I. Background

On December 30, 2004, FNS published a Notice of Proposed Rulemaking (proposed rule) in the Federal Register (69 FR 78340) intended to remedy the deficiencies in school food authority procurement practices that are undermining full and open competition and resulting in unallowable uses of nonprofit school food service account funds. The December 2004 rule proposed to:

(1) Clarify allowable nonprofit school food service account expenditures for costs resulting from cost reimbursable contracts or cost reimbursable contract provisions;

(2) prohibit contract terms that allow payments from the nonprofit school food service account in excess of the contractor's actual net allowable costs, computed by deducting certain rebates, discounts and other credits; and

(3) require State agency review and approval of all contracts between school food authorities and food service management companies prior to their execution.

As discussed in the preamble to the proposed rule, most school food authorities manage the National School Lunch Program, School Breakfast Program and Special Milk Program on their own. However, some school food authorities choose to contract with a commercial enterprise to manage the programs. These commercial enterprises are collectively known as food service management companies.

In regulations published on January 18, 1969, FNS first permitted school food authorities operating under contract with a food service management company to participate in the National School Lunch Program under a pilot program (34 FR 807). On March 1, 1969, FNS issued prototype agreements for use by these school districts (34 FR 3704-3709). At that time, the only form of payment to a food service management company was a fixed price per plate or other meal equivalency served or delivered that included the contractor's full costs and profit. The food service management company was required to purchase food for the school food authority with invoices sent directly to the school food authority for payment. The cost of such food purchases was limited to the amount agreed upon between the food service management company and the school food authority (34 FR 3704). In effect, this contract was a cost reimbursable contract with a cap on costs plus a fixed management fee. Over time, the limit on costs was abandoned. Currently, food service management company contracts are either an inclusive fixed price per meal, or cost reimbursable with a fixed fee (without a cap on costs) contracts. We understand that the majority of all food service management company contracts are cost reimbursable with a fixed fee.

School food authorities use funds from the nonprofit school food service account to pay for costs incurred under both self-managed and food service management company-contracted programs. The funds in the nonprofit school food service account come from federal and nonfederal sources. The federal funds are provided as reimbursements from the U.S. Department of Agriculture (Department) for meals and milk meeting the requirements in 7 CFR 210.10, 215.7 and 220.8 that are served to eligible children. The primary sources of nonfederal revenue are student payments, adult payments and a la carte sales revenue. Additional funding sources include State and local funds and sales revenue from vending and catering activities. Regardless of the source, the school food authority must retain all of these revenues in the restricted nonprofit school food service account and may only expend these revenues for the allowable costs of the school food authority's nonprofit school food service program.

When procuring goods or services, including the use of a food service management company, school food authorities must conduct procurements in a manner that provides full and open competition. Full and open competition is necessary to provide a “level playing field” so that all potential contractors have the opportunity to win the contract award. Competition is impaired when potential contractors lack the necessary information to properly identify allowable and unallowable costs and establish the best and most responsive price, or when the procurement is written in a way that inhibits the ability of potential contractors to submit bids. A properly conducted procurement results in the school food authority obtaining the best product at the best price.

Cost allowability is determined using the applicable program and Departmental regulations (7 CFR parts 210, 215, 220, 3016 and 3019, as applicable) and Office of Management and Budget (OMB) Cost Circulars (A-87 Cost Principles for State, Local Governments and Indian Tribal Governments, or A-122 Cost Principles for Non-profit Organizations, as applicable). The determination regarding allowability is made, in part, based on the character of the recipient (i.e., school food authority) incurring the costs under the Federal program. As school food authorities are generally local governmental entities, all costs would, therefore, be subject to the principles found under OMB Circular A-87. In cases where the school food authority is a private non-profit (e.g., in the case of a parochial school), OMB Circular A-122 would apply. Further discussion of this matter is found later in this preamble (see Applicability of the OMB Cost Circulars to school food authority contracts under Section II of this preamble).

The proposed rule clarified that only costs resulting from cost reimbursable contracts or cost reimbursable contracts or cost reimbursable contract provisions that meet applicable cost allowability requirements are allowable nonprofit school food service account expenditures. The proposed rule required that allowable contractor costs paid from the nonprofit school food service account be net of all discounts, rebates and applicable credits. In addition, the proposed rule required contractors to provide sufficient information to permit the school food authority to identify allowable and unallowable costs and the amount of all such discounts, rebates and credits on invoices and bills presented for payment to the school food authority. This requirement serves to make the identification of discounts, rebates and credits more transparent to school food authorities and allows for proper use of nonprofit school food service account funds. This requirement should not place an additional burden on contractors as they already track the costs that are billed to school food authorities and have accounting and billing systems in place for school food authority contracts. Under Generally Accepted Accounting Principles and good business practices, these contractors also must maintain systems to track and report discounts, rebates and credits.

The proposed rule was prompted in part by two audits released by the Office of Inspector General (OIG) in 2002, both of which identified deficiencies in school food authority procurement practices that are undermining full and open competition and resulting in unallowable uses of nonprofit school food service account funds. The first audit, released in February 2002 as Audit Report 27010-3-AT, identified a number of instances where a cooperative buying group, using nonprofit school food service account funds, failed to conduct procurement transactions in a manner that provided for full and open competition. For example, one cooperative buying group failed to include all items to be purchased in its bid solicitation and instead purchased items directly from the contractor outside of the terms of the contract. To purchase directly from the contractor without the benefit of a proper procurement limits full and open competition, as other potential contractors are eliminated from consideration.

The second audit (OIG Audit Report 207601-0027-CH, released in April 2002) revealed problems in several cost reimbursable contracts between school food authorities and food service management companies. OIG found contracts between school food authorities and food service management companies that lacked controls as to exactly how the company would determine the allowability of costs charged to the school food authority, including how the company would provide the school food authority with the benefits of purchase discounts, rebates, and credits in the determination of net costs. The failure of a school food authority to describe its cost reporting requirements fully in its solicitation document undermines full and open competition by placing unreasonable burdens on potential contractors. Without adequate details on how it must report costs to the school food authority, a potential contractor lacks the information needed to properly establish the fixed price component (management fee) of its offer. In addition, school food authorities cannot determine whether nonprofit school food service account funds may be used to pay all or only part of the costs billed by the contractor. In other cases, OIG found that even though the school food authority's procurement documents required the return of such discounts, rebates, and applicable credits, the food service management company was permitted to keep the discounts and rebates earned through purchases billed to the school food authority. Allowing the food service management company to keep these funds was a material change to the contract; material changes require a rebidding of the contract. The net effect is that excess charges are made against the food service account, thereby diminishing food service resources.

FNS received 16 comments on the proposed rule within the allotted 60-day comment period. Of the 16 commenters, seven were State agencies, three were food service management companies, and the rest were trade and professional organizations and consultants.

The proposed rulemaking allowed interested parties the opportunity to request further information from FNS. Three interested parties (food service management companies and their representatives) requested and received the opportunity to meet with FNS in lieu of requesting the information via other means. These meetings were for informational purposes only. None of the discussions at those meetings constituted comments on the proposed rulemaking.

Fourteen of the sixteen commenters supported either one or both of the proposed rule's goals of improving full and open competition in school food service procurements and limiting nonprofit school food service account expenditures to net allowable costs. All but two commenters raised concerns or objections to one or more of the proposed rule's provisions or requested additional guidance. One commenter only addressed long term beverage contracts and one commenter disagreed that the identification of credits and rebates in cost reimbursable procurement solicitations and contracts would foster greater competition in school food service procurements. No specific comments were received on the proposal to make the procurement and contract requirements and the consequences for failing to take corrective action in the Special Milk Program and School Breakfast Program regulations consistent with the National School Lunch Program regulations.

The proposed rule added definitions of “Applicable credits,” “Contractor,” and “Nonprofit school food service account” to 7 CFR 210.2, 215.2 and 220.2. All subsequent references to regulatory sections are to title 7, Code of Federal Regulations, unless otherwise indicated.

“Applicable credits” was defined with a cross-reference to definitions provided in OMB Circulars A-87 and A-122. The proposed rule at §§ 210.21(e)(1)(i), 215.14a(d)(1)(i) and 220.16(e)(1)(i) required that cost reimbursable contracts include a provision that costs paid to the school food authority's contractor be net of all discounts, rebates and other applicable credits received by the contractor. Examples of applicable credits are discount incentives for volume purchases, credits for returned goods, and rebates paid for the purchase of specific goods.

Several commenters asked for clarification on whether earned income would be considered an “applicable credit” under the proposed definition. In general, earned income is a payment from the manufacturer to the distributor for work performed by the distributor on behalf of the manufacturer. Some examples of earned income include payments made to a distributor for promoting new products, hosting trade shows, distributing promotional information, or carrying a particular product in inventory. In each of these cases, the distributor must perform some service to receive the payment from the manufacturer. This type of earned income is not related to purchases made by a school food authority using its nonprofit school food service account and, therefore, is not considered an applicable credit.

Three commenters asked for clarification on whether a prompt payment discount would be considered an applicable credit. A prompt payment discount is an applicable credit to the nonprofit school food service account only if the school food authority earns the reduction by paying the bill or by providing advance funds to another party to pay the bill on its behalf. We understand that in the majority of school food authority cost reimbursable contracts, distributors and food service management companies obtain goods from suppliers, are billed by those suppliers, pay the suppliers and then deliver the goods at some later point in time to the school food authority. In these arrangements, the prompt payment discounts are not applicable credits to the school food authority.

On the proposed definition of “contractor,” a number of commenters asked for confirmation that the definition includes all contractors to the school food authority, not just food service management companies. The commenters are correct.

Commenters also wanted clarification on whether a purchasing cooperative meets the definition of a contractor. A school food service purchasing cooperative, an organization formed by school food authorities to conduct purchases, is not a contractor to its school food authority members, but instead acts as their purchasing agent. As an agent, the purchasing cooperative must follow the same rules in acquiring goods and services that its school food service members would follow should the members make the acquisitions themselves.

Another type of purchasing cooperative is a cooperative buying group, which is an already existing public, for-profit or nonprofit buying group which usually requires the payment of a fee to become a member. In exchange for the membership fee, the cooperative buying group offers its members pre-selected items at prices that are generally lower than the price paid at retail establishments for the same items. While the purchase of a membership from the cooperative buying group might create a contractual relationship between the cooperative buying group and the school food authority, a cooperative buying group is not considered a “contractor” under the program regulations.

One comment was received on the proposed rule's definition of “Nonprofit school food service account.” The proposed rule established the definition of “Nonprofit school food service account” to mean the restricted account in which all of the revenue from the food service operations conducted by the school food authority principally for the benefit of school children is retained and used only for the operation or improvement of the nonprofit school food service. The commenter requested the word “restricted” be further defined. No change to this definition is being made in this final rule because the nature of the restrictions on the use of nonprofit school food service account funds are explained within the definition itself and at § 210.14(a).

In addition to the requests for clarification discussed above, commenters also requested that definitions be added to the final rulemaking for “cost contract,” “fixed price contract,” “cost reimbursable contract” and “fixed fee.” The terms “cost reimbursable contract” and “fixed fee” have been defined in this final rule, because FNS will need to use these terms in regulatory language. However, we did not define the other two terms. The term “cost contract” is already defined in Department regulation 7 CFR 3016.3. FNS does not see the need to use the term “fixed price contract” in the National School Lunch, Special Milk or School Breakfast Program regulations, and has therefore elected not to define that term in regulatory language. (Please note, however, that while the term “fixed price contract” is not used in the regulations, it is a commonly used type of contract in these programs, and will be used at various times in this preamble.) Thus, the final rule adds definitions for “cost reimbursable contract” and “fixed fee” based on existing regulations, accounting definitions and previously issued policy and guidance.

Accordingly, the three definitions proposed for “applicable credit,” “contractor,” and “nonprofit school food service account” are adopted without changes, and definitions for “cost reimbursable contract” and “fixed fee” are added to this final rulemaking for the National School Lunch, Special Milk and School Breakfast Programs at §§ 210.2, 215.2 and 220.2, respectively.

As a general rule, all procurements in the School Nutrition Programs, whether for goods or services, must be competitive. Sections 210.21(c), 215.14a(c), and 220.16(c) of the proposed rule included the requirement that, in conducting procurements, State agencies and school food authorities may use their own procurement procedures which reflect applicable state and local laws and regulations, as long as procurements made with nonprofit school food service account funds meet the standards set forth in the program regulations and §§ 3016.36(b) through 3016.36(i), § 3016.60 and §§ 3019.40 through 3019.48, as applicable, and in the applicable OMB Cost Circulars. We have modified the language of §§ 210.21(c), 215.14a(c) and 220.16(c) to more accurately reflect the provisions of §§ 3016.36(a) and 3016.60(a), which specify that State grantees may elect to follow either the State laws, policies and procedures, or the procurement standards for other governmental grantees and subgrantees in accordance with § 3016.60(b) through (i). Regardless of the option selected, States must ensure that all contracts include any clauses required by Federal statutes and executive orders and that the requirements of § 3016.60(b) and (c) are followed.

Two commenters raised issues with procurement procedures in general. The first asked that we consider permitting cost plus percentage of cost contracts. The commenter's rationale for allowing this procurement method was that this form of contract costing may be the most cost effective procedure for school food authority bidding. In a cost plus percentage of cost contract, the contractor earns its fee based on a percentage of the cost of goods it sells under the contract. This contract cost method is prohibited government-wide because this form of contract pricing provides a financial incentive for the contractor to increase costs.

The second commenter expressed concern that our position that competition is required for all procurements would prevent school food authorities from taking advantage of “value added” products or consider factors other than price in awarding a contract. Although the proposed rule did not directly address this issue, this comment reflects a misunderstanding of procurement practices which we will address briefly in this preamble and in future guidance and training.

While a potential contractor may indeed have a better (“value added”) product, if that product does not meet solicitation specifications, the school food authority cannot use the phrase “value added” to circumvent proper procurement procedures. It is not appropriate for a school food authority to select products that do not meet solicitation requirements. If the school food authority determines that the value added product is more appropriate than the product it specified in its procurement solicitation, the school food authority must issue a new solicitation or wait until its next bid cycle to change its specifications. This does not mean, however, that a school food authority must consider a product that does not meet the specifications even if that product has the lowest cost.

Another concern raised by this commenter and others was that school food authorities could be penalized if they failed to use either sealed bidding or competitive proposals to purchase every item needed during the school year. This is not the case, but does represent a common misunderstanding that the term “competitive procurement” means that either the sealed bid or competitive proposal method must be used. Some form of competition is required for every purchase, but not every purchase is subject to the formal (sealed bid or competitive proposal) solicitation methods. There are many items that are purchased in such small quantities that it is not cost effective for the school food authority to conduct a formal procurement to acquire these items. However, just because a purchase will not meet the formal procurement threshold does not mean the school food authority is exempt from competitively procuring the purchase. In these situations, the school food authority would use simplified small purchase procedures. Simplified small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or property that may be used when the anticipated acquisition will fall below the Federal simplified acquisition threshold currently set at $100,000. Informal or small purchase procedures, discussed at § 3016.36(d), are relatively simple and informal practices that are not as rigorous as formal procurement procedures, but that still provide competition. For example, a school food authority seeking to purchase several thousand dollars worth of office supplies would not have to issue a formal solicitation document and publicize it widely. Rather, the school food authority could simply fax its list of needed supplies to at least three local suppliers, and then compare the prices received from each. School food authorities must determine and apply any State or local thresholds that are lower, and therefore more restrictive, than the current Federal small procurement threshold of $100,000.

The proposed rule required, in §§ 210.21(e)(1), 215.14a(d)(1), and 220.16(e)(1), that school food authorities include specific solicitation and contract provisions in cost reimbursable contracts or contracts with cost reimbursable terms. These proposed provisions included the requirement that allowable costs be paid to the contractor net of all discounts, rebates, and applicable credits; and that the contractor individually identify on bills and invoices, and maintain documentation of, discounts, rebates, and applicable credits. In addition, the proposed provisions included the requirement that the contractor separately identify for each cost submitted for payment to the school food authority the amount of the cost that is allowable (i.e., can be paid from the nonprofit school food service account) and the amount that is unallowable, as determined in accordance with the applicable regulations and OMB cost circulars.

These proposals, taken together, are intended to provide school food authorities with the information they need to identify the net allowable portion of their contract costs that can be funded from the nonprofit school food service account, and the amount of unallowable contract costs that must be funded from other sources. These proposals are also intended to inform contractors about these reporting requirements up front.

A number of comments were received regarding the applicability of these solicitation and contract terms to fixed price contracts or to the fixed fee components of cost reimbursable contracts. A fixed price contract is a contract cost method that establishes a fixed price, usually on a per unit basis, for the goods and/or services provided by the contractor for the duration of the contract, including renewals. A fixed fee is often one component of a cost reimbursable contract.

We did not propose, nor does this final rule require that these same solicitation and contract provisions relating to discounts, rebates, and applicable credits be included in fixed price solicitations or in the resulting fixed price contracts, because contractors have already taken discounts, rebates and other credits into consideration when formulating their prices for fixed price contracts. The same holds true for the fixed fee component of a cost reimbursable contract. However, the cost reimbursable components of any contract would be subject to the requirement that specific provisions relative to discounts, rebates and applicable credits be included.

One commenter asked whether fixed fee contracts or the fixed fee components of cost reimbursable contracts that were adjusted over time would be subject to the proposed rulemaking. As long as these changes result from contractually agreed-upon adjustment factors, such as changes in the reimbursement rates for the School Meal Programs or changes in other third-party cost or price indices, the adjustments would not be subject to the contract terms set forth in this rulemaking.

Several commenters suggested that FNS mandate the use of fixed price contracts. Based on anecdotal information, some State procurement statutes and regulations already limit public school food authorities to fixed price contracting, while other State agencies have mandated this form of contracting for specific acquisitions, such as acquiring the services of a food service management company. However, mandating the use of fixed price contracts on a national basis is not in the best interest of the school nutrition programs. State agencies and school food authorities, not FNS, should determine whether acquisitions are best suited to fixed price or cost reimbursable contracts.

Commenters also expressed concern that by not subjecting fixed price contracts to the provisions of the proposed rule, school food authorities would not be required to determine the allowability of costs resulting from fixed price contracts. As stated above, fixed price contracts are not subject to the provision of the proposed rule requiring that allowable contractor costs paid from the nonprofit school food service account be net of all discounts, rebates, and applicable credits because contractors have already taken into consideration factors such as discounts, rebates and other credits when formulating their prices for fixed price contracts. However, the net cost factor is only one aspect used in determining allowable costs. Expenditures from the nonprofit school food service account for fixed price contracts must still meet the general requirements for allowable costs. To be allowable, a cost must be necessary, reasonable, and allocable.

For example, a school seeks to contract for janitorial supplies for the entire school building through a single procurement solicitation. The contract will be awarded on a fixed price per item basis. Under the allowable cost rules, the costs associated with the janitorial supplies purchased for use by the school food service would be an allowable expenditure from the nonprofit school food service account, but costs associated with the janitorial supplies purchased for the rest of the school would not, as they are not allocable to the nonprofit school food service account. The fact that the contract was fixed price would not supersede the cost requirement that to be allowable, a cost must be necessary, reasonable and allocable to the nonprofit school food service. The same principles would apply to the fixed price fee of a cost reimbursable with fixed fee contract.

One commenter raised the issue of the risks contractors, particularly food service management companies, incur when including guaranteed return provisions in contracts, and requested that contracts containing such provisions be considered fixed price for purposes of the final rulemaking. The commenter asserted that providing a guaranteed return causes its company to take profit and loss risks similar to what it assumes in fixed price contracts. The commenter further offered that since a company assumes financial risk by agreeing to the guaranteed return provision, it would be inequitable to treat the contract as cost reimbursable. Instead, the commenter indicated the contract should be viewed as fixed price, thus eliminating the need for the company to include discounts, rebates, and other applicable credits on bills and invoices submitted to the school food authority.

We disagree. Guaranteed return provisions do not substantially alter the terms of a contract enough to convert it from cost reimbursable to fixed price. Furthermore, guaranteed return provisions are neither new nor unique to the School Meal Programs, nor are these provisions limited to cost reimbursable contracts. By entering into contracts with guaranteed return provisions, the contractor willingly agrees to accept the risk. In their current form, most of these guaranteed return provisions do not place successfully performing contractors at risk. As the commenter noted, guaranteed return provisions provide a financial assurance that certain contractual promises made to the school food authority will be met. There is no Federal requirement that a contract be drafted to eliminate all possible risk to a contractor, nor is a school food authority required to indemnify its contractor against all potential risks that might occur, particularly those that the contractor has agreed to accept.

No changes are being made in this final rule based on these comments.

Most commenters supported the proposed rule's provisions limiting expenditures from the nonprofit school food service account to net allowable costs. However, there did appear to be some misunderstanding of this proposal. Some commenters asserted that we were proposing that discounts, rebates, and other applicable credits must be returned to the school food authority. Another commenter asserted that the proposal that contractors identify allowable and unallowable costs on invoices would substantially alter the current economic structuring of transactions between food service management companies and school food authorities.

To clarify, this provision does not prevent a school food authority from entering into a contract that results in unallowable costs. It does, however, prohibit the school food authority from using nonprofit school food service account funds to pay any amount above net allowable costs. The decision regarding whether discounts, rebates, and other applicable credits are returned to the school food authority is a decision between the school food authority and its contractor. However, the school food authority can only use nonprofit school food service account funds to pay for costs that are net of discounts, rebates, and applicable credits.

To prevent any future misunderstanding of this distinction, we have amended this final rule at §§ 210.21(f)(1)(i), 215.14a(d)(1)(i) and 220.16(e)(1)(i) to clarify that the limitations on the payment of allowable and unallowable costs pertain only to expenditures from the nonprofit school food service account.

One commenter requested confirmation that contractors would be required to disclose discounts, rebates, and other applicable credits whether the amounts were received by the contractor itself, a subsidiary or an affiliate of the contractor. The commenter is correct. The commenter also requested confirmation that the disclosure of such amounts would apply whether the contractor's headquarters is in the United States or otherwise or when these amounts are received by entities under the control of the same parent corporation as the contractor. Again, the commenter is correct. The intent is to promote full and open competition and limit expenditures of the nonprofit school food service account to allowable costs. That would not be achieved if contractors could use their corporate structures to circumvent the disclosure requirements of this rulemaking.

Three commenters raised concerns with the protection of confidential business arrangements when reporting discounts, rebates and other applicable credits. FNS is sensitive to the commenters' concerns related to confidential business relationships. We agree with the commenters that the reporting of discounts, rebates and other applicable credits should not compromise business relationships that have been promised confidentiality. We were aware that such confidential business relationships could exist and we considered these relationships in developing the proposed regulation. For this reason, we proposed that the contractor individually identify discounts, rebates or applicable credits on the bills and invoices, but did not propose that the contractor identify the source of the discount, rebate or other applicable credit on the invoice.

There are a number of ways for a contractor to provide sufficient information on its billing documents about the nature of the amounts reported without compromising its confidential business relationships. The contractor could provide the school food authority with a list of products upon which a discount, rebate, or other applicable credit could be earned during the term of the contract and then report the amount of discounts, rebates and other applicable credits in aggregate on billing documents to the school food authority; the contractor could identify the discount, rebate, or other applicable credit by earning period, e.g. for products purchased during the month of April the contractor could identify the discount, rebate, or applicable credit by invoice number. Since not all contractors will use the same method to record and report discounts, rebates, and other applicable credits within their corporate recordkeeping systems, FNS does not want to prescribe the specific method that should be used to identify these amounts on school food authority billing documents.

Although this final rule does not require the reporting of confidential business information on bills and invoices, it does require that the contractor maintain records and source documents in support of the costs and discounts, rebates and other applicable credits included on bills and invoices to the school food authority and make them available to the school food authority, State agency and Department upon request. This record retention requirement is no different from the existing requirements found in Department regulations at §§ 3016.36(i)(10) and 3019.48(d). Contractors have always been required to maintain source documents in support of the costs charged to school food authorities. The intent of the provisions at §§ 210.21(f)(1)(iv), 215.14a(d)(1)(iv) and 220.16(e)(1)(iv) and the record retention requirements in the Department's regulations is to provide sufficient information to permit a school food authority to determine the costs billed by its contractors that can be paid from the nonprofit school food service account, and to permit a subsequent review of the contractor's source documents to verify that the costs, discounts, rebates, and other applicable credits were properly reported under the terms of the contract.

To eliminate the possibility that readers could misinterpret this requirement, this final rule amends §§ 210.21(f)(1)(iv), 215.14a(d)(1)(iv) and 220.16(e)(1)(iv) to clarify that contractors are only required to identify the amount of each discount, rebate or applicable credit on the bill or invoice and whether the amount is a discount, rebate, or in the case of some other form of applicable credit, the nature of that credit.

Several commenters expressed concerns with the timing of the reporting required of contractors to identify discounts, rebates and other applicable credits on all bills and invoices sent to the school food authority. Presumably, this would occur on a monthly basis. In commenting on the timing, one commenter suggested requiring potential contractors to include this information up front, by bidding prices as if the discount, rebate or other applicable credit had already been earned, with a subsequent reconciliation at the end of the contract.

We considered the option of requiring prices to be bid less discounts, rebates and other applicable credits. However, we do not believe this will improve full and open competition nor will such a requirement maintain the integrity of the nonprofit school food service account given the current state of school food authority procurements, as this information may not always be available to the contractor at the time of bidding.

However, since FNS is encouraging State agencies to take a more active role in school food authority procurements, this final rule amends §§ 210.21(f)(1)(iv), 215.14a(d)(1)(iv) and 220.16(e)(1)(iv) to permit State agencies to approve reporting on other than a monthly basis, but not less frequently than annually. A State agency may choose to establish reporting timeframes on an individual contract basis or on a Statewide basis.

Other commenters on the issue of timing addressed the reporting of discounts, rebates and other applicable credits that result from contract activity, but are not earned or received by the contractor until after the contract has ended. While some discounts, rebates, and other applicable credits will be known to the contractor when bills are issued to the school food authority, others, particularly volume discounts, may not be known until some point in the future. For example, a volume purchase discount is earned when sales of a particular item reach an established target. The contractor may not reach the target sales volume until after the school food authority's contract has ended, even though the purchases by the school contributed to reaching the target volume. This could occur when the timing of the school food authority's contract does not coincide with the timing of the volume discount earning period, or even when the timing of the contract and the volume discount earning period is the same but the contractor does not receive the benefit of a volume discount, rebate or other applicable credit until after the school food authority's contract has concluded. The method for providing the discount, rebate, or other applicable credit amount in this situation depends on whether the contractor and the school food authority maintain an on-going, uninterrupted, contractual relationship, i.e. , a subsequent or renewal contract is in place. When the contractor and the school food authority's contractual relationship is uninterrupted, the contractor can include the discount, rebate, or other applicable credit in the next reporting period after it is received. For those situations in which the contractor and the school food authority do not maintain an uninterrupted contractual relationship, the amount of the discount, rebate or applicable credit must be provided to the school food authority once these amounts are known to the contractor. Depending upon the school food authority's financial management practices, the school food authority may need the contractor to identify the period in which the discount, rebate, or other applicable credit was earned so that it can adjust its accounting records accordingly. In such cases, the contractor would need to provide sufficient information for the school food authority to identify the appropriate accounting period requiring adjustment.

We agree that the proposed regulatory provisions should be clarified to address this issue. Therefore, we are amending §§ 210.21(f), 215.14a(d) and 220.16(e)(1) to require school food authorities to include specific directions in solicitations and contracts for reporting discounts, rebates, and applicable credits after the close of the contract to which the cost reductions apply.

The provision of the proposed rule requiring contractors to identify allowable and unallowable costs on invoices was added to provide school food authorities with the information they need to determine what may be paid out of the nonprofit school food service account. We considered four alternatives when developing this provision of the proposed rule, including: (1) Maintaining the status quo of not requiring specific documentation; (2) requiring that contractors provide source documentation to school food authorities for all costs charged; (3) requiring that contractors have an annual audit for each cost contract with a school food authority to determine allowable and unallowable costs; or (4) requiring that contractors include only allowable costs on invoices.

Maintaining the status quo was rejected because OIG audits and investigations indicated that nonprofit school food service account funds have been expended for unallowable costs because the school food authority had insufficient information to identify unallowable costs included on invoices. The requirement that contractors provide source documentation for all costs charged was rejected because it would be excessively burdensome on contractors to provide this information. Similarly, an annual audit requirement was rejected because it would be both burdensome and cost prohibitive for contractors to incur annual audit costs for each of its cost reimbursable contracts with school food authorities. Finally, the fourth alternative of requiring that contractors include only allowable costs on invoices was rejected in developing the proposed rule because it would interfere with the school food authority's right to enter into contracts that contained costs that were unallowable nonprofit school food service account expenditures, but nevertheless represented costs the school food authority was willing to fund from other sources.

However, FNS has now reconsidered this fourth alternative (requiring that contractors include only allowable costs on invoices) because a school food authority can elect to contract only for allowable costs. If, in our previous example, the janitorial supplies contract was cost reimbursable instead of fixed price, pursuant to the provisions of this final rule, the contractor would appropriately identify all of the janitorial supplies sold to the school food authority as allowable costs on its monthly invoice. The contractor's identification of allowable and unallowable costs on the invoice does not mean that the school food authority can fund the entire cost of its janitorial supplies contract from its nonprofit school food service account. Because the school food authority, not the contractor, is ultimately responsible for ensuring that expenditures from the nonprofit school food service account are allowable costs as determined in accordance with the applicable OMB cost circular, the school food authority would still be required to fund only its share of the allowable and allocable janitorial supply costs from its nonprofit school food service account.

As a result of this reconsideration, this final rule amends §§ 210.21(f)(1)(ii), 215.14a(d)(1)(ii) and 220.16(e)(1)(ii) to allow school food authorities to choose between two cost reporting provisions for solicitation documents and contracts. The first cost reporting provision finalizes the provision contained in the proposed rulemaking that contractors identify allowable and unallowable costs on billing documents. The second cost reporting provision requires contractors to exclude unallowable costs from billing documents and to certify that only allowable costs are submitted for payment and that records have been established that maintain the visibility of unallowable costs, including directly associated costs, in a manner suitable for contract cost determination and verification. Regardless of the cost provision chosen, contractors would still be required to report discounts, rebates and other applicable credits, and school food authorities would still be required to limit expenditures of nonprofit school food service account funds to net allowable costs.

Two comments were received on the proposed rule's provision that allowable costs be identified by the contractor in accordance with applicable OMB Cost Circulars (A-87 Cost Principles for State, Local Governments and Indian Tribal Governments and A-122 Cost Principles of Non-profit Organizations). These commenters asserted that the cost principles contained within the Federal Acquisition Regulations (FAR) should be used to determine allowable costs that result from contracts with commercial organizations rather than cost principles contained in the OMB Cost Circulars applicable to public and private nonprofit school food authorities.

The governing Department regulations (§§ 3016.22(b) and 3019.27) make clear that for each type of organization there is a set of Federal principles for determining allowable costs. The determination is made based on the type of recipient incurring the costs under the Federal program. Since commercial organizations are not eligible recipients of the school nutrition funds provided by FNS, their only role can be that of a contractor to an eligible recipient ( i.e. , a school food authority). As an eligible recipient of federal funds, a public school food authority must use OMB Circular A-87 to determine whether costs are allowable, while a private nonprofit school food authority ( e.g. , in the case of a parochial school) must use OMB Circular A-122 to make this determination. Only when a commercial organization is contracting directly with the Federal government would the FAR (48 CFR part 31, Subpart 31.2) and its applicable Cost Accounting Standards (48 CFR 9901.306) be used to determine allowable costs.

Ultimately, the school food authority, not its contractor, is responsible for ensuring that expenditures from the nonprofit school food service account are allowable costs as determined in accordance with the applicable OMB cost circular. This is not a new requirement. School food authorities have been subject to the OMB cost circulars since November 10, 1981, when the Department issued 7 CFR 3015, Uniform Federal Assistance Regulations (46 FR 55640). Further, limitations on claiming only allowable costs have been in place for school food authorities since at least January 1, 1967 (32 FR 33).

A related issue concerning the applicability of the FAR to school food service contracts is the recovery of administrative cost overhead charges from retained discounts and rebates. In this case, one commenter asserted that contractors should be allowed to retain rebates and discounts to cover those corporate indirect costs that are not included in the fixed fee component of their cost reimbursable contracts, and that such actions were permissible for contractors subject to the FAR at 48 CFR part 31, Subpart 31.2. The commenter further asserted that FNS should allow such practices. We disagree. As discussed above, the FAR does not apply to any school food service contracts. Therefore, these suggested practices are not adopted in this final rule.

The same commenter also asserted that even if the FAR did not apply to contracts with school food authorities, the OMB cost circulars would allow the contractor to retain the discounts, rebates, and other applicable credits earned on the cost component of its contracts in order to offset its administrative costs charged through its fixed fee. Again, the Department disagrees. The effect of the commenter's position could unnecessarily increase nonprofit school food service expenditures. A cost reimbursable with fixed fee contract consists of the cost component and the fixed fee component. The rebates, discounts and other applicable credits subject to the rulemaking are earned through the cost component of the contract, not the contractor's fixed fee component.

If FNS accepted the commenter's position, potential contractors could have an unfair advantage over school food authorities. Without full disclosure of the costs a contractor will actually charge, full and open competition is compromised because the school food authority cannot determine which of the respondents has made the most advantageous offer, taking into consideration price and other factors. The outcome of the commenter's position would be that a school food authority could not rely on the price a contractor bid or the contractual agreement into which it entered.

This final rulemaking does not affect how a contractor establishes its full administrative costs in its fixed fee since this is a business decision. However, the principle of a fixed price is that the price is fixed in the manner and for the period of time specified in the contract. We are not aware of any cost principle or procurement provision that permits a contractor to increase the fixed price component of a contract without disclosure of the change and the agreement of the other party to the contract. When a potential contractor submits a fixed price offer, is awarded a contract based on the price, and then contractually agrees to that price, the contractor may not violate the terms of its contract by increasing that price by retaining undisclosed rebates, discounts or other applicable credits.

This confirms one of the key points underlying the issuance of the proposed rule as well as this final rule, which is that school food authorities must clearly specify how costs must be billed to the school food authority in order for a potential contractor to determine which costs should be included in its fixed fee.

In order to clarify what can be included in fixed fees, the newly added definition of “fixed fee” at §§ 210.2, 215.2 and 220.2 specifies that the contractor's direct and indirect administrative costs and profit allocable to the contract may be included. A potential contractor is free to determine what portion of its overhead and indirect administrative costs is allocable to a contract in its fixed fee component. However, if a potential contractor chooses to exclude such costs from the fixed fee component, attempting to recover these costs by retaining discounts, rebates and other applicable credits earned through the cost reimbursable portion of the contract is unallowable. If a school food authority permits the contractor to retain these discounts, rebates, and applicable credits the school food authority is responsible for ensuring that the amount that these discounts, rebates, and credits represent is returned the nonprofit school food service account.

One commenter asserted that contractors should have the option of charging the school food authority a fee for late payments. The commenter did not explain why he believed such charges were prohibited or how the proposed rule would interfere in a contractor's right to include a provision requiring payment of late fees in a contract with a school food authority. There is no provision in this final rule or elsewhere in any of the Child Nutrition Program or Department regulations that would prevent a contractor from negotiating an agreement that imposes a fee when the school food authority fails to pay its debts in a timely manner. In the past, FNS has affirmed the right of contractors to request and enforce provisions addressing the imposition of late payment fees in contracts, as long as such provisions do not conflict with applicable State and local procurement laws and regulations. However, we also continue to maintain the position that the school food authority may not use its nonprofit school food service account funds to pay the cost of such fees. These fees represent fines and penalties, which are unallowable costs under the applicable OMB cost circulars. In keeping with the provisions of this final rulemaking, the contractor would be required to identify any late payment charge on its billing documents as an unallowable cost ( i.e. , a cost that cannot be funded from the nonprofit school food service account).

Two commenters requested clarification that any added costs resulting from implementing this final rule would be allowable charges to school food authorities. Neither of the commenters specifically identified where they would incur increased costs or the amount of any increase, but we would expect any increased costs to be incurred in the allocation and records maintenance of discounts, rebates, and other applicable credits to school food authorities, and/or in the identification and reporting of allowable and unallowable costs. Contractors already track the costs that are billed to school food authorities and have accounting and billing systems in place for school food authority contracts. Further, under Generally Accepted Accounting Principles and good business practices, these contractors maintain systems to track and report discounts and rebates. Any additional cost incurred by contractors for implementing the provisions of this regulation is an element of a company's administrative expenses and is allocable and may be included in the fixed fee component of a cost reimbursable contract. The decision as to whether to record the expense as an overhead, accounting or management cost is a corporate financial management decision.

Sections 210.16(a)(10), 210.19(a)(6), 215.14a(c)(1) and 220.7(d)(1)(ix) of the proposed rule required State agency review and approval of contracts and contract amendments between school food authorities and food service management companies prior to each contract's execution to ensure that such contracts comply with all program requirements. If a school food authority fails to make changes required by the State agency, then the proposed rule provided at §§ 210.19(a)(2), 215.a(c)(3) and 220.16(c)(3) that all costs associated with such contracts would be unallowable charges to the nonprofit school food service account.

One commenter was concerned that the proposal for the State agency to review the school food authority's food service management company contract prior to its execution would place a substantial burden on the State agency. The commenter viewed this review as a new requirement. It is not. FNS only proposed to change the timing of this review, not its scope.

Under current regulations, State agencies generally do not review school food authority contracts until after the contracts have been executed ( i.e. , signed by the school food authority and the contractor). Unfortunately, when the State agency finds problems with the terms of an already executed contract, it may be too late to remedy the problems for the current contract, except when State or local laws and procedures permit contract nullification. Since the school food authority is bound to fulfill its contract terms, in the most serious cases, the State agency's only recourse is to disallow all costs resulting from the contract. In this case, school food authorities may not use the nonprofit school food service account to pay these costs.

One State agency suggested that a school food authority's compliance with procurement requirements be included in the Single Audit. Since an audit is conducted on a prior period, it would be too late to correct any deficiencies that are found. Generally the only option to respond to audit deficiencies is to disallow the costs associated with noncompliance and seek corrective action to prevent recurrence of the problem. Cost disallowances can seriously undermine the financial integrity of the school's nutrition programs for children.

FNS' intent in moving the State agency review of food service management company contracts from after execution to before execution is to provide a means for identifying and correcting problems in contracts before they are signed. This approach helps ensure that school food authorities are not routinely subject to cost disallowances.

Another State agency expressed concern that the proposed rule at § 210.19(a)(6) would require a State agency to review previously approved prototype food service management company contracts even when no changes had been made to the contract. This was not our intent, nor do we believe this will occur. This final rulemaking requires school food authorities using a State agency pre-approved prototype food service management company contract to obtain prior written approval of the State agency only when changes are made to that contract (§§ 210.16(a)(10) and 220.7(d)(1)(ix)). In response to this comment, we have added a corresponding sentence at § 210.19(a)(6) of this final rule to clarify that when a school food authority is using a State agency prototype food service management company contract, the State agency is only required to review the changes made to that prototype contract.

A third State agency, which from the description of its current actions already has an extensive preapproval process for food service management company contracts, expressed concern that the proposed change would impose an additional review on top of the review it already performs. FNS will work with individual State agencies to ensure that any changes resulting from implementing this final rulemaking do not duplicate or diminish a State agency's current approval process. Two State agencies indicated that pre-execution reviews of food service management company contracts are already occurring; four additional commenters supported the proposal.

One commenter suggested nonsubstantive rewording of certain sentences at § 210.16(a)(9) and (a)(10). We agree that the commenter's proposed changes make the provisions easier to read and have amended § 210.16(a)(9) and (a)(10) and the corresponding provisions at § 220.7(d)(1)(viii) and (d)(1)(ix) of this final rule accordingly. We also added language to § 210.19(a)(6) to clarify that State agency review of contracts includes review of the supporting documentation to the contract, including the request for proposal or invitation for bid.

Other commenters requested that the regulation permit the State agency flexibility in establishing due dates for school food authority procurement documents. Two commenters requested more specific regulatory authority to withhold payments when school food authorities fail to comply with a request for timely submission of required documents.

Currently, sufficient regulatory authority exists to permit State agencies to establish reasonable due dates consistent with their resource and work load limitations. However, this final rule amends §§ 210.16(a)(10), 210.19(a)(6) and 220.7(d)(1)(ix) to permit State agencies to establish due dates for submission of the documents needed for this approval. Failure of a school food authority to respond to these due dates would result in regulatory noncompliance, and the school food authority's failure to correct this deficiency could result in the withholding of reimbursement pursuant to current §§ 210.22 and 220.18.

Several commenters expressed opinions on the provision in the proposed rule at § 210.16(b)(1) that permits a food service management company to submit the 21-day menu and requires compliance with the menu for the first 21 days of food service operations. FNS was not proposing any changes to this provision, but instead used the opportunity of the proposed rulemaking to restructure a cumbersome sentence.

One commenter questioned FNS' legal authority to issue the proposed regulation. The Secretary's authority to issue regulations is found at 42 U.S.C. 1779 which authorizes the Secretary to prescribe such regulations as deemed necessary to carry out the provisions of the Child Nutrition Act of 1966 and the Richard B. Russell National School Lunch Act.

One commenter suggested clarifying that FNS regulations implement applicable OMB circulars at § 210.21(a) and the deletion of the last sentence at § 210.21(c). We agree and have amended § 210.21(a) and (c) as well as the corresponding provisions at §§ 215.14a(a), 215.14(a)(c), 220.16(a) and 220.16(c) accordingly.

Another commenter requested clarification as to whether Department regulation 7 CFR part 3015 still applies to FNS's school nutrition programs. While the majority of the Department's requirements that apply to the school nutrition programs have been moved from 7 CFR part 3015 into 7 CFR parts 3106 and 3019, some requirements, particularly those affecting the award of discretionary grants, acknowledgment on audio visual materials and procedures for prior approval of costs, still remain in 7 CFR part 3015.

One commenter requested clarification that the prohibition at § 3016.60(b) that contractors may not develop or draft specifications, requirements, statements of work, invitations for bid, requests for proposal, contract terms and conditions or other document for use by a school food authority would not apply to winning bidders negotiating contract terms since conducting a procurement does not include post-procurement activities. While 7 CFR part 3016 was not the subject of the proposed rulemaking, it is important to correct the commenter's misunderstanding of what constitutes the procurement process. The procurement process includes all phases of the process from the initial determination that goods and services are needed until the conclusion of the record retention period following the termination of the contract period. While negotiating contract terms is acceptable, potential contractors are not permitted to draft contract terms and conditions. This position is consistent with §§ 3016.36(b) and 3016.60(b), and with the direction provided in Conference Report 105-786 accompanying the William F. Goodling Child Nutrition Reauthorization Act of 1998 (Pub. L. 105-336).

This same commenter also expressed concerns that under the Federalism principles it is inappropriate for FNS to assist State agencies in the development and drafting of procurement documents. Responding to requests for assistance from State agencies does not conflict with the principles of Federalism, nor does providing assistance to State agencies in their development of procurement documents run counter to the report language cited. It is unreasonable to expect State agencies to develop appropriate procurement materials without access to FNS's resources and expertise concerning federal procurement rules.

The proposed rule requested comments on whether additional regulatory action is needed concerning ethical practices associated with the procurement of long term beverage and food service management company procurements. FNS did not propose new regulatory requirements to address ethics in contracting since minimum standards already exist within the Department's regulations (§ 3016.36(b)(3) and § 3019.42).

Three commenters indicated their opinions that FNS needs to undertake additional efforts in this area. Commenters also supported the need for additional efforts by FNS to address long term beverage contracting issues. Some of these commenters were specific about ethical issues in the procurement of long term beverage and food service management contracts, while others addressed the ethics issue on a broader scale. One commenter requested that the final regulations prohibit contractors from offering incentive payments or providing payments in advance of contract execution since such payments could subvert full and open competition. We do not disagree with the commenter that an inducement to contract conflicts with full and open competition. However, because we did not propose to issue regulations addressing ethics at this time, it would be inappropriate for us to do so in a final rulemaking. Pursuant to the Department regulations, school food authorities are currently required to have a written code of conduct that prohibits unethical actions in the procurement process.

Another commenter recommended that FNS require State agencies and school food authorities to obtain written financial interest statements from potential consultants which would require these consultants to disclose possible conflicts of interest before engaging in consulting and technical assistance efforts. Again, while we agree that such statements represent good business practice, it would be inappropriate at this time to issue final regulations requiring such statements.

Given the comments received on the issue of ethics in contracting, FNS has determined it is appropriate to include a reference to its existing ethics and integrity requirements at §§ 210.21(c), 215.14a and 220.16(c). FNS will continue to monitor procurement ethics and integrity as this final rule is implemented and will evaluate if additional actions are needed to address these issues.

FNS also received comments on implementation timeframes for a final rulemaking. Some of the commenters requested a moratorium on implementation for existing contracts between school food authorities and food service management companies until after all contract renewals had been completed. These commenters viewed the one-year term of a food service management company contract with up to four additional one-year renewals as a single contract. That is not correct. Food service management company contracts are one year in duration. The decision to renew the contract is an affirmative decision by both parties. Generally each renewal period is accompanied by some change in the contract terms, usually related to the change in FNS' school meal reimbursement rates. We are also aware that some contracts contain a provision that results in renewal unless notification of nonrenewal is provided. This type of provision does not create a multi-year contract.

One commenter requested implementation over a period of time to permit an orderly process for school food authorities to develop appropriate procurement documents and provide sufficient time for State agencies to review those documents.

We recognize that in some cases, immediate implementation of these regulatory changes would create an unreasonable burden on school food authorities, State agencies and contractors. However, delaying implementation for years is more unreasonable. In considering how best to implement the changes in procurements required under this final rulemaking, we have determined that there is no reason to delay implementation for procurements yet to be conducted, but consideration is needed for existing contracts. Such consideration would take into account the available renewal periods under those contracts and procurement solicitations that have been issued but not yet awarded as of the date this final rulemaking is effective. Each State agency should have flexibility in establishing implementation schedules within its own State.

In balancing the critical need for prompt implementation against these considerations, we have established the following implementation schedule:

(1) The regulations are applicable for all new solicitations issued on or after the effective date of this final rule.

(2) For those solicitations for contracts issued prior to the effective date of this final rule:

a. School food authorities and State agencies with contracts with a term of 12 months or fewer remaining are exempt from applying the provisions of this rulemaking to those contracts;

b. With State agency approval, school food authorities with contracts that have annual renewal provisions may delay implementation until expiration of the current contract plus one 12-month renewal period; and

c. With State agency approval, school food authorities with contracts that have a term of more than 12 months (i.e., contracts with entities other than food service management companies) may delay implementation up to 24 months from the effective date of this regulation when the solicitation for the contract was issued prior to the effective date of this regulation.

The annual term of most school food authority food service management company contracts mirrors the July 1-June 30 school year. This means that a school food authority that entered into the first year of its contract effective for the July 1, 2007-June 30, 2008 school year may, with State agency approval, renew the contract for the July 1, 2008-June 30, 2009 school year, but must conduct a new procurement that meets the requirements of these regulations for the school year that begins on July 1, 2009. State agencies are free to establish shorter timeframes for implementation or may require some school food authorities to implement the requirements sooner than others. However, in no case may a school food authority be permitted to delay implementation beyond the timeframes specified above.

Many commenters, particularly State administering agencies and the School Nutrition Association, requested training and technical assistance on this final rule as well as on procurement requirements and allowable costs in general. The Department agrees and will, within current resource constraints, do its best to provide training and technical assistance on this rule after publication. We will also continue to issue guidance as the need arises. However, neither the Department's planned training nor its guidance will address specific State and local procurement requirements. Public school food authorities must follow their own applicable State and local procurement procedures and will only revert to Federal requirements when applicable State and local requirements are less restrictive. FNS is not the appropriate source for interpreting State and local requirements or for providing training on these requirements. We encourage State administering agencies, school food authorities and industry partners to look for these resources within their own State and local jurisdictions.

This rule has been determined to be significant and was reviewed by the Office of Management and Budget in conformance with Executive Order 12866.

This action is needed to remedy deficiencies in school food authority procurements that have been identified in audits and program reviews, and to make the procurement requirements and consequences for failing to take corrective action consistent in the National School Lunch, Special Milk and School Breakfast Programs.

School food authorities will benefit from the provisions of this rule because they will better understand their responsibilities for conducting proper procurements and consequences for failing to conduct proper procurements. State agencies will have the authority to review school food authority procurement documents and procedures to identify deficiencies and obtain corrective action, thereby minimizing the potential for the misuse of program funds. Competition will be enhanced because potential contractors will be provided with more specific information that will allow them to prepare more appropriate and competitive responses to school food authority solicitations.

Any increases in costs resulting from this final rule are expected to result from the contractor's allocation and records maintenance of rebates, discounts, and other applicable credits to school food authorities and the identification and reporting of allowable and unallowable costs. However, contractors already have accounting, reporting and records maintenance systems in place to track and report the costs that are billed to school food authorities. Further, under generally accepted accounting principles and good business practices, these contractors maintain systems to track and report rebates and discounts. For these reasons, it is not expected that contractors will incur a significant increase in costs due to these requirements. However, any additional costs incurred by contractors for implementing the provisions of these regulations would be part of the contractor's administrative expenses and could be included in the fixed fee component of a cost reimbursable contract.

This rule has been reviewed with regard to the requirements of the Regulatory Flexibility Act (5 U.S.C. 601-612). Nancy Montanez Johner, Under Secretary for Food, Nutrition and Consumer Services has certified that this rule will not have a significant economic impact on a substantial number of small entities. This rule will affect school food authorities, State agencies and cost reimbursable contractors. School food authorities will be required to limit the expenditure of nonprofit school food service account funds to net allowable costs, while cost reimbursable contractors of school food authorities will be required to provide information to permit school food authorities to make this determination. State agencies will be required to review contracts between school food authorities and food service management companies prior to their execution. While the effect of this rule may require potential contractors, selected contractors and school food authorities to amend the bidding process and make adjustments to accountability activities during a contract period, these process changes will not have a significant economic impact on those small entities.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104-4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. Under Section 202 of the UMRA, the Department 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, or tribal governments in the aggregate, or to the private sector, of $100 million or more in any one year. When such a statement is needed for a rule, section 205 of the UMRA generally requires the Department to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, more cost-effective or least burdensome alternative that achieves the objectives of the rule. This rule contains no Federal mandates (under the regulatory provisions of Title II of the UMRA) that impose costs on State, local, or tribal governments or to the private sector of $100 million or more in any one year. This rule is, therefore, not subject to the requirements of sections 202 and 205 of the UMRA.

The National School Lunch Program, Special Milk Program and School Breakfast Program are listed in the Catalog of Federal Domestic Assistance under No. 10.555, 10.556, and 10.553, respectively. For the reasons set forth in the final rule in 7 CFR part 3015, Subpart V and related Notice published at 48 FR 29114, June 24, 1983, these programs are included in the scope of Executive Order 12372, which requires intergovernmental consultation with State and local officials.

Executive Order 13132 requires Federal agencies to consider the impact of their regulatory actions on State and local governments. Where such actions have federalism implications, agencies are directed to provide a statement for inclusion in the preamble to the regulations describing the agency's considerations in terms of the three categories called for under section (6)(b)(2)(B) of Executive Order 13132. FNS has considered the impact of this rule on State and local governments and has determined that this rule does not have Federalism implications. This rule does not impose substantial or direct compliance costs on State and local governments. Therefore, under Section 6(b) of the Executive Order, a federalism summary impact statement is not required.

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is intended to have preemptive effect with respect to any State or local laws, regulations or policies which conflict with its provisions or which would otherwise impede its full implementation. This rule is not intended to have a retroactive effect unless so specified in the DATES paragraph of this preamble. Prior to any judicial challenge to the provisions of this rule or the application of its provisions, all applicable administrative procedures must be exhausted.

Under Department Regulation 4300-4, Civil Rights Impact Analysis, FNS has reviewed this final rule to identify and address any major civil rights impacts the final rule might have on minorities, women, and persons with disabilities. After a careful review of the rule's intent and provisions, FNS has determined that this rule would not in any way limit or reduce participants' ability to participate in the Child Nutrition Programs on the basis of an individual's or group's race, color, national origin, sex, age or disability. FNS found no factors that would negatively and disproportionately affect any group of individuals.

FNS is revising the regulations governing procedures related to the procurement of goods and services in the National School Lunch Program, School Breakfast Program and Special Milk Program to remedy deficiencies identified in audits and program reviews. This final rule makes changes in a school food authority's responsibilities for proper procurement procedures and contracts, limits a school food authority's use of nonprofit school food service account funds to costs resulting from proper procurements and contracts, and clarifies a State agency's responsibility to review and approve school food authority procurement procedures and contracts.

As a result, we are amending § 210.16(a) by adding two requirements for school food authorities that contract with food service management companies to manage their food service operations. First, § 210.16(a)(9) requires school food authorities to obtain written approval of invitations for bids and requests for proposals when required by the State agency and to incorporate all State agency changes before issuance. Second, § 210.16(a)(10) requires the school food authority to ensure that the State agency has reviewed and approved contract terms and to incorporate all changes before any contract or amendment to an existing contract is executed. We are also amending § 210.19(a)(6) to specify that State agencies must review contracts, including amendments, and all supporting documentation, before execution of the contract. Current regulations require State agencies to annually review each contract to ensure compliance, which is usually done after the contract has been executed. Since the current requirement does not specify the timing of the review, additional time will be needed to review the contract and its related documents. As outlined below, these sections contain specific public reporting and recordkeeping requirements that require clearance under the Paperwork Reduction Act of 1995. Respondents to this collection are State agencies and school food authorities that employ a food service management company in the operation of their nonprofit school food service.

Burden associated with this rule has been approved by OMB under OMB Control Number 0584-0544. State agencies and school food authorities that operate the School Breakfast and Special Milk Programs also operate the National School Lunch Program; therefore, the burden will be merged into OMB #0584-0006, National School Lunch Program, once this rule becomes effective.

Title: Procurement Requirements for the National School Lunch

FNS is committed to complying with the E-Government Act, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.

On May 24, 2007, the Board issued a Notice and Request for comments on the proposed reincorporation of the Federal Credit Union Bylaws (proposal). 72 FR 30984 (June 5, 2007). The proposal also included bylaw provisions on director succession, an expedited approval process for bylaw amendments previously approved for other FCUs, and revisions to the Introduction to the FCU Bylaws to reflect these changes. Id. On July 2, 2007, the Board extended the original comment period an additional two weeks. 72 FR 37122 (July 9, 2007).

NCUA is reincorporating the FCU Bylaws into NCUA regulations to clarify NCUA's authority to use a range of administrative actions to enforce bylaw violations in the rare cases where bylaw disputes cannot be resolved within an FCU. As discussed in the proposal, NCUA removed the Bylaws from its regulations in the 1980's. 72 FR 30984, 30985 (June 5, 2007). NCUA is concerned that the policy of requiring members to enforce rights granted in the Bylaws in state courts has resulted in members being unable to enforce rights granted in the Bylaws. The proposal limits NCUA intervention to cases where a fundamental, material member right is at issue and outlines a dispute resolution process.

The Federal Register requires the FCU Bylaws to be published as an Appendix to Part 701 rather than being incorporated by reference in the regulatory text. Accordingly, § 701.2 of the final rule has been revised from the proposal and specifically reincorporates the FCU Bylaws into NCUA's regulations as an Appendix.

NCUA received 32 comment letters in response to the proposal. Nine credit union members, nine state credit union leagues, eight federal credit unions, two national credit union trade organizations, one law firm, one consultant, and two other organizations submitted comments. Sixteen commenters supported reincorporating the Bylaws into NCUA regulations and 16 commenters opposed reincorporation. Both supporters and opponents of reincorporation sought changes to the revised Introduction to the FCU Bylaws, the standards for limiting NCUA's involvement, and the dispute resolution process. Many commenters also discussed the proposed bylaw provisions on director succession and the expedited approval process for certain bylaw amendments; the comments on these provisions overwhelmingly favored the proposal. Finally, several commenters asked NCUA to increase the cap on the number of members required to call a special meeting. The comments on each subject are discussed below.

Most commenters opposing reincorporation cited concerns over increased regulation and oversight. The NCUA Board reiterates its position that reincorporating the Bylaws into NCUA's regulations imposes no new regulatory burden, as all FCUs are already required to have NCUA-approved bylaws. NCUA publishes form bylaw language and all FCUs have adopted some version of the form language. Further, as the preamble to the proposal stated, under the risk-based examination system in use for FCUs, examiners do not currently, nor will they once the Bylaws are incorporated in the regulations, inquire into an FCU's bylaws unless management raises the issue.

In contrast, commenters supporting reincorporation cited the lack of other realistic options for bylaw enforcement and the potential for credit union boards to violate bylaws with impunity. The most common theme was dissatisfaction with NCUA's policy of requiring members to enforce bylaws under state contract law. Commenters cited the expense and time required to bring suit as well as the possibility courts will find members lack standing to litigate bylaw disputes.

The commenters were split on the issue of whether NCUA needs to reincorporate the FCU Bylaws to clarify its ability to use its full range of enforcement actions.

Five commenters expressed the view that NCUA already has authority to use its full range of enforcement actions to enforce the Bylaws. Three commenters stated the FCU Act gives no authority to NCUA to enforce bylaw violations other than by charter suspension or revocation. Based on its analysis of the FCU Act, the Board concludes reincorporating the Bylaws is necessary to provide clear authority for NCUA to use its full range of enforcement actions for Bylaw violations.

NCUA does not agree with the commenters who assert its authority to enforce the Bylaws using the full range of administrative actions is clear under the current system. The FCU Act gives NCUA explicit authority to suspend or revoke the charter of any FCU, or place the FCU into involuntary liquidation, for a violation of any provision of its bylaws. 12 U.S.C. 1766(b)(1). A charter revocation or suspension, however, is a very extreme remedy and is unlikely to be an appropriate remedy for any bylaw violation. The resultant loss of credit union service would likely result in far more harm to members than the FCU's failure to follow its bylaws. The FCU Act also allows NCUA to place FCUs into conservatorship for reasons including protection of members' interests. 12 U.S.C. 1786(h)(1). Conservatorship, like charter suspension or liquidation, is an extreme remedy NCUA would prefer not to use if other enforcement options are available. The FCU Act, however, does not explicitly provide for such other options.

In contrast, the FCU Act explicitly provides NCUA authority to take other, less severe administrative actions for other types of violations. A cease and desist order, for example, identifies the violation, gives the credit union a deadline to come into compliance, and may prescribe procedures to come into compliance. NCUA may issue cease and desist orders for violations of “a law, rule, or regulation.” 12 U.S.C. 1786(e)(1). Before promulgating its proposed regulation, NCUA considered whether the authority to issue cease and desist orders extended to bylaw violations that did not also violate a statutory or regulatory requirement or pose a threat to the safety and soundness of the FCU. As discussed in the proposal, previous Board actions removed the Bylaws from NCUA regulations. 72 FR 30984, 30985 (June 5, 2007).

As a result, NCUA has concluded it should now reincorporate the Bylaws to give it clear authority to act if a bylaw violation threatens a fundamental, material credit union member right.

Some commenters suggested NCUA simply change its policy on enforcement of Bylaws violations not involving another violation or a safety and soundness threat without adopting a regulation. Agencies are entitled to change their positions, as long as they explain the new position and the reasons necessitating the change. Motor Vehicle Manufacturers Ass'n v. State Farm Ins. Co., 463 U.S. 29, 41-42 (1983). Courts take a dim view of reversals of agency positions adopted without public notice, such as agency interpretations adopted in the course of litigation. Bowen v. Georgetown University Hosp. , 488 U.S. 204, 212 (1988). NCUA believes an abrupt reversal of prior policy, could leave any enforcement action taken for a Bylaw violation not involving an issue of safety and soundness or violations of other regulations vulnerable to challenge. Instead, the Board is using the rulemaking process to adopt its revised policy—which is actually a return to the Bylaws' original status as a regulation—to allow for public notice and input.

In summary, the FCU Act's explicit provisions for enforcing Bylaw violations include only limited and drastic options, and the Act's provisions for other, less severe remedies do not explicitly cover Bylaw violations. The Board has concluded that its authority in this area is not clear unless the Bylaws are again incorporated in NCUA regulations. Because the reincorporation of the Bylaws changes NCUA's most recent policy regarding Bylaws enforcement and returns the Bylaws to their original status as regulation, the Board is adopting the change using the rulemaking process.

One commenter who argued NCUA's existing authority would allow the use of the full range of actions for bylaw violations suggested that if, in fact, the Act provided authority only to liquidate or conserve FCUs for bylaw violations, NCUA could not create authority to use other actions by adopting the Bylaws as a regulation. Several other commenters generally questioned NCUA's authority to adopt this rule reincorporating the Bylaws. NCUA disagrees with these comments, as the FCU Act provides separate authority for it to adopt regulations. Section 120 of the FCU Act gives the NCUA Board broad, general authority to “prescribe rules and regulations for the administration of [the FCU Act].” 12 U.S.C. 1766. This authority is in no way limited by the separate authority to suspend or revoke an FCU's charter or place an FCU into conservatorship for failing to follow its bylaws. Moreover, several provisions of the FCU Act clearly contemplate that FCUs will follow their bylaws. The FCU Act's references to bylaws include the following requirements:

• FCUs must adopt bylaws prescribed by NCUA. 12 U.S.C. 1758.

• FCUs may impose late charges as permitted by their bylaws. 12 U.S.C. 1757(10).

• FCUs must hold their annual meetings at the time and place prescribed by their bylaws. 12 U.S.C. 1760.

• An FCU's bylaws must prescribe the number of and the procedures for electing directors, and may provide for a credit committee. 12 U.S.C. 1761; 1761c(a), (b).

• An FCU's bylaws must specify the number of board officers and identify the compensated officer, if any. 12 U.S.C. 1761a.

• An FCU's board of directors must follow bylaw provisions allowing for an elected or appointed credit committee, the appointment of loan officers, the hiring and compensation of officers and employees, the appointment of an executive committee, and information it is required to review at monthly meetings. 12 U.S.C. 1761b(4), (5), (10), (11), (13), (15).

• An FCU's supervisory committee may call a special meeting of the members to consider a bylaw violation. 12 U.S.C. 1761d.

• The amount to be refunded to expelled members is to be determined according to the bylaws. 12 U.S.C. 1764(c).

• Shares issued to minors are subject to conditions prescribed in the bylaws. 12 U.S.C. 1765.

The FCU Act provisions noted above require an FCU's bylaws to provide procedures and rules for an FCU's structure and operation, at the time of chartering and going forward. Under its general rulemaking authority NCUA is charged with administering the FCU Act. This authority is not restricted by the separate authority for charter revocation or suspension, or conservatorship, for bylaw violations. The FCU Act's many references to the FCU Bylaws demonstrate the Act requires FCUs to follow their bylaws. As the FCU Act allows NCUA authority to administer its provisions, and the FCU Act requires FCUs to have and follow bylaws, the NCUA Board finds reincorporating the FCU Bylaws into NCUA regulations will assist in its administration of the FCU Act.

Accordingly, the NCUA Board concludes reincorporating the Bylaws will clarify its authority without imposing any new regulatory burden on FCUs, and the final rule reincorporates the FCU Bylaws into NCUA regulations as an Appendix to Part 701.

Commenters were also split on whether the proposal adequately defined and limited the situations in which NCUA has discretion to take action. Seven commenters found the standard adequate or supported limiting NCUA intervention to disputes involving fundamental, material member rights, as described in the preamble to the proposal. Eight other commenters found the standard too broad and expressed concern NCUA would start to intervene in all bylaw disputes. The NCUA Board reiterates the agency will limit its involvement to bylaw disputes involving a fundamental, material credit union member right, including the right to: Maintain a share account; maintain credit union membership; have access to credit union facilities; participate in the director election process; attend annual and special meetings; and petition for removal of directors and committee members. The proposal added language to the Introduction to the Bylaws explaining NCUA's discretion to intervene in disputes involving fundamental, material credit union member rights; the final rule includes minor revisions to this language to further clarify the Board's intent.

The preamble to the proposal explained FCUs and FCU members should continue to attempt to resolve bylaw disputes within the credit union, and contact the regional office with jurisdiction for the FCU if a bylaw dispute cannot be resolved internally. 72 FR 30984, 30986 (June 5, 2007). Six commenters—both supporters and opponents of reincorporation—sought additional details regarding the resolution of bylaw disputes.

Four commenters requested additional information on the internal procedures FCUs and their members should use to resolve bylaw disputes. FCUs and FCU members should attempt to resolve bylaw disputes with the usual procedures for addressing member complaints, such as requesting review by the supervisory committee. Every FCU must have a supervisory committee, appointed from among its members. 12 U.S.C. 1761(b). One of the supervisory committee's roles is reviewing member complaints, and the Board believes the supervisory committee is well-suited to address bylaw disputes, since it has substantial experience in investigating and resolving member complaints.

Several commenters also raised questions about how NCUA will determine when to take an enforcement action related to a bylaw dispute. The NCUA Board reiterates NCUA's regional offices will analyze disputes to see if they affect a fundamental, material credit union member right. A determination that a fundamental, material member right may be affected allows NCUA the discretion to intervene, but does not require intervention. As noted previously in this preamble and in the preamble to the proposal, the Board's view is the agency will only become involved in bylaw disputes that involve fundamental, material credit union member rights. In considering whether to initiate formal administrative action, the agency will consider various factors, as it would with any regulatory violation, including the specific facts and circumstances in a case; alternatives, such as a supervisory letter; the willingness of the parties to cure a violation; and the seriousness of the violation.

Two commenters sought clarification about who may report bylaw disputes to NCUA. As is presently the case, any FCU member or FCU official may report a bylaw dispute within an FCU. Likewise, any FCU, member, or official may report a bylaw dispute to NCUA.

One commenter asked if FCU members must seek to enforce an FCU's bylaws as a contract, in court, before requesting NCUA intervention. The preamble to the proposal noted FCU members still have the right to seek enforcement of the Bylaws in court. 72 FR 30984, 30985 (June 5, 2007). The NCUA Board clarifies FCU members do not need to seek judicial relief before reporting a bylaw dispute to NCUA.

Two commenters asked if regional directors' decisions on bylaw disputes may be appealed to the NCUA Board. The right to appeal a regional director's decision and to what forum will depend on the nature of the decision, namely, whether a regional director's decision involves formal administrative action. For example, if the agency takes formal administrative action by issuing an immediate cease and desist order directing an FCU to cease activity that violates the Bylaws or directing an FCU to undertake specific actions to cure a violation, then an FCU will have a right to challenge the order in federal court. 12 U.S.C. 1786(e), (f).

The preamble to the proposal stated NCUA's intent that FCUs and their members continue to attempt to resolve bylaw disputes internally. 72 FR 30984, 30986 (June 5, 2007). Several commenters asked for a similar statement to be added to the Introduction to the Bylaws or the text of § 701.2. The Board agrees this would be helpful and the final rule revises the Introduction accordingly.

The only changes the proposal made to the FCU Bylaws were amendments on director succession; the amendments essentially incorporated NCUA legal opinions. The proposal added a new Section to Article IX to clarify the supervisory committee's responsibilities if an FCU has no remaining directors. If an entire board of directors resigns, is removed simultaneously, or for whatever circumstance is unable to serve, the supervisory committee has the responsibility to act as a board of directors until the members elect new directors. The proposal also cross-references this new language in Article XVI, Section 3, addressing removal of directors by members, and Article VI, Section 4, addressing board of director vacancies.

Seven of eight commenters on this subject generally approved of the new language. Two commenters sought clarifications in the process and one of these commenters suggested alternative language for the amendment to Article IX. The commenter's alternative language would give the supervisory committee acting as the board the option of holding a special meeting to elect directors if the FCU's annual meeting is already scheduled or would usually occur within the next 45 days. The proposal had required the supervisory committee to serve as the board until the next annual meeting if the annual meeting were scheduled, or would usually occur, within the next 45 days. The final rule adopts the commenter's alternative, as NCUA agrees FCUs in this rare situation should have the option of formally electing directors as soon as possible, even if the next annual meeting will occur shortly.

In addition, the final rule includes certain grammatical changes to the proposal. The proposal used the term “temporary board” to refer to the supervisory committee acting as the board and “interim board” to refer to the new directors elected at the special meeting. A commenter's suggested alternative deletes the references to “temporary” and “interim” boards in Article IX, and instead uses the terms “supervisory committee acting as the board” and “board.” The NCUA Board finds these suggestions improve the bylaw and has adopted them.

The proposal prohibited the supervisory committee acting as the board from acting on policy matters. 72 FR 30984, 30987 (June 5, 2007). The intent of this prohibition was to ensure that an elected board makes decisions affecting the direction and future of an FCU. One commenter sought more explanation of permissible actions by the supervisory committee acting as the board, and another commenter requested the prohibition on acting on policy matters be modified to allow for policy action in exigent circumstances. Generally, the Board's view is the supervisory committee acting as the board should maintain the status quo and defer major decisions, such as opening new branches or launching new products, until the FCU's members elect a new board of directors. NCUA believes an exception for exigent circumstances is unnecessary given the short period of service that is likely and the fact that the limitation is only on policy matters. Also, an FCU where the supervisory committee is acting as the board will likely be in contact with its examiner and can seek advice on whether matters should be left to the elected board.

NCUA also clarifies that newly chartered FCUs and FCUs defined as “troubled” under § 701.14 of NCUA's regulations must follow the procedures under § 701.14 and notify NCUA of changes in their boards. NCUA recognizes these bylaw provisions may not afford sufficient time to notify NCUA 30 days before the effective date of the change in board members as required by § 701.14, but the supervisory committee acting as the board should notify the Regional Office of the change as soon as possible. The regulation also provides a waiver of the prior notice requirement for board members elected at a members' meeting, if the Regional Office receives notice within 48 hours of the election. 12 CFR 701.14(c)(2)(i). A newly chartered or troubled FCU that loses all its directors will likely be in contact with its examiner and can seek further advice on compliance with § 701.14.

The sole commenter opposing these provisions argued NCUA lacks authority to adopt them because they are inconsistent with the FCU Act's requirement for FCUs to be governed by a board of directors and for vacancies on the board to be filled by the remaining directors. NCUA believes the commenter misunderstood the proposal and its intent. The bylaw applies only in the rare circumstance of an FCU losing all its directors simultaneously and does not conflict with the FCU Act's requirement for director vacancies to be filled by other directors. The FCU Act is silent about how to proceed when an FCU has no remaining directors, leaving NCUA discretion to address this matter through regulation.

The proposed rule also outlined an expedited review process for bylaw amendments previously approved for other FCUs, which NCUA is adopting as proposed. NCUA will post the actual language of bylaw amendments approved since the last major revision of the FCU Bylaws in April 2006 on its website. Other FCUs seeking to adopt identical language will receive a response from NCUA's regional offices within 15 business days. All seven commenters on this topic endorsed the proposal.

One commenter also suggested NCUA post the language for all previously approved bylaw amendments that remain consistent with current NCUA guidance, not only amendments approved since April 2006. Because NCUA's Office of General Counsel staff has received only a handful of requests for bylaw amendment language predating the 2006 revisions, the Board has determined posting actual language for all bylaw amendments would not be the most productive use of staff resources. Further, FCUs seeking exact language for an approved bylaw amendment that predates 2006 can access the Opinion Letters on NCUA's Web site and contact their regional office or the Office of General Counsel to obtain the exact language of any approved amendments.

Although the proposal did not explicitly ask for comments on the 750-member cap on the number of members required to call a special meeting, it noted the NCUA Board has decided it may consider individual FCUs' requests to increase this number through the bylaw amendment process outlined in the Introduction to the FCU Bylaws. 72 FR 30984, 30986 (June 5, 2007). Six of the eight commenters on this subject urged NCUA to adopt amendments to the FCU Bylaws increasing the cap to either a percentage of members, regardless of size, or a higher maximum number for larger credit unions. One commenter opposing an increase noted, although some increase in the cap may be appropriate for very large credit unions, setting the cap too high would disenfranchise members just as much as an FCU board ignoring the members' request for a special meeting.

The NCUA Board understands concerns some commenters expressed about the potential for a relatively small number of members to make disruptive requests for special meetings. NCUA also agrees with the commenter who expressed concern about the potential for disenfranchisement of FCU members resulting from a higher cap. The cap recently increased from 500 to 750 members. 71 FR 24551, 24554 (April 26, 2006). More time is needed to assess the appropriateness of this figure for large FCUs. Obtaining 750 signatures to request a special meeting is a significant undertaking, and NCUA is not aware of any actual instances since 2006 where members obtained this number of signatures to require a board of directors to hold a special meeting for a frivolous reason. NCUA repeats any necessary changes in this area should be handled through the bylaw amendment process explained in the introduction to the Bylaws. Any FCU requesting such an amendment should have documented, verifiable reasons why an increase in the cap is necessary, such as a history of members' abuse of the special meeting request process at that particular FCU.

The Federal Credit Union Bylaws, as amended by this final rule, are reprinted in their entirety as Appendix A to Part 701. The final rule made very few changes to the text of the FCU Bylaws, and these changes are listed below.

(1) The following paragraph was added to the end of Section 3 of Article IX:

If all director positions become vacant simultaneously, the supervisory committee immediately assumes the role of the board of directors. The supervisory committee acting as the board must generally call and hold a special meeting to elect a board that will serve until the next annual meeting. The special meeting must occur at least 7 but no more than 14 days after all director positions became vacant, and candidates for the board at the special meeting may be nominated by petition or from the floor. However, if the next annual meeting has been scheduled and will occur within 45 days after all the director positions become vacant, the supervisory committee may decide to forego the special meeting and continue serving as the board until the election of new directors at the annual meeting.

If the next annual meeting has not been scheduled, but the month and day of the previous year's meeting plus 7 days falls within 45 days after all the director positions become vacant, the supervisory committee acting as the board may decide to forego the special meeting to elect new directors. In this case, the supervisory committee must schedule the annual meeting within 7 days before or after the month and day of the previous annual meeting and continue to serve as the board until directors are elected at the annual meeting.

The supervisory committee acting as the board may not act on policy matters. However, directors elected at a special meeting have the same powers as directors elected at the annual meeting.

(2) The following sentence was added to the end of Section 3 of Article XVI:

If member votes at a special meeting result in the removal of all directors, the supervisory committee immediately becomes the temporary board of directors and must follow the procedures in Article IX, Section 3.

(3) The following sentence was inserted after the first sentence of Section 4 of Article VI:

If all director positions become vacant simultaneously, the supervisory committee immediately becomes the temporary board of directors and must follow the procedures in Article IX, Section 3.

(4) The sixth paragraph of the Introduction was deleted and replaced with the following paragraph:

Federal credit unions considering an amendment may find it useful to review the bylaws section of the agency Web site, which includes Office of General Counsel opinions about proposed bylaw amendments. Opinions issued after April 2006 will include the language of approved amendments. Even if an amendment has been previously approved, the credit union must submit a proposed amendment to NCUA for review under the procedure listed above to ensure the amendment is identical. Credit unions requesting previously approved amendments will receive notice of the regional office's decision within 15 business days of the receipt of the request.

(5) The last paragraph of the Introduction was deleted and replaced with the following two paragraphs:

NCUA expects federal credit unions and their members will make every effort to resolve bylaw disputes using the credit union's internal member complaint resolution process. If a bylaw dispute cannot be resolved internally, however, credit union officials or members should contact the regional office with jurisdiction for the credit union for assistance in resolving the dispute.

NCUA has discretion to take administrative actions when a credit union is not in compliance with its bylaws. If a potential violation is identified, NCUA will carefully consider all of the facts and circumstances in deciding whether to take enforcement action. NCUA will not take action against minor or technical violations, but emphasizes that it retains discretion to enforce the bylaws in appropriate cases, such as safety and soundness concerns or threats to fundamental, material credit union member rights.

(6) The first paragraph of the Introduction was replaced with the following paragraph:

Effective Date: After consideration of public comment, the National Credit Union Administration (NCUA) Board adopted these Bylaws and incorporated them as Appendix A to Part 701 of NCUA's regulations on [date of final]. Unless a federal credit union has adopted bylaws before [date of final] it must adopt these revised Bylaws.

The Regulatory Flexibility Act requires NCUA to prepare an analysis to describe any significant economic impact a rule may have on a substantial number of small credit unions, defined as those under ten million dollars in assets. This rule incorporates the Bylaws into NCUA's regulations without imposing any regulatory burden, since the FCU Act requires FCUs to adopt NCUA-approved bylaws. The rule will not have a significant economic impact on a substantial number of small credit unions, and, therefore, a regulatory flexibility analysis is not required.

NCUA has determined the rule would not increase paperwork requirements under the Paperwork Reduction Act of 1995 and regulations of the Office of Management and Budget. 44 U.S.C. 3501 et seq. ; 5 CFR part 1320.

Executive Order 13132 encourages independent regulatory agencies to consider the impact of their actions on state and local interests. In adherence to fundamental federalism principles, NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies with the executive order. The rule would not have substantial direct effects on the states, on the connection between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. NCUA has determined that this rule does not constitute a policy that has federalism implications for purposes of the executive order.

NCUA has determined the rule would not affect family well-being within the meaning of § 654 of the Treasury and General Government Appropriations Act, 1999, Pub. L. 105-277, 112 Stat. 2681 (1998).

The Small Business Regulatory Enforcement Fairness Act of 1996, Pub. L. 104-121 (SBREFA), provides generally for congressional review of agency rules. A reporting requirement is triggered in instances where NCUA issues a final rule as defined by Section 551 of the APA. 5 U.S.C. 551. The Office of Management and Budget has determined that this rule is not a major rule for purposes of SBREFA. As required by SBREFA, NCUA will file the appropriate reports with Congress and the General Accounting Office so that the final rule may be reviewed.

On August 15, 2007, the FAA proposed to amend Title 14 Code of Federal Regulations (14 CFR) part 71 by amending Class E airspace at Scottsboro, AL, (72 FR 45700). This action provides adequate Class E airspace for IFR operations at Scottsboro Municipal—Word Field Airport, Scottsboro, AL. Designations for Class E airspace areas extending upward from 700 feet or more above the surface of the Earth are published in FAA Order 7400.9R, dated August 15, 2007, and effective September 15, 2007, which is incorporated by reference in 14 CFR part 71.1. The Class E designations listed in this document will be published subsequently in the Order.

Interested parties were invited to participate in this rulemaking proceeding by submitting written comments on the proposal to the FAA. No comments objecting to the proposal were received.

This amendment to Title 14, Code of Federal Regulations (14 CFR) part 71 amends Class E airspace at Scottsboro, AL, to provide additional controlled airspace required to support new Area Navigation (RNAV) Global Positioning System (GPS) Runway (RWY) 4 and RWY 22 SIAP at Scottsboro Municipal—Word Field Airport.

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

This rule amends Title 14 of the Code of Federal Regulations, Part 97 (14 CFR part 97), by establishing, amending, suspending, or revoking SIAPs, Takeoff Minimums and/or ODPs. The complete regulatory description of each SIAP and its associated Takeoff Minimums or ODP for an identified airport is listed on FAA form documents which are incorporated by reference in this amendment under 5 U.S.C. 552(a), 1 CFR part 51, and 14 CFR part 97.20. The applicable FAA Forms are FAA Forms 8260-3, 8260-4, 8260-5, 8260-15A, and 8260-15B when required by an entry on 8260-15A.

The large number of SIAPs, Takeoff Minimums and ODPs, in addition to their complex nature and the need for a special format make publication in the Federal Register expensive and impractical. Furthermore, airmen do not use the regulatory text of the SIAPs, Takeoff Minimums or ODPs, but instead refer to their depiction on charts printed by publishers of aeronautical materials. Thus, the advantages of incorporation by reference are realized and publication of the complete description of each SIAP, Takeoff Minimums and ODP listed on FAA forms is unnecessary. This amendment provides the affected CFR sections and specifies the types of SIAPs and the effective dates of the SIAPs, the associated Takeoff Minimums,and ODPs. This amendment also identifies the airport and its location, the procedure, and the amendment number.

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

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

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

Created in a final rule on June 19, 2007 (72 FR 33646), Authorization Validated End-User (VEU) is for approved end-users located in eligible destinations to which eligible items (commodities, software and technology, except those controlled for missile technology or crime control reasons) may be exported, reexported or transferred without a license, in conformance with Section 748.15 of the EAR. As established in the June 19 rule, the PRC is the initial destination eligible for exports, reexports and transfers under Authorization VEU.

Authorization VEU is a mechanism to facilitate increased high-technology exports to companies in the PRC that have a record of using such items responsibly. VEUs will be able to obtain eligible items that are on the Commerce Control List without having to wait for their suppliers to obtain export licenses from BIS. A wide range of items are eligible for Authorization VEU. In addition, Authorization VEU may be used by foreign reexporters, and does not have an expiration date.

BIS amended Supplement No. 7 to Part 748 of the EAR to identify five companies with 14 eligible facilities in the PRC as VEUs and to identify the items that may be exported, reexported, or transferred to them in a final rule published in the Federal Register on Friday, October 19, 2007 (72 FR 59164). Also see a related Federal Register publication on Wednesday, October 24, 2007 (72 FR 60408). The VEUs listed in Supplement No. 7 to Part 748 were reviewed and approved by the U.S. Government in accordance with the provisions of Section 748.15 and Supplement Nos. 8 and 9 to Part 748 of the EAR. The October 19th rule should have listed items controlled under Export Control Classification Numbers (ECCNs) 3A001.a.5.a.5. and 3A001.a.5.b. in the “Eligible Items (By ECCN)” column of Supplement No. 7 to Part 748 of the EAR for validated end-user National Semiconductor Corporation in the PRC. This final rule amends the EAR to correct that inadvertent omission in the list of items in Supplement No. 7 to Part 748 of the EAR approved for National Semiconductor Corporation in the PRC.

Since August 21, 2001, the Export Administration Act has been in lapse and the President, through Executive Order 13222 of August 17, 2001 (3 CFR, 2001 Comp, p. 783 (2002)), as extended most recently by the Notice of August 15, 2007 (72 FR 46137, August 16, 2007), has continued the EAR in effect under the International Emergency Economic Powers Act. BIS continues to carry out the provisions of the Act, as appropriate and to the extent permitted by law, pursuant to Executive Order 13222.

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

2. Notwithstanding any other provision of law, no person is required to respond to nor be subject to a penalty for failure to comply with a collection of information, subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ) (PRA), unless that collection of information displays a currently valid Office of Management and Budget (OMB) Control Number. This regulation involves collections previously approved by the OMB under control number 0694-0088, “Multi-Purpose Application”, which carries a burden hour estimate of 58 minutes to prepare and submit form BIS-748; and for recordkeeping, reporting and review requirements in connection with Authorization Validated End-User, which carries an estimated burden of 30 minutes per submission. This rule is expected to result in a decrease in license applications submitted to BIS. Total burden hours associated with the Paperwork Reduction Act and Office and Management and Budget control number 0694-0088 are not expected to increase significantly as a result of this rule.

3. This rule does not contain policies with Federalism implications as that term is defined under Executive Order 13132.

4. The provisions of the Administrative Procedure Act requiring notice of proposed rulemaking, the opportunity for public participation, and a delay in effective date, are inapplicable because this regulation involves a military and foreign affairs function of the United States (5 U.S.C. 553(a)(1)). Further, no other law requires that a notice of proposed rulemaking and an opportunity for public comment be given for this final rule. Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule under the Administrative Procedure Act or by any other law, the analytical requirements of the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) are not applicable. Therefore, this regulation is issued in final form. Although there is no formal comment period, public comments on this regulation are welcome on a continuing basis. Comments should be submitted to Sheila Quarterman, Regulatory Policy Division, Bureau of Industry and Security, Department of Commerce, P.O. Box 273, Washington, DC 20044.

This document and additional information concerning the Office of Foreign Assets Control are available from OFAC's Web site ( http://www.treas.gov/ofac ) or via facsimile through a 24-hour fax-on demand service, tel.: (202) 622-0077.

The Sudanese Sanctions Regulations, 31 CFR part 538 (the “SSR”), were promulgated to implement Executive Order 13067 of November 3, 1997 (“E.O. 13067”), in which the President declared a national emergency with respect to the policies and actions of the Government of Sudan. To deal with that emergency, E.O. 13067 imposed comprehensive trade sanctions with respect to Sudan and blocked all property and interests in property of the Government of Sudan in the United States or within the possession or control of United States persons.

On October 13, 2006, the President signed into law the Darfur Peace and Accountability Act of 2006 (the “DPAA”), which, among other things, calls for support of the regional government of Southern Sudan, assistance with the peace efforts in Darfur, and provision of economic assistance in specified areas of Sudan. In particular, section 7 of the DPAA requires the continuation of the sanctions currently imposed on the Government of Sudan pursuant to E.O. 13067. However, section 8(e) of the DPAA exempts from the prohibitions of E.O. 13067 activities or related transactions with respect to certain areas in Sudan, including Southern Sudan, Southern Kordofan/Nuba Mountains State, Blue Nile State, Abyei, Darfur, and marginalized areas in and around Khartoum.

To reconcile sections 7 and 8(e) of the DPAA and to maintain in place sanctions on the Government of Sudan, the President issued Executive Order 13412 on October 13, 2006 (“E.O. 13412”). In E.O. 13412, the President determined that the Government of Sudan continues to implement policies and actions that violate human rights, in particular with respect to the conflict in Darfur, and that the Government of Sudan plays a pervasive role in Sudan's petroleum and petrochemical industries, thus constituting a threat to U.S. national security and foreign policy.

In light of these determinations, and in order to take additional steps with respect to the national emergency declared in E.O. 13067, section 1 of E.O. 13412 continues the blocking of the Government of Sudan's property and interests in property that are in or come within the United States, or that are in or come within the possession or control of United States persons. Section 2 of E.O. 13412 prohibits transactions by United States persons relating to the petroleum or petrochemical industries in Sudan, including, but not limited to, oilfield services and oil or gas pipelines. Both sections 1 and 2 of E.O. 13412 apply to the entire territory of Sudan.

Section 4 of E.O. 13412, consistent with section 8(e) of the DPAA, provides that the prohibitions contained in section 2 of E.O. 13067 no longer apply to activities or related transactions with respect to Southern Sudan, Southern Kordofan/Nuba Mountains State, Blue Nile State, Abyei, Darfur, or marginalized areas in and around Khartoum, provided that the transactions do not involve any property or interests in property of the Government of Sudan. Section 4(b)(ii) of E.O. 13412 authorizes the Secretary of State, after consultation with the Secretary of the Treasury, to define the geographic areas of Southern Sudan, Southern Kordofan/Nuba Mountains State, Blue Nile State, Abyei, Darfur, and marginalized areas in and around Khartoum for purposes of the order. In addition, section 6(d) of E.O. 13412 defines the term “Government of Sudan” to include its agencies, instrumentalities, and controlled entities, and the Central Bank of Sudan, but to exclude the regional government of Southern Sudan.

In accordance with E.O. 13412, the Office of Foreign Assets Control (“OFAC”) today is amending the SSR to add several new provisions implementing the provisions of E.O. 13412 discussed above. First, OFAC is renumbering §§ 538.210 and 538.211 as §§ 538.211 and 538.212, respectively, in order to add a new § 538.210. Paragraph (a) of new § 538.210 prohibits all transactions by United States persons relating to the petroleum or petrochemical industries in Sudan, including, but not limited to, oilfield services and oil or gas pipelines. Paragraph (b) of § 538.210 prohibits the facilitation by a United States person of any transaction relating to Sudan's petroleum or petrochemical industries.

Second, OFAC is adding an exemption to newly renumbered § 538.212. Paragraph (g)(1) of § 538.212 provides that, except for the provisions of §§ 538.201-203, 538.210, and 538.211, and except as provided in paragraph (g)(2) of § 538.212, the prohibitions contained in the SSR do not apply to activities or related transactions with respect to the Specified Areas of Sudan. This provision means that, subject to the new interpretive sections set forth below, activities and related transactions with respect to the Specified Areas of Sudan are no longer prohibited, unless they involve any property or interests in property of the Government of Sudan or relate to Sudan's petroleum or petrochemical industries. In addition, paragraph (g)(2) of § 538.212 states that the exemption does not apply to the exportation or reexportation of agricultural commodities, medicine, and medical devices. Section 906 of the Trade Sanctions Reform and Export Enhancement Act of 2000 (Pub. L. 106-387) continues to impose licensing requirements on these transactions, regardless of the intended destination in Sudan. These licensing requirements are implemented in §§ 538.523, 538.525, and 538.526.

Third, OFAC is revising the definition of the term Government of Sudan contained in § 538.305 to exclude the regional government of Southern Sudan, as set forth in section 6(d) of E.O. 13412.

Fourth, OFAC is adding a new definitional section to identify the areas of Sudan that were exempted in section 4(b) of E.O. 13412 from the prohibitions contained in section 2 of E.O. 13067. New § 538.320 defines the term Specified Areas of Sudan to mean Southern Sudan, Southern Kordofan/Nuba Mountains State, Blue Nile State, Abyei, Darfur, and marginalized areas in and around Khartoum. This section also defines the term “marginalized areas in and around Khartoum” to refer to four official camps for internally displaced persons.

Fifth, OFAC is adding interpretive § 538.417 to clarify that all of the prohibitions in the SSR apply to shipments of goods, services, and technology that transit areas of Sudan other than the Specified Areas of Sudan. Section 538.417(a) provides that an exportation or reexportation of goods, technology, or services to the Specified Areas of Sudan is exempt under § 538.212(g) only if it does not transit or transship through any area of Sudan other than the Specified Areas of Sudan. Section 538.417(b) provides that an importation into the United States of goods or services from, or originating in, the Specified Areas of Sudan is exempt under § 538.212(g) only if it does not transit or transship through any area of Sudan other than the Specified Areas of Sudan. Thus, imports and exports to or from the Specified Areas of Sudan that do not transit or transship non-exempt areas of Sudan are not prohibited, provided that the Government of Sudan does not have an interest in the transaction and the transaction does not relate to Sudan's petroleum or petrochemical industries. However, imports and exports to or from the Specified Areas of Sudan that involve the transiting of, or transshipment through, non-exempt areas of Sudan, e.g. , Khartoum and Port Sudan, require authorization from OFAC.

OFAC is also adding interpretive § 538.418 to explain the prohibitions on financial transactions in Sudan. Financial transactions are no longer prohibited by the SSR if: (1) The underlying activity is not prohibited by the SSR; (2) the financial transaction involves a third-country depository institution, or a Sudanese depository institution not owned or controlled by the Government of Sudan, that is located in the Specified Areas of Sudan; and (3) the financial transaction is not routed through a depository institution that is located in the non-exempt areas or that is owned or controlled by the Government of Sudan, wherever located. However, any financial transactions that involve, in any manner, depository institutions that are located in the non-exempt areas of Sudan, e.g. , Khartoum, remain prohibited and require authorization from OFAC.

For example, if a financial transaction involves a branch of a depository institution in the Specified Areas of Sudan, but that depository institution is headquartered in Khartoum and requires all financial transactions to be routed through the headquarters or another branch located in the non-exempt areas of Sudan, that transaction is prohibited and requires authorization from OFAC.

Finally, OFAC is amending the SSR to add three new general licenses, which are set forth in §§ 538.530, 538.531, and 538.532. Paragraph (a) of § 538.530 provides that all general licenses issued pursuant to E.O. 13067 are authorized and remain in effect pursuant to E.O. 13412. Paragraph (b) of § 538.530 provides that all specific licenses and all nongovernmental organization registrations issued pursuant to E.O. 13067 or the SSR prior to October 13, 2006, are authorized pursuant to E.O. 13412 and remain in effect until the expiration date specified in the license or registration, or if no expiration date is specified, June 30, 2008. OFAC urges all license and nongovernmental organization registration holders to take note of this potentially new expiration date, which applies to all licenses and registrations that do not otherwise contain an expiration date, regardless of when they were originally issued.

The second general license, new § 538.531, authorizes otherwise prohibited official activities of the United States Government and international organizations. Subject to certain conditions and limitations, paragraph (a)(1) of § 538.531 authorizes all transactions and activities otherwise prohibited by the SSR or E.O. 13412 that are for the conduct of the official business of the United States Government by contractors or grantees thereof. Employees who engage in transactions for the conduct of the official business of the United States Government already are exempt from these prohibitions. See § 538.212(e) and section 5(a) of E.O. 13412. Paragraph (a)(2) of § 538.531 authorizes, subject to the same conditions and limitations as paragraph (a)(1), all transactions and activities otherwise prohibited by the SSR or E.O. 13412 that are for the conduct of the official business of the United Nations, or United Nations specialized agencies, programmes, and funds, by employees, contractors, or grantees thereof. Paragraphs (b), (c), and (d) of § 538.531 set forth conditions and limitations on the authorizations described in paragraph (a).

The third general license, § 538.532, authorizes humanitarian transshipments of goods, technology, or services through non-exempt areas of Sudan to or from Southern Sudan and Darfur. This license will be subject to review on an annual basis. Upon completion of the annual review, OFAC may revoke the general license through the issuance of a notice in the Federal Register . If OFAC does not take any action, this license will remain in force.

Because the amendment of the SSR involve a foreign affairs function, Executive Order 12866 and the provisions of the Administrative Procedure Act (5 U.S.C. 553) requiring notice of proposed rulemaking, opportunity for public participation, and delay in effective date are inapplicable. Because no notice of proposed rulemaking is required for this rule, the Regulatory Flexibility Act (5 U.S.C. 601-612) does not apply.

The collections of information related to the SSR are contained in 31 CFR part 501 (the “Reporting, Procedures and Penalties Regulations”). Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3507), those collections of information have been approved by the Office of Management and Budget under control number 1505-0164. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number.

This document and additional information concerning the Office of Foreign Assets Control (“OFAC”) are available from OFAC's Web site ( http://www.treas.gov/ofac ) or via facsimile through a 24-hour fax-on demand service, tel.: (202) 622-0077.

OFAC administers three sanctions programs with respect to terrorists and terrorist organizations. The Terrorism Sanctions Regulations, 31 CFR part 595 (“TSR”), implement Executive Order 12947 of January 23, 1995, in which the President declared a national emergency with respect to “grave acts of violence committed by foreign terrorists that disrupt the Middle East peace process * * *” The Global Terrorism Sanctions Regulations, 31 CFR part 594 (“GTSR”), implement Executive Order 13224 of September 23, 2001, in which the President declared an emergency more generally with respect to “grave acts of terrorism and threats of terrorism committed by foreign terrorists * * *” The Foreign Terrorist Organizations Sanctions Regulations, 31 CFR part 597 (“FTOSR”), implement provisions of the Antiterrorism and Effective Death Penalty Act of 1996.

HAMAS is a target of each of these sanctions programs, resulting in the blocking of its property and interests in property that are in the United States or within the possession or control of a U.S. person. In the case of the FTOSR, U.S. financial institutions are required to retain possession or control of any funds of HAMAS and report the existence of such funds to Treasury. These restrictions effectively prohibit U.S. persons from dealing in property or interests in property of HAMAS. Following the 2006 parliamentary elections in the West Bank and Gaza, which resulted in HAMAS members forming the majority party within the Palestinian Legislative Council and holding positions of authority within the government, OFAC determined that HAMAS had a property interest in the transactions of the Palestinian Authority. That determination remains in place. Accordingly, pursuant to the TSR, the GTSR, and the FTOSR, U.S. persons are prohibited from engaging in transactions with the Palestinian Authority unless authorized. On April 12, 2006, OFAC issued six general licenses authorizing U.S. persons to engage in certain transactions in which the Palestinian Authority may have an interest.

Based on foreign policy considerations resulting from recent events in the West Bank and Gaza, including the appointment of Salam Fayyad as the new Prime Minister of the Palestinian Authority and of other ministers not affiliated with HAMAS, OFAC is revising the TSR, GTSR, and FTOSR to add a new general license as TSR § 595.514, GTSR § 594.516, and FTOSR § 597.512. Paragraph (a) of new §§ 595.514, 594.516, and 597.512 authorizes U.S. persons to engage in all transactions with the Palestinian Authority. Paragraph (b) of these sections defines the term Palestinian Authority, for purposes of the authorization in paragraph (a), as the Palestinian Authority government of Prime Minister Salam Fayyad and President Mahmoud Abbas, including all branches, ministries, offices, and agencies (independent or otherwise) thereof. Transactions with HAMAS, or in any property in which HAMAS has an interest, not covered by the general license remain prohibited.

Because the amendment of 31 CFR parts 594, 595, and 597 involves a foreign affairs function, the provisions of Executive Order 12866 and the Administrative Procedure Act (5 U.S.C. 553) requiring notice of proposed rulemaking, opportunity for public participation, and delay in effective date, are inapplicable. Because no notice of proposed rulemaking is required for this rule, the Regulatory Flexibility Act (5 U.S.C. 601-612) does not apply.

The collections of information related to 31 CFR parts 594, 595, and 597 are contained in 31 CFR part 501 (the “Reporting, Procedures and Penalties Regulations”). Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3507), those collections of information have been approved by the Office of Management and Budget under control number 1505-0164. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number.

On October 3, 2007, we published a notice of proposed rulemaking (NPRM) entitled “Security Zone; Nawiliwili Harbor, Kauai, Hawaii” in the Federal Register (72 FR 56308), identified by docket number USCG-2007-29354. The comment period for that NPRM was originally set to expire on October 24, 2007. Although we received many comments on the NPRM, a few people wishing to submit comments expressed difficulty using the Federal eRulemaking Portal, one of the four methods available to submit comments on the NPRM.

Recently, the Coast Guard migrated its online rulemaking docket from the Docket Management System (DMS) to the Federal Docket Management System (FDMS). (72 FR 54315, Sept. 24, 2007.) This migration has been accompanied by transition difficulties and delays in comments being posted on FDMS. To accommodate the public, the comment period for that rulemaking (USCG-2007-29354) has been extended until November 20, 2007. A separate notice extending the comment period for the USCG-2007-29354 NPRM can be found elsewhere in this issue of the Federal Register .

This temporary final rule, identified by docket CGD14 07-002, is a separate emergency rulemaking that will maintain a security zone for Nawiliwili Harbor, Kauai from November 1 through November 30, 2007, after an existing security zone (72 FR 50877, Sept. 5, 2007) expires and while we complete the USCG-2007-29354 notice-and-comment rulemaking. We did not publish an NPRM for this regulation.

Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing an NPRM for this temporary rule. It would be contrary to public interest not to maintain a security zone for Nawiliwili Harbor until the USCG-2007-29354 rulemaking is completed.

Though operation of the Hawaii Superferry from Oahu to Kauai has been voluntarily suspended by the operating company, operations could resume at any time. As of October 24, 2007, there are no, nor have there been, any state court injunctions or other legal prohibitions on the Superferry resuming operations between Oahu and Kauai. Although the Superferry's operating company announced on September 21, 2007, that it was “indefinitely” suspending operations into and out of Kauai, that suspension is only voluntary; nothing binds the company to adhere to that suspension of operations, and in fact, it could decide to sail for Kauai at any time. Furthermore, the Hawaii legislature has announced that it will commence a special legislative session beginning on October 24, 2007, at which, among other things, it intends to consider a bill that would allow the Superferry to operate into and out of Hawaii's ports while an environmental impact statement regarding Superferry operations is being prepared. To the extent this legislative action may permit the Superferry to resume operations into and out of Maui, which it is currently enjoined from doing, and to the extent the operating company's decision to “indefinitely” suspend operations into and out of Kauai was tied to the company's inability to operate into and out of Maui, this legislative action may well have the net effect of causing the Superferry's operating company to renew its desire to resume operations to Kauai as soon as possible. Delay in implementing this rule would expose obstructers in the water and ashore, as well as ferry passengers and crew, to undue hazards due to the obstructers' tactics of entering Nawiliwili Harbor from land and waterfront facilities adjacent to the harbor and using themselves as human barriers to obstruct the Superferry's movement into Nawiliwili Harbor, a transit that under the best of circumstances is difficult to make due to the small size of the Harbor.

For the same reasons, under 5 U.S.C. 533(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register .

The Hawaii Superferry (HSF) is a 349-foot large passenger vessel documented by the U.S. Coast Guard with an endorsement for coastwise trade, and certificated for large passenger vessel service in the United States. The HSF, operating Hawaii's first inter-island vehicle-passenger service, is intended to provide service among the islands of Oahu, Maui, and Kauai.

The HSF enters Kauai at Nawiliwili Harbor, a federally maintained waterway. During the HSF's inaugural commercial trip to Kauai on August 26, 2007, nearly 40 swimmers and obstructers on kayaks and surfboards blocked Nawiliwili Harbor's navigable channel entrance to prevent the lawful entry of the HSF into Kauai. Many of the obstructers entered the water from the jetty that is south of Nawiliwili Park, which is adjacent to the Matson shipping facility in Nawiliwili Harbor. Other demonstrators ashore on the jetty threw rocks and bottles at Coast Guard personnel who were conveying detained obstructers to shore. Coast Guard Station Kauai resources were eventually able to clear the channel for the HSF's arrival while also ensuring the personal safety of the waterborne obstructers. The HSF was able to dock on August 26, 2007.

On the following day, August 27, 2007, approximately 70 persons entered the water again to block the channel entrance, thereby preventing the HSF from docking in Nawiliwili Harbor. Due to the difficulty of maneuvering in the small area of Nawiliwili Harbor, and in the interest of ensuring the safety of the protesters, the HSF's master chose not to enter the channel until the Coast Guard cleared the channel of obstructers. However, because the vessel remained outside the harbor, and because the obstructers did not approach within 100 yards of the vessel, the existing security zone for large passenger vessels (33 CFR 165.1410) did not provide the Coast Guard with the authority to control obstructer entry into Nawiliwili Harbor or clear the channel of obstructers before the HSF commenced its transit into the harbor.

After waiting 3 hours, and with nearly 20 obstructers still in the water actively blocking the HSF, the HSF was forced to return to Oahu without mooring in Kauai. This decision was made by the Superferry's master, in consultation with company officials.

As a result of the events of August 26 through 27, 2007, the HSF voluntarily suspended operations between Oahu and Kauai on August 28, 2007. HSF's goal, however, was and is to resume operations between Oahu and Kauai as soon as possible. As of October 24, 2007, there are no, nor have there been, any state court injunctions or other legal prohibitions on the HSF resuming operations between Oahu and Kauai.

Although the Superferry's operating company announced on September 21, 2007, that it was “indefinitely” suspending operations into and out of Kauai, that suspension is only voluntary; nothing binds the company to adhere to that suspension of operations, and in fact, it could decide to sail for Kauai at any time. Furthermore, the Hawaii legislature has announced that it will commence a special legislative session beginning on October 24, 2007, at which, among other things, it intends to consider a bill that would allow the Superferry to operate into and out of Hawaii's ports while an environmental impact statement regarding Superferry operations is being prepared. To the extent this legislative action may permit the Superferry to resume operations into and out of Maui, which it is currently enjoined from doing, and to the extent the operating company's decision to “indefinitely” suspend operations into and out of Kauai was tied to the company's inability to operate into and out of Maui, this legislative action may well have the net effect of causing the Superferry's operating company to renew its desire to resume operations to Kauai as soon as possible.

Responding to the unexpected events of August 26 and 27, 2007, the Coast Guard's Fourteenth District Commander established a temporary fixed security zone in Nawiliwili Harbor. That emergency rulemaking established a temporary security zone in order to prevent persons and vessels from endangering themselves and HSF passengers and crew by attempting to impede the vessel's passage after it commences the difficult transit into the harbor. That rule, which became effective September 1, 2007, was issued by the Coast Guard's Fourteenth District Commander on August 31, 2007 (72 FR 50877, September 5, 2007).

The purpose of this temporary rule, as with the rule that is expiring October 31, is several-fold. First, by designating significant portions of the waters of Nawiliwili Harbor as a security zone, activated for enforcement 60 minutes before the HSF's arrival into the zone through 10 minutes after its departure from the zone, this temporary rule provides the Coast Guard and its law enforcement partners the authority to prevent persons and vessels from endangering themselves and the HSF passengers and crew during attempts to impede the vessel's passage after it commences the difficult transit into the harbor. Extending the security zone to Nawiliwili Jetty and its access road provides law enforcement personnel with the authority necessary to control access into the water so the HSF may enter and depart the harbor safely and unimpeded by obstructers. Furthermore, closing off the jetty and its access road prevents violent protesters from continuing to impede law enforcement operations and endanger law enforcement personnel by throwing rocks, bottles, and other dangerous objects. Finally, the security zone makes land adjacent to the harbor available for law enforcement purposes, and in fact will be used by the Patrol Commander (the person in overall command of all waterborne law enforcement assets present in Nawiliwili Harbor enforcing the security zone) as the command post during any Superferry protests.

This temporary final rule follows the original temporary final rule that is set to expire on October 31, 2007. There is continued uncertainty regarding when, if ever, the HSF might resume service into Nawiliwili Harbor. The resolve of obstructers to continue attempting to impede the Superferry's passage into and through Nawiliwili Harbor, should it indeed resume service there, has been vocally manifested. Therefore, the Coast Guard has determined there is a need to ensure that law enforcement personnel will still have a fixed security zone available to them beyond the expiration date of the original temporary final rule to facilitate the safe arrival of the HSF, should it again return to Nawiliwili Harbor.

This temporary rule is in effect from November 1, 2007, until November 30, 2007. It creates a security zone in most of the waters of Nawiliwili Harbor, and on Nawiliwili Jetty in Nawiliwili Harbor. The security zone will be activated for enforcement 60 minutes before the Hawaii Superferry's arrival into the zone, and remain activated for 10 minutes after the Hawaii Superferry's departure from the zone. The activation of the zone for enforcement will be announced by marine information broadcast and by a red flag, illuminated after sunset, displayed from Pier One and the Harbor Facility Entrance on Jetty Road. During its period of activation and enforcement, entry into the land and water areas of the security zone are prohibited without the permission of the Captain of the Port, Honolulu, or his or her designated representative.

In preparing this temporary rulemaking, the Coast Guard made sure to consider the rights of lawful protestors. To that end, the Coast Guard excluded from the security zone two regions which create a sizeable area of water in which demonstrators may lawfully assemble and convey their message in a safe manner to their intended audience. These areas include the waters west of a line running from the southeastern-most point of the breakwater of Nawiliwili Small Boat Harbor due south to the south shore of the harbor, and the waters from Kalapaki Beach south to a line extending from the western most point of Kukii Point due west to the Harbor Jetty. These areas of the harbor not included in the security zone are completely accessible to anyone who desires to enter the water, and are fully visible to observers ashore, at the HSF mooring facility, aboard the HSF when transiting the harbor, and from the air.

The Coast Guard also took into account the lawful users of Nawiliwili Harbor in its creation of this rule. As previously noted, the rule will only be activated 1 hour before the HSF's arrival into port, and will be deactivated 10 minutes after the HSF departs the port. The harbor is fully available to all users during the period when the zone is not activated. Furthermore, the rule affords persons who want to use the harbor, even during a period when the zone is activated, with the opportunity to request permission of the Captain of the Port to do so.

Under 33 CFR 165.33, entry by persons or vessels into the security zone during an enforcement period is prohibited unless authorized by the Coast Guard Captain of the Port, Honolulu or his or her designated representatives.

Operation of any type of vessel, including every description of watercraft or other artificial contrivance used, or capable of being used, as a means of transportation on water, within the security zone during an enforcement period is prohibited. If a vessel is found to be operating within the security zone during an enforcement period without permission of the Captain of the Port, Honolulu, and refuses to leave, the vessel is subject to seizure and forfeiture.

All persons and vessels permitted in the security zone during an enforcement period must comply with the instructions of the Coast Guard Captain of the Port or the designated on-scene patrol personnel. These personnel include commissioned, warrant, and petty officers of the Coast Guard and other persons permitted by law to enforce this regulation. Upon being hailed by an authorized vessel or law enforcement officer using siren, radio, flashing light, loudhailer, voice command, or other means, the operator of a vessel must proceed as directed.

If authorized passage through the security zone, a vessel must operate at the minimum speed necessary to maintain a safe course and must proceed as directed by the Captain of the Port or his or her designated representatives. While underway with permission of the Captain of the Port or his or her designated representatives, no person or vessel is allowed within 100 yards of the Hawaii Superferry when it is underway, moored, position-keeping, or at anchor, unless authorized by the Captain of the Port or his or her designated representatives.

When conditions permit, the Captain of the Port, or his or her designated representatives, may permit vessels that are at anchor, restricted in their ability to maneuver, or constrained by draft to remain within the security zone during the enforcement period in order to ensure navigational safety. Any Coast Guard commissioned, warrant, or petty officer, and any other person permitted by law, may enforce the regulations in this section.

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

We expect the economic impact of this rule to be so minimal that a full Regulatory Evaluation is unnecessary. This expectation is based on the short activation and enforcement duration of the security zone created by this temporary rule, as well as the limited geographic area affected by the security zone.

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

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities. While we are aware that the affected area has small entities, including canoe and boating clubs and small commercial businesses that provide recreational services, we anticipate that there will be little or no impact to these small entities due to the narrowly tailored scope of the temporary rule, and to the fact that such entities can request permission from the Captain of the Port to enter the security zone when it is activated.

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

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule so that they can better evaluate its effects on them and participate in the rulemaking. If the rule will affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact Lieutenant Sean Fahey, U.S. Coast Guard District 14, at (808) 541-2106. The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

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

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

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

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

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

We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that might disproportionately affect children. While some obstructers used small children in obstruction tactics, both on land and on shore, during the August 26 and 27 Superferry arrivals into Kauai, and while online forums and other sources indicate that organizers are actively recruiting adolescents and small children with the intent of putting them into harm's way as obstructers of the Superferry's passage should it ever again approach and enter Nawiliwili Harbor, any heightened harm faced by children as a result of these tactics has no relation to the creation of this rule. Instead, those heightened risks are entirely the product of persons who recruit and employ adolescents and children to put themselves at risk of death or serious physical injury by attempting to physically obstruct the passage of a large passenger vessel in a small harbor.

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

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

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

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

We have analyzed this temporary rule under Commandant Instruction M16475.1D which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, under figure 2-1, paragraph (34)(g) of the Commandant Instruction M16475.1D, this temporary rule is categorically excluded from further environmental documentation. An “Environmental Analysis Checklist” and “Categorical Exclusion Determination” supporting this conclusion are available in the docket where indicated under ADDRESSES.

The Postal Service, after high-level discussions with the Republic of the Marshall Islands and the Federated States of Micronesia and consultation with the U.S. Department of State, is returning these countries to domestic published prices and mailing standards.

On September 15, 2005, the Postal Service published in the Federal Register (70 FR 54510) a notice proposing use of the international price schedules for the Republic of the Marshall Islands and the Federated States of Micronesia. The application of international rate schedules to these former Trust Territories of the United States was permissible, in conformity with, and in furtherance of the terms of the Compact of Free Association between the United States Government and the governments of the Republic of the Marshall Islands and the Federated States of Micronesia. After considering comments on its proposal to move these nations to international postal prices, fees, and mail classifications, the Postal Service published, on November 23, 2005, in the Federal Register (70 FR 70976), a notice implementing the new published prices and mailing standards. That notice amended the Mailing Standards of the United States Postal Service , International Mail Manual (IMM®) to include the Republic of the Marshall Islands and the Federated States of Micronesia in most international products and services, and added them to the individual country listings. A subsequent article removed all references to these countries from the Mailing Standards of the United States Postal Service , Domestic Mail Manual (DMM®).

This final rule rescinds the final rule published on November 23, 2005. Effective November 19, 2007, the Republic of the Marshall Islands and the Federated States of Micronesia will revert to the domestic mail classification schedule that was in effect prior to January 8, 2006, the effective date of the original article. The application of international rates to these Freely Associated States had observable effects on the economy and business correspondence of the Republic of the Marshall Islands and the Federated States of Micronesia. The Postal Service had considered a number of business solutions to lessen that impact. Technological and other obstacles currently make other solutions impracticable. Therefore, to allow the governments of the Republic of the Marshall Islands and the Federated States of Micronesia to continue to pursue appropriate long term solutions to this problem without adversely impacting the economies of the parties and the lives of their people, the Postal Service takes this step to return the parties and their people to the position they held prior to the application of the international mail schedule to them. An additional article will be published to add references to these countries to the Mailing Standards of the United States Postal Service , Domestic Mail Manual (DMM®).

The Republic of the Marshall Islands (RMI) and the Federated States of Micronesia (FSM) were, from 1947 to 1986, under United States government administration pursuant to the trusteeship provisions of the United Nations Charter. From 1986 to 2003, the United States was party to a treaty of international political association with each of these two emerging nations, designed to bring about their self-government. The Compact of Free Association (CFA), as the treaty was called, included provisions for economic assistance and defense. Its terms included postal and related services and provided for reimbursement to the Postal Service for the costs associated with these services.

In 2000, the General Accounting Office produced a report evaluating the progress made under the CFA. The report, GAO/NSIAD-00-216, Foreign Assistance: U.S. Funds to Two Micronesian Nations Had Little Impact on Economic Development (Report to Congressional Requesters Sept. 2000), concluded that the CFA had not accomplished its goals with regard to economic development. Subsequently, the Compact of Free Association Amendments Act of 2003 ratified an amended and renewed CFA (2003 CFA). The 2003 CFAs again addressed the postal services to be provided to the RMI and the FSM, leaving some services open to further negotiations between the Postal Service and the governments of the RMI and the FSM. The 2003 CFAs called for a phased transition for the RMI and the FSM to move to international status as an office of exchange for mail. The 2003 CFAs will expire in 2024.

On September 15, 2005, the Postal Service published a notice in the Federal Register (70 FR 54510) proposing use of the phased international rate schedules for the Republic of the Marshall Islands and the Federated States of Micronesia. The application of international rate schedules to these Freely Associated States was permissible, in conformity with, and in furtherance of the terms of the 2003 CFAs between the United States Government and the governments of the RMI and the FSM.

After considering comments on its proposal to use international postal rates, fees, and mail classifications, on November 23, 2005, the Postal Service published a final rule in the Federal Register (70 FR 70976) implementing the use of international published prices and mailing standards.

That notice amended the Mailing Standards of the United States Postal Service, International Mail Manual (IMM) to include the RMI and the FSM in most international products and services, and it added them to the individual country listings. At the same time, a phased schedule of international rates was introduced in conformity with the 2003 CFAs, which permits such a change to begin not sooner than 2006 and allows the rates to increase to full international rates over a period of not less than five years. A subsequent article removed all references to these countries from the Mailing Standards of the United States Postal Service, Domestic Mail Manual (DMM).

The application of international rates to these Freely Associated States had observable effects on the economy and business correspondence of the RMI and the FSM. The Postal Service has considered a number of business solutions to lessen that impact, but none are believed to provide optimal service to the FSM and RMI. Consequently, the Postal Service is reverting mail service to the FSM and RMI to domestic status treatment. This is consistent with the CFAs, since the CFAs do not preclude the continuation of domestic mail service treatment to the FSM and RMI. The Postal Service accordingly is returning the parties and their people to substantially similar position they held prior to the application of the international mail schedule, thereby enabling the governments of the RMI and FSM to continue to pursue appropriate long term solutions without adversely impacting the economies of the parties and the lives of their people.

This final rule amends the final rule published on November 23, 2005. Effective November 19, 2007, the RMI and the FSM will revert to the domestic mail treatment as provided in DMM section 608.2.2. As explained below, the Postal Service will restore the domestic mail treatment offered to its status quo prior to the transition to phased international service, with certain exceptions.

As background, prior to the November 2005 change, electronic return receipts, Delivery Confirmation and Signature Confirmation were not offered in the Freely Associated States, including the RMI and FSM, for both inbound and outbound mail. The January 6, 2005, issue of the Domestic Mail Manual updated on March 17, 2005, set out these limitations on services in sections 608.2.2 (Mail Treated as Domestic), 503.6.2.1 (Return Receipt, Description), 503.9.2.4 (Delivery Confirmation, Ineligible Matter), and 503.10.2.3 (Signature Confirmation, Ineligible Matter). Thus, these services will continue not to be available to customers in the RMI and the FSM.

The 2003 CFAs (Compacts) signed by the United States government and the governments of the RMI and FSM provide for postal services in Article VI. There, certain additional limits on products and services are provided. The Compacts allow the following services to be provided as negotiated between the Postal Service and the governments of the Freely Associated States: “Express Mail without a guarantee (EMS); Registered Mail; insured parcel service; recorded delivery and money orders.” The Compacts further state that “COD (cash (sic) on delivery) orders will no longer be available.” In accordance with the terms of these international agreements, COD service will not be provided.

Further, Express Mail service will be provided for inbound and outbound items, but without a guarantee. This is, however, substantially the same expedited service now offered to the FSM and the RMI. That is, as international destinations, the customers of the RMI and FSM currently receive Express Mail International service, which generally does not provide a guarantee, but which does receive expedited handling over other classes of mail. This handling of the Express Mail without a guarantee will continue to provide a benefit to the customers who choose it.

The Postal Service adopts the following changes to Mailing Standards of the United States Postal Service, Domestic Mail Manual (DMM®), which is incorporated by reference in the Code of Federal Regulations . See 39 CFR part 111.

Throughout this document, “we,” “us” and “our” refer to EPA.

Table 1 lists the rules we are approving with the dates that the rules were amended by the local air agencies and submitted by the California Air Resources Board (CARB).

On November 22, 2005, the submittal of GBUAPCD Rule 405 was determined to meet the completeness criteria in 40 CFR part 51 appendix V, which must be met before formal EPA review. On July 23, 2007, the submittal of GBUAPCD Rule 431 and MDAQMD Rule 444 was determined to meet the completeness criteria.

A version of GBUAPCD Rule 405 was approved into the SIP on June 6, 1977 (42 FR 28883). EPA has not acted on a version of Rule 405 revised on May 8, 1996 and submitted on August 5, 2002. While we can act only on the most recent version, we have considered the contents of the superseded version.

A version of GBUAPCD Rule 431 was approved into the SIP on June 24, 1996 (61 FR 32341).

MDAQMD was previously comprised of the Riverside County Air District (RCAD) and the San Bernardino County Air District (SBCAD). The versions on which the current MDAQMD Rule 444 are based are RCAD Rule 444, SBCAD Rule 57, and SBCAD Rule 57.1, which were approved into the SIP on September 8, 1978 (43 FR 40011), June 14, 1978 (43 FR 25684), and June 14, 1978 (43 FR 25684), respectively.

Section 110(a) of the Clean Air Act (CAA) requires states to submit regulations that control volatile organic compounds, nitrogen oxides, particulate matter, and other air pollutants which harm human health and the environment. These rules were developed as part of local air districts' programs to control these pollutants.

The purposes of the submitted GBUAPCD Rule 405 revisions relative to the SIP rule are as follows:

• (405.preamble): The rule extends the applicability of the listed exceptions to Rule 404-A, Particulate Matter, and Rule 404-B, Oxides of Nitrogen, from the original Rule 400, Ringlemann Chart.

• (405.C,E): The rule deletes the exceptions to open burning regulations for agricultural operations and the use of other agricultural equipment necessary in the growing of crops or raising of fowl or animals.

• (405.F,G,H,I,J): The rule adds exceptions to open burning regulations for (a) the treatment of waste propellants, explosives, and pyrotechnics in open burning/open detonation operations on military bases for operations approved in a burn plan as regulated by SIP Rule 432, (b) burning of materials for special effects in filming or video operations, (c) the disposal of contraband by burning, (d) recreational or ceremonial fires, and (e) a fire set for the purpose of eliminating a public health hazard that cannot be abated by any other practical means.

The purposes of the submitted GBUAPCD Rule 431 revisions relative to the SIP rule are as follows:

• 431.A: The rule is expanded to include communities that are determined by the Board of GBUAPCD to be High Road Dust Areas (HRDA) or High Wood Smoke Areas (HWSA), which contribute to exceedences of state or federal 24-hour PM-2.5 or PM-10 standards. The SIP rule applies only to the Town of Mammoth Lakes.

• 431.B: The rule adds appropriate definitions for HRDA and HWSA in addition to the HRDA and HWSA government agencies that regulate these areas.

• 431.C.5: The rule adds the requirement that a HWSA keep a record of all EPA Phase II certified wood-burning appliances.

• 431.D.3 and 4: The rule adds the requirement to obtain a building permit from the Town of Mammoth Lakes for the installation of all solid fuel burning appliances. Outside the Town of Mammoth Lakes, the building permit is obtained from the HWSA agency.

• 431.D.5 and E: The rule adds requirements for inspectors for verification of compliance with regulations for installation of new certified solid fuel burning appliances and removal or replacement of non-certified appliances.

• 431.I and J: The rule adds requirements and thresholds for mandatory curtailment and voluntary curtailment of solid fuel combustion in the Town of Mammoth Lakes and HWSA areas.

The purposes of the submitted MDAQMD Rule 444 revisions relative to the SIP rules are as follows:

• 444(A): The rule is revised to apply the District Smoke Management Program to open burning while minimizing smoke impacts to the public.

• 444(B)(13): The rule replaces an “Approved Burn Plan” with a “Smoke Management Plan.”

• 444(C)(1): The rule adds the requirement for all burn projects that are greater than 10 acres or that are estimated to produce more than one ton of particulate matter shall be conducted in accordance with the Smoke Management Program.

• 444(C)(2): The rule adds a list of materials prohibited from open burning.

• 444(C)(3): The rule adds the permission to burn during adverse meteorological conditions in a case where there would be an imminent and substantial economic loss, providing a special permit is obtained from the District and not a local fire agency.

• 444(C)(4): The rule adds the provision for a prescribed burn permittee to obtain from CARB up to 48 hours in advance of the burn day a permissive-burn, marginal-burn, or no-burn forecast.

• 444(C)(6): The rule adds requirements for ignition, stacking, drying, and time of day for open burning, except for prescribed burning.

• 444(C)(7): The rule adds to the list of burning applications with a permit (a) empty containers used for explosives, (b) right-of-way clearance for a public entity or utility, or (c) wood waste.

• 444(C)(9): The rule adds the requirement for a Smoke Management Plan for prescribed burning in (a) Forest Management, (b) Range Improvement, and (c) Wildland Vegetation Management.

• 444(D)(1): The rule deletes the exemptions for (a) open fires in agricultural operations at over 3,000 feet elevation and (b) open fires in agricultural burning at over 6,000 feet elevation.

EPA's technical support document (TSD) has more information about these rules.

Generally, SIP rules must be enforceable (see section 110(a) of the CAA) and must not relax existing requirements (see sections 110(l) and 193). SIP rules in serious PM-10 nonattainment areas must require for significant sources best available control measures (BACM), including best available control technology (BACT) (see section 189(b)). GBUAPCD regulates a serious PM-10 nonattainment area (see 40 CFR part 81), so GBUAPCD Rules 405 and 431 must fulfill the requirements of BACM/BACT. MDAQMD regulates a moderate PM-10 nonattainment area (see 40 CFR part 81), so MDAQMD Rule 444 must fulfill the requirements of RACM/RACT.

Guidance and policy documents that we used to help evaluate rules consistently include the following:

• Requirements for Preparation, Adoption, and Submittal of Implementation Plans, U.S. EPA, 40 CFR part 51.

• PM-10 Guideline Document (EPA-452/R-93-008).

• Technical Information Document for Residential Wood Combustion Best Available Control Measures, (EPA-450/2-92-002).

• Minimum BACM/RACM Control Measures for Residential Wood Combustion Rules, EPA Region IX (August 8, 2007).

We believe that GBUAPCD Rules 405 and 431 and MDAQMD Rule 444 are consistent with the relevant policy and guidance regarding enforceability, BACM/BACT, RACM/RACT, and SIP relaxations and should be given full approval. The TSD has more information on our evaluation.

The TSD describes an additional rule revision that does not affect EPA's current action but is recommended for the next time the local agency modifies GBAPCD Rule 431.

As authorized in section 110(k)(3) of the CAA, EPA is fully approving the submitted rules because we believe they fulfill all relevant requirements. We do not think anyone will object to this approval, so we are finalizing it without proposing it in advance. However, in the Proposed Rules section of this Federal Register , we are simultaneously proposing approval of the same submitted rule. If we receive adverse comments by November 30, 2007, we will publish a timely withdrawal in the Federal Register to notify the public that the direct final approval will not take effect and we will address the comments in a subsequent final action based on the proposal. If we do not receive timely adverse comments, the direct final approval will be effective without further notice on December 31, 2007. This will incorporate the rule into the federally enforceable SIP.

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.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). This action merely approves State law as meeting Federal requirements and imposes no additional requirements beyond those imposed by State law. Accordingly, the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). Because this rule approves pre-existing requirements under State law and does not impose any additional enforceable duty beyond that required by State law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4).

This rule also does not have tribal implications because it will not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000). This action also does not have Federalism implications because it does not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). This action merely approves a State rule implementing a Federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. This rule also is not subject to Executive Order 13045 “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it approves a State rule implementing a Federal standard.

In reviewing SIP submissions, EPA's role is to approve State choices, provided that they meet the criteria of the Clean Air Act. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards (VCS), EPA has no authority to disapprove a SIP submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a SIP submission, to use VCS in place of a SIP submission that otherwise satisfies the provisions of the Clean Air Act. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

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

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by December 31, 2007. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

The following table of contents describes the format for this section:

EPA is approving the State Implementation Plan (SIP) revision submitted by the State of New York on July 7, 2006 for the purpose of enhancing an existing Emission Statement program for stationary sources in New York. The SIP revision consists of amendments to Title 6 of the New York Codes Rules and Regulations (NYCRR), Chapter III, Part 202, Subpart 202-2, Emission Statements (Emission Statement rule).

The SIP revision was submitted by New York to satisfy the ozone nonattainment provisions of the Clean Air Act. These provisions require states in which all or part of any ozone non-attainment area is located to submit a revision to its SIP which requires owner/operators of stationary sources of volatile organic compounds (VOC) and oxides of nitrogen (NO X ) to provide the State with a statement, at least annually, of the source's actual emissions of VOC and NO X . On July 7, 2006, New York submitted a SIP revision for ozone which included an adopted Emission Statement rule. The regulation amends Title 6 of the NYCRR, Subpart 202-2, Emission Statements, which was originally adopted on July 13, 2004. On April 12, 2005, the New York State Department of Environmental Conservation (NYSDEC) adopted these amendments, which became effective on May 29, 2005. The reader is referred to the proposed rulemaking (July 20, 2007, 72 FR 39773) for further details.

EPA received no comments in response to the July 20, 2007 proposed rulemaking action.

Section 182(a)(3)(B)(i) of the Act requires states in which all or part of any ozone non-attainment area is located to submit SIP revisions to EPA by November 15, 1992, which require owner/operators of stationary sources of VOC and NO X to provide the state with a statement, at least annually, of the source's actual emissions of VOC and NO X . Sources were to submit the first emission statements to their respective states by November 15, 1993. Pursuant to the Emission Statement Guidance, if the source emits either VOC or NO X at or above levels for which the State Emission Statement rule requires reporting, the other pollutant (VOC or NO X ) from the same facility should be included in the emission statement, even if the pollutant is emitted at levels below the minimum reporting level.

Section 182(a)(3)(B)(ii) of the Act allows states to waive, with EPA approval, the requirement for an emission statement for classes or categories of sources located in nonattainment areas, which emit less than 25 tons per year of actual plant-wide VOC and NO X , provided the class or category is included in the base year and periodic inventories and emissions are calculated using emission factors established by EPA (such as those found in EPA publication AP-42) or other methods acceptable to EPA.

In order to consolidate reporting requirements by the states to EPA, on June 10, 2002 (See 67 FR 39602), EPA published the final Consolidated Emissions Reporting Rule (CERR). The purpose of the CERR is to simplify the states' annual reporting, to EPA, of criteria pollutants (VOC, NO X , SO 2 , PM 10 , PM 2.5 , CO, Pb) for which National Ambient Air Quality Standards (NAAQS) have been established, and annual reporting of NH 3 , a precursor pollutant. The CERR also provides options for data collection and exchange, and unified reporting dates for various categories of criteria pollutant emission inventories. The CERR requires states to report annually to EPA on emissions of VOC, NO X , SO 2 , PM 10 , CO and Pb, for industrial point sources, based on specific emission thresholds. The CERR emissions reports for calendar year 2001 were due on June 1, 2003, and subsequent reports were due every year thereafter (i.e., calendar year 2002 emission inventory due June 1, 2004, etc.). Reporting of PM 2.5 and NH 3 from point sources was not required until June 2004, for emissions that occurred during calendar year 2002.

New York's Emission Statement rule, which requires facilities to report information for the criteria pollutants and the associated precursors mentioned earlier, satisfies the federal emission statement and CERR reporting requirements for major sources. In addition, New York's Emission Statement rule which requires facilities to report information for HAPs, assists the State in satisfying the HAPs reporting requirements for major sources. For EPA's detailed evaluation of New York's Emission Statement rule, the reader is referred to the proposed rulemaking notice (July 20, 2007, 72 FR 39773).

It should be noted that the State's Emission Statement program requires facilities to report individual HAPs that may not be classified as criteria pollutants or precursors to assist the State in air quality planning needs. While EPA recognizes the value of this information, EPA will not take SIP-related enforcement action should a facility not submit this information to the State in an emissions statement because these substances do not cause or exacerbate exceedances of the NAAQS.

EPA has concluded that the New York Emission Statement rule contains the necessary applicability, compliance, enforcement and reporting requirements for an approvable emission statement program. Accordingly, EPA is approving 6 NYCRR, Chapter III, Part 202, Subpart 202-2, Emission Statements, as part of New York's SIP adopted on April 12, 2005 and effective May 29, 2005.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). This action merely approves state law as meeting Federal requirements and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). Because this rule approves pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4).

This rule also does not have tribal implications because it will not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000). This action also does not have Federalism implications because it does not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). This action merely approves a state rule implementing a Federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. This rule 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 program.

In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards (VCS), EPA has no authority to disapprove a SIP submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a SIP submission, to use VCS in place of a SIP submission that otherwise satisfies the provisions of the Clean Air Act. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

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

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by December 31, 2007. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

The February 8, 2007, submittal revises NCDENR regulation:

.0605 “General Recordkeeping and Reporting Requirements” by adding a section to prohibit the falsifying of information and submission of falsified information. The intent of this addition is to aid NCDENR in prosecuting persons who falsify records or submit false records.

.0927 “Bulk Gasoline Terminals” by adding details on leak detection, recordkeeping, and requirements for leak repair. The intent of this addition is to standardize procedures used at bulk gasoline terminals to locate, repair, and document leaks of volatile organic compounds (VOC).

.0932 “Gasoline Truck Tanks and Vapor Collections” to make corrections, updates, and clarifications. The intent of this revision is to correct the definitions of “bulk terminal” and “bulk gasoline terminal,” update the pressure standard to correspond to the current Department of Transportation standard, and clarify the requirements for gasoline truck tanks and vapor control systems.

EPA is approving the aforementioned changes to the North Carolina SIP because they meet the requirements of EPA and the CAA. EPA is publishing this rule without prior proposal because the Agency views this as a noncontroversial submittal and anticipates no adverse comments. However, in the proposed rules section of this Federal Register publication, EPA is publishing a separate document that will serve as the proposal to approve the SIP revision should adverse comments be filed. This rule will be effective December 31, 2007. without further notice unless the Agency receives adverse comments by November 30, 2007.

If the EPA receives such comments, then EPA will publish a document withdrawing the final rule and informing the public that the rule will not take effect. All public comments received will then be addressed in a subsequent final rule based on the proposed rule. The EPA will not institute a second comment period. Parties interested in commenting should do so at this time. If no such comments are received, the public is advised that this rule will be effective on December 31, 2007 and no further action will be taken on the proposed rule. Please note that if we receive adverse comment on an amendment, paragraph, or section of this rule and if that provision may be severed from the remainder of the rule, we may adopt as final those provisions of the rule that are not the subject of an adverse comment .

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). This action merely approves state law as meeting Federal requirements and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). Because this rule approves pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4).

This rule also does not have tribal implications because it will not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000). This action also does not have Federalism implications because it does not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). This action merely approves a state rule implementing a Federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the CAA. This rule also is not subject to Executive Order 13045 “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it is not economically significant.

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

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

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by December 31, 2007. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2)).

Throughout this document, “we,” “us” and “our” refer to EPA.

Sections 111(d) and 129 of the Clean Air Act (CAA or the Act) require States to submit plans to control certain pollutants (designated pollutants) at existing solid waste combustor facilities (designated facilities) whenever standards of performance have been established under section 111(b) for new sources of the same type, and EPA has established emission guidelines (EG) for such existing sources. A designated pollutant is any pollutant for which no air quality criteria have been issued, and which is not included on a list published under section 108(a) or section 112(b)(1)(A) of the CAA, but emissions of which are subject to a standard of performance for new stationary sources. However, section 129 of the CAA also requires EPA to promulgate EG for solid waste incineration units that emit a mixture of air pollutants. These pollutants include organics (dioxins/furans), carbon monoxide, metals (cadmium, lead, mercury), acid gases (hydrogen chloride, sulfur dioxide, and nitrogen oxides) and particulate matter (including opacity).

On December 16, 2005, (70 FR 74870), EPA promulgated new source performance standards and EG for other solid waste incineration (OSWI) units, located at 40 CFR part 60, subparts EEEE and FFFF, respectively. The designated facility to which the EG apply is each existing OSWI unit, as defined in subpart FFFF, that commenced construction on or before December 9, 2004.

Subpart B of 40 CFR part 60 establishes procedures to be followed and requirements to be met in the development and submission of State plans for controlling designated pollutants. Also, 40 CFR part 62 provides the procedural framework for the submission of these plans. When designated facilities are located in a State, the State must then develop and submit a plan for the control of the designated pollutant. However, 40 CFR 60.23(b) and 62.06 provide that if there are no existing sources of the designated pollutant in the State, the State may submit a letter of certification to that effect (i.e., negative declaration) in lieu of a plan. The negative declaration exempts the State from the requirements of subpart B for the submittal of a 111(d)/129 plan.

The Nevada Division of Environmental Protection (NDEP) has determined that there are no designated facilities subject to the OSWI unit EG requirements in its air pollution control jurisdiction. On December 19, 2006, NDEP submitted to EPA a negative declaration letter certifying this fact. EPA is amending 40 CFR part 62, subpart DD (Nevada) to reflect the receipt of this negative declaration letter.

After publication of this Federal Register notice, if an OSWI facility is later found within the NDEP jurisdiction, then the overlooked facility will become subject to the requirements of the Federal OSWI 111(d)/129 plan, including the compliance schedule. The Federal plan would no longer apply if EPA were to subsequently receive and approve a 111(d)/129 plan from NDEP.

EPA is publishing this action without prior proposal because the Agency views this as a noncontroversial amendment and anticipates no adverse comments. This action simply reflects already existing Federal requirements for State air pollution control agencies under 40 CFR parts 60 and 62. In the Proposed Rules section of this Federal Register publication, EPA is publishing a separate document that will serve as the proposal to approve NDEP's negative declaration should relevant adverse or critical comments be filed.

This rule will be effective December 31, 2007 without further notice unless the Agency receives relevant adverse comments by November 30, 2007. If EPA receives such comments, then EPA will publish a timely withdrawal in the Federal Register to notify the public that the direct final approval will not take effect and we will address the comments in a subsequent final action based on the proposal. The EPA will not institute a second comment period on this action. Any parties interested in commenting must do so at this time.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). This action merely approves a State determination as meeting Federal requirements and imposes no additional requirements beyond those imposed by State law.

Accordingly, the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). Because this rule does not impose any additional enforceable duty beyond that required by State law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4).

This rule also does not have tribal implications because it will not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000). This action also does not have Federalism implications because it does not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). This action merely approves a State negative declaration in response to implementing a Federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. This rule also is not subject to Executive Order 13045 “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it merely approves a State negative declaration in response to implementing a Federal standard.

In reviewing 111(d)/129 plan submissions, EPA's role is to approve State choices, provided that they meet the criteria of the Clean Air Act. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards (VCS), EPA has no authority to disapprove a 111(d)/129 plan submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a 111(d)/129 plan submission, to use VCS in place of a 111(d)/129 plan submission that otherwise satisfies the provisions of the Clean Air Act. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.).

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

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by December 31, 2007. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action approving the section 111(d)/129 negative declaration submitted by NDEP may not be challenged later in proceedings to enforce its requirements (see section 307(b)(2)).

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

In addition to using regulations.gov, you may access this Federal Register document electronically through the EPA Internet under the “ Federal Register ” listings at http://www.epa.gov/fedrgstr .

EPA is correcting the nomenclature document issued in the Federal Register on September 18, 2007 (72 FR 53134) (FRL-8126-5). Subsequent to publication of the September 18, 2007 Federal Register document, EPA learned that in the table of some 600 entries, several of the nomenclature changes had been included in a tolerance regulation that was issued in the Federal Register of September 12, 2007, (72 FR 52013), thus making inclusion of those entries unnecessary and confusing. Therefore, EPA is removing the duplicate nomenclature changes that appeared in the September 12, 2007 Federal Register tolerance rule from the September 18, 2007 tolerance nomenclature document.

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

EPA included the required statutory discussion in the September 18, 2007 nomenclature rule.

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

This final rule amends the Federal Travel Regulation (FTR) by:

1. Updating and correcting agency and office titles and acronyms;

2. Making several editorial and grammatical changes, and clarifying areas of existing policy where needed.

3. Replacing the term “eTravel Service” with “E-Gov Travel Service” wherever it appears.

4. Replacing “Federal Premier Lodging Program” and “FPLP” with “FedRooms” wherever it appear.

5. Replacing references to “Military Traffic Management Command (MTMC)” with “Surface Deployment and Distribution Command (SDDC)” wherever it appears.

6. Replacing “Travel Management System” with “Travel Management Service” wherever it appears.

7. Replacing “General Accounting Office” with “Government Accountability Office” wherever it appears.

8. Replacing “eTravel Program Management Office” with “E-Gov Travel Program Management Office” wherever it appears.

9. Adding to the category of miscellaneous expense reimbursements, under passport and/or visa fees, the reimbursement of fees incurred by a required physical examination for foreign travel.

10. Removing the acronym “GEBAT” in Section 301-51.100 and Appendix D to Chapter 301.

11. Adding changes to authority citations to be consistent with the codification of Title 40 of the United States Code.

12. Adding a term and definition for “Subsistence Allowance”.

13. Clarifying that lodging taxes for United States locations are not included in the per diem allowance.

14. Amending helpful do’s and don’ts for Government contractor-issued travel cardholders.

15. Amending Chapter 301-Appendices B and D, in accordance with the above changes.

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

This final rule is not required to be published in the Federal Register for notice and comment therefore, the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. , does not apply.

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

This final rule is also exempt from congressional review prescribed under 5 U.S.C. 801 since it relates solely to agency management and personnel.

* * * The GSA Per Diem Rates webpage ( http://gsa.gov/perdiem ) provides more information on State tax exemptions.

Submitting Comments: As the public was provided an opportunity to comment on the substance of the rule during the comment period prior to the publication of the September 19, 2007 final rule, and as the substance of the rule is not changed by this interim final rule with comment period, we are accepting comments only to the extent that they pertain to the applicability of the new authority for the rule. You can assist us by referencing the file code CMS-2278-IFC.

Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received: http://www.cms.hhs.gov/eRulemaking. Click on the link “Electronic Comments on CMS Regulations” on that Web site to view public comments.

Comments received timely will be also available for public inspection as they are received, generally beginning approximately three weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951.

Sections 553 and 554 of the National Flood Insurance Reform Act of 1994 (NFIRA) (Pub. L. 103-325, enacted September 23, 1994) (also known as Title V of the Riegle Community Development and Regulatory Improvement Act of 1994) amended the National Flood Insurance Act of 1968 (42 U.S.C. 4101 et seq. ). Specifically, section 553 authorized the Director (now Administrator) of the Federal Emergency Management Agency (FEMA) to carry out a flood mitigation assistance program, known as the Flood Mitigation Assistance Program (FMA). Through the FMA Program, FEMA is authorized to provide grants to States and communities for planning assistance and mitigation projects that reduce the risk of flood damage to structures covered under contracts for flood insurance. Section 554 required FEMA to establish the National Flood Mitigation Fund (NFMF) to provide funds for flood mitigation program assistance described in section 553. On March 20, 1997 (62 FR 13346), FEMA published an interim rule implementing section 553 and 554 of the National Flood Insurance Reform Act.

This final rule adopts, without substantive change, the regulations established by the March 20, 1997 interim rule. It addresses the comments received from the public in response to the interim rule, and finalizes the regulations contained in 44 CFR part 78.

The Regulation Identifier Number (RIN) listed in the March 20, 1997 interim final rule was 3067-AC45. Since FEMA became a component of the Department of Homeland Security (DHS), FEMA's RINs were renumbered and 3067-AC45 became 1660-AA00.

FEMA received seven public comments on the interim rule. The seven commenters included five States, one local government, and one association. The comments received, together with FEMA's responses, are set forth below.

The Community Rating System. One commenter wrote that while it is good that the Community Rating System (CRS) criterion may be a basis for a floodplain management plan, CRS communities with repetitive loss or floodplain management plans developed prior to the publishing of 44 CFR part 78 in March 1997 may not realize that their plans will require modification to meet the new criteria of 44 CFR 78.5, and States and regions should be counseled to closely review these older plans. The commenter wrote that the CRS plan reviewer for the Insurance Services Organization (ISO) should be consulted before any FEMA region approves any CRS plans developed prior to 1997 for the purpose of receiving FMA project funds unless the region or State carefully reviews them to see that they meet FMA criteria. The commenter wrote that the States and regions should accept nothing less than plan adoption by resolution of the community's governing board. The commenter also wanted FEMA not to accept as evidence of adoption a letter from the Mayor stating that the community will follow the plan since the CRS criterion requires full adoption by the governing board. The commenter thought that FMA should be consistent with the CRS plan adoption process and require that all local elected officials see the proposed plan and ratify it.

FEMA's Response: The CRS program is a voluntary program that predates these regulations and creates an incentive for communities that participate in the National Flood Insurance Program (NFIP) to implement floodplain management practices that exceed NFIP minimum requirements. The CRS program, which was established in 1993, provides credit for communities in the form of lower flood insurance premium rates for property owners. The CRS has been and is currently operated by FEMA through an agreement with ISO. The schedule of creditable activities is described in its reference guide, the CRS Coordinator's Manual available through http://www.fema.gov/business/nfip/intnfip.shtm. One of the approved CRS activities that communities may receive credit for is to develop a flood mitigation or repetitive flood loss plan.

FEMA has addressed CRS plans developed prior to 1997 by coordinating with CRS staff to ensure that all review criteria are consistent with FMA and CRS plans. As a result, FEMA has accepted CRS plans based on guidance provided in FEMA Publication No. 299: The FMA Program Guidance (August 1997), as meeting the requirements of § 78.5 as approvable local Flood Mitigation Plans. Further, ISO continues to review CRS plans submitted by local communities against the requirements of § 78.5 if requested by a local community. Such plans would then be forwarded to the State and FEMA for approval as FMA plans.

Further, § 201.6(c)(5) states that the planning process shall include, documentation “that the plan has been formally adopted by the governing body of the jurisdiction requesting approval of the plan ( e.g. City Council, County Commissioner, Tribal Council).” FEMA has provided implementation procedures in the Multi-Hazard Mitigation Planning Guidance under DMA2000 (Disaster Mitigation Act of 2000) located at http://www.fema.gov/plan/mitplanning/index.shtm , which describes how local executives and governing bodies can facilitate plan approval according to local laws and procedures consistent with § 201.6(c)(5).

Insurable structures. One commenter wrote that § 78.1(b) discusses assisting State and local governments in funding cost-effective actions on “insurable” structures, while § 78.12 discusses eligible types of projects as being “insured structures.” The commenter asked whether the regulation covers “insurable” structures or “insured” structures. Another commenter wrote that since the State plan must be in place to address insurable structures, this limits the State's eligibility for project money for State agencies who do not have public buildings to protect or whose mission does not involve the protection of private structures. A third commenter asked if States that participate in the self-insurance program are eligible for FMA project monies that affect State owned facilities insured under their program.

FEMA's Response: The terms “insurable” and “insured” were used in part 78 interchangeably. FEMA realizes it made a technical error in using insurable and insured interchangeably as the two terms have different definitions. FEMA intended to mean “any structure covered by an insurance policy underwritten by the NFIP.” FEMA has revised § 78.1(b) in this final rule by replacing “insurable” with “insured.”

The authorized purpose for the FMA program is to reduce the risk of flood damage to structures covered under contracts for flood insurance. Furthermore, activities funded under FMA must be cost-beneficial to the NFMF. Thus, self-insured structures within States participating in the self-insurance program are not eligible to receive FMA project funds.

Use of Planning Grants. One commenter wrote that under § 78.1(b), planning grants can be used to “assess the flood risk and identify actions to reduce that risk” but the supplementary information section of the interim rule on planning grants states that the “purposes of the planning grants is to develop or update a Flood Mitigation Plan.” The commenter asked if the State or the community could receive a planning grant without actually developing a Flood Mitigation Plan.

FEMA's Response: FEMA will only fund planning activities that will result in a completed project, which in this case is a FEMA-approved State or local flood mitigation plan. The language in § 78.1(b) states that FMA planning grants are intended to help State and local communities assess the flood risk and identify actions to reduce risk. The local mitigation plan is the process FEMA uses for the community to assess flood risk and identify actions to reduce flood risk. Sections 78.4 and 78.5 define eligible planning grant activities. States may only use FMA planning funds to develop State and local Flood Mitigation Plans, which must be adopted by the governing body of the jurisdiction.

Definition of the term “community.” One commenter wrote that as written, § 78.2's definition of “community” could be interpreted to mean that any jurisdiction, city, or county that does not have the authority to adopt a building code or require zoning, even if that jurisdiction, city, or county has a good floodplain management program would not be eligible for participation in FMA. The commenter wrote that numerous States do not give ordinance-making authority to county level government. For example, in Texas, counties can participate in the NFIP, and some have very strong floodplain management programs, but without the ability to adopt building codes or regulate land use through zoning, would this exclude them from FMA participation? Additionally, the City of Houston has an active floodplain management program with over 45,000 flood policyholders who pay over $16.5 million annually in premiums; however, the city has no zoning (although they have adopted a building code). Does a literal interpretation of the regulation exclude the City of Houston from FMA eligibility?

One commenter wrote that although no one has explicitly included regional agencies ( e.g. , regional planning commissions, urban drainage districts, metropolitan sewer or sanitary districts, and similar agencies) within the definition of “communities,” regional agencies often manage sizable floodplain management programs and have their own mitigation programs; thus, FEMA should consider regional agencies as eligible applicants for grant funds. The commenter wrote that regional agencies can also provide a great deal of planning and technical assistance support to eligible communities.

FEMA's Response: FEMA has historically been flexible in providing FMA planning and project subgrants to local flood control districts that have the capacity to plan for and implement mitigation measures but that may not have the delegated authority from the State to adopt a building code or zoning ordinances. Local flood control districts acting on behalf of one or more local communities would meet the requirements of § 78.3(b)(2) for the purpose of receiving FMA subgrants. Further, FEMA would consider plans developed by local flood control districts to be multi-jurisdictional plans. Section 201.6(c) requires that multi-jurisdictional plans include: (1) Identifiable action items specific to each jurisdiction requesting FEMA approval or credit for the plan, and (2) documentation that the plan has been formally adopted by a governing body representing each jurisdiction such as a City Council, County Commissioner, or Tribal Council.

Planning Grant Approval. One commenter wrote that § 78.3(b)(2) says that the State point of contact can award the planning grants, but that it is unclear whether FEMA approves the planning grants, because § 78.3(a)(2) states that the Director of the FEMA Region will approve the Flood Mitigation Plans.

FEMA's Response: FEMA approves all eligible FMA planning grant applications submitted by the State. The State in turn awards funds to local communities as subgrants. Once the local community has completed the plan, it is forwarded to the State for review and submission to FEMA for approval in order for the local community to become eligible to receive FMA project subgrants.

Procedures for forwarding planning documents to FEMA. One commenter wrote that § 78.3(b), which refers to alternative procedures outlined in § 78.14 that allow the community to coordinate planning document directly with FEMA, seems to imply that these alternative procedures have been formulated. The commenter believes that it is vital that the procedures be finalized and published as soon as possible.

FEMA's Response. The alternative application procedures provided at § 78.3(b) have been seldom utilized by local communities applying for FMA project and planning grants. However, procedures on alternative application procedures were described in more detail in the FEMA 299 (“Flood Mitigation Assistance Guidance,”) the original FMA implementation document.

Eligibility for Technical Assistance. One commenter wrote that under § 78.4(a), the State is eligible to apply for Technical Assistance grants, and that FEMA Region VII has stated that the State can pass the TA funds through to the local level ( i.e. , Council of Governments) to administer the TA. Does this mean that local jurisdictions are not eligible to directly apply for the TA funds?

FEMA's Response: States have been permitted to pass FMA technical assistance funds through to the local level under §§ 78.4(b) and 78.8(c) as long as that amount does not exceed 10 percent of the local community's project allocation from the State.

Increase Project Grant funds. One commenter wrote that the base amount of $100,000 awarded to each State for Project Grants is insufficient to perform any meaningful flood mitigation planning projects. The commenter cited the project category of land acquisition of insured structures and underlying real property, where, in many cases, the cost of acquiring a single real property site may exceed $50,000. As a result, the base amount of $100,000 awarded to a State for Project Grants will only allow a State to do very small and inexpensive projects that may not significantly impact a State's long term goal to advance its flood mitigation program within the State.

FEMA's Response: FEMA agrees with the commenter, and will consider removing the $100,000 base limitation in a future rulemaking.

The 5 year grant allocation of $150,000. One commenter asked if, under § 78.8(b), the State can apply once every 5 years for a single planning subgrant of $150,000, and then carry over any unobligated planning grant dollars to the next fiscal year until the 5-year period expires. The commenter also asked if the State can submit an application for a $150,000 planning grant and have FEMA make separate subgrant awards in phases over 5 years, as long as the total amount does not exceed $150,000 in 5 years. Another commenter wrote that, per § 78.9, if the maximum performance period for a planning grant is 3 years, why does a State or community have to wait for 5 years to apply for another planning grant. Another commenter wrote that since planning grants can only be issued to States once every 5 years for an amount up to $150,000, the allocations presented to the States will preclude most States from reaching the $150,000 ceiling if they chose to accept the planning grant allocation in the interim final rule. The commenter felt that the emphasis seems to be the issuance of one grant, not the maximum of $150,000.

FEMA's Response: The State may apply for the full 5-year statutory limit of $150,000 in one grant application if FEMA allocates that amount to the State based on the formula provided in § 78.8(a). Further, the State may apply for multiple applications that total $150,000 over any 5-year period. FEMA believes that the 3-year performance period on planning grants is sufficient for completing and gaining FEMA approval on an FMA plan, and this statutory requirement is not related directly to the 5-year cycle on limits for FMA planning funds. Finally, the National Flood Insurance Act of 1968, as amended (42 U.S.C. 4104c) does not require that each State receive the maximum $150,000 over any 5-year period.

Limits on FMA funds. One commenter asked if, under § 78.8, TA dollars are included in the $20 million maximum for project grants. Can the $20 million be spread over 5 years? Do the awarded funds also have to actually be spent within the 5 years? Another commenter wrote that although he understood funding for the FMA project grant funding was limited to $3,300,000 to any community over 5 years, setting arbitrary limits on States or communities will only serve to stifle the overall effectiveness of the program, and establishing such a low limit puts an unnecessary restraint on the commenter's potential program.

FEMA's Response: The National Flood Insurance Act of 1968, as amended (42 U.S.C. 4104c) lists the statutory limits on FMA project funds at $20,000,000. Since the FMA technical assistance allocation is currently 10 percent of the project grant, all technical assistance funds must be counted as part of the 5 year $20,000,000 for States. FEMA does consider waivers of these statutory funding limits during major disasters or emergencies declared by the President as a result of flood conditions consistent with the National Flood Insurance Act of 1968, as amended (42 U.S.C. 4104c).

Eligibility of mapping projects. One commenter wrote that the limitation regarding planning grants and floodplain map updates in § 78.9 is a concern. The commenter stated that current floodplain maps and the provision of map information in digital format are fundamental in estimating the population and structures at risk. The commenter felt that flood mitigation plans will suffer without the eligibility of funding updated floodplain maps to write them. The commenter asked that FEMA reconsider mapping projects as eligible for FMA planning grants.

FEMA's Response: FEMA is actively engaged in the development and update of floodplain maps under a separate authority of the NFIP (42 U.S.C. 4101), and receives separate appropriations to digitize maps under the Map Modernization program for use by States and local communities in their floodplain management and mitigation planning activities. FEMA determined that mapping activities under FMA to be a duplication of programs; therefore, mapping activities are not included in part 78. States and local communities receive funds for flood mapping activities under the Cooperating Technical Partners Program (CTP). The CTP is an innovative approach to creating partnerships between FEMA and participating NFIP communities, regional agencies, and State agencies that have the interest and capability to become more active participants in the FEMA Flood Hazard Mapping Program. Also, FEMA provides States and local communities with access to flood hazards data including Flood Insurance Rate Maps (FIRMs), Letters of Map Changes, and other technical documents through its Map Service Center at http://msc.fema.gov/webapp/wcs/stores/servlet/FemaWelcomeView?storeId=10001&catalogId=10001&langId=-1.

Delay caused by FEMA final approval. One commenter wrote that under § 78.10, the project grant approval process, project applications will be forwarded to FEMA for final approval, and FEMA will provide funding on a project-by-project basis through a supplement to the annual Cooperative Agreement (CA). The concern is that project-by-project approval through the regional offices can be very time sensitive and not conducive to accessing the FEMA dollars within the performance period. Does project-by-project approval delay State access to any of the 10 percent TA dollars associated with the project dollars?

FEMA's Response: FEMA currently awards FMA grants to States using an e-Grant system, rather than through a CA. In 1997, FEMA opted to award most non-disaster grant funds to States under the combined Emergency Management Performance Grant (EMPG). However, FMA and other FEMA non-disaster mitigation grants did not fit under the EMPG structure. This is because the EMPG process was designed for awarding and tracking non-construction grants, and most mitigation grants, including FMA grants, are awarded and tracked as construction grants. Therefore, FEMA developed a Mitigation e-Grant system which grantees must use to apply for FMA and Pre-Disaster Mitigation Grant Program grants, as required by the E-Government Act of 2002 (Pub. L. 107-347) and the Federal Financial Assistance Management Improvement Act of 1999 (Pub. L. 106-107). States receive one FMA grant award each fiscal year that includes project, planning, and technical assistance subgrants. Each time a new subgrant is awarded, the annual State grant is automatically amended in the e-Grant system. States are awarded technical assistance funds based on the total dollar amount of eligible FMA project applications. The e-Grant system has facilitated the receipt of all FMA funds, including technical assistance funds to States, in a timelier basis than at the inception of the program.

Eligible types of projects. One commenter stated that a strict interpretation of what encompasses an eligible structure under § 78.12(a) could have a harmful effect on a community's Flood Mitigation Plan. The commenter suggested program flexibility to allow communities the ability to complete their plans; the commenter also suggested a requirement that 90 percent of the properties have flood insurance. Three commenters wrote that the phrase “minor physical flood mitigation” in § 78.12(g) needs a better definition. The term “minor” is subject to a great deal of interpretation. Commenters suggested that FEMA establish a dollar cap ($100,000), determine a scope of work limitation on this category of project, or further define the term “minor” to clarify the type of project that is eligible for funding. One commenter wrote that the term “Beach nourishment activities” in § 78.12 needs a better definition. The commenter stated that more specific guidelines will reduce or prevent abuses of FMA intent. Another commenter felt that the acquisition of insured structures and the demolition and removal of insured structures on acquired property per § 78.12 should be considered as one type of project in its entirety.

FEMA's Response: FEMA agrees that a strict interpretation of what encompasses an eligible structure could be detrimental, and FEMA does not dictate the definition of eligible structure. In fact, FEMA allows local communities to conduct their own risk assessments in the process of developing their local mitigation plans; these risk assessments can include identifying eligible insured and non-insured properties for future hazard mitigation projects. In response to the comment regarding a 90 percent flood insurance requirement, if a local community chooses to apply for an FMA project grant, all properties included in the application must have an NFIP insurance policy in force at the time of application. The local community can encourage an uninsured property owner to become NFIP-insured in order to participate in an FMA mitigation project that is otherwise cost beneficial to NFMF. In response to the comment that “minor physical flood mitigation” be better defined, the phrase is derived from the eligible mitigation activities as stated in the National Flood Insurance Act of 1968, as amended (42 U.S.C. 4104c):

Grant administration. Three commenters wrote that § 78.13 makes no mention about administrative costs incurred by grantees and subgrantees as grant program participants. The commenters wrote that this section is unclear as to whether or not State and local governments are expected to bear these administrative costs (which can be considerable) on their own or as part of the grant program. One commenter recommended that this section be rewritten to state that the administrative costs incurred by State and local governments can be considered to be part of the non-Federal 25 percent cost share for an eligible grant. Another commenter asked if the States received administrative allowance funds to administer the FMA dollars, as States do with the Hazard Mitigation Grant Program (HMGP). A commenter stated that § 78.13(a) penalizes States that may be willing to contribute a Full Time Employee (FTE) dedicated to providing technical assistance to other State agencies and communities. The requirement of a cash contribution from States may prohibit many States from participating, especially with the limited amount of funding available; the commenter also opposes the 12.5 percent limit on in-kind contributions. One commenter asked if time extensions are awarded under § 78.13(c).

FEMA's Response: Currently, States are eligible to apply for FMA technical assistance funds to pay State Program Manager salaries as long as those amounts are directly allocable to the FMA program and do not duplicate costs allowed under a State's indirect cost agreement. Any amount reimbursed for salaries requires a 25 percent non-Federal cost share, half of which must be provided as cash. The FMA cost-share requirement for planning and project activities and management costs remains consistent with current statutory requirements under the National Flood Insurance Act of 1968, as amended (42 U.S.C. 4104c):

FMA grant performance periods may be extended consistent with the guidelines provided in § 13.23(b) and implemented in annual program guidance at http://www.fema.gov/government/grant/fma/index.shtm and consistent with statutory time limitations on FMA planning grants provided in the National Flood Insurance Act of 1968, as amended (42 U.S.C. 4104c). Generally, the performance period of FMA project grants may be extended twice if work is in progress and if financial and programmatic progress reports are current. FMA planning grants may be extended one time within the maximum statutory 3-year performance if work is in progress and if financial and programmatic progress reports are current.

Fund rollover. One commenter requested additional information regarding the appropriations rollover for FMA dollars to the next fiscal year.

FEMA's Response: If Congress appropriates funds, States are awarded FMA grants annually based upon State target allocations. Congress historically has appropriated FMA funds with a 2-year period of availability. FEMA will carryover FMA funds, including technical assistance funds, once during the 2-year period of availability, if the State has eligible projects that require further benefit cost, engineering, or environmental review and that could not be obligated during the first fiscal year. Eligible project, planning, and technical assistance grants must be obligated within the 2-year period of availability. The maximum recommended performance period for FMA project and technical assistance grants is 4 years, and the maximum statutory performance period for FMA planning grants is 3 years.

The Catalog of Federal Domestic Assistance number. A commenter asked for the Catalog of Federal Domestic Assistance (CFDA) number.

FEMA's Response : The current CFDA number for FMA grants awarded under part 78 is 97.029. The FEMA Assistance Officers and their State counterparts are notified of the current CFDA number through annual program guidance at http://www.fema.gov/government/grant/fma/index.shtm.

Plan revisions. A commenter asked if a community has to follow the same procedure for developing and adopting the initial flood mitigation assistance plan in order to submit a revision to the plan. One commenter asked if an administrative revision to the local plan would require public participation. Another commenter asked if the State can approve a revision to the local plan or if FEMA must approve the revision.

FEMA's Response: Under part 78, revisions to flood mitigation plans are not required after initial approval of the plan. Further, there is no FEMA requirement for public participation in administrative revisions to flood mitigation plans. However, States may establish their own policies and procedures on requiring and approving local plan updates and/or administrative revisions.

Communities that have pre-existing plans. A commenter asked whether communities that already have developed a flood mitigation plan can obtain a planning grant to update or revise its flood mitigation plan to fit FMA requirements.

FEMA's Response: States and local communities can apply for FMA planning funds every 5 years for the purpose of plan updates and can reapply for funds during the same 5-year period if the State or local community has not exceeded the State limit of $150,000 or the local limit of $50,000.

Approval time. One commenter asked for the amount of time that the FEMA has to approve a revision to the plan.

FEMA's Response: Under the terms of the National Flood Insurance Act of 1968 as amended, (42 U.S.C. 4104c), FEMA has 120 days to approve any revisions or updates to the original FEMA-approved plan if such revisions or updates are funded with FMA program funds.

The scope of mitigation planning. One commenter wrote that all flood mitigation projects are, in fact, local projects, and that the interim final rule places too much emphasis on community flood mitigation planning as opposed to planning on an entire watershed basis. The commenter wrote that the flood mitigation program should encourage the development of a flood mitigation planning approach that will take into consideration all relevant flood mitigation factors and impacts within a watershed. The commenter wrote that FEMA can take the lead in promoting a much more comprehensive solution to the nation's flood mitigation problems.

FEMA's Response: Flood mitigation plans developed to meet the FMA planning requirements may be multi-jurisdictional, such as a watershed-based approach. Multi-jurisdictional plans include local planning objectives submitted from each community or jurisdiction that would have its local governing body adopt the plan for the purpose of receiving FMA project funds.

State distribution of grant funds. One commenter wrote that States should not have full discretion for determining the distribution of available grant funding unless FEMA establishes and enforces clear, specific, and objective criteria for rating and prioritizing the grant applications, and that criteria is available to potential grant applicants prior to development of their mitigation plans. In addition, the commenter wrote that eligible jurisdictions turned down for a grant by their State should be given the opportunity to appeal the decision to FEMA and/or submit the application directly to FEMA for consideration.

FEMA's Response: FMA is a State-administered program, meaning that States work with local communities to identify, select, and forward to FEMA projects and planning activities that will reduce the risk of flood damage to NFIP-insured structures based on detailed annual program guidance provided at http://www.fema.gov/government/grant/fma/index.shtm. Further, FEMA regional offices oversee the adherence of States to the annual program guidance when awarding grants to communities. FEMA does not use an appeals process for local communities whose FMA subgrant applications are declined by their State. However, if a State requests that FEMA review an FMA grant determination, FEMA would re-examine prior planning grant decisions made by the State. Furthermore, local communities are able to resubmit, the next fiscal year, subgrant applications that have been declined.

Cost-effective mitigation measures. One commenter wrote that the interim rule limited certain structure retrofitting that can be employed as part of cost-effective mitigation measures. For example, examinations of flood insurance claims histories for repetitive loss structures may suggest minimal retrofitting efforts such as elevating the electrical panel may remove repetitive loss and be more cost effective and practical than elevating the entire structure.

FEMA's Response: FMA project grants may only be used to fund cost-effective mitigation measures for individual properties, such as acquisition or elevation, which provide a 100-year level of flood protection. FEMA has determined that mitigation actions not resulting in a 100-year level of flood protection for individual properties are inconsistent with the requirements of the FEMA floodplain management regulations provided in § 60.3. Therefore, elevation and dry-floodproofing activities, such as minimal retrofits for repetitive loss properties recommended by the commenter, are not considered eligible for FMA project funds if they do not result in a 100-year flood protection for residential and non-residential properties.

Premiums. One commenter asked whether insurance premiums would be reimbursable under the FMA program, as they are under the Hazard Mitigation Grant Program. The commenter stated that reimbursed insurance premiums were perceived as an incentive for maintaining insurance during the acquisition program after the 1993 floods in order to get property owners to accept FEMA buyouts.

FEMA's Response: Insurance premiums are not reimbursable under the FMA program. For acquisition projects, HMGP provides States with the opportunity to allow local communities to reimburse flood insurance premium amounts to property owners. However, States and local communities are not allowed to reimburse flood insurance premiums amounts to participants in FMA acquisition projects because the flood insurance policy is a requirement for program participation.

Tracking repetitive loss structures. One commenter wrote that the Federal Insurance Administration should establish a method to track acquisition of repetitive loss structures so that FEMA can adjust allocation formulas to reflect the actual number of structures at risk. The commenter wanted to ensure that FEMA is both tracking the number of new repetitive loss properties as well as the number of mitigated properties, so that target allocation amounts are computed in a fair manner.

FEMA's Response: Since the inception of the Community Rating System in 1990, FEMA has been tracking both new and mitigated repetitive loss properties present in NFIP participating communities. New repetitive loss properties are added through the FEMA insurance databases which track claims data on all NFIP insured structures. Repetitive loss properties are mitigated by several means including acquisition, elevation, floodproofing, and structural flood control projects. FEMA tracks these mitigated properties through the Bureau and Statistical Agent (BSA) developed by the NFIP within its data mainframe to capture and record both the reported mitigation action and the reported funding sources used to achieve that mitigation action. As of June 30, 2007, 13,477 repetitive loss properties have been identified as mitigated in some manner by the use of local, State, and Federal funds. This number includes 1,372 mitigated properties which were partially or completely demolished by fire, wind, flood, or other natural disasters for which FEMA or another local, State, or Federal agency provided funds in order to complete the removal of the original structure. FEMA tracks mitigated and demolished repetitive loss properties in order to ensure an accurate count of the remaining repetitive loss properties in need of mitigation. Previously mitigated structures are not counted when determining the need for future mitigation activities. FEMA uses the most current data available on unmitigated repetitive loss structures in order to determine FMA target allocations each fiscal year for States and territories.

FEMA has prepared and reviewed this rule under the provisions of Executive Order 12866, Regulatory Planning and Review. OMB has determined that this rule is not a significant regulatory action. OMB has not reviewed this rule. Under Executive Order 12866, a significant regulatory action is subject to the Office of Management and Budget (OMB) review and the requirements of the Executive Order. The Executive Order defines “significant regulatory action” as one that is likely to result in a rule that may:

(1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities;

(2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;

(3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or

(4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order.

The interim rule published on March 20, 1997 at 62 FR 13346 established the regulations that this document makes final. FEMA calculates the annual economic impact of the interim rule to be approximately $40,000,000. As this final rule makes no significant change to the interim rule, FEMA is adopting the $40,000,000 annual economic impact estimate of the interim rule as the annual economic impact of this final rule. The following paragraphs provide a more detailed explanation of the economic impact of the rulemaking.

This rulemaking establishes the FMA grant system. States receive one FMA grant award each fiscal year that includes three types of subgrants: Project, Planning, and Technical Assistance subgrants. FMA Project Grants are available to States, and NFIP-participating communities and Indian tribal governments, to implement measures to reduce flood losses. Up to 10 percent of the Project Grant may be given to States as a Technical Assistance Grant. These funds may be used to help administer the program. FMA Planning Grants are available to States, and NFIP-participating communities and Indian tribal governments, to prepare Flood Mitigation Plans.

The development of community flood mitigation plans is required as a condition of receiving FMA project grants under Section 553 of the National Flood Insurance Reform Act of 1994, Title V, (Pub. L. 103-325). Section 553 mandates that FEMA approve plans before awarding any project grants to a community or State applicant. The purpose of the planning requirement is to encourage communities and States to evaluate the flood hazards in their jurisdiction(s) and devise a feasible mitigation strategy to reduce the impacts of the hazard. As communities implement these strategies, fewer flood losses to insured structures will occur, resulting in reduced costs to the National Flood Insurance Fund. There is no renewal requirement with respect to FMA plans, and only communities are required to have approved FMA plans. There is no such requirement for States.

There are 660 communities with approved plans. There were approximately 60 approved per year from 1997-2005, with an annual increase to 120 in 2006 after Hurricanes Katrina and Rita. For the purpose of this analysis, FEMA is estimating that there will be 120 local plans that are developed and reviewed for approval each year. FEMA estimates that it takes an average of 2,080 hours per local plan to develop, resulting in 249,600 hours of work. The hours of work is calculated as follows: 120 × 2080. In addition, all States must review the local plans submitted. Assuming 120 local plans are submitted annually and it takes 8 hours to review each plan, the total annual burden for both States, local, and tribal governments would be 250,560 hours. Total annual burden is calculated as follows: ((120 × 8) + 249,600). Using wage rates from the May 2004, U.S. Department of Labor, Bureau of Labor Statistics (BLS), Standard Occupation Classification (SOC) System, the median hourly wage for urban and regional planners (SOC Code Number 19-3051) is $26.31 per hour. Adding 30 percent to the BLS figure to account for benefits, FEMA has calculated the burden using a wage rate of $34.20 per hour. Therefore, the total cost to respondents to collect the information required in flood mitigation plans in this rule is $8,569,152 annually. The total cost to respondents is calculated as follows: (250,560 × $34.20).

The next cost implication of this rule is on the submission of FMA grant applications. There are over 18,000 communities participating the NFIP, however, the limited funding of the program will not permit approval of a large number of applicants. The number of respondents used to calculate the burden hours was, therefore, estimated to be 56 States and Territories × 4 subgrants per State = 224 + 56 States to review, coordinate and forward grant applications to FEMA for approval = 280 total respondents. Using wage rates from the May 2004, BLS SOC System, the median hourly wage for urban and regional planners (SOC Code Number 19-3051) is $26.31 per hour. Adding 30 percent to the BLS figure to account for benefits, FEMA has calculated the burden using a wage rate of $34.20 per hour. Using the Paperwork Reduction Act calculations approved by OMB for “FEMA Emergency Preparedness and Response Directorate Grants Administration Forms” (OMB 1660-0025) and “Flood Mitigation Assistance (eGrants) and Grant Supplemental Information” (OMB 1660-0072), the burden hours for the collection of information for FMA grants with supplemental information are estimated at 6,642 hours. Therefore, the total cost to respondents to apply for Flood Mitigation Assistance is $227,156 annually (6,642 × $34.20).

The total Federal appropriations available for the FMA program, which establishes the annual award amounts, began at $12,600,000 in FY 1997/1998 and has slowly risen to $31,000,000 for FY 2007/2008. As the March 20, 1997 interim rule established the FMA program, FEMA is counting the $31,000,000 awarded as an economic impact of this rule, as it represents a “transfer” from the Federal government. Therefore, the annual economic impact of this regulation, including the cost to prepare local plans, apply for grants, and the actual grant funds awarded is $39,796,308, or approximately $40,000,000. The economic impact is calculated as follows: ($8,569,152 + $227,156 + $31,000,000).

Under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) (RFA), as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121, 110 Stat. 857), FEMA is not required to prepare a final regulatory flexibility analysis for this final rule because the agency has not issued a notice of proposed rulemaking prior to this action.

The National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq. ) (NEPA) implementing regulations governing FEMA activities at 44 CFR 10.8(d)(2)(ii) categorically exclude the preparation, revision, and adoption of regulations from the preparation of an environmental assessment or environmental impact statement, where the rule relates to actions that qualify for categorical exclusions. Actions to be implemented under program regulations revised or adopted by this rulemaking include structural mitigation measures. These activities are categorically excluded under 44 CFR 10.8(d)(2)(xv) and (xvi). Thus, the preparation, revision, and adoption of regulations related to these actions are also categorically excluded.

Under Executive Order 12898, “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations” (59 FR 7629, published February 16, 1994), FEMA incorporates environmental justice into its policies and programs. The Executive Order requires each Federal agency to conduct its programs, policies, and activities that substantially affect human health or the environment in a manner that ensures that those programs, policies, and activities do not have the effect of excluding persons from participation in programs, denying persons the benefits of programs, or subjecting persons to discrimination because of race, color, or national origin.

FEMA believes that no action under this rule will have a disproportionately high or adverse effect on human health or the environment. This rule is intended to provide grant funding to States and local communities to assist them with efforts to mitigate against flooding. This rulemaking is intended to assist States and local communities in reducing the adverse affects on human health or the environment from flooding. Accordingly, the requirements of Executive Order 12898 do not apply to this rule.

FEMA has sent this final rule to the Congress and to the Government Accountability Office under the Congressional Review of Agency Rulemaking Act, (“Congressional Review Act,”) Public Law 104-121. This rule is not a “major rule” within the meaning of the Congressional Review Act. This rule will not result in a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions. It will not have “significant adverse effects” on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises. The rule is not an unfunded Federal mandate within the meaning of the Unfunded Mandates Reform Act of 1995, Public Law 104-4, and any enforceable duties that FEMA imposes are a condition of Federal assistance or a duty arising from participation in a voluntary Federal program.

Title II of the Unfunded Mandates Reform Act of 1995, enacted as Public Law 104-4 on March 22, 1995, requires each Federal agency, to the extent permitted by law, to prepare a written assessment of the effects of any Federal mandate in a proposed or final agency rule that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any one year.

The rule is not an unfunded Federal mandate as any enforceable duties that FEMA imposes are a condition of Federal assistance or a duty arising from participation in a voluntary Federal program.

Executive Order 13132, entitled “Federalism,” (64 FR 43255, published August 10, 1999), sets forth principles and criteria that agencies must adhere to in formulating and implementing policies that have federalism implications; that is, regulations that have substantial direct effects on the States, or on the distribution of power and responsibilities among the various levels of government. Federal agencies must closely examine the statutory authority supporting any action that would limit the policymaking discretion of the States, and to the extent practicable, must consult with State and local officials before implementing any such action. This rulemaking creates an entirely voluntary grant program that may be used by States and local governments to receive Federal grants for mitigation projects, plans and technical assistance. States and local governments are not required to seek grant funding and this rulemaking does not limit the States' policymaking discretion. This final rule involves no policies that have federalism implications under Executive Order 13132.

As required by the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ), an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number. This final rule does not impose any new reporting or recordkeeping requirements under the Paperwork Reduction Act. The regulations finalized by this rule contain requirements for the submission of information contained in OMB-approved collection titled “Flood Mitigation Assistance—Flood Mitigation Plan,” OMB approval number 1660-0075.

FEMA has reviewed this rule under Executive Order 13175, “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, published November 9, 2000). In reviewing the portion of the rule which streamlines the mitigation planning requirements affecting Indian tribal governments, FEMA finds that, while it does have “tribal implications” as defined in Executive Order 13175, 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.

FEMA has reviewed this rule under Executive Order 12630, “Governmental Actions and Interference with Constitutionally Protected Property Rights” (53 FR 8859, published March 18, 1988) as supplemented by Executive Order 13406, “Protecting the Property Rights of the American People” (71 FR 36973, published June 28, 2006). This rule will not effect a taking of private property or otherwise have taking implications under Executive Order 12630.

FEMA has reviewed this rule under Executive Order 12988, “Civil Justice Reform” (61 FR 4729, published February 7, 1996). This rule meets applicable standards to minimize litigation, eliminate ambiguity, and reduce burden.

This rulemaking finalizes, without substantive changes, interim rules implementing sections 322 and 323 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) (42 U.S.C. 5165), enacted by section 104 of the Disaster Mitigation Act of 2000 (DMA 2000), (42 U.S.C. 5121 note). Section 322 requires, as a condition of receipt of federal hazard mitigation grant assistance, hazard mitigation planning and is implemented in the Emergency Management and Assistance regulations at 44 CFR part 201 (Mitigation Planning). Section 323 requires, as a condition of receipt of disaster loans or grants distributed under the Hazard Mitigation Grant Program (HMGP) that minimum repair and construction codes, specifications, and standards are followed. Section 323 is implemented at 44 CFR part 206 (Federal Disaster Assistance for Disasters Declared On Or After November 23, 1988), Subpart N (Hazard Mitigation Grant Program).

Parts 201 and 206 outline mitigation planning and hazard mitigation grant requirements, respectively, for State, Indian tribal, and local entities. To be eligible for FEMA mitigation and public assistance grant funds (except for emergency assistance), State, local, or Indian tribal governments must have a FEMA-approved hazard mitigation plan. All hazard mitigation plans must be submitted to FEMA for final review and approval. FEMA will review and comment on the plan within 45 days, whenever possible. Once approved, local plans are to be revised and resubmitted to FEMA every 5 years, State plans are to be revised and resubmitted to FEMA every 3 years, and Indian tribal governments may either apply directly to FEMA, thereby assuming the responsibilities of a State, or may apply through a State, thereby assuming the responsibilities of a local government.

Additionally, for States that complete FEMA requirements for enhanced mitigation planning, the amount of HMGP funds available increases from 15 percent of the Federal share of disaster assistance for that event to 20 percent of the Federal share of disaster assistance for that event. Up to 7 percent of hazard mitigation grants may be used to develop State, tribal, and/or local mitigation planning activities outlined in 44 CFR part 201.

There have been four interim rules (IRs) and one correction published in this rulemaking action. On February 26, 2002, FEMA published an IR at 67 FR 8844 implementing section 322 of the Stafford Act. This first IR addressed State mitigation planning, identified new local mitigation planning grant requirements, authorized HMGP funds for planning activities, and increased the amount of HMGP funds available to States that develop a comprehensive, enhanced mitigation plan.

On October 1, 2002, FEMA published a second IR at 67 FR 61512. This IR amended the February 26, 2002, IR to extend the date by which State and local governments must develop mitigation plans as a condition of grant assistance in compliance with 44 CFR part 201 from November 1, 2003 to November 1, 2004.

On October 28, 2003, FEMA published a third IR at 68 FR 61368. This IR clarified that the November 1, 2003 effective date for the planning requirement applied only to Pre-Disaster Mitigation (PDM) grant funds awarded under any Notice of Availability of Funding Opportunity issued after that date. It also updated the mitigation planning requirements identified in 44 CFR part 204 (Fire Management Assistance Grant Program), as well as 44 CFR part 206, subpart H (Public Assistance Eligibility) to bring those sections into conformity with the existing planning requirements in 44 CFR part 201.

On November 10, 2003, FEMA published a correcting amendment to the third IR at 68 FR 63738, correcting a paragraph reference.

On September 13, 2004, FEMA published a fourth IR at 69 FR 55094. This IR provided a mechanism for Governors or Indian tribal leaders to request a 6 month extension of the plan approval deadline for State-level mitigation plans, up to May 1, 2005. The IR also allowed mitigation planning grants provided through the PDM program to continue to be available to State, Indian tribal, and local governments after November 1, 2004. The IR also made technical amendments and adjusted the general major disaster allocation for HMGP from 15 percent to 7.5 percent to be consistent with statutory mandates.

With respect to docket management, the Regulatory Identifier Number (RIN) listed in the first two IRs was 3067-AD22. Since FEMA became a component of the Department of Homeland Security (DHS), FEMA's RINs were renumbered and 3067-AD22 became 1660-AA17.

FEMA received 17 public comments on the February 26, 2002 IR, and 3 comments on the October 1, 2002 IR. FEMA received no comments on the October 28, 2003 or September 13, 2004 IRs. Fourteen State emergency management agencies, three organizations, two local governments, and one independent group submitted comments. The comments received, together with FEMA's response, are set forth below. The “Multi-Hazard Mitigation Planning Guidance under DMA2000” (also known as the Mitigation Planning “Blue Book”) and the FEMA “How-To” series for Mitigation Planning (FEMA 386) are posted on the FEMA Web site ( http://www.FEMA.gov/library ). Unless otherwise stated, these are the documents referred to in FEMA's response when references to program policy or guidance are made.

Mitigation Planning Requirement Support; Timeline: Six commenters indicated support for the hazard mitigation planning process, agreeing that the process is necessary for effective, sustained mitigation programs. Thirteen commenters wrote that there was not enough time for State and local governments to comply with the planning requirements, and that the timeframe should either be extended or the requirements eased in over time.

FEMA's response: FEMA recognized that not enough time was originally allowed to prepare the plans and issued another interim rule on October 1, 2002 that extended the planning requirement for State Mitigation Plans from November 1, 2003 to November 1, 2004. FEMA also extended the local planning requirement under the HMGP to November 1, 2004. In addition, FEMA published an interim rule on September 13, 2004 which provided a mechanism for Governors or Indian tribal leaders to request a 6 month extension of the effective date for State level mitigation plans (to May 1, 2005). All 50 States, the District of Columbia, and 6 Territories had approved hazard mitigation plans by May 1, 2005. Currently, all 50 States, the District of Columbia, 7 territories, and 33 Indian tribal governments have approved State level mitigation plans. In addition, over 11,000 jurisdictions now have approved local level mitigation plans. FEMA believes the timeframes to implement hazard mitigation plans have been sufficient.

Technological Hazards: Five commenters wrote that plans should be required to address manmade or technological hazards.

FEMA's response: Section 322 of the Stafford Act specifically requires mitigation planning for natural hazards, and FEMA decided that it was not appropriate to require planning for manmade or technological hazards. However, FEMA does support plans that address both natural and technological or manmade hazards. A State, Indian tribal, or local mitigation plan can be approved under the Stafford Act without consideration of technological hazards. However, FEMA's planning guidance can be used to assist in developing and evaluating plans that include manmade and technological hazards as part of a comprehensive mitigation strategy. More specifically, FEMA has developed a guidebook titled: “Integrating Manmade Hazards into Mitigation Planning” as part of the Planning “How-To” guidance series. This document is number seven in that series (FEMA 386-7).

Number of hours necessary to prepare a plan: Two commenters wrote that FEMA underestimated the average number of hours necessary to prepare a local mitigation plan.

FEMA's response: When FEMA published the February 26, 2002, interim rule, FEMA's original estimate of the number of hours necessary to prepare a local mitigation plan was based on planning done under the Flood Mitigation Assistance (FMA) program. FEMA published an estimate of 300 hours per plan to develop State or local mitigation plans under part 201. After several years of implementing the planning regulations, this estimate was adjusted to 2,080 hours to develop new State, local, or Indian tribal plans and 320 hours for plan updates to more accurately reflect the amount of time States and local communities actually spent in developing new plans or updating plans to meet the 3- or 5-year update requirements.

Level of information required to develop plans: Six commenters wrote that the level of detail required to develop local mitigation plans may be unreasonable, that the costs necessary to develop the plans result in an unfunded mandate, and that communities will be reluctant to develop plans because of a fear of liability in the event that problems are identified and mitigation measures are not implemented.

FEMA's response: The February 26, 2002 interim rule established new requirements for hazard mitigation planning. FEMA worked to ensure that appropriate guidance was developed for those responsible for developing, evaluating, and reviewing the plans. FEMA believes that the level of detail is reasonable and necessary to ensure that the statutory purposes of the mitigation planning provision are met and result in meaningful and effective mitigation planning. FEMA hosted a series of workshops in both 2002 and 2003 at each FEMA Region at which every State was represented. These workshops provided an opportunity to clarify the planning requirements identified in the regulation and to answer questions regarding these requirements. During the workshops, FEMA clarified the level of information required by the regulations in developing risk assessments for local mitigation plans. FEMA also issued policy related to the possible lack of hazard specific risk information, which allows planners to use the “best available information” that is currently available in doing the risk assessment, and document how that information would be improved over time.

FEMA recognized that many jurisdictions did not budget for the costs associated with the development of mitigation planning. FEMA made an effort to ensure that the existing mitigation grant programs (HMGP, PDM, and FMA) were available to assist as many jurisdictions as possible. Through these programs, FEMA has approved over 1,400 planning grants between February 2002 and March 2007 with an obligated Federal share of over $157,000,000. As stated above, all 50 States, the District of Columbia, 7 territories, and 33 Indian tribal governments have approved State level mitigation plans. In addition, over 11,000 jurisdictions have approved local level mitigation plans. In fact, over 50 percent of the population of the United States is covered by an approved local level mitigation plan. Since these regulations were originally published in 2002, over 1,400 planning grants have been awarded and over 14,000 jurisdictions are covered by an approved mitigation plan. Due to the volume of plans being developed and approved, it appears that the issue of liability has not been a significant reason for communities to not undertake development of a mitigation plan.

Significant regulatory action: Two commenters disagreed with FEMA's conclusion that the rule is not an economically significant regulatory action because the nationwide cost projection of less than $100 million annually to implement the rule is not realistic.

FEMA's response: FEMA disagrees. For the reasons cited in the Executive Order 12866 section below, FEMA asserts that this is not an economically significant regulatory action. The annual impact of this rule on the economy is approximately $46 million. This regulation's effect on the economy is below the $100 million threshold to qualify as an economically significant action. Furthermore, this final rule makes no significant change to the interim rules which have been in place, and the regulated industry has been following, since 2002.

Coordination among FEMA Regions: Two commenters wrote that coordination within the 10 FEMA Regions is needed to ensure consistency for plan review and other aspects relating to regulation implementation.

FEMA's response: FEMA has worked to ensure that the regulation has been implemented in a fair and consistent manner. The agency has held several workshops, meetings, and training sessions to bring together FEMA staff and State representatives to identify areas of concern and to develop policy and guidance to resolve these issues. For example, a FEMA course entitled “Mitigation Plan Review” has been delivered at FEMA's Emergency Management Institute (EMI) in Emmitsburg, Maryland, and in almost all FEMA Regions, as well as in many States. FEMA will continue to work towards a nationally consistent application of the planning requirements.

Flexibility in implementing the requirements: Four commenters wrote that it is necessary for hazard mitigation plans and the hazard mitigation planning process to be flexible to meet the needs of diverse communities, to address mitigation issues based on actual circumstances, and to meet post-disaster mitigation needs.

FEMA's response: FEMA understands the commenters' concerns. To emphasize the importance and flexibility of the planning process, FEMA has taken, to the extent possible, a “performance standard” approach rather than a “prescriptive” approach to the planning requirements. In other words, hazard mitigation planning requirements are designed to generally identify what should be done in the process and documented in the plan, rather than specify exactly how it should be done. This approach recognizes and appreciates the inherent differences that exist among State, Indian tribal, and local governments with respect to size, resources, capability, and vulnerability. In addition, FEMA recognizes that flexibility is necessary in the post-disaster environment, and that individually-tailored mitigation plans can be very useful tools in the recovery process.

Benefit-cost and planning: Eight commenters wrote and asked what level of effort is required to prioritize cost-effective projects in the State level plan and in the local level action plan where “benefits are maximized according to a cost benefit review of the proposed projects and their associated costs.”

FEMA's response: Local mitigation plans do not require a formal benefit-cost calculation to be included within the plan document. However, one consideration in deciding what type of mitigation action(s) to pursue is an economic assessment of the particular action. This (and other considerations) should be debated and discussed as part of the planning team's and/or larger community's decision-making process. A possible result of these local discussions could be the decision to complete a formal benefit-cost evaluation of the various mitigation approaches that are technically appropriate for the situation. However, this is not required to be included in the plan. It is sufficient if economic considerations are summarized in the plan document as part of the comprehensive range of specific mitigation actions of projects being considered. Once funding is sought for the particular mitigation action, a detailed benefit-cost calculation would be required as described under the various grant program regulations. A similar evaluation should be done as part of the State planning process. The plan is required to document the process by which projects and activities will be prioritized and ranked, and this process must include cost effectiveness. In addition, FEMA intends to release additional guidance to help clarify the requirements.

Definition of Critical facility: Two commenters requested a definition of the term “critical facility.”

FEMA's response: The list of assets that are most important to protect, as well as the criticality of any given facility, can vary widely from community-to-community. Thus, there is no universal definition of a critical facility, nor is one associated with FEMA's planning requirements. For planning purposes, a jurisdiction should determine criticality based on the relative importance of its various assets for the delivery of vital services, the protection of special populations, and other important functions. FEMA's Mitigation Planning How-To Guide, “Understanding Your Risks: Identifying Hazards and Estimating Losses” (FEMA 386-2) provides guidance on how to identify critical facilities. Based on a hazard-by-hazard identification of facilities that may be at risk, the Guide's emphasis on determining priorities for inventory data collection will help planners identify assets that are most critical to the jurisdiction. The companion publication “Integrating Manmade Hazards into Mitigation Planning” (FEMA 386-7) details how asset inventory can be tailored to focus on high-risk facilities such as critical infrastructures and key resources. In addition, the inventory information available with FEMA's HAZUS-MH loss estimation software can assist in identifying critical facilities. HAZUS-MH databases include information on essential facilities such as hospitals, police and fire stations, emergency operations centers, shelters, and schools; transportation systems; utility lifelines; high potential loss facilities such as potable water, wastewater, oil, natural gas, electric power, and communication systems; and hazardous material facilities.

Other sources provide additional guidance on identifying facilities that may be critical. FEMA's “Public Assistance Guide” (FEMA 322) states that “[c]ritical facilities are those that serve as emergency shelters; contain occupants who are not sufficiently mobile to avoid death or injury, such as hospitals; house emergency operation or data storage that may become lost or inoperative; are generating plants and principal points of utility lines; or that produce, use, or store volatile, flammable, explosive, toxic, or water reactive materials.” The related regulation at § 206.226, Restoration of damaged facilities, refers to facilities that provide critical services, “which include power, water * * * sewer services, wastewater treatment, communications, emergency medical care, fire department services, emergency rescue, and nursing homes.” Further, the National Infrastructure Protection Plan (NIPP), issued in 2006, provides a framework for a national strategy that includes State, local, Tribal and regional identification of risks and the protection of “critical infrastructure” and “key resources.” Critical Infrastructure is defined in the NIPP as “[a]ssets, systems, and networks, whether physical or virtual, so vital to the United States that the incapacity or destruction of such assets, systems, or networks would have a debilitating impact on security, national economic security, public health or safety, or any combination of those matters,” and Key Resources is defined as “publicly or privately controlled resources essential to the minimal operations of the economy and government.” Mitigation planning is identified in the NIPP as an activity that can help achieve protection of these assets.

The hazard mitigation plan should provide enough information regarding critical facilities to enable the jurisdiction to identify and prioritize appropriate mitigation actions. However, some information may be deemed highly sensitive and should not be made available to the public. Such information that the jurisdiction considers sensitive should be treated as an addendum to the mitigation plan so that it is still a part of the plan, but access can be controlled. For more information on protecting sensitive information See, “Integrating Manmade Hazards into Mitigation Planning” (FEMA 386-7).

FEMA notes that in § 201.4(c)(2)(ii), the regulation contains the phrase “State owned critical or operated facilities,” when in fact FEMA intended to use the phrase “State owned or operated critical facilities.” This typographical error is corrected in this final rule.

Coordination of FEMA's planning requirements: Four commenters requested that FEMA coordinate its planning requirements, especially between FMA and the new regulations at part 201.

FEMA's response: It was FEMA's intent to create a single local mitigation plan requirement in publishing the planning regulations at part 201. Since part 201 has been in effect, FEMA has realized that there are few areas of difference between the FMA plans and the part 201 plans. FEMA plans to revise part 201 to clarify that part 201 contains FEMA's mitigation plan requirements for all mitigation grant programs.

Plan adoption: Three commenters asked for clarification on how the State plan is “formally adopted.” One comment specifically requested that the plan be approved by the “Governor's Authorized Representative.”

FEMA's response: An appropriate body in the State must adopt the plan. Depending on the State's established procedures, this could be the State Legislature or the Governor. States with hazard mitigation teams or councils may choose to use these bodies to adopt the plan. At a minimum, the plan must be endorsed by the director of the State agency responsible for preparing and implementing the plan, as well as the heads of other agencies with primary implementation responsibilities. The plan must include a copy of the resolution of adoption, indicating the State's formal adoption of the plan. It is recommended that the plan be formally adopted after FEMA has reviewed the plan and determined that it meets all the other requirements of part 201.

Consultation with Indian tribal governments: One commenter wrote that FEMA did not fulfill its requirement to consult with Indian tribal governments prior to issuing this rule.

FEMA's response: Before FEMA developed the interim rule, the agency met with representatives from State and local governments and the Bureau of Indian Affairs to discuss the new planning requirements of section 322 of the Stafford Act. The same opportunity for comment was offered to all parties. FEMA received valuable input from all attendees, which helped FEMA to develop the interim rule. Also, since FEMA published the interim rule, it has coordinated more directly with Indian tribal governments, and with the organizations that represent them. For example, in conjunction with the National Congress of American Indians, FEMA hosted a Tribal Mitigation Conference in October 2002 at the Ak-Chin Indian Community, Arizona. This conference provided FEMA with an opportunity to better understand its responsibilities relating to Indian tribal governments and to build a working relationship with many of the Indian tribal representatives. A follow-up conference was held at the Salish Kootenai Community, Montana in August 2003. As a direct result of these conferences, FEMA developed an EMI resident course titled “Mitigation for Tribal Officials.” This course provides a direct opportunity for coordination and information sharing between Indian tribal representatives and FEMA, resulting in refinements to FEMA's Indian tribal policy and guidance.

Indian tribal governments and mitigation planning: Three commenters wrote that the interim rule contributes to a loss of sovereignty of Indian tribal governments.

FEMA's response: FEMA sees no impact on the sovereignty of Indian tribal governments as a result of these regulations. FEMA recognizes that Native American Tribes are sovereign States. Although § 201.2 states that Indian tribal governments who chose to act as subgrantees are accountable to the State grantee, Indian tribal governments are not required to act as subgrantees. Furthermore, in § 201.3(e), Indian tribal governments may interact directly with the Federal government, or may choose to apply through a State as a subgrantee. This allows for an Indian tribal government to have the flexibility of either applying directly to FEMA for mitigation assistance, or, where the Indian tribal government has a working relationship with a State, apply through the State as a subgrantee. Some Indian tribal governments have participated on local level multi-jurisdictional plans, which have allowed them to participate in FEMA's mitigation programs while they gain expertise and management capability. It is entirely at the discretion of the Indian tribal government and the State whether funding should be sought by Indian tribal governments directly from FEMA or through the State.

Edits to § 206.434(d): One commenter requested that in § 206.434(d), FEMA make available 7 percent of any unspent HMGP funds currently available to the States regardless of declaration date, and remove the word “tribal.”

FEMA's response: Section 322 of the Stafford Act (42 U.S.C. 5165) limits 7 percent of the HMGP funds to be spent on mitigation planning, and since Indian tribal governments are eligible for mitigation funding, FEMA is unable to make them ineligible for HMGP planning grants.

Technical assistance: One commenter wrote that mitigation planning has great public value for Indian tribes; however, Indian tribes do not have the financial resources or the technical capacity to undertake such exercises, and that the rule seems to overlook the role of technical assistance.

FEMA's response: FEMA believes that technical assistance is critical to successful mitigation at all levels of government. FEMA has been working to technically assist all Federally-recognized Indian tribal governments regarding the availability of grant funding, training opportunities, as well as program requirements.

The definition of “Indian tribe:” One commenter wrote that the term “Indian tribe” should be clarified to identify if FEMA means all Indian tribes, just Federally-recognized Indian tribes, or those tribes with either Federal or State recognition.

FEMA's response: The term “Indian tribe” means all Federally recognized Indian tribes. Section 201.2 includes the definition for Indian tribal government: “* * * any Federally recognized governing body of an Indian or Alaska Native tribe, band, nation, pueblo, village, or community that the Secretary of Interior acknowledges to exist as an Indian tribe” under the Federally Recognized Indian Tribe List Act of 1994, 25 U.S.C. 479a.

Enhanced State Mitigation Plans: Six commenters asked for additional clarification regarding Enhanced State Mitigation Plan requirements.

FEMA's response: In July 2002, FEMA provided guidance titled “Multi-Hazard Mitigation Planning Guidance under the Disaster Mitigation Act of 2000” on the development of Enhanced State Mitigation Plans, FEMA revised that guidance in March 2004. These documents are available through FEMA regional offices, and the 2004 guidance, which retains the 2002 guidance but includes more explanations and examples, is available on the FEMA Web site at http://www.fema.gov/plan/mitplanning/index.shtm. These documents provide guidance on implementing each section of the enhanced plan requirements. FEMA established the criteria for enhanced plans to provide a more qualitative and less quantitative basis for evaluating the plans. In addition, FEMA's policy for reviewing enhanced plans has been to establish a panel consisting of two State representatives, staff from two FEMA Regions, and two FEMA Headquarters staff to review and evaluate the plan. This practice makes the plan review process more transparent and fair and provides States with an opportunity to see how the process works. As of August 2007, there are 9 States with approved Enhanced Mitigation Plans.

Confusion regarding § 201.5(b)(4): Commenters wrote that there is confusion regarding § 201.5(b)(4), which states: “Demonstration that the State is committed to a comprehensive state mitigation program, which might include any of the following.”

FEMA's response: The list of items in § 201.5(b)(4)(i) through (vi) are provided as examples of that commitment, and are not expected to be addressed in every plan.

State ability to satisfy NEPA requirements: One commenter wrote that States should not be required to ensure that all environmental reviews (categorical exclusions, environmental impact statements, etc.) are completed because they are incapable of performing an environmental assessment or environmental impact statement.

FEMA's response: Section 201.5(b)(2)(iii)(B) requires States to prepare and submit accurate environmental reviews and benefit-cost analyses. FEMA concurs that it is FEMA's responsibility to develop the environmental documentation, in compliance with the National Environmental Protection Act (NEPA). However, FEMA's position is that the State is responsible for and is capable of ensuring that all appropriate information necessary to prepare the NEPA documentation is provided with project applications.

Documentation of capability to manage HMGP: One commenter expressed concern regarding how the Enhanced State Mitigation Plan requirement in § 201.5(b)(2)(iii), “[d]emonstration that the State has the capability to effectively manage the HMGP as well as other mitigation grant programs, including a record of the following,” would be implemented.

FEMA's response: FEMA recognized that it would be difficult for States to provide documentation of their capability in this section, so FEMA developed a policy that allows the Region and State to work together to complete the documentation for this requirement. This policy appears in the “Multi-Hazard Mitigation Planning Guidance under DMA2000, Part 2 Enhanced State Mitigation Plans, Program Management Capability,” which can be found at: http://www.fema.gov/library. For the initial Enhanced Plan approval, a State would be evaluated on their capability to effectively manage the HMGP as well as other mitigation grant programs over the previous four quarters. For subsequent plan update approvals, the State would be evaluated based on demonstrated capability for the full 3 years the plan had been in effect.

Private Nonprofit entities: One commenter asked for more clarification regarding the planning requirements for private nonprofit entities (PNPs).

FEMA's response: Private nonprofit (PNP) organizations, especially those that may be eligible applicants for hazard mitigation projects under 44 CFR part 206, should participate in the development of the local mitigation plan. If a PNP has fully participated in the development and review of the local plan, it is not necessary for the PNP to approve/adopt the plan, as long as it is adopted by the local jurisdiction. PNP applicants for HMGP project grants do not need to have an approved multi-hazard mitigation plan in order to receive HMGP project funds. However, FEMA has developed a policy for PNP project applications; in order for the applications to be approved, the jurisdiction in which the project is located should have an approved plan, and the project must be consistent with the plan's goals and objectives. For FEMA's PDM program, PNPs are not eligible subapplicants, but an eligible local government could apply for a grant to mitigate a PNP facility.

Rural Electric Cooperatives: One commenter wrote that a discrepancy exists regarding rural electric cooperatives. The commenter wrote that public power States with electrical services provided by districts administered by elected officials cover multiple local jurisdictions. These types of cooperatives do not conform to the definition of local jurisdictions and potentially multiple districts would have to be included in every local plan to qualify for future funding. This problem must be addressed in the rule.

FEMA's response: Multi-jurisdictional utility PNPs, including Rural Electric Cooperatives (RECs), which sometimes span several counties, are eligible subapplicants for assistance under HMGP. Their infrastructure often sustains damage from severe snow and ice storms, and they frequently seek HMGP funding after disaster declarations from these storms to mitigate future similar losses. RECs are treated as PNPs for the purposes of disaster assistance provided by FEMA under the Stafford Act. They are not considered local governments. This distinction is important, because current regulations provide only for local governments, not PNPs, to meet the planning requirement by submitting a local mitigation plan (LMP) to FEMA. For PNPs such as RECs or other multi-jurisdictional utilities, FEMA is identifying two ways in which RECs may meet the mitigation planning requirements to ensure that projects funded by HMGP are consistent with the mitigation strategies of the State, Tribal, and/or local jurisdiction in which the project is located: the local jurisdiction(s) within which the REC mitigation project is located must have FEMA approved LMPs, or the FEMA approved State Mitigation Plan must address RECs. Further guidance is available on this topic on FEMA's Web site at http://www.fema.gov.

Small and impoverished communities: One commenter wrote that FEMA should identify criteria it will use to determine if a State identified community qualifies as “small and impoverished.”

FEMA's response: The term “small and impoverished communities” is defined in § 201.2. This definition combines the term in section 203 of the Stafford Act, as amended by the Disaster Mitigation Act of 2000, with criteria for “economically disadvantaged” communities as used by the U.S. Environmental Protection Agency under their National Watershed Initiative. Communities can compare their per capita income to the Bureau of Economic Analysis's per capita income for the U.S. as a whole, issued annually; local unemployment data can be compared with the national unemployment rate according to the U.S. Bureau of Labor Statistics, also issued annually. Further guidance on FEMA's criteria for determining small and impoverished communities can be found on pages 1-10 of the FY 2007 Pre-Disaster Mitigation Program Guidance, which can be found at http://www.fema.gov/library/viewRecord.do?id=2095.

State authority: Two commenters wrote that FEMA was taking away the State's authority to administer and manage mitigation programs. The commenters wrote that States should be able to approve local mitigation plans and prioritize mitigation funding decisions.

FEMA's response: FEMA believes it is important to establish a national standard for local mitigation plans and to ensure that local jurisdictions are being evaluated based on the same criteria across the Nation. States may introduce additional criteria for their localities, but FEMA may only enforce the requirements of this rule. FEMA has worked to establish a solid baseline for mitigation plans, especially at the local level, and FEMA continues to work to ensure that plans are being evaluated in a fair and consistent manner. FEMA believes that the planning process supports the State's authority to administer the grant programs. By engaging in State-established planning processes, funding decisions can be made based on State-developed mitigation strategies.

Listening session: One commenter wrote and questioned the value of listening sessions that were held to gather comments and suggestions on implementing the planning requirements.

FEMA's response: The intent of the listening sessions was to gain input at an early stage from State and local officials, as well as other Federal agencies, for FEMA to consider as it began to develop regulations to implement the planning requirements. Much of the information generated by the listening session was very useful to FEMA in developing these regulations.

Definition of local government: One commenter wrote to request the word “community” be used rather than “jurisdiction” regarding the terminology used to discuss the local entity developing the local level plan.

FEMA's response: FEMA uses the term “jurisdiction” rather than “community” since the term “jurisdiction” is broader than the term “community.” A jurisdiction could be a county, city, township, parish, or other local entity. Furthermore, within FEMA, the term “community” is closely linked to the local entity that implements the National Flood Insurance Program.

Local plan eligibility: One commenter wrote that local governments should be able to receive assistance if the local jurisdiction has an approved plan, even if the State does not have an approved plan.

FEMA's response: The State is responsible for administering FEMA's programs. The requirement for a State plan as a condition for local governments to receive non-emergency disaster assistance was originally established through section 409 of the Stafford Act (42 U.S.C. 5176). However, section 409 was repealed by the Disaster Mitigation Act of 2000. In addition, every State has met the planning deadline thus far, and FEMA is confident that States will continue to meet the planning deadlines, thus ensuring that local plans can be approved.

Availability of post-disaster assistance: Two commenters wrote to ask how post-disaster assistance would be affected by the lack of an approved State Mitigation Plan by the established deadline.

FEMA's response: The post-disaster assistance that would be withheld by the lack of an approved State Mitigation Plan includes Public Assistance, categories C-G, HMGP, and Fire Management Assistance. As stated above, however, every State has thus far met the planning deadlines, so no post-disaster assistance has been withheld due to a State's lack of an established State plan.

State planning: One commenter asked what the purpose of the State mitigation planning process is, how the term “effectiveness” will be measured, how the “factual basis” for proposed activities will be established, how State laws should be evaluated, and stated that the requirement that the plan contain an overview of “all natural hazards” that can affect the State is too comprehensive.

FEMA's response: FEMA's approach to the planning process is to establish a mechanism for State and local governments to make informed decisions regarding their risk reduction activities rather than creating a prescriptive list of requirements. Section 201.4(a) describes the purpose of the State Mitigation Plan: “[t]he mitigation plan is the demonstration of the State's commitment to reduce risks from natural hazards and serves as a guide for State decision makers as they commit resources to reducing the effects of natural hazards.” FEMA looks to the State to establish baselines by which the State will measure the effectiveness of the programs and activities that it has identified that reduce its risks. FEMA is evaluating the effectiveness of plans based on how well the States document the planning process. The requirement regarding the “factual basis” for activities means that the State should be developing its mitigation strategy based on the facts (risks and vulnerabilities) established in its risk assessment. State laws would be evaluated based on the criteria established by the State to do so. Regarding the requirement that the plan contain overviews of all natural hazards, FEMA requires the State to identify all natural hazards that can affect the State, but only to evaluate those that pose the greatest risk (as determined by the State). This distinction ensures that natural hazards are not overlooked and can assist in future evaluations of the State's risk, by summarizing the process used to conduct the risk assessment.

Generic plans: One commenter wrote that the required elements of a mitigation plan, such as listing facilities located in hazard areas or estimating the potential dollar losses to vulnerable structures, may produce generic plans or lists that are simply trying to comply with specifications rather than truly reducing risk.

FEMA's response: The type of information indicated above is essential to developing a thorough risk assessment. It is not FEMA's intent to require plans that merely list information, but, rather, have States, Indian tribes, and local jurisdictions carefully analyze information to better establish their risks and vulnerabilities. FEMA will continue to provide guidance regarding the level of detail necessary in the planning process, and to ensure that the process remains relevant to those who develop plans.

Public Assistance: Two commenters wrote that there should be a link between the mitigation plan and mitigation activities that might be funded through FEMA's Public Assistance program.

FEMA's response: FEMA concurs with these comments, and continues to coordinate within the agency to ensure that our programs and requirements are implemented as consistently as possible.

Link between State and local plans: Four comments requested clarification of the requirement that State Mitigation Plans be linked to local mitigation plans.

FEMA's response: Section 201.4(c)(4) requires that State Mitigation Plans describe the processes for incorporating local planning efforts into the statewide plan and prioritizing assistance to local jurisdictions. The intent of this section is to ensure that the State mitigation strategies and priorities can be evaluated and incorporated into the local mitigation plans, as appropriate. In addition, risk assessment and other data used in the development of the State plan can be used by local jurisdictions developing their plans, and more site specific data developed in the local mitigation plans may be useful to the State as it progresses in the development of any updated State Mitigation Plans. When the State plans were originally prepared under this regulation, there were few local plans that met FEMA's planning requirement under part 201. Therefore, States had limited local information on which to base their plans. Since then, many local plans have been approved and adopted, providing States with the opportunity to better coordinate with local jurisdictions.

Types of resources for Local Mitigation Planning: Two commenters requested additional information regarding the types of resources that are to be used to obtain information and data for the risk assessment and mitigation strategy in local mitigation plans.

FEMA's response: The information used to develop the local mitigation plans will be driven by local needs, State priorities, and the availability of information and data. Our guidance has been for jurisdictions to do a reasonable search for risk assessment information, to use the “best available data” for the analysis, and to indicate how any lack of information or data will be addressed (if at all) in future plan updates. The mitigation strategy should be vetted through the process established by the local mitigation planning team, which should include a public involvement process.

Use of HMGP Planning Funds: One commenter asked whether the 7 percent HMGP planning funding can be used for plan amendments at the local level.

FEMA's response: HMGP planning funds can be used to update or amend mitigation plans.

Privacy concerns: One comment stated that while State and local mitigation plans should identify factors that will be considered when developing specific projects, the plan should not be required to identify specific projects or properties, because doing so could affect privacy concerns and the perceived impact on land values.

FEMA's response: FEMA agrees that specific property addresses should not be included in the plan; however, it may be appropriate to identify project areas for certain risk mitigation activities. For example, as part of a mitigation strategy, a list of properties or areas being considered for acquisition should be prepared, but the specifics regarding property addresses should remain within project applications and not in the plan document itself.

Definition of mitigation: Two commenters wrote that the term “sustained” must be clarified to avoid confusion as to what specifically is appropriately termed hazard mitigation and what will be allowed for funding under FEMA programs. The commenters also noted that the term is at odds with the definition found in § 206.2(14).

FEMA's response: As the commenters note, § 206.2(14)'s definition of “Hazard Mitigation” is any cost-effective measure which will reduce the potential for damage to a facility from a disaster event, while § 201.2's definition of “Hazard Mitigation” is any sustained action taken to reduce or eliminate the long-term risk to human life and property from hazards. The difference between the part 201 and part 206 definitions of hazard mitigation is that “sustained” is related to mitigation planning under part 201, and “cost-effective measures” is related to grant activities under part 206. The definition for hazard mitigation found in part 201 is meant to allow State, tribal, and local officials latitude to evaluate a wide range of options that might reduce risk; the term “sustained” was added to the definition in part 201 to make clear that mitigation activities should be a continuous undertaking, and is consistent with the long-term explanation of hazard mitigation projects in part 206.

Definition of local government: One commenter wrote that the definition of local government was too broad, covering subdivisions of political jurisdictions, and that it is important to look at the community as a whole.

FEMA's response: FEMA understands the commenter's concern. However, section 102 of the Stafford Act (42 U.S.C. 5122) contains a definition for “local government,” and this is the definition that FEMA closely follows. FEMA agrees that it is important to look at the whole community. FEMA developed guidance titled “Multi-Jurisdictional Mitigation Planning,” (FEMA 386-8), which assists jurisdictions in developing plans that can look at the whole community. A plan developed for a larger community can be adopted by sub-jurisdictions (as long as those sub-jurisdictions participated in the process), which ensures a sub-jurisdiction's eligibility for mitigation grant projects.

Assistance affected by lack of plan: One commenter wrote that §§ 201.4(a) and 201.6(a)(1) are inconsistent with each other, as the former eliminates eligibility for all assistance other than emergency measures for all local governments in a State, if the State fails to secure approval of a plan, while the latter only eliminates eligibility for funding if local entities fail to complete a plan. Since the State is dependent upon local mitigation planning efforts for data, the two sections should be consistent.

FEMA's response: The State Mitigation Plan is required in order for non-emergency disaster assistance, as well as mitigation grants, to be made available throughout the State. The local mitigation plan is required in order to receive mitigation project grants. Other non-emergency assistance is not affected by the lack of a local mitigation plan. FEMA recognizes that the initial State planning efforts will be limited by the lack of local mitigation plans, but updated State plans will be able to incorporate local level data as it becomes available.

“Ongoing State planning efforts:” One commenter asked what is meant by “ongoing state planning efforts” in § 201.4(b).

FEMA's response: Section 201.4(b) states that an effective planning process is essential in developing and maintaining a good standard State Mitigation Plan. “Ongoing state planning efforts” means that the process should include continued coordination to the extent possible with other State agencies, appropriate Federal agencies, and additional interested groups. It is up to the State to determine what other planning processes might be affected by the mitigation planning process.

Vulnerability Assessments: One comment stated § 201.4(c)(2)(ii) would require the States to conduct vulnerability assessments based on local assessments of hazards and risk, but that it is not clear if the States would have to abandon their existing Hazard and Vulnerability Analysis methodology. Also, these risk analyses would have to be based on local participation, which cannot be mandated in many States.

FEMA's response: FEMA does not intend for any State to abandon their existing Hazard and Vulnerability Analysis methodologies. The State Mitigation Plans should document the process used to gather and analyze the data, and explain the methodology in determining vulnerability assessments. This documentation of previous hazard events and potential future hazard events will ensure that current and future users of the mitigation plan will be able to understand the basis for the decisions made in the plan. FEMA agrees that local participation in the planning process cannot be mandated, but where there are local plans, the available data and information should be used.

State risk assessment: One commenter questioned the level of detail required in the State risk assessment. The commenter stated that requiring the State Hazard Mitigation Plan to contain the potential losses to each structure, facility, or infrastructure identified as a risk by local governments for being located in an identified hazard area is redundant of the local mandates.

FEMA's response: Section 201.4 requires the State plan to provide an overview and analysis of potential losses to identified vulnerable structures based on estimates provided in local risk assessments. The intent is to look more broadly on risk and vulnerability than can be done at a local level. The local mitigation plans provide the necessary detail, but the State Mitigation Plan is where the data can be evaluated and summarized to determine overall vulnerabilities and to identify areas that may need additional assistance.

State mitigation strategy: One commenter questioned the level of detail required in the mitigation strategy section of the State Mitigation Plan. The commenter wrote that States may not be able to properly represent local actions and projects with respect to the elements in § 201.4(c)(3)(iii) because it would be quite costly to fully incorporate data for every local plan.

FEMA's response: Section 201.4 (c)(3)(iii) is based on the risk assessment portion of the plan and includes actions that have been identified through the planning process. These actions may be statewide in nature (such as adopting statewide building codes or establishing a multi-agency grant evaluation panel). It is not intended that every activity or action identified in local mitigation plans would be specifically addressed in the State plan. The State plan, through the description of the planning process, the establishment of the mitigation strategy, and the plan maintenance process, will dictate how future plan updates will be evaluated. FEMA will look at what was completed, deleted, or deferred from the plan and the justification for the process.

Intense development pressure: One comment asked for clarification of the term “intense development pressure.”

FEMA's response: FEMA believes that States can reasonably interpret and apply the term “intense development pressure.”

Prioritizing HMGP funds: One commenter requested that FEMA should consider allowing each State to prioritize the use of HMGP funds generated by a disaster based on whether the community has a multi-hazard plan.

FEMA's response: FEMA agrees with this comment. Program regulations, policy, and guidance allow States to prioritize the use of HMGP funds.

Mandatory planning: One commenter wrote that mitigation planning is a mandatory requirement, yet there is no guaranteed funding.

FEMA's response: The mitigation planning requirement is not an independently enforced, mandatory requirement. Rather, mitigation planning is a condition of eligibility for receiving certain assistance under the Stafford Act. State mitigation planning can result in reduced disaster losses. While there is no guaranteed funding for mitigation planning, FEMA has provided over $157 million in mitigation planning grants to States, Indian tribal governments, and local jurisdictions from February 2002 through March 2007. Projects are funded based on a thorough understanding of the local risks and vulnerabilities and the mitigation strategy outlined in the local mitigation plan.

Executive Order 12898: One comment stated that the rule substantially affects human health or the environment under Executive Order 12898 by creating a planning requirement that will be difficult for large urban cities and rural poor areas to meet, thereby denying those jurisdictions the opportunity to apply for HMGP project grants.

FEMA's response: FEMA does not agree that the rule has a disproportionate, adverse impact on minority or low income populations or on large urban cities. After the first interim rule, FEMA recognized that insufficient time was originally allowed to prepare the plans, and issued another IR on October 1, 2002 that extended the planning requirement for local plans under the HMGP from November 1, 2003 to November 1, 2004. Currently, over 14,000 jurisdictions now have approved local level mitigation plans, covering over 50 percent of the United States population. Large urban cities generally have their own planning and emergency management departments with staff who can carry out the work related to preparing the plan and/or direct the efforts of contractors. FEMA also recognized the potential administrative burden on jurisdictions that did not budget for the costs associated with the development of mitigation planning, and FEMA has provided funding opportunities for jurisdictions (through planning grants) to allow projects to proceed in minority or low income populations. This eases the potential burden on these jurisdictions while maintaining the statutory intent. Through these programs, FEMA has approved over 1,400 planning grants between February 2002 and March 2007 with obligated Federal grants of over $157,000,000.

In addition, § 201.6(a)(3) allows for an exception, in extraordinary circumstances, for a jurisdiction to receive an HMGP project grant without an approved plan. In this circumstance, the jurisdiction must agree to develop a plan within 12 months of receiving the project grant. This exception allows small or impoverished communities or jurisdictions with limited resources the opportunity to apply for project funds, while meeting the planning requirement. This exception is available after a disaster, which also allows FEMA to provide resources to jurisdictions that need to complete their mitigation plan. These resources can include training and workshops, new data leading to the risk assessment, assistance in holding and facilitating community meetings, as well as the grant funding for plan development. This allows such potentially disadvantaged communities to receive HMGP project grants concurrent with the development of their mitigation plan, and FEMA will work with those jurisdictions to assist them in meeting the planning requirement. Therefore, FEMA has implemented the planning requirement in a manner that addresses any potential disproportionate adverse effect on minority or low income populations by providing technical assistance and funding opportunities to meet the requirement, as well as exceptions allowing project grants to proceed even where the regular planning requirement is not yet met.

45-day FEMA review: One comment wrote to express concern with the regulatory language that FEMA will review mitigation plans within 45 days, “whenever possible,” yet State, tribal, and local governments are required to meet firm deadlines.

FEMA's response: While FEMA makes every effort to review all plans in a timely manner, it must have the flexibility to have an extended review period beyond 45 days, if necessary. FEMA cannot control for disaster activity, field deployments, or large numbers of plans being submitted within a short timeframe, but is not aware of any programs or project grants being denied due to the lack of a plan being approved. The FEMA Regional offices have established draft plan review procedures that expedite the review and approval of final plans.

Multi-jurisdictional plans: One comment requested additional information regarding criteria for multi-jurisdictional planning.

FEMA's response: FEMA has developed a guidance document titled “Multi-Jurisdictional Mitigation Planning” (FEMA 386-8). This document contains all of the guidance developed to date regarding multi-jurisdictional planning, and provides direction to those considering this type of planning process. This document can be obtained through any FEMA Regional office or on the FEMA Web site at http://www.fema.gov/plan/mitplanning/index/shtm .

Disaster funding restrictions and planning: One commenter wrote that the Disaster Mitigation Act of 2000 did not intend to restrict disaster assistance to individuals due to the lack of a mitigation plan, and that failure to complete a plan should result in the denial of the increased mitigation dollars, not the entire mitigation grant program.

FEMA's response: FEMA agrees that assistance to individuals and other emergency disaster assistance should not be impacted by the lack of a State Mitigation Plan, and have provided for this exception in the regulation in § 201.3(c)(1). However, regarding non-emergency disaster assistance, State Mitigation Plans are critical to the disaster recovery process. The State establishes the framework for the recovery regarding how to address specific issues arising from the disaster, how to address building codes in the recovery effort, and to set priorities for mitigation activities. The requirement for this plan is based on over 30 years of experience that State mitigation planning can result in reduced disaster losses. Since State-level mitigation plans have been required for over 30 years, and section 322 of the Stafford Act is intended to increase mitigation activities, FEMA allows for Enhanced Plans, which make States eligible for the increased share of HMGP funding.

Vulnerability information in State Plans: One commenter wrote that every structure, infrastructure, and critical facility is vulnerable to the risk of disasters and the estimated total loss is potentially the total assessed value of all properties in a jurisdiction, excluding land; therefore, the requirement to analyze these losses as indicated in § 201.4(c)(2)(iii) is a meaningless and burdensome task.

FEMA's response: Section 201.4 requires the State to provide an overview and analysis of potential losses in order to develop a strategy for reducing its risk and vulnerability. If an entire State is subject to losses from disasters, it would be important to assess that risk and determine the best approach to reducing vulnerabilities. FEMA has designed the planning criteria so that each State can develop its own approach to determining how to mitigate its risks.

Publish as a proposed regulation: One comment stated that the regulation should be published as a proposed regulation to allow adequate consideration of the comments from State and local governments.

FEMA's response: As FEMA noted in the interim rule, these regulations needed to be effective in order for State and local governments to be eligible for and to receive mitigation funds as soon as possible. The public benefit of an interim rule is to assist States and communities assess their risks and identify activities to strengthen the larger community in order to be less susceptible to disasters. For these reasons, delaying the effective date of this rule would not have furthered the public interest. Furthermore, prior to this rulemaking, FEMA hosted a meeting where interested parties provided comments and suggestions on how FEMA could implement planning requirements. FEMA has also considered comments provided by States and local governments during the rulemaking process in implementing the planning requirements. The agency will continue to assess the utility and practicality of the requirements based on the experiences of States, tribes, and local governments.

Mitigation under the Public Assistance Program: One comment requested that FEMA change § 206.226(c) so that the hazard mitigation measures identified in a FEMA approved local hazard mitigation plan and associated with facilities and sites which subsequently suffer disaster related damage in a declared disaster are automatically incorporated into the entity's public assistance hazard mitigation proposal on the Project Worksheet as an eligible item.

FEMA's response: Activities funded under § 206.226 must meet the basic eligibility requirements of the Public Assistance program. While mitigation measures identified in the approved mitigation plan may be worthwhile actions, they may not meet the requirements of the Public Assistance program, and would not be eligible.

New language for the regulation: A number of comments proposed specific language revisions. One commenter wrote that the following language should be added to the FEMA responsibilities set out in § 201.3(b)(2), “* * * and assist the [S]tate in the identification of the appropriate mitigation actions that a [S]tate or locality must take in order to have a measurable impact on reducing or avoiding the adverse effects of a specific hazard or hazardous situation” because requiring the State to coordinate all State and local activities exceeds the State's capability and authority with regard to local control. Another commenter wrote that § 201.3(c) be revised to read “[t]he key responsibilities of the State are to coordinate all State and regional activities relating to hazard evaluation and mitigation, and to the extent possible, local activities relating to hazard evaluation and mitigation.” One commenter wrote that § 201.3(c)(4) should be removed as it is redundant to Subpart N, and that § 201.4(c)(4)(iii) should be stricken as it conflicts with § 201.4(c)(3)(iii). One comment suggested that FEMA should add the following to § 206.401: “* * * except where the local or [S]tate entity has adopted, in the post disaster period, new codes, standards, and ordinances that decrease risk to facilities from natural and manmade hazards.” One comment asked that the language in § 206.432(b)(1) and (2) replace “not to exceed” with “equal to.”

FEMA's response: Regarding the request to add “* * * and assist the [S]tate in the identification of the appropriate mitigation actions that a [S]tate or locality must take in order to have a measurable impact on reducing or avoiding the adverse effects of a specific hazard or hazardous situation” to FEMA's responsibilities; FEMA believes that the existing description requiring FEMA to provide technical assistance covers this type of activity, if necessary, but does not require the provision of the assistance in every situation, where it might not be required. In addition, FEMA believes that State and local jurisdictions often have a better understanding than FEMA of what is an appropriate mitigation action given the local conditions.

Regarding the request to revise § 201.3(c) to read “[t]he key responsibilities of the State are to coordinate all State and regional activities relating to hazard evaluation and mitigation, and to the extent possible, local activities relating to hazard evaluation and mitigation;” FEMA understands that some States lack the authority to mandate local actions, but FEMA believes that this section can be (and is) interpreted broadly enough to accommodate this situation. The proposed language change emphasizes regional over local activities, and FEMA believes that if the State coordinates regional activities, it has met the requirements of this section, given the broad interpretation of local activities.

Regarding the comment that § 201.3(c)(4) should be removed as it is redundant to Subpart N; FEMA believes that it is important to identify a potential source of funding for planning within the planning regulation, even if it addressed in Subpart N.

Regarding the comment that § 201.4(c)(4)(iii) should be stricken as it conflicts with § 201.4(c)(3)(iii); FEMA believes that while the two sections are similar, they are not identical and both need to be retained. Under the Mitigation Strategy (§ 201.4(c)(3)(iii)), the intent is to identify a range of mitigation actions and activities that are prioritized based on a variety of criteria and under the Coordination of Local Mitigation Planning (§ 201.4(c)(4)(iii)), the requirement is to prioritize communities who might most benefit from either planning or project grants ( i.e. communities with high risk or multiple repetitive loss properties).

Regarding the comment that FEMA add the following to § 206.401: “* * * except where the local or [S]tate entity has adopted, in the post disaster period, new codes, standards, and ordinances that decrease risk to facilities from natural and manmade hazards;” FEMA disagrees with this change since it would conflict with regulations guiding the restoration of damaged facilities under § 206.226(d), and would substitute a very broad qualitative criterion of codes in general, as opposed to the five very specific criteria in the current regulation, which specifically requires that codes must be written, adopted, universally applied, and have demonstrated evidence of prior enforcement.

Regarding the comment that that the language in § 206.432(b)(1) and (2) replace “not to exceed” with “equal to;” it would not be appropriate to lock in the HMGP funding level by replacing “not to exceed” with “equal to” since Congress has already demonstrated a willingness to modify the HMGP funding formula.

In the future, FEMA intends to engage in additional discussions with interested groups on how to improve the planning process, which may include changes to the regulatory language.

Hazard Mitigation Surveys: One comment requested that FEMA restore the Hazard Mitigation Early Implementation Strategy, the Hazard Mitigation Surveys, and the Interagency Hazard Mitigation Survey requirements.

FEMA's response: FEMA will consider restoring these post-disaster surveys as part of the ongoing implementation of the Hazard Mitigation Grant Program.

Support for the extension of the date: One comment encouraged the interim rule to become final, and supported the extension of the date by which State and local governments must develop mitigation plans as a condition of grant assistance to November 1, 2004.

FEMA's response: FEMA agrees and had already extended the date by which State and local governments must develop mitigation plans.

Plan updates: One commenter asked about the process to bring existing mitigation plans into compliance with the regulations at part 201, and how plans are to be updated when they expire.

FEMA's response: Plans approved prior to the implementation of part 201 must be reevaluated and re-approved by FEMA to ensure that they meet the planning requirements identified in part 201. FEMA has also provided guidance through FEMA's “Multi-Hazard Mitigation Planning Guidance under DMA2000” on how plans developed under the FMA program can be upgraded to meet the regulations at part 201. This document may be obtained through any Regional office or from the FEMA Web site at http://www.fema.gov/plan/mitplanning/index.shtm . In addition, FEMA is in the process of issuing specific guidance on how to update the State, tribal, and local plans when they expire.

Disaster costs and mitigation planning: One commenter asked that FEMA provide each State and community with a detailed analysis of prior disaster assistance outlays by all Federal agencies, an integrated review of all structural projects in the community both as built and proposed, and a legal review regarding the authority of the planning process.

FEMA's response: FEMA will work with State, tribal and local jurisdictions to ensure that they have information generated by FEMA regarding disaster outlays, and has developed guidance through its “Multi-Hazard Mitigation Planning Guidance under DMA2000” on how to obtain additional data. This document may be obtained through any Regional office or from the FEMA Web site at http://www.fema.gov/plan/mitplanning/index.shtm . Most State, tribal, and local jurisdictions have the authority to develop and implement plans. FEMA encourages the mitigation planning process to be integrated across jurisdictions to ensure that existing data and information is shared and that there is no duplication of effort in gathering and analyzing data.

FEMA has prepared and reviewed this rule under the provisions of Executive Order 12866, Regulatory Planning and Review. Under Executive Order 12866, a significant regulatory action is subject to the Office of Management and Budget (OMB) review and the requirements of the Executive Order. OMB has determined that this rule is not a significant regulatory action. OMB has not reviewed this rule. The Executive Order defines “significant regulatory action” as one that is likely to result in a rule that may:

(1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities;

(2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;

(3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or

(4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order.

The purpose of this rule is to implement section 322 of the Stafford Act, which addresses mitigation planning at the State, local and tribal levels, identifies new local planning requirements, allows HMGP funds to be used for planning activities, and increases the amount of HMGP funds available to States that develop a comprehensive, Enhanced Mitigation Plan. The rule clarifies the requirements for State Mitigation Plans, identifies local mitigation planning requirements before approval of project grants, and requires our approval of an Enhanced State Mitigation Plan as a condition for increased mitigation funding. The rule also implements section 323 of the Stafford Act, which requires that repairs or construction funded by disaster loans or grants must comply with applicable standards and safe land use and construction practices.

FEMA calculates the annual economic impact of the interim rules that this final rule finalizes to be approximately $46,000,000. As this final rule makes no significant change to these interim rules, FEMA is adopting the economic impact estimate of these interim rules as the economic impact of this final rule. The following paragraphs provide a more detailed explanation of the economic impact of this rulemaking.

This rule modifies the State Mitigation planning requirement. Currently, all 50 States, the District of Columbia, 7 territories, and 33 Indian tribal governments have approved State level mitigation plans. FEMA estimates that it takes an average of 2,080 hours for States to prepare State Mitigation Plans to comply with this regulation. Using wage rates from the May 2004, U.S. Department of Labor, Bureau of Labor Statistics (BLS), Standard Occupation Classification (SOC) System, the median hourly wage for urban and regional planners (SOC Code Number 19-3051) is $26.31 per hour. Adding 30 percent to the BLS figure to account for benefits, FEMA has calculated the burden using a wage rate of $34.20 per hour. Since there are a total of 91 State level plans, it is estimated that the one time cost of compliance to submit the State Mitigation plans is $6,473,376. This figure is calculated as follows: ((91 × 2,080) × $34.20).

These State Mitigation Plans must be updated every 3 years. Since there are a total of 91 State level plans, the cost estimate will assume that, on average, there will be 31 updated plans each year. All States now have existing State Mitigation Plans, and the only continuing requirement is for plan updates. FEMA estimates that it would take an average of 320 hours for States to prepare plan updates. Using wage rates from the May 2004, U.S. Department of Labor, BLS, SOC System, the median hourly wage for urban and regional planners (SOC Code Number 19-3051) is $26.31 per hour. Adding 30 percent to the BLS figure to account for benefits, FEMA has calculated the burden using a wage rate of $34.20 per hour. Therefore, it is estimated that the annual cost of compliance to submit the updates to State Mitigation Plans is $339,264. This figure is calculated as follows: ((31 × 320) × $34.20).

This rule also allows States to submit an Enhanced State Mitigation Plan, should they wish to increase the amount of HMGP funds they receive from 15 percent to 20 percent. States may now opt to create an Enhanced Mitigation Plan to receive additional funding. As of March 2007, there were 11 States with Enhanced Mitigation Plans. Two were approved in 2004, four in 2005, three in 2006, and two in 2007. These plans must be renewed every 3 years. As of July 2, 2007, there were only nine approved plans as two States opted not to renew their Enhanced Mitigation Plan.

Once a State has a FEMA-approved Enhanced Mitigation Plan, its only remaining requirement is to review and update it once every 3 years. Using the data from the 5 years since the first interim rule was published the average number of plans submitted in a year is three. The cost estimates will assume three new and three renewal plans submitted to calculate the annual burden.

Again, all States already have existing State Mitigation Plans. FEMA estimates that it would take an average of 320 hours for States to update their Enhanced Mitigation Plan, and an additional 160 hours for States to upgrade an existing Standard State Mitigation Plan to an Enhanced Plan. Since FEMA is encouraging States to update their plans when preparing an Enhanced Plan, the total hours for developing “new Enhanced Mitigation plans” is 480 hours (160 hours to upgrade from Standard to Enhanced plus 320 hours to update the plan). Using wage rates from the May 2004, U.S. Department of Labor, BLS, SOC System, the median hourly wage for urban and regional planners (SOC Code Number 19-3051) is $26.31 per hour. Adding 30 percent to the BLS figure to account for benefits, FEMA has calculated the burden using a wage rate of $34.20 per hour. Therefore, it is estimated that the annual cost of compliance to voluntarily submit an Enhanced Mitigation Plan is $82,080. This figure is calculated as follows: ((3 × 480) × $34.20) + ((3 × 320) × $34.20).

After its Enhanced Mitigation Plan is approved, pursuant to § 206.432(b), a State is then able to receive an amount equal to 20 percent of the total estimated Federal assistance (excluding administrative costs) provided for a major disaster declaration, instead of 15 percent. The table below reflects all States with Enhanced Plans, each disaster that has been declared in that State since its Enhanced plan was approved, and reflects the amount of HMGP funds it was eligible for. Each State was given funds at the 20 percent rate, however, the 15 percent rate is provided to determine the economic benefit (transfer) received from having the approved Enhanced Plan. In some cases, these are not final lock-in figures, but it is the most accurate data that FEMA has as of August 2007.

These disasters range in date from March 16, 2006 to Feb. 23, 2007, which is roughly one year. A total of $63,767,588 in HMGP funds were granted at the 20 percent rate due to the fact that these States had approved Enhanced Mitigation Plans. This 5 percent increase translates to an additional $15,941,897 in funds distributed as a result of this regulation.

This rule also requires that after November 1, 2004, a local mitigation plan must be approved in order to receive HMGP project grants. As of June 2007, over 2,500 local mitigation plans covering over 13,000 jurisdictions have been approved. FEMA receives and approves approximately 280 local plans per year. The requirement of a local plan does not affect the amount of HMGP funds that were available to the jurisdiction before this regulation. The economic impact results from the cost to create the plan. If a local jurisdiction is covered by a plan, it will receive the same amount of HMGP project funds it would have received before this requirement was created.

From experience over the past 5 years, FEMA expects approximately 280 new local plans to be developed annually. Once a local jurisdiction has a FEMA-approved Mitigation plan, they are required to review and update it once every 5 years. FEMA averages 280 plan updates per year. FEMA estimates that it would take an average of 2,080 hours to develop new plans, and 320 hours for plan updates, plus 8 hours for the State to review the local plan. Using wage rates from the May 2004, U.S. Department of Labor, BLS, SOC System, the median hourly wage for urban and regional planners (SOC Code Number 19-3051) is $26.31 per hour. Adding 30 percent to the BLS figure to account for benefits, FEMA has calculated the burden using a wage rate of $34.20 per hour. Therefore, it is estimated that the annual cost of compliance is (((280 × 2,080) + (280 × (320 + 8)) × 34.20) = $23,059,008.

Under § 206.434(d), up to 7 percent of the State's HMGP grant may be used to develop State, tribal and/or local mitigation plans. This change does not have any effect on the actual amount of HMGP funds that a State is eligible for, but allows the cost to develop plans described above to be offset by HMGP planning grants. This regulation simply expands the eligible use of HMGP funds to include the development of mitigation plans. States are not required to use the funds for this purpose. Any HMPG funding spent on mitigation planning is accounted for in the analysis above, under each category of planning (Standard State Mitigation Plans, Enhanced State Mitigation Plans, and local mitigation plans). For the reasons stated above, the annual impact of this rule on the economy is approximately $46,000,000. This figure is calculated as follows: ($6,473,376+$339,264+ $82,080+$15,941,897+$23,059,008).

Under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) (RFA), as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121, 110 Stat. 857), FEMA is not required to prepare a final regulatory flexibility analysis for this final rule because the agency has not issued a notice of proposed rulemaking prior to this action.

The National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq. ) (NEPA) implementing regulations governing FEMA activities at § 10.8(d)(2)(ii) categorically exclude the preparation, revision and adoption of regulations from the preparation of an environmental assessment or environmental impact statement, where the rule relates to actions that qualify for categorical exclusions. Mitigation plans to be developed under regulations revised or adopted by this rulemaking include hazard mitigation measures categorically excluded under § 10.8(d)(2)(iii).

Under Executive Order 12898, “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations” (59 FR 7629, published February 16, 1994), FEMA incorporates environmental justice into its policies and programs. The Executive Order requires each Federal agency to conduct its programs, policies, and activities that substantially affect human health or the environment in a manner that ensures that those programs, policies, and activities do not have the effect of excluding persons from participation in programs, denying persons the benefits of programs, or subjecting persons to discrimination because of race, color, or national origin.

FEMA believes that no action under the rule will have a disproportionately high or adverse effect on human health or the environment. This rulemaking implements sections 322 and 323 of the Stafford Act. Section 322 focuses specifically on mitigation planning to identify the natural hazards, risks, and vulnerabilities of areas in States, localities, and tribal areas; development of local mitigation plans; technical assistance to local and tribal governments for mitigation planning; and identifying and prioritizing mitigation actions that the State will support as resources become available. Section 323 requires compliance with applicable codes and standards in repair and construction, and use of safe land use and construction standards. This rulemaking is intended to result in the creation of hazard mitigation plans that will assist communities in planning for hazards, so as to protect human lives and the environment. The Hazard Mitigation Grant Program is available to all States, tribes and local communities regardless of race, color, or national origin. Accordingly, the requirements of Executive Order 12898 do not apply to this rule.

FEMA has sent this final rule to the Congress and to the Government Accountability Office under the Congressional Review of Agency Rulemaking Act, (“Congressional Review Act”), Public Law 104-121. This rule is not a “major rule” within the meaning of the Congressional Review Act. The rule will not result in a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions. It will not have “significant adverse effects” on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), enacted as Public Law 104-4 on March 22, 1995, requires each Federal agency, to the extent permitted by law, to prepare a written assessment of the effects of any Federal mandate in a proposed or final agency rule that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any one year.

This final rule is not an unfunded Federal mandate within the meaning of the UMRA. This final rule would not impose a significant cost or uniquely affect small governments. The final does not have an effect on the private sector of $100 million or more in any 1 year. Any enforceable duties that FEMA imposes are a condition of Federal assistance or a duty arising from participation in a voluntary Federal program.

Executive Order 13132, entitled “Federalism,” (64 FR 43255, published August 10, 1999), sets forth principles and criteria that agencies must adhere to in formulating and implementing policies that have federalism implications; that is, regulations that have substantial direct effects on the States, or on the distribution of power and responsibilities among the various levels of government. Federal agencies must closely examine the statutory authority supporting any action that would limit the policymaking discretion of the States, and to the extent practicable, must consult with State and local officials before implementing any such action.

FEMA has determined that this rule involves no policies that have federalism implications under Executive Order 13132. However, FEMA consulted with State, local and tribal officials in the promulgation of this rulemaking. Furthermore, in order to assist in the development of this rule, FEMA hosted a meeting to allow interested parties an opportunity to provide their perspectives on the legislation and options for implementation of the Stafford Act requirements. Stakeholders who attended the meeting included representatives from the National Emergency Management Association, the Association of State Floodplain Managers, the National Governors' Association, the International Association of Emergency Managers, the National Association of Development Organizations, the American Public Works Association, the National League of Cities, the National Association of Counties, the National Conference of State Legislatures, the International City/County Management Association, and the Bureau of Indian Affairs. FEMA received valuable input from all parties at the meeting which was taken into account in the development of the initial interim rule. In addition, FEMA received comments on the interim rules from 14 State emergency management agencies, 3 organizations, 2 local governments; and 1 independent group.

As required by the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ), an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number. OMB has approved a collection of information entitled “State/Local/Tribal Hazard Mitigation Plans—Section 322 of the Disaster Mitigation Act of 2000” (OMB No. 1660-0062) for the use of information gathered pursuant to this rulemaking. The OMB collection number for this collection is 1660-0062. An emergency extension was filed with OMB on June 18, 2007, and approved on June 25, 2007. The collection is currently set to expire on October 31, 2007. Before the collection expires, FEMA will submit a request for revision to this collection and begin the OMB clearance process for long-term approval by publishing a 60 day request for comments on the revision.

FEMA has reviewed this rule under Executive Order 13175, “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, published November 9, 2000). FEMA finds that, while it does have “tribal implications” as defined in Executive Order 13175, 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.

Despite this determination, FEMA has, and continues to, consult with Indian tribal governments with respect to hazard mitigation. Before FEMA developed the interim rule, the agency met with representatives from State and local governments and the Bureau of Indian Affairs to discuss the new planning requirements of section 322 of the Stafford Act. The same opportunity for comment was offered to all parties. FEMA received valuable input from all attendees, which helped FEMA to develop the interim rule. Also, since FEMA published the interim rule, it has coordinated more directly with Indian tribal governments, and with organizations that represent them. For example, in conjunction with the National Congress of American Indians, FEMA hosted a Tribal Mitigation Conference in October 2002 at the Ak-Chin Indian Community, Arizona. This conference provided FEMA with an opportunity to better understand its responsibilities related to Indian tribal governments and to build a working relationship with many of the Indian tribal representatives. A follow-up conference was held at the Salish Kootenai Community, Montana in August 2003. As a direct result of these conferences, FEMA developed an EMI resident course titled “Mitigation for Tribal Officials.” This course provides a direct opportunity for coordination and information sharing between Indian tribal representatives and FEMA, resulting in refinements to FEMA's Indian tribal policy and guidance.

Finally, FEMA believes that planning is critical to successful mitigation at all levels of government. The agency has been working to technically assist all federally-recognized Indian tribal governments regarding the availability of grant funding, training opportunities, as well as program requirements.

Regulations implemented under the authority of the Atlantic Tunas Convention Act (16 U.S.C. 971 et seq. ) and the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act; 16 U.S.C. 1801 et seq. ) governing the harvest of BFT by persons and vessels subject to U.S. jurisdiction are found at 50 CFR part 635. Section 635.27 subdivides the U.S. BFT quota recommended by the International Commission for the Conservation of Atlantic Tunas (ICCAT) among the various domestic fishing categories, per the allocations established in the Consolidated Highly Migratory Species Fishery Management Plan (Consolidated HMS FMP). The latest (2006) ICCAT recommendation for western Atlantic BFT included a U.S. quota of 1,190.12 mt, effective beginning in 2007, through 2008, and thereafter until changed (i.e., via a new ICCAT recommendation).

The 2007 fishing year began on June 1, 2007, and ends December 31, 2007. NMFS published final specifications on June 18, 2007 (72 FR 33401) and increased the default General category retention limit of one large medium or giant BFT (measuring 73 inches (185 cm) curved fork length (CFL) or greater) per vessel per day/trip to three large medium or giant BFT, measuring 73 inches CFL or greater, per vessel per day/trip through August 31, 2007. On August 31, 2007 (72 FR 50257), NMFS published a notice to increase the General category retention limit for September 1-October 31, 2007, to three large medium or giant BFT. NMFS took these actions to enhance commercial BFT fishing opportunities to those vessels permitted in the Atlantic tunas General category and the Highly Migratory Species (HMS) Charter/Headboat category, while fishing commercially. In addition, NMFS stated that it would consider adjustment of retention limits for future time periods, if warranted.

Pursuant to this action, the daily BFT retention limits for the Atlantic tunas General and HMS Charter/Headboat categories are as follows:

Under 50 CFR 635.23(a)(4), NMFS may increase or decrease the daily retention limit of large medium and giant BFT over a range of zero to a maximum of three per vessel to provide for maximum utilization of the General category quota for BFT. Such adjustments to the commercial retention limit are based on NMFS' consideration of the criteria provided under § 635.27(a)(8), which include: the usefulness of information obtained from catches in the particular category for biological sampling and monitoring of the status of the stock; the catches of the particular category quota to date and the likelihood of closure of that segment of the fishery if no adjustment is made; the projected ability of the vessels fishing under the particular category quota to harvest the additional amount of BFT before the end of the fishing year; the estimated amounts by which quotas for other gear categories of the fishery might be exceeded; effects of the adjustment on BFT rebuilding and overfishing; effects of the adjustment on accomplishing the objectives of the fishery management plan; variations in seasonal distribution, abundance, or migration patterns of BFT; effects of catch rates in one area precluding vessels in another area from having a reasonable opportunity to harvest a portion of the category's quota; and a review of dealer reports, daily landing trends, and the availability of the BFT on the fishing grounds.

As of October 22, 2007, the coastwide General category has landed 74.8 metric tons (mt) out of a possible 643.6 mt, and catch rates remain less that 1.0 mt per day even though the General category retention limit was increased to three BFT per vessel per trip, measuring 73 inches (185 cm) CFL or greater for June through October 2007. Starting on November 1, 2007, the General category daily retention limit, located at 50 C.F.R. 635.23(a)(2), is scheduled to revert back to the default retention limit of one large medium or giant BFT (measuring 73 inches (185 cm) CFL) or greater per vessel per day/trip. This scheduled retention limit applies to General category permitted vessels and HMS Charter/Headboat category permitted vessels (when fishing commercially for BFT).

Each of the General category time periods (January, June-August, September, October-November, and December) is allocated a portion of the coastwide General category quota, thereby ensuring fishing opportunities are provided in years where high catch rates are experienced. In combination with the subquota rollover from previous 2007 fishing year time-periods, scheduled RFDs, current catch rates, and the daily retention limit reverting to one large medium or giant BFT per vessel per day on November 1, 2007, NMFS anticipates the full 2007 fishing year General category quota and January 2008 subquota will not be harvested. Adding an excessive amount of unused quota from one time-period subquota to the subsequent time-period subquota is undesirable because it effectively changes the time-period subquota allocation percentages established in the Consolidated HMS FMP and may contribute to excessive carry-overs to subsequent fishing years.

NMFS has considered the set of criteria cited above and their applicability to the commercial BFT retention limit for the remainder of the 2007 fishing year and the January portion of the 2008 fishing year. Based on these considerations, NMFS has determined that the General category retention should be adjusted to allow for retention of the established General category quota. Therefore, NMFS increases the General category retention limit from the default limits effective November 1, 2007, through January 31, 2008. This adjustment increases the General category daily retention limit to three large medium or giant BFT, measuring 73 inches (185 cm) CFL or greater, per vessel per day/trip. This General category retention limit is effective in all areas, except for the Gulf of Mexico, and applies to those vessel permitted in the General category as well as to those HMS Charter/Headboat permitted vessels fishing commercially for BFT.

The 2007 fishing year BFT specifications and effort controls included the following RFDs: all Saturdays and Sundays from November 17, 2007, through December 31, 2007, plus November 22 and December 25, 2007. These RFDs were designed to provide for an extended late season, south Atlantic BFT fishery for the commercial handgear fishermen in the General category. For the reasons referred to above, NMFS has determined that the scheduled RFDs are no longer required to meet their original purpose, but may in fact exacerbate low catch rates, and waives all previously scheduled RFDs for the 2007 fishing year. Therefore, NMFS has determined that an increase in the General category daily BFT retention limit effective from November 1, 2007, through January 31, 2008, inclusive of days that were previously scheduled as RFDs, is warranted. Thus, NMFS is extending the General category daily retention limit of three large medium or giant BFT per vessel per day/trip through January 31, 2008, including all Saturdays and Sundays in November and December 2007 as well as November 22 and December 25, 2007.

This adjustment is intended to provide a reasonable opportunity to harvest the U.S. landings quota of BFT while maintaining an equitable distribution of fishing opportunities, to help achieve optimum yield in the General category BFT fishery, to collect a broad range of data for stock monitoring purposes, and to be consistent with the objectives of the Consolidated HMS FMP.

NMFS selected the daily retention limit and the duration after examining an array of data as it pertains to the determination criteria. These data included, but were not limited to, current and previous catch and effort rates, quota availability, previous public comments on inseason management measures, stock status, etc. NMFS will continue to monitor the BFT fishery closely through the mandatory dealer landing reports, which NMFS requires to be submitted within 24 hours of a dealer receiving BFT. Depending on the level of fishing effort and catch rates of BFT, NMFS may determine that additional retention limit adjustments are necessary to ensure available quota is not exceeded or to enhance scientific data collection from, and fishing opportunities in, all geographic areas.

Closures or subsequent adjustments to the daily retention limits, if any, will be published in the Federal Register . In addition, fishermen may call the Atlantic Tunas Information Line at (888) 872-8862 or (978) 281-9260, or access the internet at www.hmspermits.gov, for updates on quota monitoring and retention limit adjustments.

The Assistant Administrator for NMFS (AA), finds that it is impracticable and contrary to the public interest to provide prior notice of, and an opportunity for public comment on, this action for the following reasons:

NMFS continues to receive information refining its understanding of the commercial sector's specific needs regarding retention limits through the latter portions of the 2007 season. NMFS assessments and analyses show catch rates to date have been low and that there is sufficient quota for an increase to the General category retention limit during the months of November 2007 through January 2008.

The regulations implementing the Consolidated HMS FMP provide for inseason retention limit adjustments to respond to the unpredictable nature of BFT availability on the fishing grounds, the migratory nature of this species, and the regional variations in the BFT fishery. Affording prior notice and opportunity for public comment to implement these retention limits is impracticable as it would preclude NMFS from acting promptly to allow harvest of BFT that are available on the fishing grounds. Analysis of available data shows that the General category BFT retention limits may be increased with minimal risks of exceeding the ICCAT-allocated quota.

Delays in increasing these retention limits would adversely affect those General and Charter/Headboat category vessels that would otherwise have an opportunity to harvest more than the default retention limit of one BFT per day and may exacerbate the problem of low catch rates and quota rollovers. Limited opportunities to harvest the respective quotas may have negative social and economic impacts to U.S. fishermen that either depend upon catching the available quota within the time periods designated in the Consolidated HMS FMP. Adjustment to the retention limit needs to be effective November 1, 2007, to minimize any unnecessary disruption in fishing patterns and for the impacted sectors to benefit from the adjustments so as to not preclude fishing opportunities from fishermen who only have access to the fishery during this time period.

Therefore, the AA finds good cause under 5 U.S.C. 553(b)(B) to waive prior notice and the opportunity for public comment. For all of the above reasons, and because this action relieves a restriction (i.e., current default retention limit is one fish per vessel/trip but this action increases that limit and allows retention of more fish), there is also good cause under 5 U.S.C. 553(d) to waive the 30-day delay in effectiveness.

This action is being taken under 50 CFR 635.23(a)(4) and (b)(3) and is exempt from review under Executive Order 12866.