if necessary, related investigative actions, and other specified actions.

As published, the docket number of the final rule is incorrectly cited in the product identification section of the preamble and the regulatory information of the final rule. In the regulatory text, that AD reads “* * * Docket No. FAA-2004-19767. * * *” However, that AD should have read “* * * Docket No. FAA-2004-19050. * * *”

No other part of the regulatory information has been changed; therefore, the final rule is not republished in the Federal Register .

The effective date of this AD remains January 13, 2005.

Before Commissioners: Pat Wood, III, Chairman, Nora Mead Brownell, Joseph T. Kelliher, and Suedeen G. Kelly.

1. In this order, we affirm, with certain clarifications, the fundamental determinations made in Order Nos. 2003 1 and 2003-A. 2 Adopting the pro forma Large Generator Interconnection Procedures (LGIP) and Large Generator Interconnection Agreement (LGIA) will help prevent undue discrimination, preserve the reliability of the nation's transmission system, and lower prices for customers by increasing the number and variety of generation resources competing in wholesale electricity markets. At its core, the Commission's interconnection policy enunciated in this series of orders ensures that all Generating Facilities are offered Interconnection Service on comparable terms.

2. This order reaffirms that an important objective of the Commission's pricing policy is the protection of the Transmission Provider's existing Transmission Customers, including native load, from subsidizing Network Upgrades required to interconnect merchant generators. This order also reaffirms the Order No. 2003-A crediting policy for Network Upgrades. Order No. 2003-A gave the Transmission Provider the option, after five years from the Commercial Operation Date of the Interconnection Customer's Generating Facility, of either fully reimbursing the Interconnection Customer for its upfront payment for Network Upgrades or continuing to make dollar-for-dollar credits against charges for Transmission Service. Order No. 2003-A provided no date certain for full reimbursement of the upfront payment.

3. On rehearing, petitioners  3 argue that a date certain is needed for a variety of reasons. In particular, they state that a date certain is needed to make the crediting policy consistent with the notion that the upfront payment is primarily a mechanism for financing Network Upgrades. This order addresses their concerns by clarifying that if the Transmission Provider chooses not to fully reimburse the Interconnection Customer after five years, it must continue to provide dollar-for-dollar credits to the Interconnection Customer, or develop an alternative schedule that is mutually agreeable and provides for the return of all amounts advanced for Network Upgrades not previously repaid. However, full reimbursement shall not extend beyond twenty (20) years from the Commercial Operation Date.

4. This order takes effect 30 days after issuance by the Commission. As with the Order No. 2003 compliance process, the Commission will deem the open access transmission tariff (OATT) of each non-independent Transmission Provider to be amended to adopt the revisions to the pro forma LGIP and LGIA contained herein on the effective date of this order. Unlike the Order No. 2003 compliance process, however, each non-independent Transmission Provider will be required to amend its OATT to include the LGIP and LGIA revisions contained herein within 60 days after issuance of this order by the Commission. Also, within 60 days after issuance of this order, each independent Transmission Provider must submit revised tariff sheets incorporating its revisions to its OATT or an explanation under the independent entity variation standard as to why it is not proposing to adopt each change described in this order.

5. Order No. 2003 required all public utilities that own, control, or operate facilities used for transmitting electric energy in interstate commerce to have on file standard procedures and a standard agreement for interconnecting Generating Facilities capable of producing more than 20 megawatts of power (Large Generators) to their Transmission Systems. 4 Order No. 2003 also required that all such public utilities modify their OATTs to include the pro forma LGIP and LGIA.

6. Order No. 2003 stated that interconnection plays a crucial role in bringing generation into national energy markets to meet the growing needs of customers and to obtain for customers the benefits of increased competition. It noted that the then-existing interconnection process was fraught with delays and lack of standardization that discouraged merchant generators from entering the energy marketplace, in turn stifling the growth of competitive energy markets. It concluded that the delays and lack of standardization inherent in the then-current system undermined the ability of generators to compete in the market and provided an unfair advantage to utilities that own both transmission and generation facilities. As a result, the Commission concluded that there was a pressing need for a single, uniformly applicable set of procedures and agreements to govern the process of interconnecting a Large Generator to a Transmission Provider's Transmission System. 5

7. Order No. 2003-A affirmed the legal and policy conclusions on which Order No. 2003 was based. It held that Order No. 2003 did not expand the Commission's jurisdiction beyond that asserted in Order No. 888 and upheld in court. 6 For example, it reaffirmed that Order No. 2003 applies only to an interconnection with a public utility's Transmission System that, at the time the interconnection is requested, is used either to transmit electric energy in interstate commerce or to deliver electric energy sold at wholesale in interstate commerce under a Commission-filed OATT. It also reaffirmed that dual use facilities (those used both for wholesale and retail transactions) are subject to Order No. 2003 (1) if the facilities are subject to an OATT on file with the Commission when the Interconnection Request is submitted and (2) the interconnection will facilitate a wholesale sale.

8. Order No. 2003-A also generally affirmed the pricing policy adopted in Order No. 2003 for the recovery of the costs of Network Upgrades associated with an interconnection. 7 That is, the Commission's existing pricing policy continues to apply to a non-independent Transmission Provider, but an independent Transmission Provider such as a Regional Transmission Organization (RTO) or an Independent System Operator (ISO) has greater flexibility to propose a customized pricing policy to fit its circumstances. It also reaffirmed that all Distribution Upgrades (upgrades to the Transmission Provider's “distribution” or lower voltage facilities that are subject to an OATT) are to be paid for by the Interconnection Customer without reimbursement (direct assignment).

9. In addition, Order No. 2003-A clarified that, consistent with the Commission's transmission ratemaking policy, a non-independent Transmission Provider continues to have the option to charge the Interconnection Customer a transmission rate that is the “higher of” an average embedded cost (rolled-in) rate or an incremental cost rate for the Network Upgrades needed for the interconnection. It also explained that incremental pricing is not the same as direct assignment.

10. Order No. 2003-A reiterated that, unless the Transmission Provider and the Interconnection Customer agree otherwise, the Interconnection Customer must initially fund the cost of any Network Upgrades used to interconnect its Generating Facility with a non-independent Transmission Provider's Transmission System. The Transmission Provider must then reimburse the Interconnection Customer on a dollar-for-dollar basis, with interest. This reimbursement is in the form of credits against the rates the Interconnection Customer pays for the delivery component of Transmission Service. In Order No. 2003-A, however, the Commission granted rehearing on two aspects of the mechanics of crediting. First, Order No. 2003-A required the Transmission Provider to provide credits to the Interconnection Customer only against transmission delivery service taken from the interconnecting Generating Facility, as opposed to Transmission Service taken elsewhere on the Transmission System. Second, it eliminated the requirement that transmission credits be refunded at the end of five years from the Commercial Operation Date of the Generating Facility and instead gave the Transmission Provider the option of either (1) reimbursing the Interconnection Customer for the remaining balance of the upfront payment, plus accrued interest, five years from the Commercial Operation Date of the Generating Facility or (2) continuing to provide credits until the upfront payment has been repaid, with accrued interest. Order No. 2003-A also eliminated the requirement that any Affected System Operator refund the Interconnection Customer's upfront payments for Network Upgrades built on the Affected System as a consequence of the interconnection of the Generating Facility, and instead required the Affected System to provide credits toward the Interconnection Customer's upfront payment only when Transmission Service is taken by the Interconnection Customer on the Affected System.

11. Order No. 2003-A also clarified that neither Energy Resource Interconnection Service (ERIS) nor Network Resource Interconnection Service (NRIS) guarantees delivery service. It explained that while both services give the Interconnection Customer the capability to deliver the output of its Generating Facility into the Transmission System at the Point of Interconnection, neither allows the Interconnection Customer the right to withdraw power at any particular Point of Delivery. It also clarified that when an Interconnection Customer wants to deliver the output of its Generating Facility to a particular load (or set of loads), regardless of whether it has chosen ERIS or NRIS, it may simultaneously request Network Interconnection Transmission Service or Point-to-Point Transmission Service under the OATT. Order No. 2003-A also clarified that NRIS is not the same as or a substitute for Network Integration Transmission Service under the OATT.

12. SoCal Edison claims that in Order No. 2003-A the Commission rejected its argument that all interconnections of generators intending to sell power to “wholesale entities,” except interconnections of Qualifying Facilities that will sell all of their output to host utilities under the Public Utilities Regulatory Policy Act of 1978, 8 should be subject to Commission jurisdiction. In particular, SoCal Edison objects to the Commission's explanation that states have jurisdiction over an interconnection when the facility with which the Generating Facility is being interconnected is not subject to a Commission-approved OATT at the time the Interconnection Request is submitted, even if the Interconnection Customer intends to make a jurisdictional wholesale sale. 9 This conclusion is legally erroneous and a significant departure from established policy and precedent.

13. SoCal Edison further argues that Order No. 888 states that wholesale transmission is within the Commission's exclusive jurisdiction. It cites to TAPS v. FERC , where the Supreme Court affirmed Order No. 888. 10 Because interconnection is a form of Transmission Service, it should not matter whether an interconnection is with a facility that is subject to an OATT or already in use by a wholesale customer. Furthermore, SoCal Edison claims that it “can cite to myriad orders involving its distribution system alone where [the Commission] accepted jurisdiction under Section 205 over the interconnection of generation to distribution facilities used at the time by no other wholesale customers but the interconnecting generator.”

14. The passage in Order No. 2003-A that SoCal Edison objects to states as follows: “States will retain jurisdiction over interconnection to dual use facilities when * * * the facility is not subject to a Commission-approved OATT at the time the Interconnection Request is made, even if the Interconnection Customer intends to make a jurisdictional wholesale sale.” 11 This statement was in error. We grant rehearing to clarify that this statement was based on the false premise that a dual use facility may not be subject to an OATT at the time the Interconnection Request is made. In fact, a facility may be considered dual use only if it serves both state- and Commission-jurisdictional functions at the time the Interconnection Request is submitted. As a result, a dual use facility must be subject to an OATT. And if an Interconnection Customer seeks to interconnect with a dual use facility to make a wholesale sale, that interconnection will be subject to Order No. 2003. This is consistent with Order No. 2003 and other statements in Order No. 2003-A, where the Commission stated that an interconnection with dual use “distribution” facilities  12 that already serve a Commission-jurisdictional transmission function (and are subject to an OATT) for the purpose of facilitating a jurisdictional wholesale sale of electricity is subject to Order No. 2003. 13 In conclusion, Order No. 2003-A incorrectly suggested that a state regulatory agency would have jurisdiction over an interconnection with a dual use facility when the Interconnection Customer intends to make a jurisdictional wholesale sale. Because this is the only statement on which SoCal Edison's request for rehearing is based, there is no need to address its other arguments.

15. In Order No. 2003-A, the Commission noted that requiring the Transmission Provider to provide the Interconnection Customer with credits against transmission service unrelated to the Generating Facility, and to fully reimburse the Interconnection Customer after only five years, tends to shift risk from the entity in control of the investment ( i.e. , the Interconnection Customer) to native load and other Transmission Customers. The Commission stated that this shifting of risk may result in inefficient siting decisions, and may require native load or other Transmission Customers to bear the cost of the Network Upgrades when the Interconnection Customer takes little additional transmission service with the new Generating Facility as the source, or where the Interconnection Customer elects to retire the Generating Facility early. Therefore, to place an appropriate level of risk on the Interconnection Customer, the Commission in Order No. 2003-A revised the Final Rule policy (1) to make credits available only for transmission service that has the Generating Facility as the source of the power transmitted, and (2) to eliminate the guarantee of full reimbursement of the upfront payment in five years.

16. Several petitioners object to the revisions made in Order No. 2003-A. 14 Specifically, they argue that the Commission (1) should not have limited the applicability of credits to transmission service that has the Generating Facility as the source, (2) should not have given the Transmission Provider the option to fully reimburse the Interconnection Customer's upfront payment, plus interest, after five years, or to continue to provide credits to the Interconnection Customer until the total of all credits equals the Interconnection Customer's initial payment for the Network Upgrades plus interest, and (3) should not have excused an Affected System from having to provide credits except when transmission service is taken on the Affected System and has the Generating Facility as the source.

17. Calpine states that in Order No. 2003-A, the Commission has destroyed the balance and fairness of the Order No. 2003 policies. 15 It argues that the Commission is now obligating the Interconnection Customer to finance Network Upgrades under terms that virtually guarantee that the Interconnection Customer will not be made whole for its upfront funding.

18. Reliant, PSEG, and Intergen state that, contrary to the Commission's stated rationale, the revised crediting rules will not cause the Interconnection Customer to make more efficient siting decisions, and they are not needed to protect native load or other Transmission Customers from bearing the costs of Network Upgrades if the Generating Facility is retired early. Intergen objects to the new policies for a number of reasons. First, Network Upgrade costs cannot influence siting decisions because the costs are typically unknown when siting decisions are made. Second, the Interconnection Customer must take multiple factors into consideration when making siting decisions. For example, the Interconnection Customer must consider the ability to access particular markets, fuel and water supply access, air quality issues, tax issues, and zoning issues, among other things. Third, because a Generating Facility is a multi-hundred million dollar investment, the Interconnection Customer has tremendous risk exposure, and adding a few million dollars in Network Upgrade costs will not shift the risk of commercial infeasibility or poor siting decisions to others. Fourth, oversight by state regulatory authorities is an important constraint on where the Interconnection Customer chooses to site its facility. Fifth, the amount of Network Upgrades needed is directly tied to the condition in which the Transmission Provider keeps its Transmission System. If the Transmission Provider has been properly upgrading and expanding its facilities, then fewer Network Upgrades are likely to be needed. Also, Reliant claims that continuing to require that the Interconnection Customer fund the Network Upgrade costs upfront mitigates any lack of incentive that the Interconnection Customer may otherwise have to make efficient siting decisions.

19. With regard to the need to protect native load and other transmission customers, Intergen states that an Interconnection Customer has strong incentives to maximize its use of the Transmission System, since it makes money only when it sells the output of its Generating Facility. Even under a worst case scenario, in which all Network Upgrade costs are assigned to existing customers, they would not suffer a significant rate increase. Intergen argues that concerns about native load customers being harmed by early retirements are overblown and do not recognize the significant benefits of increased competition in the generation market.

20. PSEG states that, by allowing the full reimbursement of upfront payments to be delayed beyond the five-year period, the Commission is discouraging development of RTOs. What will happen, for example, to an Interconnection Customer's transmission credits when the non-independent Transmission Provider to which it is interconnected joins an RTO? PSEG argues that permitting generators to “cash out” their credits on a date certain would alleviate these complexities and engender a smoother transition to an RTO system in which the interconnecting generator receives well-defined property rights rather than credits. Also, Intergen states that allowing the time for repayment to be extended indefinitely is inconsistent with the Commission's underlying “financing” policy for Network Upgrades and forces the Interconnection Customer to bear the full costs of a below-market interest rate.

21. Calpine points out that there are also Transmission Systems where the Interconnection Customer does not directly pay for transmission service. As a result, the Interconnection Customer does not receive a bill for transmission services to which credits can be applied. This is the situation, for example, in the California ISO, where load pays for transmission service. However, under Order No. 2003-A, the dollar-for-dollar offset against transmission service payments is the only way explicitly provided to receive transmission credits, and this might allow someone to argue that credits need not be paid in areas such as California. Under the Order No. 2003 language in article 11.4.1 of the pro forma LGIA, this argument could not have been made because that provision required that all upfront payments for Network Upgrades had to be refunded within five years, and the Parties had to agree on a mechanism to do so. Because Order No. 2003-A dropped the mandatory five-year repayment provision, there is no explicit provision as to how an Interconnection Customer that does not pay directly for transmission service is to receive its credits. Therefore, Calpine proposes adding the following sentence to article 11.4.1 of the LGIA:

22. Reliant and others state that the Commission departed from the balanced approach of Order No. 2003 by deciding that transmission credits must be given by the Transmission Provider only for transmission service that has the Generating Facility as the source of the power transmitted. Reliant argues that certain Generating Facilities, such as peakers, require transmission service on a very limited schedule and, as a result, owners of such facilities may find it difficult to recover the sums advanced to the Transmission Provider under Order No. 2003-A. Reliant claims that the new policy creates a barrier to entry for exactly the type of facility needed during tight supply conditions.

23. Reliant and Intergen argue that the Commission's new policy on credits effectively takes away a fundamental right that Order No. 888 provided to the Transmission Customer. That is, the use of credits for any service taken on a Transmission Provider's system must be equated to the right of a Transmission Customer to change its Point of Receipt or Point of Delivery under Point-to-Point Transmission Service. If the Transmission Provider can provide service from the new points, it grants the service with no additional charge to the Transmission Customer. Petitioners argue that, similarly, the Transmission Customer should be allowed to use its credits at alternate points of receipt or delivery without paying an additional charge to the Transmission Provider.

24. Intergen states that Order No. 2003 mitigated adverse cost impacts by giving the Interconnection Customer flexibility in determining how best to use the credits it received for the costs of Network Upgrades. The ability to transfer credits to other entities for which the Generating Facility is not the source of the power transmitted may be crucial for an Interconnection Customer that must meet its debt obligations, but has limited ability to acquire transmission service or sell its output. Also, because the interest accruing on the credits does not fully compensate the Interconnection Customer for its upfront payment, an Interconnection Customer has a strong incentive to transfer the credits to another entity that can use the credits immediately.

25. TAPS states that a problem would arise if a Transmission Provider were to seek to restrict credits to a Network Customer by basing the credits on the energy output, rather than the capacity, of a Generating Facility used as a Network Resource. TAPS asks the Commission to revise or clarify Order No. 2003-A to provide that a Network Customer that designates an interconnecting Generating Facility as a Network Resource will receive credits based on the full capacity of the Network Resource (or the amount reserved by the Network Customer if it is less), not just the energy delivered from the resource.

26. EPSA states that if the Commission retains the policy of limiting credits to transmission service that has the Generating Facility as the source, there are several issues that must be clarified. First, the Commission should clarify that credits will be applied to the total reservation payment for any service obtained to support the delivery of the generator, whether or not energy is scheduled in any particular hour of the reservation period and whether or not the power customers take advantage of the options to use alternative receipt or delivery points provided under the pro forma OATT to all point-to-point customers. Second, the Commission should clarify that credits will be applied to network services whenever a Network Customer designates the Generating Facility as a Network Resource or substitute resource, regardless of whether the Generating Facility produces energy during each hour of the designation. Finally, EPSA asks the Commission to clarify that credits must be provided by the Transmission Provider when it designates the Generating Facility as a Network Resource or substitute resource for meeting its native load requirements, whether or not the Transmission Provider actually enters into a service agreement under the OATT.

27. TAPS states that changes described in P 675 of Order No. 2003-A suggest that only credits equal to the OATT's embedded cost rates must be provided, even if the Transmission Provider charges an incremental transmission rate. 16 The Rule should be revised or clarified to address this discrepancy. A Transmission Provider that seeks transmission charges based on the incremental cost of Network Upgrades should be required to provide the Interconnection Customer that paid for those upgrades upfront with credits applied against the full amount of the incremental transmission charges, until the Interconnection Customer's upfront payment, plus interest, has been completely reimbursed.

28. PSEG states that under Order No. 2003-A, a non-independent Transmission Provider may have an incentive to “tack on” unnecessary Network Upgrade requirements (for which ultimate compensation to the generator has now been made considerably less certain) or not to build Network Upgrades that would allow transmission service to be taken from the Generating Facility (for which credits would have to be given). PSEG claims that this will discourage the construction of new generation and create incentives for preferential treatment of affiliated generation.

29. Intergen states that unlike merchant units, the Transmission Provider's generating facilities never had to pay the upfront costs of their Network Upgrades. Thus, Transmission Provider facilities never had to assume any of the risks associated with Network Upgrades that the merchant generators do. To mitigate these competitive disadvantages, Intergen asserts that the Commission should allow the Interconnection Customer to receive credits for service sourcing at points other than the Generating Facility.

30. PSEG argues that Network Upgrades benefit the entire Transmission System, and this common benefit is what distinguishes Network Upgrades from sole use facilities. The Interconnection Customer's financing of investment in the network of a non-independent Affected System benefits all Network Customers and all network transactions. It is unduly discriminatory to limit the Interconnection Customer's recovery of the funds it advances for Network Upgrades on an Affected System simply because the Interconnection Customer is unable to make direct use of them.

31. EPSA urges the Commission to reverse its decision to modify the crediting policy with respect to Network Upgrades funded by an Interconnection Customer on an Affected System. A Generating Facility will be less likely to use transmission service on an Affected System than on the Transmission System to which it is interconnected, and this will unreasonably delay repayment. This is especially true in the West, where network facilities affected by an interconnection are often jointly owned by a number of Transmission Providers. These Transmission Providers are often far removed from the Transmission Provider to which the Generation Facility is interconnected. According to EPSA, an Interconnection Customer is unlikely to take transmission service on the Transmission System of a Transmission Provider that jointly owns these affected facilities. Therefore, the Interconnection Customer will have little ability to use the credits to which it is entitled.

32. In Order No. 2003-A, the Commission revised the rules governing transmission credits to place the Interconnection Customer at greater risk for the cost of Network Upgrades occasioned by the Interconnection Request. The Commission was concerned that to do otherwise would not lead to efficient siting decisions and would not adequately protect native load and other Transmission Customers from having to bear Network Upgrade costs if the Generating Facility were to retire early. In their arguments opposing the modifications, Intergen and others state that the cost of Network Upgrades is typically small compared to the cost of the Generating Facility and that the Interconnection Customer will often embark on a project even though Network Upgrade costs are unknown. This suggests that placing the risk for the cost of Network Upgrades on the Interconnection Customer does not place a significant burden on the Interconnection Customer and thus is completely appropriate. Also, Intergen states that the Interconnection Customer has a strong incentive to maximize its use of the Transmission System because it only makes money if it is selling output from its Generating Facility. The crediting policy, however, reinforces that incentive by linking transmission credits directly to the output of the Generating Facility.

33. We strongly encourage policies that promote efficient investment decisions and protect native load and other Transmission Customers from having to bear the burden of the Interconnection Customer's Network Upgrade costs. Given these concerns, we continue to find that the Order No. 2003-A crediting policy provides a reasonable balance between the objectives of promoting competition and infrastructure development, protecting the interests of Interconnection Customers, and protecting native load and other Transmission Customers.

34. Intergen states that extending the reimbursement timeframe indefinitely is inconsistent with the Commission's determination that the upfront payment is merely a mechanism for financing the cost of the Network Upgrades. In addition, PSEG states that the indefinite timeframe will make the transition to RTO development more complex, and Calpine claims that an uncertain timeframe for reimbursement will create problems in areas such as California where the Interconnection Customer does not receive directly a bill for transmission service to which credits can be applied.

35. These petitioners make valid points. To address the Interconnection Customer's need for a date certain for reimbursement of its upfront payment, we are specifying what the Transmission Provider must do if it elects not to return to the Interconnection Customer any portion of its upfront payment that remains due at the end of five years. Specifically, in order to provide a definite end date for reimbursement that is not to be exceeded, we are revising pro forma LGIA article 11.4.1 to state that full reimbursement shall not extend beyond twenty (20) years from the Commercial Operation Date. The portion of this article that describes the Transmission Provider's second repayment option now reads as follows:

36. All other crediting rules remain the same. This change addresses Intergen's concern that Order No. 2003-A's removal of a date certain for the repayment of Network Upgrade costs was inconsistent with the notion that the upfront payment is, in essence, a loan to the Transmission Provider designed to facilitate construction of the Network Upgrades. The change also addresses PSEG's concern that the lack of a date certain might create an obstacle to the development of an RTO, which may require the Interconnection Customer's upfront payment to be converted into financial transmission rights. Finally, the change addresses Calpine's concern that, in the absence of a date certain for repayment of Network Upgrade costs, a Transmission Provider could conclude that credits need not be repaid in areas where the Interconnection Customer does not pay directly for transmission service. We further clarify that the Interconnection Customer is entitled to full reimbursement for its upfront payment and the period for reimbursement may not be longer than the period that would be required if the Interconnection Customer paid for transmission service directly and received credits on a dollar-for-dollar basis, or 20 years, whichever is less. In short, the imposition of a 20-year date certain does not mean that the Commission is switching from reimbursing through credits to reimbursing over 20 years. Rather, if credits have not fully reimbursed the upfront payment within 20 years, there will be a balloon payment at the end of year 20.

37. Reliant argues that the owner of a Generating Facility, such as a peaker, that requires transmission service on a limited schedule may find it difficult or impossible to recover its upfront payment under the Commission's rules as revised by Order No. 2003-A. We disagree. Any Interconnection Customer whose Generating Facility is used as intended, whether or not it is a peaker, normally will be required to take Firm Point-to-Point Transmission Service or Network Integration Transmission Service and therefore will have ample opportunity to use its transmission credits to obtain reimbursement of its upfront payment. Furthermore, reimbursement of any upfront payment must occur no later than 20 years after the Commercial Operation Date.

38. Reliant and Intergen argue that limiting credits to transmission service taken with the Generating Facility as the source takes away the Transmission Customer's fundamental right under Order No. 888 to change its Point of Receipt or Point of Delivery under Point-to-Point Transmission Service without additional charge if the Transmission Provider is able to grant the service at the alternate points. Also, Intergen argues that the ability to transfer credits may be crucial for an Interconnection Customer that must meet debt obligations but is constrained in its ability to acquire transmission service. The new policy does not revoke any rights provided by Order No. 888. If the Interconnection Customer or other Transmission Customer is taking firm Point-to-Point Transmission Service under the OATT with the Generating Facility as the source of the power transmitted, the customer continues to have all of the rights given under the OATT to change temporarily Points of Receipt or Delivery, if capacity is available, and is entitled to continue to receive credits toward the cost of the transmission service while doing so.

39. TAPS and EPSA ask the Commission to revise or clarify Order No. 2003-A to provide that a Network Customer that designates a Generating Facility as a Network Resource will receive credits based on the full capacity of the Network Resource (or the amount reserved by the Network Customer if it is less), not just the energy delivered from the resource. We clarify that when a Generating Facility is designated as a Network Resource or a substitute resource, the Interconnection Customer is entitled to credits for the full amount of the reserved capacity of the Generating Facility regardless of the amount of energy that is scheduled for delivery in any particular hour. Also, TAPS states that changes to the Final Rule described in P 675 of Order No. 2003-A suggest that only credits equal to the Tariff's embedded cost rates would be provided, even if the Transmission Provider chooses to charge an incremental cost rate. We clarify that, if the Transmission Provider chooses to charge an incremental cost rate, the Interconnection Customer is entitled to receive credits, on a dollar-for-dollar basis, at the incremental rate.

40. PSEG states that the new rules may provide a non-independent Transmission Provider with an incentive to “tack on” unnecessary Network Upgrades or omit necessary Network Upgrades. Also, Intergen claims that, unlike a merchant developer, the Transmission Provider never had to assume for its Generating Facilities any of the risks associated with Network Upgrades, and this places the merchant developer at a competitive disadvantage. We disagree. The Commission's crediting policy assigns risk and cost responsibility in a reasonable manner and applies to Interconnection Requests by entities affiliated with the Transmission Provider and to Interconnection Requests by unaffiliated merchant generators. We reiterate that the Transmission Provider has an obligation to apply our interconnection policy in a non-discriminatory manner to all new Interconnection Requests, whether the Generating Facility is owned by the Transmission Provider, its Affiliate, or a merchant developer.

41. EPSA and PSEG are concerned that the Interconnection Customer may be unable to recoup upfront payments for Network Upgrades that are constructed on an Affected System. We note that taking transmission service on an Affected System is entirely at the option of the Interconnection Customer. Whether or not the Interconnection Customer exercises its option, the Network Upgrades on the Affected System benefit the Interconnection Customer by making the minimum transmission additions necessary for it to interconnect safely and reliably, as well as by facilitating access to customers and markets that are outside the Transmission Provider's electric system. Furthermore, if the Interconnection Customer were to be reimbursed by the Affected System Operator for the cost of the Network Upgrades without ever taking service on the Affected System, other Transmission Customers on the Affected System would have to bear the cost instead. This would create a disincentive for the Affected System to construct the Network Upgrades necessary for the Interconnection Customer to interconnect, a problem that would be particularly difficult to address if the Affected System were not a public utility.

42. In addition, EPSA states that when an Affected System is jointly owned, an Interconnection Customer is unlikely to take transmission service on the Transmission System of a Transmission Provider that is far removed from the Affected System on which Network Upgrades had to be constructed. We clarify that the Affected System Operator must provide the Interconnection Customer with credits for transmission service taken on the Affected System until the Interconnection Customer's entire upfront payment has been reimbursed. In the case of an Affected System that is jointly owned, it is the responsibility of the Affected System Operator to provide the credits and to seek reimbursement for any amounts that it believes it is owed by the other owners. We note that this problem is not unique to an Affected System. If a Transmission Provider provides transmission service on a Transmission System that is jointly owned, that Transmission Provider must follow a similar procedure.

43. Cinergy requests clarification of LGIA article 11.4.1, which states that if the Generating Facility fails to achieve commercial operation, but it or another Generating Facility is later constructed and uses the Network Upgrades, the Transmission Provider and the Affected System Operator shall at that time reimburse the Interconnection Customer for the amounts advanced for Network Upgrades. Specifically, where a Generating Facility fails to achieve commercial operation, Cinergy argues that it would be difficult for a Transmission Provider to determine who would be entitled to any eventual credit for the costs of Network Upgrades. This is significant because, given the uncertain state of the energy industry, the original entity constructing the Generating Facility could have been either purchased in whole or in part by another company, bankrupt, or simply no longer be in existence. Cinergy argues that the obligation to keep track of who should receive such reimbursement, if any, should not lie with the Transmission Provider but rather with the Interconnection Customer or its successors.

44. In addition, Cinergy states that article 11.4.1 is not clear as to whether interest accrues on the upfront payment made by an Interconnection Customer whose Generating Facility fails to achieve commercial operation. Cinergy argues that interest should not accrue during what could possibly be an extended period of time where the upgrades remain idle, unused by either another Generating Facility or the Transmission Provider. Cinergy asks the Commission to clarify article 11.4.1 accordingly.

45. We agree with Cinergy that, when a Generating Facility does not achieve commercial operation, the responsibility for keeping track of the entity that is entitled to receive any transmission credits that may be due should lie with the Interconnection Customer, or with any successor entity that may later construct a Generating Facility that makes use of the Network Upgrades. Therefore, we are adding the following sentence to the final paragraph of LGIA article 11.4.1: “Before any such reimbursement can occur, the Interconnection Customer, or the entity that ultimately constructs the Generating Facility, if different, is responsible for identifying the entity to which reimbursement must be made.”

46. With regard to the accrual of interest on upfront payments in cases where the Generating Facility fails to achieve commercial operation, we clarify that interest continues to accrue provided the interconnection agreement remains in effect. Interest does not accrue after an interconnection agreement has been terminated by either Party or during any period in which no interconnection agreement is in effect.

47. SWTransco and Southern Company argue that the Commission's interconnection pricing policy, in certain circumstances, would not protect native load and other customers from bearing the cost of Network Upgrades required for interconnection. 17 Moreover, these petitioners argue that a policy of allowing the Transmission Provider to charge the higher of an incremental rate or an embedded cost rate does not always protect other customers from subsidizing the Interconnection Customer.

48. SWTransco states that to leave the other Transmission Customers no worse off in certain situations, it is necessary to charge the Interconnection Customer not only the Network Upgrade costs, but also the share of the rolled-in costs attributable to any Generating Facility that is displaced by the new Generating Facility. Also, Southern Company states that charging the Interconnection Customer only an incremental rate would not cover the Generating Facility's use of the rest of the Transmission System.

49. Southern Company states that to truly prevent subsidies, the Commission must either (1) allow the direct assignment of Interconnection Facilities and NRIS facilities (because they do not provide a system benefit) and require the generator (or its customer) to pay the embedded transmission rate for delivery service or (2) allow all Transmission Providers to implement participant funding. Southern Company agrees that any disputes regarding participant funding determinations may need to be resolved by an independent entity, but asserts that, in the absence of an RTO or other independent entity, the Commission is well equipped (and, indeed, charged under sections 205 and 206 of the Federal Power Act) to resolve such disputes.

50. Southern Company states that the subsidization issue is generally not a concern if the Generating Facility is designated a Network Resource of the Transmission Provider, or of its Network Customers, contemporaneously with the execution of its interconnection agreement. Southern Company argues that the subsidization issue arises mainly when a merchant generator has no long-term reservations for transmission delivery service from its plant contemporaneously with the execution of the interconnection agreement, or when the Interconnection Customer and the Transmission Customer are different entities.

51. On a related matter, some petitioners ask for guidance regarding the implementation of incremental pricing in the context of generator interconnections. For example, NRECA seeks answers to the following questions. Over what period of time should the incremental costs be presumed to be amortized? If the Interconnection Customer has only a short-term contract for the output of the Generating Facility, should the costs be amortized over that short period? If the Interconnection Customer has only a short-term contract for the output of the Generating Facility, but the Transmission Customer that requests delivery of the Generating Facility's power is taking service under a long-term transmission contract, should the cost of the Network Upgrades be amortized over the length of the transmission contract? Should the cost of Network Upgrades be amortized over their useful life?

52. SWTransco claims that the interconnection procedures and agreement in Order No. 2003-A do not appear to contain mechanics sufficient to allow the pricing concept to be implemented. Southern Company argues that the Transmission Provider will not be able to calculate an incremental rate with any certainty because it often has no reasonable idea regarding the amount of the delivery service that might ultimately be taken from the facility (or which entities will actually be requesting any such delivery service) or the duration of any such service. This is because, in Southern Company's experience, merchant generators normally do not seek interconnection and transmission delivery services at the same time. At a minimum, the Commission must clarify how the incremental pricing calculation could be performed for a merchant generator that does not make a request for transmission delivery service at the time of the execution of the interconnection agreement or when the Interconnection Customer and the Transmission Customer are separate entities.

53. TAPS states that it is unclear from Order No. 2003-A whether or how the Commission intends that incremental pricing would be applied to network Transmission Customers, given the load ratio share pricing required by the OATT.

54. Order No. 2003-A clarified that the Commission was not abandoning any of the fundamental principles that have long guided its transmission pricing policy. The Commission's interconnection pricing policy continues to allow the Transmission Provider to charge the Interconnection Customer a transmission rate that is the higher of the incremental cost rate for Network Upgrades required to interconnect the Generating Facility or an embedded cost rate for the entire Transmission System (including the cost of the Network Upgrades). Order No. 2003-A emphasized that this “higher of” policy ensures that other Transmission Customers, including the Transmission Provider's native load, will not subsidize Network Upgrades required to interconnect merchant generation.

55. On rehearing, petitioners raise concerns regarding the implementation of this policy and whether other customers are protected from having to bear the costs of Network Upgrades under all circumstances. Petitioners argue that they can devise certain hypothetical cases in which the Transmission Provider must either impose some new transmission costs on existing customers or violate the Commission's prohibition against “and” pricing.

56. In response to these petitioners, we first reaffirm that an important objective of our interconnection pricing policy continues to be the protection of existing Transmission Customers, including the Transmission Provider's native load, from adverse rate implications associated with Interconnection Facilities and Network Upgrades required to interconnect a new Generating Facility. Despite the unsupported hypothetical generalizations of some petitioners, we have not been presented with any evidence that native load and other Transmission Customers cannot be held harmless under our existing pricing policy. If a Transmission Provider (or an existing Transmission Customer) believes that, for an actual interconnection, it faces circumstances where native load and other customers are not held harmless, it should make that demonstration in an actual transmission rate filing. The Transmission Provider must explain the facts of the case and the assumptions on which its calculation is based and provide evidentiary support. While we cannot envision any circumstances where our existing pricing policy will not fully protect native load and other Transmission Customers, we are willing to consider alternative pricing proposals under the facts of a specific case. We emphasize that the Transmission Provider bears the full burden of showing that any such proposal is just and reasonable and not unduly discriminatory or preferential, and is appropriate under the circumstances.

57. Similarly, with regard to the calculation of incremental rates, we are not prescribing generic rules at this time. Rather, we invite the Transmission Provider, in the context of an actual interconnection agreement or transmission rate filing, to propose a calculation method that assigns appropriate cost responsibility to the Interconnection Customer and is consistent with applicable Commission policy and precedent.

58. Some petitioners seek clarification of the provisions of Order No. 2003-A governing NRIS and ERIS.

59. NRECA requests that the Commission clarify that, consistent with the OATT (1) only Interconnection Customers that are load serving entities may request Network Integration Transmission Service under a Transmission Provider's OATT, and (2) only Network Customers can designate Network Resources.

60. TAPS asserts that, as clarified in Order No. 2003-A, the unique feature of NRIS has nothing to do with being a “Network Resource,” which is defined by the OATT as a resource designated by a Network Customer under Network Integration Transmission Service. Rather, NRIS provides assurance that even absent any transmission service, “the Generating Facility, as well as other generating facilities in the same electrical area, can be operated at peak load,” and that the output of the Generating Facility will not be “bottled up” under such conditions. The name “Network Resource Interconnection Service,” therefore, is misleading. TAPS recommends an alternative name, such as “Enhanced Interconnection Service,” that more accurately describes this Interconnection Service.

61. Also, TAPS states that the references to “other Network Resources” in LGIA articles 4.1.2.1 and 4.1.2.2 and LGIP section 3 are particularly confusing, because as noted above, “Network Resource” is defined as a resource designated under Network Integration Transmission Service. In other words, the references to “other” Network Resources assume something that has not necessarily happened in the case of resources taking NRIS.

62. TAPS states that article 4.1.2.2 suggests that generators taking NRIS are different from generators taking ERIS with respect to their ability to be designated as Network Resources. Specifically, the introductory sentences of article 4.1.1.2, especially if read in conjunction with LGIA article 4.1.2.2, suggest that NRIS is the preferred route to obtaining a Network Resource designation under the OATT. Although the preamble of Order No. 2003-A otherwise makes clear that a resource with ERIS may be designated as a Network Resource, it confusingly states elsewhere that “Network Resource Interconnection Service makes it possible for the Generating Facility to be designated as a Network Resource.”

63. Similarly, TAPS states that LGIA article 4.1.1.1 and LGIP section 3.2.2.1 continue to describe ERIS as providing “as available” access, without restricting application of that limit, i.e., without adding language such as “unless combined with Network Integration Transmission Service or Firm Point-to-Point Transmission Service,” which would be consistent with the preamble of Order No. 2003-A. TAPS is concerned that LGIP section 3 lacks any reference to the ability of an ERIS customer to obtain anything other than “as available” transmission service. The Commission should modify LGIP section 3 and LGIA articles 4.1.1.1, 4.1.1.2, and 4.1.2.2 to eliminate any confusion.

64. EPSA states that the Commission has introduced some uncertainty as to the additional studies or additional upgrades that might be associated with NRIS. It asks the Commission to clarify that any references to such studies or upgrades apply only to optional upgrades to reduce congestion or to customer-specific delivery issues, not to upgrades related to the designation of a NRIS generator as a Network Resource. If the Commission does not clarify that the Interconnection Customer's responsibility to pay for additional studies and upgrades is to be limited to the circumstances described above, EPSA requests rehearing on this issue. EPSA also urges the Commission to require Transmission Providers to include in their compliance filings the protocols and procedures they will use to determine when additional studies or upgrades are needed.

65. Intergen asserts that the studies associated with NRIS and with Network Integration Transmission Service are essentially identical. Thus, a NRIS customer and a Network Integration Transmission Service customer should build the same Network Upgrades. However, Intergen interprets the clarification in Order No. 2003-A to mean that the NRIS customer will not receive any delivery assurances despite the fact that it is fronting the costs of the Network Upgrades needed to permit Network Integration Transmission Service. The Commission's statement that the Interconnection Customer's Generating Facility may have to be restudied and pay for additional upgrades once it is designated as a Network Resource, according to Intergen, eviscerates the value of NRIS.

66. In addition, Intergen states that, if the Network Integration Transmission Service studies reveal that the Interconnection Customer cannot acquire Network Integration Transmission Service without significant upgrades, and the Interconnection Customer cannot use its credits for service sourcing elsewhere on the Transmission Provider's Transmission System, the credits could be “locked” into a facility that cannot move its power. Intergen asks for further clarification or rehearing of this aspect of Order No. 2003-A. Intergen also asks the Commission to clarify that, because NRIS uses studies similar to those used to determine whether Network Integration Transmission Service is available, and because the Interconnection Customer is paying for the upgrades associated with those studies, an NRIS generator does not need to be restudied and does not need to construct additional Network Upgrades when designated as a Network Resource.

67. NRECA states that NERC and others had stressed in earlier comments to the Commission that the requirement in LGIP section 3.2.2.2 that the Transmission Provider study the Transmission System “at peak load, under a variety of severely stressed conditions * * *.” was insufficient to ensure the reliability of the Transmission System. Order No. 2003-A failed to address NERC's concern over the wording of section 3.2.2.2 of the LGIP. NRECA argues that, although the Commission indicates that it will allow a Transmission Provider to petition for changes to the study criteria subject to the “consistent with or superior to” standard, such an ad hoc approach to this important reliability issue is insufficient. It notes that Order No. 2003-A indicated that a threshold requirement for obtaining the Commission's permission to deviate from the pro forma LGIP will be whether there is an accepted regional practice addressing this issue. However, NRECA claims that in many regions there is no such established practice. Consequently, a Transmission Provider in such regions would be barred from making the necessary changes to the NRIS study criteria.

68. Most of the questions and concerns raised by petitioners concerning interconnection products and services were fully addressed in Order No. 2003-A, and we will not repeat those conclusions here. We remind petitioners that, to gain a full understanding of Order No. 2003-A's treatment of NRIS and ERIS, the preamble, LGIP and LGIA must be read together. To include all of the relevant preamble discussion in the LGIP and LGIA would make those documents unwieldy.

69. In response to TAPS's concerns about the descriptions of NRIS and ERIS and the relationship between NRIS, ERIS and Network Integration Transmission Service, we note that the Commission addressed these matters in detail at P 530-537 of Order No. 2003-A. Also, we disagree with TAPS's assertion that the name “Network Resource Interconnection Service” is misleading. The name is suitable given that the principal purpose of the service is to allow the Generating Facility to qualify for designation as a Network Resource by a Network Customer. However, we agree that the use of the word “other” as a modifier of “Network Resources” in LGIP sections 1 and 3.2.2.1 and LGIA articles 1 and 4.1.2.2 is confusing. Therefore, we are eliminating it from those sections and articles. In response to NRECA, we clarify that we are not changing the requirement of Order No. 888 that only a load serving entity can become a Network Customer and only a Network Customer can designate a Generating Facility as a Network Resource.

70. In response to EPSA's and Intergen's concerns that an Interconnection Customer taking NRIS may be required to pay for additional studies and additional upgrades to have the Generating Facility designated as a Network Resource, we note that the Commission addressed this matter at P 544-545 of Order No. 2003-A; no further response is needed.

71. NRECA argues that the study criteria for NRIS are insufficient, and is concerned that the Commission will not allow a Transmission Provider to adopt different criteria if there is no established practice addressing this issue in the Transmission Provider's region. Our experience with the Order No. 2003 and Order No. 2003-A compliance filings leads us to agree with NRECA that the orders' requirements regarding the Transmission Provider's use of alternative NRIS study criteria are unnecessarily burdensome. In their compliance filings, a number of Transmission Providers proposed to modify the NRIS study criteria to allow them to study the Transmission System under non-peak load conditions. Some of these Transmission Providers supported their requests with references to criteria documented in their reliability region's planning standards, while others explained that the use of their proposed criteria is a generally accepted regional practice. The Commission generally accepted these proposals subject to certain conditions. 18 Based on our experience with these compliance filings, we now conclude that it is no longer necessary to require the Transmission Provider that wishes to include non-peak load criteria in its NRIS study process to demonstrate that the use of such study criteria is consistent with or superior to the requirements of pro forma LGIP section 3.2.2.2. Rather, we will allow the non-independent Transmission Provider to adopt study criteria that consider non-peak load conditions if the Transmission Provider, upon request by the Interconnection Customer, agrees to provide the Interconnection Customer with a written justification for doing so. We emphasize, however, that the Transmission Provider must provide comparable service; that is, it must study non-peak conditions for the interconnection of its own and its affiliates' Generating Facilities on the same basis that it studies non-peak conditions for the non-affiliated Interconnection Customer. To implement this change, we are inserting the following sentences after the first sentence of LGIP section 3.2.2.2:

This should simplify the compliance process and satisfy NRECA's concerns. 19

Controlled substances are drugs that have a potential for abuse and addiction; these include opiates, stimulants, depressants, hallucinogens, anabolic steroids, and substances that are immediate precursors to these controlled substances. Controlled substances are listed in 21 CFR part 1308. The substances are divided into five schedules. Schedule I substances are drugs for which there is a high potential for abuse, no currently accepted medical treatment in use in the United States, and lack accepted safety for use under medical supervision. Schedule II-V substances have accepted medical uses, but have a potential for abuse and may lead to physical and psychological dependence. Such drugs are subject to varying levels of control. Chemicals that can be used to manufacture controlled substances are regulated as either List I chemicals (important to the manufacture) or List II chemicals (used in the manufacture) of controlled substances.

Gamma-Hydroxybutyric acid (GHB) is a central nervous system depressant drug. In recent years, the abuse of GHB has increased substantially. GHB is abused for its euphoric and purported hallucinogenic effects, as well as for its alleged role as an agent to stimulate muscle growth. GHB can produce drowsiness, dizziness, nausea, visual disturbances, unconsciousness, seizures, severe respiratory depression, coma, and death.

GHB can be produced in clandestine laboratories using a relatively simple synthesis with readily available and inexpensive source materials. Gamma-Butyrolactone (GBL), a List I chemical, is an industrial chemical that is used in the illicit manufacture of GHB. GBL and 1,4-butanediol, another industrial chemical, are also abused for their GHB-like effects. Due to their structural and pharmacological similarities to GHB, GBL and 1,4-butanediol are considered controlled substance analogues as defined by 21 U.S.C. 802(32). Manufactured GHB usually results in a clear solution that can be disguised by adding food coloring, flavorings, or storing it in different kinds of bottles and containers.

The listed chemical GBL has many industrial applications, and has not been scheduled at this time to prevent an undue regulatory burden to legitimate commerce in this substance. Because GBL is a controlled substance analogue, individuals who manufacture or distribute or possess with intent to manufacture or distribute this chemical intending it for human consumption may be prosecuted under provisions of the Controlled Substances Act. This is because a controlled substance analogue which is intended for human consumption is treated as a Schedule I controlled substance. When handled for industrial purposes, with no intent for human consumption, it is not treated as a Schedule I controlled substance and those handling it are not subject to any Schedule I controlled substances penalties under the Controlled Substances Act.

On February 18, 2000, the “Hillory J. Farias and Samantha Reid Date-Rape Drug Prohibition Act of 2000” was enacted (Pub. L. 106-172, 114 Stat. 7). Public Law 106-172 declared GHB an imminent hazard to public safety that required immediate regulatory action under the Controlled Substances Act. Public Law 106-172 required the Attorney General to list GHB as a Schedule I controlled substance and designated GBL as a List I chemical. As a result of the Hillory J. Farias and Samantha Reid Date-Rape Drug Prohibition Act, DEA issued two final rules: Schedules of Controlled Substances: Addition of Gamma-Hydroxybutyric Acid to Schedule I (65 FR 13235, March 13, 2000) (corrected at 65 FR 17440, April 3, 2000) and Placement of Gamma-Butyrolactone in List I of the Controlled Substances Act (21 U.S.C. 802(34)) (65 FR 21645, April 24, 2000).

Under the March 13, 2000 final rule, GHB and its salts, isomers, and salts of isomers were placed in Schedule I, and GHB became subject to the regulatory controls and administrative, civil, and criminal sanctions applicable to the manufacture, distribution, dispensing, importing, and exporting of a Schedule I controlled substance. As required by the Hillory J. Farias and Samantha Reid Date-Rape Drug Prohibition Act, the March 13, 2000 final rule created an exception for drug products containing GHB, including its salts, isomers, and salts of isomers, for which an application is approved under section 505 of the Federal Food, Drug, and Cosmetic Act (FDCA) (21 U.S.C. 355). The exception placed any such drug products—there were none approved at the time the legislation was passed—in Schedule III. Therefore, registered manufacturers and distributors of FDA-approved drug products containing GHB are subject to Schedule III regulatory requirements. However, criminal penalties for unlawful distributions of these drug products are those for Schedule I controlled substances.

On July 17, 2002, the Food and Drug Administration (FDA) approved Xyrem, a drug product containing gamma-hydroxybutyric acid, as a drug for the treatment of cataplexy associated with narcolepsy.

The March 13, 2000 final rule did not address the recordkeeping and reporting requirements recommended by the Hillory J. Farias and Samantha Reid Date-Rape Drug Prohibition Act for drug products containing GHB for which an application is approved under section 505 of the FDCA. On November 25, 2003 DEA issued a notice of proposed rulemaking (68 FR 66048) to establish requirements to prevent the diversion of Schedule III GHB drug products for illicit purposes as was intended by Congress as part of the regulatory scheme for these products. DEA received no comments in response to the November 25, 2003 notice of proposed rulemaking and is adopting the rule language as proposed.

In response to section 4 of the Hillory J. Farias and Samantha Reid Date-Rape Drug Prohibition Act, this rule establishes recordkeeping requirements for practitioners dispensing Schedule III GHB drug products and reporting requirements for manufacturers and distributors of Schedule III GHB drug products. Under existing 21 CFR 1304.22(c), dispensers of any controlled substance, including GHB, are required to maintain the name and address of the person to whom the controlled substance was dispensed, the date of dispensing, the number of units or volume dispensed, and the written or typewritten name or initials of the individual who dispensed or administered the substance on behalf of the dispenser. This final rule adds 21 CFR 1304.26, which requires pharmacies and practitioners dispensing GHB to maintain and make available for inspection the name of the prescribing practitioner, the prescribing practitioner's Federal and State registration numbers with expiration dates, verification that the prescribing practitioner possesses appropriate registration, and the patient's insurance provider, if available. Section 4 of the Hillory J. Farias and Samantha Reid Date-Rape Drug Prohibition Act also recommended that DEA establish a recordkeeping requirement for “documentation by a medical practitioner licensed and registered to prescribe the drug of the patient's medical need for the drug.” Part of this recommendation is satisfied by existing DEA requirements in 21 CFR 1306.04 which state that prescriptions “must be issued for a legitimate medical purpose.” To further satisfy this statutory requirement, DEA has amended 21 CFR 1306.05 to require that the medical need be written on the prescription.

This final rule also amends 21 CFR 1304.33 to include Schedule III GHB drug products as controlled substances that must be reported under the Automation of Reports and Consolidated Orders System (ARCOS). ARCOS is an automated, comprehensive drug reporting system that monitors the flow of DEA controlled substances from their point of manufacture through commercial distribution channels to point of sale or distribution at the dispensing/retail level, e.g. , hospitals, retail pharmacies, practitioners, mid-level practitioners, and teaching institutions. Included in the list of controlled substance transactions tracked by ARCOS are the following: All Schedules I and II materials (manufacturers and distributors); Schedule III narcotic materials (manufacturers and distributors); and selected Schedules III and IV psychotropic controlled substances (manufacturers only). This final rule adds Schedule III GHB drug products to this list for both manufacturers and distributors.

In addition, section 4 of the Hillory J. Farias and Samantha Reid Date-Rape Drug Prohibition Act recommended that DEA apply the mail order reporting requirements of 21 U.S.C. 830(b)(3) to “gamma hydroxybutyric acid to the same extent and in the same manner as such section applies with respect to the chemicals and drug products specified in subparagraph (B)(i) of such section.” DEA has complied with these recommendations in this final rule by amending 21 CFR 1310.03(c), which makes GHB subject to mail order requirements established under the Methamphetamine Anti-Proliferation Act of 2000 (MAPA) (Title XXXVI of the “Children's Health Act of 2000” (Pub. L. 106-310, 114 Stat. 1101)). The Methamphetamine Anti-Proliferation Act of 2000 imposed mail order reporting requirements for export transactions involving ephedrine, pseudoephedrine, or phenylpropanolamine. These reporting requirements do not apply to distributions of drug products, including GHB, under a valid prescription, which were excluded under MAPA (21 U.S.C. 830(b)(3)(D)). Regulations implementing MAPA were published October 7, 2003 (68 FR 57799). The net effect is that all export transactions involving GHB must be reported to DEA. Transactions involving prescriptions of GHB are not required to be reported to DEA.

The Deputy Assistant Administrator certifies that this rulemaking has been drafted in accordance with the Regulatory Flexibility Act (5 U.S.C. 605(b)). The Deputy Assistant Administrator has reviewed this regulation, and by approving it certifies that it will not have a significant economic impact upon a substantial number of small entities. This rulemaking creates new recordkeeping and reporting requirements which will have an extremely limited impact on a small number of registrants due to the restricted use of GHB for legitimate medical purposes. As a condition of Xyrem's (the FDA-approved product containing GHB) approval, a risk management program was designed to limit its distribution. Under this program, Xyrem will only be available to physicians and patients through a single centralized pharmacy. As a result of this program, at this time, controlled substance distributors and retail pharmacies will not be handling Xyrem and, thus, will not be affected by these requirements. For those few persons affected by these regulations, the information requested by these added records is readily and commonly available, and due to the limited distribution of GHB, the impact on reporting requirements should be minimal.

The Deputy Assistant Administrator further certifies that this regulation has been drafted in accordance with the principles of Executive Order 12866, Section 1(b). This action has been determined to be a “significant regulatory action” under Executive Order 12866, and accordingly this rule has been reviewed by the Office of Management and Budget.

This regulation meets the applicable standards set forth in Sections 3(a) and 3(b)(2) of Executive Order 12988.

This rulemaking does not preempt or modify any provision of State law; nor does it impose enforcement responsibilities on any State; nor does it diminish the power of any State to enforce its own laws. Accordingly, this rulemaking does not have federalism implications warranting the application of Executive Order 13132.

This rulemaking will not result in the expenditure by State, local, and tribal governments in the aggregate, or by the private sector, of $114.5 million or more in any one year, and will not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995.

While, technically, this rule requires new, minimal recordkeeping and reporting requirements for drug products containing GHB, DEA does not believe that these recordkeeping and reporting requirements create any greater hour or cost burden for respondents than what already exists. Records required to be maintained by dispensing practitioners under 21 CFR 1304.26, including the prescribing practitioner's name, address, state license and federal registration numbers, and the patient's insurance provider (if available) are all records which are maintained as a usual course of professional practice by a dispensing practitioner. The reporting requirements in 21 CFR 1304.33 are part of an already-approved collection of information (OMB 1117-0003: ARCOS Transaction Reporting—DEA Form 333). DEA believes that the additional reporting requirements will have no impact on the hour or cost burden for respondents as reports are generated and submitted electronically. As has been stated previously, due to the risk management plan established for Xyrem (the FDA-approved drug product containing GHB) this product has an extremely limited distribution potential. Because of the nature of this product's distribution, DEA anticipates that fewer than five persons will be impacted by the requirement to report handling Schedule III GHB products to ARCOS, and those persons are already filing reports with DEA for other controlled substances handled. The system modifications necessary to generate this report will occur as a normal part of a registrant's handling of this product. Therefore, DEA is not submitting any changes or amendments to its active information collections under the Paperwork Reduction Act of 1995.

This rulemaking is not a major rule as defined by section 804 of the Small Business Regulatory Enforcement Fairness Act of 1996. This rule will not result in an annual effect on the economy of $100 million or more; a major increase in costs or prices; or significant adverse effects on competition, employment, investment, productivity, innovation or on the ability of U.S.-based companies to compete with foreign-based companies in domestic and export markets.

On Wednesday, December 15, 2004, DEA published a Final Rule with request for comment entitled “Exemption of Chemical Mixtures” in the Federal Register (69 FR 74957). The aspect of the Final Rule subject to this correction concerns the amendatory instructions for 21 CFR 1310.04 in which DEA indicated that “Section 1310.04 is to be amended by revising paragraph (h) and adding new paragraphs (i) and (j)”. However, it was not DEA's intent to add new paragraphs (i) and (j). DEA only intended to revise paragraph (h). Therefore, to alleviate any confusion which might arise regarding these amendatory instructions, DEA is correcting the amendatory instructions for 21 CFR 1310.04. No substantive changes to 21 CFR 1310.04 are occurring in this correction.

On December 24, 2003, proposed regulations (REG-139845-02) were published in the Federal Register (68 FR 74534). The proposed regulations contained proposed amendments to the Estate Tax Regulations (26 CFR part 20) and the Procedure and Administration Regulations (26 CFR part 301) relating to the election under section 2032 to value a decedent's gross estate on the alternate valuation date. The proposed regulations reflected changes that were made to section 2032 by the Deficit Reduction Act of 1984, Public Law 98-369 (98 Stat. 494). Written comments were received on the proposed regulations, and a public hearing was held on June 3, 2004. The proposed regulations, with certain changes in response to the written and oral comments, are adopted as final regulations.

The proposed regulations provided that the alternate valuation election may be made only if the election results in a decrease both in the value of the gross estate and in the sum of the estate tax and generation-skipping transfer tax liability (reduced by credits allowable against these taxes). One commentator noted that it may not be possible to determine whether the election will reduce the sum of estate tax and generation-skipping transfer tax if the generation-skipping transfer tax will not be imposed until a later time, as in the case of a later taxable termination or taxable distribution. In response to this comment, the final regulations provide that the determination of whether there has been a decrease in the sum of the estate tax and generation-skipping transfer tax liability (reduced by credits allowable against these taxes) is made with reference to the estate tax and generation-skipping transfer tax payable by reason of the decedent's death.

In view of the 1-year limitation imposed under section 2032(d)(2), the proposed regulations provided that no request for an extension of time to make the alternate valuation election under the provisions of §§ 301.9100-1 and 301.9100-3 will be granted if the request is submitted to the IRS more than 1 year after the due date of the return of tax imposed by section 2001 (including extensions of time actually granted). One commentator argued that the 1-year limitation in section 2032(d)(2) applies only to late-filed returns, and therefore should not limit the availability of relief under §§ 301.9100-1 and 301.9100-3 to make a late alternate valuation election if the taxpayer timely filed its return, but failed to make the election on the return. After considering the language and intent of section 2032 and §§ 301.9100-1 and 301.9100-3, the IRS and Treasury Department have determined that taxpayers may request relief under §§ 301.9100-1 and 301.9100-3, even after the expiration of the 1-year period, and that such relief may be granted (subject to the requirements of §§ 301.9100-1 and 301.9100-3) provided that the return of tax is filed no later than 1 year after the due date of the return (including extensions of time actually granted). This rule also will apply to requests under §§ 301.9100-1 and 301.9100-3 for an extension of time to make a protective election under section 2032.

The IRS and Treasury Department also have determined that taxpayers should be permitted to apply for relief under §§ 301.9100-1 and 301.9100-3 to make a late election under section 2056A to be treated as a Qualified Domestic Trust (QDOT). Like the alternate valuation election of section 2032, no election under section 2056A to be treated as a QDOT may be made on a return that is filed more than 1 year after the due date of the return (including extensions of time actually granted). Section 2056A(d). Thus, taxpayers will be permitted to apply for an extension of time under the provisions of §§ 301.9100-1 and 301.9100-3 to make an election under section 2056A(d), provided that the return of tax is filed no later than 1 year after the due date of the return (including extensions of time actually granted).

Any taxpayer eligible for relief under §§ 301.9100-1 and 301.9100-3 to make the section 2032 election or the 2056A(d) election is encouraged to file promptly an application for relief and a claim for refund before the statute of limitations under section 6511 expires in the event the requested relief is granted.

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

The principal author of these regulations is Theresa Melchiorre of the Office of Associate Chief Counsel (Passthroughs and Special Industries). However, other personnel from the IRS and the Treasury Department participated in their development.

The Federal Civil Penalties Adjustment Act of 1990 (Inflation Adjustment Act) (28 U.S.C. 2461 note), as amended by the Debt Collection Improvement Act of 1996 (DCIA) (31 U.S.C. 3701 note), provides for the regular evaluation of CMPs to ensure that they continue to maintain their deterrent value. As amended by the DCIA, the Inflation Adjustment Act requires that each agency issue regulations to adjust its CMPs beginning in 1996 and at least every 4 years thereafter. The Department's initial adjustment to each CMP was published in the Federal Register on November 18, 2002 (67 FR 69654) and became effective on the date of publication. Although it has not been 4 years since the Department's last adjustments, had the Department published adjustments in 1996 and 2000, it would now be time to adjust its CMPs. Accordingly, the Department is now making any necessary adjustments.

A CMP is defined in the statute as any penalty, fine, or other sanction that is (1) for a specific monetary amount as provided by Federal law, or has a maximum amount provided for by Federal law; (2) assessed or enforced by an agency pursuant to Federal law; and (3) assessed or enforced pursuant to an administrative proceeding or a civil action in the Federal courts.

The formula for the amount of a CMP inflation adjustment is prescribed by law and is not subject to the exercise of discretion by the Secretary of the Department of Education (Secretary). The adjustment reflects the percentage increase in the Consumer Price Index for all urban consumers (CPI-U) published by the Department of Labor from June of the calendar year in which the amount was last set or adjusted pursuant to law, to June of the calendar year preceding the adjustment.

Four of the Department's CMP were adjusted in 2002. These CMPs are (1) 20 U.S.C. 1082(g), which provides for a fine of up to $27,500 for violations by lenders and guaranty agencies of Title IV-B of the Higher Education Act of 1965, as amended (HEA), which authorizes the Federal Family Education Loan Program; (2) 20 U.S.C. 1094(c)(3)(B), which provides for a fine of up to $27,500 for an institution of higher education's violation of Title IV of the HEA, which authorizes various programs of student financial assistance; (3) 31 U.S.C. 1352(c)(1) and (c)(2)(A), which provide for a fine of $11,000 to $110,000 for recipients of Government grants, contracts, etc. that lobby Congress or the Executive Branch with respect to the award of Government grants and contracts; and (4) 31 U.S.C. 3802(a)(1) and (a)(2), which provide for a fine of up to $5,500 for false claims and statements made to the Government. For these four CMPs, not enough inflation has occurred since 2002 to require an adjustment under the Inflation Adjustment Act.

Two of the Department's CMPs were enacted as part of the Higher Education Amendments of 1998 (Pub. L. 105-244). These CMPs are 20 U.S.C. 1015(c)(5), which provides for a fine of up to $25,000 for failure by an institution of higher education (IHE) to provide information on the cost of higher education to the Commissioner of Education Statistics, and 20 U.S.C. 1027(f)(3), which provides for a fine of up to $25,000 for failure by an IHE to provide information to the State and the public regarding its teacher preparation programs. In 2002, when the Department last adjusted its CMPs, not enough inflation had occurred to require an adjustment to these CMPs under the Inflation Adjustment Act. At this time, however, there has been more than 10 percent inflation, warranting an adjustment for each of these CMPs. By statute, the Department's first adjustment of a CMP may not exceed 10 percent of such a penalty, and, therefore, we are adjusting these CMPs by 10 percent.

Two additional points regarding the Department's adjustments are worth noting. First, the Department is using the following CPI-U figures as measures of inflation: 163 for June 1998; 179.9 for June 2002; and 183.7 for June 2003. Second, the increases to the Department's CMPs due to these inflation adjustments apply only to violations that occur after the effective date of the adjustments.

Under the Administrative Procedure Act (5 U.S.C. 553), the Department generally offers interested parties the opportunity to comment on proposed regulations. However, these regulations merely implement the statutory mandate to adjust CMPs for inflation. The regulations reflect administrative computations performed by the Department as prescribed by the statute and do not establish or affect substantive policy. Therefore, under 5 U.S.C. 553(b)(B), the Secretary has determined that public notice and comment are impracticable, unnecessary, and contrary to the public interest.

The Secretary certifies that these regulations will not have a significant economic impact on a substantial number of small entities. The formula for the amount of the inflation adjustments is prescribed by statute and is not subject to the exercise of discretion by the Secretary. These CMPs are infrequently imposed by the Secretary, and the regulations do not involve any special considerations that might affect the imposition of CMPs on small entities.

These regulations do not contain any information collection requirements.

Based on our own review, we have determined that these final regulations do not require transmission of information that any other agency or authority of the United States gathers or makes available.

You may view this document, as well as all other documents of this Department published in the Federal Register , in text or Adobe Portable Document Format (PDF) on the Internet at the following site: http://www.ed.gov/news/fedregister .

To use PDF you must have Adobe Acrobat Reader, which is available free at this site. If you have questions about using PDF, call the U.S. Government Printing Office (GPO), toll free, at 1-888-293-6498; or in the Washington, DC, area at (202) 512-1530.

Federal Acquisition Regulation (FAR) Subpart 33.2 (48 CFR subpart 33.2) implements the requirements of the Contract Disputes Act of 1978, as amended (41 U.S.C. 601-613) (the Act), which establishes procedures and requirements for asserting and resolving claims subject to the Act. It is the Government's policy to resolve all contractual issues in controversy by mutual agreement at the contracting officer level. The Act provides for Agencies Boards of Contract Appeals (Boards) and the United States Court of Federal Claims (Court) to resolve appeals of a contracting officer's decision. However, the Boards and Court do not have authority to interpret tariffs or tariff-related matters established through public hearings in each jurisdiction for regulated utilities. The authority pertaining to these matters lie with state public utility commissions.

A proposed rule was published in the Federal Register at 69 FR 40730, July 6, 2004. No comments were received from the public.

FAR section 33.215 requires that the clause 52.233-1, Disputes, be inserted in all solicitations and contracts, except those with a foreign government or agency of that government, or an international organization or subsidiary body of that organization, if the agency head determines that the application of the Act to the contract would not be in the public interest. GSA's Public Buildings Service awards contracts for public utility services. From time-to-time, disputes may arise from those contracts that involve tariffs and tariff-related matters. This rule provides for a supplement to FAR 52.233-1, Disputes, allowing for such disputes to be subject to the jurisdiction and regulation of the utility rate commission having jurisdiction. This rule also provides GSA contracting officers and contractors, acting under a utility service contract, with specific guidance regarding the resolution of disputes involving tariffs and tariff-related matters.

This is not a significant regulatory action and, therefore, was not subject to review under Section 6(b) of Executive Order 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

The General Services Administration certifies that this final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. , because the majority of small entities that are in the industry were established as a result of deregulation and are not subject to the utility rate commissions. Also, this is intended to be a clarification of existing law, not a substantive change. A Final Regulatory Flexibility Act Analysis was, therefore, not performed.

The Paperwork Reduction Act does not apply because the changes to the GSAR do not impose recordkeeping or information collection requirements, or otherwise collect information from offerors, contractors, or members of the public that require approval of the Office of Management and Budget under 44 U.S.C.3501, et seq.

FMVSS No. 119 specifies performance requirements for tires used on motor vehicles other than passenger cars, and requires certain markings on tires to facilitate proper selection and use. S6.5(e) requires that a tire be marked with a speed restriction information if the maximum speed is below 88 km/h (55 mph). Further, Table III contains a reference to speed-restricted tires with the maximum speed of 88 km/h (55 mph).

Within the tire industry, the metric value of the tire speed restriction threshold is 90 km/h instead of 88 km/h. Also, the English value of the tire speed restriction threshold is sometimes listed at 56 mph, instead of 55 mph. The industry uses speed rating symbols to differentiate among the tires with various maximum speed capabilities. The speed symbol of “G” is associated with tires with a maximum speed of 90 km/h. The discrepancy between 88 km/h and 90 km/h, as well as 55 mph and 56 mph is the result of using different methods of converting the English speed measurements to the metric system and vice versa.

The Tire and Rim Association Inc., has petitioned NHTSA to change the speed restriction threshold from 88 km/h to 90 km/h and from 55 mph to 56 mph. They argued that this change would make FMVSS No. 119 more consistent with established tire industry protocol and labeling technology, and would facilitate international harmonization.

The agency decided to amend only the metric value of tire speed restriction threshold from 88 km/h to 90 km/h. The English value will remain at 55 mph because we found that majority of tire industry literature lists the speed restriction threshold at 55 mph (90 km/h) instead of 56 mph (90 km/h). 1 Thus, 55 mph appears to be generally accepted within the industry.

We believe that the discrepancy between the metric values of the speed restriction threshold currently used by the agency and the one used by the majority of industry publications result from different methods of converting 55 mph to km/h. We note that the change from 88 km/h to 90 km/h will have no substantive practical effect on FMVSS No. 119 because the difference between the two values is so insignificant.

In consideration of the foregoing, this document amends the CFR by changing the metric value of tire speed restriction threshold in S6.5(e) and Table III from 88 km/h to 90 km/h.

This technical amendment will not impose or relax any substantive requirements or burdens on manufacturers. Therefore, NHTSA finds for good cause that any notice and opportunity for comment on these correcting amendments are not necessary.

The reef fish fishery of Puerto Rico and of the U.S. Virgin Islands is managed under the Fishery Management Plan for the Reef Fish Fishery of Puerto Rico and of the U.S. Virgin Islands (FMP). The FMP was prepared by the Council and is implemented under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act) by regulations at 50 CFR part 622.

On November 16, 2004, NMFS published a proposed rule (69 FR 67104) to implement the interim measures specified in this temporary final rule as requested by the Caribbean Fishery Management Council for Grammanik Bank and to request comments on the proposed actions. The rationale for the interim measures is provided in the preamble to the proposed rule and is not repeated here. No public comments were received during the comment period on the proposed rule. Therefore, the proposed rule is adopted as final.

The Administrator, Southeast Region, NMFS, determined that the interim measures that this temporary final rule implements are necessary for the conservation and management of the yellowfin grouper fishery in the Caribbean and that they are consistent with the Magnuson-Stevens Act and other applicable laws.

This temporary final rule has been determined to be not significant for purposes of Executive Order 12866.

NMFS prepared a final regulatory flexibility analysis (FRFA). The FRFA incorporates the initial regulatory flexibility analysis (IRFA) and a summary of the analyses completed to support the action. No public comments were received on the economic impacts of this rule. A summary of the analysis follows.

The rule is intended to protect an important spawning aggregation of yellowfin grouper, to help arrest the decline in the resource, and to support its recovery. The Magnuson-Stevens Act, as amended, provides the statutory basis for the rule.

The rule is intended to implement, on an interim basis, an action currently included in the draft Sustainable Fisheries Act (SFA) Amendment. The SFA Amendment is expected to be implemented prior to the 2006 fishing year. This rule will be an interim action providing protection to an important yellowfin grouper spawning aggregation during the 2005 spawning season and will expire prior to the implementation of the SFA Amendment. No duplicate, overlapping, or conflicting rules have been identified.

No issues were raised by public comments in response to the IRFA. Therefore, no changes were made in the FRFA.

There are two general classes of small business entities that will be directly affected by the rule: commercial fishing vessels and for-hire fishing vessels. The Small Business Administration defines a small business that engages in commercial fishing as a firm that is independently owned and operated, that is not dominant in its field of operation, and that has annual receipts up to $3.5 million per year. The revenue benchmark for a small business that engages in charter fishing is a firm with receipts up to $6.0 million.

There are an estimated 342 registered commercial fishing vessels in the U.S. Virgin Islands. The majority of participants are part-time fishermen. Total annual average dockside revenues from commercial fishing activity are estimated at $1.72 million, or an average of $5,000 per registered vessel. Given the average revenue estimates of the fleet, all commercial entities are determined to be small business entities. It cannot be precisely determined how many of the commercial vessels that operate in the U.S. Virgin Islands would be affected by the rule, though the rule will apply to all commercial fishing vessels. NMFS assumes that indirect impacts would be incurred industry-wide, and that all the commercial fishing entities that will be affected by the rule are small entities.

An estimated 27 year-round charter fishing operations operate in the U.S. Virgin Islands, with an unknown number of seasonal operations. No information exists on the business profile of this fleet. However, the average gross revenue for charter vessels operating in Florida is estimated at $68,000, and ranges from $26,000 (South Carolina) to $82,000 (Alabama) for other areas in the southeastern United States. No information exists to suggest the revenue profile of charter vessels operating in the U.S. Virgin Islands is substantially different from these estimates, so NMFS concludes that all charter vessels operating in the U.S. Virgin Islands are small business entities. It cannot be determined how many of the charter vessels that operate in the U.S. Virgin Islands will be affected by the rule, though the rule will apply to all charter vessels. NMFS assumes that indirect effects will be incurred industry-wide, and that all the charter fishing entities that will be affected by the rule are small entities.

The rule does not impose any reporting or recordkeeping requirements.

No precise estimates of the profits of either the commercial fishing vessels or the charter vessels that are expected to be affected by the rule are available. However, even though not all water habitat is equally productive, the rule will affect only approximately 3 percent of the available water area in the less than 100-fathom (183-m) depth range and close the area to fishing for only 25 percent of the year. Thus, less than 1 percent of available fishing area and time will be affected. Although harvests from this area during this time period will likely exceed 1 percent because it is a spawning site, the restriction is expected to be sufficiently small so as to not significantly affect the profits of a substantial number of small entities.

Including the no-action alternative (Alternative 1), five alternatives were considered in addition to the rule (that is, the preferred Alternative 2). The no-action alternative and Alternatives 3 through 6 provided insufficient spawning protection or failed to minimize the significant economic impacts on small entities. The no-action alternative would not impose any closure in the target area, thereby allowing all current fishing practices. This would eliminate all short-term adverse impacts expected to result from the closure. However, spawning protection of yellowfin grouper would not be provided, thereby forgoing the benefits of rebuilding the stock, and the action would, therefore, not be consistent with the Council's intent. The remaining four alternatives differ in the geographic size and time duration of the closure. Alternative 3 would establish closure over a larger geographic area than the rule, 17.5 nm 2 (60 km 2 ) vs. 6.88 nm 2 (28.60 km 2 ), but would not encompass the entire period during which yellowfin grouper are known to spawn, thereby potentially negating the purpose and effectiveness of the closure. Alternatives 4 and 6 would only establish closure in a 1 nm 2 (3.4 km 2 ) area, an area insufficient to afford the necessary protection. Alternative 4 would additionally not encompass the full spawning period and may allow fishing pressure to significantly impact an aggregation that is still present in the latter half of April. Alternative 6 would encompass the entire spawning period, but would continue the closure longer than is believed necessary. Alternative 5 would encompass 5 nm 2 (17.2 km 2 ), an area smaller than that in Alternative 2 but possibly affording sufficient geographic scope. However, Alternative 5 would also extend the closure for an additional month, which is longer than necessary and would, therefore, impose unnecessary adverse impacts.

Among the alternatives, only the preferred action (i.e., this rule) meets the geographic and temporal scope necessary to meet the management objectives. The fishing restriction described in the preferred action will affect less than 1 percent of available fishing area and time and therefore is expected to be sufficiently small so as to not significantly affect the profits of a substantial number of small entities. A copy of this analysis is available from NMFS (see ADDRESSES ).

Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996 states that, for each rule or group of related rules for which an agency is required to prepare a FRFA, the agency shall publish one or more guides to assist small entities in complying with the rule, and shall designate such publications as “small entity compliance guides.” The agency shall explain the actions a small entity is required to take to comply with a rule or group of rules. As part of this rulemaking process, a letter to permit holders that also serves as small entity compliance guide (the guide) was prepared. Copies of this final rule are available from the Southeast Regional Office (see ADDRESSES ), and the guide, i.e., permit holder letter, will be sent to all holders of permits for the reef fish fishery. The guide and this final rule will be available upon request.

Regulations implemented under the authority of the ATCA (16 U.S.C. 971 et seq. ) and the Magnuson-Stevens Act (16 U.S.C. 1801 et seq. ) governing the harvest of BFT by persons and vessels subject to U.S. jurisdiction are found at 50 CFR part 635. Section 635.27 subdivides the U.S. BFT quota recommended by ICCAT among the various domestic fishing categories, and together with General category effort controls are specified annually under procedures specified at 50 CFR 635.23(a) and 635.27(a). The proposed initial 2004 BFT Quota and General category effort controls published in the Federal Register on December 10, 2004 (69 FR 71771).

The coastwide General category BFT fishery reopened on December 8, 2004, and closed on December 20, 2004 (69 FR 71732, December 10, 2004). The intent of this 13-day reopening was to provide commercial fishing opportunities to both Atlantic tunas General and HMS Charter/Headboat category fishery participants to harvest the remainder of the available General category quota. Catch rates were lower than anticipated, primarily due to inclement weather and approximately 70 metric tons (mt) of the available 107 mt was landed during this time period. Therefore, 37 mt remains available, which is nearly the same amount as landings attributed to southern area fishermen during the winter commercial BFT fishery in January 2004.

Recent information indicates that commercial sized BFT are off the coast of North Carolina and are available to General and Charter/Headboat category fishery participants. In consideration of historical General category catch rates in January, the unpredictable nature of the weather, the availability of BFT on the fishing grounds, and the amount of available quota, NMFS has determined that a coastwide General category reopening period of three days should allow harvest of the remaining quota without risking overharvest. Therefore, the coastwide General category is scheduled to reopen at 12:30 a.m. on January 2, 2005, and close at 11:30 p.m. on January 4, 2005.

The General category daily retention limit during this reopening is one large medium or giant BFT, measuring 73 inches or greater (185 cm or greater) curved fork length (CFL) per vessel/day/trip. This limit applies in all fishing areas, for all vessels fishing under the General category quota (i.e., permitted Atlantic tunas General and HMS Charter/Headboat vessels). Fishing for, retaining, possessing, or landing large medium or giant BFT by persons fishing under the General category quota must cease at 11:30 p.m. local time January 4, 2005.

The ATCA and the Magnuson-Stevens Act both address the issue of setting quotas for the U.S. domestic fishery when a species is subject to an allocation negotiated through an international agreement. Specifically, NMFS is charged to enable harvest of the full amount of these agreed quotas. To balance the collective legislative requirements to prevent overharvest of the overall U.S. quota, to allocate available quota consistent with traditional fishing practices, and to provide a reasonable opportunity to harvest the quota, some flexibility is needed to adapt to seasonal variations in the migratory patterns of bluefin tuna. Current regulations provide this flexibility in the following three ways:(1) placement of a portion of the total quota in a Reserve category (50 CFR 635.27(a)(7)); (2) inseason transfers of unharvested quota between fishing categories or to the Reserve category (50 CFR 635.27(a)(8)); and (3) carryover of overharvested or unharvested amounts to the subsequent fishing year (50 CFR 635.27(a)(9)).

While NMFS exercises discretion in adapting to prevailing fishery conditions by balancing reserves, transfers, and carryover there are certain criteria which guide the decision making process for transfers. Those criteria include: (1) the usefulness of information obtained from catches in the particular category for biological sampling and monitoring of the status of the stock; (2) the catches of the particular category quota to date and the likelihood of closure of that segment of the fishery if no allocation is made; (3) the projected ability of the vessels fishing under the particular category quota to harvest the additional amount of BFT before the end of the fishing year; (4) the estimated amounts by which quotas established for other gear segments of the fishery might be exceeded; (5) the effects of the transfer on BFT rebuilding and overfishing; and (6) the effects of the transfer on accomplishing the objectives of the HMS FMP. If it is determined, based on the indicated factors and the likelihood of exceeding the total quota, that vessels fishing under any category or subcategory quota are not likely to take the initial quota, NMFS may transfer inseason any portion of the remaining quota of that fishing category to any other fishing category or to the Reserve quota.

In considering these criteria, NMFS also recognizes the unique nature of the Purse seine category which is managed by an individual vessel quota system. As such, the Purse seine vessels are vested with a greater degree of autonomy for managing their allocations, including: fishing days, transfers between vessels, and planning for carryover. Consequently, NOAA Fisheries has elected to exclude Purse seine allocations from past inseason transfers between fishing categories on the premise that the vessels are always able to harvest their remaining allocations or to elect to carry them over, after considering: current market conditions, the need to avoid discards in setting the gear when only small amounts of allocation remain, and the possibilities for transfers between vessels to consolidate residual allocations. While this approach has worked reasonably well in past years, anomalous fishery conditions since 2002 have resulted in the carryover of unprecedented amounts of unharvested Purse seine quota. Given this atypical situation, NMFS has reconsidered how the inseason transfer provisions should be applied to the Purse seine category in 2004.

The 2004 fishing year proposed initial BFT quota specifications were prepared in accordance with: the 2002 ICCAT quota recommendation, the ICCAT recommendation regarding the dead discard allowance, the HMS FMP percentage shares for each of the domestic categories including restrictions on landings of school BFT, and the addition or subtraction of any underharvest or overharvest from the previous fishing year (69 FR 71771, December 10, 2004). NMFS proposed initial quota specifications for the 2004 fishing year as follows: General category - 659.0 mt; Harpoon category - 81.4 mt; Purse Seine category - 389.4 mt; Angling category - 65.5 mt; Longline category - 171.2 mt; Trap category - 2.3 mt; and the Reserve category - 36.6 mt. Subsequently, NMFS transferred 300 mt from the General category, 45 mt from the Longline category, and 40 mt from the Harpoon category (69 FR 71732, December 10, 2004). These transfers resulted in additions of 223.1 mt to the Angling category and 161.9 mt to the Reserve.

NMFS has determined that a transfer of 100 mt from the Purse Seine category to the Reserve is warranted, based on the 2004 proposed BFT specifications, the subsequent transfers, an assessment of the commercial and recreational landings data to date, carryover of unharvested amounts from prior years, and considering the factors governing quota transfers between categories. The Reserve category was established, in part, for the purpose of compensating overharvest in any category and to ensure overall U.S. landings do not exceed ICCAT recommended quotas. Given the suspension of Purse seine fishing activity for the remainder of the 2004 fishing year and continued fishing activity in several other categories through May 31, 2005, it is likely that allowing for full utilization of the U.S. quota may require additional transfers from the Reserve.

The effects on rebuilding and overfishing as a result of this transfer are predicted to be neutral. The prime effect is to transfer quota among categories and no additional harvest above the level authorized in the BFT rebuilding plan is anticipated. The transfer is consistent with the objectives of the HMS FMP as it would provide for fair and reasonable fishing opportunities and allow for maximum utilization of the 2004 U.S. BFT allocation while preventing an overharvest of that allocation.

NMFS selected the duration of the reopening and the daily retention limit based on a review of available quota, dealer reports, daily landing trends, the availability of BFT on the fishing grounds, and previous fishing years effort and landings rates for the month of January. NMFS will continue to monitor the General category BFT fishery closely via the commercial BFT landing reports submitted by authorized BFT dealers. Once the General category BFT fishery has closed, NMFS will assess reported landings and available quota and determine if a subsequent reopening is warranted.

The Assistant Administrator for Fisheries, NOAA (AA), finds that it is impracticable and contrary to the public interest to provide prior notice of, and an opportunity for public comment on, this action. The General category BFT fishery closed on December 20, 2004, after a 13 day reopening. Catch rates were slower that anticipated, due primarily to inclement weather and the full 107 mt of quota that was available was not attained. Since the closure, NMFS has compiled all commercial BFT landing reports submitted by permitted dealers and determined that approximately 37 mt is still available for a limited General category BFT fishery in the month of January. Recent information shows BFT in the commercial size classes are now available off southern Atlantic states in nearshore areas and accessible to commercial anglers as well as Charter/Headboat operations. Under ATCA and the HMS FMP, NMFS is required to provide fishing opportunities to catch the available quota.

Delaying this action would be contrary to the public interest as BFT are now available in nearshore waters and will soon migrate out of range of the commercial and charter/headboat fleets. As the General category is currently closed, fishery participants are not currently able to access these BFT while they are available. It is in the public interest to act quickly to open the fisheries while the BFT are accessible so that the short window of fishing opportunity is not lost. Therefore, the AA finds good cause under 5 U.S.C. 553(b)(B) to waive prior notice and the opportunity for public comment. For all of the above reasons and because this action relieves a restriction (e.g., reopens fisheries), there is good cause under 5 U.S.C. 553(d) to waive the delay in effectiveness of this action.

These actions are being taken under 50 CFR 635.23(a)(4) and 50 CFR 635.27(a)(8) and are exempt from review under Executive Order 12866.

The summer flounder, scup, and black sea bass fisheries are managed cooperatively by the Atlantic States Marine Fisheries Commission (Commission) and the Mid-Atlantic Fishery Management Council (Council), in consultation with the New England and South Atlantic Fishery Management Councils. The management units specified in the FMP include summer flounder ( Paralichthys dentatus ) in U.S. waters of the Atlantic Ocean from the southern border of North Carolina (NC) northward to the U.S./Canada border, and scup ( Stenotomus chrysops ) and black sea bass ( Centropristis striata ) in U.S. waters of the Atlantic Ocean from 35°13.3′ N. lat. (the latitude of Cape Hatteras Lighthouse, Buxton, NC) northward to the U.S./Canada border. Implementing regulations for these fisheries are found at 50 CFR part 648, subparts A, G (summer flounder), H (scup), and I (black sea bass).

The regulations outline the process for specifying annually the catch limits for the summer flounder, scup, and black sea bass commercial and recreational fisheries, as well as other management measures ( e.g. , mesh requirements, minimum fish sizes, gear restrictions, possession restrictions, and area restrictions) for these fisheries. The measures are intended to achieve the annual targets set forth for each species in the FMP, specified either as an F or an exploitation rate (the proportion of fish available at the beginning of the year that are removed by fishing during the year). Once the catch limits are established, they are divided into quotas based on formulas contained in the FMP. Detailed background information regarding the status of the summer flounder, scup, and black sea bass stocks and the development of the 2005 specifications for these fisheries (and 2006 summer flounder specifications) was provided in the proposed specifications (69 FR 70414, December 6, 2004). That information is not repeated here.

NMFS will establish the 2005 recreational management measures for summer flounder, scup, and black sea bass by publishing a proposed and final rule in the Federal Register at a later date, following receipt of the Council's recommendations as specified in the FMP.

The FMP specifies a target F of F max , that is, the level of fishing that produces maximum yield per recruit. The best available scientific information indicates that, for 2005 and 2006, F max for summer flounder is 0.26 (equal to an exploitation rate of about 22 percent from fishing). The Total Allowable Landings (TAL) associated with the target F rate is allocated 60 percent to the commercial sector and 40 percent to the recreational sector. The commercial quota is allocated to the coastal states based upon percentage shares specified in the FMP. The recreational harvest limit is specified on a coastwide basis. Recreational measures will be the subject of a separate rulemaking early in 2005.

This final rule implements the specifications contained in the proposed rule, a summer flounder TAL of 30.3 million lb (13,744 mt) for 2005 and 33.0 million lb (14,969 mt) for 2006. The TAL for 2005 is allocated 18.18 million lb (8,246 mt) to the commercial sector and 12.12 million lb (5,498 mt) to the recreational sector, and the TAL for 2006 is allocated 19.8 million lb (8,981 mt) to the commercial sector and 13.2 million lb (5,987 mt) to the recreational sector. This TAL was determined by the Council's Summer Flounder Monitoring Committee to have at least a 75-percent probability of achieving the F max (0.26) that is specified in the FMP, if the 2004 TAL and assumed discard levels are not exceeded. Two research projects that would utilize the full summer flounder research set-aside (RSA) of 353,917 lb (161 mt) have been conditionally approved by NMFS and are currently awaiting notice of award. After deducting this RSA, the TAL is divided into a commercial quota of 17.97 million lb (8,151 mt) and a recreational harvest limit of 11.98 million lb (5,434 mt). If either project is not approved by the NOAA Grants Office, the research quota associated with the disapproved proposal will be restored to the summer flounder TAL through publication of a notice in the Federal Register by NMFS.

Consistent with the revised quota setting procedures for the FMP (67 FR 6877, February 14, 2002), summer flounder overages are determined based upon landings for the period January-October 2004, plus any previously unaccounted for landings from January-December 2003. Table 1 summarizes, for each state, the commercial summer flounder percent share, the 2005 commercial quota (both initial and less the RSA), the 2004 quota overages as described above, and the resulting final adjusted 2005 commercial quota less the RSA.

The Commission has established a system whereby 15 percent of each state's quota may be voluntarily set aside each year to enable vessels to land an incidental catch allowance after the directed fishery in a state has been closed. The intent of the incidental catch set-aside is to reduce discards by allowing fishermen to land summer flounder caught incidentally in other fisheries during the year, while ensuring that the state's overall quota is not exceeded. These Commission set-asides are not included in these 2005 and 2006 final summer flounder specifications because NMFS does not have authority to establish such subcategories.

Table 1 above indicates that, for Delaware, the amount of the 2004 summer flounder quota overage (inclusive of overharvest from 2003) is greater than the amount of commercial quota allocated to Delaware for 2005. As a result, there is no quota available for 2005 in Delaware. The regulations at § 648.4(b) provide that Federal permit holders, as a condition of their permit, must not land summer flounder in any state that the Regional Administrator has determined no longer has commercial quota available for harvest. Therefore, effective December 30, 2004, landings of summer flounder in Delaware by vessels holding commercial Federal fisheries permits are prohibited for the 2005 calendar year, unless additional quota becomes available through a quota transfer and is announced in the Federal Register . Federally permitted dealers are advised that they may not purchase summer flounder from federally permitted vessels that land in Delaware for the 2005 calendar year, unless additional quota becomes available through a transfer, as mentioned above.

For 2006, because information pertaining to the potential amount of RSA is unknown, RSA is conservatively estimated as 3 percent of the TAL (the maximum allowed under the FMP), i.e. , 990,000 lb (449 mt). After deducting the RSA, the TAL for 2006 will be divided into a commercial quota of 19.21 million lb (8,714 mt) and a recreational harvest limit of 12.80 million lb (5,806 mt). Table 2 shows, for each state, the commercial summer flounder percent share, the 2006 commercial quota (both initial and less the RSA, which is estimated at this point and which will be revised in the proposed specifications for 2006). These state quota allocations are preliminary and are subject to a reduction if there are any overages of a state's quota for the previous fishing year (using the landings information and procedures described earlier). Any commercial quota adjustments to account for 2005 overages will be published in the Federal Register in the final rule implementing the 2006 specifications.

The target exploitation rate for scup for 2005 is 21 percent. The FMP specifies that the Total Allowable Catch (TAC) associated with a given exploitation rate be allocated 78 percent to the commercial sector and 22 percent to the recreational sector. Scup discard estimates are deducted from both sectors' TACs to establish TALs for each sector (TAC less discards = TAL). The commercial TAL is then allocated on a percentage basis to three quota periods, as specified in the FMP: Winter I (January-April)—45.11 percent; Summer (May-October)—38.95 percent; and Winter II (November-December)—15.94 percent. The recreational harvest limit is allocated on a coastwide basis. Recreational measures will be the subject of a separate rulemaking early in 2005.

This final rule implements the specifications contained in the proposed rule, i.e. , an 18.65-million lb (8,460-mt) scup TAC and a 16.5-million lb (7,484-mt) scup TAL. After deducting 303,675 lb (138 mt) of RSA for the three approved research projects, the TAL is divided into a commercial quota of 12.23 million lb (5,547 mt) and a recreational harvest limit of 3.96 million lb (1,796 mt). If any of these projects are not approved by the NOAA Grants Office, the research quota associated with the disapproved proposal(s) will be restored to the scup TAL through publication of a notice in the Federal Register by NMFS.

Consistent with the revised quota setting procedures established for the FMP (67 FR 6877, February 14, 2002), scup overages are determined based upon landings for the Winter I and Summer 2004 periods, plus any previously unaccounted for landings from January-December 2003. Table 3 presents the final 2004 commercial scup quota for each period and the reported 2004 landings for the 2004 Winter I and Summer periods; there was no overage of the Winter I or Summer quota. On October 12, 2004 (69 FR 60565), NMFS announced a transfer of quota from Winter I to Winter II 2004. Per the quota counting procedures, after June 30, 2005, NMFS will compile all available landings data for Winter II 2004 and compare the landings to the Winter II 2004 allocation, as adjusted. Any overages will be determined and required deductions will be made to the Winter II 2005 allocation.

Table 4 presents the commercial scup percent share, 2005 TAC, projected discards, 2005 initial quota (with and without the RSA deduction), and initial possession limits, by quota period. To achieve the commercial quotas, this final rule implements a Winter I period (January-April) per-trip possession limit of 30,000 lb (6.8 mt), and a Winter II period (November-December) initial per-trip possession limit of 1,500 lb (680 kg). The Winter I per-trip possession limit will be reduced to 1,000 lb (454 kg) when 80 percent of the commercial quota allocated to that period is projected to be harvested.

As described in the proposed rule, the Council recommended no change in the Winter II possession limits that result from potential rollover of quota from the Winter I period for the 2005 fishing year. Therefore, NMFS maintains the Winter II possession limit-to-rollover amount ratios specified for 2004, as presented in Table 5.

This final rule makes two changes to the regulations regarding the directed otter trawl fishery for scup. The purpose of these modifications is to reduce potential scup discards. First, NMFS increases the minimum mesh size to 5 inches (12.7 cm) for the first 75 meshes from the terminus of the net; and for codends constructed with fewer than 75 meshes, requires a minimum mesh size of 5 inches (12.7 cm) throughout the net. Second, this final rule increases the threshold level to trigger the minimum mesh size requirement from 100 lb (45 kg) to 200 lb (90 kg) for the Scup Summer period (May 1 through October 31). The change to the minimum mesh size regulations also apply in the Scup Gear Restricted Areas (GRA's).

This final rule shifts the entire Southern GRA by 3 longitudinal minutes to the west. The recommendation to move the Southern GRA follows an industry request and subsequent analysis by the Northeast Fisheries Science Center (NEFSC), which indicates that the shift would expose an additional 3 percent of the scup stock to small-mesh gear during the effective period, while allowing access to an additional 8 percent of the Loligo squid stock. NMFS also terminates the existing GRA Exemption Program, in which no vessels have participated to date. The intent of these actions is to allow greater opportunity for trawl vessels to harvest Loligo squid while maintaining the protective aspects of the Southern GRA for scup.

For 2005, the target exploitation rate for black sea bass is 25 percent. The FMP specifies that the TAL associated with a given exploitation rate be allocated 49 percent to the commercial sector and 51 percent to the recreational sector. The recreational harvest limit is allocated on a coastwide basis. Recreational measures will be the subject of a separate rulemaking early in 2005.

This final rule implements the specifications contained in the proposed rule, i.e. , an 8.2-million lb (3,719-mt) black sea bass TAL. After deducting 109,500 lb (50 mt) of RSA for the three approved research projects, the TAL is divided into a commercial quota of 3.97 million lb (1,796 mt) and a recreational harvest limit of 4.13 million lb (1,873 mt). If any of these projects are not approved by the NOAA Grants Office, the research quota associated with the disapproved proposal(s) will be restored to the black sea bass TAL through publication of a notice in the Federal Register by NMFS.

Consistent with the revised quota setting procedures for the FMP, black sea bass overages are determined based upon landings for the period January-September 2004, plus any previously unaccounted for landings from January-December 2003. No adjustment to the 2005 commercial quota is necessary. Table 6 presents the initial 2005 commercial quota and the final 2005 commercial quota (less the RSA).

In addition to the changes recommended by the Council and the Commission's Summer Flounder, Scup, and Black Sea Bass Management Board (Board), this final rule removes references to a specific date by which the Summer Flounder, Scup, and Black Sea Bass Monitoring Committees shall meet for the purposes of recommending annual or multi-year TALs. This action is intended to provide flexibility for the Council in scheduling Monitoring Committee meetings and to remove an unnecessary restriction. NMFS previously modified the text regarding Monitoring Committee meetings in §§ 648.100, 648.120, and 648.140 to reflect that annual review of updated information on the fisheries by the Monitoring Committees would not be required during the period of multi-year specifications. These regulatory changes were effective November 29, 2004 (69 FR 62818, October 28, 2004).

In the proposed rule, the longitude coordinate for the Southern GRA point SGA1 was inadvertently listed as 72°50′ W. long. In the second mention of SGA1. NMFS corrects the longitude coordinate of point SGA1 to 72°53′ W. long to reflect the shift of the entire Southern GRA by 3 longitudinal minutes to the west.

One comment letter was received regarding the proposed measures.

Comment 1: The commenter, representing a commercial seafood association, wrote in support of the proposed TALs, RSA amounts, commercial scup possession limits, scup minimum mesh size, and westward shift of the Southern GRA.

Response: NMFS agrees and this final rule implements these proposed measures.

Comment 2: The same commenter noted the error in the Southern GRA point 1 as described in Changes from the Proposed Rule in this preamble.

Response: NMFS has corrected the Southern GRA point 1 coordinate in this final rule.

This final rule has been determined to be not significant for purposes of Executive Order 12866.

The Assistant Administrator for Fisheries, NOAA, finds good cause under 5 U.S.C. 553(d)(3) to waive the 30-day delayed effectiveness period for this rule. This action establishes annual quotas for the summer flounder, scup, and black sea bass fisheries and possession limits for the commercial scup fishery. Preparation of the proposed rule was dependent on the submission by the Council of the final EA/RIR/IRFA, which occurred in early November 2004, and appended in early December 2004. NMFS published the proposed rule on December 6, 2004, with an abbreviated, 15-day comment period, in order to allow for finalization of the proposed regulatory changes by January 1, 2005. NMFS was unable to obtain the necessary data from the Council before November 2004 to finalize the specifications. Therefore, in order to implement the 2005 specifications before the beginning of the finishing season beginning January 1, 2005, NMFS waives the 30-day delay in effectiveness.

If implementation of the specifications is delayed, NMFS will be prevented from carrying out its legal obligation to prevent overfishing of these three species. The fisheries covered by this action will begin making landings on January 1, 2005. If a delay in effectiveness were to be required, and a quota were to be harvested during a delayed effectiveness period, the lack of effective quota specifications would prevent NMFS from closing the fishery. The scup and black sea bass fisheries are expected to be active at the start of the fishing season in 2005. In addition, the Delaware summer flounder fishery would be open for fishing but in a negative quota situation. This likely would result in overages that may require deduction from the associated state quota or coastwide quota period in the future, and might have a negative economic impact for some gear sectors.

Additionally, pursuant to 5 U.S.C. 553(d)(1), the measure regarding the commercial scup possession limit relieves a restriction and is therefore not subject to a delay in effective date. The current commercial scup possession limit (15,000 lb (6.8 mt) per trip) is more restrictive than the measure recommended by the Council and implemented by NMFS in this rule (30,000 lb (13.6 mt) per trip).

Under the current GRA Exemption Program requirements, vessels that are subject to the provisions of the GRA's must carry on board a Scup GRA Exemption Program Authorization (which requires application to the Regional Administrator) and a NMFS-certified observer in order to fish for, or possess, non-exempt species (black sea bass, Loligo squid, or silver hake (whiting)) using trawl nets having a minimum mesh size less than that required at § 648.123. A minimum of 5 business days in advance of a trip is required to obtain an observer. NMFS terminates the GRA Exemption Program in this rule at the recommendation of the Council and because no vessels have participated in the program to date. Further, NMFS shifts the entire Southern GRA by 3 longitudinal minutes to the west in response to an industry request and subsequent analysis by the NEFSC, which indicates that the shift would expose an additional 3 percent of the scup stock to small-mesh gear during the effective period, while allowing access to an additional 8 percent of the Loligo squid stock. NMFS implements this measure in order to allow greater opportunity for trawl vessels to harvest Loligo squid while maintaining the protective aspects of the Southern GRA for scup. The commercial scup fishery is active at the beginning of January. If a delay in effectiveness were to be required, it would affect trawl vessel owners' ability to plan fishing trips until the rule is in effect, specifically due to the current Scup GRA Exemption Program requirements.

Included in this final rule is the Final Regulatory Flexibility Analysis (FRFA) prepared pursuant to 5 U.S.C. 604(a). The FRFA incorporates the IRFA, the comments and responses to the proposed rule (69 FR 70414, December 6, 2004), and the analyses completed in support of this action. A copy of the EA/RIR/IRFA is available from the Council ( see ADDRESSES ).

The preamble to the proposed rule included a detailed summary of the analyses contained in the IRFA, and that discussion is not repeated here.

A description of the reasons why this action is being taken, and the objectives of and legal basis for this final rule are explained in the preambles to the proposed rule and this final rule and are not repeated here.

The one comment letter received on the proposed rule did not specifically address the potential economic impact of the rule. Other than the correction described in Changes to the Proposed Rule, no changes to the proposed rule were required to be made as a result of public comments. For a summary of the comments received, and the responses thereto refer to the “Comments and Responses” section of this preamble.

The categories of small entities likely to be affected by this action include commercial and charter/party vessel owners holding an active Federal permit for summer flounder, scup, or black sea bass, as well as owners of vessels that fish for any of these species in state waters. The Council estimates that the 2005 quotas (and 2006 summer flounder quota) could affect 2,114 vessels that held a Federal summer flounder, scup, and/or black sea bass permit in 2003. However, the more immediate impact of this final rule will likely be felt by the 1,040 vessels that actively participated ( i.e., landed these species) in these fisheries in 2003.

No additional reporting, recordkeeping, or other compliance requirements are included in this final rule.

Economic impacts are being minimized to the extent practicable with the quota specifications being implemented in this final rule, while being consistent with the target fishing mortality rates or target exploitation rates specified in the FMP. Specification of commercial quotas and possession limits is constrained by the conservation objectives of the FMP, and implemented at 50 CFR part 648 under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act).

The economic analysis assessed the impacts of the various management alternatives. In the EA, the no action alternative is defined as follows: (1) No proposed specifications for the 2005 and 2006 summer flounder fishery and for the 2005 scup and black sea bass fisheries would be published; (2) the indefinite management measures (minimum sizes, possession limits, minimum mesh size, threshold limits to trigger mesh requirements, permit and reporting requirements, etc.) would remain unchanged; (3) there would be no quota set-aside allocated to research in 2005 and 2006; (4) the existing GRA's and GRA regulations would remain in place for 2005; and (5) there would be no specific cap on the allowable annual landings in these fisheries ( i.e. , there would be no quota). Implementation of the no action alternative would be inconsistent with the goals and objectives of the FMP, its implementing regulations, and the Magnuson-Stevens Act. In addition, the no action alternative would substantially complicate the approved management program for these fisheries, and would very likely result in overfishing of the resources. Therefore, the no action alternative is not considered to be a reasonable alternative to the preferred action and is not analyzed in the EA/RIR/IRFA/FRFA.

Alternative 1 (preferred) consists of the harvest limits proposed by the Council and the Board for summer flounder, scup, and black sea bass. Alternative 2 consists of the most restrictive quotas ( i.e. , lowest landings) considered by the Council and the Board for all of the species. Alternative 3 consists of the least restrictive quotas ( i.e. , highest landings) considered by the Council and Board for all three species. Although Alternative 3 would result in higher landings for 2005 (and for the summer flounder fishery in 2006), it would also likely exceed the biological targets specified in the FMP and could, therefore, not be implemented without violating the requirements of the Magnuson-Stevens Act.

Table 7 evaluates three alternative combinations of summer flounder, scup, and black sea bass landings (commercial and recreational).

In summary, relative to 2004, the 2005 commercial quotas and recreational harvest limits contained in the Preferred Alternative would result in an 11-percent and a 7-percent increase in summer flounder landings for the commercial and recreational sectors, respectively, a less than 1-percent decrease in scup landings for both sectors, and a 5-percent and 3-percent increase in black sea bass landings for the commercial and recreational sectors, respectively; percentage changes associated with each alternative are discussed in the proposed rule. The measures contained in the Preferred Alternative were chosen because they provide for the maximum level of landings that still achieve the fishing mortality and exploitation targets specified in the FMP. While the commercial quotas and recreational harvest limits specified in Alternative 3 would provide for even larger increases in landings and revenues, they would not achieve the fishing mortality and exploitation targets specified in the FMP.

The commercial possession limits for scup were chosen in part because they are intended to provide for economically viable fishing trips that will be equitably distributed over the entire quota period. The minimum mesh size and threshold increases were chosen in part because they would effect reduction in the discard of undersized fish, thus increasing the efficiency of the commercial scup fishery. Through the proposed rule, NMFS specifically sought comment on the likely effectiveness of and/or costs associated with the proposed change in minimum mesh size for scup. The change to the minimum mesh size regulations also would apply in the Scup GRA's.

The decision to eliminate the GRA Exemption Program was made because no vessels have participated in the program since its implementation in 2003, and because there would be no change to the economic aspects of the fishery. Revised Southern GRA coordinates were selected in order to allow greater opportunity for trawl vessels to harvest Loligo squid while maintaining the protective aspects of the Southern GRA for scup.

Finally, the revenue decreases associated with the RSA program are expected to be minimal, and are expected to yield important long-term benefits associated with improved fisheries data. It should also be noted that fish harvested under the RSAs would be sold, and the profits would be used to offset the costs of research. As such, total gross revenue to the industry would not decrease substantially if the RSAs are utilized.