The regulations in 7 CFR 301.50 through 301.50-10 (referred to below as the regulations) restrict the interstate movement of certain regulated articles from quarantined areas in order to prevent the spread of pine shoot beetle into noninfested areas of the United States.

In an interim rule  1 effective and published in the Federal Register on February 12, 2007 (72 FR 6433-6435, Docket No. APHIS-2006-0169), we amended the pine shoot beetle regulations in § 301.50-3(c) by adding the entire State of Iowa and two counties, Morris and Somerset, in New Jersey to the list of quarantined areas.

Comments on the interim rule were required to be received on or before April 13, 2007. We did not receive any comments. Therefore, for the reasons given in the interim rule, we are adopting the interim rule as a final rule.

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

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

Black stem rust is one of the most destructive plant diseases of small grains that is known to exist in the United States. The disease is caused by a fungus that reduces the quality and yield of infected wheat, oat, barley, and rye crops by robbing host plants of food and water. In addition to infecting small grains, the fungus lives on a variety of alternate host plants that are species of the genera Berberis, Mahoberberis, and Mahonia . The fungus is spread from host to host by windborne spores.

The black stem rust quarantine and regulations, which are contained in 7 CFR 301.38 through 301.38-8 (referred to below as the regulations), quarantine the conterminous 48 States and the District of Columbia and govern the interstate movement of certain plants of the genera Berberis, Mahoberberis, and Mahonia , known as barberry plants. The species of these plants are categorized as either rust-resistant or rust-susceptible. Rust-resistant plants do not pose a risk of spreading black stem rust or of contributing to the development of new races of the rust; rust-susceptible plants do pose such risks. Section 301.38-2 of the regulations includes a listing of regulated articles and indicates those species and varieties of the genera Berberis, Mahoberberis, and Mahonia that are known to be rust-resistant. Although rust-resistant species are included as regulated articles, they may be moved into or through protected areas if accompanied by a certificate. In accordance with the procedures described below under “Effective Date,” this direct final rule will add Berberis thunbergii atropurpurea ‘Moretti Select', B. thunbergii ‘Fireball', B. thunbergii ‘Orange Rocket', and B. thunbergii ‘Sparkler' to the list of rust-resistant Berberis species in § 301.38-2(a)(1).

The addition of the species listed above to the list of rust-resistant Berberis species is based on recent testing to determine rust resistance conducted by the Agricultural Research Service (ARS) of the United States Department of Agriculture (USDA) at its Cereal Rust Laboratory in St. Paul, MN. The testing is performed in the following manner: In a greenhouse, the suspect plant or test subject is placed under a screen with a control plant—a known rust-susceptible species of Berberis, Mahoberberis, or Mahonia . Infected wheat stems, a primary host of black stem rust, are placed on top of the screen. The plants are moistened and maintained in 100 percent humidity. This causes the spores to swell and fall on the plants lying under the screen. The plants are then observed for 7 days at 20-80 percent relative humidity. If the rust-susceptible plant shows signs of infection after 7 days and the test plants do not, the test results indicate that the test plants are rust-resistant. This test must be performed 12 times, and all 12 tests must yield the same result before USDA can make a determination as to whether the test plants are rust-resistant. The test may be conducted on 12 individual plants, or it may be performed multiple times on fewer plants ( e.g. , six plants tested twice or three plants tested four times). The tests must be performed on new growth, just as the leaves are unfolding. Therefore, the tests are usually conducted in the spring or fall, during the growing season. All 12 tests generally cannot be conducted on the same day because of the plants' different growth stages. Based on over 30 years of experience with this test, we believe that 12 is the reliable test sample size on which USDA can make its determination. We do not know of any plant that was subsequently discovered to be rust-susceptible after undergoing the test procedure 12 times and being determined by USDA to be rust-resistant.

We are publishing this rule without a prior proposal because we view this action as noncontroversial and anticipate no adverse public comment. This rule will be effective, as published in this document, on August 13, 2007, unless we receive written adverse comments or written notice of intent to submit adverse comments on or before July 12, 2007.

Adverse comments are comments that suggest the rule should not be adopted or that suggest the rule should be changed.

If we receive written adverse comments or written notice of intent to submit adverse comments, we will publish a document in the Federal Register withdrawing this rule before the effective date. We will then publish a proposed rule for public comment.

As discussed above, if we receive no written adverse comments or written notice of intent to submit adverse comments within 30 days of publication of this direct final rule, this direct final rule will become effective 60 days following its publication. We will publish a document in the Federal Register , before the effective date of this direct final rule, confirming that it is effective on the date indicated in this document.

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 black stem rust quarantine and regulations by adding B. thunbergii atropurpurea ‘Moretti Select', B. thunbergii ‘Fireball', B. thunbergii ‘Orange Rocket', and B. thunbergii ‘Sparkler' to the list of rust-resistant species or cultivars in the regulations. This action will provide for the interstate movement of these newly developed rust-resistant Berberis varieties without unnecessary restrictions.

Following the Small Business Administration (SBA) guidelines, the potentially affected entities are classified within the following industries: Nursery and Tree Production (North American Industry Classification System [NAICS] 111421), and Floriculture Production (NAICS 111422). For these two categories, entities are considered small by SBA standards if their annual sales are $750,000 or less. According to the 2002 Census of Agriculture, there were 64,366 farms in both NAICS categories and this total represents 3 percent of the total farms in the United States. Over 92 percent of the farms have annual sales of less than $500,000 and by SBA standards are considered small.

Barberry plants are not one of the crops tracked by the Census and therefore data on production and number of producers are not available. However, because we are removing restrictions on the movement of additional rust-resistant varieties of barberry, it is not anticipated that any of the nurseries producing barberry plant species and cultivars will experience a negative economic impact as a result of this rulemaking. Consumers will benefit from having a greater selection of barberry plants, and nurseries will benefit from being to able to market their product more quickly.

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

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

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

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

Airspace, Navigation (air).

This amendment to Title 14 of the Code of Federal Regulations, Part 97 (14 CFR part 97), establishes, amends, suspends, or revokes SIAPs and/or Weather Takeoff Minimums. The complete regulatory description of each SIAP and/or Weather Takeoff Minimums is contained in official FAA form documents which are incorporated by reference in this amendment under 5 U.S.C. 552(a), 1 CFR part 51, and 14 CFR part 97.20. The applicable FAA Forms are identified as FAA Forms 8260-3, 8260-4, 8260-5 and 8260-15A. Materials incorporated by reference are available for examination or purchase as stated above.

The large number of SIAPs and/or Weather Takeoff Minimums, their complex nature, and the need for a special format make their verbatim publication in the Federal Register expensive and impractical. Further, airmen do not use the regulatory text of the SIAPs and/or Weather Takeoff Minimums but refer to their depiction on charts printed by publishers of aeronautical materials. Thus, the advantages of incorporation by reference are realized and publication of the complete description of each SIAP and/or Weather Takeoff Minimums contained in FAA form documents is unnecessary. The provisions of this amendment state the affected CFR sections, with the types and effective dates of the SIAPs and/or Weather Takeoff Minimums. This amendment also identifies the airport, its location, the procedure identification and the amendment number.

This amendment to 14 CFR part 97 is effective upon publication of each separate SIAP and/or Weather Takeoff Minimums as contained in the transmittal. Some SIAP and/or Weather Takeoff Minimums amendments may have been previously issued by the FAA in a Flight Data Center (FDC) Notice to Airmen (NOTAM) as an emergency action of immediate flight safety relating directly to published aeronautical charts. The circumstances which created the need for some SIAP, and/or Weather Takeoff Minimums amendments may require making them effective in less than 30 days. For the remaining SIAPs and/or Weather Takeoff Minimums, an effective date at least 30 days after publication is provided.

Further, the SIAPs and/or Weather Takeoff Minimums contained in this amendment are based on the criteria contained in the U.S. Standard for Terminal Instrument Procedures (TERPS). In developing these SIAPs and/or Weather Takeoff Minimums, the TERPS criteria were applied to the conditions existing or anticipated at the affected airports. Because of the close and immediate relationship between these SIAPs and/or Weather Takeoff Minimums and safety in air commerce, I find that notice and public procedure before adopting these SIAPs and/or Weather Takeoff Minimums are impracticable and contrary to the public interest and, where applicable, that good cause exists for making some SIAPs and/or Weather Takeoff Minimums effective in less than 30 days.

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

The Federal Food, Drug, and Cosmetic Act (the act) (21 U.S.C. 301 et seq. ), as amended by the Medical Device Amendments of 1976 (1976 amendments) (Public Law 94-295), the Safe Medical Devices Act of 1990 (Public Law 101-629), the Food and Drug Administration Modernization Act of 1997 (Public Law 105-115), and the Medical Device User Fee and Modernization Act of 2002 (Public Law 107-250), established a comprehensive system for the regulation of medical devices intended for human use. Section 513 of the act (21 U.S.C. 360c) established three categories (classes) of devices, depending on the regulatory controls needed to provide reasonable assurance of their safety and effectiveness. The three categories of devices are class I (general controls), class II (special controls), and class III (premarket approval).

Under section 513 of the act, devices that were in commercial distribution before May 28, 1976 (the date of enactment of the 1976 amendments), generally referred to as preamendments devices, are classified after FDA has done the following: (1) Received a recommendation from a device classification panel (an FDA advisory committee); (2) published the panel's recommendation for comment, along with a proposed regulation classifying the device; and (3) published a final regulation classifying the device. FDA has classified most preamendments devices under these procedures.

Devices that were not in commercial distribution before May 28, 1976, generally referred to as postamendments devices, are classified automatically by statute (section 513(f) of the act) into class III without any FDA rulemaking process. Those devices remain in class III and require premarket approval, unless and until the device is reclassified into class I or II or FDA issues an order finding the device to be substantially equivalent, under section 513(i) of the act, to a predicate device that does not require premarket approval. The agency determines whether new devices are substantially equivalent to previously offered devices by means of premarket notification procedures in section 510(k) of the act (21 U.S.C. 360(k)) and part 807 (21 CFR part 807) of the regulations.

A preamendments device that has been classified into class III may be marketed, by means of notification procedures, without submission of a premarket approval application (PMA) until FDA issues a final regulation under section 515(b) of the act (21 U.S.C. 360e(b)) requiring premarket approval.

Section 513(e) of the act (21 U.S.C. 360c(e)) governs reclassification of classified preamendments devices. This section provides that FDA may, by rulemaking, reclassify a device (in a proceeding that parallels the initial classification proceeding) based upon “new information.” FDA can initiate a reclassification under section 513(e) of the act or an interested person may petition FDA to reclassify a preamendments device. The term “new information,” as used in section 513(e) of the act, includes information developed as a result of a reevaluation of the data before the agency when the device was originally classified, as well as information not presented, not available, or not developed at that time. (See, e.g., Holland Rantos v. United States Department of Health, Education, and Welfare , 587 F.2d 1173, 1174 n.1 (D.C. Cir. 1978); Upjohn v. Finch , 422 F.2d 944 (6th Cir. 1970); Bell v. Goddard , 366 F.2d 177 (7th Cir. 1966).)

Reevaluation of the data previously before the agency is an appropriate basis for subsequent regulatory action where the reevaluation is made in light of newly available regulatory authority (see Bell v. Goddard , supra, 366 F.2d at 181; Ethicon, Inc. v. FDA , 762 F.Supp. 382, 389-91 (D.D.C. 1991)), or in light of changes in “medical science.” (See Upjohn v. Finch , supra, 422 F.2d at 951.) Whether data before the agency are past or new data, the “new information” to support reclassification under section 513(e) must be “valid scientific evidence,” as defined in section 513(a)(3) of the act and 21 CFR 860.7(c)(2). (See, e.g., General Medical Co. v. FDA , 770 F.2d 214 (D.C. Cir. 1985); Contact Lens Assoc. v. FDA , 766 F.2d 592 (D.C. Cir.), cert. denied, 474 U.S. 1062 (1985)).

FDA relies upon “valid scientific evidence” in the classification process to determine the level of regulation for devices. To be considered in the reclassification process, the valid scientific evidence upon which the agency relies must be publicly available. Publicly available information excludes trade secret and/or confidential commercial information, e.g., the contents of a pending PMA. (See section 520(c) of the act (21 U.S.C. 360j(c).) Section 520(h)(4) of the act, added by FDAMA, provides that FDA may use, for reclassification of a device, certain information in a PMA 6 years after the application has been approved. This includes information from clinical and preclinical tests or studies that demonstrate the safety or effectiveness of the device but does not include descriptions of methods of manufacture or product composition and other trade secrets.

FDAMA added a new section 510(m) to the act. New section 510(m) of the act provides that a class II device may be exempted from the premarket notification requirements under section 510(k) of the act, if the agency determines that premarket notification is not necessary to assure the safety and effectiveness of the device. FDA believes that this device should not be exempt from premarket notification under section 510(m) of the act. FDA believes that it needs to review information in a premarket notification submission that addresses the risks identified in the guidance document in order to assure that a new device is at least as safe and effective as legally marketed devices of this type.

In the Federal Register of February 9, 2006 (71 FR 6710), FDA published a proposed rule to reclassify the intervertebral body fusion devices that contain bone grafting material, from class III (premarket approval) into class II (special controls), and retain those that contain any therapeutic biologic (e.g., bone morphogenic protein) in class III. FDA received 12 comments on the proposed rule and draft guidance.

In the same issue of the Federal Register of February 9, 2006 (71 FR 6778), FDA announced the availability of the draft guidance document entitled “Class II Special Controls Guidance Document: Class II Special Controls Guidance Document: Intervertebral Body Fusion Device” that FDA intended to serve as the special control for this device type, if FDA reclassified this device type. Interested persons were invited to comment on the proposed rule and special controls draft guidance document by May 10, 2006.

Therefore, under sections 513 and 520(l) of the act, FDA is adopting the summary of reasons for the panel's recommendation, the summary of data upon which the panel's recommendations are based (Ref. 1), and the assessment of the risks to public health stated in the proposed rule published on February 9, 2006. Furthermore, FDA is issuing this final rule (21 CFR 888.3080), that reclassifies intervertebral body fusion devices that contain bone grafting material, from class III (premarket approval) into class II (special controls), and retain those that contain any therapeutic biologic (e.g., bone morphogenic protein) in class III.

FDA received six comments stating the comment's full support for the reclassification as proposed and offering no additional input. Two comments suggested adding thoracic use to the classification identification. FDA disagrees with this comment because there are no legally marketed intervertebral body fusion devices indicated for thoracic use, and thus there is no experience with thoracic use of the intervertebral body fusion device. Two comments suggested that FDA classify all intervertebral body fusion devices into class II regardless of the grafting material the devices contain and regardless of whether grafting materials composed of therapeutic biologics remain class III. FDA disagrees with this comment. The intervertebral body fusion device and the grafting material it contains do not act independently in the body, thus the mitigation measures described in the special controls guidance are insufficient to provide reasonable assurance of safety and effectiveness for an intervertebral body fusion device when it contains a therapeutic biologic grafting material. The two remaining comments pertained to scientific recommendations in the draft guidance. FDA's consideration of these two comments is discussed in the notice of the availability of the guidance, published elsewhere in this issue of the Federal Register .

The agency has determined under 21 CFR 25.34(b) that this reclassification action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

FDA has examined the impacts of the final rule under Executive Order 12866 and the Regulatory Flexibility Act (5 U.S.C. 601-602), and the Unfunded Mandates Reform Act of 1995 (Public Law 104-4). Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety and other advantages; distributive impacts and equity). The agency believes that this final rule is not a significant regulatory action under the Executive order.

The Regulatory Flexibility Act requires agencies to analyze regulatory options that would minimize any significant impact of a rule on small entities. Reclassification of this device from class III to class II will relieve all manufacturers of the device of the costs of complying with the premarket approval requirements in section 515 of the act. Because reclassification will reduce regulatory costs with respect to this device, the agency certifies that the final rule will not have a significant economic impact on a substantial number of small entities.

Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires that agencies prepare a written statement, which includes an assessment of anticipated costs and benefits, before proposing “any rule that includes an Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more (adjusted annually for inflation) in any one year.” The current threshold after adjustment for inflation is $122 million, using the most current (2005) Implicit Price deflator for the Gross Domestic Product. FDA does not expect this final rule to result in any 1-year expenditure that would meet or exceed this amount.

FDA has analyzed this final rule in accordance with the principles set forth in Executive Order 13132. FDA has determined that the rule does not contain policies that have substantial direct effects on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. Accordingly, the agency has concluded that the rule does not contain policies that have federalism implications as defined in the order and, consequently, a federalism summary impact statement is not required.

This final rule contains no collections of information. Therefore, clearance by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (PRA) is not required. Elsewhere in this issue of the Federal Register , FDA is publishing a notice of availability of the guidance document entitled “Class II Special Controls Guidance Document: Intervertebral Body Fusion Devices.” The notice contains the PRA analysis for the guidance.

The following reference has been placed on display in the division of Dockets Management (see ADDRESSES ) and may be seen by interested persons between 9 a.m. and 4 p.m., Monday through Friday.

The collection of information contained in these final regulations has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control number 1545-1945. Comments on the accuracy of the estimated burden and suggestions for reducing the burden should be sent to the Internal Revenue Service, Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP, Washington, DC 20224.

The collection of information in these regulations is in § 1.475(a)-4(f)(1) and § 1.475(a)-4(k). This information is required by the IRS to avoid any uncertainty about whether a taxpayer has made an election and to verify compliance with section 475 and the safe harbor method of accounting described in § 1.475(a)-4(d). This information will be used to facilitate examination of returns and to determine whether the amount of tax has been calculated correctly. The collection of the information is required to properly determine the amount of income or deduction to be taken into account. The taxpayers providing this information are sophisticated dealers in securities or commodities.

Estimated total annual recordkeeping burden: 49,232 hours.

Estimated average annual burden per recordkeeper: 4-6 hours.

Estimated number of recordkeepers: 12,308.

Estimated frequency of recordkeeping: Annually.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number.

Books and records relating to the collection of information must be retained as long as their contents might become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

This document contains amendments to 26 CFR Part 1 under section 475 of the Internal Revenue Code (Code). Section 475 was added to the Code by section 13223(a) of the Omnibus Budget Reconciliation Act of 1993 (Pub. L. 103-66, 107 Stat. 312). Section 475(a) generally provides that the securities held by dealers in securities must be valued as of the last business day of the year at fair market value. Section 475(e) allows dealers in commodities to elect similar treatment for their commodities. Under section 475(f), if a person is engaged in a trade or business as a trader in securities or a trader in commodities, the person may elect for the section 475 mark-to-market regime to apply to their trade or business.

Section 475(g) directs the Secretary to prescribe regulations that may be necessary or appropriate to carry out the purposes of section 475. The legislative history of section 475 indicates that, under this authority, the Secretary may issue regulations to permit the use of valuation methodologies that reduce the administrative burden of compliance on the taxpayer but clearly reflect income for Federal income tax purposes. On May 5, 2003, the Treasury Department and the IRS published in the Federal Register an advance notice of proposed rulemaking (Safe Harbor for Satisfying Certain Statutory Requirements for Valuation under Section 475 for Certain Securities and Commodities) (REG-100420-03) [68 FR 23632] (the ANPRM); Announcement 2003-35, 2003-1 CB 956 (see § 601.601(d)(2)). The ANPRM solicited comments on whether a safe harbor approach using values reported on an applicable financial statement for certain securities may be used for purposes of section 475. On May 24, 2005, the Treasury Department and the IRS published in the Federal Register a notice of proposed rulemaking (Safe Harbor for Valuation under Section 475) (REG-100420-03) [70 FR 29663] (the NPRM). The NPRM set forth a possible safe harbor for valuing these securities and asked for comments on various aspects of the safe harbor. A public hearing was held on September 15, 2005. The IRS received written and electronic comments responding to the NPRM. After consideration of all comments, the proposed regulations are adopted as amended by this Treasury decision. The amendments are discussed in this preamble.

Section 475(a) requires dealers in securities to mark their securities to market. Section 475(e) allows dealers in commodities to elect similar treatment for their commodities. If the security or commodity is inventory, it must be included in inventory at its fair market value. If it is not inventory and is held at the end of the taxable year, gain or loss is recognized as if the security or commodity had been sold for its fair market value on the last business day of the taxable year.

Although the term “fair market value” has a long-standing and well-established meaning within the tax law, it is sometimes difficult to determine the fair market value of certain securities and commodities. This has impeded the efficient administration of the mark-to-market system under section 475. Consequently, with a view to improving the administrability of the valuation requirements of section 475, the Treasury Department and the IRS issued the NPRM, which set forth a safe harbor for valuing securities and commodities under section 475.

These final regulations adopt the approach of the NPRM with the modifications discussed in this preamble.

The safe harbor generally permits eligible taxpayers to elect to have the values that are reported for eligible positions on certain financial statements treated as the fair market values of those eligible positions for purposes of section 475, if certain conditions are met. The safe harbor is based upon the principle that if the mark-to-market method used for financial reporting is sufficiently consistent with the mark-to-market method required by section 475, then the values used for financial reporting should be acceptable values for purposes of section 475. To ensure minimal divergence from fair market value under tax principles, these regulations impose certain restrictions on the financial accounting methods and financial statements that are eligible for the safe harbor and also require certain adjustments to the values of the eligible positions on those financial statements that may be used under the safe harbor.

The safe harbor and its various requirements and limitations are based upon the business model for derivatives dealers that was described in comments received in response to the ANPRM and the NPRM. According to these comments, dealers seek to capture and profit from bid-ask spreads in the marketplace by entering into balanced portfolios for their derivatives, that is, positions that offset each other, either individually or in the aggregate. Although dealers may have some open positions, they seek to have balanced portfolios with a majority of positions offsetting each other. Those offsetting positions generally remain on dealers' books over the terms of the positions.

The spread between bid and ask values contains the dealer's profit, which compensates the dealer for all risks and expenses. The creation of a balanced portfolio may be seen as giving rise to a synthetic annuity, with a value that is largely immune from market-related changes in the values of the component positions. At the time the dealer has entered into the offsetting positions and created the synthetic annuity, all steps required to earn the income from the synthetic annuity have been completed. Recognizing the present value of the income attributable to the bid-ask spread is appropriate in the taxable year the synthetic annuity is created. For a matched book of eligible positions, such as a dealer's portfolio of interest rate swap contracts, use of bid or ask values approximates realization accounting and fails to recognize in income the present value of the synthetic annuity in the taxable year that the synthetic annuity is created. The final regulations are to be applied in a manner consistent with the premise that the present value of the synthetic annuity should be recognized in income not later than the taxable year in which the synthetic annuity is created.

Commentators described a different business model for securities that are not derivatives, commonly known as physicals. Under this model, dealers plan on rapid turnover of the physicals that are traded on qualified boards or exchanges or on liquid over-the-counter markets. Except for those acquired at the end of the taxable year, the acquisition and disposition of a physical occurs within a single taxable year, so that the effect of capturing a bid-ask spread also occurs entirely within that year. Consequently, for securities traded on a qualified board or exchange, as defined under section 1256(g)(7), there is little difference between the results of realization and mark-to-market accounting, and little opportunity for manipulation.

The NPRM provided that traders could elect to use the safe harbor. In both the ANPRM and the NPRM, the Treasury Department and IRS asked for comments addressing whether traders in securities and commodities should be able to elect the safe harbor and whether the business model for traders differs from the business model for dealers. The commentators that recommended that the safe harbor apply to traders did so without providing information about the business model for traders and without suggesting how the limitations set forth in the NPRM would apply to traders. Without a full understanding of the business model for traders, the Treasury Department and the IRS have determined that it would be unwise to include traders in the safe harbor at this time. Accordingly, the final regulations provide that the safe harbor is available only to taxpayers who are dealers in securities under section 475(a) or who are dealers in commodities and are subject to the election described in section 475(e)(1).

Because financial markets and products evolve rapidly, listing the securities and commodities in the regulations would make the regulations less flexible and dynamic in the future. To ensure that the safe harbor will be adaptable and administrable in a changing environment, the Commissioner will issue concurrently with these final regulations a revenue procedure that will list the types of securities and commodities that are subject to the safe harbor. This revenue procedure may be updated as necessary.

It is important to note, however, that the valuation methodology under the safe harbor applies only for positions that, taking into account any elections and identifications that are in effect, are required to be marked to market under section 475. That is, the safe harbor only addresses valuation and does not expand or contract the scope or application of section 475. For example, if a security is not marked to market under section 475 because it has been properly identified as held for investment, then it may not be marked to market for Federal income tax purposes even though the safe harbor election is in effect and the security is properly marked to market on the financial statement in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP). Similarly, if a security is not marked to market on the applicable financial statement because, for example, it is a hedge for financial statement purposes but section 475(a) applies because the security is not a hedging transaction for tax purposes, then the security must nevertheless be marked to market under section 475.

The NPRM set forth four core requirements that a financial accounting method must satisfy in order to be eligible for the safe harbor. First, the method must mark eligible positions to market through valuations made as of the last business day of each taxable year. Second, it must recognize into income on the income statement any gain or loss from marking eligible positions to market. Third, it must recognize into income on the income statement any gain or loss on disposition of an eligible position as if a year-end mark occurred immediately before the disposition. Fourth, it must arrive at fair value in accordance with U.S. GAAP.

In addition to these core requirements, the NPRM imposed certain limitations to ensure minimal divergence from fair market value. Under the first limitation, the financial accounting method must not result in values at or near the bid or ask values, even if the use of bid or ask values is permissible under U.S. GAAP. This limitation applies to all eligible positions except those that are traded on a qualified board or exchange, as defined in section 1256(g)(7). This limitation ensures that a sufficient portion of the synthetic annuity captured by a dealer is reported in the correct accounting period of that dealer.

Under the second limitation in the NPRM, if a method of valuation is based on the present value of projected cash flows from an eligible position or positions, that method must not take into account any income or expense attributable to a period or time on or before the valuation date. This limitation ensures that items of income or expense will not be accounted for twice, first through current recognition and then again in the mark.

Under the third limitation in the NPRM, no cost or risk may be accounted for more than once, either directly or indirectly. For example, a financial accounting method may allow a special adjustment for credit risk. If, however, a method computes the present value of projected cash flows using a discount rate that takes credit risk into account and the method employs a special adjustment that takes some or all of the credit risk into account, then the method does not satisfy this limitation. This limitation ensures that items of income or expense will not be accounted for twice.

Most of the comments received on the NPRM focused on the core requirements and limitations for eligible methods. As explained in this preamble, the final regulations address those comments, rejecting some suggestions and modifying the regulations in response to others. The majority of the comments focused on (1) requiring changes in value to be reported on the income statement, (2) limiting the use of bid and ask values, and (3) excepting certain types of physical securities from the bid-ask limitation.

Some commentators suggested that eligible taxpayers be allowed to report changes in value on either the balance sheet or the income statement, because both are rigorously reviewed. They also expressed concern that, because certain items of other comprehensive income generally appear on the balance sheet and not on the income statement, the methodology used by many taxpayers for financial reporting would fail to be an eligible method and, therefore, would not satisfy the safe harbor.

When changes in value appear on the income statement, they also appear in retained earnings and in earnings-per-share. This creates a tension between the benefits of higher earnings for financial reporting and the benefit of lower income for tax reporting. This tension helps to ensure the reliability of values for tax purposes, a fundamental concept underlying the safe harbor. Balance sheet items, such as other comprehensive income, do not have the same tension. Therefore, the final regulations retain the income statement requirement of the NPRM.

Some commentators suggested that the bid-ask limitation be eliminated to make it easier for taxpayers to qualify for the safe harbor. These commentators indicated that dealers generally do not retain records of individual positions' bid-ask spreads for any meaningful period of time, and it would be burdensome to monitor the spreads of those positions for which records do exist.

The safe harbor set forth in the NPRM does not add to taxpayers' existing recordkeeping burden. Without the safe harbor, other sections of the Code would require taxpayers to keep records to prove the values of individual positions or to keep records of spreads if taxpayers account for their income and loss based on those spreads. The safe harbor simply allows taxpayers to use those same records to prepare both the applicable financial statement and their tax return. Accordingly, the bid-ask limitation has been retained in the final regulations.

Additionally, according to some commentators, the requirement in the NPRM that values should be nearer to the mid-market value than to the bid or ask value could be interpreted in two ways. First, it could be a requirement that, if not met for a particular position, would disqualify an entire financial accounting method as an eligible method. Second, it could be a safe harbor that, if not met for a particular position, would not disqualify the method but would require the taxpayer to prove that the method consistently produces values nearer to mid-market than to bid or ask. The final regulations make it clear that this provision is a safe harbor and that a method that may occasionally produce a value that is not nearer to mid-market than to bid or ask will not preclude use of the safe harbor.

The Treasury Department and the IRS also received suggestions from commentators seeking expansion of the exceptions to the bid-ask limitations. Some commentators noted that the exception for exchange-traded positions in the NPRM was too narrow because it did not cover those equities and debt securities, such as Treasury obligations, that are traded in very liquid, over-the-counter markets and have easily determinable values. These commentators suggested that, rather than limit the exception to positions on qualified boards or exchanges as defined in section 1256(g)(7), the regulations should include within the exception all positions for which there is an established financial market within the meaning of § 1.1092(d)-1(b).

The exception for positions that are traded on a qualified board or exchange described in section 1256(g)(7) was included in the NPRM to except those positions with spreads so small that applying the bid-ask limitation would have little effect on the determination of fair market value. Because section 1092 is an anti-abuse provision that Congress intended to be broad in scope, the definition of established financial market in § 1.1092(d)-1(b) reflects a corresponding breadth. Thus, expansion of the exception for exchange-traded positions by reference to § 1.1092(d)-1(b) might inappropriately except too many positions from the general bid-ask limitation. For example, many derivative contracts for which dealers lock in spreads are positions for which there is an established financial market. See § 1.1092(d)-1(b), (c). Consequently, the reference to section 1256(g)(7) has been retained.

Some of the comments about the bid-ask exception were prompted by the view that debt instruments should be excepted from the bid-ask limitation for some of the same reasons as positions traded on a 1256(g)(7) board or exchange.

The Treasury Department and the IRS, however, decline at this time to adopt the suggestion that debt instruments be generally excepted from the bid-ask limitation. The Treasury Department and the IRS recognize that dealers' business model for debt instruments generally is to turn over debt securities very rapidly and that dealers have a strong economic incentive to do so because holding debt securities consumes balance sheet resources and poses risk management issues. Nevertheless, based on comments received, the Treasury Department and the IRS do not possess sufficient information to conclude that spreads in the over-the-counter debt markets are de minimis . Additionally, debt instruments may be used to lock in spreads with respect to open positions in other instruments, such as derivatives. Therefore, excepting over-the-counter debt instruments from the bid-ask limitation may be contrary to the tenets of the dealer business model for derivatives. Moreover, excepting debt instruments from the bid-ask limitation might introduce a tax-motivated distortion into the marketplace, as taxpayers may decide to lock in spreads with tax-advantaged instruments rather than with instruments that are selected on the basis of their non-tax economic attributes. The Commissioner may, however, designate additional positions as being exempt from the bid-ask limitation.

Understanding the need for a limitation on the use of bid and ask values, one commentator suggested an open position exception to the bid-ask limitation. Under this alternative, offsetting positions in the balanced portion of a portfolio would not be valued at or near the bid or ask values. Open positions, however, would not be subject to this limitation. Instead, they could be valued at any value between and including the bid and ask values. According to this commentator, the bid-ask limitation ensures that the present value of the income attributable to the bid-ask spread is recognized in the taxable year the synthetic annuity is created. Open positions, it was noted, do not create a synthetic annuity so the bid-ask limitation need not apply to them.

The Treasury Department and the IRS decline to adopt the rule suggested by this commentator. Under a mark-to-market system, when a dealer enters into an open position with a customer, that dealer has captured the spread inherent in that customer position, even if the customer position is not offset by another position. Although it can be argued that a dealer may be forced to pay a spread to obtain a position offsetting the open customer position, to assume a dealer would do so across the board would be to ascribe customer status (which is paying spreads) to the dealer, a result inconsistent with the dealer business model (which is charging spreads). Additionally, in the event a dealer actually pays a spread to offset the open customer position, the disadvantageous terms of the offsetting position will be reflected in the mark-to-market valuation of that position. Administrability is also a concern. Before accepting the suggestion that a dealer should recognize no mark-to-market income from any open position until the position is offset by one or more other positions, the Treasury Department and the IRS would need more information regarding the manner in which to verify the process for determining the proper amounts of adjustments taxpayers will use to achieve this result.

The final regulations modify the NPRM by providing that the election to use the safe harbor is made by filing a statement with the taxpayer's return declaring that the taxpayer makes the safe harbor election for all eligible positions for which it has an eligible method. An example elaborating on this concept has been added to the final regulations.

Not all financial statements qualify under the safe harbor. Consequently, these regulations set forth a system that enables a taxpayer to determine which one of its financial statements, if any, may be used when applying the safe harbor. The final regulations adopt the provisions of the NPRM on applicable financial statements.

Some commentators expressed concern that U.S. branches of foreign banks would not be eligible to use the safe harbor because they do not prepare financial statements in accordance with U.S. GAAP. The comments suggested that many of these branches prepare their financial statements in accordance with rules that are substantially similar to U.S. GAAP and, therefore, should be permitted to use those non-U.S. GAAP financial statements for purposes of the safe harbor. The commentators also suggested that call reports submitted to U.S. bank regulators by foreign banks have sufficient indicia of reliability to merit use in the safe harbor, even though changes over time in the values in those reports may not be directly reflected in income statements prepared according to U.S. GAAP.

As noted in this preamble, the safe harbor is based on the concept that, with appropriate limitations, mark-to-market values used on certain financial statements can be sufficiently consistent with fair market values under section 475. The IRS and Treasury Department have concluded that the requirements and limitations of the safe harbor ensure sufficient consistency when applied to financial statements prepared according to U.S. GAAP. This conclusion is less clear when the requirements and limitations are applied to financial statements prepared under other accounting regimes. Consequently, the final regulations retain the requirement that applicable financial statements be prepared in accordance with U.S. GAAP. The final regulations retain the requirement in the NPRM that, to be an eligible method, a financial statement method of accounting must cause changes in value to be recognized into income on the income statement.

Nevertheless, making it practical for foreign banks to use the safe harbor for their U.S. branches could be valuable not only to the foreign banks but also to the IRS in its administration and application of section 475. Therefore, the IRS and Treasury Department are interested in expanding the scope of these regulations so that they may apply in the future to foreign banks. Answers to the following questions would facilitate efforts to achieve that expansion. First, should the safe harbor require that the values reported in the call report of the foreign bank be the same values that are reported in the income statement filed in the foreign bank's home country? If so, should the foreign bank, together with its certified independent registered public accountant, file with the U.S. tax return, subject to penalties of perjury, a statement to that effect?

Second, should the valuation standards used in the foreign bank's home country be identical to the valuation standards under U.S. GAAP, and if not identical, in what ways may they differ? If so, should the foreign bank, together with its certified independent registered public accountant, file a statement with the U.S. tax return, subject to penalties of perjury, describing the differences, if any, between the foreign country valuation standards and those under U.S. GAAP? Further, should the foreign valuation standards be fully consistent with, and should the foreign country have formally adopted, International Financial Reporting Standards as published by the International Accounting Standards Board?

Third, should the income statement filed by the foreign bank be filed with the foreign bank's home country bank regulator (as distinct from a market regulator like the SEC)?

Fourth, for purposes of these questions, should the term “home country” mean the country in which the foreign bank is chartered or incorporated?

The safe harbor will be administrable only if the IRS can readily verify that the financial statements at issue are taxpayers' applicable financial statements, that the accounting methods used are eligible methods, and that the values used on the applicable financial statements are also used on the Federal income tax return. Consequently, recordkeeping and record production are critical to the effective administration of the safe harbor.

These final regulations retain the provisions of the NPRM regarding record retention and production. They provide specific requirements for the types of records that must be maintained and provided, to enable ready verification. In general, electing taxpayers must clearly show: (1) That the same value used for financial reporting was used on the Federal income tax return; (2) that no eligible position subject to section 475 is excluded from the application of the safe harbor; and (3) that only eligible positions subject to section 475 are carried over to the Federal income tax return under the safe harbor.

Commentators expressed concern that the language of the NPRM requiring all schedules, exhibits, computer programs, and other information used to produce values was too broad, making it difficult to know what materials must be retained and produced. They also expressed concern that a requirement to keep computer programs and information used in producing values not only would require taxpayers to keep information about models that are changed frequently but also would encourage IRS employees to examine valuation models not just for compliance with the definition of “eligible method” but also for examining the accuracy of the underlying valuations.

The final regulations retain the record retention and production requirements set forth in the NPRM. Other sections of the Code already require taxpayers to maintain records sufficient to support the accuracy of items reported on their Federal tax returns. Except for a possible increase in the retention period in some instances, therefore, the final regulations create no additional burden. To avoid confusion or undue burden, the final regulations permit a taxpayer to enter into an agreement with the IRS specifying which records must be maintained, how they must be maintained, and for how long they must be maintained. These agreements may include terms covering the maintenance of computer programs and information used in producing values.

The maintenance and production requirements of the regulations preclude undue delay in producing records. One commentator suggested that the 30-day deadline provided too little time to produce records. During the development of these regulations, the IRS conducted a test program to determine not only whether values could be traced from financial statements to the tax return but also how long it would take for taxpayers to produce the necessary records. This test program demonstrated that 30 days was generally a sufficient period of time. For specific cases, the Commissioner may excuse failures to provide records within 30 days if the taxpayer shows reasonable cause for the failure and has made a good faith effort to comply. As noted above, the taxpayer may also enter into an agreement with the Commissioner that sets forth a different time period. Accordingly, the final regulations retain the general 30-day requirement.

It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. It is hereby certified that the collection of information in these regulations will not have a significant economic impact on a substantial number of small entities. This certification is based upon the expectation that the safe harbor will be used primarily by dealers in securities that are financial institutions with a sophisticated understanding of the capital markets. Because section 475 is elective for dealers in commodities, some small businesses could qualify for the safe harbor if they make two voluntary elections: (1) An election to mark to market commodities under section 475 and (2) an election to apply the safe harbor. Because both elections are voluntary, it is unlikely any small business taxpayer who thinks the reporting and recordkeeping requirements are too burdensome will make these elections. Furthermore, the total average estimated burden per taxpayer is small, as reported earlier in the preamble. This is because most of the recordkeeping requirements do not require taxpayers to generate new records, but instead require records used for financial reporting purposes to be kept for tax reporting purposes. For all of these reasons, a Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the Code, the notice of rulemaking preceding this regulation was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.

The principal authors of these regulations are Marsha A. Sabin and John W. Rogers III, Office of the Associate Chief Counsel (Financial Institutions and Products). However, other personnel from the IRS and the Treasury Department participated in their development.

Regulatory Information

On May 4, 2007, we published a notice of proposed rulemaking (NPRM) entitled “Safety Zones; Annual events requiring safety zones in the Captain of the Port Lake Michigan zone” in the Federal Register (72 FR 25219). We received no letters commenting on the proposed rule. No public meeting was requested, and none was held.

Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . Any delay encountered in the regulation's effective date would be contrary to the public interest since the safety zone is needed to protect the maritime public from any potential hazards associated with fireworks displays, air shows, or other events.

In 2005 the Coast Guard consolidated the Captain of the Port Milwaukee Zone and the Captain of the Port Chicago Zone and realigned the boundaries of the Captain of the Port Sault Ste. Marie Zone to create the Captain of the Port Lake Michigan Zone. This rule consolidates the regulations found in 33 CFR part 165.909, Safety Zones; Annual fireworks events in the Captain of the Port Milwaukee Zone and 33 CFR 165.918, Safety Zones; Annual fireworks events in the Captain of the Port Chicago Zone into one rule that includes all safety zones for annual events in the Captain of the Port Lake Michigan Zone. This rule also adds several annual events not previously listed in 33 CFR part 165 and removes several events that no longer occur annually or do not require a safety zone. These safety zones are necessary to protect vessels and people from the hazards associated with fireworks displays, air shows, or other events. Such hazards include obstructions to the waterway that may cause marine casualties and the explosive danger of fireworks and debris falling into the water that may cause death or serious bodily harm.

No comments were received concerning this final rule. No changes have been made.

This rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order.

We have determined the economic impact of this rule to be so minimal that a full Regulatory Evaluation is unnecessary. The Coast Guard's use of these safety zones will be periodic in nature, of short duration, and designed to minimize the impact on navigable waters. These safety zones will only be enforced immediately before and during the time the events are occurring. Furthermore, these safety zones have been designed to allow vessels to transit unrestricted to portions of the waterways not affected by the safety zones. The Coast Guard expects insignificant adverse impact to mariners from the activation of these safety zones.

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

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

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we offered to assist small entities in understanding this rule so that they can better evaluate its effects on them and participate in the rulemaking. Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

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

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

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

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

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

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

The Coast Guard recognizes the treaty rights of Native American tribes. Moreover, the Coast Guard is committed to working with Tribal Governments to implement local policies and to mitigate tribal concerns. We have determined that this safety zone and fishing rights protection need not be incompatible. We have also determined that this rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. Nevertheless, Indian Tribes that have questions concerning the provisions of this rule or options for compliance are encouraged to contact the point of contact listed under FOR FURTHER INFORMATION CONTACT .

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

The National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the Office of Management and Budget, with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies.

This rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards.

We have analyzed this rule under Commandant Instruction M16475.lD and Department of Homeland Security Management Directive 5100.1, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this rule is categorically excluded, under figure 2-1, paragraph (34)(g), of the Instruction, from further environmental documentation.

A final “Environmental Analysis Check List” and a final “Categorical Exclusion Determination” are available in the docket where indicated under ADDRESSES .

For many years it has been the policy of the National Park Service (NPS) to encourage its concessioners to sell native handicrafts to park area visitors. The Congress, through Section 416 of the National Parks Omnibus Management Act of 1998 (1998 Act), embodied this policy into law, stating that:

In furtherance of this objective, Section 416(b) of the 1998 Act exempts the revenue derived by NPS concessioners from the sale of United States Indian, Alaska Native, Native Samoan and Native Hawaiian handicrafts from concession contract franchise fees. This final regulation collectively refers to these handicrafts as “authentic native handicrafts.”

Also, Section 417 of the 1998 Act requires the Secretary of the Interior (Secretary) to promulgate a regulation that further defines United States Indian, Alaska Native and Native Hawaiian handicrafts. Section 409 of the 1998 Act (16 U.S.C. 5958) requires the National Park Service Concessions Management Advisory Board (Advisory Board) to make recommendations to the Secretary regarding the nature and scope of products that qualify as authentic native handicrafts within the meaning of the 1998 Act. This regulation has been developed in consideration of the recommendations of the Advisory Board.

This regulation will give guidance to the NPS and NPS concessioners to determine what products meet the definition of authentic native handicrafts for purposes of franchise fee exemptions and other elements of the NPS concessions management program.

In developing the regulation, NPS, upon the recommendation of the Advisory Board, incorporated to the extent appropriate the relevant definitions established by the Indian Arts and Crafts Board of the Department of the Interior (IACB) in 25 CFR part 309 in recognition of the native handicraft expertise of the IACB.

Please note that Section 417 of the 1998 Act requires the Secretary to further define “United States Indian, Alaska Native, and Native Hawaiian handicraft.” However, section 416 of the 1998 Act additionally refers to Native Samoan handicraft. Accordingly, although the term “Native Samoan handicraft” is not defined in the regulation, the regulation specifies that the sale of Native Samoan handicrafts is encouraged and exempt from NPS concession contract franchise fees. An administrative definition of “Native Samoan handicraft” will be developed by NPS in consultation with appropriate Samoans and Samoan organizations.

The source for the definition of “Alaska Native” found in this regulation is from the Alaska Native Claims Settlement Act (43 U.S.C. 1602 (b)). The source of the term “arts and crafts objects” is 25 CFR part 309 (the regulations of the IACB) as adapted for purposes of this regulation.

The source of the definition of “authentic native handicrafts” contained in the regulation is 25 CFR part 309 as adapted for the purposes of this regulation.

The source of the term “Native Hawaiian” is Section 3001(10) of the Native American Graves Protection and Repatriation Act (25 U.S.C. 3001(10)) and Section 16(11) of the National Museum of the American Indian Act (20 U.S.C. 80q-14(11)).

The source of the term “United States Indian” is the applicable portion of the term “Indian” as defined in 25 CFR part 309. The term “label” means a separate tag, paper, sign, sticker, or signed document attesting to the authenticity of the item as “authentic native handicraft.”

On March 25, 2004, the National Park Service published a Notice of Proposed Rulemaking (NPRM) for Authentic Native Handicrafts (69 FR 15286). The comment period was open for 60 days. No public comments were received.

During the review process two comments were received from within the Department. One comment from the Office of the Assistant Secretary for Policy, Management, and Budget requested that we consider requiring concessioners to mark sales items that are authentic native handicrafts marked with a label to attest to the item's authenticity, in order to be eligible for franchise fee exemption. This requirement is in addition to the standard concession contract requirement that concessioners provide receipts from the sale of handicrafts that have been approved for sales by the Director as constituting authentic American Indian, Alaska Native, Native Samoan, or Native Hawaiian handicrafts. The regulation was changed to incorporate these recommendations.

The second comment, from the Department's Office of the Solicitor, Division of Indian Affairs, asked that we use the term Alaska Native instead of Alaskan Native or Native Alaskan. It was felt that Native Alaskan was a broader term that included more than those intended to benefit by this rule. The term Native Alaskan would include all people born in Alaska.

In accordance with the criteria in Executive Order 12866, the Office of Management and Budget makes the final determination as to the significance of this regulatory action and it has determined that this document is not a significant rule and is not subject to review as:

(1) This rule will not have an effect of $100 million or more on the economy. It will not adversely affect in a material way the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities.

(2) This rule will not create a serious inconsistency or otherwise interfere with an action taken or planned by another agency.

(3) This rule does not alter the budgetary effects or entitlements, grants, user fees, or loan programs or the rights or obligations of their recipients.

(4) This rule does not raise novel legal or policy issues.

The Department of the Interior certifies that this document will not have a significant economic effect on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). If there is an effect it will be a positive effect by exempting revenue derived by the sales of Native American Handicraft from concession contract franchise fees.

This rule is not a major rule under 5 U.S.C. 804(2), the Small Business Regulatory Enforcement Fairness Act. This rule does not have an annual effect on the economy of $100 million or more; will not cause a major increase in costs or prices for consumers, individual entities, Federal, State, or local government agencies, or geographic regions; and does not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises. The effect of the rule is to establish definitions for the sale of native handicrafts in areas of the national park system.

This rule does not impose an unfunded mandate on State, local, or tribal governments or the private sector of more than $100 million per year. The rule does not have a significant or unique effect on State, local or tribal governments or the private sector.

In accordance with Executive Order 12360, this rule does not have significant takings implications. A takings assessment is not required.

In accordance with Executive Order 13132, this rule does not have sufficient federalism implications to warrant the preparation of a federalism assessment. The rule imposes no requirements on any governmental entity other than NPS.

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

This rule does not require an information collection from 10 or more parties. Accordingly, a submission under the Paperwork Reduction Act is not required. An OMB form 83-I is not required.

This rule does not constitute a major Federal action affecting the quality of the human environment. A detailed statement under the National Environment Policy Act is not required. The rule will not increase public use of park areas, introduce non-compatible uses into park areas, conflict with adjacent land ownerships or land uses, or cause a nuisance to property owners or occupants adjacent to park areas. Accordingly, this rule is categorically excluded from procedural requirements of the National Environmental Policy Act by 516 DM 12.5(A)(10). 7.4A(10).

In accordance with Executive Order 13175 “Consultation and Coordination With Indian Tribal Governments” (65 FR 67249), the President's memorandum of April 29, 1994, “Government-to-Government Relations With Native American Tribal Governments” (59 FR 22951) and 512 DM 2, we have evaluated potential effects on federally recognized Indian tribes and have determined that there are no potential effects on the tribes.

Executive Order 12866 requires each agency to write regulations that are easy to understand. We invite your comments on how to make this rule easier to understand, including answers to questions such as the following: (1) Are the requirements in the rule clearly stated? (2) Does the rule contain technical language or jargon that interferes with its clarity? (3) Does the format of the rule (grouping and order of sections, use of headings, paragraphing, etc.) aid or reduce its clarity? (4) Would the rule be easier to read if it were divided into more (but shorter) sections? (A “section” appears in bold type and is preceded by the symbol “§ ” and a numbered heading; for example § 7.XX .........) (5) Is the description of the rule in the “Supplementary Information” section of the preamble helpful in understanding the proposed rule? What else could we do to make the rule easier to understand?

Send a copy of any comments that concern how we could make this rule easier to understand to: Office of Regulatory Affairs, Department of the Interior, Room 7229, 1849 C Street, NW., Washington, DC 20240. You may also e-mail the comments to this address: Exsec@ios.doi.gov.

Drafting Information: The principal contributors to this final rule were: Jo Pendry, Chief Concession Program, WASO; Judy Bassett, Concession Policy Analyst, WASO; Meridith Stanton, Director, and Jill Moran, Program Specialist, IACB, and Jerry Case, Regulations Program Manager, WASO.

In the following, whenever “we,” “us,” or “our” are used, we mean the United States Environmental Protection Agency.

The Clean Air Act (CAA) requires EPA to designate as nonattainment any area that is violating the 8-hour ozone NAAQS based on three consecutive years of air quality monitoring data. EPA designated Youngstown, Ohio as a nonattainment area in a Federal Register notice published on April 30, 2004, (69 FR 23857). At the same time EPA classified the area as a subpart 1 8-hour ozone nonattainment area, based on air quality monitoring data from 2001-2003.

On February 15, 2007, the Ohio EPA submitted a request to redesignate its portion of the Youngstown area to attainment for the 8-hour ozone standard. The redesignation request included three years of complete, quality-assured data for the period of 2004 through 2006, indicating the 8-hour NAAQS for ozone had been achieved. The data satisfy the CAA requirements for attainment when the 3-year average of the annual fourth-highest daily maximum 8-hour average ozone concentration is less than or equal to 0.08 ppm. Under the CAA, nonattainment areas may be redesignated to attainment if sufficient complete, quality-assured data are available for the Administrator to determine that the areas have attained the standard and the areas meet the other CAA redesignation requirements in section 107(d)(3)(E). The April 18, 2007, proposed rule (72 FR 19435) provides a discussion of how the State of Ohio met these requirements for the Youngstown, Ohio area.

EPA provided a 30-day review and comment period on the April 18, 2007, proposed rule. EPA received no comments.

The United States Court of Appeals for the District of Columbia Circuit recently vacated EPA's April 30, 2004 “Final Rule to Implement the 8-Hour Ozone National Ambient Standard” (the Phase 1 implementation rule). South Coast Air Quality Management District v. EPA , No. 04-1200., 472 F.3d 882 (D.C. Cir. 2007). This court decision and EPA's interpretation of the decision was discussed in the proposed rule. No comments were received.

EPA is taking several related actions. EPA is making a determination that the Youngstown, Ohio nonattainment area has attained the 8-hour ozone standard. EPA is approving Ohio's maintenance plan SIP revision for Mahoning, Trumbull and Columbiana counties (such approval being one of the CAA criteria for redesignation to attainment status). The Ohio maintenance plan, in conjunction with the Pennsylvania SIP, is designed to keep the area in attainment for ozone through 2018. Because Ohio has met these and other prerequisites for redesignation, EPA is approving the State's request to change the legal designation of the counties from nonattainment to attainment for the 8-hour ozone NAAQS. In addition, and supported by and consistent with the ozone maintenance plan, EPA is approving the 2009 and 2018 volatile organic compounds (VOC) and oxides of nitrogen (NO X ) MVEBs for the Ohio counties for transportation conformity purposes. The 2009 motor vehicle emission budgets are 19.58 tons per day for VOCs and 33.71 tons per day for NO X . For 2018 the budgets are 10.36 tons per day for VOC and 13.29 tons per day for NO X .

EPA finds that there is good cause for these actions to become effective immediately upon publication because a delayed effective date is unnecessary due to the nature of a redesignation to attainment, which relieves the area from certain CAA requirements that would otherwise apply to it. The immediate effective date for this action is authorized under both 5 U.S.C. 553(d)(1), which provides that rulemaking actions may become effective less than 30 days after publication if the rule “grants or recognizes an exemption or relieves a restriction” and section 553(d)(3) which allows an effective date less than 30 days after publication “as otherwise provided by the agency for good cause found and published with the rule.” The purpose of the 30-day waiting period prescribed in 553(d) is to give affected parties a reasonable time to adjust their behavior and prepare before the final rule takes effect. Today's rule, however, does not create any new regulatory requirements such that affected parties would need time to prepare before the rule takes effect. Rather, today's rule relieves the State of planning requirements for these 8-hour ozone nonattainment areas. For these reasons, EPA finds good cause under 5 U.S.C. 553(d)(3) for these actions to become effective on the date of publication of these actions.

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

Because it is not a “significant regulatory action” under Executive Order 12866 or a “significant energy action,” this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001).

This action merely approves state law as meeting Federal requirements and imposes no additional requirements beyond those imposed by state law. Redesignation of an area to attainment under section 107(d)(3)(E) of the Clean Air Act does not impose any new requirements on small entities. Redesignation is an action that affects the status of a geographical area and does not impose any new regulatory requirements on sources. Accordingly, the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ).

Because this rule approves pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4).

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

This action also does not have Federalism implications because it does not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). Redesignation is an action that merely affects the status of a geographical area, and does not impose any new requirements on sources, or allows a state to avoid adopting or implementing additional requirements, and does not alter the relationship or distribution of power and responsibilities established in the Clean Air Act.

This rule also is not subject to Executive Order 13045 “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it approves a state rule implementing a Federal Standard.

In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. In this context, in the absence of a prior existing requirement for the state to use voluntary consensus standards (VCS), EPA has no authority to disapprove a SIP submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a SIP submission, to use VCS in place of a SIP submission that otherwise satisfies the provisions of the Clean Air Act. Redesignation is an action that affects the status of a geographical area but does not impose any new requirements on sources. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply.

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

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

Under Section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by August 13, 2007. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review, nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to force its requirements. (See Section 307(b)(2).)

The EPA is publishing this rule without a prior proposed rule because we view this as a non-controversial action and anticipate no adverse comment. None of the proposed changes creates additional regulatory requirements on affected entities compared to those that were promulgated in the final rule that was published in the Federal Register on October 17, 2006. However, in the “Proposed Rules” section of this Federal Register , we are publishing a separate document that will serve as the proposed rule to make corrections to the Ambient Air Monitoring Regulations if relevant adverse comments are received on one or more of the amendments in this direct final rule as described in sections VI.A. through VI.I of this preamble. We will not institute a second comment period on this action. Any parties interested in commenting must do so at this time. For further information about commenting on this rule, see the ADDRESSES section of this document. If EPA receives relevant adverse comment on one or more of the amendments included in this rulemaking, we will publish a timely withdrawal in the Federal Register indicating which amendment or amendments we are withdrawing. The provisions that are not withdrawn will become effective on the date set out above, notwithstanding any relevant adverse comment on any other provision.

Categories and entities potentially regulated by this action include:

This table is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be regulated by this action. This table lists the types of entities that EPA is now aware could potentially be regulated by this action. Other types of entities not listed in the table could also be regulated. To determine whether your facility or Federal, State, local, tribal, or territorial agency is regulated by this action, you should carefully examine the requirements for reference or equivalent method determinations in 40 CFR part 53, subpart A (General Provisions) and the applicability criteria in 40 CFR 51.1 of EPA's requirements for State Implementation Plans (SIPs). If you have questions regarding the applicability of this action to a particular entity, consult the person listed in the preceding FOR FURTHER INFORMATION CONTACT section.

Under section 307(b)(1) of the Clean Air Act (CAA), judicial review of the direct final rule amendments is available only by filing a petition for review in the U.S. Court of Appeals for the District of Columbia by August 13, 2007. Under section 307(d)(7)(B) of the CAA, only an objection to the direct final rule amendments that was raised with reasonable specificity during the period for public comment can be raised during judicial review. Moreover, under section 307(b)(2) of the CAA, the requirements established by the direct final rule amendments may not be challenged separately in any civil or criminal proceedings brought by EPA to enforce these requirements.

The EPA rules for ambient air monitoring are authorized under sections 110, 301(a), and 319 of the CAA. Section 110(a)(2)(B) of the CAA requires that each SIP provide for the establishment and operation of devices, methods, systems, and procedures needed to monitor, compile, and analyze data on ambient air quality and for the reporting of air quality data to EPA. Section 103 authorizes, among others, research and investigations relating to the causes, effects, extent, prevention and control of air pollution. Section 301(a) of the CAA authorizes EPA to develop regulations needed to carry out EPA's mission and establishes rulemaking requirements. Uniform criteria to be followed when measuring air quality and provisions for daily air pollution index reporting are required by CAA section 319.

On October 17, 2006 (71 FR 61236), EPA amended the rules for ambient air monitoring of criteria pollutants. The rule amendments established limited ambient air monitoring requirements for particles between 2.5 and 10 micrometers (μm) in diameter (PM 10- 2.5 ) to support continued research into these particles' distribution, sources, and health effects. The rule amendments required each State to operate one to three “NCore” monitoring stations that will take an integrated, multipollutant approach to ambient air monitoring. In addition, the rule amendments modified the general monitoring network design requirements for minimum numbers of ambient air monitors to focus on populated areas with air quality problems and to reduce significantly the requirements for criteria pollutant monitors that have measured ambient air concentrations well below the applicable National Ambient Air Quality Standards. The rule amendments also revised certain provisions regarding monitoring network descriptions and periodic assessments, quality assurance, and data certifications. A number of the amendments related specifically to monitoring of fine particles (referring to particles less than or equal to 2.5 μm in diameter, PM 2.5 ), revising the requirements for reference and equivalent method determinations (including specifications and test procedures) for fine particle monitors.

EPA is taking the following actions:

• Correcting a statement in the regulatory text pertaining to the potential comparability of data collected from Special Purpose Monitors (SPM) with approved alternative quality assurance plans to the National Ambient Air Quality Standards (NAAQS).

• Correcting a statement in the preamble with regard to the requirement for collocating required continuous PM 2.5 monitors and clarifying associated regulatory text.

• Clarifying several ambiguous regulatory text passages pertaining to operating schedules for manual PM 2.5 samplers.

• Correcting a reference regarding standard versus daylight savings time.

• Restoring two instances of regulatory text that were inadvertently omitted from the network design for monitoring particles less than or equal to 10 μm in diameter (PM 10 ).

• Adding authority for the Regional Administrator, consistent with the authority that already exists for PM 2.5 and ozone, to allow monitoring agencies to deviate from PM 10 monitoring requirements.

• Updating an organizational address reference within regulatory text pertaining to quality assurance requirements.

• Clarifying the conditions when the EPA Regional Administrator is not required to offer a public comment opportunity prior to approving a State's annual monitoring network plan.

• Correcting numerous typographical errors in tables and equations.

The intent of 40 CFR 58.20(c) (published at 71 FR 61302) was to describe the conditions when data from an SPM using a Federal reference method (FRM), Federal equivalent method (FEM), or Approved Regional Method (ARM) which has operated for more than 24 months is eligible for comparison to the relevant NAAQS. The rule text states that all data from an SPM is eligible for comparison to the relevant NAAQS unless the data from the particular monitor came from a period when the requirements of appendix A to part 58 (Quality Assurance Requirements for SLAMS, SPMs, and PSD Air Monitoring) or an approved alternative, appendix C to part 58 (Ambient Air Quality Monitoring Methodology), or appendix E to part 58 (Probe and Monitoring Path Siting Criteria for Ambient Air Monitoring) were not met in practice. This text does not reflect EPA's actual intention. Instead, as discussed in the preamble (71 FR 61253), the intention of the October 17, 2006, final rule was that if the Regional Administrator approved an alternative quality assurance plan in place of the requirements of appendix A to part 58, the data from the affected SPM would not be eligible for comparison to the relevant NAAQS. The unintentional inclusion in the rule text of the phrase “or an approved alternative” implied that data from SPMs operating during a period when approved alternative quality assurance requirements were in effect, rather than appendix A requirements, would still be eligible for comparison to the relevant NAAQS.

The EPA provided the Regional Administrator with the authority to approve an alternative to the requirements of appendix A to part 58 with respect to SPM sites when meeting those requirements would be physically and/or financially impractical due to physical conditions at the monitoring site and the requirements were not essential to achieving the intended data objectives of the SPM site.

Therefore, EPA is clarifying the regulatory text by deleting the aforementioned words referencing alternative quality assurance plans. The corrected rule text 40 CFR 58.20(c) reads: “All data from an SPM using an FRM, FEM, or ARM which has operated for more than 24 months is eligible for comparison to the relevant NAAQS, subject to the conditions of § 58.30, unless the air monitoring agency demonstrates that the data came from a particular period during which the requirements of appendix A, appendix C, or appendix E to this part were not met in practice.”

The regulatory text in 40 CFR part 58, appendix D (Network Design Criteria for Ambient Air Quality Monitoring), section 4.7.2 (71 FR 61322) describes the minimum requirements for operating continuous PM 2.5 analyzers. 1 The text requires States to operate a minimum number of continuous PM 2.5 analyzers equal to at least one-half (round up) the minimum required FRM/FEM/ARM PM 2.5 sites listed in Table D-5 of appendix D to part 58. At least one required FRM/FEM/ARM PM 2.5 monitor in each MSA must be collocated with a continuous analyzer. For example, if a MSA had three required FRM/FEM/ARM PM 2.5 monitors, then two continuous monitors are required, and at least one of those continuous monitors must be collocated (placed at the same site) with one of the FRM/FEM/ARM PM 2.5 monitors. The second required continuous monitor could be collocated with one of the remaining two required FRM/FEM/ARM PM 2.5 monitors at another site, or be located at a separate site based on monitoring objectives. The EPA did not intend that the continuous analyzers required under section 4.7.2 be required to be collocated with each other.

The October 17, 2006, rule text matches our intended meaning. However, when referencing this rule requirement in the preamble (71 FR 61263), EPA incorrectly stated that the collocation requirement was adopted to address concerns about whether required continuous monitors needed to be collocated with a matching second continuous monitor, and that the final rule only required one of all the required PM 2.5 continuous monitors in each MSA to have “such a collocated match.” This unintentional statement could be construed as a requirement for collocating two continuous monitors with each other, in addition to the requirement for collocation with at least one required FRM/FEM/ARM monitor, leading to the conclusion that EPA was requiring three PM 2.5 monitors (two continuous, one filter-based) at the first required site, subject to the requirements of section 4.7.2. Moreover, it was not our intention to require a second continuous monitor be sited with an FEM or ARM that itself provides continuous data.

Therefore, EPA is clarifying the regulatory text to make clear the intentions described above. The EPA is also clarifying that an associated reference to quality assurance/quality control procedures refers to the continuous monitoring requirement by adding the words “for these required continuous analyzers.” The corrected provision of 40 CFR part 58, appendix D, section 4.7.2 now reads: “Requirement for Continuous PM 2.5 Monitoring. The State, or where appropriate, local agencies must operate continuous PM 2.5 analyzers equal to at least one-half (round up) the minimum required sites listed in Table D-5 of this appendix. At least one required continuous analyzer in each MSA must be collocated with one of the required FRM/FEM/ARM monitors, unless at least one of the required FRM/FEM/ARM monitors is itself a continuous FEM or ARM monitor, in which case no collocation requirement applies. State and local air monitoring agencies must use methodologies and quality assurance/quality control (QA/QC) procedures approved by the EPA Regional Administrator for these required continuous analyzers.”

The regulatory text in 40 CFR 58.12(d) (71 FR 61299) describes the required sampling frequency for manual filter-based PM 2.5 samplers. Manual PM 2.5 samplers at SLAMS stations must operate on at least a 1-in-3 day schedule at sites which do not also have a collocated continuously operating PM 2.5 monitor. For SLAMS PM 2.5 sites with both manual and continuous PM 2.5 monitors operating, other than NCore stations, monitoring agencies may request approval from the EPA Regional Administrator for a reduction to 1-in-6 day PM 2.5 sampling or for seasonal sampling. The EPA Regional Administrator may grant sampling frequency reductions after consideration of factors including, but not limited to, the historical PM 2.5 data quality assessments, the location of current PM 2.5 design value sites, and the regulatory data needs of States and EPA. The regulatory text provides specific criteria under which a manual PM 2.5 sampler at a SLAMS station cannot be exempted by the Regional Administrator from at least 1-in-3 day sampling, and also includes a separate provision describing when a daily sampling schedule is required. The textual length of 40 CFR 58.12(d)(1) as well as the specific wording of certain statements could create difficulty in understanding the intended operating schedule requirements for manual PM 2.5 samplers. Therefore, EPA is clarifying 40 CFR 58.12(d)(1) as described below.

The first sentence of 40 CFR 58.12(d)(1) stated that: “Manual PM 2.5 samplers at SLAMS stations other than NCore stations must operate on at least a 1-in-3 day schedule at sites without a collocated continuously operating PM 2.5 monitor.” This statement could be construed as meaning that manual PM 2.5 samplers at NCore stations were not required to maintain at least a 1-in-3 day schedule. The rule in fact does require manual PM 2.5 samplers at NCore stations to maintain at least a 1-in-3 day sampling schedule, as later noted in 40 CFR 58.12(d)(2), and these samplers are not eligible for sampling frequency relief. Therefore, EPA is clarifying the rule text by deleting the phrase “other than NCore stations” from first sentence of 40 CFR 58.12(d)(1).

Another potential ambiguity regarding the 1-in-3 day sampling frequency provision of 40 CFR 58.12(d)(1) is its geographic applicability. Since the regulatory language did not specify that the 1-in-3 day sampling frequency requirement be applied only in areas in which PM 2.5 monitoring is required, this requirement could be interpreted as applying to any manual PM 2.5 sampler within a State that recorded the highest design value “in an area” whether or not any PM 2.5 monitors were even required in that area according to 40 CFR part 58, appendix D. The EPA is concerned that such an interpretation would create a disincentive to monitoring by potentially requiring States that operated discretionary SLAMS monitors to sample on a 1-in-3 day frequency even though the monitor was in excess of minimum monitoring requirements. Therefore, the first sentence of 40 CFR 58.12(d)(1)(i) is amended to read: “Manual PM 2.5 samplers at required SLAMS stations without a collocated continuously operating PM 2.5 monitor must operate on at least a 1-in-3 day schedule.” In this rule text, “required SLAMS stations” refers to minimum monitoring requirements as specified in 40 CFR part 58, appendix D, section 4.7. It does not include SPMs; therefore SPMs are not required to sample on a 1-in-3 day schedule.

After stating the 1-in-3 day sampling requirement, the rule text at 40 CFR 58.12(d)(1)(ii) goes on to allow the Regional Administrator to grant a reduction of this schedule to 1-in-6 day for SLAMS PM 2.5 sites with both manual and continuous PM 2.5 monitors operating. In this context, the rule text contains a duplicated reference to SLAMS PM 2.5 sites; the second reference, “at SLAMS stations,” is removed in the corrected rule language since the opening part of the sentence already states the applicability of the provision to SLAMS PM 2.5 sites. The text goes on to describe two situations in which a manual PM 2.5 sampler at a required SLAMS station could not be granted sampling frequency relief by the Regional Administrator from the minimum 1-in-3 day sampling schedule. In the first situation, the phrase: “Sites that have design values that are within plus or minus 10 percent of the NAAQS” could be construed as applying to all sites within a particular area that have design values that are within plus or minus 10 percent of the NAAQS, when the intention was to apply the provision only to the site with the highest value in a particular area calculated in accordance with 40 CFR part 50, appendix N (Interpretation of the National Ambient Air Quality Standards for PM 2.5 ). 2 In the second situation, the phrase: “and sites where the 24-hour values exceed the NAAQS for a period of 3 years are required to maintain at least a 1-in-3 day sampling frequency” created ambiguity about whether the provision was applicable in situations where a single 24-hour value exceeded the NAAQS at a particular site during only 1 or 2 years of a 3-year period. The EPA's intention was that at least one 24-hour value had to exceed the NAAQS in each of the years comprising the 3-year period situation for the provision to apply.

Also, the regulatory text could be construed as requiring 1-in-3 day manual PM 2.5 sampling at all sites within a particular area that have design values within the plus or minus 10 percent criteria, regardless of whether the site is required and regardless of the potential availability of continuous PM 2.5 FEM or ARM monitors which inherently would provide every-day data eligible for comparison to the NAAQS. The EPA anticipates the increasing availability of approved FEM and ARM methods over the next few years, and expects that many such approved continuous monitors will be deployed at sites formerly dedicated to manual filter-based FRM or FEM PM 2.5 samplers, including design value sites subject to the plus or minus 10 percent criteria when compared with the 24-hour PM 2.5 NAAQS. The EPA supports the deployment of approved FEM or ARM continuous PM 2.5 methods to meet appropriate monitoring objectives as such monitors become available, and thus we did not intend to require 1-in-3 day sampling utilizing manual PM 2.5 methods at design value sites, or any other sites, where monitoring agencies have deployed an approved continuous FEM or ARM.

The clarified language of the restriction related to being within plus or minus 10 percent of the NAAQS now reads: “Required SLAMS stations whose measurements determine the design value for their area and that are within plus or minus 10 percent of the NAAQS, and all required sites where one or more 24-hour values have exceeded the NAAQS each year for a consecutive period of at least 3 years, are required to maintain at least a 1-in-3 day sampling frequency. A continuously operating FEM or ARM PM 2.5 monitor satisfies this requirement.”

At the end of 40 CFR 58.12(d)(1), EPA specified that manual PM 2.5 samplers at sites that have a design value within plus or minus 5 percent of the daily PM 2.5 NAAQS must have an FRM or FEM operate on a daily schedule. As with the previously discussed phrasing in the context of the 1-in-3 day sampling requirement, this text could be construed as applying to all sites within a particular area that have design values that are within plus or minus 5 percent of the NAAQS, when the intention was to apply the provision only to the required SLAMS site with the highest value in a particular area. Also, the above described concern regarding the acceptability of continuous PM 2.5 analyzers applies in the case of this plus or minus 5 percent criterion, and a similar clarification to the rule text is appropriate.

Therefore, EPA is clarifying 40 CFR 58.12(d)(1) and for purposes of clarity is adding subparagraph (iii). It will read: “Required SLAMS sites whose measurements determine the design value for their area and that are within plus or minus 5 percent of the daily PM 2.5 NAAQS must have an FRM or FEM operate on a daily schedule. A continuously operating FEM or ARM PM 2.5 monitor satisfies this requirement.”

The EPA notes that only population-oriented monitors are subject to the previously described percent-dependent sampling frequency requirements. In 40 CFR 58.30 (Special Considerations for Data Comparisons to the NAAQS), sites must be population-oriented to be comparable to either the annual or daily PM 2.5 NAAQS. By implication, design value sites must be NAAQS comparable, therefore non-population oriented sites would not be affected by the plus or minus 10 percent or plus or minus 5 percent provisions.

As previously mentioned, EPA is aware that the length of 40 CFR 58.12(d)(1) creates the potential for ambiguity in the applicability of individual provisions related to sampling frequency requirements. To clarify the applicability of such provisions, EPA has restructured 40 CFR 58.12(d)(1) to create distinct paragraphs encompassing the previously described amended language applicable to SLAMS sites without continuously operating PM 2.5 monitors (now numbered 40 CFR 58.12(d)(1)(i)), SLAMS sites with both manual and continuous PM 2.5 monitors (now numbered 40 CFR 58.12(d)(1)(ii)), and design value sites within plus or minus 5 percent of the daily PM 2.5 NAAQS (now numbered 40 CFR 58.12(d)(1)(iii)).

In 40 CFR 58.12(d)(3), manual PM 2.5 speciation samplers at required Speciation Trends Network (STN) stations are required to operate on a1-in-3 day sampling frequency. The EPA intended the 1-in-3 day sampling frequency to be a minimum sampling frequency and not to imply a prohibition against a more frequent sampling frequency, such as a daily sampling frequency, if such a frequency is appropriate for specific monitoring objectives. Consistent with the phraseology of sampling frequency requirements elsewhere in the regulatory text, EPA is correcting the aforementioned phrase to read: “Manual PM 2.5 speciation samplers at STN stations must operate on at least a1-in-3 day sampling frequency.”

40 CFR 58.12(e) requires that the operating schedule for PM 10 samplers must be a 24-hour sampling period taken from midnight to midnight (local time) to ensure national consistency. In a 1999 EPA memorandum, 3 the use of standard time versus daylight savings time is discussed in the context of sample collection for particulate matter monitors, concluding with the recommendation that monitoring agencies operate their particulate matter sampler clocks on standard time to avoid the semi-annual time-shift issues associated with conversion between standard time and daylight savings time. Monitoring agencies have generally adopted the practice of keeping their particulate matter sampler clocks on standard time since the issuance of the 1999 memorandum. It was EPA's intention to codify the practice of keeping particulate matter clocks on standard time in the October 17, 2006, Revisions to the Ambient Monitoring Regulations; however, the codifying rule text was inadvertently omitted for PM 10 . 4 If the aforementioned 40 CFR 58.12(e) reference to PM 10 operating schedule is left uncorrected, this could create inconsistent interpretation of the standard versus daylight savings time issue among monitoring agencies causing unnecessary confusion in the interpretation of the air quality data.

Therefore, EPA is correcting the reference to PM 10 operating schedules in 40 CFR 58.12(e) to read as follows: “For PM 10 samplers, a 24-hour sample must be taken from midnight to midnight (local standard time) to ensure national consistency.”

In the preamble to the final monitoring rule (71 FR 61240), EPA stated an intention to retain the pre-existing minimum monitoring network design requirements for PM 10 , which are based on the population of an MSA and its historical PM 10 air quality. The EPA's intention in finalizing the regulatory text in section 4.6, Particulate Matter (PM 10 ) Design Criteria, of 40 CFR part 58, appendix D (Network Design Criteria for Ambient Air Quality Monitoring) (71 FR 61320) was to retain all PM 10 -relevant portions of the pre-existing regulatory text beginning with section 3.7, Particulate Matter Design Criteria for NAMS (see 62 FR 38820, July 18, 1997), with only minor changes necessary to maintain consistency of monitor type terminology (e.g., to eliminate obsolete references to National Air Monitoring Stations (NAMS)). The EPA inadvertently omitted several passages from the pre-existing regulatory text in section 3.7 referencing PM 10 network design criteria. If left uncorrected, these omissions could lead to misinterpretation of PM 10 monitoring network design requirements. Three specific textual corrections are detailed below.

First, in Table D-4, PM 10 Minimum Monitoring Requirements (Number of Stations per MSA), the word “Approximate” which had appeared in the title of the pre-existing Table 4 was omitted. Therefore, in order to retain the earlier language EPA is revising the title of Table D-4 to read: “PM 10 Minimum Monitoring Requirements (Approximate Number of Stations Per MSA).”

Second, the first footnote contains some words (“within the ranges shown in this table”) that were not part of the corresponding footnote to the pre-existing Table 4. Therefore, the first footnote is revised to read: “Selection of urban areas and actual numbers of stations per area will be jointly determined by EPA and the State Agency.”

Third, in paragraph (a) of section 4.6, the regulatory text notes that State, and where applicable local, agencies must operate the minimum number of required PM 10 SLAMS sites listed in Table D-4 of appendix D. In the October 17, 2006, rulemaking, EPA intended to retain all of the pre-existing regulatory text in the pre-existing paragraph 3.7.1 (as last promulgated on July 18, 1997, at 62 FR 38850) in new paragraph (a) of new section 4.6, to explain in words the flexibility in minimum PM 10 monitoring requirements as provided in the pre-existing Table 4 which had listed ranges of required numbers (rather than a single number) of monitors for each of the categories of MSA population and historical PM 10 range. This regulatory text was inadvertently omitted. Therefore, EPA is restoring the omitted text and correcting paragraph (a) of section 4.6 to read: “Table D-4 indicates the approximate number of permanent stations required in MSAs to characterize national and regional PM 10 air quality trends and geographical patterns. The number of PM 10 stations in areas where MSA populations exceed 1,000,000 must be in the range from 2 to 10 stations, while in low population urban areas, no more than 2 stations are required. A range of monitoring stations is specified in Table D-4 because sources of pollutants and local control efforts can vary from one part of the country to another and, therefore, some flexibility is allowed in selecting the actual number of stations in any one locale.”

We are amending the monitoring rule to allow EPA Regional Administrators to approve departures from the minimum number of PM 10 monitors otherwise specified in the rule.

In the January 17, 2006, proposed monitoring rule (71 FR 2802), EPA proposed minimum network design monitoring requirements for PM 10-2.5 . In paragraph (b) of section 4.8.1 of 40 CFR part 58, appendix D, (Network Design Criteria for Ambient Air Quality Monitoring), EPA proposed that modifications from the PM 10-2.5 monitoring requirements must be approved by the Regional Administrator. The proposed regulatory language providing the Regional Administrator flexibility to modify the PM 10-2.5 monitoring requirements was consistent with similar language proposed for PM 2.5 that read: “Deviations from these PM 2.5 monitoring requirements must be approved by the EPA Regional Administrator” (71 FR 2801, paragraph (b) of section 4.7.1). Similar regulatory language was proposed for ozone monitoring requirements (71 FR 2798, paragraph (b) of section 4.1): “Deviations from the above O 3 requirements are allowed if approved by the EPA Regional Administrator.” The EPA finalized the Regional Administrator authority to modify the PM 2.5 and ozone monitoring requirements in the October 17, 2006, rule following a public comment period in which no adverse comments were received about the specific provisions concerning Regional Administrator flexibility in applying these regulations.

The EPA did not adopt the proposed PM 10-2.5 minimum monitoring network design including the Regional Administrator flexibility language. The EPA notes, however, that no adverse comments were received specifically addressing the proposed Regional Administrator authority to modify PM 10-2.5 monitoring network requirements although voluminous comment was received on other proposed provisions of the PM 10-2.5 monitoring network design and accompanying suitability test.

The EPA also proposed and adopted requirements for “NCore” multipollutant monitoring sites, including a provision allowing the Administrator to approve modifications from these requirements. Again, no adverse comment was received on this modification provision. Finally, specific requirements in the rule for photochemical assessment monitoring stations (PAMS) have always been modifiable by the Administrator.

Thus, EPA notes that under the current 40 CFR part 58, appendix D network design requirements, PM 10 is the only pollutant with minimum monitoring requirements not subject to modification based on either Administrator or Regional Administrator evaluation and approval. Such flexibility, already finalized for ozone and PM 2.5 , can prove useful in particular cases where a State demonstrates that meeting the minimum monitoring requirements, for an individual MSA for example, may be impractical or contrary to the optimum use of monitoring resources.

The EPA believes it is appropriate to allow the Regional Administrator to modify PM 10 monitoring requirements, for the same reasons such authority was finalized for PM 2.5 and ozone monitoring requirements. Such authority allows for specific local factors and information can be considered in order to make the PM 10 monitoring network more economical while still meeting program data needs. In light of the absence of any comments of concern regarding very similar Administrator or Regional Administrator authority for other pollutants, we do not expect any adverse comment on this action. Therefore, EPA is amending paragraph (a) of section 4.6 quoted in the section above and adding the following sentence so it now reads: “Modifications from these PM 10 monitoring requirements must be approved by the Regional Administrator.” See also section VI.E of this preamble for a clarifying amendment which also affects section 4.6 of appendix D to part 58 by restoring inadvertently omitted text.

The October 17, 2006, final rule provided an address reference in paragraph 2.4 of 40 CFR part 58 appendix A, to assist with communications regarding the National Performance Evaluation Programs. Monitoring agencies were advised to contact either the appropriate EPA Regional Quality Assurance (QA) Coordinator at the appropriate EPA Regional Office location, or the NPAP Coordinator, Emissions Monitoring and Analysis Division (D205-02), U.S. Environmental Protection Agency, Research Triangle Park, NC 27711. Due to a reorganization within the Office of Air Quality Planning and Standards and subsequent physical relocation within the North Carolina facility, the provided address mail code (D205-02) is no longer correct for quality assurance related communications. Additionally, the Emissions Monitoring and Analysis Division has been renamed to the Air Quality Assessment Division, as part of the same reorganization. Due to the possibility of future address changes, EPA believes a more general reference to quality assurance contact information is appropriate for inclusion in regulatory language. Updated contact information for all air monitoring program leads is maintained on the Ambient Monitoring Technology Information Center (AMTIC) Web site http://www.epa.gov/ttn/amtic/contacts.html. This website is well publicized and frequently accessed by all monitoring agencies; therefore, specific address entries in the rule are unnecessary and potentially misleading. Accordingly, EPA is amending the regulatory text in paragraph 2.4 to read: “For clarification and to participate, monitoring organizations should contact either the appropriate EPA Regional Quality Assurance (QA) Coordinator at the appropriate EPA Regional Office location, or the NPAP Coordinator at the Air Quality Assessment Division, Office of Air Quality Planning and Standards, U.S. Environmental Protection Agency in Research Triangle Park, North Carolina.”

The regulatory text in 40 CFR 58.10(a)(2) (71 FR 61298) describes the approval process for State-submitted annual monitoring network plans that propose SLAMS network modifications. Such plans are subject to the approval of the Regional Administrator, including a new requirement for the Regional Administrator to provide opportunity for public comment during the 120-day period allowed for approval or disapproval. The rule permits the Regional Administrator to waive the separate public comment opportunity if the State or local agency has already provided a public comment opportunity on its plan and has made no changes to the plan subsequent to that comment opportunity.

Implied but not explicitly stated in the regulatory language is that the Regional Administrator may forgo public comment only if the State or local agency submitted the full text of public comments received on its annual monitoring network plan to the Regional Administrator, because only the availability of such detailed comments would make a separate comment period by the Regional Administrator redundant.

The EPA believes that the aforementioned regulatory language should be clarified to avoid ambiguity about what situations would require the Regional Administrator to provide a public comment opportunity on submitted annual monitoring network plans that contain SLAMS network modifications. The EPA notes that the clarification does not modify the minimum requirements for State and local agencies to make their plans available for public inspection for at least 30 days prior to submission to EPA.

Accordingly, the clarified regulatory text in the second sentence of 40 CFR 58.10(a)(2) reads: “If the State or local agency has already provided a public comment opportunity on its plan and has made no changes subsequent to that comment opportunity, and has submitted the received comments together with the plan, the Regional Administrator is not required to provide a separate opportunity for comment.”

Such comments could be transmitted to the Regional Administrator in hard-copy or electronic format, and at a minimum, would include all relevant information supplied to the State or local agency by the commenters. Monitoring agencies would not be expected to provide comment summaries or comment responses, although those submissions could optionally be provided to the Regional Administrator in addition to the actual text of the received comments.

The Federal Register printing of the October 17, 2006, final rule contained typographical errors in equations, tables, and figures. These errors, as explained below and listed by Federal Register page reference and CFR section number, are corrected in this rulemaking.

• 71 FR 61284. Subpart C of Part 53—§ 53.35(d)(4), Calculation of mean concentrations. Equation 12: The “n” over the summation symbol is replaced with “m.”

• 71 FR 61284. Subpart C of Part 53—§ 53.35(e) and § 53.35(f), Tests for reference method and candidate method precision. Equations 13 and 15: 100% is moved to be outside the square root symbol.

• 71 FR 61284. Subpart C of Part 53—§ 53.35(g), Test for additive and multiplicative bias (comparative slope and intercept). Equation 17: Left part of equation is changed to be R not R j .

• 71 FR 61284. Subpart C of Part 53—§ 53.35(h), Tests for comparison correlation. Equation 21: Radical sign in the denominator is extended to cover both summation signs.

• 71 FR 61285. Table C-1 to Subpart C of Part 53, Test Concentration Ranges, Number of Measurements Required, and Maximum Discrepancy Specification. The four occurrences of “Total” in the first column are moved to the second column.

• 71 FR 61285. Table C-1 to Subpart C of Part 53, Test Concentration Ranges, Number of Measurements Required, and Maximum Discrepancy Specification. Two entries of “18” are moved 3 columns left to appear in the “Second Set” column rather than as shown in the right-most column.

• 71 FR 61285. Table C-4 to Subpart C of Part 53—Test Specifications for PM 10 , PM 2.5 and PM 10-2.5 Candidate Equivalent Methods. An erroneous “R” character in the table title is removed so that the title reads—Test Specifications for PM 10 , PM 2.5 and PM 10-2.5 Candidate Equivalent Methods.

• 71 FR 61286. Table C-4 to Subpart C of Part 53—Test Specifications for PM 10 , PM 2.5 and PM 10-2.5 Candidate Equivalent Methods. In the column header for the last 2 columns, the “PM 10-2.5 ” is corrected to be “PM 10-2.5 ”.

• 71 FR 61286. Table C-4 to Subpart C of Part 53—Test Specifications for PM 10 , PM 2.5 and PM 10-2.5 Candidate Equivalent Methods. The horizontal line under “R j > 60 μg/m3” in the table is removed.

• 71 FR 61286. Table C-4 to Subpart C of Part 53—Test Specifications for PM 10 , PM 2.5 and PM 10-2.5 Candidate Equivalent Methods. In the first column, in the “Precision of replicate reference method measurements * * *” entry, the “prime” symbols are removed from “RP Rj ” and “PM 10-2.5 ”.

• 71 FR 61286. Table C-4 to Subpart C of Part 53—Test Specifications for PM 10 , PM 2.5 and PM 10-2.5 Candidate Equivalent Methods. An unintended period is removed at the end of the entry in the last column, Intercept row, and at the end of the second footnote.

• 71 FR 61286. Table C-4 to Subpart C of Part 53—Test Specifications for PM 10 , PM 2.5 and PM 10-2.5 Candidate Equivalent Methods. Values for correlation of reference method and candidate method measurements for PM 2.5 Class II and III, and PM 10-2.5 Class II and III are added to all four columns:

• 71 FR 61287. Figure C-1 to Subpart C of Part 53—Suggested Format for Reporting Test Results for Methods for SO 2 , CO, O 3 , NO 2 . Title and the first lines of content are repositioned from being section text to being proper parts of Figure C-1.

• 71 FR 61287. Figures C-2 and C-3 to Subpart C of Part 53—Illustration of the Slope and Intercept Limits for Class II and Class III PM 2.5 Candidate Equivalent Methods and Illustration of the Slope and Intercept Limits for Class II and Class III PM 10-2.5 Candidate Equivalent Methods. “PM 2.5 ” is changed to “PM 2.5 ,” “PM 10-2.5 ” is changed to “PM 10-2.5 ,” “μg/m3” is changed to “μg/m 3 .” Also, the “Class II” and “Class III” labels are related by arrows to the outline of the hexagons rather than the area inside, to be consistent with the title, which indicates “Acceptance Limits.”

• 71 FR 61289. Figure C-4 to Subpart C of Part 53—Illustration of the Minimum Limits for Correlation Coefficient for PM 2.5 and PM 10-2.5 Class II and III methods. In the axes labels, the commas are deleted and the “r” and the “CCV” are placed within parentheses.

• 71 FR 61293. Subpart E of Part 53—§ 53.58(g), Operational field precision and blank test. Equation 26: the symbol “C 1,j ” is corrected to “C i,j .”

• 71 FR 61294. Table E-1 to Subpart E of Part 53—Summary of Test Requirements for Reference and Class I Equivalent Methods for PM 2.5 and PM 10-2.5 . In the 3rd column, row identified as “§ 53.56* * *,” a comma is added after “16.67 ± 5%” and before “L/min.”

• 71 FR 61294. Table E-1 to Subpart E of Part 53—Summary of Test Requirements for Reference and Class I Equivalent Methods for PM 2.5 and PM 10-2.5 . In the 3rd column, row identified as “§ 53.57* * *,” one of the two periods at the end of item 3 is removed.

• 71 FR 61294. Table E-1 to Subpart E of Part 53—Summary of Test Requirements for Reference and Class I Equivalent Methods for PM 2.5 and PM 10-2.5 . In the fourth column, row identified as “§ 53.57* * *,” item (c) is changed to read “Solar flux of 1000 ± 50 W/m 2 ” not “Solar flux of 1000 ? 50 W/m 2 .”

• 71 FR 61294. Table E-1 to Subpart E of Part 53—Summary of Test Requirements for Reference and Class I Equivalent Methods for PM 2.5 and PM 10-2.5 . Spurious “?” characters throughout the table are removed.

• 71 FR 61294. Table E-1 to Subpart E of Part 53—Summary of Test Requirements for Reference and Class I Equivalent Methods for PM 2.5 and PM 10-2.5 . § 53.56 cell reference, Barometric pressure effect test, Sample flow rate performance specification, value is changed to be 16.67 (versus 16.6).

• 71 FR 61296. Table F-1 to Subpart F of Part 53—Performance Specifications for PM 2.5 Class II Equivalent Samplers. In the last column, row identified as “§ 53.64,” “Dp 50 = 2.5 μm ? 0.2 μm” is changed to be “Dp 50 = 2.5 μm ± 0.2 μm.”

• 71 FR 61296. Table F-1 to Subpart F of Part 53—Performance Specifications for PM 2.5 Class II Equivalent Samplers. In the last column, last row, a comma is added after “0.15mg” and before “r ≥0.97.”

• 71 FR 61296. Table F-1 to Subpart F of Part 53—Performance Specifications for PM 2.5 Class II Equivalent Samplers. Spurious “?” characters throughout the table are removed.

• 71 FR 61300. Figure 1 to Subpart B of Part 58—Ratio to Standard for PM 10 Operating Schedule. A missing value (1.4) is added on the X axis.

• 71 FR 61309. Appendix A of Part 58—Quality Assurance Requirements for SLAMS, SPMs, and PSD Air Monitoring. Equation 7: A missing “•” character is added so that the equation reads: Lower Probability Limit = m-1.96 • S.

• 71 FR 61309. Appendix A of Part 58—Quality Assurance Requirements for SLAMS, SPMs, and PSD Air Monitoring. A missing minus sign is added in caption below Equation 11 so that it reads: a chi-squared distribution with n-1 degrees of freedom.

• 71 FR 61310. Appendix A of Part 58—Quality Assurance Requirements for SLAMS, SPMs, and PSD Air Monitoring. Equation 12: missing ellipsis is added in caption so that it reads: where, n j is the number of pairs and d 1 , d 2 , * * * dn j are the biases for each of the pairs to be averaged.

• “PM 10C ”, where it appears in Part 53 without a subscripted “C”, is replaced with “PM 10c .”

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is a “significant regulatory action” because it may raise novel legal policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order. Accordingly, EPA submitted this action to the Office of Management and Budget (OMB) for review under Executive Order 12866 and any changes made in response to OMB recommendations have been documented in the docket for this action.

This action does not impose any new information collection, as it only corrects printing errors, provides clarifications, and provides new flexibility for PM 10 monitoring on a case-by-case basis. However, the OMB has previously approved the information collection requirements contained in the existing regulations for 40 CFR part 53 and 40 CFR part 58 under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. , and has assigned OMB control number 2060-0084, EPA ICR number 0940.20. A copy of the OMB approved Information Collection Request (ICR) may be obtained from Susan Auby, Collection Strategies Division, U.S. Environmental Protection Agency (2822T), 1200 Pennsylvania Ave., NW., Washington, DC 20460 or by calling (202) 566-1672. This action does not impose any new information collection burden beyond the already-approved ICR.

Burden means the total time, effort, or financial resources expended by persons to generate, maintain, retain, or disclose or provide information to or for a Federal agency. This includes the time needed to review instructions; develop, acquire, install, and utilize technology and systems for the purposes of collecting, validating, and verifying information, processing and maintaining information, and disclosing and providing information; adjust the existing ways to comply with any previously applicable instructions and requirements; train personnel to be able to respond to a collection of information; search data sources; complete and review the collection of information; and transmit or otherwise disclose the information. An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for EPA's regulations in 40 CFR are listed in 40 CFR part 9.

The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions.

For purposes of assessing the impacts of today's rule on small entities, small entity is defined as: (1) A small business defined by the Small Business Administration's (SBA) regulations at 13 CFR 121.201; (2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.

After considering the economic impacts of today's final rule on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities.

This final rule will not impose any requirements on small entities. None of the corrections and clarifications creates additional regulatory requirements on affected entities compared to those that were promulgated in the final rule that was published in the Federal Register on October 17, 2006. The rule changes being made only correct printing errors, provide clarifications, and provides new flexibility for PM 10 monitoring on a case-by-case basis.

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

The EPA has determined that this final rule does not contain a Federal mandate that may result in expenditures of $100 million or more for State, local, and tribal governments, in the aggregate, or the private sector in any one year, because the changes being made are merely clarifications and corrections. Thus, today's rule is not subject to the requirements of sections 202 and 205 of the UMRA.

The EPA has determined that this final rule contains no regulatory requirements that might significantly or uniquely affect small governments. None of the changes creates additional regulatory requirements on affected entities compared to those that were promulgated in the final rule that was published in the Federal Register on October 17, 2006. The rule changes being made only correct printing errors, provide clarifications, and provide some new flexibility for PM 10 monitoring on a case-by-case basis. Therefore, this final rule is not subject to the requirements of section 203 of the UMRA.

Executive Order 13132 (64 FR 43255, August 10, 1999), requires EPA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in the Executive Order to include regulations that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.”

This final rule does not have federalism implications because it will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. This is because the changes being made only correct printing errors, provide clarifications, and provides some new flexibility for PM 10 monitoring on a case-by-case basis. Thus, Executive Order 13132 does not apply to this final rule.

Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000), requires EPA to develop an accountable process to ensure “meaningful and timely input by tribal officials in the development of regulatory policies that have tribal implications.” This final rule does not have tribal implications, as specified in Executive Order 13175. The EPA consulted with tribal officials early in the process of developing the October 17, 2006, rule to permit them to have meaningful and timely input into its development. Although tribal governments may elect to conduct ambient air monitoring, none of the changes in today's rule apply directly to tribal governments. Thus, Executive Order 13175 does not apply to this rule.

Executive Order 13045 “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997) applies to any rule that: (1) Is determined to be “economically significant” as defined under EO 12866, and (2) concerns an environmental health or safety risk that EPA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, the Agency must evaluate the environmental health or safety effects of the planned rule on children, and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by the Agency.

EPA interprets EO 13045 as applying only to those regulatory actions that concern health or safety risks, such that the analysis required under section 5-501 of the EO has the potential to influence the regulation. This final rule is not subject to EO 13045 because it does not establish an environmental standard intended to mitigate health or safety risks.

Executive Order 12898 (59 FR 7629, February 16, 1994) establishes federal executive policy on environmental justice. Its main provision directs Federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the United States.

EPA has determined that this final rule will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations because it does not affect the level of protection provided to human health or the environment. The rule merely amends the October 17, 2006, final monitoring rule (71 FR 61236) by correcting printing errors, providing clarifications, and providing some new flexibility for PM 10 monitoring on a case-by-case basis.

This rule is not a “significant energy action” as defined in Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution or Use” (66 FR 28355, May 22, 2001) because it is not likely to have a significant adverse effect on the supply, distribution, or use of energy. No significant change in the use of energy is expected because the total number of monitors for ambient air quality measurements will not increase above present levels. Further, we have concluded that this rule is not likely to have any adverse energy effects.

Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (“NTTAA”), Public Law No. 104-113, 12(d) (15 U.S.C. 272 note) directs EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies. The NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards.

This action does not involve technical standards, other than to make corrections and clarifications. Therefore, EPA did not consider the use of any voluntary consensus standards.

The Congressional Review Act, 5 U.S.C. 801, et seq. , as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of Congress and to the Comptroller General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . A major rule cannot take effect until 60 days after it is published in the Federal Register . This action is not “major rule” as defined by 5 U.S.C. 804(2). This final rule will not have an annual effect on the economy of $100 million or more, will not result in a major increase in costs or prices for State or local agencies, and will not affect competition with foreign-based enterprises in domestic and export markets. The final amendments will be effective on September 10, 2007.

Essential use allowances are allowances to produce or import certain ODSs in the U.S. for purposes that have been deemed “essential” by the U.S. Government and by the Parties to the Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol).

The Montreal Protocol is an international agreement aimed at reducing and eliminating the production and consumption 1 of ODSs. The elimination of production and consumption of Class I ODSs is accomplished through adherence to phase-out schedules for specific Class I ODSs, 2 which include CFCs, halons, carbon tetrachloride, and methyl chloroform. As of January 1, 1996, production and import of most Class I ODSs were phased out in developed countries, including the United States.

However, the Montreal Protocol and the Clean Air Act (the Act) provide exemptions that allow for the continued import and/or production of Class I ODSs for specific uses. Under the Montreal Protocol, exemptions may be granted for uses that are determined by the Parties to be “essential.” Decision IV/25, taken by the Parties to the Protocol in 1992, established criteria for determining whether a specific use should be approved as essential, and set forth the international process for making determinations of essentiality. The criteria for an essential use, as set forth in paragraph 1 of Decision IV/25, are the following:

“(a) That a use of a controlled substance should qualify as ‘essential’ only if:

(i) It is necessary for the health, safety or is critical for the functioning of society (encompassing cultural and intellectual aspects); and

(ii) There are no available technically and economically feasible alternatives or substitutes that are acceptable from the standpoint of environment and health;

(b) That production and consumption, if any, of a controlled substance for essential uses should be permitted only if:

(i) All economically feasible steps have been taken to minimize the essential use and any associated emission of the controlled substance; and

(ii) The controlled substance is not available in sufficient quantity and quality from existing stocks of banked or recycled controlled substances, also bearing in mind the developing countries' need for controlled substances.”

Title VI of the Act implements the Montreal Protocol for the United States. Section 604(d) of the Act authorizes EPA to allow the production of limited quantities of Class I ODSs after the phaseout date for the following essential uses:

(1) Methyl chloroform, “solely for use in essential applications (such as nondestructive testing for metal fatigue and corrosion of existing airplane engines and airplane parts susceptible to metal fatigue) for which no safe and effective substitute is available.” Under the Act, this exemption was available only until January 1, 2005. Prior to that date, EPA issued methyl chloroform allowances to the U.S. Space Shuttle and Titan Rocket programs.

(2) Medical devices (as defined in section 601(8) of the Act), “if such authorization is determined by the Commissioner [of the Food and Drug Administration], in consultation with the Administrator [of EPA] to be necessary for use in medical devices.” EPA issues allowances to manufacturers of MDIs, which use CFCs as propellant for the treatment of asthma and chronic obstructive pulmonary disease.

(3) Aviation safety, for which limited quantities of halon-1211, halon-1301, and halon-2402 may be produced “if the Administrator of the Federal Aviation Administration, in consultation with the Administrator [of EPA] determines that no safe and effective substitute has been developed and that such authorization is necessary for aviation safety purposes.” Neither EPA nor the Parties have ever granted a request for essential use allowances for halon, because in most cases alternatives are available and because existing quantities of this substance are large enough to provide for any needs for which alternatives have not yet been developed.

The Parties to the Montreal Protocol, under Decision XV/8, have additionally allowed a general exemption for laboratory and analytical uses through December 31, 2007. This exemption is reflected in EPA's regulations at 40 CFR part 82, subpart A. While the Act does not specifically provide for this exemption, EPA has determined that an allowance for essential laboratory and analytical uses is allowable under the Act as a de minimis exemption. The de minimis exemption is addressed in EPA's final rule of March 13, 2001 (66 FR 14760-14770). The Parties to the Protocol subsequently agreed (Decision XI/15) that the general exemption does not apply to the following laboratory and analytical uses: Testing of oil and grease, and total petroleum hydrocarbons in water; testing of tar in road-paving materials; and forensic finger-printing. EPA incorporated this exclusion at Appendix G to subpart A of 40 CFR part 82 on February 11, 2002 (67 FR 6352).

Before EPA allocates essential use allowances, the Parties to the Montreal Protocol must first authorize the United States' request to produce or import essential Class I ODSs. The procedure set out by Decision IV/25 calls for individual Parties to nominate essential uses and the total amount of ODSs needed for those essential uses on an annual basis. The Montreal Protocol's Technology and Economic Assessment Panel (TEAP) evaluates the nominated essential uses and makes recommendations to the Parties. The Parties make the final decisions on whether to authorize a Party's essential use nomination at their annual meeting. This nomination cycle occurs approximately two years before the year in which the allowances would be in effect. The allowances allocated through today's action were first nominated by the United States in January 2005.

Once the Parties authorize the U.S. nomination, EPA allocates essential use exemptions to specific entities through notice-and-comment rulemaking in a manner consistent with the Act. For MDIs, EPA requests information from manufacturers about the number and type of MDIs they plan to produce, as well as the amount of CFCs necessary for production. EPA then forwards the information to the Food and Drug Administration (FDA), which determines the amount of CFCs necessary for MDIs in the coming calendar year. Based on FDA's determination, EPA proposes allocations for each eligible entity. Under the Act and the Montreal Protocol, EPA may allocate essential use allowances in quantities that together are below or equal to the total amount authorized by the Parties. EPA will not allocate essential use allowances in amounts higher than the total authorized by the Parties. For 2007, the Parties authorized the United States to allocate up to 1,000 MT of CFCs for essential uses. In a notice of proposed rulemaking published in the Federal Register on November 3, 2006 (71 FR 64668), EPA proposed to allocate 125.3 MT.

EPA proposed to allocate 125.3 MT of essential use allowances for 2007 in its November 2006 proposed rule. With today's final action, EPA is allocating 167.0 MT of essential use allowances for 2007 for the production and import of CFCs for the manufacture of essential use MDIs. EPA is allocating this amount based on a revised determination letter by FDA dated May 4, 2007. EPA has placed this revised determination letter in the docket for review. This quantity of 167.0 MT includes two increases from the amounts proposed in November 2006. First, EPA is allocating 22.4 MT to Armstrong Pharmaceuticals, Inc. (an increase from a proposed allocation of 0.0 MT) for the manufacture of epinephrine; second, EPA is allocating an additional 19.3 MT to 3M Pharmaceuticals (65.0 MT total for 2007) for the manufacture of essential use MDI products (Aerobid, Aerobid M, and Maxair Autohaler). The total allocation for 2007 of 167.0 MT is far below the 1,000 MT that the Parties to the Montreal Protocol authorized for the United States for 2007. It is also a significant reduction from the 1,002.4 MT allocated for 2006. These reductions demonstrate the U.S. commitment to decreasing the amount of CFCs allocated for essential uses. Furthermore, the 167.0 MT does not include an allocation for the manufacture of CFC-albuterol MDIs, indicating that the transition to non-CFC alternatives for this application is well underway.

In its revised determination letter FDA informed EPA that Armstrong needed 22.4 MT of CFCs to manufacture generic epinephrine in 2007. EPA and FDA are allocating this amount to Armstrong to acquire CFC-114 for the manufacture of epinephrine, not CFCs to manufacture CFC-albuterol. In the revised determination letter, FDA articulated that Armstrong's allocation is specific to CFC-114 for the production of epinephrine MDIs. FDA stated, “In recent years, we aggregated the amounts for CFC-11, -12, -114 and provided recommendations on the total amounts of CFC necessary to protect the public health. This year, we provide recommendations for aggregated amount of CFCs, with one exception. We recommend that Armstrong Pharmaceuticals receive an allocation of 22.4 tonnes of CFC-114 for the manufacture of epinephrine CFC MDIs. We believe that this specific allocation is necessary to protect the public health, given the current essentiality determination as contained in 21 CFR 2.125(e).” Consistent with FDA's determination letter, EPA is allocating 22.4 MT of CFC-114 to Armstrong for the production of epinephrine MDIs for 2007.

FDA also informed EPA in its revised determination letter that it determined that 3M needed an additional 19.3 MT of essential use allowances to manufacture essential use MDI products. These products include Aerobid, Aerobid M, and Maxair Autohaler.

FDA noted to EPA that in making its revised determination, FDA reviewed supplementary information from MDI manufacturers, including more recent data on the quantities and types of CFCs held as well as more specific information on manufacturers' production plans for 2007. Based on this information, FDA recalculated the quantities and types of CFCs that would be medically necessary and recommended small increases in the allocations for two MDI manufacturers for calendar year 2007. In addition, FDA informed EPA that it applied the terms of Decision XVII/5, including the provision that each manufacturer maintain no more than a one-year operational supply of CFCs for essential uses.

EPA received comments from twelve entities on the proposed rule, as discussed below.

One commenter opposed as too low EPA's proposed allocation of 125.3 MT of CFCs for MDIs, given that the Parties to the Montreal Protocol authorized 1,000 MT. The commenter stated that 125.3 MT would not suffice to ensure the continuous availability of CFCs necessary to meet expected demand. The commenter noted that the facility being used to produce CFC-11 and CFC-12 is the only facility doing so and it is sized for far larger volumes of production. According to the commenter, continuing to decrease the size of production runs makes manufacturing more inefficient, complex, and costly. The commenter urged EPA to set policies that enable the manufacture of CFCs and allow producers and users the ability to shift unused allocations from one year to the next so that supply can be more easily assured. In addition, the commenter urged EPA to re-allocate essential use allowances in 2007 for essential use CFCs that were not produced and subsequently conferred in 2006. The commenter also noted that production of CFC-114 during 2006 was not adequate to meet MDI producer demand for which 2006 essential use allowances existed.

A second commenter provided similar comments and noted concern that qualified CFC producers may not be able or willing to produce a reliable supply in future years, citing the CFC-114 production shortfalls experienced by Honeywell as an example. The commenter expressed support for efforts by the U.S. Government to work with other Parties to the Montreal Protocol to establish a process for assessing the need for and feasibility of a final production campaign; the commenter stated that such efforts would support the ultimate phaseout of CFC production for MDIs while protecting public health by ensuring a smooth transition for MDIs.

A third commenter also opposed as too low the quantity of essential use allowances proposed for allocation. The commenter submitted two sets of comments, one of which was supplementary and received after the end of the comment period, but which EPA considered. Both sets of comments were submitted as confidential business information (CBI); EPA has placed redacted versions of them in the docket. The commenter indicated that it received a proposed allocation of zero metric tons and urged EPA to allocate additional allowances so that it could meet anticipated market demand for CFC-albuterol and CFC epinephrine in 2007 and 2008. The commenter noted that with the withdrawal of Schering-Plough from the CFC market, Armstrong would be only manufacturer of CFC-albuterol. In addition, the commenter asserted, the elimination of Schering-Plough's Warrick branded CFC-albuterol product will create a dramatic shortfall in the supply of CFC inhalers and is likely to lead to serious market disruption unless Armstrong increases production to meet demand. The commenter urged EPA to provide for its propellant needs for both 2007 and 2008 in the 2007 rule. To support its argument, the commenter provided data from IMS, a pharmaceutical market research firm, indicating market trends of CFC-albuterol that suggest in 2006, CFC-albuterol comprised a significant amount of the total albuterol market.

A fourth commenter that submitted CBI comments requested additional CFCs to manufacture its essential use MDIs. A redacted version of these comments has been placed in the docket. The commenter requested an additional 19.3 MT of CFCs to manufacture Aerobid, Aerobid M, and Maxair Autohaler. The commenter stated that without the additional allowances it would likely be unable to manufacture all of the MDIs forecasted by two of its customers.

Another commenter noted that it understood the zero allocation proposed for its company for 2007 and stated that it has been working to acquire existing CFCs to satisfy essential needs.

EPA also received comments that either supported the proposed allocations—in whole or in part—or believed they should be lower. One commenter stated that there should be no exemptions for any ODS. The commenter stated that allowing exemptions discourages the development of alternatives.

Seven commenters supported some or all of the proposed allocations for 2007. Four expressed approval of EPA's allocation of zero essential use allowances for manufacture of albuterol MDIs, as determined by FDA. One commenter additionally stated that by allocating only what was necessary and not the entire amount allowed by the Parties, FDA and EPA are supporting the over-arching goals of the Montreal Protocol. The commenter also noted that the proposed allocations are consistent with FDA's final determination on albuterol non-essentiality and that EPA's phaseout timeline fully agrees with FDA's conclusions that an effective and orderly transition to HFA MDIs would be complete by December 31, 2008.

One commenter supported EPA's choice to allocate only a portion of the essential use allowances granted to the United States by the Parties to the Montreal Protocol. The commenter stated that it supports EPA's decision to eliminate essential use allowances for those companies currently marketing both CFC and non-CFC albuterol MDIs. The commenter stated that the existing CFC stockpiles in the United States will be adequate to assure a smooth and timely transition to non-CFC albuterol inhalers.

EPA received two sets of CBI comments from one commenter, both of which were received after the close of the comment period, but which EPA considered, which supported EPA's proposed zero allocation for the manufacture of CFC-albuterol MDIs. EPA has placed redacted versions of the comments in the docket. The commenter supported the proposed allocations, specifically the proposed zero allocations for albuterol MDIs containing CFCs. The commenter argued that the proposed zero allocation will facilitate the orderly transition to HFA albuterol inhalers, minimize the confusion and related compliance and safety issues raised by patients alternating between CFC and HFA inhalers, and ensure that additional CFCs are not needlessly released into the environment.

The commenter noted that it had already begun to transition its supply of CFC-based albuterol inhalers to HFA inhalers. Additionally, the commenter asserted that an early transition to HFA inhalers would allow manufacturers, physicians, and pharmacists to act in a coordinated manner to educate patients and transition them in an orderly fashion. It noted that there are important differences between CFC and HFA inhalers that require patient counseling and that without an early and orderly transition facilitated by patient education and training, many patients will switch back and forth between the two inhalers or wait until the last minute.

The commenter further noted that to support the transition to HFA-based albuterol, it has dedicated significant resources to support patients, physicians, pharmacists, and other stakeholders. The commenter stated that it had significantly increased the production of HFA albuterol inhalers and that it has the ability to increase production further if there is need. Additionally, the commenter stated that it has implemented a comprehensive plan to communicate information regarding the transition to key stakeholders. The commenter also noted that it has a patient assistance program for low-income patients and patients without health insurance.

EPA allocates essential use allowances annually in accordance with the Act and the Montreal Protocol. For the 2007 control period, EPA, in consultation with FDA, evaluated the medical demand for essential use MDIs and determined the amount of CFCs needed to meet that demand. The U.S. Government first nominated an amount for essential use allowances for 2007 in January 2005 (1,493 MT). The Parties authorized 1,000 MT for the U.S. at the 17th Meeting of the Parties in 2006. Since the U.S. Government submitted its nomination for 2007, EPA and FDA have received more current information on the amount of CFCs needed to manufacture essential use MDIs, amounts of stockpiled CFCs available to manufacturers, and the availability of non-CFC alternatives. Neither the 1,493 MT nominated nor the 1,000 MT authorized accurately reflects the amount of CFCs necessary to meet medical needs in 2007.

In making its determination for 2007 essential use allowances, FDA informed EPA that it undertook a similar analysis as completed in years past. FDA articulated to EPA that for each MDI manufacturer that requested essential use allowances, FDA evaluated a number of factors. FDA informed EPA that it took the following steps in making the 2007 determination for essential use allowances. First, FDA evaluated the medical necessity by evaluating the number of CFC MDIs necessary to protect public health in the U.S. (including consideration of current data on the prevalence of asthma and COPD) and the quantity of CFCs necessary to ensure the manufacture and continuous availability of those MDIs. Second, FDA analyzed the existing inventory of CFCs held by each MDI manufacturer as of May 1, 2006 and updated as of December 31, 2006. Third, FDA accounted for the implementation of the terms of Decision XVII/5, including the provision that manufacturers maintain no more than a one-year operational supply, and considered how manufacturers' existing CFC supplies would be drawn down as essential use MDIs were manufactured throughout the year. As was also articulated in the determination letter, revised May 4, 2007, FDA assumed that all manufacturers would procure the full quantity of CFCs allocated to them for the year.

In response to the comments recommending allocation of essential use CFCs for multiple years, although EPA recognizes the difficulties associated with producing small amounts of CFCs per year, the Parties authorized an essential use exemption for CFC production and import for the 2007 control period only. Therefore, in accordance with the Decisions of the Parties, the United States allocated allowances to MDI manufacturers for 2007 control period. EPA understands that the U.S. manufacturer can increase the efficiency of its production run by combining the amount allocated by EPA for essential use production of pharmaceutical-grade CFCs for domestic use with the amount permitted under the Montreal Protocol, and authorized by EPA, for production of pharmaceutical-grade CFCs for export to Article 5 and non-Article 5 Parties, recognizing that the manufacturer may incur the cost of destroying the non-pharmaceutical grade portion of the run. EPA understands that the design of the Montreal Protocol and Title VI of the Act anticipated that ODS costs would increase during the transition to alternatives. However, the United States Government expects that this issue of a need for campaign production to meet the essential use health needs for CFCs for MDIs globally will be raised by the Parties to the Montreal Protocol at future meetings.

With respect to the comments recommending higher allocations for 2007 to manufacture generic albuterol and generic epinephrine, FDA has informed EPA that additional essential use allowances will be needed for the manufacture of generic epinephrine in 2007. FDA made this determination based on information about the manufacturer's existing inventory, blend requirements, and production need, as well as implementation of the terms of Decision XVII/5, including the provision that manufacturers maintain no more than a one-year operational supply for CFCs for essential uses.

FDA informed EPA that it did not agree with the comment that additional amounts of CFCs need to be allocated for the manufacture of CFC-albuterol in 2007 to meet the overall demand for albuterol. In the September 2006 letter to EPA (revised in May 2007), FDA stated that its determination of the amount of CFCs necessary for production of essential use MDIs is lower than the total amount requested by manufacturers, and in reaching its estimate, FDA took into account the manufacturers' production of MDIs that used CFCs as a propellant in 2006, their estimated production in 2007, and stockpile levels (as of December 31, 2006). FDA also stated that it considered comments received on the proposed rule for the allocation of CFCs in 2007. Finally, as articulated in its letter, FDA took into account that, at the time of the letter, roughly 40 percent of the albuterol MDIs currently produced were propelled by HFAs (HFA-134a) rather than CFCs.

Given the publicly stated plans of Schering-Plough, a major albuterol CFC supplier, FDA has informed EPA that it believes the manufacture of CFC-albuterol will decrease in 2007 (and further decrease in 2008 as the phase-out date approaches). The manufacture and sale of albuterol HFA MDIs will increase sufficiently to meet the medical needs of patients for albuterol. FDA will continue to monitor closely the availability of albuterol to ensure that there is adequate supply to meet patient needs. FDA has informed EPA that HFA inhalers now make up approximately half the overall albuterol-levalbuterol inhaler market. Furthermore, according to FDA, HFA manufacturers report they currently have the ability to produce enough HFA albuterol MDIs to meet total market demand for albuterol MDIs.

With respect to the commenter that requested additional CFCs to manufacture its essential use MDIs (Aerobid, Aerobid M, and Maxair Autohaler), FDA informed EPA that an increase of CFCs to 65.0 MT was necessary for 2007. FDA informed EPA that its revised determination was based on additional analysis of medical need and on supplementary information received from the MDI manufacturers, including more recent data on quantities of CFCs held. In addition, FDA informed EPA that it applied the terms of Decision XVII/5, including the provision that each manufacturer maintain no more than a one-year operational supply of CFCs for essential uses.

In response to the comment that there should be no exemptions for any ODS and that allowing exemptions discourages the development of alternatives, in this instance, EPA and FDA do not believe that the allocation of essential uses for the manufacture of CFC MDIs precludes the development of alternatives, in part because EPA and FDA consider a company's progress in research and development of alternatives in evaluating a company's request for an essential use exemption.

Finally, two commenters raised specific medical-related issues. One commenter, an asthmatic, expressed concern that the discontinuation of inhalers containing albuterol will leave no alternatives for asthmatics who are allergic to sulfites and sulfates. The commenter notes that he or she is allergic to sulfites and that the generic albuterol inhaler is going to be discontinued.

In response, FDA informed EPA that HFA albuterol MDIs do not contain sulfites. Indeed, unlike CFC albuterol products, each albuterol HFA has a unique formulation, which should allow patients to find a product they tolerate and find effective, even if they feel one particular product is not sufficiently tolerable.

A second commenter argued that the elimination of fluorocarbons is not necessary in aerosol albuterol items. The commenter stated that the non-aerosol form of albuterol poses several problems, such as difficulty in ascertaining when a canister is empty. In addition, the commenter noted that there is no sensation that a dosage of the non-aerosol medication is being received and that this may have profoundly negative medical repercussions. The commenter also asserted that because the disbursement of albuterol aerosol liquid goes into a mouth that is surrounding the canister and seals off the disbursement, no aerosol escapes into the surrounding atmosphere. Lastly, the commenter stated that the elimination of aerosol-dispensed respiratory medications will have a negative effect on patients.

In its March 31, 2005 final rule (70 FR 17168), FDA determined that albuterol will no longer be designated as an “essential use” after December 31, 2008. FDA discussed issues associated with the essentiality of albuterol in that rule. Today's final action allocating CFCs for the manufacture of MDIs does not address the essentiality of albuterol. EPA notes that the non-ODS albuterol MDIs (i.e. HFA-albuterol) that are currently available to patients also contain an aerosol, HFA-134a.

One commenter stated that EPA should not allocate any new essential use allowances for 2007, claiming that existing stockpiles of CFCs must be used before new essential use allowances may be granted. The commenter stated that EPA's proposed essential use allowances for 2007 were in contravention of Decision IV/25 of the Montreal Protocol, which provides that production and consumption of CFCs for essential uses is permitted only if the CFCs are “not available in sufficient quantity and quality from existing stocks.” The commenter stated that where stockpiles are in excess of essential need, EPA should first seek voluntary transfers, and second redistribute CFC stockpiles to where they are most needed.

The commenter provided three supporting claims. First, the commenter provided data indicating that there are sufficient aggregate stockpiles available in the U.S. to cover the essential needs for 2007. The commenter recognized that these stockpiles are not evenly held by U.S. companies and urged EPA to take steps to redistribute them. Second, the commenter asserted that the Montreal Protocol and the Act support the “reallocation” of existing CFC stockpiles before new essential use allowances are allocated. The commenter argued that the objective of the Montreal Protocol supports an interpretation of Decision IV/25 that the Montreal Protocol Parties should deplete the aggregate CFC stockpiles available in their respective markets before allocating new essential use allowances to any MDI manufacturers. The commenter stated that it recognizes that Decisions XVII/5 and XVIII/7 state that Parties must consider the operational supply of each manufacturer in making essential use allowance decisions. However, the commenter asserted that it does not believe that these Decisions conflict with or supersede Decision IV/25 as the Parties can take into account both the aggregate CFC stockpile and each manufacturer's operational supply. Additionally, the commenter argued that Decision XII/2 provides for the transfer of essential use allowances and CFCs held by MDI producing companies in order to avoid unnecessary production. According to the commenter, Decision VII/28 provides for Parties, under certain circumstances, to reallocate excess essential use allowances or CFCs in their respective markets. Thus the commenter asserted that the Montreal Protocol supports compelling U.S. companies with excess CFCs to sell their stockpiles to the U.S. Government for reallocation.

Furthermore, the commenter argued that the Act, specifically Section 615, grants EPA the right to take certain actions to prevent endangerment to public health or welfare. The commenter asserted that unnecessary emissions of CFCs will endanger public health or welfare due to the effects of stratospheric ozone depletion, and that EPA is justified in promulgating regulations that would allow it to mandate the reallocation of excess stockpiled CFCs.

Lastly, the commenter stated that transfers or reallocations of CFCs are subject to all other Montreal Protocol (specifically, Decisions IV/25, XII/2, and XVII/5) and CAA parameters. Further, the commenter stated that EPA may not approve any transfer or reallocation of CFCs for any CFC MDI product approved after December 31, 2000 unless the essentiality criteria set out in paragraph 1(a) of Decision IV/25 are met, or to the extent the intended recipient maintains CFC stockpiles in excess of the one-year operational supply threshold.

In assessing the amount of new CFC production required to satisfy 2007 essential uses, just as in 2006, EPA and FDA applied the terms of Decision XVII/5 including the provision on stocks of CFCs that indicates Parties should allocate such that manufacturers of MDIs maintain no more than a one-year operational supply of CFCs for essential uses. FDA's approach for 2007 was similar to that for 2006; first it calculated the quantity that each MDI manufacturer needed to produce essential use MDIs for the year and then it subtracted from that quantity any CFC stocks owned by that MDI manufacturer exceeding a one-year operational supply. The remainder, if more than zero, is the quantity of newly produced or imported CFCs needed by that manufacturer. In addition, FDA has informed EPA that consistent with Decision XVII/5, FDA evaluates each company on an individual basis, rather than an aggregate of all MDI manufacturers. So, while amounts of CFCs may be available for purchase in the marketplace, FDA and EPA only account for stocks owned by a particular MDI manufacturer in evaluating that manufacturer's CFC need.

EPA agrees with the commenter that the objective of the Montreal Protocol is to reduce and eventually eliminate the production of ODSs, but that the essential use provision exists to ensure that an adequate supply of CFCs are available for those uses deemed “essential” by the Parties. EPA recognizes that in making the determination for essential uses for 2007, FDA took into account a number of considerations in assessing each MDI manufacturer's need, including the amount and type of CFC necessary to produce specific MDIs. The commenter's recommendation about redistribution of excess CFCs is outside the scope of the proposal on which this final rule is based. While the commenter suggests that EPA use Section 615 authority to redistribute excess CFCs, EPA does not believe that government-mandated redistribution is necessary at this time, and has not examined the extent of its authority for such action. EPA regulations currently allow transfer of both essential use allowances and essential use CFCs among essential use allowance holders. These mechanisms provide for redistribution of CFCs with minimal government involvement. The small number of participants in the market for essential use CFCs and the limited quantities of CFCs at issue further suggest that there is no need to expand EPA's role. In addition, any entity that chooses to hold stocks of essential use CFCs rather than sell to a willing purchaser runs the risk that the stocks will decline in value and ultimately become a liability for domestic use.

EPA regulates transfers of essential use CFCs to ensure their proper use, and in approving transfers between domestic MDI manufacturers, EPA requires the companies involved to certify that the MDIs produced with the transferred essential use CFCs were approved by FDA before December 31, 2000. EPA does not apply the terms of Decision XVII/5, including the provision on manufacturers maintaining no more than a one-year operational supply, when assessing whether to approve a transfer of essential use CFCs. However, in determining annual essential use allocations for MDI manufacturers, FDA analyzes each MDI manufacturer's stocks of CFCs. Therefore, if a company obtains essential use CFCs during a particular year from another MDI manufacturer, FDA would account for those stocks in making its determinations for the year. EPA encourages, but does not mandate, such transfers.

A second commenter noted that based on the projected use of its 2006 stockpile amounts, it would require additional CFCs to meet the increased demand for albuterol MDIs and epinephrine mist MDIs. EPA and FDA disagree with the commenter that additional essential use allowances should be allocated in 2007 for the production of CFC-albuterol MDIs. EPA and FDA believe that the commenter's projections assume a level of production exceeding that medically necessary. Further, this comment does not take into account all CFCs available to the company for albuterol production. When these factors are considered, EPA believes, based on consultation with FDA, that no additional CFC allowances for albuterol should be allocated in 2007.

One commenter supported the zero allocation for albuterol manufacture in 2007, but voiced concern with the method by which FDA calculated essential use allowances. The commenter noted that while FDA appeared to have based its allocation recommendation on the operational supply rule established by paragraph 2 of Decision XVII/5, FDA implemented this paragraph by setting the minimum stockpile threshold at 12 months (as articulated in EPA's final rule allocating 2006 essential use allowances) while the Decision states that 12 months is the maximum operational supply that may be maintained by an MDI manufacturer. Recognizing that the Decision allows Parties to set the operational supply threshold at less than one year, the commenter recommended a threshold of one to three months.

A second commenter noted that FDA applied the twelve-month cap on each company's operational supply of CFCs, as stated in paragraph 2 of Decision XVII/5, to determine that no allocations for manufacturers of CFC albuterol MDIs were necessary. The commenter stated that this interpretation was “logical, reasonable, and equitable,” but further stated that the twelve-month stockpile supply is a maximum amount and that a six-month supply stockpile allowance should be used in any future assessments of allocations.

A third commenter expressed support for the calculation of anticipated CFC requirements for future manufacture of albuterol MDIs, as described in the proposed rule, and stated that the calculation is both reasonable and appropriate to ensure a smooth transition. The commenter noted that sufficient stockpiles of CFCs exist to meet albuterol CFC MDI production needs through the end of 2008. In addition, the commenter stated that an orderly transition to albuterol HFA implies a phase-out of albuterol CFC production before the December 31, 2008 deadline. After that deadline, section 610 of the Clean Air Act will prohibit the sale or distribution of albuterol CFC MDIs in interstate commerce. Therefore, the commenter states, retailers and suppliers must have adequate time to deplete their stock before then.

Paragraph 2 of Decision XVII/5 states that Parties “shall take into account pre- and post-1996 stocks of controlled substances as described in paragraph 1(b) of Decision IV/25, such that no more than a one-year's operational supply is maintained by that manufacturer.” In making its determination for allocation of essential use allowances, FDA acted consistent with this provision by allowing manufacturers to maintain a supply of up to 12 months of the manufacturing operations. FDA calculates volumes to allow the manufacturer to end the calendar year with the appropriate level of stock. EPA and FDA do not agree that allowing manufacturers to maintain up to a 12-month supply is excessive because, in part, maintaining such an amount accounts for unexpected variability in the demand for MDI products or other unexpected occurrences in the market and therefore ensures that MDI manufacturers are able to produce their essential use MDIs.

One commenter requested that EPA reconsider its allocations in light of Schering-Plough's October 13, 2006 announcement that it would end production of its Warrick Pharmaceutical brand CFC-albuterol MDIs early in 2007. According to the commenter, most customers believe that Warrick brand CFC-albuterol will not be available after early 2007. In this regard, the commenter noted that after the first quarter of 2007, Armstrong will be the sole producer and supplier of albuterol CFCs and that EPA must make an additional CFC allocation to Armstrong in order to avoid a dramatic shortfall in CFC supply relative to projected demand.

With Schering-Plough's announcement, EPA and FDA expected that the manufacture of CFC-albuterol would be significantly lower in 2007 than 2006 and that this decrease will be balanced by an increase in HFA production and availability sufficient to meet patient needs. EPA and FDA expect a further decrease in albuterol CFC production in 2008, particularly in the months leading up to December 31, 2008, when all sales of CFC albuterol MDIs must cease. FDA has informed EPA that based on information it is receiving from HFA manufacturers, HFA manufacturers currently have the ability to produce enough HFA albuterol MDIs to meet total market demand for albuterol MDIs. Therefore FDA does not anticipate shortages of albuterol MDIs.

One commenter indicated that it believed that CFCs should not be allocated to companies unless they have demonstrated good faith efforts to research and develop CFC-free alternatives. The commenter argued that EPA's interpretation of Paragraph 1 of Decision VIII/10—that the Parties will request information on research and development from companies but not use it as a basis for denying an essential use allowance request—is inadequate. The commenter asserted that the reiteration of the same language from Paragraph 1 of Decision XVIII/10 in Paragraph 3 of Decision XVIII/7 indicates that Parties did not believe that the plain intent of Decision VIII/10 was being followed and that at this stage of the phaseout the Parties are looking for demonstrations of commitment to the transition. The commenter also argued that Decisions VIII/10 and XVIII/7 warrant EPA to require companies requesting essential use allowances to demonstrate ongoing research and development of CFC-free alternatives and that EPA has the authority to do so under Sections 604(d)(2) and 615 of the CAA.

EPA agrees that companies applying for essential use allocations to manufacture MDIs generally should demonstrate ongoing research and development of alternatives to CFC MDIs. To this end, in accordance with Decision VIII/10, since 1997 EPA has requested that applicants provide this information with their applications for CFC essential use nominations. EPA reiterated this policy in the final rules allocating essential use allowances for 2005 and 2006 (70 FR 49836 and 71 FR 58504, respectively). Each company that is receiving an essential use allocation has submitted information to EPA pertaining to its research and development efforts. In its essential use nominations, the U.S. Government articulates that the MDI manufacturers, for which the U.S. Government is submitting an essential use request, have submitted information demonstrating their on-going research and development activities in pursuit of alternatives to CFC MDIs. To this end, today's rulemaking is fully consistent with the Decisions to the Protocol.

One commenter stated that EPA's essential use allowance allocation process and proposed allocations comport with general standards of administrative law. The commenter stated that the proposed rule allocating 2007 allowances clearly meets the non-arbitrariness standard of administrative law that a rulemaking agency must “examine relevant data” and that failure to do so could constitute arbitrary decision-making. The commenter specifically commended the use of company-specific stockpile information collected in a follow-up letter sent to companies on May 10, 2006, seeking information under the authority of Section 114 of the CAA. In addition, the commenter stated that the 2007 proposed rule correctly applied the “one-year operational supply” provision of Decision XVII/5 and that EPA disclosed FDA's methodology and allowed ample opportunity for public comments. Last, the commenter argued that EPA is required to provide an additional notice and comment opportunity for public comment on any material increase in any company's allocation (e.g. allocating essential use volumes to a company that EPA had proposed would not receive any). The commenter noted that this would include the posting of an explanatory letter from FDA on the docket articulating the reasons for the changes. The commenter requested that EPA provide notice and opportunity for public comment if it is considering allocating any volumes to manufacturers of CFC-albuterol MDIs.

In response to the commenter's request for notice and an opportunity for public comment in the event that EPA issues material changes to a company's allocation, EPA believes that it has reasonably articulated the reasons that two companies are receiving additional allocations in this final rule and that further notice and comment on this issue is unnecessary. As stated in preceding paragraphs, FDA determined, based on additional information received, that essential use allowances should be increased for two companies. With respect to essential use allocations for the manufacture of CFC-albuterol, EPA confirms that it is not allocating any essential use allowances for the manufacture of CFC-albuterol MDIs in the 2007 allocation.

EPA received three comments supporting its timeliness in starting the allocation process and granting allocations in the first quarter of the year to provide for better planning and security of supply.

One commenter provided information showing that HFA products have accounted for a small and largely constant share of the albuterol market over the past four years, and that CFC inhalers represented 92% of total albuterol sales through the first nine months of 2006, according to IMS data. The commenter stated that meeting the demand for CFC-albuterol with the withdrawal of Schering-Plough would require production of CFC-propelled units in 2007 and 2008. The commenter stated that EPA should allocate additional CFC allowances for albuterol production in 2007 and 2008 to allow for an orderly market transition to HFA albuterol. The commenter stated that failure to allocate CFC allowances for albuterol production in 2007 would create marketplace disruption and risk harm to public health, and provided the following justifications to substantiate that claim.

First, the commenter argued that public and private reimbursement has not completely caught up to the changeover to HFA inhalers and gaps remain, particularly in Medicaid and Medicare Part D coverage. Citing IMS data, the commenter maintained that the wholesale prices for HFA albuterol are more than five times higher than for CFC albuterol. A shortage of less-expensive CFC-albuterol MDIs would deprive low-income asthma sufferers of access to inhalers, potentially forcing uninsured patients to seek relief in emergency rooms where treatment may be costly and untimely.

Second, the commenter stated that converting a market from 92% CFC to 100% HFA requires a measured and orderly transition that shifts patients to HFA inhalers while allowing for scale-up of HFA production capacity, education of doctors and patients about the differences between CFC and HFA albuterol, and adaptation to HFA products by pharmacies and insurance companies. The commenter stated that FDA and patient advocates have stressed this point. Further, the commenter argued that a sudden, unexpected unavailability of CFC albuterol might endanger patient health because patients might not have sufficient time to safely transition and because not all formulations of HFA albuterol might be available in sufficient supplies. The commenter also asserted that HFA inhalers differ from CFC inhalers in taste and delivery feel and that noted that patients may need time to find the most agreeable formulation. Lastly, the commenter stated that pharmacists in states that rely on the Orange Book or the FDA to define “therapeutic equivalence,” and do not give discretion to pharmacists to substitute, will not be able to substitute HFA albuterol for CFC albuterol in cases where the prescription provides for CFC albuterol.

Based on input from FDA, EPA disagrees that further allocations of essential use allowances for the manufacture of CFC-albuterol are medically necessary. For 2007 essential use allocations, FDA examined the amount of CFCs available from stocks to manufacture CFC albuterol as well as the supply of HFA albuterol in the marketplace and has determined that there is not a medical need to allocate allowances for CFC albuterol. According to FDA, based on information that FDA is receiving from HFA manufacturers, HFA manufacturers currently have the ability to produce enough HFA-albuterol MDIs to meet total market demand for albuterol MDIs.

EPA and FDA understand that patients may incur additional costs to purchase albuterol inhalers as the market transitions to HFA MDIs. For example, EPA and FDA recognize that patients covered by medical insurance may encounter higher co-payments to purchase HFA albuterol. However, patient assistance programs exist to assist patients with the increased costs. For low-income patients, these programs include free and discounted medicines. To assist patients facing higher co-pays associated with the increased costs of the HFA MDIs, programs such as coupons and discounted HFA MDIs are being made available through physicians, at pharmacies, and at individual manufacturers' Web sites.

Advocacy and non-profit groups have been pursuing education and outreach efforts in preparation for the December 31, 2008 phaseout of CFC-albuterol inhalers. They understand that educating doctors, patients, and pharmacies is paramount. FDA selected December 31, 2008, as the phaseout date largely because it provided sufficient time for the transition to HFA MDIs to occur. This time allows for patients to meet with their doctors and for their doctors to discuss the change to HFA MDIs. FDA is monitoring the supply of albuterol closely and does not anticipate any shortages in 2007.

One commenter supported EPA's proposal to allocate no essential use allowances for 2007 for single-moiety albuterol CFC MDIs because satisfactory alternatives are available. The commenter asserted that the December 31, 2008 effective date of non-essentiality of CFC-albuterol MDIs is overly conservative. Two CFC-free alternatives to CFC-albuterol MDIs have been on the market for several years. In addition, the commenter stated that it is now clear that the bulk of the transition to CFC-free albuterol will occur well before 2008, provided that the companies' efforts to transition the market are not undercut. The commenter noted that two additional CFC-free alternatives to CFC-albuterol MDIs have been introduced into the market since FDA began its rulemaking process to remove the essential use designation for albuterol MDIs. According to the commenter, FDA has determined that approximately 40 percent of albuterol MDIs produced in 2006 used HFA-134a as their propellant and FDA anticipates that this will grow to 60 percent in 2007 and 80 percent in 2008. The commenter stated its belief that this estimate is overly conservative given that Warrick Pharmaceuticals, which currently produces approximately 70 percent of the albuterol CFC MDIs sold in the US, announced plans to cease manufacture of CFC inhalers in early 2007 and plans to transition patients to its HFA alternative.

The commenter also noted that the only remaining risk to the successful transition of the albuterol MDI market is that those companies that do not have albuterol CFC-free alternatives on the market, and therefore have no interest in seeing the transition successfully concluded, may see the transition as an opportunity to gain temporary market share. The commenter argued that these companies could capitalize on patients who are displeased with the new prescriptions, and with adjustments to the inhalers' “taste and feel,” associated with alternatives.

One commenter recommended that EPA state that CFC albuterol MDIs are not essential in the U.S. under Montreal Protocol criteria and that new CFC production for such uses is not necessary. The commenter noted that four CFC-free albuterol MDIs have been approved by FDA and are now on the market and that numerous patient assistance programs ensure that low-income and uninsured patients can afford these medications. Therefore, the commenter notes, CFC-albuterol MDIs are no longer essential under the Decision IV/25 criterion and essential use allowances may no longer legally be allocated for that use because technically and economically feasible alternatives are available. The commenter believes that, at a minimum, EPA should state that new production of CFCs for albuterol MDIs is per se not necessary.

Similarly, another commenter noted that the preamble to Decision XVIII/7 states the need for Parties to limit essential use allocations. This commenter cites Decision IV/25, which states that CFCs for use in MDIs shall not qualify as essential “if technically and economically feasible alternatives or substitutes are available,” and the TEAP report concludes that “technically satisfactory alternatives” to CFC-based MDIs are available for short-acting beta-agonists.

In 2005, FDA issued a final rule removing the essential use designation for CFC-albuterol MDIs as of December 31, 2008 (70 FR 17168). FDA based this decision on a comprehensive analysis that addressed, among other issues, the availability and convenience of non-ODS alternatives. FDA determined that December 31, 2008, was an appropriate date because it believed that adequate production capacity and supplies of HFA albuterol would be available to meet patient need. So, while alternatives to CFC-albuterol MDIs were available at that time, the supply and the capacity of manufacturers to produce sufficient amounts of HFA MDIs to meet the demand for albuterol were not yet adequate. A date of December 31, 2008 was chosen to provide time for a smooth and successful transition to occur and to prevent a shortage in the market that would affect patients' ability to receive albuterol. That transition is well underway, but some production of CFC-albuterol remains necessary and albuterol remains listed in 21 CFR 2.125(e).

One commenter stated that based on current market conditions, it believes that the total supply of albuterol MDIs (both HFA and CFC inhalers) in the market should continue to meet demand during the transition to HFA. The commenter noted that it has significantly increased the amount of HFA albuterol inhalers that it produces, and that it is in the position to increase its supply further if the need arises. It further noted that based on publicly available data, it appears that another HFA albuterol inhaler manufacturer has also increased supply of its HFA albuterol inhaler. Lastly, the commenter stated that its communications from FDA indicate that FDA, based on discussions with all manufacturers of albuterol inhalers, is not anticipating near-or medium-short-term shortages of albuterol MDIs. In this regard, the commenter argued that there is no need for incremental CFC-based albuterol MDIs beyond the previously approved 2006 CFC allocations to meet overall albuterol demand in the United States.

Two commenters supported EPA's proposed allocation and asserted that a gradual transition from CFC albuterol to HFA albuterol would benefit patients. One commenter stated EPA correctly concluded, based on the availability of alternatives, that CFCs for albuterol MDIs are not necessary, as defined by Section 604(d)(2) of the Clean Air Act; and that the proposed allocations would benefit patients by smoothing the transition to alternatives.

One commenter supported the proposed allocation because it provided for a timetable that would enable CFC albuterol supplies to be drawn down while ensuring a steady, reliable supply of HFA product. The commenter stated that a smooth transition requires a gradual conversion of the albuterol market to HFAs and that this transition should be completed sufficiently in advance of December 31, 2008. The commenter noted that an abrupt transition would have potential negative health impacts, present an onerous administrative burden on providers and pharmacies, and waste any potential for transition to improve disease management.

Both commenters cautioned the Agency about the negative health outcomes potentially associated with patients transitioning several times between CFC and HFA inhalers or using both products at once. One commenter stated that specific benchmarks can minimize confusion in pharmacies and that an efficient phase-out period with consistent downward pressure on the availability of CFC MDIs can prevent these problems. The commenter also suggested that nine months would be an appropriate conversion period for CFC and HFA products to coexist in the market.

One commenter noted that the four HFA albuterol MDIs on the market are all different formulations, while the CFC albuterol MDIs were all similar. The commenter asserted that this variety will benefit patients by allowing them to find a formulation that works best for them and to avoid formulations to which they are allergic. The commenter noted that some of the HFA MDIs also have new features that were absent in the CFC models and that the production variety improves security of supply. The commenter also stated that the proposed allocations sent a consistent and appropriate signal to all affected constituencies that the Government is serious about the albuterol transition, which is prompting patient education and outreach.

With this action, EPA is allocating essential use allowances for calendar year 2007 to the entities listed in Table 1. These allowances are for the production or import of the specified quantity of Class I controlled substances solely for the specified essential use.

Under Executive Order (EO) 12866 (58 FR 51735, October 4, 1993), this action is a “significant regulatory action” because it raises novel legal or policy issues. Accordingly, EPA submitted this action to the Office of Management and Budget (OMB) for review under EO 12866 and any changes made in response to OMB recommendations have been documented in the docket for this action.

EPA prepared an analysis of the potential costs and benefits related to this action. This analysis is contained in the Agency's Regulatory Impact Analysis (RIA) for the entire Title VI phaseout program (U.S. Environmental Protection Agency, “Regulatory Impact Analysis: Compliance with Section 604 of the Clean Air Act for the Phaseout of Ozone Depleting Chemicals,” July 1992). A copy of the analysis is available in the docket for this action and the analysis is briefly summarized here. The RIA examined the projected economic costs of a complete phaseout of consumption of ozone-depleting substances, as well as the projected benefits of phased reductions in total emissions of CFCs and other ozone-depleting substances, including essential use CFCs used for metered-dose inhalers.

This action does not impose any new information collection burden. The recordkeeping and reporting requirements included in this action are already included in an existing information collection burden and this action does not make any changes that would affect the burden. However, the Office of Management and Budget (OMB) has previously approved the information collection requirements contained in the existing regulations at 40 CFR 82(a) under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and has assigned OMB control number 2060-0170, EPA ICR number 1432.25. A copy of the OMB approved Information Collection Request (ICR) may be obtained from Susan Auby, Collection Strategies Division; U.S. Environmental Protection Agency (2822T); 1200 Pennsylvania Ave., NW., Washington, DC 20460 or by calling (202) 566-1672.

Burden means the total time, effort, or financial resources expended by persons to generate, maintain, retain, or disclose or provide information to or for a Federal agency. This includes the time needed to review instructions; develop, acquire, install, and utilize technology and systems for the purposes of collecting, validating, and verifying information, processing and maintaining information, and disclosing and providing information; adjust the existing ways to comply with any previously applicable instructions and requirements; train personnel to be able to respond to a collection of information; search data sources; complete and review the collection of information; and transmit or otherwise disclose the information.

An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for EPA's regulations are listed in 40 CFR part 9.

The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions.

For purposes of assessing the impact of today's rule on small entities, small entities are defined as: (1) Pharmaceutical preparations manufacturing businesses (NAICS code 325412) that have fewer than 750 employees; (2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit enterprise that is independently owned and operated and is not dominant in its field.

After considering the economic impacts of today's final rule on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities. In determining whether a rule has a significant economic impact on a substantial number of small entities, the impact of concern is any significant adverse economic impact on small entities, since the primary purpose of the regulatory flexibility analyses is to identify and address regulatory alternatives “which minimize any significant economic impact of the proposed rule on small entities.” 5 U.S.C. 603 and 604. Thus, an agency may conclude that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, or otherwise has a positive economic effect on all of the small entities subject to the rule. This rule provides an otherwise unavailable benefit to those companies that are receiving essential use allowances. We have therefore concluded that today's final rule will relieve regulatory burden for all small entities.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104-4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. Under section 202 of the UMRA, EPA generally must prepare a written statement, including a cost-benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures to State, local, and tribal governments, in the aggregate, or to the private sector, of $100 million or more in any one year.

Before promulgating an EPA rule for which a written statement is needed, section 205 of the UMRA generally requires EPA to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, most cost-effective, or least burdensome alternative that achieves the objectives of the rule. The provisions of section 205 do not apply when they are inconsistent with applicable law. Moreover, section 205 allows EPA to adopt an alternative other than the least costly, most cost-effective, or least burdensome alternative, if the Administrator publishes with the final rule an explanation why that alternative was not adopted.

Before EPA establishes any regulatory requirements that may significantly or uniquely affect small governments, including tribal governments, it must have developed a small government agency plan under section 203 of the UMRA. The plan must provide for notifying potentially affected small governments, enabling officials of affected small governments to have meaningful and timely input in the development of EPA regulatory proposals with significant Federal intergovernmental mandates, and informing, educating, and advising small governments on compliance with the regulatory requirements.

Today's rule contains no Federal mandates (under the regulatory provisions of Title II of the UMRA) for State, local, or tribal governments or the private sector, since it merely provides exemptions from the 1996 phase-out of Class I ODSs. Similarly, EPA has determined that this rule contains no regulatory requirements that might significantly or uniquely affect small governments, because this rule merely allocates essential use exemptions to entities as an exemption to the ban on production and import of Class I ODSs.

Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999), requires EPA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in the Executive Order to include regulations that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.”

This final rule does not have federalism implications. It will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. Thus, Executive Order 13132 does not apply to this rule.

Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000), requires EPA to develop an accountable process to ensure “meaningful and timely input by tribal officials in the development of regulatory policies that have tribal implications.” This final rule does not have tribal implications, as specified in Executive Order 13175. Today's rule affects only the companies that requested essential use allowances. Thus, Executive Order 13175 does not apply to this rule.

Executive Order 13045, “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), applies to any rule that (1) is determined to be “economically significant” as defined under Executive Order 12866, and (2) concerns an environmental health and safety risk that EPA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, the Agency must evaluate the environmental health or safety effects of the planned rule on children, and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by the Agency.

EPA interprets E.O. 13045 as applying only to those regulatory actions that are based on health or safety risks, such that the analysis required under section 5-501 of the Order has the potential to influence the regulation. This final rule is not subject to Executive Order 13045 because it implements the phaseout schedule and exemptions established by Congress in Title VI of the Clean Air Act.

This rule is a not “significant energy action” as defined in Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355 (May 22, 2001)) because it is not likely to have a significant adverse effect on the supply, distribution, or use of energy. The rule affects only the pharmaceutical companies that requested essential use allowances.

Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (“NTTAA”), Public Law 104-113, section 12(d) (15 U.S.C. 272 note) directs EPA to use voluntary consensus standards in regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies. The NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards. This final rule does not involve technical standards. Therefore, EPA did not consider the use of any voluntary consensus standards.

The Congressional Review Act, 5 U.S.C. 801 et seq. , as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. Therefore, EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . This rule is not a “major rule” as defined by 5 U.S.C. 804(2). This rule will be effective June 12, 2007.

Under section 307(b)(1) of the Act, EPA finds that these regulations are of national applicability. Accordingly, judicial review of the action is available only by the filing of a petition for review in the United States Court of Appeals for the District of Columbia Circuit within sixty days of publication of the action in the Federal Register . Under section 307(b)(2), the requirements of this rule may not be challenged later in judicial proceedings brought to enforce those requirements.

Section 553(d) of the Administrative Procedures Act (APA) generally provides that rules may not take effect earlier than 30 days after they are published in the Federal Register . Today's final rule is issued under section 307(d) of the CAA, which states, “The provisions of section 553 through 557 * * * of Title 5 shall not, except as expressly provided in this subsection, apply to actions to which this subsection applies.” Thus, section 553(d) of the APA does not apply to this rule. EPA nevertheless is acting consistently with the policies underlying APA section 553(d) in making this rule effective June 12, 2007. APA section 553(d) provides an exception for any action that grants or recognizes an exemption or relieves a restriction. Because today's action grants an exemption to the phaseout of production and consumption of CFCs, EPA is making this action effective immediately to ensure continued availability of CFCs for medical devices.