I. Purpose

It is the Agency's objective that the risk-based capital stress test (RBCST) continue to determine regulatory capital requirements consistent with statutory requirements and constraints. The purpose of this proposed rule is to revise the risk-based capital (RBC) regulations that apply to Farmer Mac to more accurately reflect changes in Farmer Mac's operations or business practices. The substantive issues addressed in this proposed rule are treatment of program loan volume with certain credit enhancement features ( e.g. , Off-Balance Sheet AgVantage volume, subordinated interests, and program loan collateral pledged in excess of Farmer Mac's guarantee obligation (hereafter, “overcollateral”)), counterparty risk on nonprogram investments, and the resolution timing for nonperforming loans and associated carrying costs. We also propose minor formatting changes to the structure of the Credit Loss Module that are in the nature of technical changes.

In 2006, Farmer Mac initiated a program to guarantee timely repayment of principal and interest on notes that are collateralized by Farmer Mac-eligible agricultural real estate mortgage assets and are also secured by an obligation of the mortgage lender. We will refer to this product as Off-Balance Sheet AgVantage. The first such transaction was a guarantee of $500 million in guaranteed notes announced by Farmer Mac on January 23, 2006. Subsequently, Farmer Mac announced similarly structured transactions for $1 billion each on July 13, 2006, and April 11, 2007. The current version of the RBCST lacks a component to recognize the credit enhancement provided by the lender's obligation and, consequently, this volume is excluded from the modeled loan portfolio. We propose to begin including this product in the RBCST model. Further, in the event that Farmer Mac introduces products that include a subordinated interest retained by the primary lender, we propose a modeling treatment of such structures.

We proposed revisions to the treatment of nonprogram investments and the carrying cost of nonperforming loans in our rule published in November 2005. 1 We did not adopt those proposed revisions in the final rule that amended other parts of the model. 2 We now propose revisions to these two components that differ somewhat from those proposed in November 2005. We propose to account for counterparty risk on nonprogram investments by applying a discount (or “haircut”) to the yields of nonprogram investments scaled according to credit ratings, with a 10-year phase-in. We propose a method of calculating the carrying cost of nonperforming loans over a period we refer to as the Loan Loss Resolution Time period, or “LLRT”, that will include a quarterly update of the LLRT estimate.

Finally, we propose other technical changes to improve formatting and clarity of labeling in certain cells of the Credit Loss Module worksheets.

In 2006, Farmer Mac initiated a program to guarantee the timely repayment of principal and interest on notes that, in addition to being collateralized by Farmer Mac-eligible agricultural real estate mortgages, are also secured by an obligation of the primary lender of those mortgages. The current version of the model lacks a component to recognize the credit enhancement provided by the issuer's general obligation and any contractually required loan collateral in excess of the face value of the guaranteed notes.

We propose to revise the model to include this program volume by modeling all loans in guaranteed note portfolios in the same manner as all other program volume, with two differences. The first difference would recognize the risk mitigation provided by the general obligation by reducing the age-adjusted dollar losses estimated on the subject loans by an adjustment factor derived from historical default rates by the whole letter credit ratings of corporate bond issuers as reported by a nationally recognized statistical rating organization (NRSRO). The second difference would address the risk-reducing effects of contractually required overcollaterization of the subject portfolio, if any.

The derivation and application of the general obligation adjustment factor would be as follows. We would define five levels of credit ratings from “AAA” to “below BBB and unrated.” We would assign each of the NRSRO-rating categories to one of the five general whole-letter rating categories we define. The adjustment factors applied would be equal to the average cumulative issuer-weighted, 10-year corporate default rates from 1920 through the most recent year as published by Moody's Investor Services. 3 For issuers that are rated below BBB or are unrated, the model would apply a factor equal to the 10-year corporate default rates on Speculative-Grade bonds published in the same report. This rate would then be further adjusted to obtain an estimated loss rate related only to a general obligation of the corporate issuer/Off-Balance Sheet AgVantage counterparty with a given credit rating by considering the loss-severity rate as implied by recovery rates published in the same annual Moody's report (i.e., 1 minus recovery rate). In this case, because recovery rates are not published by whole-letter credit rating categories in the Moody's report, we would apply a loss severity implied by Moody's average Defaulted Bond Recovery Rates by Lien Position for as long a period as the Moody's report provides. Moody's 2006 report includes a table of data on recovery rates from 1982 to 2006. We propose to adopt a severity rate adjustment to historical corporate default rates based on the published long-term recovery rate for senior unsecured bonds. We considered using the recovery rates of the “All Bonds” category to calculate implied loss-severity rate factors but rejected that approach because we believe that the senior unsecured category is likely to reflect a more accurate analog of a general obligation than a “catch-all” category like “All Bonds” that would include senior secured bond and subordinated bond categories in addition to the senior unsecured category. We believe that neither of these bond lien position categories reflects the nature of a general obligation as accurately as the senior unsecured category.

We considered whether the senior secured category might be more applicable, given the mortgage loans that collateralize this obligation. However, we believe our proposed application is justified because, in the RBCST's Credit Loss Module, we target an estimate of the ultimate loss rate associated with the occurrence of what are assumed to be independent events (a corporate default and agricultural mortgage loan pool defaults). For example, suppose that a counterparty utilizing Farmer Mac's Off-Balance Sheet AgVantage product goes bankrupt. We assume that the default event is uncorrelated with the occurrence of worst-case stress in the agricultural lending sector. Therefore, we treat the estimated loss rate calculation on the general obligation separately from the estimated loss rate calculation on the program loan collateral. Thus, we believe the estimation of a counterparty default/severity rate should be done separately from and without regard to the loan collateral and, therefore, that the senior unsecured severity rate is most appropriate.

The following table sets forth the proposed credit loss adjustment factors and their components (Adjustment Factor = Default Rate × Severity Rate). 4

The adjustment factors would be updated quarterly as the updated Moody's report on Default and Recovery Rates of Corporate Bond Issuers becomes available. In the event that there is an interruption of Moody's publication of this annual report, or FCA informs Farmer Mac it has determined that the report has changed so much that it prevents or calls into question the identification of suitable updated factors, the prior year's factors would remain in effect until FCA revises the process through rulemaking.

In addition, the loan portfolio collateral underlying Off-Balance Sheet AgVantage volume may contain loan collateralization in excess of the face value of the note. This overcollateral may be contractually required or it may be provided by the issuer of the guaranteed note to reduce administrative expense associated with monitoring the eligibility of the collateral, or both. We view overcollateral in excess of contractually required amounts as solely an administrative convenience for the lender in question. When there is excess overcollateral, any loan in the overcollateral can automatically be deemed to replace a loan that might become ineligible under the AgVantage contract without the need for additional action on the part of either party. However, when it is discretionary and not contractually required, the amount of excess overcollateral provided by Farmer Mac's counterparty is subject to change at any time. Therefore, we believe that overcollateral that is required by contract and is not simply an administrative convenience should be recognized in the model for the risk mitigation it provides, but that the additional collateral provided solely for administrative convenience should not.

Whenever overcollateral exists, we model a portfolio that is larger than the dollar amount of Farmer Mac's guarantee obligation because there is no direct means to segregate a specific set of loans in the total collateral portfolio that could be considered to comprise 100 percent of the face value of the guaranteed notes. We then need an adjustment to reduce the amount of submitted loan collateral for purposes of estimating credit losses in the Credit Loss Module (CLM) in order to avoid the model's recognition of the credit risk on loan volume that is in excess of the contractually required volume.

Given the above considerations, we propose the following treatment. The Off-Balance Sheet AgVantage volume will be modeled using separate worksheets of the CLM with added features to:

We acknowledge that the order of these adjustments may seem incongruous with the legal structure of a given transaction, but we believe the proposed order makes sense from a modeling perspective. For example, the counterparty's general obligation might legally be first in terms of the security provided in support of Farmer Mac's risk position—followed by access to the loan collateral after an event of default by the counterparty. However, we adjust for the risk-mitigation of the contractually required overcollateralization first, followed by the adjustment for the general obligation. As a practical matter, we believe that Farmer Mac, to make itself whole on any losses after the counterparty defaults, would first work through the overcollateral, which would be held by a bankruptcy-remote vehicle. Only after that overcollateral proved insufficient to make Farmer Mac whole, would it need to pursue further recovery from the counterparty.

In the event Farmer Mac introduces new products that include the specific retention of a portion of the credit risk at either a loan level or a pool level by the primary lender or seller, this loan volume would also be modeled in separate worksheets of the CLM. The model would recognize the subordinated interest by multiplying the age-adjusted dollar losses in the subject portfolio by one minus the percentage of the subordinated interest in order to isolate the portion of estimated loss that Farmer Mac would incur. To the extent that such structures include further stratification of losses, such as a cap on the exposure to losses assumed by Farmer Mac, such stratification would be treated in a similar manner.

Currently, the RBCST does not include a component to reflect counterparty risk on Farmer Mac's portfolio of nonprogram investments or its derivatives. We propose adopting a system of haircuts to the yields on investment securities scaled according to credit ratings, with larger haircuts applied to cash flows from investments from issuers with lower credit ratings. We previously proposed haircuts in our November 2005 proposed rule but did not include them in our final rule published on December 26, 2006.

The previously proposed rule based investment haircuts on the risk-based capital regulations of the Office of Federal Housing Enterprise Oversight (OFHEO) (12 CFR part 1750). OFHEO's haircut levels were based on worst-case corporate bond default rates using Depression-era default rates and recovery rates, expanded to a 10-year period. For all counterparties, the default rates used were 5 percent for AAA, 12.5 percent for AA, 20 percent for A, 40 percent for BBB and 100 percent for below BBB or unrated. Severity rates used were 70 percent for nonderivative securities, yielding net haircuts of 3.5 percent, 8.75 percent, 14.0 percent, and 28.0 percent for ratings AAA through BBB, respectively. One hundred percent (100%) haircuts were applied to the “BBB or unrated” category. Our November 2005 proposal contained the same haircut levels as in OFHEO's regulations.

We decided not to adopt the November 2005 haircut proposal out of concern that the worst-case perspective on historical default rates is not as appropriate for Farmer Mac as it is for the housing Government-sponsored enterprises (GSEs). While it is plausible that worst-case stress in the housing markets could be highly correlated with worst-case conditions throughout the economy as exhibited by corporate bond defaults, we believe that worst-case agricultural credit conditions would likely be far less correlated with events of major stress in financial markets generally. Therefore, we have based the haircuts in this proposed rule on average bond default rates rather than worst-case historical corporate defaults. In addition, we have chosen not to follow a similar method for expansion of the worst case interval to the 10-year time interval. Instead, we propose a more direct reliance on empirical evidence and base the haircuts on Moody's Average 10-year cumulative issuer-weighted corporate default rates by whole letter rating, adjusted by the average implied long-term severity rate for Senior Unsecured bonds. The weighted-average yields of non-program investment categories would be reduced by the haircut percentage phased in linearly over the 10-year modeling horizon. The haircut levels are the same as the loss rate adjustment factors proposed above for application on loans underlying guaranteed notes, and like those factors these will be updated as new information becomes available. The proposed investment haircuts to recognize counterparty risk are as follows:

We propose to phase in the haircuts over the 10-year modeling horizon, based on our assumption that defaults on investments in response to a general downturn in the economy would not be instantaneous but rather spread through time. Furthermore, consistent with the OFHEO rule, we would not assign the rating of a parent company to its unrated subsidiary because NRSROs will not impute a corporate parent's rating to a derivative or credit enhancement counterparty in the context of a securities transaction, and because extending that rating to the unrated subsidiary would be tantamount to the regulator rating the subsidiary. 5 However, when an investment is structured as a collateralized obligation backed by the issuer's general obligation and, in turn, a pool of collateral, we accept the issuer rating of that issuer as the credit rating applicable to the security. Unrated securities that are fully guaranteed by GSEs receive the same treatment as AAA securities. Unrated securities backed by the full faith and credit of the U.S. Government do not receive a haircut.

In the event that FCA approves the purchase of an unrated investment, and portions of that investment with specific risk characteristics are later sold by Farmer Mac, the Director will take reasonable measures to adjust the haircut level applied to the investment to recognize the change in the risk characteristics of the retained portion. In taking these measures, the Director will consider the approaches taken to address capital requirements related to similar investments that have been adopted by other Federal financial institution regulators.

We propose to apply the haircuts to yields on a weighted-average basis by investment categories established in the “Data Inputs” worksheet of the RBCST, e.g., commercial paper, corporate debt and asset-backed securities, agency mortgaged-backed securities and collateralized mortgage obligations. This treatment would require Farmer Mac to calculate the weighted-average haircut by investment category to be applied to the weighted-average yields for each investment category and to input the haircuts into the “Data Inputs” worksheet. The proposed haircuts are set forth in the table in paragraph e. of section 4.1 in the appendix A, subpart B of part 652.

We considered proposing a similar haircut on derivative securities, on the ground that credit stress that impacts Farmer Mac's nonprogram investment portfolio would reasonably be expected to affect its derivatives counterparties and its terms of access to the swap market. 6 We believe a more appropriate approach to haircutting derivatives may be to reflect lost payments on defaulted derivative securities in a net-receive position, as well as the “replacement cost”—i.e., the additional expense associated with the replacement of derivative positions when the counterparty defaults and the market value of the derivative has increased since the date the defaulted derivative contract was executed. Such an increased market value would be to Farmer Mac's benefit when the counterparty does not default, but to its detriment when it does default. The Agency plans to address this issue in future revisions of the RBCST and specifically requests comment on the most appropriate approach to incorporate into the RBCST such “replacement cost” risk relating to derivative securities.

The RBCST was originally developed with a loss-severity estimate that assumes it would take Farmer Mac 1 year to work through problem loans from the point of default through final disposition. An estimate was used because, at the time of development of the RBCST, historical nonperforming loan resolution timing data from Farmer Mac were not sufficient. Farmer Mac data collected since that time indicate that an adjustment to the 1-year assumption to recognize Farmer Mac's actual historical experience is appropriate. If the actual historical time interval is longer than the current model's assumption, the capital needs for carrying nonperforming assets are likely understated in the model. Therefore, we propose amendments to the model to reflect costs associated with any additional time period over which Farmer Mac has carried nonperforming loans on average throughout its history. The LLRT is the weighted average time in fractions of 1 year that Farmer Mac has carried nonperforming loans from the date of the last interest payment, the Interest Paid-Through Date (ITPD) and the date the loan is finally resolved. This proposed LLRT differs from that proposed in November 2005 in the method used to estimate the LLRT period, as described in detail below.

In the final rule preamble to RBCST Version 2.0 published December 26, 2006, we discussed our intent to review further the scaling factor used to estimate the unpaid premium balance associated with estimated loan loss dollar volume. After further review, we believe that basing the scaling factor on the total current portfolio average relationship between origination loan amount and current outstanding loan amounts, as originally proposed, is more appropriate than basing the scaling factor on that same relationship among the small universe of loans that have been through the default and resolution process historically. Our view is based on the small size of the latter data set. This proposed rule also clarifies the calculation of the LLRT period and incorporates additional information provided by Farmer Mac regarding its actual historical LLRT experience.

With the exception of the 1-year period assumed in the loss-severity rate, the current RBCST under a steady-state scenario requires backfilling of loan loss volume with like assets, without recognizing any of the costs associated with carrying loans as non-earning, but funded, assets. Under the proposed rule, the RBCST would reflect additional costs associated with carrying the unpaid principal balance of nonperforming loans during the portion of the LLRT period that exceeds the 1-year assumption.

The change would be incorporated into the RBCST as follows. Off-balance sheet loans with estimated losses are assumed to be purchased from the off-balance sheet portfolio and fully funded at the short-term cost of funds rate used in the model, and any associated guarantee fee income is reversed. The short-term cost of funds (adjusted to incorporate interest rate shock effects) is used to estimate this additional funding cost in recognition of Farmer Mac's actual business practices. On-balance sheet loans generating losses are also removed from the interest earnings calculations and continue to generate interest expense at the blended cost of long- and short-term funds for the portion of the LLRT period that exceeds 1 year. In response to a comment on the original proposed rule, the rates are not adjusted to incorporate interest rate shock effects in this proposed rule, in contrast to the original proposal of this revision, in recognition that these rates would be in place at the time of the onset of the stress. The model would continue to backfill new loans at the point of loan resolution to retain its steady-state specification.

The proposed revisions involve two principal changes from the current RBCST. First, the date of backfill would be moved to a point in time that more accurately reflects Farmer Mac's actual experience. The model would then capture the additional costs of carrying loans in a non-interest earning category on the balance sheet. Second, the guarantee fee income would be reduced by the weighted average guarantee fee in the portfolio multiplied by the relevant off-balance sheet loan volume over the portion of the LLRT period that exceeds one year. The LLRT would become a data input to be updated with each quarterly submission of the model.

When we first proposed to revise this component in November 2005, we received several comments that noted the need for greater clarity in the LLRT's calculation formula. We have attempted to provide greater clarity in the proposed LLRT calculation as follows:

Farmer Mac commented on our November 2005 proposal that the application of funding rates to the calculation of the carrying cost of nonperforming loans is inconsistent with its actual practice and that the proposed change should be withdrawn. Farmer Mac's comment focused on three aspects of the proposed LLRT change. We will summarize those three and then provide a discussion of each with our response. In this discussion, we refer to liabilities due in 1 year or less as short-term liabilities and to liabilities due after 1 year as “long-term” debt. The comment's three points were: (a) Farmer Mac does not fund nonperforming loans using a certain tenor of debt with perfect consistency, (b) Farmer Mac can effectively change the cost of funds of any nonperforming on-balance sheet loan by employing a “cross-funding” strategy, and (c) the model should not fund on-balance sheet, nonperforming loans at the shocked interest rates under the interest rate risk stress component in the model because these loans would, by having been on the balance sheet at the point in time when rates are shocked, have already been funded at pre-shock rates.

Farmer Mac acknowledged that purchases of nonperforming, off-balance sheet loans would be done at short-term rates in the preponderance of cases, which is consistent with this proposed rule. However, Farmer Mac stated that, in actual practice, it uses a mix of short- and long-term debt because it decides on the appropriate funding term for such purchases based on the existing yield curve conditions and REO disposition expectations. While we accept the premise that in certain cases Farmer Mac might fund such purchases using longer term debt, we believe these cases are likely to be rare exceptions (e.g., steeply inverted yield curves) and do not create a sufficiently compelling reason to add more complexity to the model such as, for example, a new data input for average off-balance sheet nonperforming loan funding rates. Therefore, we made no change to this specific aspect of the model in this proposed rule.

Farmer Mac commented that it could employ a cross-funding strategy to effectively fund on-balance sheet non-performing loans at the short-term debt rates such as it uses in most cases of purchases of off-balance sheet nonperforming loans. While we agree that such opportunities could occur, we believe that assuming that Farmer Mac would always have the opportunity to purchase new program assets with the same size and expected life characteristics as on-balance sheet nonperforming loans is too broad an assumption to incorporate into the model. While it is possible that Farmer Mac could execute a similar rebalancing and reassignment of debt tenors among its program assets by adjustments to its ongoing daily funding selections, we would also view such a potentially complex incorporation of this contingent scenario into the model as unjustified for the added level of accuracy it might provide in certain cases. Therefore, we have made no change to the funding rates applied to calculate carrying cost of on-balance sheet nonperforming loans in this proposed rule.

Finally, Farmer Mac commented that the model should not fund on-balance sheet, nonperforming loans at shocked interest rate levels established by statute because these loans would, by having been already on the balance sheet at the point in time when rates are shocked, have been funded at pre-shocked rates. We agree with the comment and have revised the cost of funds applied to on-balance sheet nonperforming loans during the LLRT to pre-shock blended long- and short-term cost of funds rates in this proposed rule.

The proposed LLRT revisions are forward-looking only. In other words, actual loans that defaulted in year zero and are in their second year of nonperforming status in year one of the model's 10-year time horizon are not included in the proposed LLRT revision, and therefore no adjustment to restate current balance sheet amounts is needed. We considered an approach involving such a restatement but rejected it as unnecessarily complex. We note that our proposed revision to more accurately reflect the carrying cost of nonperforming loans results in less additional stress in a down-rate interest rate risk environment. This result is appropriate, as it would be less costly to fund nonperforming loans when interest rates are relatively low.

We propose one further adjustment to complete the LLRT revision. The RBCST is sometimes referred to as an “origination loan model” because it performs its loss estimation based on origination loan amounts and dates. The model does not incorporate loan interest rates or amortization of the loan portfolio. However, implementation of the LLRT revision would require us to make an estimate of loan amortization because it would be inaccurate to estimate the additional carrying cost associated with the LLRT period by applying the appropriate cost of funds to a loan's origination amount. We propose to use the portfolio average principal amortization to make this adjustment (i.e., total portfolio current scheduled principal balance divided by total origination balance). We would also incorporate into the blended rate used to calculate the carrying cost of nonperforming on-balance sheet loans an increment of interest expense associated swap expense according to Farmer Mac's practice of combining debt and swap contracts to fund loans.

In the RBCST spreadsheet, we have relocated the quarter-end date selection pull-down menu from the Assumptions and Relationships page to the Capital worksheet for convenience. We have also made line item labeling changes to enhance clarity in both the CLM and the RBC modules. We have also revised § 652.85 to update submission deadlines to be the same as the filing deadlines of Farmer Mac's public disclosures on Forms 10-Q and 10-K required by the Securities and Exchange Commission.

We have evaluated the impact of the proposed changes to the currently active version of the model, Version 2.0. Our tests indicate that changes related to the LLRT would have the most significant impact on risk-based capital calculated by the model. The table below provides an indication of the impact of the revisions in the quarter ended March 31, 2007. The lines labeled “General Obligation Adjustment”, “Investment Haircuts”, and “Carrying Costs of Nonperforming Loans” present the impacts if only that revision were made to the current version, and the column labeled “Difference” calculates the impact of that individual change for the quarter ended March 31, 2007, compared to the requirement calculated using the currently active Version 2.0. The bottom line presents the impact of all proposed revisions in Version 3.0. As the table shows, the individual estimated impacts do not have an additive relationship to the total impact on the model output. This is due to the interrelationship of the changes with one another when they are combined in Version 3.0.

Pursuant to section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ), FCA hereby certifies the rule will not have a significant economic impact on a substantial number of small entities. Farmer Mac has assets and annual income over the amounts that would qualify it as a small entity. Therefore, Farmer Mac is not considered a “small entity” as defined in the Regulatory Flexibility Act.

For the reasons stated in the preamble, part 652 of chapter VI, title 12 of the Code of Federal Regulations is proposed to be amended to read as follows:

We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2007-29170; Directorate Identifier 2007-NM-075-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD based on those comments.

We will post all comments we receive, without change, to http://dms.dot.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD.

The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Community, has issued EASA Airworthiness Directive 2007-0067R1, dated June 7, 2007 (referred to after this as “the MCAI”), to correct an unsafe condition for the specified products. The MCAI states:

Airbus has issued Service Bulletins A320-57-1129 and A320-57-1130, both Revision 01, both dated July 28, 2006. The actions described in this service information are intended to correct the unsafe condition identified in the MCAI.

Depending on airplane configuration, the compliance times specified in Service Bulletin A320-57-1129 range from between 37,500 and 42,000 flight cycles and 96,100 and 107,300 flight hours, whichever occurs first, from AD effective date; the repetitive intervals range from between 6,100 and 6,500 flight cycles and 15,700 and 16,800 flight hours, whichever occurs first; the grace period is 6,100 flight cycles or 15,600 flight hours, whichever occurs first.

Depending on airplane configuration, the compliance times specified in Service Bulletin A320-57-1130 range from between 23,600 and 45,000 flight cycles and 60,400 and 101,000 flight hours, whichever occurs first, from AD effective date; the repetitive intervals range from between 6,100 and 10,000 flight cycles and 15,600 and 22,500 flight hours, whichever occurs first; the grace period is 6,100 flight cycles or 15,600 flight hours, whichever occurs first.

This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with the State of Design Authority, we have been notified of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all pertinent information and determined an unsafe condition exists and is likely to exist or develop on other products of the same type design.

We have reviewed the MCAI and related service information and, in general, agree with their substance. But we might have found it necessary to use different words from those in the MCAI to ensure the AD is clear for U.S. operators and is enforceable. In making these changes, we do not intend to differ substantively from the information provided in the MCAI and related service information.

We might also have proposed different actions in this AD from those in the MCAI in order to follow FAA policies. Any such differences are highlighted in a Note within the proposed AD.

Based on the service information, we estimate that this proposed AD would affect about 583 products of U.S. registry. We also estimate that it would take about between 16 and 77 work-hours per product to comply with the basic requirements of this proposed AD. The average labor rate is $80 per work-hour. Based on these figures, we estimate the cost of the proposed AD on U.S. operators to be between $746,240 and $3,591,280, or between $1,280 and $6,160 per product.

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

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

We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify this proposed regulation:

1. Is not a “significant regulatory action” under Executive Order 12866;

2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

Comments Invited

We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2007-29175; Directorate Identifier 2007-NM-134-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD based on those comments.

We will post all comments we receive, without change, to http://dms.dot.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD.

The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Community, has issued EASA Airworthiness Directive 2006-0115, dated May 10, 2006 (referred to after this as “the MCAI”), to correct an unsafe condition for the specified products. The MCAI states:

Dassault has issued the following service information:

This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with the State of Design Authority, we have been notified of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all pertinent information and determined an unsafe condition exists and is likely to exist or develop on other products of the same type design.

We have reviewed the MCAI and related service information and, in general, agree with their substance. But we might have found it necessary to use different words from those in the MCAI to ensure the AD is clear for U.S. operators and is enforceable. In making these changes, we do not intend to differ substantively from the information provided in the MCAI and related service information.

We might also have proposed different actions in this AD from those in the MCAI in order to follow FAA policies. Any such differences are highlighted in a Note within the proposed AD.

Based on the service information, we estimate that this proposed AD would affect about 739 products of U.S. registry. We also estimate that it would take about 2 work-hours per product to comply with the basic requirements of this proposed AD. The average labor rate is $80 per work-hour. Based on these figures, we estimate the cost of the proposed AD on U.S. operators to be $118,240, or $160 per product.

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

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

We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify this proposed regulation:

1. Is not a “significant regulatory action” under Executive Order 12866;

2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

We invite you to submit any relevant written data, views, or arguments regarding this proposed AD. Send your comments to an address listed in the ADDRESSES section. Include the docket number “FAA-2007-29174; Directorate Identifier 2007-NM-125-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments.

We will post all comments we receive, without change, to http://dms.dot.gov , including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this proposed AD. Using the search function of that web site, anyone can find and read the comments in any of our dockets, including the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc.). You may review DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477-78), or you may visit http://dms.dot.gov.

You may examine the AD docket on the Internet at http://dms.dot.gov , or in person at the Docket Operations office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Operations office (telephone (800) 647-5527) is located on the ground floor of the West Building at the DOT street address stated in the ADDRESSES section. Comments will be available in the AD docket shortly after the Docket Management System receives them.

We have received reports of cracks found at the cutout in the web of the body station 303.9 frame inboard of stringer 16L on seven Boeing Model 737 “classic” airplanes. The cracks were found on airplanes that had accumulated between 37,562 and 64,000 total flight cycles. Such cracking, if not corrected, could prevent the left forward entry door from sealing correctly, and could cause in-flight decompression of the airplane.

We have reviewed two service bulletins related to this action. The service bulletins are similar but affect different groups of airplanes.

Boeing Alert Service Bulletin 737-53A1188, Revision 2, dated May 9, 2007, for certain Model 737-300, -400, and -500 series airplanes, describes the following actions:

• Repetitive high-frequency eddy current (HFEC) and detailed inspections to detect cracking in the station 303.9 web and doubler around the cutouts for door stop straps at stringers 15L and 16L.

• A repair/preventive change, which includes installing a new web, doubler, and stop fitting assemblies; changing the shape of the web cutout; and doing an eddy current inspection.

Service Bulletin 737-53A1188 specifies a threshold for the initial inspection of 10,000 total flight cycles and a grace period of 2,250 flight cycles.

Boeing Alert Service Bulletin 737-53A1197, dated August 25, 2006, for certain Model 737-100, -200, -200C, -300, -400, and -500 series airplanes, describes the following actions:

• Repetitive ultrasound inspections of the slot-shaped cutout in the web for the door stop strap at stringer 16L.

• Repetitive HFEC inspections of the web along the upper edge and lower edge of the doubler around the doorstop strap at stringer 16L.

• Repetitive detailed inspections of the web around the doubler for the cutout at stringer 16.

• A repair/preventive change, which involves installing a new web and doubler.

Service Bulletin 737-53A1197 specifies a threshold for the initial inspection of 30,000 total flight cycles and a grace period of 2,250 flight cycles.

For both service bulletins, a repair/preventive change eliminates the need for the repetitive inspections. For airplanes on which the repair/preventive change was previously done according to the original version or Revision 1 of Alert Service Bulletin 737-53A1188, replacing the existing kit with a new kit (in accordance with Revision 2) is necessary to eliminate the need for the repetitive inspections.

Accomplishing the actions specified in the service bulletins is intended to adequately address the unsafe condition.

We have evaluated all pertinent information and identified an unsafe condition that is likely to exist or develop on other airplanes of this same type design. For this reason, we are proposing this AD, which would require accomplishing the actions specified in the service information described previously, except as discussed below.

The service bulletins specify to contact the manufacturer for instructions on how to repair certain conditions, but this proposed AD would require repairing those conditions in one of the following ways:

• Using a method that we approve; or

• Using data that meet the certification basis of the airplane, and that have been approved by an Authorized Representative for the Boeing Commercial Airplanes Delegation Option Authorization Organization whom we have authorized to make those findings.

There are about 2,765 airplanes of the affected design in the worldwide fleet. The following table provides the estimated costs, depending on airplane configuration, for U.S. operators to comply with this proposed AD.

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

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

We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that the proposed regulation:

1. Is not a “significant regulatory action” under Executive Order 12866;

2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket. See the ADDRESSES section for a location to examine the regulatory evaluation.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

This proposed rule would amend 15 CFR Part 806.14 to set forth the reporting requirements for the BE-11, Annual Survey of U.S. Direct Investment Abroad. The Department of Commerce, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995.

The BE-11 survey is a mandatory survey and is conducted annually by BEA under the International Investment and Trade in Services Survey Act (22 U.S.C. 3101-3108), hereinafter, “the Act.” BEA will send the survey to potential respondents in March of each year; responses will be due by May 31.

BEA proposes to collect data on bank and nonbank U.S. parent companies and their bank and nonbank foreign affiliates on the BE-11 annual survey. Currently, collection of data on the BE-11 annual survey is limited to that of nonbank U.S. parent companies and their nonbank foreign affiliates. Data for bank U.S. parent companies and their bank and nonbank foreign affiliates and data for bank affiliates of nonbank U.S. parent companies have been collected only once every five years on BEA's BE-10, Benchmark Survey of U.S. Direct Investment Abroad.

To collect data for a U.S. Reporter that is a bank, BEA is proposing to use the BE-11A, Report for U.S. Reporter, that is used for nonbank U.S. parents. BEA is proposing that a new, specialized form, Form BE-11B(FN), be provided for foreign affiliates of bank U.S. parents and bank affiliates of nonbank U.S. parents. The items proposed to be collected on this form would include most of those collected on the form used for bank affiliates on the BE-10 benchmark survey and a few additional items, including sales of services by destination and employment by broad occupational structure, that would make the data more useful for studies of offshoring and more comparable with the data collected for nonbank affiliates of nonbank parents. Because affiliates of bank parents and bank affiliates of nonbank parents tend to be quite large, BEA is proposing to set the exemption level for reporting on the proposed Form BE-11B(FN) at $250 million. (In comparison, the exemption level for other foreign affiliates would be $40 million.) Foreign affiliates of bank U.S. parents and bank affiliates of nonbank U.S. parents with total assets, sales or gross operating revenues, and net income of $250 million or less (positive or negative) would not be required to be reported on the annual survey. Instructions on the forms and in the instruction booklet will be modified to include banks.

The Bureau of Economic Analysis (BEA), U.S. Department of Commerce, conducts the BE-11 survey under the authority of the International Investment and Trade in Services Survey Act (22 U.S.C. 3101-3108), hereinafter, “the Act.” Section 4(a) of the Act requires that with respect to United States direct investment abroad, the President shall, to the extent he deems necessary and feasible, conduct a regular data collection program to secure current information on international financial flows and other information related to international investment and trade in services, including (but not limited to) such information as may be necessary for computing and analyzing the United States balance of payments, the employment and taxes of United States parents and affiliates, and the international investment and trade in services position of the United States.

In Section 3 of Executive Order 11961, as amended by Executive Orders 12318 and 12518, the President delegated the responsibility for performing functions under the Act concerning direct investment to the Secretary of Commerce, who has redelegated it to BEA. The annual survey of U.S. direct investment abroad is a sample survey that collects information on a variety of measures of the overall operations of U.S. parent companies and their foreign affiliates, including total assets, sales, net income, employment and employee compensation, research and development expenditures, and exports and imports of goods. The sample data are used to derive universe estimates in nonbenchmark years from similar data reported in the BE-10, Benchmark Survey of U.S. Direct Investment Abroad, which is taken every five years. The data are needed to measure the size and economic significance of direct investment abroad, measure changes in such investment, and assess its impact on the U.S. and foreign economies. The data are disaggregated by country and industry of the foreign affiliate and by industry of the U.S. parent.

This proposed rule has been determined to be not significant for purposes of E.O. 12866.

This proposed rule does not contain policies with Federalism implications sufficient to warrant preparation of a Federalism assessment under E.O. 13132.

This proposed rule contains a collection-of-information requirement subject to review and approval by the Office of Management and Budget (OMB) under the Paperwork Reduction Act (PRA). The requirement has been submitted to the OMB for approval as a revision to a collection currently approved under OMB control number 0608-0053. BEA proposes to expand the reporting requirements on the BE-11 annual survey so that U.S. parent companies that are banks and their foreign affiliates and bank foreign affiliates of nonbank U.S. parent companies will now be reportable. Minor changes will be required to the instructions on Form BE-11A, Report for U.S. Reporter, so it can be used to collect bank as well as nonbank data. A new, sepialized form, Form BE-11B(FN), will be provided for foreign affiliates of bank parents and bank affiliates of nonbank parents.

Notwithstanding any other provisions of the law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with, a collection-of-information subject to the requirements of the Paperwork Reduction Act unless that collection displays a currently valid OMB control number.

The BE-11 survey, as proposed, is expected to result in the filing of reports from approximately 1,550 respondents. The respondent burden for this collection of information will vary from one company to another, but is estimated to average 79.3 hours per response, including time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Thus the total respondent burden of the survey is estimated at 122,900 hours (1,550 respondents times 79.3 hours average burden). This estimate is slightly above the burden of 117,600 hours currently requested for this survey in the OMB inventory. The increase in the burden is due to proposed changes in reporting requirements.

Comments are requested concerning: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the burden estimate; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology. Comments should be addressed to: Director, Bureau of Economic Analysis (BE-1), U.S. Department of Commerce, Washington, DC 20230; FAX: 202-606-5311; and to the Office of Management and Budget, O.I.R.A., Paperwork Reduction Project 0608-0053, Attention PRA Desk Officer for BEA, via e-mail at pbugg@omb.eop.gov, or by Fax at 202-395-7245.

The Chief Counsel for Regulation, Department of Commerce, has certified to the Chief Counsel for Advocacy, Small Business Administration, under the provisions of the Regulatory Flexibility Act (5 U.S.C. 605(b)), that this proposed rulemaking, if adopted, will not have a significant economic impact on a substantial number of small entities. Few small U.S. businesses are subject to the reporting requirements of this survey. U.S. companies that have direct investments abroad tend to be quite large, thereby excluding them from the definition of small entity. The proposed changes to the BE-11 annual survey would not increase the burden on small businesses. The exemption level for the BE-11 survey is set in terms of the size of a U.S. company's foreign affiliates (foreign companies owned 10 percent or more by the U.S. company); if a foreign affiliate has total assets, sales, or net income (loss) greater than the exemption level, it must be reported on Form BE-11B(LF), BE-11B(SF), BE-11B(FN), BE-11B(EZ), or BE-11C. The exemption level for the BE-11 survey for nonbank affiliates of nonbank U.S. Reporters is unchanged at $40 million. Because affiliates of bank parents and bank affiliates of nonbank parents tend to be quite large and to keep respondent burden as low as possible, the proposed exemption level for reporting on the proposed Form BE-11B(FN) is $250 million. Affiliates of bank parents and bank affiliates of nonbank parents with total assets, sales or gross operating revenues, and net income (loss) of $250 million or less would not be required to be reported on the annual survey. To further ease the reporting burden on smaller businesses, U.S. Reporters with total assets, sales or gross operating revenues, and net income (loss) less than or equal to $150 million are required to report only selected items on the BE-11A form for U.S. Reporters in addition to forms they may be required to file for their foreign affiliates.

Because few small businesses are impacted by this rule, and because those small businesses that are impacted are subject to only minimal recordkeeping burdens, the Chief Counsel for Regulation certifies that this proposed rule will not have a significant economic impact on a substantial number of small entities.

For the reasons set forth in the preamble, BEA proposes to amend 15 CFR part 806 as follows:

A notice of proposed rulemaking and notice of public hearing that appeared in the Federal Register on Friday, June 1, 2007 (72 FR 30501), announced that a public hearing was scheduled for September 28, 2007, at 10 a.m. in the IRS Auditorium, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC. The subject of the public hearing is under section 4980G of the Internal Revenue Code.

The public comment period for these regulations expired on August 30, 2007. The notice of proposed rulemaking and notice of public hearing instructed those interested in testifying at the public hearing to submit a request to speak and an outline of the topics to be addressed by August 28, 2007. As of September 6, 2007, no one has requested to speak and therefore, the public hearing scheduled for September 28, 2007, is cancelled.

For additional information see the direct final rule which is published in the Rules Section of this Federal Register .

In the Final Rules section of this Federal Register , EPA is approving the State's SIP submittal as a direct final rule without prior proposal because the Agency views this as a noncontroversial submittal and anticipates no adverse comments. A detailed rationale for the approval is set forth in the direct final rule. If no adverse comments are received in response to this rule, no further activity is contemplated. If EPA receives adverse comments, the direct final rule will be withdrawn and all public comments received will be addressed in a subsequent final rule based on this proposed rule. EPA will not institute a second comment period. Any parties interested in commenting on this action should do so at this time. Please note that if EPA receives adverse comment on an amendment, paragraph, or section of this rule and if that provision may be severed from the remainder of the rule, EPA may adopt as final those provisions of the rule that are not the subject of an adverse comment. For additional information, see the direct final rule which is located in the Rules section of this Federal Register .

Throughout this document whenever “we,” “us,” or “our” is used, we mean EPA. This supplementary information section is arranged as follows:

When submitting comments, remember to:

1. Identify the rulemaking by docket number and other identifying information (subject heading, Federal Register date and page number).

2. Follow directions—The EPA may ask you to respond to specific questions or organize comments by referencing a Code of Federal Regulations (CFR) part or section number.

3. Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes.

4. Describe any assumptions and provide any technical information and/or data that you used.

5. If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.

6. Provide specific examples to illustrate your concerns, and suggest alternatives.

7. Explain your views as clearly as possible, avoiding the use of profanity or personal threats.

8. Make sure to submit your comments by the comment period deadline identified.

This proposed rule affects electrical generation units (EGUs) as well as large boilers which are subject to Ohio's NO X budget trading program and are not considered to be “new” units under the guidelines of the trading program. Affected units will not receive certain excess new unit set aside allowances for the year 2006.

On December 31, 2005, Ohio discontinued the motor vehicle inspection and maintenance (I/M) programs, otherwise known as E-Check, in the Cincinnati and Dayton areas. According to section 110(l) of the Clean Air Act, EPA may not approve the discontinuation of this program unless the State can demonstrate that the revision will not interfere with attainment of the health-based National Ambient Air Quality Standards. For this purpose, Ohio is providing emission reductions that compensate for the emission increase expected to result from discontinuation of E-Check. It should be noted that Ohio is currently seeking approval of the removal of E-Check from the SIP, which will be addressed in a separate rulemaking.

As compensation for the emissions reductions lost through the discontinuation of E-Check, Ohio adopted requirements for low-volatility gasoline and requirements for lower emissions from gas cans, solvent degreasing, and automobile refinishing. EPA approved the gas can, solvent degreasing, and automobile refinishing measures in a rulemaking action published on March 30, 2007, (72 FR 15045). The lower-volatility gasoline requirement was originally intended to be implemented in 2006, but was delayed until June 2008. (For more information see rulemaking published on May 25, 2007, at 72 FR 29269).

Without the low-volatility gasoline program to compensate for emissions in 2006 resulting from discontinuation of E-Check, Ohio asked EPA, in a May 6, 2005, letter, if emission control devices that were installed on various power plants around the Cincinnati-Dayton area could provide the compensatory NO X emissions reduction. In our response, dated September 20, 2005, EPA noted that, while the reductions clearly occurred and clearly provide both local and regional air quality benefits, these actions would not be considered surplus emission reductions because these reductions would have occurred anyway through regular implementation of the Regional NO X Budget Trading Program, otherwise known as the NO X SIP Call.

The NO X SIP Call created a market-based cap and trade program to reduce NO X emissions from power plants and other large sources across the Eastern half of the United States. The program is designed to allow states to have greater flexibility to achieve state-wide emission reductions with local as well as regional benefits. Because the NO X SIP Call garners reductions which are not source-specific, Ohio does not have the ability to decide exactly where reductions will take place.

However, we noted that if Ohio were to withdraw and retire new source set aside allowances, this action would yield surplus reductions. By retiring new source set aside allowances that would otherwise have been redistributed the following year for use by existing sources subject to the trading program, Ohio has mandated a reduction in emissions that EPA considers surplus reductions beyond the reductions of the existing NO X SIP Call.

Ohio adopted changes to Ohio Administrative Code (OAC) Chapters 3745-72-01 and 3745-14-05, and submitted them for approval on October 11, 2006. These rules provide a revised start date for the use of low-volatility gasoline and provide the necessary quantity of interim, surplus NO X emission reductions through the permanent retirement of new source set aside allowances from the State's NO X budget trading program.

Withholding and retiring new source set aside allowances from the year 2005 ensured that these allowances would not return to existing NO X budget trading program sources in 2006, therefore providing surplus emission reductions for 2006. As indicated above, the portion of the submittal concerning low-volatility gasoline has been addressed by EPA in a separate rulemaking action.

The Director of the Ohio Environmental Protection Agency (Ohio EPA) submitted a request for EPA to approve revisions to OAC 3745-14-05 (NO X allowance allocations) in a letter dated October 11, 2006.

The proposed rule language was filed as an emergency rule on April 24, 2006. A proposed permanent adoption package for this rule was filed the same day. The Director of the Ohio Environmental Protection Agency issued an order of adoption for permanent revisions to OAC 3745-14-05 on July 10, 2006. The effective date of this order was July 17, 2006. EPA is rulemaking on the permanent rule revisions and is not acting on the emergency rules.

A public hearing on revisions to OAC 3745-14-05 was held on June 2, 2006, in Columbus, Ohio.

A commenter questioned the necessity of amending OAC rule 3745-14-05; the commenter stated that the Cincinnati/Dayton area had already monitored attainment, so meeting anti-backsliding regulations is not necessary. Ohio EPA disagreed with the commenter, noting that the Cincinnati area may still be monitoring nonattainment air quality at four sites. Also, OEPA noted that the anti-backsliding elements of the areas' 1-hour ozone nonattainment requirements cannot be removed; therefore the State's proposed rule revisions are, in fact, necessary.

A commenter representing Buckeye Power, Inc., Columbus Southern Power Company, Dayton Power & Light Company, Duke Energy, Ohio Power Company, and Ohio Valley Electric Corporation (hereafter described as the ‘Utilities') objected to the proposed rule revisions because local reductions were being realized by applying regional reductions to NO X budgets, which wouldn't necessarily have local benefit to the Cincinnati/Dayton areas. Ohio EPA responded by noting that air quality modeling indicates that the optimum scenario for reducing ozone in the Cincinnati/Dayton areas is a combination of regional NO X reductions coupled with local VOC reductions. Ohio EPA also noted that EPA had commented on the regionalism of the retired new source set aside allowances.

The ‘Utilities' believe that withdrawal and retirement of 240 new source set aside allowances undermines the stability of the regional NO X trading program. Ohio EPA disagreed, and noted that the retired allowances were set aside, and unused, by new sources in the specified time period, and that such a small amount of retired new source set aside allowances would not have an impact on the budget trading program.

The ‘Utilities' commented that they believe the retirement of NO X allowances is unlawful under Ohio statute, and that the Ohio EPA has no authority to retire or otherwise remove allowances from the pool. Ohio EPA disagreed, noting that they have indeed had the authority to retire or remove allowances since the program's inception in 2002. Additionally, Ohio EPA found it important to make clear that a NO X budget allowance does not constitute a property right.

The ‘Utilities' commented that they believe retiring allowances will not create emission reductions because sources can simply purchase more allowances from anywhere in the U.S. at the end of the ozone season. Ohio EPA responded by noting that the point of the NO X Budget Trading Program is not to limit individual sources, but to limit regional emissions, which-as they had already stated-will benefit Cincinnati and Dayton.

The ‘Utilities' comment that they had provided Ohio EPA with an alternative proposal for emission reductions in 2005, but Ohio EPA chose not to adopt the proposal. Ohio EPA responded by noting that the utilities' proposal to reduce emissions through compliance with the NO X Budget Trading Program could not be considered to garner surplus emissions unless allowances were retired to make those reductions surplus. Ohio EPA noted that the utilities did not appear to be willing to retire the associated allowances.

A commenter representing American Municipal Power (AMP) Ohio stated that Ohio EPA had not demonstrated that low-RVP gasoline was not available for the 2006 ozone season. Ohio EPA responded by noting the multitude of issues which caused it to conclude that institution of 7.8 RVP fuel was not an option for the 2006 ozone season. The reasons included a U.S. EPA survey indicating that refinery production capabilities for 7.8 RVP gasoline would fall short for the Cincinnati and Dayton areas, as well as lack of a preemption waiver from U.S. EPA allowing the adoption of low-RVP fuel. Additionally, Ohio EPA noted that if it were to allow noncompliant fuel into the area, compliant suppliers providing low-RVP fuel would be at a disadvantage.

A commenter representing AMP Ohio stated that the Ohio EPA targeted NO X budget sources for NO X reductions without fully evaluating other appropriate reduction sources. Ohio EPA disagreed, noting that prior to establishing the RVP fuel program for Cincinnati and Dayton, they fully evaluated numerous control strategies to offset the emissions reduction shortfall that resulted from closing the E-Check program.

A commenter representing the Ohio Manufacturers' Association (OMA) stated that Ohio's manufacturing sector only represents 7% of the state's total NO X emissions, yet the manufacturing sector is being called on to, in their own words, “solve the problem”. Ohio EPA noted that the effect of retiring 240 allowances on non-EGU's would be very small for a one-time allocation adjustment. Ohio EPA noted that 15 non-EGU's are participating in Ohio's NO X trading program, and two of those units are shut down. Furthermore, of the 240 allowances being retired, non-EGU's represent 19 of the 240 allowances spread across the 15 non-EGU facilities whether still in operation or not.

The State of Ohio has adopted revisions to its NO X budget trading program regulations. On October 11, 2006, the State requested that EPA approve these rule revisions for incorporation into Ohio's SIP. Specifically, Ohio's revisions to this rule are:

OAC 3745-14-05 (C)(7):

Ohio inserted this new paragraph which withholds and permanently retires 240 new source set aside allowances from the 2005 control period to offset emission increases associated with the termination of the E-Check program in Cincinnati and Dayton. These withheld and retired allowances would normally have been allocated to existing Ohio NO X budget sources in 2006.

On February 23, 2007, Ohio supplemented its submittal with information regarding NO X emission reductions that have occurred in the Cincinnati/Dayton area. This letter identifies several actions that substantially reduced NO X emissions starting from before the 2006 ozone season, which include installation of selective catalytic reduction controls at 3 units and installation of low NO X burners at 9 other units. Ohio estimates that the total emission reduction from these actions is over 10,000 tons per ozone season.

In ordinary circumstances, an emission limit can be imposed on a specific source, and the surplus emission reduction clearly occurs at the location of that source. However, a different relationship between regulatory action and resulting emission reductions applies to power plants and other sources regulated under the NO X SIP Call. The NO X SIP Call provides a restricted set of allowances that allow a reduced quantity of NO X emissions across the entire NO X SIP Call region, while maximizing the flexibility of participants in the program to decide where these reductions will occur. In particular, allowances may be bought and sold and used anywhere in the NO X SIP Call region. Since the allowances are not assigned to particular locations, Ohio posed the question to EPA of how best to pursue utility emission reductions in the Cincinnati/Dayton area to obtain creditable reductions. EPA responded that reductions at utilities could not be considered surplus to the NO X SIP Call unless Ohio provided for retirement of allowances, but EPA added that Ohio had substantial flexibility in what allowances to retire.

Ohio's action creates a surplus reduction of 240 tons of NO X emissions. This action fully conforms with EPA regulations concerning the NO X SIP Call and other relevant regulations, and so this action is fully approvable. More at issue is whether this action may be treated as fully offsetting the loss of 240 tons of NO X emission reductions (or its VOC equivalent) from the discontinuation of E-Check in the Cincinnati and Dayton areas.

An important underpinning of the NO X SIP Call is the interchangeability of emission reductions, i.e. a finding that the impacts of the emissions are sufficiently regional in nature and sufficiently insensitive to the spatial distribution of the emission reductions that EPA need not restrict where allowances are used. This finding underlying the NO X SIP Call has important implications for Ohio's action in retiring allowances. EPA believes that Ohio's retirement of 240 allowances may be credited to make 240 tons of the actual emission reductions occurring in the Cincinnati/Dayton area surplus. We find that the retirement benefits Cincinnati/Dayton air quality, and is reasonable under the circumstances, including the actual emissions reductions in the area.

EPA believes that Ohio may reasonably assign the surplus reductions it has mandated to actual emission reductions that have occurred in the Cincinnati/Dayton area. Allowances have no inherent geographic location. That is, the allowances have no inherent properties that dictate the location of the emission reduction that is attributed to a particular retirement of a particular allowance. Substantial emission reductions have occurred in the Cincinnati/Dayton area. While most of the reductions would be attributable to the NO X SIP Call, EPA believes that Ohio has latitude to attribute 240 tons of the 2006 NO X emission reductions in the Cincinnati/Dayton area to its retirement of 240 allowances. Furthermore, even if Ohio or EPA were to associate the allowance retirement with emission reductions in a geographically broader area, EPA believes that the corresponding air quality benefit in the Cincinnati/Dayton area would be similar to the benefit of 240 tons of NO X emission reductions within the Cincinnati/Dayton area. Indeed, the regional influence of NO X emissions is the fundamental basis for EPA to establish the NO X trading program as a regional program without restriction on where (within the trading area) allowances may be used.

EPA views Ohio as having made surplus 240 tons of the emission reductions in 2006. The surplus reductions that result from this retirement provide significant benefit to the Cincinnati/Dayton area, and it is reasonable to assign 240 tons of NO X emission reductions credit to the Cincinnati/Dayton area, and to count 240 tons of the area's actual reductions as attributable to the retirement of 240 allowances. Therefore, EPA proposes to approve this rule change, and to conclude that Ohio has provided compensatory emissions decreases for discontinuing the E-Check program in this area in the amount of 240 tons of NO X emission reduction for the year 2006.

EPA received a January 12, 2007, letter commenting on this issue from a law firm on behalf of the Environmental Committee of the Ohio Electric Utility Institute. This law firm submitted additional comments on February 15, 2007, and on March 13, 2007. EPA views these letters as commenting on the action being proposed here. EPA will review these comments, and address any comments it receives during the comment period, as we prepare final rulemaking on Ohio's submittal.

OAC 3745-14-05 (C)(8) through (C)(10):

Ohio renumbered the existing paragraphs (C)(7) through (C)(9) to (C)(8) through (C)(10), in order to accommodate the inclusion of the new paragraph (C)(7). As the addition of a new paragraph (C)(7) necessitates renumbering the existing paragraphs, we find this rule change to be acceptable and approvable.

EPA is proposing to approve the addition of paragraph (C)(7) to OAC 3745-14-05, and its incorporation into the Ohio SIP, as adopted by the State of Ohio, as defined in Ohio's October 11, 2006, submittal. EPA is also proposing to approve the renumbering of the original OAC 3745-14-05 paragraphs (C)(7) through (C)(9) to (C)(8) through (C)(10), respectively. If EPA takes final action as proposed here, EPA would then retire 240 allowances from Ohio's new source set aside as instructed in this rule. EPA proposes to conclude that Ohio has thereby provided compensatory emissions decreases for discontinuing the E-Check program in this area in the amount of 240 tons of NO X emission reduction for the year 2006.

Under Executive Order 12866 (58 FR 51735, September 30, 1993), this action is not a “significant regulatory action” and, therefore, is not subject to review by the Office of Management and Budget.

This proposed 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. ).

This proposed action merely proposes to approve state law as meeting Federal requirements and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this proposed 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 proposes to approve pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4).

This action also does not have Federalism implications because it does not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). This action merely proposes to approve a state rule implementing a Federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act.

This proposed 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 proposed rule also is not subject to Executive Order 13045 “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it is not economically significant.

Because it is not a “significant regulatory action” under Executive Order 12866 or a “significant regulatory 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).

Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), 15 U.S.C. 272, requires Federal agencies to use technical standards that are developed or adopted by voluntary consensus to carry out policy objectives, so long as such standards are not inconsistent with applicable law or otherwise impractical. In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Absent a prior existing requirement for the state to use voluntary consensus standards, EPA has no authority to disapprove a SIP submission for failure to use such standards, and it would thus be inconsistent with applicable law for EPA to use voluntary consensus standards in place of a program submission that otherwise satisfies the provisions of the Clean Air Act. Therefore, the requirements of section 12(d) of the NTTA do not apply.

For further information, please see the information provided in the direct final action, with the same title, that is located in the “Rules and Regulations” section of this Federal Register publication. Please note that if EPA receives adverse comment on an amendment, paragraph, or section of this rule and if that provision may be severed from the remainder of the rule, EPA may adopt as final those provisions of the rule that are not the subject of an adverse comment.

EPA is proposing to approve Pennsylvania's State Plan for the control of mercury emissions from coal-fired EGUs, as submitted by Pennsylvania on November 6, 2006, and as subsequently revised by Pennsylvania on March 16, 2007. EPA is proposing to determine that the State Plan will meet the applicable requirements of CAMR. In its State Plan, Pennsylvania would meet CAMR requirements by implementing a Pennsylvania-specific mercury control regulation for coal-fired EGUs, rather than through participation in the EPA-administered CAMR cap-and-trade program. Pennsylvania's state-specific regulation establishes annual emission limitations as part of a Statewide mercury nontradable allowance program; sets mercury emissions standards; and includes other requirements for the purpose of controlling mercury emissions from coal-fired EGUs.

CAMR was published by EPA on May 18, 2005 (70 FR 28606, “Standards of Performance for New and Existing Stationary Sources: Electric Utility Steam Generating Units; Final Rule”). In this rule, acting pursuant to its authority under section 111(d) of the Clean Air Act (CAA), 42 U.S.C. 7411(d), EPA required that all States and the District of Columbia (all of which are referred to herein as States) meet Statewide annual budgets limiting mercury emissions from coal-fired EGUs (as defined in 40 CFR 60.24(h)(8)) under Clean Air Act (CAA) section 111(d). EPA required all States to submit State Plans with control measures that ensure that total, annual mercury emissions from the coal-fired EGUs located in the respective States do not exceed the applicable Statewide annual EGU mercury budget. Under CAMR, States may implement and enforce these reduction requirements by participating in the EPA-administered cap-and-trade program or by adopting any other effective and enforceable control measures.

CAA section 111(d) requires States, and, along with CAA section 301(d) and the Tribal Air Rule (40 CFR part 49), allows Tribes granted treatment as States (TAS), to submit State Plans to EPA that implement and enforce the standards of performance. CAMR explains what must be included in State Plans to address the requirements of CAA section 111(d). The State Plans were due to EPA by November 17, 2006. Under 40 CFR 60.27(b), the Administrator will approve or disapprove the State Plans.

CAMR establishes Statewide annual EGU mercury emission budgets and is to be implemented in two Phases. The first Phase of reductions starts in 2010 and continues through 2017. The second Phase of reductions starts in 2018 and continues thereafter. CAMR requires States to implement the budgets by either: (1) Requiring coal-fired EGUs to participate in the EPA-administered cap-and-trade program; or (2) adopting other coal-fired EGU control measures of the respective State's choosing and demonstrating that such control measures will result in compliance with the applicable State annual EGU mercury budget.

Each State Plan must require coal-fired EGUs to comply with the monitoring, recordkeeping, and reporting provisions of 40 CFR part 75 concerning mercury mass emissions. Each State Plan must also show that the State has the legal authority to adopt emission standards and compliance schedules necessary for attainment and maintenance of the State's annual EGU mercury budget and to require the owners and operators of coal-fired EGUs in the State to meet the monitoring, recordkeeping, and reporting requirements of 40 CFR part 75.

Each State Plan must impose control requirements that the State demonstrates will limit Statewide annual mercury emissions from new and existing coal-fired EGUs to the amount of the State's applicable annual EGU mercury budget. States have the flexibility to choose the type of EGU control measures they will use to meet the requirements of CAMR. EPA anticipates that many States will choose to meet the CAMR requirements by selecting an option that requires EGUs to participate in the EPA-administered CAMR cap-and-trade program. EPA also anticipates that many States may choose to control Statewide annual mercury emissions for new and existing coal-fired EGUs through an alternative mechanism other than the EPA-administered CAMR cap-and-trade program. Each State that chooses an alternative mechanism must include with its plan a demonstration that the State Plan will ensure that the State will meet its assigned State annual EGU mercury emission budget.

A State submitting a State Plan that requires coal-fired EGUs to participate in the EPA-administered CAMR cap-and-trade program may either adopt regulations that are substantively identical to the EPA model mercury trading rule (40 CFR part 60, subpart HHHH) or incorporate by reference the model rule. CAMR provides that States may only make limited changes to the model rule if the States want to participate in the EPA-administered trading program. A State Plan may change the model rule only by altering the allowance allocation provisions to provide for State-specific allocation of mercury allowances using a methodology chosen by the State. A State's alternative allowance allocation provisions must meet certain allocation timing requirements and must ensure that total allocations for each calendar year will not exceed the State's annual EGU mercury budget for that year.

In today's action, EPA is proposing to approve Pennsylvania's State Plan as assuring that mercury emissions from the State's EGUs will not exceed the levels specified in the CAMR budget for Pennsylvania found at 40 CFR 60.24(h)(3), i.e., 1.779 tons per year for EGU mercury emissions in Phase 1 and 0.702 tons per year for EGU mercury emissions in Phase 2.

The State Plan includes a State-specific regulation which requires owners or operators of affected new or existing coal-fired EGUs  1 to comply with a Statewide mercury nontradable allowance program among other provisions. Pennsylvania assured that the regulation would apply to all of the EGUs which have emissions required to be accounted for under the CAMR budget for Pennsylvania by using in the regulation a definition of EGU consistent with the definition specified in CAMR at 40 CFR 60.24(h)(8). Pennsylvania's Statewide mercury nontradable allowance program, limits total mercury emissions from EGUs in the State to the same Phase 1 and Phase 2 amounts as are set forth in the CAMR budget for Pennsylvania found at 40 CFR 60.24(h)(3). Pennsylvania's mercury nontradeable allowance program requires its Phase 1 reductions to be achieved starting January 1, 2010, the same date as the Phase 1 reductions are required to be achieved under the CAMR, but requires its Phase 2 reductions to be achieved starting January 1, 2015, earlier than the required Phase 2 reductions under CAMR.

Pennsylvania's State-specific regulation implements the annual limits on total mercury emissions of EGUs in the State by setting aside for each EGU an amount of nontradable allowances that comprises the annual emission limitation (in ounces of mercury emissions) for that EGU. The amount set aside may include allowances requested by the owner or operator and provided from an annual emission limitation supplement pool. Further, the regulation states, in § 123.207(p), that an owner or operator must demonstrate compliance with annual emission limitation on a unit-by-unit, facility-wide, or system-wide basis and explains, in § 123.207(q) and (r), that, under facility-wide or system-wide compliance, the total annual emissions from the EGUs involved must be less than the total amount of allowable annual emissions for such EGUs. However, the regulation also provides, in §§ 123.207(j)(5) and 123.209, that each ounce of emissions by an EGU, facility, or system, as applicable, in excess of the amount of allowances set aside for the EGU, facility, or system, including any set aside under § 123.209, constitutes a violation. EPA interprets § 123.207(j)(5) and (p) through (r) and § 123.209 as requiring that the total mercury emissions from an EGU, or from the appropriate group of EGUs where compliance is on a facility-wide or system-wide basis, determined in accordance with §§ 123.210-123.215, must not exceed the total amount of allowances set aside for the EGU or the appropriate group of EGUs, including any allowances set aside from the annual emission limitation supplement pool, for the year.

It should be noted that Pennsylvania's mercury reduction regulation also restricts the emissions of mercury from existing and new coal-fired EGUs through the imposition of emission standards. These standards, established in § 123.205, are to be achieved in addition to the Statewide mercury nontradeable allowance program provisions described above. The CAMR does not establish or require similar emissions standards to be applied to individual emission units. As discussed above, CAMR requires a demonstration that the State Plan will ensure that the State will meet its assigned State annual EGU mercury emission budget. Pennsylvania meets this requirement through the establishment of its Statewide nontradeable mercury allowance program and not through the emission limitations required by § 123.205.

In addition, EPA is proposing to approve Pennsylvania's Plan, interpreted as discussed below, as meeting the CAMR provision that State plans must require owners and operators of coal-fired EGUs to meet the monitoring, recordkeeping, and reporting requirements of 40 CFR part 75. The provisions of the regulation included in the State's plan concerning monitoring, recordkeeping, and reporting, found at §§ 123.210-123.215, are intended to be consistent with the monitoring, reporting, and recordkeeping requirements for mercury mass emissions in 40 CFR part 75, Subpart I and in EPA's CAMR model rule, which is based on and references 40 CFR part 75, Subpart I. Section 123.210(a) and (b) states that, for purposes of compliance with 12-month rolling average mercury emission requirements in § 123.205 and annual mercury mass emission requirements in § 123.207, the monitoring, reporting, and recordkeeping requirements of §§ 123.210-123.215 and 139.101, 40 CFR part 75, Subpart I, and Pennsylvania's Continuous Source Monitoring Manual (DEP 274-0300-001) apply. The manual (at 1), in turn, states that part 75 applies to “monitoring systems required pursuant to only” part 75 (e.g., mercury mass monitoring systems) and that “[a]pproval for compliance with [part 75] must be obtained from” EPA. In addition, § 123.210(k) states that an owner or operator may not use any alternative to a part 75 requirement unless the alternative is approved by the Administrator in writing. EPA therefore interprets the monitoring, reporting, and recordkeeping requirements in Pennsylvania's regulation as requiring owners and operators to meet the requirements of 40 CFR part 75, Subpart I and providing that, if there is any conflict between those requirements and any other requirements set forth in §§ 123.210-123.215, the part 75 provisions will take precedence for the purpose of compliance with annual mercury mass emission requirements.

Specifically, Pennsylvania's regulation includes provisions, in § 123.210(n)(1), allowing discontinuation of use of an approved monitoring system when the owner or operator is using another certified monitoring system for the appropriate parameter that is approved by the department in accordance with §§ 123.210-123.215 and Chapter 139, Subchapter C. In light of the other provisions of Pennsylvania's regulation discussed above, EPA interprets § 123.210(n)(1) as allowing discontinuation of an approved monitoring system used for determining compliance with the annual mercury mass emission requirements in § 123.207 only if another monitoring system for the appropriate parameter is approved in accordance with part 75, subpart I. 2

Further, Pennsylvania's regulation includes provisions, in § 123.211(a)(5)(iii), requiring the substitution of alternative data in cases where the State “issues a notice of disapproval of a certification application or a notice of disapproval of certification status” and allowing the substitution of either data values as specified in part 75 or “an alternative emission value that is more representative of actual emissions that occurred during the period.” In light of the other provisions of Pennsylvania's regulation discussed above, EPA interprets § 123.211(a)(5)(iii) as giving Pennsylvania the authority to approve substitute data values other than those specified by part 75 only in cases where those data values would be used solely for the purpose of showing compliance with the mercury emission requirements in § 123.205 and not for any data required for the purpose of showing compliance with the annual mercury mass emission limitation in § 123.207.

Similarly, § 123.212(a) of Pennsylvania's regulations requires the use of substitute data based on the Continuous Source Monitoring Manual if a monitoring system fails to meet certain quality-assurance, quality-control, or data validation requirements. As discussed above, the manual requires mercury mass emission monitoring systems to meet the requirements of part 75. Further, § 123.212(a) also states that a mercury mass emission monitoring system failing to meet quality-assurance or quality-control requirements must use substitute data under part 75. EPA therefore interprets § 123.212(a) to require the use of substitute data as prescribed in part 75 for the purpose of showing compliance with the annual mercury mass emission limitation in § 123.207.

EPA is also proposing to approve the Plan as meeting the requirements of CAMR, and also of 40 CFR Subpart B, entitled, “Adoption and Submittal of State Plans for Designated Facilities,” for a demonstration of legal authority. The State's Plan includes an opinion by the Chief Counsel of the Pennsylvania Department of Environmental Protection which demonstrates that the State has the required legal authority to adopt emission standards and compliance schedules necessary for attainment and maintenance of the State's annual EGU mercury budget and to require the owners and operators of coal-fired EGUs in the State to meet the monitoring, recordkeeping, and reporting requirements of 40 CFR part 75.

Finally, EPA is proposing to approve the State's Plan as meeting the other applicable general requirements for approval under 40 CFR part 60, subpart B. The State's Plan requires owners and operators of affected coal-fired EGUs in Pennsylvania to comply with emission limitations (expressed as nontradable mercury allowances) that ensure that total emissions from the affected coal-fired EGUs in Pennsylvania will not exceed the CAMR budget for Pennsylvania found at 40 CFR 60.24(h)(3). The State's Plan also requires owners or operators of affected coal-fired EGUs to achieve mercury emission reductions on a schedule that is equivalent to, or more rapid than, the schedule under CAMR. The State's Plan includes evidence that three public hearings were held, and also that public notice of these hearings was provided. The State's Plan also includes an emissions inventory of the State's EGUs.

EPA describes the State's Plan in more detail below.

Pennsylvania's State Plan includes a State regulation at 25 Pa. Code, Chapter 123, Standards for Contaminants; Mercury, Annex A. Pennsylvania's state-specific mercury control regulation establishes annual mercury emission limitations for EGUs as part of a Statewide mercury nontradable allowance program, sets mercury emissions standards for EGUs, and includes monitoring, recordkeeping, reporting and other provisions.

Pennsylvania's State-specific regulation is applicable to all of the EGUs which have emissions required to be accounted for under the CAMR budget for Pennsylvania found at 40 CFR 60.24(h)(3). Pennsylvania assured that the regulation would apply to all of the EGUs which have emissions required to be accounted for under the CAMR budget for Pennsylvania by using in the regulation a definition of EGU consistent with the definition specified in CAMR at 40 CFR 60.24(h)(8).

The Statewide mercury nontradable allowance program ensures that the mercury emissions from new and existing EGUs in the State will not exceed the CAMR budget for Pennsylvania found at 40 CFR 60.24(h)(3) by limiting total mercury emissions from EGUs in the State to the same Phase 1 and Phase 2 amounts as specified in the CAMR budget for the State. Under the Statewide mercury nontradable mercury allowance program the total amount of mercury emissions allowed to be emitted from affected coal-fired EGUs is 56,928 ounces (3,558 lbs or 1.779 tons) per year during Phase 1 extending from January 1, 2010 through December 31, 2014, and 22,464 ounces (1,404 pounds or 0.702 tons) per year during Phase 2 starting January 1, 2015 (rather than January 1, 2018, as specified in the CAMR budget for Pennsylvania found at 40 CFR 60.24(h)(3)) and continuing in subsequent years.

The Statewide mercury nontradable allowance program provides that of the total of 56,928 ounces per year of mercury emissions available for emission limitation set-asides during Phase 1, 54,080 ounces will be allocated to existing affected EGUs and the remaining five (5) percent will be set-aside for use by new affected EGUs. The Statewide mercury nontradable allowance program further provides that of the 22,464 ounces per year of mercury emissions available for emission limitation set-asides during Phase 2, 21,790 ounces will be allocated to existing affected coal-fired EGUs and the remaining three (3) percent will be set aside for new affected coal-fired EGUs.

The Statewide mercury nontradable allowance program provides that the annual nontradeable allowances set aside for owners and operators of new affected coal-fired EGUs shall be placed in an annual emission limitation supplement pool administered by the State. Upon petition by owners or operators of new affected EGUs, Pennsylvania may grant annual nontradeable allowances for the new affected coal-fired EGUs from this annual emission limitation supplement pool.

Under the Statewide mercury nontradable allowance program owners or operators of new affected coal-fired EGUs that do not yet have a baseline heat input will be allocated allowances in accordance with the requirements of an approved State permit. The Statewide mercury nontradable allowance program specifies that after a new affected coal-fired EGU has commenced operation and completed three control periods of operation, the EGU will become an existing EGU. The Statewide mercury nontradable allowance program provides that a new affected EGU will continue to receive annual nontradeable mercury allowances from the new unit set-aside until the new affected EGU is eligible for annual nontradable mercury allowances allocated from the set-aside for existing EGUs. Under the allowance program when a new affected EGU is eligible to receive annual nontradable mercury allowances from the set-aside for existing affected EGUs, new maximum allowance levels for all existing affected EGUs will be established, and the State will publish these new allocation levels in the Pennsylvania Bulletin for comment by May 31 of the year that is two years prior to the affected control period.

The Statewide mercury nontradable allowance program provides for determining the maximum number of annual nontradeable allowances set aside for the owners or operators of all existing affected coal-fired EGUs, except for owners or operators of existing circulating fluidized bed (CFB) units, by multiplying the EGU's baseline heat input fraction of the State's total baseline annual heat input from all affected EGUs by the State's annual mercury allowance set-aside for existing affected EGUs for each Phase.

The Statewide mercury nontradable allowance program provides for determining the maximum number of annual nontradable mercury allowances set aside for owners or operators of existing affected CFB units by multiplying the affected CFB's baseline heat input fraction of the State's total baseline annual heat input for all EGUs by the State's Phase 2 annual mercury allowance for existing EGUs.

The Statewide mercury nontradable allowance program provides that the State will publish for comment in the Pennsylvania Bulletin, by May 31, 2008, the maximum number of annual nontradeable allowances set aside for “the owner or operator of each existing affected CFB and EGU other than CFB for Phase 1 of the Statewide mercury allowance program,” and that it will publish for comment in the Pennsylvania Bulletin, by May 31, 2013, the maximum number of annual nontradeable allowances set aside for “the owner or operator of each existing affected CFB and EGU other than CFB for Phase 2 of the Statewide mercury allowance program.”

The Statewide mercury nontradable allowance program specifies that the actual number of annual nontradable mercury allowances awarded to the owner or operator of the EGU, facility, or system shall be based on the actual emissions reported to the State. The Statewide mercury nontradable allowance program further specifies that the actual number of annual nontradable mercury allowances awarded to the owner or operator of the EGU, facility, or system may not exceed the maximum number of annual nontradeable mercury allowances assigned to the owner or operator of the EGU, facility, or system, except in cases where the owner or operator has petitioned for and been granted supplemental allowances. Under the Statewide mercury nontradable allowance program the State could provide such allowances from its annual emission limitation supplement pool.

The Statewide mercury nontradable allowance program provides that by March 31 of the year following each reporting year, Pennsylvania will notify the owner or operator of each affected EGU, facility, or system, in writing, of the actual number of annual nontradable mercury allowances awarded to the owner or operator of the affected EGU, facility, or system for the control period.

The Statewide mercury nontradable allowance program provides that the owner or operator of one or more affected mercury allowance program EGUs shall demonstrate compliance either on: (1) A unit-by-unit basis, (2) a facility-wide basis, or (3) a system-wide basis. Under the Statewide mercury nontradable allowance program, each ounce of mercury emitted in excess of the maximum number of annual nontradable mercury allowances set aside for the owner or operator of an EGU, facility, or system constitutes a violation of the program and of Pennsylvania's Air Pollution Control Act, unless the owner or operator has petitioned for and has been granted supplemental allowances.

Under the Statewide mercury nontradable allowance program if the actual emissions of mercury reported to the State for an EGU, facility, or system are less than the maximum number of annual nontradeable mercury allowances set aside for the owner or operator of the EGU, facility, or system, the State will place the unused portion of the allowances in its annual emission limitation supplement pool.

The Statewide mercury nontradable allowance program specifies that the unused portion of annual nontradeable mercury emission allowances assigned to the owner or operator of an affected EGU, facility, or system for any year may not be added to the maximum number of annual nontradable mercury allowances assigned to the owner or operator of the affected EGU, facility, or system for use in future years. Under the Statewide mercury nontradable allowance program annual nontradable mercury allowances may not be banked for use in future years.

The Statewide mercury nontradable allowance program does not apply to the owner or operator of an EGU that will be permanently shutdown no later than December 31, 2009. The allowance program provides that annual nontradable mercury allowances will not be set aside for the owner or operator of an existing affected EGU that is already shut down or scheduled for shutdown unless the owner or operator of the EGU obtains a plan approval for the construction of a new EGU, or is on “standby” as of the effective date of each set-aside Phase. When a standby unit is ready for normal operation, the owner or operator may petition the State for annual nontradeable allowances. Under the regulation's allowance program the State could provide such allowances from its annual emission limitation supplement pool.

The Statewide mercury nontradable allowance program specifies that an owner or operator of an existing affected EGU who enters into an enforceable agreement with the State, by December 31, 2007, to shutdown that existing EGU and to replace it, by December 31, 2012, with a new Integrated Gasification Combined Cycle (IGCC) unit, is eligible to request annual nontradable mercury allowances from the annual emission limitation supplement pool.

The Statewide mercury nontradable allowance program provides that the State may revise the percentage of set-aside used to determine the number of ounces of mercury set-aside for future annual mercury emission limitations to accommodate the emissions from new EGUs, or changes in the calculation of baseline heat input, so that the total number of ounces of mercury emissions in the Statewide mercury nontradable allowance program is not exceeded.

Pennsylvania's regulation requires owners or operators of EGUs not only to keep the emissions of their EGUs at or below levels consistent with their allowances for their EGUs, but also to meet emission limits. The emission limits for EGUS vary depending upon whether or not the EGU qualifies as a new or existing unit and on the type of EGU.

The regulation defines a new EGU as “[a]n EGU which commenced construction modification, or reconstruction, as defined under 40 CFR Part 60 (relating to standards of performance for new stationary sources), on or after January 30, 2004, and has less than three complete control periods of heat input data as of December 31 of the preceding control period.” The regulation defines an existing EGU as “[a]n EGU which commenced construction, modification or reconstruction on or before January 30, 2004, or which has three complete control periods of heat input data as of December 31 or the preceding control period.”

For new EGUs, Pennsylvania's regulation requires the owner or operator to comply at the commencement of operation on a rolling 12 month basis with one of the following standards:

(1) Pulverized Coal Fired (PCF) EGU. The owner or operator of a PCF EGU shall comply with either or the following:

(i) A mercury emission standard of 0.011 pound of mercury per Gigawatt-hour (GWh).

(ii) A minimum 90% control of total mercury as measured from the mercury content in the coal, either as fired or as approved in writing by Pennsylvania.

(2) Circulating Fluidized Bed (CFB) EGU. The owner or operator of a CFB EGU shall comply with the following applicable provisions:

(i) CFB EGUs burning 100% coal refuse as the only solid fossil fuel shall comply with either of the following:

(A) A mercury emission standard of 0.0096 pound of mercury per GWh.

(B) A minimum 95% control of total mercury as measured from the mercury content in the coal refuse, either as fired or as approved in writing by the State.

(ii) CFB EGU's burning 100% coal as the only solid fossil fuel shall comply with either of the following:

(A) A mercury emission standard of 0.011 pound of mercury per GWh.

(B) A minimum 90% control of total mercury as measured from the mercury content in the coal refuse, either as fired or as approved in writing by the State.

(iii) CFB EGUs burning multiple fuels shall comply with a prorated emission standard based on the percentage of heat input from the coal and the percentage of heat input from the coal refuse.

(3) Integrated Gasification Combined Cycle (IGCC) EGU. The owner or operator of an IGCC EGU shall comply with one of the following:

(i) A mercury emission standard of 0.0048 pound of mercury per GWh.

(ii) A minimum 95% control of total mercury as measured from the mercury content in the coal, either as processed or as approved in writing by the State.

Pennsylvania's regulation notifies owners or operators of new EGUs that they are also required to comply with the New Source Performance Standards (NSPS) found at 40 CFR Part 60, Subpart Da. In addition, the regulation indicates that the State's emission standards will serve as the baseline the State uses for review and approval of case-by-case best available technology determinations in accordance with the State's requirements relating to construction, modification, reactivation and operation of sources.

For existing EGUs, the regulation requires the owner or operator to comply on a rolling 12-month basis with one of the following standards:

(1) Phase 1—Effective from January 1, 2010 through December 31, 2014:

(i) PCF EGU—The owner or operator of a PCF shall comply with one of the following:

(A) A mercury emission standard of 0.024 pound of mercury per GWh.

(B) A minimum 80% control of total mercury as measured from the mercury content in the coal, either as fired or as approved in writing by the State.

(ii) CFB EGU—The owner or operator of a CFB burning coal refuse shall comply with one of the following:

(A) A mercury emission standard of 0.0096 pound of mercury per GWh.

(B) A minimum 95% control of total mercury as measured from the mercury content in the coal refuse, either as fired or as approved in writing by the State.

(2) Phase 2—Effective beginning January 1, 2015, and each subsequent year:

(i) PCF EGU—The owner or operator of a PCF shall comply with one of the following:

(A) A mercury emission standard of 0.012 pound of mercury per GWh.

(B) A minimum 90% control of total mercury as measured from the mercury content in the coal, either as fired or as approved in writing by the State.

(ii) CFB EGU—The owner or operator of a CFB burning coal refuse shall comply with one of the following:

(A) A mercury emission standard of 0.0096 pound of mercury per GWh.

(B) A minimum 95% control of total mercury as measured from the mercury content in the coal refuse, either as fired or as approved in writing by the State.

The regulation also provides that the owner or operator of an EGU may request, in writing, credit for the mercury removal efficiency resulting from the pretreatment of coal or coal refuse towards the minimum specified percent control efficiency of the total mercury requirements.

The regulation provides that the owner or operator of one or more EGUs subject to the mercury emissions standards shall demonstrate compliance on: (1) A unit-by-unit basis, or (2) a facility-wide basis.

Pennsylvania's regulation requires owners or operators of coal-fired EGUs to comply with the monitoring, recordkeeping, and reporting provisions of 40 CFR part 75 concerning mercury mass emissions. The regulation provides that the monitoring, recordkeeping, and reporting requirements of 40 CFR part 75 Subpart I (relating to mercury mass emission provisions) apply, as well as other monitoring, recordkeeping and reporting provisions which are Pennsylvania-specific, as discussed in detail above. The regulation further indicates that Pennsylvania has adopted by reference the provisions entitled “Mercury Designated Representative for Mercury Budget Sources,” found in EPA's model rule, 40 CFR part 60, Subpart HHHH, at sections 60.4110 through 60.4114. In addition, the regulation provides that, for purposes of complying with its requirements, the definitions in 40 CFR 72.2 shall apply.

The regulation also includes provisions pertaining to initial certification and recertification procedures for emissions reporting, provisions for out-of-control periods for emissions monitors, provisions pertaining to monitoring of gross electrical output, provisions pertaining to coal sampling and analysis for input mercury levels, and provisions pertaining to general recordkeeping and reporting.

The regulation provides that owners or operators of new or existing affected EGUs will be issued a State plan approval or operating permit (including Title V permits) in which the applicable mercury control requirements will be specified. The regulation specifies that these plan approvals or permits will be issued before the later of January 1, 2010 or the date on which the affected EGU commences operation.

The regulation further provides, at § 123.206, that the State's Department of Environmental Protection (the Department) “may approve in a plan approval or operating permit, or both, an alternate mercury emission standard or compliance schedule, or both, if the owner or operator of an EGU subject to the emission standards of § 123.205 demonstrates in writing to the Department's satisfaction that the mercury reduction requirements are economically or technologically infeasible. The Department's approval of such an alternative emission standard or compliance schedule does not relieve the owner or operator of the EGU from complying with the other requirements of §§ 123.201-123.205 and 123.207-123.215.”

The State Plan also contains required non-regulatory elements. The State Plan includes an inventory of the existing designated coal-fired EGUs in the State, and provides data regarding the mercury emissions of these EGUs. The Plan also provides documentation of the State's public participation process, including copies of public notices announcing public hearings and the opportunity to comment, a certification that three public hearings were held, and a summary of comments received by the State and of the State's responses. Further, the Plan includes a legal opinion of the Chief Counsel of the Pennsylvania Department of Environmental Protection which demonstrates that the State has the legal authority to adopt emission standards and compliance schedules necessary for attainment and maintenance of the State's annual EGU mercury budget and to require the owners and operators of coal-fired EGUs in the State to meet the monitoring, recordkeeping, and reporting requirements of 40 CFR part 75.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this proposed action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). This action merely proposes to approve State law as meeting Federal requirements and would impose no additional requirements beyond those imposed by State law. Accordingly, the Administrator certifies that this proposed rule would not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). Because this action proposes to approve pre-existing requirements under State law and would 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 proposal also does not have Tribal implications because it would 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 proposed action also does not have Federalism implications because it would not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). This action merely proposes to approve a State rule implementing a Federal standard. It does not alter the relationship or the distribution of power and responsibilities established in the CAA. This proposed 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.

Executive Order 12898, “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations,” requires Federal agencies to consider the impact of programs, policies, and activities on minority populations and low-income populations. EPA guidance  3 states that EPA is to assess whether minority or low-income populations face risk or a rate of exposure to hazards that is significant and that “appreciably exceed[s] or is likely to appreciably exceed the risk or rate to the general population or to the appropriate comparison group.” (EPA, 1998) Because this rule merely proposes to approve a state rule implementing the Federal standard established by CAMR, EPA lacks the discretionary authority to modify today's regulatory decision on the basis of environmental justice considerations. However, EPA has already considered the impact of CAMR, including this Federal standard, on minority and low-income populations. In the context of EPA's CAMR published in the Federal Register on May 18, 2005, in accordance with EO 12898, the Agency has considered whether CAMR may have disproportionate negative impacts on minority or low income populations and determined it would not.

In reviewing State Plan submissions, EPA's role is to approve State choices, provided that they meet the criteria of the CAA. 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 State Plan for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a State Plan submission, to use VCS in place of a State Plan submission that otherwise satisfies the provisions of the CAA. 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 proposing to approve Pennsylvania's State Plan submittal for the CAMR requirements would not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.).

Table of Contents I. General Information A. What should I consider when preparing my comments? II. Extension of the Global Laboratory and Analytical Use Exemption III. Applicability of the Global Laboratory and Analytical Use Exemption to Methyl Bromide IV. Minor Technical Corrections V. Statutory and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review B. Paperwork Reduction Act C. Regulatory Flexibility Act D. Unfunded Mandates Reform Act E. Executive Order 13132: Federalism F. Executive Order 13175: Consultation and Coordination With Indian Tribal Governments G. Executive Order 13045: Protection of Children From Environmental Health Risks and Safety Risks H. Executive Order 13211: Actions That Significantly Affect Energy Supply, Distribution, or Use I. National Technology Transfer and Advancement Act J. Executive Order 12898: Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations I. General Information A. What should I consider when preparing my comments?

1. Confidential Business Information . Do not submit this information to EPA through www.regulations.gov or e-mail. Clearly mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD-ROM that you mail to EPA, mark the outside of the disk or CD-ROM as CBI and then identify electronically within the disk or CD-ROM the specific information that is claimed as CBI. In addition to one complete version of the comment that includes information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR Part 2.

2. Tips for Preparing Your Comments . When submitting comments, remember to:

• Identify the rulemaking by docket number and other identifying information (subject heading, Federal Register date and page number).

• Follow directions—The agency may ask you to respond to specific questions or organize comments by referencing a Code of Federal Regulations (CFR) part or section number.

• Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes.

• Describe any assumptions and provide any technical information and/or data that you used.

• If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.

• Provide specific examples to illustrate your concerns, and suggest alternatives.

• Explain your views as clearly as possible, avoiding the use of profanity or personal threats.

• Make sure to submit your comments by the comment period deadline identified.

The Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol) is the international agreement to reduce and eventually eliminate the production and consumption  1 of all stratospheric ozone-depleting substances (ODSs). The elimination of production and consumption of ODSs has been accomplished through adherence to phaseout schedules for specific ODSs. Section 604 of the Clean Air Act, as amended in 1990 and 1998, requires EPA to promulgate regulations implementing the Montreal Protocol's phaseout schedules in the United States. Those regulations are codified at 40 CFR part 82 Subpart A. As of January 1, 1996, production and import of most class I ODSs—including chlorofluorocarbons (CFCs), halons, carbon tetrachloride, and methyl chloroform  2 —were phased out in developed countries, including the United States.

However, the Montreal Protocol provides exemptions that allow for the continued import and/or production of ODSs for specific uses. Under the Montreal Protocol, for most class I ODSs, the Parties may collectively grant exemptions to the ban on production and import of ODSs for uses that they determine to be “essential.” For example, with respect to CFCs, Article 2A(4) provides that the phaseout will apply “save to the extent that the Parties decide to permit the level of production or consumption that is necessary to satisfy uses agreed by them to be essential.” Similar language appears in the control provisions for halons (Art. 2B), carbon tetrachloride (Art. 2D), methyl chloroform (Art. 2E), hydrobromofluorocarbons (Art. 2G), and chlorobromomethane (Art. 2I). As defined by Decision IV/25 of the Parties, use of a controlled substance is essential only if (1) it is necessary for the health, safety or is critical for the functioning of society (encompassing cultural and intellectual aspects), and (2) there are no available technically and economically feasible alternatives or substitutes that are acceptable from the standpoint of environment and health.

Decision X/19 (taken in 1998) allowed a general exemption for essential laboratory and analytical uses through December 31, 2005. EPA included this exemption in our regulations at 40 CFR part 82, subpart A. While the Clean Air Act does not specifically provide for this exemption, EPA determined that an exemption for essential laboratory and analytical uses was allowable under the Act as a de minimis exemption. EPA addressed the de minimis exemption in the final rule of March 13, 2001 (66 FR 14760-14770).

Decision X/19 also requested the Montreal Protocol's Technology and Economic Assessment Panel (TEAP), a group of technical experts from various Parties, to report annually to the Parties to the Montreal Protocol on procedures that could be performed without the use of controlled substances. It further stated that at future Meetings of the Parties (MOPs), the Parties would decide whether such procedures should no longer be eligible for exemptions. Based on the TEAP's recommendation, the Parties to the Montreal Protocol decided in 1999 (Decision XI/15) that the general exemption no longer applied to the following 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).

Most recently, in its 2006 Assessment Report, the Chemicals Technical Options Committee (CTOC) (a subgroup that reports to the TEAP), explained that while it was brought to their attention that some opportunities for substitution exist, there has been only slow progress in replacing ODSs that are being used in laboratory and analytical procedures with substances that are less harmful to the ozone layer (p. 31, Air Docket EPA-HQ-OAR-2007-0384). The TEAP has not recommended any additional procedures to exclude from the exemption for existing approved ODSs. Members of the CTOC will continue to monitor possible alternatives and report back to the Parties.

However, at the Eighteenth MOP the Parties acknowledged the need for methyl bromide for laboratory and analytical procedures, and added methyl bromide to the approved ODSs under the essential laboratory and analytical use exemption. Decision XVIII/15 outlines specific uses and exclusions for methyl bromide under the exemption. Section III of this preamble provides further discussion of the inclusion of methyl bromide in the essential laboratory and analytical use exemption.

Based on (1) The CTOC's recognition that new non-ODS methods are not available for existing exempted laboratory and analytical uses and (2) the recent decision by the Parties to include methyl bromide under the exemption, EPA believes it is very likely that the Parties plan to extend the existing exemption, which is currently set to expire on December 31, 2007. EPA expects this decision to be made during the nineteenth MOP in September 2007, as the current agenda includes the discussion to extend the essential laboratory and analytical use exemption.

Anticipating extension of the essential laboratory and analytical use exemption, EPA is proposing in this rulemaking to extend the applicability of the exemption beyond December 31, 2007. Specifically, EPA is proposing to extend the exemption through December 31, 2015; however, based on comments and the anticipated Decision by the Parties to the Protocol, EPA would amend the date in the final rule to be consistent with the Parties' Decision if a date other than December 31, 2015 is chosen. Until a Decision is adopted by the Parties the Agency does not know exactly what date will be decided upon by the Parties. EPA considered proposing an extension date of 2009, since the previous extension for this exemption was two years, from December 31, 2005 through December 31, 2007. But based on recent discussions by technical experts, such as the CTOC (p. 31, Air Docket EPA-HQ-OAR-2007-0384), EPA believes that the exemption for essential laboratory and analytical uses will be necessary for some time longer than two years and that the Parties may decide upon an extension beyond two years. Therefore, EPA is proposing to extend the exemption through December 31, 2015 based on when it may be reasonable to assume that an exemption would no longer be necessary. EPA intends to finalize this rulemaking using the actual extension date decided upon by the Parties to ensure consistency, noting that the Parties will have considered the most recent technical review and analysis conducted by the CTOC and the TEAP. Furthermore, the overall finalization of the rule is contingent upon the Parties' extension of the exemption under the Montreal Protocol. EPA is interested in any comments the public may have on the proposed extension date, including our rationale for finalizing a date different from the proposed date of December 31, 2015, based on the anticipated future decision by the Parties of the Montreal Protocol.

EPA's regulations regarding this exemption at 40 CFR 82.8(b) currently state, “A global exemption for class I controlled substances for essential laboratory and analytical uses shall be in effect through December 31, 2007 subject to the restrictions in appendix G of this subpart, and subject to the record keeping and reporting requirements at Sec. 82.13(u) through (x). There is no amount specified for this exemption.” Because certain laboratory procedures continue to require the use of class I substances in the United States, because non-ODS replacements for the class I substances have not been identified for all uses, and because EPA anticipates the Parties will extend this exemption under the Montreal Protocol, EPA is proposing to revise 40 CFR 82.8(b) to reflect the extension of the exemption to December 31, 2015. For a more detailed discussion of the reasons for the exemption, refer to the March 13, 2001, Federal Register notice. As discussed in the March 2001 notice, the controls in place for laboratory and analytical uses provide adequate assurance that very little, if any, environmental damage will result from the handling and disposal of the small amounts of class I ODS used in such applications. In addition, the 2006 CTOC Assessment Report shows a general decrease from 2002 through 2005 in the amount of phased-out class I substances being supplied to laboratories under this exemption (p. 33, EPA-HQ-OAR-2007-0384).

As of January 1, 2005, production and import of methyl bromide has been disallowed in the United States, except for limited exemptions (40 CFR 82.4(d)). Methyl bromide is a class I controlled substance used chiefly as a fumigant for soil treatment and pest control. EPA created a system of allowances to permit continued production and import of methyl bromide for critical uses after January 1, 2005 (see 69 FR 76981, December 23, 2004). This exemption does not include provisions for continued production of methyl bromide to supply laboratories. However, the phaseout of methyl bromide production and import does not currently restrict inventories of methyl bromide produced prior to January 1, 2005, from being used for laboratory and analytical applications, as described in the Framework rule (69 FR 76982).

Methyl bromide (also known as bromomethane) does have laboratory uses, for example, as a chemical intermediate and methylating agent. EPA regulations allow for methyl bromide to be produced after the January 1, 2005, phaseout date if production is covered by “essential use allowances or exemptions.” (40 CFR 82.4(b)(1)) The regulations list the laboratory and analytical use exemption as a “global exemption for class I controlled substances,” subject to the restrictions in appendix G (40 CFR 82.4(n)(1)(iii), 82.8(b)). EPA did not originally address the issue of whether the exemption should apply to methyl bromide, but EPA did propose to include methyl bromide in the 2005 rulemaking that extended the exemption through December 31, 2007 (see 70 FR 25727). EPA received one comment on the proposed inclusion of methyl bromide, and it was general in nature. Nonetheless, EPA recognized that further discussion of whether the global laboratory exemption should include methyl bromide might occur at a future MOP and deferred final action on the issue.

In November of 2006, during the meeting of the Parties to the Montreal Protocol, the Parties included methyl bromide in the essential laboratory and analytical use exemption via Decision XVIII/15. Specifically, the Decision XVIII/15 allows methyl bromide be used: (1) As a reference or standard (a) to calibrate equipment which uses methyl bromide; (b) to monitor methyl bromide emission levels; (c) to determine methyl bromide residue levels in goods, plants, and commodities; (2) in laboratory toxicological studies; (3) to compare the efficacy of methyl bromide and its alternatives inside a laboratory; (4) as a laboratory agent which is destroyed in a chemical reaction in the manner of feedstock. Furthermore, Decision XVIII/15 specifically disallows classifying field trials using methyl bromide as essential laboratory and analytical uses and indicates that entities wishing to carry out such field trials could submit critical use nominations for that purpose (p. 43, EPA-HQ-OAR-2007-0384).

Furthermore, we believe that extending the essential laboratory and analytical uses exemption to include methyl bromide is fully consistent with allowing this exemption under the Clean Air Act as a de minimis exemption. EPA addressed the de minimis exemption in a final rule dated March 13, 2001 (66 FR 14760-14770). EPA believes only a very small amount of methyl bromide will produced under the laboratory and analytical use exemption. To date, very few companies have approached EPA about extending the laboratory and analytical use exemption to include methyl bromide. EPA does not believe that there is a large demand for methyl bromide for laboratory and analytical uses, and there is no indication that there has been significant use of the pre-phaseout inventories (that is, methyl bromide produced prior to January 1, 2005) for such uses.

One interested company provided EPA with an estimate of annual methyl bromide sales for laboratory and analytical use, if allowed under the current exemption. That company anticipated only 0.14 metric tons in sales. Considering that 27 metric tons of ODSs were produced in 2005 and reported to the UNEP under the current laboratory and analytical use exemption, and considering that EPA has no reason to believe that large amounts of methyl bromide will be demanded and produced under the laboratory and analytical exemption, EPA, in accordance with Decision XVIII/15, proposes to add language regarding methyl bromide inclusion under the global laboratory exemption rule in Appendix G to Subpart A of Part 82. EPA is seeking public comment on the proposed inclusion of methyl bromide in the essential laboratory and analytical use exemption.

EPA is proposing to revise three paragraphs in the reporting requirements at § 82.13 to correct two sets of minor typographical errors. The first set addresses incorrect paragraph references. Under § 82.13(v), distributors of laboratory supplies who purchased controlled substances under the essential global laboratory and analytical use exemption must report on a quarterly basis the quantity of each controlled substance purchased by each laboratory customer whose certification was previously provided to the distributor, and refers to the provisions of paragraph (y). The reference to paragraph (y) is erroneous and should be a reference to paragraph (w), which describes annual certifications provided by laboratory customers. The same paragraph (§ 82.13(v)) also refers to § 82.4(z), but should actually reference § 82.13(x).

Similarly, § 82.13(x) (applicable to distributors who only sell controlled substances as reference standards for calibrating laboratory analytical equipment) incorrectly refers to paragraph (y) and should refer to paragraph (w). Further, the reference to reports required under paragraph (x) should be corrected to refer to reports required under (v).

The second set of corrections addresses the inaccurate terminology that is used to refer to the essential laboratory and analytical use exemption. In § 82.13(v), (w), and (x), the exemption is referred to as the “global laboratory essential-use exemption.” This is not consistent with the rest of the regulation. EPA proposes to replace the reference to “global laboratory essential-use exemption” with “global essential laboratory and analytical use exemption” found in § 82.13(v), (w), and (x).

EPA seeks comment on these proposed corrections.

This action is not a “significant regulatory action” under the terms of Executive Order (EO) 12866 (58 FR 51735, October 4, 1993) and is therefore not subject to review under the EO.

This action does not propose 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 propose 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 82.8(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 in 40 CFR are listed in 40 CFR part 9.

The 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 proposed rule on small entities, small entity is defined as: (1) Pharmaceutical preparations manufacturing businesses (NAICS code 325412) that have less 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 which is independently owned and operated and is not dominant in its field.

After considering the economic impacts of today's proposed 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 rule on small entities.” 5 U.S.C. 603 and 604. Thus, an agency may certify 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 action, once finalized, will provide an otherwise unavailable benefit to those companies that obtain ozone-depleting substances under the essential laboratory and analytical use exemption. We have therefore concluded that today's proposed rule will relieve regulatory burden for all small entities. We continue to be interested in the potential impact of the proposed rule on small entities and welcome comments on issues related to such impacts.

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 proposed 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 an essential laboratory and analytical use exemption from the 1996 and 2005 phase outs of Class I ODSs (including methyl bromide). Similarly, EPA has determined that this rule contains no regulatory requirements that might significantly or uniquely affect small governments, because this rule merely extends the essential laboratory and analytical use exemption.

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 proposed 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 proposed rule does not have tribal implications, as specified in Executive Order 13175. Today's proposed 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” under E.O. 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 E.O. 13045 as applying only to those regulatory actions that are based on health or safety risks, such as the analysis required under section 5-501 of the Order has the potential to influence the regulation. This proposed rule is not subject to E.O. 13045 because it implements Section 604(d)(2) of the Clean Air Act which states that the Agency shall authorize essential use exemptions should the Food and Drug Administration determine that such exemptions are necessary.

This proposed rule is not subject to Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use (66 Fed. Reg. 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 No. 104-113, section 12(d) (15 U.S.C. 272 note) directs EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies. The NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards. This proposed rule does not involve technical standards. Therefore, EPA did not consider the use of any voluntary consensus standards.

Executive Order (EO) 12898 (59 FR 7629 (Feb. 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 proposed 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 controls in place for laboratory and analytical uses provide adequate assurance that very little, if any, environmental damage will result from the handling and disposal of the small amounts of class I ODS used in such applications. Furthermore, the 2006 CTOC Assessment Report shows a general decrease from 2002 through 2005 in the amount of phased-out class I substances being supplied to laboratories under this exemption.

40 CFR part 82 is proposed to be amended as follows:

This is a summary of the Commission's Notice of Proposed Rule Making , MB Docket No. 07-175, adopted August 22, 2007, and released August 24, 2007. The full text of this Commission decision is available for inspection and copying during normal business hours in the Commission's Reference Center, 445 Twelfth Street, SW., Washington, DC 20554. This document may also be purchased from the Commission's duplicating contractors, Best Copy and Printing, Inc., 445 12th Street, SW., Room CY-B402, Washington, DC 20554, telephone 1-800-378-3160 or http://www.BCPIWEB.com . This document does not contain proposed information collection requirements subject to the Paperwork Reduction Act of 1995, Public Law 104-13. In addition, therefore, it does not contain any proposed information collection burden “for small business concerns with fewer than 25 employees,” pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4).

The Provisions of the Regulatory Flexibility Act of 1980 do not apply to this proceeding. Members of the public should note that from the time a Notice of Proposed Rule Making is issued until the matter is no longer subject to Commission consideration or court review, all ex parte contacts are prohibited in Commission proceedings, such as this one, which involve channel allotments. See 47 CFR 1.1204(b) for rules governing permissible ex parte contact.

For information regarding proper filing procedures for comments, see 47 CFR 1.415 and 1.420.

For the reasons discussed in the preamble, the Federal Communications Commission proposes to amend 47 CFR part 73 as follows:

This is a synopsis of the Commission's Notice of Proposed Rule Making, MB Docket No. 07-124, adopted June 27, 2007, released June 29, 2007, and corrected August 31, 2007. The full text of this Commission decision is available for inspection and copying during normal business hours in the FCC Reference Information Center (Room CY-A257), 445 12th Street, SW., Washington, DC 20554. The complete text of this decision may also be purchased from the Commission's copy contractor, Best Copy and Printing, Inc., 445 12th Street, SW., Room CY-B402, Washington, DC 20554, (800) 378-3160, or via the company's Web site, http://www.bcpiweb.com. This document does not contain proposed information collection requirements subject to the Paperwork Reduction Act of 1995, Public Law 104-13. In addition, therefore, it does not contain any proposed information collection burden “for small business concerns with fewer than 25 employees,” pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(C)(4).

The Provisions of the Regulatory Flexibility Act of 1980 do not apply to this proceeding. Members of the public should note that from the time a Notice of Proposed Rule Making is issued until the matter is no longer subject to Commission consideration or court review, all ex parte contacts are prohibited in Commission proceedings, such as this one, which involve channel allotments. See 47 CFR 1.1204(b) for rules governing permissible ex parte contacts.

For information regarding proper filing procedures for comments, see 47 CFR 1.415 and 1.420.

For the reasons discussed in the preamble, the Federal Communications Commission proposes to amend 47 CFR part 73 as follows:

NMFS has authority, delegated from the Secretary of Commerce, to issue permits for research and enhancement activities under Section 104 of the MMPA (16 U.S.C. 1361 et seq. ) and section 10(a)(1)(A) of the ESA (16 U.S.C. 1531 et seq. ). Permits to take marine mammal species are governed by the MMPA, ESA, and NMFS implementing regulations at 50 CFR parts 216 and 222. As a Federal agency, issuance of permits by NMFS is also governed by the procedural requirements and provisions of the Administrative Procedure Act (APA) and the National Environmental Policy Act (NEPA).

The APA is the law under which federal regulatory agencies, including NMFS, create the rules and regulations necessary to implement and enforce major legislative acts such as the MMPA and ESA. Under the APA, NMFS is required to publish in the Federal Register descriptions of rules of procedure, substantive rules of general applicability, and make available to the public statements of policy and interpretation, administrative staff manuals and instructions. NEPA requires Federal agencies to integrate environmental values into their decision making processes by considering the environmental impacts of their proposed actions and reasonable alternatives to those actions. The requirements of NEPA apply to NMFS “decision-making process” for issuance of permits. The NOAA Administrative Order No. 216-6 (NAO 216-6), Environmental Review Procedures for Implementing the National Environmental Policy Act, is also an agency guidance document for applying the requirements of NEPA to agency actions, including permit issuance.

The following paragraphs provide some possible regulatory changes being considered by NMFS. The changes being considered are found in 50 CFR part 216, most in subpart D, although comments or recommendations regarding any of the subparts will be considered. The sections identified are either followed by recommendations from NMFS on possible alternatives or changes to the current language, or a general solicitation by NMFS to the public for comments pertaining to that section. Several of the regulatory changes would require an amendment or change to the MMPA before implementation could be effective.

NMFS does not have any recommended changes for § 216.1 (Purpose) or 216.2 (Scope). Do either of these sections require further consideration or clarification?

§ 216.3 Definitions: Are there existing definitions relevant to the marine mammal permitting process that need clarification? Are there any other definitions that need clarification, or definitions that need to be added to these regulations?

Are there any other sections in Subpart A whose language requires further consideration or clarification?

§ 216.14 Marine mammals taken before the MMPA: Should we add provisions to authorize export in addition to import under § 216.14 (c)?

§ 216.15 Depleted species: Should we clarify that any species or population stock listed as endangered or threatened under the ESA is automatically listed as depleted under the MMPA?

Do any of the remaining sections in Subpart B require further consideration or clarification?

Several regulatory changes are being considered by NMFS in this subpart and include, but are not limited to, the following:

§ 216.23 Native exceptions: Does NMFS need to clarify sections regarding transfer of marine mammal parts? Do we need to include provisions for authorizing transfers of marine mammal parts for research purposes? If so, be explicit on how this should occur and whether this should be combined with transfers of other marine mammal parts legally taken, or kept under this section.

§ 216.25 Exempted marine mammals and marine mammal products: Should this section be consolidated with other sections (e.g., incorporate this § 216.25 into §§ 216.14 and 216.12; remove § 216.25)? Do we then reserve this section (or use another section) for a consolidated parts transfer section (for parts taken legally under §§ 216.22, 216.26, and 216.37) if possible? Subpart C is a substantial component of part 216. Therefore, any comments or recommendations regarding whether the language in other sections in subpart C require further consideration or clarification would be appreciated.

§ 216.31 Definitions: Are there any definitions relevant to marine mammal permitting procedures that need to be added?

§ 216.32 Scope : Does the scope of this subpart need to be modified or clarified in any manner?

§ 216.33 Permit application submission, review, and decision procedures: Generally, NMFS is considering reorganizing and/or consolidating permitting regulation §§ 216.33 (Permit application, submission, review, and decision procedures), 216.34 (Issuance criteria), 216.35 (Permit restrictions), 216.36 (Permit conditions), and 216.41 (Permits for scientific research and enhancement) where possible. We have included some specific recommendations; however any recommendations where regulations need consolidation or simplification in the following sections, and how this might be achieved, would be considered.

§ 216.33 (c) Initial review: NMFS regulations currently require the agency to determine that a proposed permit is categorically excluded from the need to prepare further environmental documentation, or to prepare an environmental assessment (EA) with a finding of no significant impact (FONSI) or a final environmental impact statement (EIS), during initial review of the application and prior to making it available for public comment and review pursuant to § 216.33(d). This sequence precludes public input on the application that may influence NMFS' determination regarding whether the activity requires an EA or EIS. Therefore, NMFS is considering a revision to this section, and the corresponding language at 216.33(d) such that NEPA documentation is not required at the time an application is made available for public review and comment. NMFS Administrative Order 216-6 stipulates that issuance of scientific research, enhancement, photography, and public display permits pursuant to the MMPA and issuance of research permits pursuant to the ESA are, in general, categorically excluded from the need to prepare further environmental documentation because, as a class, they do not have significant environmental impacts. With this recommended change NMFS would continue to evaluate the potential environmental impacts of permits, but could conduct this assessment after the close of the comment period on the application, when comments from the public and other agencies could be considered in that assessment.

§ 216.33(d) Notice of receipt and application review: Consistent with the proposed changes to § 216.33(c) regarding NEPA, NMFS proposes to revise the requirements for including a NEPA statement in the notice of receipt of an application. Where NMFS believes a permit would be categorically excluded from the need to prepare further environmental documentation, the notice will so state. If that determination is based on information in an existing EA/FONSI or Final EIS, that document will be referenced in the notice and made available simultaneously with the application. When no previous NEPA documentation relevant to the proposed activity is available, the notice will solicit public input on the appropriate level of NEPA documentation concurrent with review of the application. After the close of the comment period on the application, NMFS would determine the appropriate level of NEPA documentation for the activity, in consideration of comments received, information presented in the application, and the best available information. NMFS' final NEPA determination on a specific application would be published in the Federal Register prior to or concurrent with notice of permit issuance or denial pursuant to § 216.33(e).

§ 216.33(e) Issuance or denial procedures: Consistent with MMPA section 104(d), the current regulations state that “within 30 days of the close of the public comment period the Office Director will issue or deny a special exception permit.” NMFS is considering revising this section to reconcile the ESA section 7 and NEPA compliance timelines with statutory requirements for when permit decisions must be made relative to the close of the comment period. For example, when NMFS determines, subsequent to the public comment period on an application, that issuance of a proposed permit requires preparation of an EA or EIS, processing of the application cannot be completed within 30 days of the close of the comment period. Under the current regulations, NMFS would have to deny the permit because the appropriate NEPA documentation could not be completed in time to support a decision to issue. Rather than deny such permits, NMFS proposes to defer a decision on the application until the appropriate NEPA documentation is completed. Similarly, when formal consultation is required under section 7 of the ESA, which allows 135 days or more for consultation and completion of a Biological Opinion, processing of the application cannot be completed within 30 days of the close of the comment period. Rather than deny such permits, NMFS proposes to defer a decision on the application until the section 7 consultation is completed. In both cases NMFS would publish a notice in the FR within 30 days of the close of the comment period announcing that a decision on the specific application has been deferred pending completion of the appropriate NEPA and ESA section 7 analyses.

§ 216.33(e)(4): For permits involving marine mammals listed as endangered or threatened under the ESA, NMFS is required to determine whether the permit is consistent with the requirements of section 10(d) of the ESA. NMFS would appreciate comments on how to determine whether an applicant has applied for a permit “in good faith” and whether the permit “will operate to the disadvantage of such endangered or threatened species.”

§ 216.34 Issuance criteria: NMFS would appreciate any recommendations on whether or how this section should be clarified or consolidated with other sections. In support of the applicant's demonstration that the proposed activity is humane, NMFS is considering requiring proof of Institutional Animal Care and Use Committee approval of the proposed activity where such approval would be required pursuant to the Animal Welfare Act. Any comments on this would be appreciated.

§ 216.35 Permit restrictions: One consideration by NMFS is to provide for only minor amendments to original permits (see § 216.39), not major vs. minor as currently exists, which would require modifying language in this section. Any proposed change resulting in the need for an increased level of take or risk of adverse impact above those authorized in the original permit would no longer be considered under an amendment, and would require a new permit application. Since the current regulatory process for reviewing and issuing major amendments requires a public comment and review period, the time it takes to issue a major amendment is consistent with the time it takes to process a new application. Amendments would be issued that only covered those activities that are currently consistent with a minor amendment. One exception to this would be that proposed changes in location, species, and numbers where no take is involved (e.g., import of parts or specimens legally acquired by a foreign institution) would be a minor amendment. Similarly, NMFS is considering removing the part in § 216.35(b) that provides for a 1 year extension of the original permit. If this change were implemented neither the life of the original permit nor any subsequent amendment would exceed five years from the effective date of the permit. NMFS would appreciate any comments on this recommendation.

The regulations require individuals conducting permitted activities to possess qualifications commensurate with their duties and responsibilities, or be under the direct supervision of a person with such qualifications. NMFS is seeking input on whether it should promulgate regulations specifying minimum standards for such qualifications or specific criteria by which applicants' qualifications and those of other personnel listed in the application could be evaluated.

§ 216.36 Permit conditions: NMFS is considering consolidating this section with other sections of permit regulations (e.g., § 216.35, Permit restrictions) that also contain conditions pertinent to marine mammal permits. NMFS would appreciate any recommendations on how this might best be achieved.

§ 216.37 Marine mammal parts: This section of the regulations is the subject of much confusion in interpretation and implementation. This section is similar to the transfer requirements in § 216.22. NMFS is interested in clarifying and consolidating this section with other sections (§§ 216.22 and 216.26) involving the transfer of parts legally taken, such that the same provisions would apply to the subsequent transfer of any marine mammal part that was already legally taken under the MMPA and/or ESA. Should there be different requirements for the transfer of parts legally taken from an ESA-listed versus a non ESA-listed marine mammal? Does there need to be any clarification on how to apply or receive authorization for a transfer, and for determining who can be authorized to receive marine mammal parts and what documentation is required? Are the reporting requirements adequate and necessary, and should they be modified in any way? Does the language in § 216.37(d) regarding export and re-import need to be clarified, and if so, how?

NMFS seeks recommendations for developing regulatory language to streamline and govern the issuance of research permits involving collection, receipt, import, export, and archiving marine mammal parts for future opportunistic research. Currently marine mammal parts taken or obtained under permit may be transferred to another person pursuant to this section of the regulations, but there is no mechanism for facilitating the initial collection of marine mammal parts by institutions for eventual use for research purposes where the bona fide criteria required in section 104(c)(3) of the MMPA cannot be met for each and every part obtained by the institution. We are considering establishing guidelines in this section for determining when such activities would satisfy the bona fide scientific purpose requirement when the purpose of the initial receipt of the part may be unknown. We are also considering establishing standardized documentation and reporting requirements for permits involving marine mammal parts to demonstrate that the parts are taken legally and in a humane manner and that all requirements for applicable domestic and foreign laws have been met regarding importation and exportation.

NMFS is also considering adding to this section requirements and procedures governing the development, use, distribution or transfer, and prohibited sale of cell lines derived from marine mammal tissues. We are also considering similar regulations pertaining to gametes used by the public display industry and research community in assisted reproductive techniques of captive marine mammals. Any recommendations or comments on these topics would be appreciated.

§ 216.39 Permit amendments: One consideration already mentioned (in § 216.35) is to provide for only one amendment type, not major vs. minor. This would require consolidating this section considerably. Under this change the language in this section would be consistent with the following:

(a) General. Special exception permits may be amended by the Office Director. Amendments may be made to permits in response to, or independent of, a request from the permit holder. Amendments must be consistent with the Acts and comply with the applicable provisions of this subpart. Special exception permits may be amended by the Office Director without need for further public review or comment.

(1) An amendment means any change to the permit specific conditions under Sec. 216.36(a) provided that the amendment does not result in any of the following:

(i) An increase in the number and species of marine mammals that are authorized to be taken, imported, exported, or otherwise affected;

(ii) A change in the manner in which these marine mammals may be taken, imported, exported, or otherwise affected, where such change would result in an increased level of take or risk of adverse impact; and

(iii) A change in the location(s) in which the marine mammals may be taken, from which they may be imported, and to which they may be exported, as applicable.

(2) A request involving changes to the location, species, and number of marine mammal parts or specimens received, imported, or exported, where no take is involved, would qualify as an amendment.

(b) Amendment requests and proposals.

(1) Requests by a permit holder for an amendment must be submitted in writing and include the following:

(i) The purpose and nature of the amendment;

(ii) Information, not previously submitted as part of the permit application or subsequent reports, necessary to determine whether the amendment satisfies all issuance criteria set forth at Sec. 216.34, and, as appropriate, Sec. 216.41, Sec. 216.42, and Sec. 216.43.

(iii) Any additional information required by the Office Director for purposes of reviewing the proposed amendment.

(2) If an amendment is proposed by the Office Director, the permit holder will be notified of the proposed amendment, together with an explanation.

(c) Review of proposed amendments.

(i) After reviewing all appropriate information, the Office Director will provide the permit holder with written notice of the decision on a proposed or requested amendment, together with an explanation for the decision.

(ii) An amendment will be effective upon a final decision by the Office Director.

§ 216.40 Penalties and permit sanctions: NMFS is considering specifying criteria and procedures for the suspension, revocation, modification, and denial of scientific research or enhancement permits, in addition to, but consistent with, the provisions of subpart D of 15 CFR part 904. For example, NMFS is considering promulgating specific regulations for suspension, revocation, modification, and denial of scientific research and enhancement permits for reasons not related to enforcement actions.

§ 216.41 Permits for scientific research and enhancement : Should NMFS attempt to streamline, clarify and consolidate this large section with existing general permitting requirements? If so, any specific language toward that end would be considered. One change we are considering is the requirements for public display of marine mammals held under a scientific research permit in § 216.41(c)(1)(vi)(A) such that marine mammals may be on display if necessary to address the research objectives or if authorized by the Office Director, in addition to the existing requirements in § 216.41(c)(1)(vi)(B) and (C). We would appreciate any comments on if this should be changed. We are also considering adding a new section, § 216.41(c)(3), to authorize via an enhancement permit the long-term captive maintenance and incidental public display of ESA-listed species originally obtained under a research or enhancement permit when such activities have been completed or are not able to be carried out and the animals cannot be returned to the wild. Such permits would require that an appropriate educational program is established and approved by Office Director and that the animals are made available for research or enhancement activities at the request of the Office Director. In addition, if we implemented the General Authorization changes (see § 216.45), then those changes would also apply to this section for non-strategic marine mammals.

§ 216.42 Photography [Reserved] : NMFS may propose regulations similar to those for the General Authorization (§ 216.45). We are also considering limiting the number of personnel that may be involved in order to eliminate potential problems with permit holders using such authorization for ecotourism, since the MMPA does not provide exemptions for harassment of marine mammals via ecotourism permits. Any specific recommendations as to what these regulations should or should not include would be considered.

§ 216.45 General Authorization for Level B harassment for scientific research : NMFS is considering modifications to this section that would make General Authorizations (GAs) available based on the status of the target stock, rather than strictly based on the level of harassment. The recommended change would make a GA available for all Level A and Level B research on all non-strategic stocks of MMPA species. A GA would also be available for stocks defined as strategic under the MMPA, but only for Level B research activities. Under this suggested change a GA would not be appropriate for Level A research on ESA listed species, or depleted and strategic stocks under the MMPA. A number of paragraphs throughout this section would have to change as a result of this recommendation. This change, prior to implementation, would require a similar change in section 104(c)(3)(C) of the MMPA.

Regardless of whether changes are made to allow the GA to apply to level A harassment, NMFS proposes to modify this section to clarify that the description of methods in the letter of intent must specify the number of marine mammals, by species or stock, that would be taken, including a justification for such sample sizes.

NMFS is also considering revising the terms and conditions of the GA regulations to clarify that any activity conducted incidental to the research, such as commercial or educational filming or photography, would require prior written approval from NMFS, and such activities would be subject to the same conditions as those specified at § 216.41(c)(1)(vii) for scientific research and enhancement permits, i.e., the conduct of such incidental activities must not involve any taking of marine mammals beyond what is necessary to conduct the research.

Other considerations: NMFS is also considering adding new sections to the regulations. One such consideration would place the permit application and amendment process on a cycle. One option would be to accept permit applications and amendment requests quarterly (i.e., during any one of four three-month cycles per year). Applicants would have firmly established deadlines (made known through FR notification, mailings, and web site) to assist them in planning the submission of their application relative to the proposed start of their research. Another option would be to accept applications and amendments only twice a year, during one of two six-month cycles

One possible disadvantage for applicants under either alternative is that if a submission deadline were missed an applicant would have to wait three (option 1) to six (option 2) additional months for their permit. Applicants are used to requesting amendments at any time. They too would be affected by this modification and a request for an amendment could only happen once a permit cycle. However, a permit cycle ultimately makes receipt of permits predictable and helps researchers plan the submission of their applications with respect to proposed initiation of their work.

For applications to conduct research on non-ESA listed species, NMFS would aim for an average processing time of 90 days such that processing an application submitted by the deadline for one cycle could be completed by the end of the next cycle (three months later). Another advantage to this is that the average processing time of applications involving ESA-listed marine mammal species would likely be reduced because we would be able to conduct batched consultations and analyses under the ESA and NEPA. In cases where programmatic NEPA documents and corresponding ESA section 7 consultations have been completed, an average processing time of 90 to 120 days could be possible for those research activities covered by the documents.

NMFS invites the public to submit comments on the current regulations, recommended changes to the current regulations that might be considered in a new set of proposed regulations, and any relevant issues pertaining to the permitting process that might be considered as part of future proposed rulemaking. Be as specific as possible including providing draft language if appropriate. NMFS does not intend to convene public meetings under this ANPR. Comments and recommendations received under this ANPR will be reviewed as part of a proposed rulemaking which will be the next step in this regulatory process.