The Virus-Serum-Toxin Act regulations in 9 CFR part 113 (referred to below as the regulations) contain standard procedures and requirements that are used to establish the purity, safety, potency, and efficacy of veterinary biological products. Current standard requirements for certain live bacterial and viral vaccines require that each Master Seed be retested for immunogenicity 3 years after the initial immunogenicity test.

The requirement to confirm the immunogenicity of a Master Seed at 3 years has been in place since the master seed concept for vaccine production was established, and had been considered necessary until such time that an accumulation of data derived from such confirmatory testing established the antigenic stability of Master Seed bacteria and viruses over extended periods of storage. Data accumulated by veterinary biologics licensees over several years have shown that the immunogenicity of the Master Seed is not adversely affected over extended periods of storage.

On January 31, 2007, we published in the Federal Register (72 FR 4470-4472, Docket No. APHIS-2006-0079) a proposal 1 to amend the Virus-Serum-Toxin Act regulations for certain live bacterial and viral vaccines by removing the requirement to retest the Master Seeds for immunogenicity 3 years after the initial qualifying immunogenicity test. We also proposed to amend the requirement concerning mouse safety tests prescribed for biological products recommended for animals other than poultry.

We solicited comments concerning our proposal for 60 days ending April 2, 2007. We received two comments by that date, from a trade association representing veterinary biologics manufacturers and a representative of a State animal health commission.

One commenter supported the elimination of unnecessary testing/retesting from the regulations and noted that such action would decrease duplicative testing in animals. With regard to using the subcutaneous route of inoculation when conducting the mouse safety test, that same commenter recommended that proposed § 113.33(a)(1) should provide the option to split the injection volume among more than one injection site. The commenter pointed out that this recommendation was consistent with the “good practice” guidelines for subcutaneous injections recommended by the Association for Assessment and Accreditation of Laboratory Animal Care.

We agree with the commenter's recommendation and have amended § 113.33(a)(1) in this final rule to allow the option of dividing the 0.5 mL inoculation volume among more than one injection site.

The second commenter expressed concern that adverse local reactions may be missed if intraperitoneal inoculation is the only route used for the mouse safety test, and suggested that such test be conducted by inoculating mice using both the subcutaneous and intraperitoneal routes instead of by only one route as had been proposed.

In response to the commenter's concern that adverse local reactions may be missed if only one route is used, we wish to point out that § 113.300(b) of the regulations requires final container samples from each serial of product to be tested for safety in at least one species for which the vaccine is intended; the purpose of such test is to ensure freedom from undue adverse local reactions. Accordingly, we are not making any changes in this final rule in response to the comment.

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

This proposed rule has been reviewed under Executive Order 12866. The rule has been determined to be not significant for the purposes of Executive Order 12866 and, therefore, has not been reviewed by the Office of Management and Budget.

We are amending the regulations for certain live bacterial and viral vaccines to eliminate the requirement to retest the Master Seed for immunogenicity 3 years after the initial qualifying immunogenicity test. In addition, this amendment updates the regulations concerning mouse safety tests by requiring either intraperitoneal or subcutaneous inoculation of mice, but not both, in such tests. The primary effect of this rule will be to update the standard requirements by eliminating unnecessary testing of Master Seed bacteria and viruses and other forms of bulk or completed product in animals.

There are approximately 125 veterinary biologics establishments, including licensees and permittees that may be affected by this rule. According to the standards of the Small Business Administration, most veterinary biologics establishments would be classified as small entities.

It is anticipated that no increased recordkeeping burden will be added to licensees or permittees since the amended regulations actually will mean that fewer tests will be needed and fewer reports required to be submitted. We further anticipate that licensees and permittees may benefit economically from the cost savings associated with the reduction in the amount of required animal testing. The overall effect of this amendment will be to reduce the costs associated with producing and testing veterinary biological products.

Under these circumstances, the Administrator of the Animal and Plant Health Inspection Service has determined that this action will not have a significant economic impact on a substantial number of small entities.

This program/activity is listed in the Catalog of Federal Domestic Assistance under No. 10.025 and is subject to Executive Order 12372, which requires intergovernmental consultation with State and local officials. (See 7 CFR part 3015, subpart V.)

This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. It is not intended to have retroactive effect. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule. The Virus-Serum-Toxin Act does not provide administrative procedures which must be exhausted prior to a judicial challenge to the provisions of this rule.

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

Section 305 of the Energy Conservation and Production Act (ECPA), as amended by the Energy Policy Act of 1992 (Pub. L. 102-486) requires DOE to establish building energy efficiency standards for all new Federal buildings. (42 U.S.C. 6834) Section 305(a)(1) requires standards that contain energy efficiency measures that are technologically feasible and economically justified but, at a minimum, require the subject buildings to meet the energy saving and renewable energy specifications in the applicable voluntary consensus energy code specified in section 305(a)(2). (42 U.S.C. 6834(a)(1) and (2))

Until amended by the Energy Policy Act of 2005 (EPAct 2005; Pub. L. 109-58), section 305(a)(2) set the minimum or baseline standards as the CABO (Council of American Building Officials) Model Energy Code, 1992 (for residential buildings) and ASHRAE (American Society of Heating, Refrigerating, and Air-Conditioning Engineers) Standard 90.1-1989 (for commercial and multi-family high rise residential buildings). Section 305(a)(2)(C) of ECPA requires that DOE consider, in consultation with the Environmental Protection Agency and other Federal agencies, and where appropriate, measures regarding radon and other indoor air pollutants.

Section 306(a)(1) of ECPA provides that each Federal agency must adopt procedures to ensure that new Federal buildings will meet or exceed the Federal building energy efficiency standards established under section 305. (42 U.S.C. 6835(a)(1)) Additionally, section 306(a)(2) extends the requirements for new Federal buildings established under section 305 to buildings under the jurisdiction of the Architect of the Capitol. (42 U.S.C. 6835(a)(2)) Section 306(b) bars the head of a Federal agency from expending Federal funds for the construction of a new Federal building unless the building meets or exceeds the applicable Federal building energy standards established under section 305. (42 U.S.C. 6835(b))

DOE established Federal building standards under ECPA and initially placed both the commercial and residential standards in Part 435 of Title 10 of the Code of Federal Regulations (CFR). In a final rule published on October 6, 2000, DOE established new energy efficiency standards for new Federal commercial and multi-family high-rise residential buildings. 65 FR 59999. DOE placed the revised Federal commercial and multi-family high-rise residential building standards in a new 10 CFR part 434, entitled “Energy Code for New Federal Commercial and Multi-Family High Rise Residential Buildings.” The standards for Federal low-rise residential buildings remain in 10 CFR part 435.

Section 109 of EPAct 2005 amended section 305 of ECPA. (42 U.S.C. 6835) Section 109 replaced the minimum standards referenced in section 305(a)(2)(A) with references to updated building codes that are widely used today. For residential buildings, CABO Model Energy Code, 1992, was replaced with the 2004 International Energy Conservation Code (IECC). For commercial and multi-family high rise buildings, ASHRAE Standard 90.1-1989 was replaced with ASHRAE Standard 90.1-2004.

Section 109 of EPAct 2005 also added a new section 305(a)(3)(A) that requires DOE, by rule, to establish revised Federal building energy efficiency performance standards not later than August 8, 2006. (42 U.S.C. 6834(a)(3)(A)) Under the revised standards, new Federal buildings must be designed to achieve energy consumption levels that are at least 30 percent below the updated minimum standards referenced in section 305(a)(2), if life-cycle cost-effective. (42 U.S.C. 6834(a)(3)(A)(i)(I))

On December 4, 2006, the Department published an interim final rule establishing energy conservation standards for the design and construction of new Federal commercial and multi-family high rise residential buildings (10 CFR part 433) and the design and construction of new Federal low-rise residential buildings (10 CFR part 435, subpart A). 71 FR 70275. DOE determined that establishing these requirements through an interim final rule offered the best opportunity to achieve the energy efficiency goals of section 109 of the EPAct 2005 as soon as possible. Further, the standards are applicable only to the design and construction of Federal buildings, which are public property. Regulations applicable only to public property are exempted from the Administrative Procedure Act's prior notice and comment requirements. (5 U.S.C. 553(a)(2)) Additionally, the explicitness of the direction provided to DOE for this rule in section 109 of the EPAct 2005 supported the issuance of an interim final rule, as a matter of policy.

The interim final rule established an energy efficiency baseline for new Federal commercial and multi-family high rise residential buildings and new Federal low-rise residential buildings based on referencing ASHRAE Standard 90.1-2004 and the 2004 IECC, respectively. These standards establish requirements for the structure and major systems of a building and are mandatory for new Federal buildings. The interim final rule established a requirement for new Federal buildings to achieve a level of energy efficiency 30 percent greater than that of the ANSI/ASHRAE/IESNA or the 2004 IECC levels, as appropriate, when life-cycle cost-effective, again as directed by the statute.

The standards established in the interim final rule do not take a prescriptive approach as to how the 30 percent reduction is to be obtained. The baseline standards contain a limited set of mandatory requirements, such as sealing leaks in the building envelope and air duct systems. Beyond this, there are no restrictions on how a Federal agency is to achieve cost-effective energy savings. DOE believes that Federal agencies should be given the flexibility necessary to determine the most effective ways to achieve energy savings above that of the incorporated standards, rather than relying on prescriptive requirements that may not be appropriate in all cases.

The interim final rule became effective January 3, 2007. All new Federal buildings for which design for construction began on or after that date must comply with the requirements established in this rule. Again, the interim final rule applied to the design and construction of Federal buildings, as opposed to the operation of Federal buildings following construction. All new Federal buildings for which design for construction began prior to that date must comply with the requirements in 10 CFR part 434 or subpart C of part 435, as applicable.

DOE provided a list of resources to help Federal agencies achieve building energy efficiency levels of at least 30 percent below that of ASHRAE Standard 90.1-2004 or the 2004 IECC. 71 FR 70278-70279. The resources were provided in three categories—for all buildings, specifically for commercial and high-rise multi-family residential buildings, and specifically for low-rise residential buildings.

In today's final rule, the Department makes a number of minor changes to the interim final rule. These changes are described in Section II below.

DOE received a variety of comments from twenty different parties in response to the interim final rule. The comments covered a variety of topics. There were comments and questions on scope and timing of new Federal standards, such as what energy end-uses the rules cover, and whether they should apply to major retrofits and leased buildings. Some comments suggested changes or alternatives to the baseline minimum standards. In particular, several commenters requested an update to the 2006 IECC in place of 2004 IECC for low-rise residential buildings. A number of comments suggested that the rules require more than 30 percent energy savings if cost effective. Some commenters wanted DOE to actively enforce that Federal agencies comply with the standards and/or provide support and guidance for implementing the standards. DOE received two comments (United States Postal Service, No. 15; Edison Electric Institute No. 18  1 ) that simply expressed support for the content of the new Federal standards. Comments are discussed and addressed in greater detail below.

As stated above, the interim final rule applies to Federal buildings for which design for construction began on or after January 3, 2007. Los Alamos National Laboratory (Comment No. 6) and the Department of Veterans Affairs (Comment No. 20) requested clarification of when “design for construction” begins as this establishes the applicable stage when the new rule applies. The rule becomes effective at the design stage when the impact of the rule needs to be accounted for in the procurement process. Specifically, this is the stage when the energy efficiency and sustainability details (such as insulation levels, HVAC systems, water-using systems, etc.) are either explicitly determined or implicitly included in a project cost specification. If prior to January 3, 2007, energy efficiency and sustainability details were incorporated into a building design, and thus a costly redesign would be required to meet this rule, the new rule is not applicable. Today's final rule clarifies the applicability of the new Federal building standards.

Four comments questioned if the standards apply to leased buildings (Naval Facilities Engineering Command, No. 3; The Alliance to Save Energy, No. 9; The American Institute of Architects; No. 10 and No. 14). The last three comments recommended that the scope of the interim rule be expanded to apply to leased buildings.

ECPA specifically defines “Federal building” to mean any building to be “constructed by, or for the use of, any Federal agency which is not legally subject to State or local building codes or similar requirements.” (42 U.S.C. 6832(6)) DOE applied the statutory definition to define “new Federal buildings” for the purpose of 10 CFR 433.2 and 435.2. A building being constructed for lease by a Federal agency would be for the use of the Federal agency and therefore would be a “new Federal building” subject to the requirements established in the interim final rule if it is not legally subject to State or local building codes.

Four comments suggested the rule should apply to additions and/or major renovations. (Comments No. 6; No. 9; No. 10; No. 14). Commenters noted that the previous building standards applied to major renovations.

Section 305 of ECPA specifies that the rule shall apply to only new buildings. Today's final rule provides additional clarity on the distinction between a “new” building and a major renovation. Under today's final rule the definition of “new Federal building” specifies that a building is a new building if it is completely replaced from the foundation up. DOE notes that the recent Executive Order 13423, Strengthening Federal Environmental, Energy, and Transportation Management , includes mandatory energy efficiency requirements for major renovations to Federal buildings. 72 FR 3919 (January 24, 2007).

Five commenters (Birch Point Consulting, No. 1; American Architectural Manufacturers Association, No. 4; Pilkington North America No. 5; APA-The Engineered Wood Association No. 12; and a combined comment from Icynene, Nu-Wool Co., Inc., and Building Quality, No. 13) requested that the residential standards be updated from the 2004 IECC Edition to the 2006 IECC. These commenters stated that the 2004 IECC is what is referred to as a “supplement edition” that is published at the midpoint between the three year cycles when stand-alone editions of the IECC are published. Some of the commenters further stated that the 2004 IECC is “not a code.” Comments stated that the 2006 IECC is the most current version of the IECC and the 2004 Supplement is now an older version. Additionally, several commenters objected to requirements in the 2004 IECC and stated a preference for the alterations to these requirements in the 2006 IECC. Conversely, one commenter believes the Department was correct to use the 2004 IECC (Responsible Energy Codes Alliance, No. 11)

Several commenters observed that ECPA requires that the Department determine whether the Federal standards should be updated within one year after approval of revisions to the IECC (or ASHRAE Standard 90.1). These commenters requested that consistent with this provision of EPCA DOE incorporate the 2006 version of the IECC.

The interim final rule reflected Congress's specific instruction as to which voluntary consensus standard DOE is to incorporate into the requirements as the baseline for Federal residential buildings, 2004 IECC. Further, the 2004 IECC is code language that is fully sanctioned by the International Code Council. As directed by ECPA, DOE will consider updating to the 2006 IECC based on the cost effectiveness of the revisions contained in the 2006 IECC. However, at this time DOE has not completed the analysis necessary to determine if the standard should be updated to cite the 2006 IECC.

DOE received a number of comments suggesting the use of alternative baseline standards to the 2004 IECC (for low-rise residential buildings) and ASHRAE Standard 90.1-2004 (for commercial and high-rise residential buildings). Suggestions included the use of the IECC for commercial and high-rise residential buildings (Comment No. 1; Responsible Energy Codes Alliance, No. 11) and use of the IRC (Comment No. 1) or ASHRAE Standard 90.2-2004 (Comment No. 14; No. 18) for low-rise residential buildings.

Today's final rule does not amend the use of ASHRAE Standard 90.1-2004 and the 2004 IECC as the baselines for the requirement. As stated above, section 109 of EPAct 2005 is explicit in the voluntary standards that are to be incorporated as the baseline.

Under the requirements established in the interim final rule, Federal buildings must exceed the energy efficiency level of the appropriate consensus standard by 30 percent if life-cycle cost effective. 10 CFR 433.4(a)(2) and 435.4(a)(2). DOE received several comments on the 30 percent level specified in the standards and the reliance on “life-cycle cost effective.”

Regarding the energy savings target, four commenters suggested that DOE require the maximum cost-effective energy efficiency, even if it is beyond 30% (Comments No. 9; No. 10; No. 14; and Natural Resources Defense Council, No. 17). These commenters interpreted the direction in EPAct 2005 to be to achieve the maximum level of energy efficiency that is cost-effective relative to the baseline standards, not just to achieve at least 30 percent savings.

As stated in the preamble to the interim final rule, Congress expressly specified a minimum performance requirement of a 30 percent improvement, if life-cycle cost effective. 71 FR 70277. Although the statute requires DOE to establish performance standards that are “at least” 30 percent below the levels in the incorporated ASHRAE and IECC standards, the standards that DOE established in the interim final rule do not require Federal agencies to consider the life-cycle cost effectiveness of improvements beyond the 30 percent level.

It is DOE's view that had Congress sought to require improvements at a maximum energy savings with the condition that it has an equal or lower life-cycle cost relative to the baseline standard, it would have mandated designs to achieve that level and would not have specified the 30 percent minimum. The rule uses the same language in EPAct—that at least 30 percent savings be achieved if cost-effective. Federal agencies are not precluded from designing buildings to achieve greater improvements, and DOE encourages agencies to design new Federal buildings to achieve lower energy consumption levels if life-cycle cost effective. Further, DOE has made a minor modification to Sections 433.4(c) and 435.4(c) of the final rule to permit energy efficient better than the maximum level that is cost effective. This allows Federal agencies the flexibility to pursue additional energy efficiency for demonstration projects, such as zero energy buildings.

One commenter objected to the performance based nature of the 30 percent requirements. The commenter stated that DOE should establish more prescriptive standards (Comment No. 17). The standards established in the interim final rule allow Federal designers flexibility in choosing a compliant design and assign the responsibility of ensuring compliance to the Federal agencies. The commenter's statements suggest a preference for prescriptive standards to achieve the additional 30 percent savings compared to the reference national standards, with explicit minimum requirements for individual building components (such as walls, windows, and floors) and systems (such as lighting and mechanical systems).

Previous standards for Federal buildings were generally prescriptive in nature. However, given the complexity of developing a set of prescriptive requirements that meet both the energy efficiency and cost-effectiveness goals of section 109 of the EPAct 2005 for all Federal buildings of all types, DOE established a performance-based approach, utilizing the prescriptive requirements of the private sector standards as the absolute minimum if higher levels are not cost-effective. This approach permits the applicable construction costs and fuel costs for any given project to be accounted for, allowing for most cost-effective solution, which may indeed result in a greater than 30 percent savings over the minimum reference standards.

One commenter (Comment No. 3) stated that “life-cycle cost-effectiveness” had not been adequately defined. The definition in the interim final rule specifies that life cycle cost-effectiveness is determined in accordance with 10 CFR part 436. The definition of “life-cycle cost effective” in 10 CFR part 436 provides agencies a choice of 4 methods of showing life cycle cost effectiveness, including lowest life cycle costs (10 CFR 436.19), positive net savings (10 CFR 436.20), a saving-to-investment ratio greater than one (10 CFR 436.21), or an internal rate of return higher than the discount rate published by OMB (10 CFR 436.22). The methodologies specified in 10 CFR 436 have been widely established in Federal projects, with the National Institute of Standards and Technology (NIST) responsible for providing support for implementing 10 CFR 436 ( http://www.bfrl.nist.gov/oae/projects/04ps75.html ).

DOE received five comments about addressing plug and process loads in Federal buildings. Two of the comments (Environmental Protection Agency, No. 7; Department of Interior, No. 19) objected to the fact that receptacle and process loads were exempted from calculation of the savings for the 30 percent requirement for commercial and high-rise residential buildings in the interim final rule. Laclede Gas (Comment No. 16) urged the Department to keep food service ventilation classified as process load. Conversely, the Department of Veterans Affairs (Comment No. 20) asked that medical equipment loads be exempt from the energy consumption savings requirements. Another comment (Los Alamos National Laboratory, No. 6) suggested that it be recognized that there are situations that should be excluded from the evaluation of energy savings such as industrial, manufacturing, or commercial processes.

The energy efficiency of many receptacle loads (anything that is plugged in, such as a personal computer) is addressed through a separate section of EPAct 2005. Section 104 of EPAct 2005 requires Federal agencies to purchase energy efficient appliances and equipment. (42 U.S.C 8259b). Additionally, today's final rule applies to buildings as designed and constructed and it is often not possible to identify all receptacle loads when a building is designed or constructed as the occupants will to some degree establish what is plugged in. As equipment is replaced over time the initial savings from receptacle loads may diminish. As such DOE is maintaining the exclusion of receptacle loads for the purpose of calculating energy savings under the Federal building standards.

With respect to process loads (for example, medical or industrial equipment), the Department is excluding these energy end-uses from the energy savings metric. Process loads typically involve specialized equipment for which improvements in energy efficiency may affect the functionality of the equipment or where improvements are not available at all. Some Federal buildings use most of their energy serving process loads, and application of the energy savings requirement to these buildings would likely place an undo burden on the rest of the building if the 30 percent savings is to be achieved.

In order to provide additional clarity, DOE is establishing definitions of “receptacle load” and “process load.”

DOE received a comment from the American Gas Association (Comment No. 8) suggesting the use of source energy instead of site energy as the energy metric to be used for determining energy consumption in the new Federal standards. Site energy is the energy used at the building. Source energy is the site energy and all energy used to produce and deliver the energy to the site. ECPA as modified by EPAct 2005 specifies the use of ASHRAE Standard 90.1 and the IECC as the reference standards. The procedures for calculating energy efficiency performance in these reference standards are annual energy cost. These procedures are adopted in this rulemaking. Energy costs implicitly account for the complete process of producing energy.

DOE received a number of comments requesting that additional actions be taken to implement and enforce the rule. Two commenters (Comments No. 10 and No. 14) urged the Department to issue rulemakings with provisions for sustainable design principles and water conservation technologies as required by EPCA, as amended by section 109 of EPACT 2005. DOE is currently preparing a notice of proposed rulemaking to address these provisions.

Three commenters (The Polyisocyanurate Insulating Manufacturers Association, No. 2; Comments No. 9; and No. 14) suggested the Department take actions to ensure that agencies are complying with the standards. DOE again notes that today's final rule applies to the design and construction of new Federal buildings. Section 109 of EPAct 2005 assigns the responsibility of reporting compliance to the individual agencies as part of their annual budget request. Agencies are required to submit a list of all new Federal buildings owned, operated, or controlled by the Federal agency, and a statement specifying whether the Federal buildings have been constructed (or designed to be constructed) to meet or exceed the standards adopted in this notice. (42 U.S.C. 6834(a)(3)(C)) DOE has determined that the existing reporting requirement is sufficient to identify agency compliance.

The interim final rule provided a list of resources to provide guidance on compliance with the requirements. 71 FR 70278-70279. Additionally, DOE, through its Federal Energy Management Program, is preparing training for federal agencies on how to comply with today's final rule.

The Alliance to Save Energy commented that DOE should add requirements for commissioning and energy metering (Comment No. 9). DOE notes that section 103 of EPAct 2005 amended EPCA to require that all Federal buildings be metered. (42 U.S.C. 8253) The rule does not contain requirements for commissioning as the applicable Federal agencies are responsible for ensuring that the energy efficiency measures be properly installed.

The Alliance to Save Energy commented that the Department should consider innovative provisions to make buildings more adaptable to new and emerging technologies (Comment No. 9). DOE notes that it participates in the development of new energy-efficient technologies for buildings and does promote the use of new energy-efficient technologies in buildings. Private sector standards and codes (ASHRAE Standard 90.1-2004 and the 2004 IECC) are typically “technology-neutral.” Particular technologies may be used to set the level of performance for energy codes or standards, but it would be this level of performance and not the specific technology that would be embodied in the code or standard. As stated above, the 30-percent requirement is a performance based requirement. Federal agencies are free to rely on a variety of technologies that they determine to be appropriate for their specific applications.

The Alliance to Save Energy suggested that the provisions of section 104 of EPAct 2005 for building equipment to meet Energy Star and FEMP-designated efficiency criteria be included in this rule (Comment No. 9). As discussed above, DOE does not believe that it is appropriate to address receptacle loads in the Federal building standards. DOE is addressing the procurement requirements of section 104 in a separate rulemaking. 72 FR 33696 (June 19, 2007).

One commenter (No. 2; 2) requested that the Department develop a comprehensive database of energy-efficiency features. FEMP maintains a database on high performance Federal buildings. ( http://www.eere.energy.gov/femp/highperformance/ ) Three commenters (Comments No. 2; No. 10; and No. 14) requested that DOE provide support for education and training. FEMP intends to provide training and education on the new Federal standards, beginning in late 2007.

DOE received a comment (Comment No. 10) suggesting that DOE implement the requirements of the new Federal standards in design specifications and model contract language that could be used by all agencies. The Department believes this is a good suggestion and will take this under consideration for action.

DOE received a comment from the American Gas Association (Comment No. 8) requesting that the references to the ASHRAE Advanced Energy Design Guide (AEDG) be removed from the preamble because it “encourages more buildings to use electric resistance.” DOE notes that the references provided in the preamble of the interim final rule are for informational purposes only and the AEDG is approved by ASHRAE, a leading national technical society. The references are not intended to promote any single method for achieving compliance with the requirements.

Today's final rule is a “significant regulatory action” under section 3(f)(1) of Executive Order 12866, “Regulatory Planning and Review.” 58 FR 51735 (October 4, 1993). Accordingly, today's action was subject to review by the Office of Information and Regulatory Affairs in the Office of Management and Budget (OMB). OMB has completed its review.

The Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) requires the preparation of an initial regulatory flexibility analysis for any rule that by law must be proposed for public comment, unless the agency certifies that the rule, if promulgated, will not have a significant economic impact on a substantial number of small entities. As required by Executive Order 13272, Proper Consideration of Small Entities in Agency Rulemaking, 67 FR 53461 (August 16, 2002), DOE published procedures and policies on February 19, 2003, to ensure that the potential impacts of its rules on small entities are properly considered during the rulemaking process (68 FR 7990). The Department has made its procedures and policies available on the Office of General Counsel's Web site: http://www.gc.doe.gov.

Today's rule amending standards on energy efficiency performance standards for the design and construction of new Federal buildings is a rule relating to public property, and therefore, is not subject to any legal requirement to publish a general notice of proposed rulemaking. The Regulatory Flexibility Act does not apply.

This rulemaking will impose no new information or record keeping requirements. Accordingly, Office of Management and Budget (OMB) clearance is not required under the Paperwork Reduction Act. (44 U.S.C. 3501 et seq. )

DOE prepared an Environmental Assessment (EA) (DOE/EA-1463) entitled, Draft Environmental Assessment for Interim Final Rule, 10 CFR Part 433, “Energy Efficiency Standards for New Federal Commercial and Multi-Family High-Rise Residential Buildings,” and 10 CFR Part 435, “Energy Efficiency Standards for New Federal Low-Rise Residential Buildings,” pursuant to the Council on Environmental Quality's (CEQ) Regulations for Implementing the Procedural Provisions of the National Environmental Policy Act (40 CFR Parts 1500-1508), the National Environmental Policy Act of 1969 (NEPA), as amended (42 U.S.C. 4321 et seq. ), and DOE's NEPA Implementing Procedures (10 CFR Part 1021).

The EA addresses the possible environmental effects attributable to the implementation of the interim final rule. The only projected impact is a decrease in outdoor air pollutants resulting from decreased fossil fuel burning for energy use in Federal buildings. Today's minor changes to the interim final rule do not affect the findings of the EA or the discussion of those findings in the preamble to the interim final rule. 71 FR 70280.

Executive Order 13132, “Federalism,” 64 FR 43255 (August 4, 1999), imposes certain requirements on agencies formulating and implementing policies or regulations that preempt State law or that have federalism implications. The Executive Order requires agencies to examine the constitutional and statutory authority supporting any action that would limit the policymaking discretion of the States and to carefully assess the necessity for such actions. The Executive Order also requires agencies to have an accountable process to ensure meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications. On March 14, 2000, DOE published a statement of policy describing the intergovernmental consultation process it will follow in the development of such regulations. (65 FR 13735). DOE examined this rule and determined that it does not preempt State law and does not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of Government. No further action is required by Executive Order 13132.

With respect to the review of existing regulations and the promulgation of new regulations, section 3(a) of Executive Order 12988, “Civil Justice Reform,” 61 FR 4729 (February 7, 1996), imposes on Federal agencies the general duty to adhere to the following requirements: (1) Eliminate drafting errors and ambiguity; (2) write regulations to minimize litigation; and (3) provide a clear legal standard for affected conduct, rather than a general standard and promote simplification and burden reduction. Section 3(b) of Executive Order 12988 specifically requires that Executive agencies make every reasonable effort to ensure that the regulation: (1) Clearly specifies the preemptive effect, if any; (2) clearly specifies any effect on existing Federal law or regulation; (3) provides a clear legal standard for affected conduct, while promoting simplification and burden reduction; (4) specifies the retroactive effect, if any; (5) adequately defines key terms; and (6) addresses other important issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney General. Section 3(c) of Executive Order 12988 requires Executive agencies to review regulations in light of applicable standards in section 3(a) and section 3(b) to determine whether they are met or it is unreasonable to meet one or more of them. DOE has completed the required review and determined that, to the extent permitted by law: this rule meets the relevant standards of Executive Order 12988.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) (Pub. L. 104-4) requires each Federal agency to assess the effects of Federal regulatory actions on State, local, and tribal governments and the private sector. For a proposed regulatory action likely to result in a rule that may cause the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector of $100 million or more in any one year (adjusted annually for inflation), section 202 of UMRA requires a Federal agency to publish a written statement that estimates the resulting costs, benefits, and other effects on the national economy. (2 U.S.C. 1532(a) and (b)). The UMRA also requires a Federal agency to develop an effective process to permit timely input by elected officers of State, local, and tribal governments on a proposed “significant intergovernmental mandate,” and requires an agency plan for giving notice and opportunity for timely input to potentially affected small governments before establishing any requirements that might significantly or uniquely affect small governments. On March 18, 1997, DOE published a statement of policy on its process for intergovernmental consultation under UMRA (62 FR 12820) (also available at http://www.gc.doe.gov ). This final rule contains neither an intergovernmental mandate nor a mandate that may result in the expenditure of $100 million or more in any year, so these requirements under the Unfunded Mandates Reform Act do not apply.

Section 654 of the Treasury and General Government Appropriations Act of 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family Policymaking Assessment for any rule that may affect family well-being. This final rule would not have any impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment.

The Department has determined, under Executive Order 12630, “ Governmental Actions and Interference with Constitutionally Protected Property Rights,” 53 FR 8859 (March 18, 1988), that this rule would not result in any takings which might require compensation under the Fifth Amendment to the United States Constitution.

Section 515 of the Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 3516, note) provides for agencies to review most disseminations of information to the public under guidelines established by each agency pursuant to general guidelines issued by OMB. OMB's guidelines were published at 67 FR 8452 (February 22, 2002), and DOE's guidelines were published at 67 FR 62446 (October 7, 2002). DOE has reviewed today's final rule under the OMB and DOE guidelines and has concluded that it is consistent with applicable policies in those guidelines.

Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,” 66 FR 28355 (May 22, 2001), requires Federal agencies to prepare and submit to the Office of Information and Regulatory Affairs (OIRA), Office of Management and Budget, a Statement of Energy Effects for any proposed significant energy action. A “significant energy action” is defined as any action by an agency that promulgated or is expected to lead to promulgation of a final rule, and that: (1) Is a significant regulatory action under Executive Order 12866, or any successor order; and (2) is likely to have a significant adverse effect on the supply, distribution, or use of energy, or (3) is designated by the Administrator of OIRA as a significant energy action. For any proposed significant energy action, the agency must give a detailed statement of any adverse effects on energy supply, distribution, or use should the proposal be implemented, and of reasonable alternatives to the action and their expected benefits on energy supply, distribution, and use. This final rule would not have a significant adverse effect on the supply, distribution, or use of energy and, therefore, is not a significant energy action. Accordingly, DOE has not prepared a Statement of Energy Effects.

As required by 5 U.S.C. 801, DOE will report to Congress on the promulgation of this rule prior to its effective date. The report will state that it has been determined that the rule is not a “major rule” as defined by 5 U.S.C. 804(2).

The Secretary of Energy has approved publication of today's final rule.

The agencies' CRA regulations establish CRA performance standards for small and intermediate small banks and savings associations. The regulations define small and intermediate small institutions by reference to asset-size criteria expressed in dollar amounts, and they further require the agencies to publish annual adjustments to these dollar figures based on the year-to-year change in the average of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPIW), not seasonally adjusted, for each twelve-month period ending in November, with rounding to the nearest million. 12 CFR 25.12(u)(2), 228.12(u)(2), 345.12(u)(2), and 563e.12(u)(2).

The threshold for small banks was revised most recently for the OCC, the Board, and the FDIC effective January 1, 2007 (71 FR 78335 (Dec. 29, 2006)). These agencies' CRA regulations, as revised on December 29, 2006, provide that banks that, as of December 31 of either of the prior two calendar years, had assets of less than $1.033 billion are “small banks.” Small banks with assets of at least $258 million as of December 31 of both of the prior two calendar years and less than $1.033 billion as of December 31 of either of the prior two calendar years are “intermediate small banks.” 12 CFR 25.12(u)(1), 228.12(u)(1), 345.12(u)(1). The threshold for small savings associations was revised in the same way and the same threshold for intermediate small savings associations was established by OTS effective July 1, 2007 (72 FR 13435 (Mar. 22, 2007). 12 CFR 563e.12(u)(1). This joint final rule further revises these thresholds.

During the period ending November 2007, the CPIW increased by 2.7 percent. As a result, the agencies are revising 12 CFR 25.12(u)(1), 228.12(u)(1), 345.12(u)(1), and 563e.12(u)(1) to make this annual adjustment. Beginning January 1, 2008, banks and savings associations that, as of December 31 of either of the prior two calendar years, had assets of less than $1.061 billion are “small banks” or “small savings associations.” Small banks or small savings associations with assets of at least $265 million as of December 31 of both of the prior two calendar years and less than $1.061 billion as of December 31 of either of the prior two calendar years are “intermediate small banks” or “intermediate small savings associations.” The agencies also publish current and historical asset-size thresholds on the website of the Federal Financial Institutions Examination Council at http://www.ffiec.gov/cra/ .

The agencies also are amending their CRA regulations to make a technical correction to revise a paragraph heading that is inaccurate as a result of annual small institution threshold adjustments. The technical correction revises the paragraph headings found at 12 CFR 25.26(a)(1), 228.26(a)(1), and 345.26(a)(1) (“Small banks with assets of less than $250 million”) and 12 CFR 563e.26(a)(1) (“Small savings associations with assets of less than $250 million”). As a result of the agencies' annual adjustments to the dollar amount threshold for small institutions, the threshold of $250 million described in the paragraph heading is inaccurate. The agencies are revising the headings so that they do not reference the dollar amount of the small bank or small savings association asset threshold.

Under 5 U.S.C. 553(b)(B) of the Administrative Procedure Act (APA), an agency may, for good cause, find (and incorporate the finding and a brief statement of reasons therefore in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.

The amendments to the regulations to adjust the asset-size thresholds for small and intermediate small banks and savings associations result from the application of a formula established by a provision in the CRA regulations that the agencies previously published for comment. See 70 FR 12148 (Mar. 11, 2005), 70 FR 44256 (Aug. 2, 2005), 71 FR 67826 (Nov. 24, 2006), and 72 FR 13429 (Mar. 22, 2007). Sections 25.12(u)(1), 228.12(u)(1), 345.12(u)(1), and 563e.12(u)(1) are amended by adjusting the asset threshold as provided for in §§ 25.12(u)(2), 228.12(u)(2), 345.12(u)(2), and 563e.12(u)(2).

Accordingly, since the agencies' rules provide no discretion as to the computation or timing of the revisions to the asset-size criteria, the agencies have determined that publishing a notice of proposed rulemaking and providing opportunity for public comment are unnecessary.

With regard to the revision amending the paragraph heading, as a result of the annual adjustment required by the regulations, the heading describing “small banks” or “small savings associations” as those with assets of less than $250 million is inaccurate. The revision merely amends the heading to correct this inaccuracy and prevent further inaccuracies when annual adjustments are made in the future. For this reason, the agencies, for good cause, find that the notice and comment procedures prescribed by the APA are unnecessary because the joint final rule is making a technical correction without substantive change to the provisions of parts 25, 228, 345, and 563e.

This joint final rule takes effect January 1, 2008. Under 5 U.S.C. 553(d)(3) of the APA, the required publication or service of a substantive rule shall be made not less than 30 days before its effective date, except, among other things, as provided by the agency for good cause found and published with the rule. The agencies find that there is good cause for shortened notice because their current rules already provide notice that the small and intermediate asset-size thresholds will be adjusted as of December 31 based on twelve-month data as of the end of November each year. Moreover, the revisions to the headings in the agencies' rules are minor, nonsubstantive, and technical.

The Regulatory Flexibility Act (RFA) does not apply to a rulemaking where a general notice of proposed rulemaking is not required. 5 U.S.C. 603 and 604. As noted previously, the agencies have determined that it is unnecessary to publish a notice of proposed rulemaking for this joint final rule. Accordingly, the RFA's requirements relating to an initial and final regulatory flexibility analysis do not apply.

There are no collection of information requirements in this joint final rule.

The OCC and OTS have each determined that its portion of this joint final rule is not a significant regulatory action as defined in Executive Order 12866.

Section 202 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1532 (Unfunded Mandates Act), requires that an agency must prepare a budgetary impact statement before promulgating any rule likely to result in a Federal mandate 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 in any one year. If a budgetary impact statement is required, section 205 of the Unfunded Mandates Act also requires an agency to identify and consider a reasonable number of regulatory alternatives before promulgating a rule. The OCC and OTS have each determined that its portion of this joint final rule will not result in expenditures by State, local, and tribal governments, or by the private sector, of $100 million or more in any one year. Accordingly, this joint final rule is not subject to section 202 of the Unfunded Mandates Act.

The OCC and OTS have each determined that its portion of this joint final rule does not have any Federalism implications as required by Executive Order 13132.

This document, the notice of proposed amendments (NPA), the supplemental notice of proposed amendments (SNPA), and all comments received may be viewed online through the Federal eRulemaking portal at http://www.regulations.gov. Electronic submission and retrieval help and guidelines are available under the help section of the Web site.

An electronic copy of this document may also be downloaded from the Office of the Federal Register's home page at: http://www.archives.gov and the Government Printing Office's Web page at: http://www.access.gpo.gov/nara.

On July 30, 2004, at 69 FR 45623, the FHWA published in the Federal Register a NPA proposing to amend the MUTCD to include methods to maintain traffic sign retroreflectivity. The NPA was issued in response to section 406 of the Department of Transportation and Related Agencies Appropriations Act, 1993 (Pub. L. 102-388; October 6, 1992). Section 406 of this Act directed the Secretary of Transportation to revise the MUTCD to include a standard for minimum levels of retroreflectivity that must be maintained for traffic signs and pavement markings, which apply to all roads open to public travel. The FHWA is currently conducting research to develop a standard for minimum levels of pavement marking retroreflectivity. The FHWA expects to initiate the pavement marking retroreflectivity rulemaking process once the research is concluded and the results are analyzed and considered.

The FHWA has led a significant effort toward establishing minimum-maintained levels of sign retroreflectivity since the statute was issued in 1993. Three national workshops were held in 1995 to educate State and local highway agency personnel and solicit their input regarding an initial set of minimum maintained sign retroreflectivity levels. In 1998, FHWA published revisions to initial research recommendations on minimum sign retroreflectivity levels  1 noting that additional work would be needed because the National Highway Traffic Safety Administration was also revising the Federal Motor Vehicle Safety Standard Number 108 Lamps, Reflective Devices, and Associated Equipment (FMVSS 108). The additional research was completed in 2003, at which time FHWA began preparing the NPA for traffic sign retroreflectivity for the MUTCD, which was published in 2004.

After considering and analyzing the comments on the NPA for minimum levels of retroreflectivity for traffic signs, FHWA decided to publish a supplemental notice of proposed amendments (SNPA). In particular, the SNPA was developed to address comments to the docket that: (1) Expressed concern that the NPA proposal did not meet the intent of the 1993 statute, (2) suggested that the table of minimum retroreflectivity levels should be placed in the MUTCD, (3) requested clarification of the compliance period, and (4) expressed concern about the resource requirements for complying with the rulemaking. The proposed MUTCD text in the SNPA included a STANDARD statement that required that a method be used to manage and maintain retroreflectivity and required that sign retroreflectivity be maintained at minimum levels. It also included the table of minimum retroreflectivity levels in the MUTCD. These changes were significant enough to warrant an SNPA to allow FHWA to obtain and assess additional public comments. The SNPA was published on May 8, 2006, at 71 FR 26711. The comment period for the SNPA ended on November 6, 2006.

Based on the comments received and its own experience, FHWA is issuing this final rule establishing the minimum levels of retroreflectivity that must be maintained for traffic signs. The FHWA is designating the MUTCD, with these changes incorporated, as Revision 2 of the 2003 Edition of the MUTCD.

The text of this Revision No. 2 and the text of the 2003 Edition of the MUTCD with Revision No. 2 final text incorporated are available for inspection and copying as prescribed in 49 CFR part 7 at the FHWA Office of Transportation Operations. Furthermore, final Revision No. 2 changes are available on the official MUTCD Web site at http://mutcd.fhwa.dot.gov. The entire MUTCD text with final Revision No. 2 text incorporated is also available on this Web site.

The FHWA received 121 letters submitted to the docket in response to the SNPA containing approximately 550 individual comments. The FHWA received comments from the National Committee on Uniform Traffic Control Devices (NCUTCD), the American Association of State Highway and Transportation Officials (AASHTO) and 20 State Departments of Transportation (DOT) members of AASHTO, the National Association of County Engineers (NACE) and seven county association members of NACE, city and county governmental agencies, consulting firms, private industry, associations, other organizations, and individual private citizens. The FHWA has considered all these comments. Docket comments and summaries of FHWA's analyses and determinations are discussed below. General comments are discussed first, followed by discussion of major issues and adopted changes, and finally, discussion of other comments.

Many respondents agreed with the intent and the concepts proposed in both the NPA and the SNPA. In analyzing the comments to the SNPA, FHWA decided that additional clarification should be provided in the MUTCD text and in the explanations provided in the final rule in order to address the following five major issues:

(1) Clarification of compliance period;

(2) Resource burdens on public agencies;

(3) Statutory requirements;

(4) Table of minimum retroreflectivity levels in the MUTCD; and

(5) Impacts of sign retroreflectivity on safety.

This section provides a discussion of each of the five major issues raised by commenters in response to the SNPA, along with FHWA's analysis and resolution.

(1) Clarification of the compliance period.

Several county associations and many county and local officials requested an extension from 2 to 4 years for the compliance period for the establishment and implementation of a method to maintain sign retroreflectivity, in order to accommodate their programs within their 2-year budget cycles. There were also a few requests to extend the 7 and 10 year compliance periods for the signs themselves.

Considering the comments regarding budget cycles, particularly budget cycles for local agencies, FHWA has extended to 4 years the compliance period for establishing and implementing a sign assessment or management method to maintain minimum levels of sign retroreflectivity. This extended compliance period will allow transportation agencies to make allowances for budgets (including working with the States or regional organizations) to access funds and/or partnerships to achieve the minimum levels of sign retroreflectivity.

The 7 and 10 year compliance dates for minimum levels for sign retroreflectivity will remain 7 years for regulatory, warning, and ground-mounted guide signs and 10 years for street name and overhead guide signs, because these compliance target dates correspond to the normal expected service life of sign sheeting and will allow highway agencies to make the proper accommodations in their efforts to maintain minimum retroreflectivity levels. The 7 and 10 year compliance dates are counted from the effective date of this rule and are not in addition to the 4-year period for establishing the methods.

(2) Resource burdens on public agencies.

While the Minnesota DOT (MNDOT) recognized that the proposed language would impose additional time and resource burdens on public agencies, it did not perceive this rule as an “unmanageable burden.” Several sign manufacturers and some private citizens appreciated the FHWA's effort to point out that Federal funds are available for up to 100 percent funding of “replacement of signs in this program.” In addition, the American Traffic Safety Services Association (ATSSA), the American Automobile Association (AAA), the American Association of Retired People (AARP), the American Highway Users Alliance (AHUA), and several private citizens agree that the benefits from this rulemaking will outweigh the costs that agencies may experience. However, AASHTO, NACE, and several State and local DOTs believe that the requirements, as proposed in the SNPA, are an unfunded mandate with serious financial implications to their agencies.

The FHWA conducted a study to determine if unfunded mandates, as defined by the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, 109 Stat. 48, March 22, 1995), would be imposed by including requirements in the MUTCD for minimum maintained traffic sign retroreflectivity levels. 2 Based on the analysis, this rulemaking effort does not impose an unfunded mandate. Additionally, because Federal-aid highway dollars are often provided to States to use for these types of sign replacements, this requirement does not rise to the level of an unfunded mandate.

One commenter reviewed the FHWA's report “Maintaining Traffic Sign Retroreflectivity: Impacts on State and Local Agencies (DRAFT)” (1994—15149-06), and suggested that perhaps there was a mathematical error in that report that would mean that the costs incurred by agencies when replacing signs would be above those that can be required from agencies without funding. The FHWA has updated the 1994 draft report with a 2007 version (see footnote # 2). The updated report now includes the costs of overhead and street name signs, which the 1994 version excluded. The updated report concludes that the national impact of including the minimum maintained traffic sign retroreflectivity levels in the MUTCD is approximately $37.5 million over a 10-year implementation period, with a maximum annual impact of $4.5 million in years 1 through 7. This is below the annual $128.1 million unfunded mandate level.

The FHWA has also provided ample phase-in time for agencies to comply. Agencies are already required to have a highway safety program that includes provisions for the upgrading of substandard traffic control devices and installations to achieve conformity with the MUTCD, so this rulemaking does not create additional burdens.

While many counties believe that FHWA should consider a funding stream directly to local jurisdictions for rulemaking activities such as minimum retroreflectivity standards, such funding stream discussions are outside the scope of this rulemaking. Signing programs remain eligible for Federal-aid highway dollars.

(3) Statutory requirements:

Several organizations representing highway users from a safety perspective agree that the language proposed in the SNPA satisfied the statutory requirements to establish a standard for the minimum levels of sign retroreflectivity; however, AASHTO, and several States, commented that Congress did not explicitly indicate that the minimum values for maintaining sign retroreflectivity had to be included in the MUTCD as a Standard. Alternatively, the Advocates for Highway and Auto Safety (AHAS) believe that the language proposed in the SNPA still did not fully satisfy the statutory requirements, which AHAS interprets as requiring the establishment of specific and mandatory minimum levels of retroreflectivity for signs and pavement markings in the MUTCD and an obligation on State and local authorities to maintain those specific minimum values of retroreflectivity. AHAS stated that the intent can only be met by including such requirements in a “standard” statement in the MUTCD, which is defined as one of the “required, mandatory, or specifically prohibitive practice regarding a traffic control device.”

The FHWA includes the reference to minimum levels for sign retroreflectivity in a Standard statement because the statute requires the Secretary to revise the MUTCD to include a standard for minimum levels of retroreflectivity that must be maintained for traffic signs. Under the MUTCD's current organization, the best way to do this is by including it in a STANDARD statement, because Standards represent requirements. 3 In addition, the congressional reference to a standard did not exclude the use of GUIDANCE, OPTION, and SUPPORT statements to help clarify the STANDARD statement of required minimum levels of retroreflectivity that must be maintained, similar to the other sections of the MUTCD.

The FHWA also received comments from the city of Plano, Texas, and the Illinois County Engineers expressing a concern and/or confusion that the language proposed in the SNPA “imbedded” a GUIDANCE statement within a STANDARD, because the STANDARD statement referenced the GUIDANCE statement for minimum retroreflectivity levels.

Based on this concern, and to clarify FHWA's intent, FHWA revises the STANDARD statement to explicitly reference Table 2A-3 Minimum Maintained Retroreflectivity Levels, which contains minimum-maintained retroreflectivity levels for various sign color combinations and types of sign sheeting.

The National Association of Counties (NACo) and NACE suggested adding “recommended” before “minimum level” in describing the retroreflectivity levels shown in Table 2A-3. The FHWA retains the wording “minimum level” in describing the levels shown in Table 2A-3, because the word “recommended” is not appropriate when referencing a Standard.

(4) Table of minimum retroreflectivity levels in the MUTCD.

The ATSSA, AAA, AARP, AHUA, Minnesota and Virginia DOTs, the city of Plano, Texas, sign manufacturers, and many private citizens were in favor of including the table of minimum retroreflectivity levels in the MUTCD. However, many organizations, such as AASHTO, NACo, NACE, and numerous State DOTs, as well as county and local agencies were opposed to the inclusion of the table. Those who opposed including the table in the MUTCD expressed concern over potential litigation that could be brought against public agencies if an individual sign within their jurisdiction was to fall below the minimum maintained levels in the table. The NCUTCD also commented that before any table is inserted into the MUTCD, FHWA should provide substantial clarification regarding the process and frequency for updating or changing the table of retroreflectivity values.

The FHWA believes that including this table in the MUTCD is necessary to satisfy the statutory requirement that the MUTCD be amended to include minimum retroreflectivity levels. Therefore, the FHWA includes Table 2A-3, titled “Minimum Maintained Retroreflectivity Levels” in the MUTCD. The FHWA also believes inclusion of the table will provide clarity and convenience to the users of the MUTCD. In response to the request by the NCUTCD that FHWA clarify the process for updating or changing values in the table, we note that updates or changes to the table would be subject to a public rulemaking process before FHWA could adopt changes to the values of the table in the MUTCD. This process will include notice and opportunity for comment by the public.

Table 2A-3 will be included in the MUTCD as follows (note that the values in this table have not changed during the rulemaking process):

This document contains amendments to the regulations under section 904 relating to the application of separate foreign tax credit limitations to certain categories of income under section 904(d), as amended by the AJCA. Prior to the effective date of the AJCA amendments (that is, for taxable years beginning before January 1, 2007 (“pre-2007 taxable years”)), the foreign tax credit limitation applied separately to the following categories of income: passive income, high withholding tax interest, financial services income, shipping income, certain dividends from a DISC or former DISC, taxable income attributable to certain foreign trade income, certain distributions from a FSC or former FSC, and any other income not described in this sentence (“general limitation income”). Other provisions of the Code that subject other categories of income to separate foreign tax credit limitations were not amended by the AJCA. See, for example, sections 56(g)(4)(C)(iii)(IV), 245(a)(10), 865(h), 901(j), and 904(h)(10); see also H.R. Rep. No. 108-755, at 383 (October 7, 2004).

Effective for taxable years beginning after December 31, 2006 (“post-2006 taxable years”), the AJCA reduced the number of section 904(d) separate categories to two categories for “passive category income” and “general category income.” New section 904(d)(2)(A) defines passive category income as passive income and specified passive category income, and general category income as income other than passive category income. In addition, new section 904(d)(2)(C) and (D) provides rules concerning the treatment of financial services income and companies.

These temporary regulations modify the regulations under section 904 to reflect the new separate categories for passive category income and general category income, and provide transition rules for the treatment of earnings and profits and foreign income taxes of controlled foreign corporations and noncontrolled section 902 corporations accumulated in pre-2007 taxable years, overall foreign losses and separate limitation losses under section 904(f), and the carryover and carryback of excess foreign taxes under section 904(c).

Section 904(d)(2)(K)(i), as added by the AJCA, provides that excess taxes carried from a pre-2007 taxable year to a post-2006 taxable year shall be assigned to the post-2006 separate categories based on where the related income would have been assigned had such taxes been paid or accrued in a post-2006 taxable year.

Consistent with this statutory amendment, § 1.904-2T(i)(1)(i) provides that if a taxpayer carries over to a post-2006 taxable year any excess taxes that were paid, accrued, or deemed paid with respect to income in any pre-2007 separate category, the excess taxes are assigned to the appropriate post-2006 separate category as if the taxes had been paid or accrued in a post-2006 taxable year. For example, to the extent that any taxes were related to income that would have been treated as high-taxed income under section 904(d)(2)(B)(iii)(II), such taxes will be assigned to the post-2006 separate category for general category income.

Because the IRS and the Treasury Department recognize that taxpayers may face difficulties in reconstructing excess taxes accounts, § 1.904-2T(i)(1)(ii) of the temporary regulations provides a safe harbor. Under the safe harbor, a taxpayer may assign excess taxes in any pre-2007 separate category, except the passive category, to the post-2006 separate category for general category income. The safe harbor provides that excess taxes in the pre-2007 passive category will be assigned to the post-2006 separate category for passive category income.

Section 904(d)(2)(K)(ii), as added by the AJCA, authorizes the Secretary to issue regulations for allocating carrybacks of excess taxes with respect to income from a post-2006 taxable year to a pre-2007 taxable year for purposes of allocating the excess taxes among the separate categories in effect for the taxable year to which carried. The IRS and the Treasury Department believe that it is appropriate to allow a taxpayer to reconstruct separate categories of income earned and excess taxes paid or accrued in its first post-2006 taxable year as if the pre-2007 rules applied. Accordingly, § 1.904-2T(i)(2)(i) provides that if a taxpayer carries back excess taxes paid, accrued, or deemed paid with respect to income in the post-2006 separate category for passive category income or general category income to a pre-2007 taxable year, the excess taxes are assigned to the appropriate pre-2007 separate category or categories as if the taxes had been paid or accrued in a pre-2007 taxable year. Section 1.904-2T(i)(2)(ii) provides that a taxpayer may, in lieu of reconstruction, assign excess taxes in the separate category for general category income to the pre-2007 general category, and excess taxes in the separate category for passive category income to the pre-2007 passive category.

New section 904(d)(2)(A)(i) defines passive category income as passive income and specified passive category income. New section 904(d)(2)(B)(i) generally defines passive income as “any income received or accrued by any person which is of a kind which would be foreign personal holding company income (as defined in section 954(c)).” Passive income includes amounts includible in gross income under section 1293, except as provided in section 904(d)(3)(H) (providing that look-through treatment applies to an amount included in gross income under section 1293 if the passive foreign investment company is a controlled foreign corporation (CFC) and the taxpayer is a United States shareholder in such CFC) and section 904(d)(2)(E)(ii) (providing that an inclusion under section 1293 with respect to a foreign corporation that is a noncontrolled section 902 corporation with respect to the taxpayer shall be treated as a dividend from such corporation). See section 904(d)(2)(B)(ii). Passive income does not include export financing interest and high-taxed income. See section 904(d)(2)(B)(iii). New section 904(d)(2)(B)(iv) provides that in determining whether income is of a kind which would be foreign personal holding company income, the rules of section 864(d)(6) apply only in the case of income of a CFC.

New section 904(d)(2)(B)(v) defines specified passive category income as dividends from a DISC or former DISC (as defined in section 992(a)) to the extent such dividends are treated as income from sources without the United States, taxable income attributable to foreign trade income (FTI) within the meaning of section 923(b), and distributions from a FSC or former FSC out of earnings and profits attributable to FTI (within the meaning of section 923(b)) or interest or carrying charges (as defined in section 927(d)(1)) derived from a transaction which results in FTI (as defined in section 923(b)).

The temporary regulations reflect the new definitions of passive category income, passive income, and specified passive category income. Section 1.904-4T(b)(3) incorporates the definition of specified passive category income in section 904(d)(2)(B)(v), which includes dividends from DISCs, distributions from FSCs, and FTI. Because these types of income constitute specified passive category income and not passive income, such income can never qualify as financial services income that could be treated as general category income.

The final regulations at § 1.904-5(h)(3) currently provide that gain from the sale of a partnership interest is assigned to the separate category for passive income. Section 954(c)(4), which was enacted by the AJCA, provides a look-through rule for sales of 25-percent-owned partnerships. Because the definition of passive income in section 904(d)(2)(B) refers to section 954(c), these temporary regulations revise § 1.904-5(h)(3) to reflect that gain on the sale of a partnership interest by a 25-percent partner is assigned to the separate category for general category income, to the extent that, under the section 954(c)(4) look-through rule, the gain is not classified as foreign personal holding company income.

Section 904(d)(2)(C)(i), as amended by the AJCA, provides that financial services income shall be treated as general category income in the case of a member of a financial services group and any other person predominantly engaged in the active conduct of a banking, insurance, financing or similar business. New section 904(d)(2)(C)(ii) defines a financial services group as “any affiliated group (as defined in section 1504(a) without regard to paragraphs (2) and (3) of section 1504(b)) which is predominantly engaged in the active conduct of a banking, insurance, financing or similar business.” In determining whether a group is so engaged, only the income of members of the group that are U.S. corporations or CFCs in which U.S. corporations own, directly or indirectly, at least 80 percent of the vote or value of the stock are taken into account. Section 904(d)(2)(C)(iii) provides that the Secretary “shall by regulation specify for purposes of this subparagraph the treatment of financial services income received or accrued by partnerships and by other pass-thru entities which are not members of a financial services group.”

Section 904(d)(2)(D), as amended by the AJCA, generally adopts the definition of financial services income of former section 904(d)(2)(C)(i) and (ii), except that it includes neither the rule providing that financial services income includes export financing interest that would be high withholding tax interest, nor the exception in former section 904(d)(2)(C)(iii) for high withholding tax interest and export financing interest that would not be high withholding tax interest. New section 904(d)(2)(D)(i) defines financial services income as “any income which is received or accrued by any person predominantly engaged in the active conduct of a banking, insurance, financing or similar business,” and which is either described in section 904(d)(2)(D)(ii) (which provides a general description of financial services income) or is passive income (determined without regard to whether it is high-taxed). An item of income satisfies the general description of financial services income if such income is (1) derived in the active conduct of a banking, financing, or similar business; (2) derived from the investment by an insurance company of its unearned premiums or reserves ordinary and necessary for the proper conduct of its insurance business; or (3) of a kind which would be insurance income as defined in section 953(a) determined without regard to section 953(a)(1)(A), which limits insurance income to income from countries other than the country in which the corporation was created or organized. See section 904(d)(2)(D)(ii).

The final regulations at § 1.904-4(e) provide rules concerning the separate category for financial services income. Section 1.904-4(e)(1) provides a general definition of financial services income. Section 1.904-4(e)(2) provides an exclusive list describing items of income that are treated as active financing income. Section 1.904-4(e)(3)(i) provides that a person is considered to be predominantly engaged in the active financing business for any taxable year if for that year at least 80 percent of its gross income is active financing income, as defined in § 1.904-4(e)(2).

On June 26, 2007, the IRS and the Treasury Department issued Notice 2007-58, 2007-29 IRB 88 (see § 601.601(d)(2)(ii)( b )), in which the IRS and the Treasury Department announced that in light of the amendments to the foreign tax credit rules in the AJCA, they were reviewing the provisions relating to financial services income, active financing income, and financial services entities in § 1.904-4(e). The Notice also solicited comments relating to these definitions. The IRS and the Treasury Department received several written comments and are continuing to study this issue. Accordingly, the rules of § 1.904-4(e) of the current final regulations are not being revised at this time.

To reflect the reduction of separate categories, §§ 1.904-4(d) (definition of high withholding tax interest), 1.904-4(f) (definition of shipping income), and 1.904-4(g) (treatment of dividends from a noncontrolled section 902 corporation) are reserved.

It should be noted that the separate category for shipping income remained effective for taxable years beginning before January 1, 2007. Section 415 of the AJCA repealed the foreign base company shipping income rules of section 954(f), effective for taxable years of foreign corporations beginning after December 31, 2004, and taxable years of U.S. shareholders in which or with which such taxable years of the foreign corporations end. Notice 2007-13, 2007-5 IRB 410, stated that in light of the repeal of section 954(f), § 1.954-1(e)(4)(i)(A) (providing a trump rule for income that qualifies as foreign base company shipping income) is obsolete, and § 1.954-6 (providing rules for determining foreign base company shipping income) is effective only for purposes of applying the rules for the withdrawal of previously excluded subpart F income from qualified investments. However, a technical correction in the Tax Increase Prevention and Reconciliation Act of 2005 confirmed that the separate category for shipping income is defined by reference to shipping income as defined in section 954(f) prior to its repeal. Accordingly, the subpart F shipping regulations continued to apply for section 904(d) purposes, and the separate category for shipping income continued to exist, through the end of taxable years beginning before 2007. See § 601.601(d)(2)(ii)( b ).

The final regulations at §§ 1.904-4(h) (definition of and rules relating to treatment of export financing interest), 1.904-4(i) (concerning the interaction of section 907(c) and § 1.904-4), 1.904-4(j) (concerning DASTM gain or loss), 1.904-4(l) (priority rules for income meeting the definitions of more than one pre-2007 separate category), and 1.904-5 have been revised to reflect the new separate categories for passive category income and general category income.

If a dividend is paid, or an amount is included in the gross income of a U.S. shareholder under section 951, out of post-1986 undistributed earnings (or pre-1987 accumulated profits) of a foreign corporation attributable to more than one separate category, the amount of foreign income taxes deemed paid by the domestic shareholder or upper-tier corporation under section 902 or 960 is computed separately with respect to the post-1986 undistributed earnings (or pre-1987 accumulated profits) in each separate category out of which the dividend is paid or to which the subpart F inclusion is attributable. See §§ 1.902-1T(d)(1); 1.960-1(i)(1). The temporary regulations implement the reduction of separate categories under the AJCA by recharacterizing the foreign corporation's pools of post-1986 undistributed earnings and post-1986 foreign income taxes in the pre-2007 separate categories as pools of post-1986 undistributed earnings and post-1986 foreign income taxes in the separate categories for passive category income and general category income on the first day of the foreign corporation's first post-2006 taxable year.

Section 1.904-7T(g)(2) of the temporary regulations provides that in the case of a CFC or noncontrolled section 902 corporation that has pools of post-1986 undistributed earnings and post-1986 foreign income taxes in any pre-2007 separate category, the earnings and foreign income taxes that exist as of the end of the foreign corporation's last pre-2007 taxable year are treated as if they were accumulated and paid during a period when the post-2006 rules applied, including the rules under section 904(d)(3)(E). Recharacterized amounts of earnings and taxes are taken into account in determining the opening balance of the post-1986 undistributed earnings and post-1986 foreign income taxes pools in each of the foreign corporation's post-2006 separate categories on the first day of the foreign corporation's first post-2006 taxable year.

Section 1.904-7T(g)(3)(i) of the temporary regulations provides that in order to substantiate the recharacterization of the pools of post-1986 undistributed earnings and post-1986 foreign income taxes in any pre-2007 separate category, the pools must be reconstructed for each pre-2007 taxable year, beginning with the first year in which earnings were accumulated in the pool with respect to each such pre-2007 separate category. Earnings are treated as if they were accumulated in a period when the post-2006 rules applied, taking into account earnings distributed and taxes deemed paid pro rata from the amounts that were added to the pools in each separate category in subsequent pre-2007 taxable years. As reconstructed, the pools of earnings and taxes in a pre-2007 separate category are assigned to the post-2006 separate categories on the first day of the foreign corporation's first post-2006 taxable year. (A hovering deficit is subject to the same rules for purposes of identifying the post-2006 separate categories to which the deficit is assigned, but the hovering deficit is not included in determining the opening balance of the pool. See § 1.367(b)-7.)

Similar rules apply to assign to the post-2006 separate categories amounts of previously-taxed earnings and profits described in section 959(c)(1)(A), accumulated deficits, and pre-1987 accumulated profits in pre-2007 separate categories. For example, if there is an accumulated deficit in any pre-2007 separate category as of the end of a CFC's or noncontrolled section 902 corporation's last pre-2007 taxable year, the deficit and associated taxes (if any) are treated in the same manner as if there had been positive accumulated earnings and taxes in the separate category, that is, the deficit and taxes are treated as if the post-2006 rules applied in the year the deficit was accumulated and the taxes were paid. The earnings and deficits in earnings making up the accumulated deficit are assigned to the post-2006 separate categories based on where those items of income and expenses or losses would have been assigned had they been incurred when the post-2006 rules were in effect. As reconstructed, the deficit is taken into account in determining the opening balance of the post-1986 undistributed earnings pool in the appropriate post-2006 separate category or categories on the first day of the foreign corporation's first post-2006 taxable year.

The IRS and the Treasury Department recognize that shareholders may face difficulties in reconstructing historical accumulated earnings and taxes accounts of a foreign corporation. Therefore, a reasonable approximation of the amounts properly included in the post-2006 separate categories, based on available records obtained through reasonable, good-faith efforts by the taxpayer, will adequately substantiate reconstruction.

For pools of undistributed earnings and foreign income taxes in the pre-2007 separate categories of CFCs and noncontrolled section 902 corporations, the temporary regulations provide that a taxpayer may elect to apply one of two safe harbors in lieu of reconstructing historical accumulated earnings and taxes accounts of the foreign corporation. See § 1.904-7T(g)(3)(ii). The safe harbors apply to allocate post-1986 undistributed earnings (as well as deficits and previously-taxed earnings, if any) and pre-1987 accumulated profits and associated foreign income taxes in a foreign corporation's pre-2007 separate categories. Amounts allocated to the post-2006 separate categories under a safe harbor are taken into account in computing the opening balance of the post-1986 undistributed earnings and post-1986 foreign income taxes pools, as well as pre-1987 accumulated profits and pre-1987 foreign income taxes, in each of the foreign corporation's post-2006 separate categories on the first day of the foreign corporation's first post-2006 taxable year.

Under § 1.904-7T(g)(3)(ii)(B)( 1 ) of the temporary regulations, the safe harbor for post-1986 undistributed earnings and post-1986 foreign income taxes (as well as deficits and previously-taxed earnings, and pre-1987 accumulated profits, if any) in a CFC's or noncontrolled section 902 corporation's pre-2007 separate category for passive income, certain dividends from a DISC or former DISC, taxable income attributable to certain foreign trade income, or certain distributions from a FSC or former FSC provides that such earnings and taxes are allocated to the post-2006 separate category for passive category income. Under § 1.904-7T(g)(3)(ii)(B)( 2 ), the safe harbor for post-1986 undistributed earnings and post-1986 foreign income taxes (as well as deficits, previously-taxed earnings, and pre-1987 accumulated profits, if any) in a CFC's or noncontrolled section 902 corporation's pre-2007 separate category for financial services income, shipping income, or general limitation income provides that such earnings and taxes are allocated to the post-2006 separate category for general category income.

Under § 1.904-7T(g)(3)(ii)(B)( 3 ), the safe harbor for post-1986 undistributed earnings and post-1986 foreign income taxes (as well as deficits, previously-taxed earnings, and pre-1987 accumulated profits, if any) in a CFC's or noncontrolled section 902 corporation's pre-2007 separate category for high withholding tax interest generally provides that such earnings and taxes are allocated to the post-2006 separate category for passive category income. However, § 1.904-7T(g)(3)(ii) (B)( 4 ) provides that if a CFC has positive post-1986 undistributed earnings or pre-1987 accumulated profits and foreign income taxes attributable to high-withholding tax interest, such earnings and taxes are allocated to the post-2006 separate category for general category income if the earnings would qualify as income subject to high foreign taxes under section 954(b)(4) if the entire amount of earnings in the pre-2007 pool in the separate category for high withholding tax interest were treated as a net item of income subject to the rules of § 1.954-1(d). If the earnings would not qualify as income subject to high foreign taxes under section 954(b)(4), the earnings and taxes are allocated to the post-2006 separate category for passive category income. The IRS and the Treasury Department believe that, given that high withholding tax interest generally constitutes subpart F income unless it is high-taxed, this safe harbor is an appropriate alternative to reconstructing earnings and taxes in a CFC's separate category for high withholding tax interest.

A second safe harbor is provided under § 1.904-7T(g)(3)(ii)(C) which allows taxpayers to allocate the post-1986 undistributed earnings and post-1986 foreign taxes (and deficits, previously-taxed earnings, and pre-1987 accumulated profits, if any) in a CFC's or noncontrolled section 902 corporation's pre-2007 pools following the principles of the safe harbor method described in the transition rules under § 1.904-7T(f)(4)(ii) for post-1986 undistributed earnings and post-1986 foreign income taxes in the non-look-through pool of a controlled foreign corporation or noncontrolled section 902 corporation.

To allocate pools of undistributed earnings (and deficits, previously-taxed earnings, and pre-1987 accumulated profits, if any) and foreign income taxes in the pre-2007 separate categories of a CFC or noncontrolled section 902 corporation to the foreign corporation's post-2006 separate categories, the temporary regulations at § 1.904-7T(g)(3)(iii) provide that a taxpayer may elect to apply a safe harbor in lieu of reconstruction on a separate-category-by-separate-category basis. If a taxpayer elects to apply a safe harbor to allocate pre-2007 pools of more than one pre-2007 separate category of a foreign corporation, the same safe harbor (that is, the general safe harbor described in § 1.904-7T(g)(3)(ii)(B) or the interest apportionment safe harbor described in § 1.904-7T(g)(3)(ii)(C)) shall then apply to allocate the pre-2007 pools of all of the foreign corporation's pre-2007 separate categories for which the taxpayer elects to apply a safe harbor method in lieu of reconstructing the pre-2007 pools.

The transition rules described in Sections V.A. and B in this preamble apply to post-1986 undistributed earnings and post-1986 foreign income taxes (as well as deficits, previously- taxed earnings, and pre-1987 accumulated profits, if any) not only of a first-tier foreign corporation but also of lower-tier foreign corporations as well. See § 1.904-7T(g)(5). Accordingly, to the extent a lower-tier foreign corporation has pools of post-1986 undistributed earnings (attributable to amounts not yet included in gross income by the U.S. shareholder) and foreign income taxes in a pre-2007 separate category, the rules of § 1.904-7T(g) apply in treating the earnings and taxes as the opening balance of the foreign corporation's pools of post-1986 undistributed earnings and post-1986 foreign income taxes in the appropriate post-2006 separate category or categories on the first day of the foreign corporation's first post-2006 taxable year. Similarly, pre-1987 accumulated profits and pre-1987 foreign income taxes in a pre-2007 separate category of a lower-tier foreign corporation are allocated to the appropriate post-2006 separate categories in accordance with the rules of § 1.904-7T(g).

Because the AJCA reduced the number of section 904(d) separate categories from eight to two for post-2006 taxable years, the temporary regulations provide transition rules for recapture in a post-2006 taxable year of an overall foreign loss (OFL) or separate limitation loss (SLL) in a pre-2007 separate category that offset U.S. source income or income in another pre-2007 separate category, respectively, in a pre-2007 taxable year.

Section 1.904(f)-12T(h)(1) of the temporary regulations provides that to the extent a taxpayer has an OFL or SLL at the end of the taxpayer's last pre-2007 taxable year in the pre-2007 separate category for passive income, certain dividends from a DISC or former DISC, taxable income attributable to certain foreign trade income, or certain distributions from a FSC or former FSC, such OFL or SLL is allocated on the first day of the taxpayer's next taxable year to the taxpayer's post-2006 separate category for passive category income. Accordingly, such OFL or SLL will be subject to recapture in subsequent taxable years out of the taxpayer's passive category income. Where a taxpayer has an SLL in some other pre-2007 separate category (for example, a general limitation SLL) that offset passive income, certain dividends from a DISC or former DISC, taxable income attributable to certain foreign trade income, or certain distributions from a FSC or former FSC, the SLL will be recaptured in subsequent taxable years as passive category income.

Section 1.904(f)-12T(h)(2) of the temporary regulations provides that to the extent a taxpayer has an OFL or SLL at the end of the taxpayer's last pre-2007 taxable year in the pre-2007 separate category for financial services income, shipping income, or general limitation income, such OFL or SLL is allocated on the first day of the taxpayer's next taxable year to the taxpayer's post-2006 separate category for general category income. Accordingly, such OFL or SLL will be subject to recapture in subsequent taxable years out of the taxpayer's general category income. Where a taxpayer has an SLL in some other pre-2007 separate category (for example, a passive SLL) that offset financial services income, shipping income, or general limitation income, the SLL will be recaptured in subsequent taxable years as general category income.

Section 1.904(f)-12T(h)(3) provides that to the extent a taxpayer has an OFL or SLL at the end of the taxpayer's last pre-2007 taxable year in the pre-2007 separate category for high withholding tax interest, the allocation of such OFL or SLL to the taxpayer's post-2006 separate categories depends on the taxpayer's allocation of excess taxes in the high withholding tax interest loss category for carryover purposes. Accordingly, if the excess taxes are assigned to the appropriate post-2006 separate category or categories based on reconstruction (that is, treating the taxes as if they had been paid or accrued in a post-2006 taxable year under § 1.904-2T(i)(1)(i)), the OFL or SLL is allocated pro rata to the taxpayer's post-2006 separate categories based on the proportions in which the excess high withholding taxes are assigned to the post-2006 separate categories. If instead the taxpayer elects to assign the excess taxes to the post-2006 separate category for general category income under the safe harbor described in § 1.904-2T(i)(1)(ii), the OFL or SLL is also allocated to the same post-2006 general category. If there are no excess taxes in the loss category that are carried over to post-2006 taxable years, an OFL or SLL in the pre-2007 separate category for high withholding tax interest is allocated to the post-2006 separate category for passive category income.

Similarly, where a taxpayer has an SLL in a pre-2007 separate category that offset high withholding tax interest, the SLL will be recaptured in subsequent taxable years pro rata as income in the post-2006 separate categories for general category income and passive category income based on how the taxpayer allocated excess taxes in the pre-2007 separate category for high withholding tax interest under § 1.904-2T(i)(1). If no excess taxes in the pre-2007 separate category for high withholding tax interest are carried over to post-2006 taxable years, the SLL will be recaptured in subsequent taxable years as income in the post-2006 separate category for passive category income.

Section 1.904-12T(h)(4) provides that after application of paragraphs (1) through (3), any separate limitation loss account allocated to the post-2006 separate category for passive category income for which income is to be recaptured as passive category income will be eliminated, since “recapture” to and from the same category would be meaningless. For the same reason, any separate limitation loss accounts allocated to the post-2006 separate category for general category income for which income is to be recaptured as general category income will be eliminated.

Section 1.904-12T(h)(5) provides that taxpayers may in the alternative determine the treatment of OFLs and SLLs in pre-2007 separate categories following the principles of the transition rules of § 1.904-12T(g)(1) and (2) concerning the treatment of OFLs and SLLs in the separate category for dividends from a noncontrolled section 902 corporation.

The effective date for these regulations is December 21, 2007. The temporary regulations apply to taxable years of United States taxpayers beginning after December 31, 2006, and ending on or after December 21, 2007, and to taxable years of a foreign corporation which end with or within a taxable year of its domestic corporate shareholder beginning after December 31, 2006, and ending on or after December 21, 2007.

It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. For the applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6), refer to the Special Analyses section of the preamble of the cross-referenced notice of proposed rulemaking published in this issue of the Federal Register . Pursuant to section 7805(f) of the Internal Revenue Code, this regulation has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small businesses.

The principal author of these regulations is Jeffrey L. Parry of the Office of Associate Chief Counsel (International). However, other personnel from the IRS and Treasury Department participated in their development.

Section 402 of the AJCA enacted new section 904(g) of the Code to provide for the recharacterization of U.S. source income as foreign source income where a taxpayer's foreign tax credit limitation has been reduced as a result of an overall domestic loss. See Public Law 108-357, 118 Stat. 1418 (October 22, 2004), as corrected by the Gulf Opportunity Zone Act of 2005, Public Law 109-135, 119 Stat. 2577 (December 22, 2005). The primary reason for enacting these provisions was “to create parity in the treatment of overall domestic losses and overall foreign losses in order to prevent the double taxation of income.” H.R. Rep. No. 108-548, at 187 (June 16, 2004); see also S. Rep. No. 108-192, at 19-20 (November 7, 2003).

When a U.S. source loss is allocated to reduce foreign source income, the foreign tax credit limitation is reduced for the taxable year, which may result in excess foreign tax credits. Any such excess foreign taxes may be credited, if at all, in a subsequent (or the preceding) taxable year. In addition, U.S. source taxable income in a subsequent taxable year is not offset by the U.S. source loss allocated to foreign source income in the prior taxable year, and U.S. tax on such U.S. source taxable income cannot be offset by the foreign tax credit carryforward. This may lead to the double taxation of foreign source income over time. The overall domestic loss recapture provisions amend this result.

Section 904(g)(1) generally provides that a portion of a taxpayer's U.S. source income is recharacterized as foreign source income in an amount equal to the lesser of (1) the amount of the overall domestic loss for years prior to such taxable year and (2) fifty percent of the taxpayer's U.S. source income for such taxable year. Section 904(g)(2) generally defines an overall domestic loss for this purpose as any domestic loss to the extent it offsets foreign source taxable income for the current year or any preceding taxable year by reason of a carryback. Section 904(g)(4) provides that the Secretary of the Treasury shall prescribe such regulations as may be necessary to coordinate the overall domestic loss provisions with the overall foreign loss provisions.

Similar rules were first enacted as a part of the Tax Reform Act of 1976, Public Law 94-455, 90 Stat. 1531 (1976), in section 904(f) to deal with overall foreign losses. Under the overall foreign loss provisions, a portion of foreign source taxable income earned after an overall foreign loss year is recharacterized as U.S. source taxable income for foreign tax credit purposes. Unless a taxpayer elects a higher percentage, generally no more than 50 percent of the foreign source taxable income earned in any particular taxable year is recharacterized as U.S. source taxable income. Recapturing the overall foreign loss reduces the foreign tax credit limitation in one or more years following an overall foreign loss.

The separate limitation loss provisions of section 904(f)(5) were added by the Tax Reform Act of 1986, Public Law 99-514, 100 Stat. 2085 (1986) (the 1986 Act) and amended by the Technical and Miscellaneous Revenue Act of 1988, Public Law 100-647, 102 Stat. 3342 (1988). Other amendments to the overall foreign loss provisions were made by the AJCA as well.

Regulations addressing overall foreign losses under section 904(f) were published in the Federal Register (52 FR 31992) on August 25, 1987 (the 1987 regulations) and updated by regulations published in the Federal Register (71 FR 24516) on April 25, 2006 (the 2006 regulations). Additional guidance was provided in Notice 89-3, 1989-1 CB 623, regarding ordering rules for the allocation of net operating losses, overall foreign losses, and separate limitation losses; the recapture of overall foreign losses and separate limitation losses; and the allocation of U.S. source losses. The section 904(f) regulations have not been amended to reflect changes to the Code since the Tax Reform Act of 1976 or to incorporate the rules of Notice 89-3. See § 601.601(d)(2)(ii)( b ).

These temporary regulations provide guidance needed to comply with enactment of the overall domestic loss regime, as well as provide updated guidance with respect to overall foreign losses and separate limitation losses.

The temporary regulations include rules in §§ 1.904(g)-1T and 1.904(g)-2T which address the establishment, maintenance, and recapture of overall domestic loss accounts.

Section 1.904(g)-1T(b)(1) provides that taxpayers must establish overall domestic loss accounts for an overall domestic loss. It further provides that a separate overall domestic loss account must be maintained for each separate category of foreign source income that is offset by a domestic loss.

Section 1.904(g)-1T(b)(2) explains when an overall domestic loss is sustained. Generally, an overall domestic loss is treated as sustained in the later of the taxable years in which the domestic loss is incurred or the foreign source income offset by the domestic loss is earned. Accordingly, in the case of a domestic loss that is carried back to offset foreign source income in a prior taxable year in which the taxpayer elects to credit foreign taxes, the resulting overall domestic loss is treated as sustained in the taxable year the domestic loss is incurred, not in the prior taxable year in which the domestic loss offsets foreign source income. In the case of a domestic loss that is carried forward to offset foreign source income in a later taxable year, however, the overall domestic loss is treated as sustained in the year in which the domestic loss offsets foreign source income, not the earlier year in which the domestic loss is incurred. Accordingly, if a taxpayer incurs a domestic loss in a pre-2007 taxable year, and the loss is carried forward as part of a net operating loss and applied to offset foreign source income in a post-2006 taxable year, the resulting overall domestic loss is treated as sustained in the post-2006 taxable year.

Section 1.904(g)-1T(c) provides that an overall domestic loss is sustained when a domestic loss offsets foreign source taxable income in the same taxable year or a preceding taxable year by reason of a carryback, provided the taxpayer has elected to take a credit for its foreign taxes in the year of the offset. A domestic loss is the amount by which U.S. source gross income is exceeded by deductions properly allocated and apportioned thereto. See § 1.904(g)-1T(c).

Section 1.904(g)-1T(d) describes additions to overall domestic loss accounts. This includes any overall domestic losses of the taxpayer, as determined above, as well as any allocation from another taxpayer of an overall domestic loss account under § 1.1502-9T, described in Part V of this preamble, and certain adjustments for capital gains and losses. Section 1.904(g)-1T(e) describes reductions to overall domestic loss accounts, including reductions for recaptured amounts and any allocation to another taxpayer of an overall domestic loss account under § 1.1502-9T.

Section 1.904(g)-2T provides that overall domestic losses are recaptured by treating a portion of a taxpayer's U.S. source taxable income as foreign source income. If the taxpayer has overall domestic loss accounts attributable to more than one separate category, the recharacterized income will be allocated among those categories on a pro rata basis. The amount of U.S. source income subject to recapture is the lesser of the aggregate balance in the overall domestic loss account, or fifty percent of the taxpayer's U.S. source taxable income. Unlike the overall foreign loss recapture provisions in section 904(f), section 904(g) does not permit a taxpayer to elect to recharacterize more than fifty percent of its U.S. source taxable income. Recapture continues until the balance in the overall domestic loss account has been reduced to zero.

As discussed below, the 1987 regulations do not reflect the enactment of the separate limitation loss provisions of section 904(f)(5) as part of the 1986 Act. These temporary regulations include new provisions regarding the establishment and recapture of separate limitation loss accounts. Section 1.904(f)-7T provides that taxpayers must establish a separate limitation loss account with respect to a separate category to the extent a foreign source loss in that category offsets foreign source income in another separate category. This section also provides definitions and rules relating to the maintenance of these accounts.

Section 1.904(f)-8T provides rules for the recapture of separate limitation loss accounts. Separate limitation loss accounts are recaptured by recharacterizing a portion of the foreign source income in the separate category with the loss account as income in the separate category in which foreign source income of a prior year was offset to create the loss account. The amount of foreign source income subject to recharacterization is the lesser of the balance in a separate limitation loss account or the amount of foreign source income for the taxable year in that same separate category. There is no fifty-percent limitation with respect to separate limitation loss account recapture. If there is more than one separate limitation loss account in a single separate category and the aggregate balance in all those loss accounts exceeds the income in the separate category, income is recharacterized in proportion to the balance in each account. Recapture with respect to a particular separate limitation loss account continues until the balance in the separate limitation loss account has been reduced to zero.

The 1987 regulations set forth rules governing the determination and maintenance of overall foreign loss accounts, as well as the recapture of overall foreign losses and the allocation of net operating losses and net capital losses. The regulations do not reflect changes made to the overall foreign loss rules of section 904(f) as part of the 1986 Act and certain subsequent changes to section 904(f), such as the enactment in the AJCA of section 904(f)(3)(D), addressing dispositions of stock in controlled foreign corporations. These temporary regulations update the existing regulations to take into account certain changes made to the overall foreign loss rules since the 1987 regulations were promulgated.

Section 1.904(f)-1(a) states that the 1987 regulations apply to taxpayers that sustain overall foreign losses (as defined in paragraph (c) of that section) in taxable years beginning after December 31, 1975. However, paragraph (c) of that section only defines overall foreign losses for taxable years beginning after December 31, 1982, and before January 1, 1987.

While it is beyond the scope of this project to undertake a full revision of the 1987 regulations to reflect all intervening statutory changes made to section 904(f), the Treasury Department and the IRS believe that as part of this regulations project the principles of the 1987 regulations should be extended to apply to overall foreign losses sustained in taxable years beginning after December 31, 1986, modified so as to take into account statutory amendments. New § 1.904(f)-1T(a)(2) adopts such a rule.

The Treasury Department and the IRS believe the application of the fifty-percent limitation on the amount of foreign source income subject to recapture in a taxable year under the overall foreign loss recapture provisions also needs to be clarified as part of this regulations project. Section 1.904(f)-2(c)(1) provides that the amount of foreign source taxable income subject to recapture in a taxable year is the lesser of the balance in the applicable overall foreign loss account in a given separate category or fifty percent of the taxpayer's foreign source taxable income in that same separate category. For example, recapture of a general category overall foreign loss would be limited to the lesser of the balance in the general category overall foreign loss account or fifty percent of the general category taxable income for the taxable year.

The legislative history to the 1986 Act clarifies that the fifty-percent limitation is to be applied to the full amount of the taxpayer's foreign source income, not on a separate-category-by-separate-category basis. See H.R. Conf. Rep. No. 99-841 at II-590 (1986). This clarification was incorporated by reference into Notice 89-3, paragraph 3(b), and reflected in instructions to Form 1118 (Foreign Tax Credit—Corporations). The temporary regulations modify the fifty-percent limitation to reflect this clarification.

Section 1.904(f)-2T(c)(1) provides that the foreign source taxable income subject to recharacterization is the lesser of the aggregate amount of maximum potential recapture in all overall foreign loss accounts or fifty percent of the taxpayer's total foreign source income. If the aggregate amount of maximum potential recapture in all overall foreign loss accounts exceeds fifty percent of the taxpayer's total foreign source taxable income, foreign source taxable income in each separate category with an overall foreign loss account is recharacterized in an amount equal to the separate category's allocable portion of the section 904(f)(1) recapture amount. The maximum potential recapture from any separate category is the lesser of the balance in the overall foreign loss account or the foreign source taxable income for the current year in the same separate category.

Other revisions to the 1987 regulations include updating provisions to reflect statutory and regulatory changes affecting capital gains and losses, in particular those provisions that were superseded by the regulations promulgated under section 904(b) in TD 9141 (July 20, 2004). In addition, § 1.904(f)-3 is made obsolete by the ordering rules added in § 1.904(g)-3T and is removed accordingly.

Under the specific grant of regulatory authority in section 904(g)(4), these temporary regulations provide ordering rules for coordinating the section 904(f) overall foreign loss and separate limitation loss provisions and the section 904(g) overall domestic loss provisions.

Section 1.904(g)-3T provides ordering rules for the allocation of net operating losses, net capital losses, U.S. source losses, and separate limitation losses, and the recapture of separate limitation losses, overall foreign losses, and overall domestic losses. While these rules generally follow the ordering rules set forth in Notice 89-3, some changes were appropriate to take into account the enactment of the overall domestic loss provisions.

These temporary regulations generally follow the rules of Notice 89-3 for the carryover and carryback of net operating losses. Under § 1.904(g)-3T(b)(1), net operating losses that are carried back to a prior year are allocated to income in the carryback year in accordance with the allocation rules for absorbing and allocating net operating loss carryovers. However, the income against which the net operating loss is allocated is the income after application of the overall foreign loss, separate limitation loss and overall domestic loss allocation and recapture rules for the carryback year.

The rules for net operating loss carryforwards vary for full and partial carryovers of the net operating loss. In the case of a full net operating loss carryover, the U.S. source losses and foreign losses in separate categories that are part of the net operating loss are carried forward and combined with U.S. source income or loss and foreign source income or loss in the same categories as the respective portions of the net operating loss.

In the case of a partial net operating loss carryover, several steps apply. In applying these steps it is important to distinguish the net operating loss, which is the total net operating loss, and the net operating loss carryover, which is the portion of the net operating loss that is absorbed in the carryover year. First, the U.S. source portion of the net operating loss (but not in excess of the net operating loss carryover) is carried over to the extent of U.S. source income in the carryover year. Second, the separate limitation losses that are part of the net operating loss are tentatively carried to the extent of taxable income in the same separate category. This amount is tentative because the total amount of matching net operating losses and separate limitation income may exceed the net operating loss carryover amount remaining after the first step. To the extent the total amount of these tentative loss carryovers is in fact limited by the amount of the remaining net operating loss carryover, then the tentative carryovers in each separate category are reduced on a pro rata basis so that their sum equals the amount of the remaining net operating loss carryover amount.

Third, any net operating loss carryover remaining after the first and second steps is carried over proportionately from any remaining loss in each separate category and combined with foreign source loss, if any, in the same separate categories in the carryover year. Finally, any remaining U.S. source loss is carried over to the extent of the net operating loss carryover remaining after the third step, if any, and combined with U.S. source loss, if any, in the carryover year.

The temporary regulations deviate from the net operating loss rules of Notice 89-3 in the final two steps. The temporary regulations require the U.S. source loss and foreign source losses in the separate categories that are carried over to be combined with U.S. source income or loss and foreign source income or loss in the same categories as the respective portions of the net operating loss. Then, the temporary regulations provide these losses are allocated against other income as part of the general loss allocation rules for current year losses. Notice 89-3, however, requires the allocation of the net operating loss against income in other separate categories before allocation of current year losses. The Treasury Department and the IRS believe there is no difference in result whether the net operating losses carried into a taxable year are allocated before or at the same time as current year losses, given the treatment of U.S. losses in § 1.904(g)-3T. However, the approach of the temporary regulations provides added simplicity in application of the ordering rules as well as greater consistency with the rules for full net operating loss carryovers.

The rules for the allocation of net operating losses apply similarly to net capital loss carryovers.

Separate limitation losses are first allocated to separate limitation income for the taxable year in other separate categories on a proportionate basis. Separate limitation loss accounts are increased as a result of any such allocations. To the extent the separate limitation losses exceed separate limitation income for the year, those losses are allocated against U.S. income, if any, for the taxable year and overall foreign loss accounts are increased.

Unlike Notice 89-3, the temporary regulations also provide that offsetting separate limitation loss accounts are netted against one another. For example, if a taxpayer has a separate limitation loss account in the general category with respect to passive category income, and in the next year incurs a passive category separate limitation loss that offsets general category income, the two accounts will be netted against each other, rather than both being carried forward until each one is recaptured.

U.S. source losses are allocated against separate limitation income on a proportionate basis, and overall domestic loss accounts are increased appropriately. Under the ordering rules in Notice 89-3, U.S. losses sustained in the current taxable year are allocated after all other losses are allocated and after separate limitation losses and overall foreign losses are recaptured. With the addition of section 904(g), Congress expressed that domestic losses and foreign source losses should be treated with greater parity. To that end, the Treasury Department and the IRS believe the ordering rules of Notice 89-3 should be amended. Accordingly, the temporary regulations provide that U.S. losses are allocated in the same manner as foreign losses, before any income is recharacterized.

To the extent a taxpayer has any separate limitation income for the taxable year after losses are allocated in steps one through three, a portion of such income will be subject to recharacterization in order to recapture prior year overall foreign losses, if any.

To the extent a taxpayer has any separate limitation income for the taxable year after overall foreign losses are recaptured in step four, then such income will be subject to recharacterization in order to recapture prior year separate limitation losses, if any.

To the extent a taxpayer has any U.S. source income after losses are allocated in steps one through three, but not taking into account any foreign source income that is recharacterized as U.S. source income under step four, then a portion of such income will be subject to recharacterization in order to recapture prior year overall domestic losses, if any.

The temporary regulations coordinate the overall foreign loss and overall domestic loss regimes by providing that the recapture of overall foreign and domestic loss accounts is done independently. Accordingly, income recharacterized under one recapture provision is not taken into account in determining the amount of income subject to recharacterization under the other recapture provision. For example, foreign source income that is recharacterized as U.S. source income in order to recapture an overall foreign loss account will not then be included in the determination of U.S. source income subject to recharacterization as foreign source income in order to recapture an overall domestic loss account.

Section 1.1502-9T revises § 1.1502-9 to include rules for the application of section 904(g) to consolidated groups and their members. Section 1.1502-9 provides rules only for the application of section 904(f) to consolidated groups and their members. Under those rules, consolidated overall foreign loss (COFL) accounts and consolidated separate limitation loss (CSLL) accounts are determined by the consolidated group on an aggregate basis under the principles of §§ 1.1502-11 and 1.1502-12. When a new member joins the group, its separate overall foreign loss and separate limitation loss accounts are combined with the appropriate COFL and CSLL accounts of the group. When a member leaves the group, it is allocated a pro rata portion of each of the group's COFL and CSLL accounts based on the member's share of the group's assets that generate income subject to recharacterization under the corresponding loss account. The temporary regulations do not alter these provisions addressing COFL and CSLL accounts. The revisions simply extend these principles to provide parallel treatment for consolidated overall domestic loss accounts.

The effective date for these regulations is December 21, 2007. The regulations generally apply to taxable years beginning after December 21, 2007. However, taxpayers may choose to apply the overall domestic loss provisions of the regulations in other taxable years beginning after December 31, 2006. In the alternative, taxpayers may use any reasonable method consistently applied for those years, including one based on the ordering rules of Notice 89-3.

It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. For applicability of the Regulatory Flexibility Act, see the cross-referenced notice of proposed rulemaking published elsewhere in this issue of the Federal Register . Pursuant to section 7805(f), these regulations have been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

The principal author of these regulations is Jeffrey L. Parry of the Office of Chief Counsel (International). However, other personnel from the Treasury Department and the IRS participated in their development.

The Employee Retirement Income Security Act of 1974 (Pub. L. 93-406) ordered the Secretary of Labor and the Secretary of Treasury to establish a Joint Board for the Enrollment of Actuaries. 29 U.S.C. 1241. The Joint Board shall, by regulation, establish reasonable standards and qualifications for persons performing actuarial services and the Joint Board shall enroll such individuals who, upon application, satisfy such standards and qualifications. 29 U.S.C. 1242(a). The regulations at 20 CFR Part 901, Subpart B address eligibility for enrollment and renewal of enrollment. Pursuant to the Joint Board's bylaws, the Secretary of the Treasury is to appoint an Executive Director to the Board who has the delegated authority to administer the Board's enrollment program. The Secretary of the Treasury has delegated these functions to the Internal Revenue Service and the costs of these activities are borne by the Service.

20 CFR 901.11(d)(4) provides for a reasonable non-refundable fee for applications for renewal of enrollment. Form 5434-A, “Application for Renewal of Enrollment” presently states that the renewal fee is $25. Final 26 CFR 300.7 and 300.8 establish separate $250 user fees for the enrollment and renewal of enrollment process. These fees represent the IRS's costs in administering the program, and the $250 fee for renewal of enrollment will supplant the $25 fee.

The IOAA of 1952 (31 U.S.C. 9701) authorizes agencies to prescribe regulations that establish charges for services provided by the agency. The charges must be fair and be based on the costs to the Government, the value of the service to the recipient, the public policy or interest served, and other relevant facts. The IOAA of 1952 provides that regulations implementing user fees are subject to policies prescribed by the President, which are currently set forth in OMB Circular A-25, 58 FR 38142 (July 15, 1993) (the OMB Circular).

The OMB Circular encourages user fees for government-provided services that confer benefits on identifiable recipients over and above those benefits received by the general public. Under the OMB Circular, an agency that seeks to impose a user fee for government-provided services must calculate its full cost of providing those services. In general, a user fee should be set at an amount in order for the agency to recover the cost of providing the special service, unless the Office of Management and Budget grants an exception. Pursuant to the guidelines in the OMB Circular, the IRS has calculated its cost of providing services under the enrolled actuaries program. The IRS has determined that the full cost of administering the enrollment and re-enrollment processes is $250 per enrolled actuary per process.

The final user fees will be implemented under the authority of the IOAA of 1952 and the OMB Circular.

On October 31, 2007, a notice of proposed rulemaking (REG-134923-07) was published in the Federal Register [72 FR 61583]. No comments were received from the public in response to the notice of proposed rulemaking. No public hearing was requested or held. The proposed regulations are adopted by this Treasury decision.

It has been determined that this final rule is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It is hereby certified that these regulations will not have a significant economic impact on a substantial number of small entities. Accordingly, a regulatory flexibility analysis is not required. This certification is based on the information that follows. These final rules affect enrolled actuaries, of which there are currently 4,600 active. The economic impact of these regulations on any small entity would result from a small entity, including a sole proprietor, being required to pay a fee prescribed by these regulations in order to obtain a particular service. The appropriate NAICS codes for enrolled actuaries relate to Insurance Other (524298) and Administrative and General Management Consulting, Including Financial Consulting (541611). Entities identified under these codes are considered small under the SBA size standards (13 CFR 121.201) if their annual revenue is less than $6.5 million. The IRS estimates that as many as 2,070 enrolled actuaries may be operating as or employed by small entities. Therefore, the IRS has determined that these final rules will affect a substantial number of small entities. The dollar amounts of the fees are not, however, substantial enough to have a significant economic impact on any entity subject to the fees. The amounts of the fees are commensurate with, if not less than, the amount charged by professional organizations. Persons who elect to apply for enrollment or renewal of enrollment also receive benefits from obtaining the enrolled actuary designation. Pursuant to section 7805(f) of the Internal Revenue Code, the NPRM preceding this regulation was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact.

The principal author of these regulations is Kimberly A. Mattonen of the Office of the Associate Chief Counsel (Procedure & Administration).

The information presented in this preamble is organized as follows:

Entities affected by this final rule include major stationary sources in all industry groups. 1 The majority of sources potentially affected are expected to be in the following groups:

Entities affected by the rule also include States, local permitting authorities, and Indian country.

In addition to being available in the docket, an electronic copy of this preamble and final amendments will also be available on the World Wide Web. Following signature by the EPA Administrator, a copy of this notice will be posted on the EPA's NSR Web site, under Regulations & Standards, at http://www.epa.gov/nsr .

We recognized that the long-standing major NSR applicability test based on “actual-to-potential” methodology was the subject of claims by industry representatives that the actual-to-potential methodology resulted in “confiscation” of unused plant capacity following a modification project. Accordingly, in a proposal in 1996, we proposed to allow non-utility units to use an actual-to-future-actual methodology, similar to what we had already extended to electric utility steam generating units (other than new units or the replacement of existing units) in the 1992 WEPCO rule. 61 FR at 38255. Some States commented that the accuracy of applicability determinations for major NSR was compromised by the potential for error in calculations of future actual projections. As a result, in 1998, we issued a supplemental proposal requesting comment on an actual-to-future-enforceable-actual methodology. To use this test, a source would be required to accept a permit limit equal to its future actual projection. 63 FR 39857. That proposal received many negative comments, particularly from States that were concerned about increases in resource burdens and in paperwork related to creating and enforcing the future actual emissions limit.

In the 2002 NSR reform rules (67 FR 80186, December 31, 2002), we promulgated an actual-to-projected-actual methodology for major NSR applicability determinations. 2 That rule further provides that if a source calculates its projected actual emissions for the project below major NSR significant levels, the source must comply with recordkeeping and, in some cases, reporting requirements, if there is a “reasonable possibility” that the project would result in a significant emissions increase. We included these requirements to respond to concerns that a source's projection could erroneously understate emissions and that the project could result in an emissions increase greater than the significant levels. Our goal for developing the “reasonable possibility” standard was to strike a balance between, on the one hand, States' concerns with possible calculation errors in applicability determinations and, on the other hand, sources' and States' concerns about resource burdens.

Specifically, we promulgated the “reasonable possibility” standard to apply “* * * in circumstances where there is a reasonable possibility that a project that is not part of a major modification may result in a significant emissions increase * * *” ( e.g. , 40 CFR 52.21(r)(6)). 3 We did not define the term “reasonable possibility” or identify the criteria under which a “reasonable possibility” would arise. Sources whose project resulted in a reasonable possibility of a significant emissions increase were required to keep pre-change and post-change records. Pre-change records include a description of the project, identification of units that could be affected, a description of the applicability test used, and netting calculations (if applicable). For purposes of pre-change recordkeeping, the description of the applicability test addresses baseline actual emissions, projected actual emissions, and emissions excluded (such as due to demand growth) with an explanation as to why they are excluded. (See, e.g. , 40 CFR 52.21(r)(6)(i).) The post-change recordkeeping requirement—actually a recordkeeping and monitoring requirement—entailed monitoring emissions of those regulated NSR pollutants for which there was a reasonable possibility of a significant emissions increase and calculating and maintaining records of the annual emissions for 5 (or 10) years. (See, e.g. , 40 CFR 52.21(r)(6)(iii).) Further, for certain cases, sources whose project resulted in a reasonable possibility of a significant emissions increase were required to submit pre-change and/or post-change reports to the reviewing authority. The reporting requirements applied depending on whether the unit was an electric utility steam generating unit and on whether the project's annual emissions exceeded the baseline by a significant amount. (See, e.g. , 40 CFR 52.21(r)(6)(ii), (iv), and (v).)

In the New York case, the Court held, “[b]ecause EPA has failed to explain how it can ensure NSR compliance without the relevant data, we will remand for it either to provide an acceptable explanation for its “reasonable possibility” standard or to devise an appropriately supportive alternative.” 413 F.3d at 35-36. This final action addresses the Court's remand by including regulatory changes that clarify the reasonable possibility standard and specify the criteria under which records must be kept for a physical change or change in the method of operation that does not trigger major NSR permitting requirements. (For purposes of this action, we refer to the physical or operational change interchangeably as a change or a project.) Two options were proposed in the March 8, 2007 proposal (45 FR 10445, March 8, 2007). These options include the “percentage increase trigger” and the “potential emissions trigger.” Based on our  4 evaluation and consideration of comments received on the two main options proposed for clarifying the “reasonable possibility” standard, we are finalizing the “percentage increase trigger” option with refinements to address concerns raised by commenters.

Other background information for this action is included in the notice of proposed rulemaking (72 FR 10445, March 8, 2007), and this notice assumes familiarity with that information.

This rule finalizes the “percentage increase trigger” option, with a few changes from what we proposed as our preferred option. Under the proposed “percentage increase trigger” option, there was a reasonable possibility that your change would result in a significant emissions increase if the projected increase in emissions of a pollutant—determined by comparing baseline actual emissions to projected actual emissions—equaled or exceeded 50 percent of the applicable NSR significant level for that pollutant. The proposed rule imposed recordkeeping, emissions monitoring, and reporting requirements on any source projecting that a change could result in a reasonable possibility of a significant emissions increase.

By definition in our regulations, “projected actual emissions” excludes emissions attributable to an independent factor  5 (such as demand growth); see, e.g. , 40 CFR 52.21(b)(41). Likewise, in our proposal, we excluded emissions attributable to independent factors from the projected increase in emissions to which the “reasonable possibility” recordkeeping trigger applied. In this final action, based on the comments received, we are requiring that emissions attributable to independent factors (such as demand growth) be considered for purposes of the “percentage increase” test. We are retaining the proposed approach, which requires sources to compare baseline actual emissions to projected actual emissions to determine whether this value equals or exceeds 50 percent of the applicable NSR significant level. The final rule requires these sources to comply with both the pre-change and the post-change recordkeeping and reporting requirements, as in the proposed rule. This final rule includes the additional requirement that sources whose projected actual emissions increase is less than 50 percent of the applicable NSR significant level must determine whether emissions attributable to demand growth that is unrelated to the change would cause the post-project emissions increase to exceed 50 percent of the applicable NSR significant level. If so, then under the final rule, these sources also have a reasonable possibility of causing a significant emissions increase, but under these circumstances, the final rule requires such sources to comply with only the pre-change recordkeeping requirements and not the pre-change reporting requirements or post-change recordkeeping and reporting requirements.

At the same time that we proposed the 50-percent “percentage increase trigger” option, we included that approach as an interim interpretation in appendix S of 40 CFR part 51. In this final rule, we are amending appendix S to include the additional requirement concerning independent factors (such as demand growth) described earlier in this section.

From the standpoint of compliance, project-related records allow permitting authorities and enforcement officials to evaluate a source's claim that any emissions increase from a project does not trigger NSR. If ease of enforcement were our only consideration, it would point us toward the most inclusive of recordkeeping and reporting requirements. Nonetheless, agencies do not invariably require the regulated community to keep records to prove the nonapplicability of a requirement. In imposing recordkeeping requirements in this case, we strove for a balance between ease of enforcement and avoidance of requirements that would be unnecessary or unduly burdensome on reviewing authorities or the regulated community.

Initially, in promulgating the “reasonable possibility” standard, we intended to limit recordkeeping requirements to those projects for which variability in calculating emissions creates an interest in obtaining additional information in order to confirm that the appropriate applicability outcome is reached. Nonetheless, the Court expressed concerns with the lack of definition for the standard and with the uncertainty that accompanies particular elements of the calculations, including demand growth and fugitive emissions, as well as startups and malfunctions. The regulated community expressed concern that the lack of a bright-line test left them uncertain about their recordkeeping and reporting obligations. As a result, our proposal in response to the Court's remand in New York included a bright-line, 50-percent test for the “reasonable possibility” standard. We stated that the closer the projected actual emissions are to the significant level, the greater the likelihood that the project could ultimately result in a significant emissions increase, and that the bright-line test will capture most if not all projects that have a higher probability of variability and/or error in projected actual emissions. Thus, we proposed the bright-line test to create certainty for the regulated community and reviewing authorities.

We are finalizing the “percentage increase trigger” option with one difference from the proposed option. This final rule requires consideration of “demand growth” emissions and additionally requires pre-change recordkeeping (specified, e.g. , at 40 CFR 52.21(r)(6)(i)) of a project whose emissions increase would equal or exceed 50 percent of the applicable NSR significant level only if emissions due to independent factors (such as demand growth) are included. As proposed, under the “percentage increase” test, “reasonable possibility” recordkeeping and reporting requirements are triggered in the case of a 50 percent or greater increase in emissions, calculated as the difference of “baseline actual emissions” and “projected actual emissions.” Under our NSR regulations, the calculation of “projected actual emissions” excludes “that portion of the unit's emissions following the project that an existing unit could have accommodated during the consecutive 24-month period used to establish the baseline actual emissions * * * and that are also unrelated to the particular project, including any increased utilization due to product demand growth.* * *” See, e.g. , 40 CFR 52.21(b)(41). This exclusion is commonly called the “demand growth exclusion.”

The Court, in its order on remand of the reasonable possibility provision to EPA, specifically cited as a problem the possibility that sources would overstate the demand growth exclusion:

Following our proposal to treat 50 percent of the applicable NSR significant level as the trigger for “reasonable possibility” recordkeeping and reporting requirements, we received numerous comments expressing continued concerns about “demand growth” emissions. These commenters argued that a source's inaccurate or improper use of the demand growth exclusion could allow projects to go unreviewed under the proposed rule trigger.

We have decided to refine the “percentage increase” test by providing for recordkeeping to document projections of an emissions increase that would exceed the 50-percent threshold if emissions attributable to independent factors (such as demand growth) are counted. Thus, this final rule requires sources to include emissions from demand growth for purposes of applying the “percentage increase” test. Several commenters specifically recommended this approach. Some commenters suggested applying the trigger at 100 percent of the significant level where demand growth is concerned. However, we believe that such an approach would complicate the regulatory requirements by applying two different percentages depending on the circumstances. For ease of implementation, we are applying the same trigger—50 percent of the significant level—that applies to sources not relying on excluding emissions caused by independent factors.

A project that triggers “reasonable possibility” recordkeeping and reporting requirements but does so only when counting emissions due to an independent factor (such as demand growth) will be subject to only pre-change recordkeeping requirements. The project will not be subject to pre-change reporting requirements or post-change recordkeeping or reporting requirements. According to the “reasonable possibility” standard of our existing rules, the source owner/operator must make a pre-change report prior to construction if the unit is an electric utility steam generating unit. (See, e.g. , 40 CFR 52.21(r)(6)(ii).) Under this final rule, however, the pre-change reporting requirement does not apply to the utility project unless the projected actual emissions increase alone equals or exceeds 50 percent of the NSR significant levels.

We believe this pre-change recordkeeping requirement establishes an adequate paper trail to allow enforcement authorities to evaluate the source's claims concerning what amount of an emissions increase is related to the project and what amount is attributable to demand growth. In most cases, it is unlikely that “demand growth” emissions could ultimately be found to be related to changes made at a facility. Accordingly, NSR applicability is not affected by whether a source overestimates or underestimates demand growth emissions. Nonetheless, we recognize that for some limited types of projects, additional information may be required to determine whether a projected emissions increase is related to the change. The source must retain pre-change records that describe the project, identify the units that could be affected, describe the baseline actual emissions, the projected actual emissions, and the emissions excluded due to demand growth with an explanation as to why they were excluded. These records provide permitting authorities and enforcement officials sufficient information to determine whether the type of project undertaken could have a causal link to increases in emissions due to demand growth. With these records, enforcement authorities will have an adequate starting point to make further inquiries and to access other types of records, as discussed later in this preamble, to verify post-project demand growth and enforce NSR requirements.

In imposing a recordkeeping requirement on projects that attribute any emissions to demand growth, we believe our “percentage increase test” further addresses the Court's concerns that a source might overstate the demand growth exclusion but not retain records to support its exclusion of emissions attributable to demand growth. The rule imposes pre-change recordkeeping requirements on projects that have a higher probability of variability and/or error in projected actual emissions. This approach balances ease of enforcement with avoidance of requirements that would be unnecessary or unduly burdensome on reviewing authorities or the regulated community. Because sources that rely on the demand growth exclusion already conduct the necessary calculations to determine whether the project would trigger major NSR requirements, requiring the source to retain this calculation adds little additional burden.

The following example illustrates the difference between the “percentage increase trigger” as proposed and as finalized with the refinement for demand growth. Consider an owner/operator who calculates a post-project emissions increase of 60 tpy for a pollutant with a 40-tpy significant level. The owner/operator attributes 10 tons of the increase to the project and the other 50 tons to demand growth. The owner/operator correctly concludes that the project is not a “major modification” that triggers major NSR requirements because the emissions increase of 10 tpy is below the significant level for the pollutant. Under our proposal, the project would not have triggered any recordkeeping or reporting requirements because the projected increase of 10 tpy is below 50 percent of the applicable significant level of 40 tpy (i.e., below the 20-tpy threshold level that triggers “reasonable possibility” recordkeeping and reporting requirements). In contrast, under this final rule, the source must take the additional step of determining whether the project has a reasonable possibility of a significant emissions increase before subtracting the 50 tpy of emissions attributed to demand growth. Because 60 tpy exceeds the 20-tpy threshold level (and even though the owner/operator attributes only 10 tons of the increase to the project), the project would trigger pre-change recordkeeping requirements as described earlier in this section. The project would not trigger pre-change reporting or post-change recordkeeping (which includes emissions monitoring) or reporting.

Our final rule (like our proposal) uses 50 percent of the applicable NSR significant level as the trigger for “reasonable possibility” recordkeeping and reporting requirements, but we solicited comment on use of a different percentage, such as 25, 33, 66 or 75 percent. Commenters who supported the “percentage increase trigger” option expressed support for a trigger of not less than 50 percent. We are using 50 percent because it balances competing interests, as described by the Court. Specifically, the Court stated:

Agencies have authority under circumstances such as these to establish a bright-line test, as opposed to making case-by-case determinations. See, e.g. , Time Warner Entertainment Co. L.P. v. F.C.C., 240 F.3d 1126, 1141 (DC Cir. 2001). We believe a bright-line test at 50 percent will capture projects that have a higher probability of variability and/or error in projected emissions.

Projects with projected increases below the 50-percent threshold, especially when emissions from demand growth are included in projections, are, we believe, sufficiently small that any variability or error in calculations is less likely to be large enough for the change to have increased emissions to the significant level. This view seems to be consistent with comments submitted by the group of States that successfully challenged the “reasonable possibility” rule. 6 Other commenters included general objections to the 50-percent threshold but did not give specific examples of projects for which sources would project emissions increases of less than 50 percent of the significant level but which would nevertheless be likely to cause emissions increases above the significant level. For projects with a projected increase of more than 50 percent of the significant level, the increase is large enough that we conclude there is a reasonable possibility of a significant emissions increase, due to variability in emissions and the possibility of error in the projection. As a result, for these projects, we do not believe the imposition of “reasonable possibility” recordkeeping and reporting requirements to be unnecessarily burdensome. The project-specific records and reports created pursuant to this rule (see, e.g. , 40 CFR 52.21(r)(6)) will provide an adequate paper trail for reviewing authorities and will be supplemented with records that are kept for other purposes for use by a reviewing agency in determining whether enforcement action is warranted.

Some commenters expressed concern that a threshold at 50 percent of NSR significant levels would capture too many small projects, including routine maintenance projects. The “reasonable possibility” standard applies when a major source undergoes a physical change or change in the method of operation. We point out that in defining “major modification,” the major NSR regulations specify that a “physical change or change in the method of operation” excludes routine maintenance, repair, and replacement, certain uses of alternative fuel or raw material, certain increases in hours of operation or production rate, changes in ownership, and certain activities associated with clean coal technology. (See, e.g. , 40 CFR 52.21(b)(2).) Thus, a project that is not a “physical change or change in the method of operation” is not subject to “reasonable possibility” recordkeeping and reporting requirements.

Under the actual-to-projected-actual methodology of the major NSR applicability test, projected actual emissions include fugitive emissions as well as emissions anticipated to be caused by startups and malfunctions. One of the concerns expressed by the Court in remanding the “reasonable possibility” standard was that sources may underestimate future emissions by understating fugitive, startup, or malfunction emissions.

We do not believe projections of fugitive, startup, or malfunction emissions are likely to be significant causes of variability or error that would lead to underestimates of emissions increases from existing units. 7 The types of emissions at issue are included in the project's baseline actual emissions, and we have no reason to expect greater amounts of these types of emissions in the post-project projections. Thus, any variability or error in estimating these types of emissions is not likely to lead to underestimates of emissions increases due to the project. Indeed, because the types of the projects at issue are often small improvements—that is, they are relatively small physical or operational changes, many of which would make nonroutine repairs or other types of improvements or make the source operations run more smoothly—such projects would, if anything, reduce these types of emissions from the amounts included in the baseline.

We believe that the reasons described earlier are sufficient to support the 50-percent bright-line test, with the demand growth refinement. In addition, we believe that as a practical matter, existing records will aid in permitting and enforcement.

For projects that do not trigger recordkeeping and reporting requirements under the “reasonable possibility” standard, many source owners/operators will have various types of records that, collectively, provide information on the baseline actual emissions and projected actual emissions, as well as post-change emissions. These records will also be valuable for projects that trigger the “reasonable possibility” recordkeeping and reporting requirements but are not required to track post-change emissions. Such records include but are not limited to reports submitted to reviewing authorities pursuant to title V operating permit program requirements of 40 CFR parts 70 and 71, State minor NSR permit application data, business records, and emissions inventory data.

In the New York case, the Court questioned whether reporting requirements of the CAA's title V program would provide the information enforcement authorities need, noting, “EPA fails to explain how emissions reported under title V can be traced to a particular physical or operational change.” 413 F.3d at 35. We recognize the Court's concern that records kept in connection with monitoring and compliance under the title V operating permit program do not necessarily provide specific information on emissions increases from particular projects. Even so, many of these records will be useful in allowing enforcement authorities to identify an emissions increase from a particular piece of equipment, which can provide a starting point for inquiry as to whether a particular project was associated with such an increase. The enforcement authority could determine whether the source has kept records of changes that caused those emissions increases and, if not, whether the source has an adequate explanation for the emissions increases.

Sources annually quantify and report emissions to reviewing authorities for purposes of computing annual permit program emission fees. Some sources calculate their reported emissions based on stack testing and emission factors. Other sources submit emissions data collected from continuous emissions monitoring (CEM). This information, in conjunction with title V permit applications, can allow enforcement authorities to determine whether emissions increases are associated with a particular piece of equipment.

In addition, major sources are subject to periodic monitoring and recordkeeping requirements for every individual applicable requirement in the source's operating permit. See 71 FR 75422. These requirements frequently apply on an emissions-unit-by-emissions-unit basis. In many cases, physical changes or changes in the method of operation associated with a project occur at the emission unit level, so that these emissions records provide enforcement authorities a starting point for further inquiry as to whether a project at that unit is associated with such increase. Large emissions equipment is also subject to additional monitoring and recordkeeping under the “compliance assurance monitoring” (CAM) regulations at 40 CFR part 64. The CAM rule requires sources to establish monitoring or recordkeeping sufficient to assure compliance on a pollutant-specific basis at each emissions unit for which there is a limit, standard, or similar pollution control requirement. Monitoring assures proper operation of active pollution control devices in order to reduce the amount of downtime which would cause emissions increases. Typically, parameters are monitored that show proper operation of the control device, and if these parameters fall outside acceptable ranges or limits, then it is possible that there has been an emissions increase. In certain cases, CEMS (continuous emission monitoring systems), COMS (continuous opacity monitoring systems), PM CEMS (particulate matter continuous emission monitoring systems), or similar direct monitoring, is required to be used for CAM. In many such cases, these devices would be providing direct evidence of emissions increases. Monitoring compliance data includes logs of operations, visible emissions and instrumental opacity readings, stack test reports, analytically generated mass balances, and strip charts from continuous direct emissions and parametric monitors. These records can also allow enforcement authorities to identify an emissions increase at a particular piece of equipment, which provides a starting point for further inquiry about projects associated with that equipment. 8

Regarding State minor source programs, the Court also expressed concern:

While we recognize the Court's concern that States have latitude in structuring their minor source review programs, we recently collected information confirming that, as a practical matter, existing State minor NSR programs already provide data that assist reviewing authorities and enforcement authorities in identifying major modifications. Specifically, CAA 110(a)(2)(C) requires States to regulate construction and modification of stationary sources. Accordingly, States have adopted programs that require the owner/operator to provide notification or obtain a permit before construction or modification. These steps allow reviewing authorities to confirm the source's preconstruction projections and non-major NSR applicability determination. Minor NSR programs by definition apply to emissions increases less than the major NSR significant level, and only activities that a State qualifies as “insignificant activities” under the SIP-approved program may be excluded from review. Thus, reviewing authorities have an opportunity to review virtually all projects causing an emissions increase before construction begins. Moreover, our regulations (40 CFR 51.161) provide for public review of information submitted by owners/operators for purposes of minor NSR review. Thus, information provided for purposes of minor NSR programs is also of value in determining applicability of major NSR.

In October 2004, the EPA published an Information Collection Request (ICR) covering changes to the major NSR regulations. Our ICR analysis resulted in an estimate of 25,000 minor NSR permit applications per year processed by State and local agencies at major sources (specifically, 74,609 applications over a 3-year period). 9 These permit applications include descriptions of the projects and other data that enforcement authorities can use in evaluating the applicability of NSR.

Business records include such routinely maintained operation-related records as production records, capital project development and appropriation requests, work orders, purchase records, and sales records. This information is readily available to reviewing authorities. In addition, publicly available information on production levels and growth in various industrial sectors can be used by authorities to determine if unexplained actual emissions increases are occurring at a source that might have constructed, installed, or modified equipment without NSR review.

Sources report the earlier-described title V data and State minor source permit data to the States, and, in turn, States must submit certain emissions data to the EPA. All information that the source submits to the State is available to assist EPA enforcement authorities, regardless of whether the information is included in the State's data submittal to EPA. States submit emissions inventory data directly to the EPA through the EPA's Central Data Exchange. 10 Under the Consolidated Emissions Reporting Rule (CERR) (at 40 CFR part 51, subpart A), States must report criteria pollutant emissions from large point sources every year and must report emissions for all point sources, at the process level, at 3-year intervals.

States develop emissions inventories in support of their State Implementation Plans (SIPs) and submit the data to the EPA through the Governor or his/her designee. The EPA interprets CAA 110(a)(2)(F) as requiring SIPs to provide for the reporting of criteria air pollutant emissions from stationary sources for all areas under the general SIP requirements of section 110. In addition, EPA interprets section 172(c)(3) as providing the Administrator with discretionary authority to require other emissions data from stationary sources as deemed necessary for SIP development in nonattainment areas to attain the National Ambient Air Quality Standards (NAAQS).

Another source of data is the National Emissions Inventory (NEI). Produced by the EPA every 3 years, the NEI is an inventory of criteria air pollutant and hazardous air pollutant emissions from stationary sources. The EPA uses data submitted by States under the CERR (as well as data from other sources) to develop the NEI. The NEI has several applications, including support for trends analyses and national rulemakings.

Enforcement authorities can use all of these earlier-described information sources to examine whether emissions from particular sources and, in some cases, particular pieces of equipment have increased. Such increases could give an enforcement authority a starting point for further inquiry. Upon inquiring, the enforcement authority could determine whether the source has kept records of changes that caused those emissions increases, and if not, whether the source has an adequate explanation for the emissions increases.

These changes will take effect in the Federal PSD and Federal nonattainment NSR programs on January 22, 2008. This means we will apply these rules in any area without a SIP-approved PSD or SIP-approved nonattainment NSR program for which we are the reviewing authority or for which we have delegated our authority to issue permits to a State, local, or tribal reviewing authority.

We are establishing these requirements as minimum program elements of the PSD and nonattainment NSR programs. Notwithstanding these requirements, it may not be necessary for a State or local authority to revise its SIP program to begin to implement these changes. 11

Some State or local authorities may be able to adopt these changes through a change in interpretation of the term “reasonable possibility” without the need to revise the SIP. For any State or local authority that can implement the changes without revising its approved SIP, the changes will become effective when the reviewing authority publicly announces that it accepts these changes by interpretation. In the case of NSR SIP revisions that include the term “reasonable possibility” but that EPA has not yet approved, we will approve the SIP revision if the State or local authority commits to implementing the “reasonable possibility” standard in a manner consistent with our final rule.

Although no SIP revision may be necessary in certain areas that adopt these changes by interpretation, we encourage State and local authorities in such areas to revise their SIPs to adopt these changes, in order to enhance the clarity of the existing rules.

For State and local authorities that revise their SIPs to adopt these changes, the changes are not effective in such areas until we approve the SIP revision. These State and local authorities must submit revisions to SIPs to EPA for approval within 3 years.

State and local authorities may adopt or maintain NSR program elements that have the effect of making their regulations more stringent than these rules. Several State and local authorities have regulations already approved into their SIPs that are more stringent than these rules. These State and local authorities must submit notice to EPA within 3 years to acknowledge that their regulations fulfill these requirements.

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

This action does not impose any new information collection burden as the burden imposed by this rule has already been taken into account in previously approved information collection requirement actions under the NSR program. The OMB has previously approved the information collection requirements contained in the existing 40 CFR parts 51 and 52 regulations under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. , and has assigned OMB control number 2060-0003, EPA ICR number 1230.19. A copy of the OMB-approved Information Collection Request (ICR), EPA ICR number 1230.19 may be obtained from Susan Auby, Collection Strategies Division; U.S. Environmental Protection Agency (2822T); 1200 Pennsylvania Avenue, NW., Washington, DC 20460 or by calling (202) 566-1672.

It is necessary that certain records and reports be collected by a State or local agency (or the EPA Administrator in non-delegated areas), for example, to: (1) Confirm the compliance status of stationary sources, including identifying any stationary sources subject/not subject to the rule, and (2) ensure that the stationary source control requirements are being achieved. The information is then used by the EPA or State enforcement personnel to ensure that the subject sources are applying the appropriate control technology and that the control requirements are being properly operated and maintained on a continuous basis. Based on the reported information, the State, local, or tribal agency can decide which plants, records, or processes should be inspected. Such information collection requirements for sources and States are currently reflected in the approved ICR referenced above for the NSR program.

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

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

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

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

After considering the economic impacts of this action on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities. This action will not impose any requirements on 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 EPA generally must prepare a written statement, including a cost-benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures to State, local, and tribal governments, in the aggregate, or to the private sector, of $100 million or more in any 1 year. Before promulgating an EPA rule for which a written statement is needed, section 205 of the UMRA generally requires EPA to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, most cost-effective or least burdensome alternative that achieves the objectives of the rule. The provisions of section 205 do not apply when they are inconsistent with applicable law. Moreover, section 205 allows EPA to adopt an alternative other than the least costly, most cost-effective or least burdensome alternative if the Administrator publishes with the final rule an explanation as to why that alternative was not adopted. Before EPA establishes any regulatory requirements that may significantly or uniquely affect small governments, including tribal governments, it must have developed under section 203 of the UMRA a small government agency plan. The plan must provide for notifying potentially affected small governments, enabling officials of affected small governments to have meaningful and timely input in the development of EPA regulatory proposals with significant Federal intergovernmental mandates, and informing, educating, and advising small governments on compliance with the regulatory requirements.

The EPA has determined that this action does not contain a Federal mandate that may result in expenditures of $100 million or more for State, local, and tribal governments, in the aggregate, or the private sector in any one year. Thus, this rule is not subject to the requirements of sections 202 and 205 of the UMRA because this action merely provides explanation of an existing recordkeeping and reporting standard.

EPA has determined that this rule contains no regulatory requirements that might significantly or uniquely affect small governments.

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

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

Executive Order 13175, entitled “Consultation and Coordination With Indian Tribal Governments” (65 FR 13175, November 9, 2000), requires EPA to develop an accountable process to ensure “meaningful and timely input by tribal officials in the development of regulatory policies that have tribal implications.” This action does not have tribal implications, as there are no tribal authorities currently issuing major NSR permits. Thus, Executive Order 13175 does not apply to this action.

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

The EPA interprets Executive Order 13045 as applying only to those regulatory actions that concern health or safety risks, such that the analysis required under section 5-501 of the Executive Order has the potential to influence the regulation. This action does not establish an environmental standard intended to mitigate health or safety risks but rather provides explanation of an existing recordkeeping and reporting standard.

This action does not constitute a “significant energy action” as defined in Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001), because it will not likely have a significant adverse effect on the supply, distribution, or use of energy.

As noted in the proposed rule, section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law 104-113, 12(d) (15 U.S.C. 272 note), directs EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical.

Voluntary consensus standards are technical standards (for example, materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies. The NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards.

This action does not involve technical standards. Therefore, EPA did not consider the use of any voluntary consensus standards.

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

The EPA has determined that this action will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations. The reason for EPA's determination is because this action does not affect the level of protection provided to human health or the environment as it merely provides an explanation of an existing recordkeeping and reporting standard.

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 does not constitute a “major rule” as defined by 5 U.S.C. 804(2). Therefore, this action will be effective January 22, 2008.

Under section 307(b)(1) of the Act, judicial review of this final action is available by filing of a petition for review in the U.S. Court of Appeals for the District of Columbia Circuit by February 19, 2008. Any such judicial review is limited to only those objections that are raised with reasonable specificity in timely comments. Under section 307(b)(2) of the Act, the requirements of this final action may not be challenged later in civil or criminal proceedings brought by us to enforce these requirements.

The statutory authority for this action is provided by sections 307(d)(7)(B), 101, 111, 114, 116, and 301 of the CAA as amended (42 U.S.C. 7401, 7411, 7414, 7416, and 7601). This action is also subject to section 307(d) of the CAA (42 U.S.C. 7407(d)).

Definitions

For the purpose of this document, we are giving meaning to certain words or initials as follows:

(i) The words or initials Act or CAA mean or refer to the Clean Air Act, unless the context indicates otherwise.

(ii) The words EPA, we, us or our mean or refer to the United States Environmental Protection Agency.

(iii) The initials SIP mean or refer to State Implementation Plan.

(iv) The words State or South Dakota mean the State of South Dakota, unless the context indicates otherwise.

Chapter 74:36:09 was submitted to EPA for inclusion in the State Implementation Plan (SIP) by the South Dakota Department of Environment and Natural Resources (DENR) on September 1, 2006. Chapter 74:36:09 relates to the Prevention of Significant Deterioration (PSD) permit program of the State of South Dakota. Revisions to Chapter 74:36:09 were adopted by the South Dakota Board Interim Rules Committee on August 29, 2006. EPA proposed on February 1, 2007 (72 FR 4671) to partially approve and partially disapprove Chapter 74:36:09 (Prevention of Significant Deterioration) of the Administrative Rules of South Dakota under section 110 of the CAA. 1 Comments were received on our February 2007 proposal (see discussion in section III. below). Subsequent to the public comment period, South Dakota revised 74:36:09:02, adopted May 14, 2007, to address EPA's concern (see Section II) and submitted the revised provision to EPA on June 28, 2007. After considering the comments received, EPA is finalizing its approval of Chapter 74:36:09, including the now-corrected provision that EPA had proposed to disapprove. EPA is also rescinding its delegation to South Dakota of the federal PSD regulations.

EPA is approving a revision to South Dakota's SIP that incorporates by reference the federal PSD requirements, found at 40 CFR 52.21, into the State's SIP. The revision to the South Dakota Administrative Rules Chapter 74:36:09 incorporates by reference the provisions of 40 CFR 52.21, as they exist on July 1, 2005, with the exceptions noted below.

South Dakota did not incorporate by reference those sections of the federal rules that do not apply to State activities or are reserved for the Administrator of the EPA. These sections are 40 CFR 52.21(a)(1) (plan disapproval), 52.21(q) (public participation), 52.21(s) (environmental impact statements), 52.21(t) (disputed permit or redesignations), and 52.21(u) (delegation of authority).

South Dakota did not incorporate by reference provisions for Clean Units and Pollution Control Project (PCPs). These provisions were vacated by a June 24, 2005, ruling by the United States Court of Appeals for the District of Columbia Circuit. References to Clean Units and PCPs were removed by EPA from Federal regulation on June 13, 2007 (see 72 FR 32526). In addition, South Dakota did not incorporate by reference the provisions for equipment replacement (40 CFR 52.21(cc)), which were stayed indefinitely by a court order on December 24, 2003, and subsequently vacated. See, New York v. EPA, 443 F.3d 880 (D.C. Cir. 2006). Therefore, the following federal provisions found in 40 CFR 52.21 are not incorporated by reference in Chapter 74:36:09: 40 CFR 52.21(x), 52.21(y), 52.21(z), 52.21(cc), 52.21(a)(2)(iv)(e), the second sentence of 52.21(a)(2)(iv)(f), 52.21(a)(2)(vi), 52.21(b)(2)(iii)(h), 52.21(b)(3)(iii)(b), 52.21(b)(3)(vi)(d), 52.21(b)(32), 52.21(b)(42), (b)(55), (b)(56), (b)(57), (b)(58), and the phrase “other than projects at a Clean Unit or at a source with a PAL” in 40 CFR 52.21(r)(6).

The phrase “reasonable possibility” used in the federal rule at 40 CFR 52.21(r)(6) limits the recordkeeping provisions to modifications at facilities that use the actual-to-future-actual methodology to calculate emissions changes and that may have a “reasonable possibility” of a significant emissions increase. The South Dakota rule does incorporate by reference the phrase “reasonable possibility” as it is used at 40 CFR 52.21(r)(6). On March 8, 2007, EPA published a proposed rule in response to the D.C. Circuit Court's remand of the recordkeeping provisions of EPA's 2002 NSR Reform Rules (see 72 FR 10445), but EPA has not yet made a final decision with regard to the remand. Therefore, EPA may need to take further action on this portion of South Dakota's PSD rule. At this time, however, South Dakota's recordkeeping provisions are as stringent as the federal requirements, and are therefore, approvable.

The South Dakota incorporation by reference describes the circumstances in which the term “Administrator” continues to mean the EPA Administrator and when it means the Secretary of the South Dakota DENR instead. South Dakota rule 74:36:09:02(1) identifies the following provisions in Chapter 74:36:09 where the term “Administrator” continues to mean the Administrator of EPA: 40 CFR 52.21(b)(17), 52.21(b)(37)(i), 52.21(b)(43), 52.21(b)(48)(ii)(c), 52.21(b)(50)(i), 52.21(g)(1) to 52.21(g)(6), 52.21(l)(2), and 52.21(p)(2). As submitted on September 1, 2006, this list did not include 40 CFR 52.21(p)(2), and under South Dakota's PSD rule, the term “Administrator” in 40 CFR 52.21(p)(2) referred to the Secretary of the DENR.

This was inconsistent with EPA's determination that 40 CFR 52.21(p)(2) must still refer to the Administrator of EPA, and EPA proposed to disapprove the incorporation by reference of 40 CFR 52.21(p)(2). On June 28, 2007, South Dakota submitted to EPA a revision of Chapter 74:36:09, effective June 13, 2007, that added 40 CFR 52.21(p)(2) to the list of provisions in Chapter 74:36:09 where the term “Administrator” continues to mean the Administrator of EPA. Therefore, EPA is approving the incorporation by reference of 40 CFR 52.21(p)(2) as part of the approval of Chapter 74:36:09.

As noted above, South Dakota did not incorporate by reference 40 CFR 52.21(q) (public participation). South Dakota has instead incorporated by reference 40 CFR 51.166(q) (public participation) at 74:36:09:03. The regulations at 40 CFR 51.166 are what a SIP must contain for EPA to approve a PSD permit program, and generally mirror the federal PSD regulations at 40 CFR 52.21. In addition, South Dakota added in 74:36:09:03 six additional provisions that revise 40 CFR 51.166(q) in order to make the PSD permit public participation requirements specific to South Dakota.

The requirements included in South Dakota's PSD program, as specified in Chapter 74:36:09, are substantively the same as the federal PSD provisions due to South Dakota's incorporation of the federal rules by reference. EPA reviewed the revisions South Dakota made to 40 CFR 52.21 and 40 CFR 51.166 noted above and found them to be as stringent as the federal rules. EPA has, therefore, determined that the revisions are consistent with the program requirements for the preparation, adoption, and submittal of implementation plans for the Prevention of Significant Deterioration of Air Quality, as set forth at 40 CFR 51.166, and are approvable as part of the South Dakota SIP.

EPA received three comment letters on our February 1, 2007 (72 FR 4671) proposal. Two commenters supported, and one commenter opposed, our proposed action. We have considered the comments received and we are generally finalizing our action as proposed. Following is a summary of the comments.

A. Two commenters support the inclusion of Chapter 74:36:09 Prevention of Significant Deterioration into the South Dakota State Implementation Plan.

Response: EPA acknowledges receipt of the comments and agrees with the commenters.

B. One commenter submitted comments opposing our proposed partial approval and supporting our proposed partial disapproval of the inclusion of Chapter 74:36:09 Prevention of Significant Deterioration into the South Dakota State Implementation Plan.

1. The commenter stated that our proposed approval “appears to be a thinly-veiled attempt by the state to rollback critical public health and environmental safeguards in South Dakota by substituting a delegated program with a more lax state-administered program” and that “the proposed changes would eliminate the public's opportunity to obtain review of a PSD permit by the U.S. Environmental Protection Agency's Environmental Appeals Board and remove the automatic stay provision that provides the public with an opportunity to obtain review of a permit before construction commences.”

Response: Federal regulations specify the parameters that state-administered programs must meet and these regulations help ensure that public health and safety safeguards remain in place with the transition from a federal to a state program. Regulations at 40 CFR 51.166 set forth the criteria for PSD program approvals that EPA applies. EPA has determined that South Dakota's PSD rules meet these criteria. As discussed above, South Dakota's rules satisfy the public participation criteria in 40 CFR 51.166(q). Since these minimum criteria are satisfied, we have no grounds to conclude that South Dakota's SIP approved program will be less rigorous than the federal permitting program that the State currently administers through a delegation.

Although permits issued under SIP approved programs are not subject to appeal to EPA's Environmental Appeals Board, such actions are instead subject to the opportunities for review and appeal provided under state law. We interpret the statute and regulations to require at minimum an opportunity for state judicial review of PSD permits. See, 61 FR 1880, 1882 (Jan. 24, 1996). South Dakota has specified procedures for contesting a final PSD permit determination and requesting an administrative hearing at Chapter 74:09 of the South Dakota Administrative Rules (Contested Case Procedure). These procedures are referenced in 74:36:09:03 (Public participation). South Dakota law also provides for the right to judicial review of contested cases (SDCL 1-26-30). We, thus, have no grounds to deny PSD program approval based on the nature of review of final permit decisions under South Dakota law.

2. The commenter stated that the proposed approval “appears to be an attempt to reduce U.S. EPA's obligation to protect endangered and threatened species in South Dakota.” The commenter noted that the Endangered Species Act (ESA) applies to EPA's proposal to approve to South Dakota's PSD permit program such that EPA “must determine whether this proposed action—approving major changes to the South Dakota PSD permit program—may affect any listed species” and “consult with the [U.S. Fish and Wildlife Service] prior to transferring air permitting authority to the State of South Dakota.” In addition, the commenter stated that EPA “must structure its approval * * * in such a manner as to preserve the agency's duties to protect and restore listed species and their habitat.”

Response: EPA disagrees with the commenter. EPA's approval of the South Dakota permitting program into the SIP is not an attempt to reduce ESA requirements in connection with PSD permitting in the State. As a practical matter, EPA has not carried out ESA consultation requirements in its prior approvals of PSD permitting programs for other states. Moreover, under relevant CAA provisions, states are entitled to administer approved PSD permitting programs, and EPA is required to approve a state's program that satisfies applicable CAA requirements. The CAA SIP approval authority does not provide the Agency with the discretion to refrain from taking the action of approving the South Dakota PSD permit program if it meets all applicable CAA requirements. Accordingly, and as confirmed by recent Supreme Court precedent, the ESA requirements cited in the comments do not apply to EPA's decision to approve South Dakota's PSD permitting program into the SIP. See 50 CFR 402.03; National Ass'n of Home Builders v. Defenders of Wildlife , 127 S. Ct. 2518 (2007).

Section 7(a)(2) of the ESA generally requires federal agencies to consult with the relevant federal wildlife agencies to ensure that actions they authorize, fund, or carry out are not likely to jeopardize the continued existence of federally-listed endangered or threatened species, or result in the destruction or adverse modification of designated critical habitat of such species. 16 U.S.C. 1536(a)(2). In accordance with relevant ESA implementing regulations, this requirement applies only to actions in which there is discretionary federal involvement or control. 50 CFR 402.03. In the Defenders of Wildlife case, the Supreme Court examined these provisions in the context of EPA's decision to approve a state permitting program under the Clean Water Act (CWA). In that case, the Court held that when a federal agency is required by statute to undertake a particular action once certain specified triggering events have occurred, there is no relevant agency discretion, and thus the requirements of ESA section 7(a)(2) do not apply. 127 S. Ct. at 2536.

With regard to EPA's transfer of CWA permitting authority to a state, the Court found that because the relevant CWA provision mandated that EPA “shall approve” a state permitting program if a list of CWA statutory criteria are met, EPA lacked the discretion to deny a transfer application that satisfied those criteria. Id. at 2531-32. The Court also found that the relevant CWA program approval criteria did not include consideration of endangered or threatened species, and stated that “[n]othing in the text of [the relevant CWA provision] authorizes EPA to consider the protection of threatened or endangered species as an end in itself when evaluating [an] application” to transfer a permitting program to a state. Id. at 2537. Accordingly, the Court held that the CWA required EPA to approve the state's permitting program if the statutory criteria were met; those criteria did not include the consideration of ESA-protected species; and thus, consistent with 50 CFR 402.03, the non-discretionary action to transfer CWA permitting authority to the state did not trigger relevant ESA section 7 requirements.

Similar to the CWA program approval provision at issue in Defenders of Wildlife , section 110(k)(3) of the CAA mandates that EPA “shall approve” a SIP submittal that meets applicable CAA requirements. 42 U.S.C. 7410(k)(3). The CAA provides a list of SIP submittal criteria in section 110. See 42 U.S.C. 7410(a)(2). With respect to SIP submittals involving PSD permitting program applications, the relevant program approval criteria are found in the general CAA provisions regarding the PSD program, Title I, Part C, and EPA's relevant regulations implementing those provisions, 40 CFR 51.166. See 42 U.S.C. 7410 (a)(2)(J).

As was the case with the CWA requirements in Defenders of Wildlife , the SIP requirements contained in section 110 of the CAA do not include protection of listed species, and neither Title I, Part C of the CAA nor EPA's PSD implementing regulations explicitly state that consideration of the impacts on listed species is a required factor in PSD permitting decisions. EPA has interpreted sections 169(3) and 165(e)(3)(B) of the CAA as providing EPA with the relevant discretion to carry out ESA section 7(a)(2) obligations during its review of individual applications for federally-issued PSD permits under section 165. See, In re: Indeck-Elwood, LLC, PSD Appeal No. 03-04 (EAB Sept. 27, 2006), slip. op at 108 (holding EPA has discretion to consider impacts to listed species in Best Available Control Technology and soils and vegetation analysis). However, the use of this discretion in individual PSD permitting decisions does not provide EPA similar discretion in its SIP approval decisions under section 110.

In issuing individual PSD permits, EPA is required to complete an environmental impacts analysis in the best available control technology determination of CAA section 169(3) and an additional impacts analysis, including impacts on soils and vegetation, under section 165(e)(3)(B) of the CAA. In carrying out these analyses, EPA has interpreted these provisions as affording the Agency discretion to determine whether listed species are impacted by individual federal PSD permitting decision. In contrast, EPA's action on state SIP submittals is governed by section 110 of the CAA, which unequivocally directs EPA to approve state plans meeting applicable CAA requirements. Section 110 does not provide for similar impact analyses in reviewing PSD SIP submittals. Thus, although EPA's approval of an individual federal PSD permit and its approval of a state PSD permitting program both involve PSD, they are entirely different actions arising under different provisions of the CAA. An ESA obligation triggered by one provision of the statute—consideration of ESA in individual federal PSD permitting decisions—cannot be bootstrapped to raise that obligation in another provision—approval of a PSD SIP submittal—that does not provide EPA with similar discretion. See generally Defenders of Wildlife (finding that while EPA undertakes ESA consultation when issuing individual federal NPDES permits, it was not required to do so in approving state NPDES permitting programs). EPA recognizes that it exercises some judgment when evaluating whether a SIP submittal meets specific statutory PSD criteria. However, as the Supreme Court held in Defenders of Wildlife , the use of such judgment does not allow the Agency “the discretion to add another entirely separate prerequisite”—such as the ESA section 7(a)(2) consultation requirements—to the list of required criteria EPA considers when determining whether it “shall approve” a state permitting program. 127 S. Ct. at 2537.

Applying the reasoning of Defenders of Wildlife , ESA consultation obligations do not apply to EPA's approval of South Dakota's PSD permit program, because the SIP approval criteria contained in the CAA do not provide EPA with the discretionary authority to consider whether approval of the State PSD permitting program into the SIP may affect any listed species. EPA has determined that the State has submitted a SIP for a PSD program that satisfies all of the applicable SIP requirements contained in section 110 of the CAA, as well as the applicable PSD requirements found in CAA Title I, Part C, and 40 CFR 51.166. Thus, given this Supreme Court precedent and applicable regulations, see 50 CFR 402.03, EPA is without discretion to disapprove or condition the State's program based on concerns for listed species, and the ESA requirements cited by the commenter are thus inapplicable to this approval action.

3. The commenter “supports U.S. EPA disapproving SD's attempt to have the state conduct the necessary consultation with a Federal Land Manager when a proposed source may impact a class 1 area.”

Response: EPA's proposed disapproval concerned only the narrow issue of the Federal Land Manager's (FLM) responsibility to consult with the EPA Administrator under 40 CFR 51.166(p)(2). See EPA's February 1, 2007 Notice of Proposed Rule (72 FR 4673) for additional discussion of this issue. On June 28, 2007, South Dakota submitted to EPA a revision of Chapter 74:36:09, effective June 13, 2007, that added 40 CFR 52.21(p)(2) to the list of provisions incorporated in Chapter 74:36:09 where the term “Administrator” continues to mean the Administrator of EPA. Therefore, in South Dakota, an FLM will continue to have the responsibility to consider, in consultation with the EPA, whether a proposed source or modification in South Dakota will have an adverse impact on air quality related values (including visibility). This is consistent with 40 CFR 51.166(p)(2).

EPA is approving the incorporation by reference of 40 CFR 52.21(p)(2) as part of the approval of Chapter 74:36:09. However, the State will have the responsibility to consider and respond to the FLM's analysis under the procedures set forth in sections 40 CFR 52.21(p)(3)-(8). In accordance with 40 CFR 51.166(p)(3) and 165(d)(2)(C)(ii) of the CAA, when there is no projected violation of the PSD increments, the FLM bears the burden of demonstrating to the satisfaction of the state permitting authority that a project will have an adverse impact on air quality related values.

We are approving the inclusion of Administrative Rules of South Dakota, Chapter 74:36:09, Prevention of Significant Deterioration, into the South Dakota SIP, including 74:36:09:02's incorporation of 40 CFR 52.21(p)(2). Additionally, EPA is rescinding its delegation of the PSD regulations to South Dakota.

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 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 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 CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by February 19, 2008. 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).)

You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. Potentially affected entities may include, but are not limited to those engaged in the following activities:

• Crop production (NAICS code 111), e.g., agricultural workers; greenhouse, nursery, and floriculture workers; farmers.

• Animal production (NAICS code 112), e.g., cattle ranchers and farmers, dairy cattle farmers, livestock farmers.

• Food manufacturing (NAICS code 311), e.g., agricultural workers; farmers; greenhouse, nursery, and floriculture workers; ranchers; pesticide applicators.

• Pesticide manufacturing (NAICS code 32532), e.g., agricultural workers; commercial applicators; farmers; greenhouse, nursery, and floriculture workers; residential users.

This listing is not intended to be exhaustive, but rather to provide a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in this unit could also be affected. The North American Industrial Classification System (NAICS) codes have been provided to assist you and others in determining whether this action might apply to certain entities. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT .

In addition to accessing an electronic copy of this Federal Register document through the electronic docket at http://www.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 . You may also access a frequently updated electronic version of EPA's tolerance regulations at 40 CFR part 180 through the Government Printing Office's pilot e-CFR site at http://www.gpoaccess.gov/ecfr .

Under section 408(g) of FFDCA, any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2007-0029 in the subject line on the first page of your submission. All requests must be in writing, and must be mailed or delivered to the Hearing Clerk as required by 40 CFR part 178 on or before February 19, 2008.

In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing that does not contain any CBI for inclusion in the public docket that is described in ADDRESSES . Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit this copy, identified by docket ID number EPA-HQ-OPP-2007-0029, by one of the following methods:

• Federal eRulemaking Portal : http://www.regulations.gov . Follow the on-line instructions for submitting comments.

• Mail : Office of Pesticide Programs (OPP) Regulatory Public Docket (7502P), Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460-0001.

• Delivery : OPP Regulatory Public Docket (7502P), Environmental Protection Agency, Rm. S-4400, One Potomac Yard (South Bldg.), 2777 S. Crystal Dr., Arlington, VA. Deliveries are only accepted during the Docket's normal hours of operation 8:30 a.m. to 4 p.m., Monday through Friday, excluding legal holidays. Special arrangements should be made for deliveries of boxed information. The Docket Facility telephone number is (703) 305-5805.

In the Federal Register of February 28, 2007 (72 FR 9000) (FRL-8115-5), EPA issued a notice pursuant to section 408(d)(3) of FFDCA, 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide petition (PP 6F7161) by Bayer CropScience LLC, 2 T.W. Alexander Dr., Research Triangle Park, NC 27709. The petition requested that 40 CFR 180.473 be amended by establishing a tolerance for combined residues of the herbicide, glufosinate-ammonium and its metabolites expressed as butanoic acid, 2-amino-4-(hydroxymethylphosphinyl)-, monoammonium salt, 2-acetamido-4-methylphosphinico-butanoic acid and 3-methylphosphinico-propionic acid (expressed as glufosinate free acid equivalents), in or on raw agricultural commodities grain aspirated fractions at 25.0 parts per million (ppm); non- transgenic canola, meal at 1.1 ppm; non-transgenic canola, seed at 0.4 ppm; non- transgenic field corn, forage at 4.0 ppm; non- transgenic field corn, grain at 0.2 ppm; non- transgenic field corn, stover at 6.0 ppm; non- transgenic soybean, at 2.0 ppm; non-transgenic soybean, hulls at 5.0 ppm. That notice referenced a summary of the petition prepared by Bayer CropScience LLC, the registrant, which is available to the public in the docket, http://www.regulations.gov .

In the Federal Register of June 27, 2007 (72 FR 35237) (FRL-8133-4), EPA issued a notice pursuant to section 408(d)(3) of FFDCA, 21 U.S.C. 346a(d)(3), announcing the amendment to existing tolerances by filing of a pesticide petition (PP 6F7161) by Bayer CropScience LLC, 2 T.W. Alexander Dr., Research Triangle Park, NC 27709. The petition proposes to amend the tolerances in 40 CFR 180.473(a) to eliminate the reference to transgenic crops tolerant to glufosinate ammonium in §180.473(a)(2) such that the crop tolerances listed under §180.473 (a) General, support uses in all of the crops listed to include both conventional and transgenic crops and to delete §180.473 (a)(1) and (a)(2). This notice clarifies the initial notice of filing published in the Federal Register of February 28, 2007 (72 FR 9000) (FRL-8115-5). The tolerances for glufosinate-ammonium and its metabolites listed for the commodities under both paragraphs (a)(1) and paragraph (a)(2) are proposed to be placed in §180.473 (a) General to read as follows: Tolerances are established for residues of glufosinate-ammonium (butanoic acid, 2-amino-4-(hydroxymethylphosphinyl)-monoammonium salt) and its metabolites expressed as butanoic acid, 2-amino-4-(hydroxymethylphosphinyl)-, monoammonium salt, 2-acetamido-4-methylphosphinico-butanoic acid and 3-methylphosphinico-propionic acid expressed as glufosinate free acid equivalents in or on the raw agricultural commodities: Almond, hulls at 0.50 ppm; apple at 0.05 ppm; grain aspirated fractions at 25.0 ppm; banana at 0.30 ppm; banana, pulp at 0.20 ppm; beet, sugar, molasses at 5.0 ppm; beet, sugar, roots at 0.9 ppm; beet, sugar, tops at 1.5 ppm; bushberry subgroup 13B at 0.15 ppm; canola, meal at 1.1 ppm; canola, seed at 0.4 at ppm; cattle, fat at 0.40 ppm; cattle, meat at 0.15 ppm; cattle, meat byproducts at 6.0 ppm; corn, field forage at 4.0 ppm; corn, field, grain at 0.2 ppm; corn, field, stover at 6.0 ppm; cotton, gin byproducts at 15 ppm; cotton, undelinted seed at 4.0 ppm; egg at 0.15 ppm; goat, fat at 0.40 ppm; goat, meat at 0.15 ppm; goat, meat byproducts at 6.0 ppm; grape at 0.05 ppm; hog, fat at 0.40 ppm; hog, meat at 0 .15; hog, meat byproducts at 6.0 ppm; horse, fat at 0.40 ppm; horse, meat at 0.15 ppm; horse, meat byproducts at 6.0 ppm; Juneberry 0.10 ppm; lingonberry at 0.10 ppm; milk at 0.15 ppm; nut, tree, group 14 at 0.10 ppm; potato at 0.80 ppm; potato, chips at 1.60 ppm; potato granules/flakes 2.00 ppm; poultry, fat 0.15 ppm; poultry, meat at 0.15 ppm; poultry, meat byproducts 0.60 ppm; rice, grain at 1.0 ppm; rice, hull at 2.0 ppm; rice, straw at 2.0 ppm; salal at 0.10 ppm; sheep, fat at 0.40 ppm; sheep, meat at 0.15 ppm; sheep, meat byproducts at 6.0 ppm; soybean at 2.0 ppm and soybean, hulls at 5.0 ppm.

Comments were received on the notices of filing. EPA's response to these comments is discussed in Unit IV.C.

Bayer's petition asks EPA to consolidate subsections (a)(1) and (a)(2) of 40 CFR 180.473 which contains tolerances for glufosinate on various non-transgenic crops and transgenic crops, respectively, and remove the restriction as to transgenic crops. In part this petition is related to Bayer's application to EPA to amend its glufosinate registration under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) to allow pre-plant burn down application to both transgenic and non-transgenic field corn, canola, and soybean. Glufosinate is currently registered foliar uses on the transgenic forms of these crops. The proposed registration amendment would not alter existing seasonal application amount limitations. There are currently no FFDCA tolerances for glufosinate on non-transgenic field corn, canola, and soybean but FFDCA tolerances are in place for the foliar use on the transgenic form of these crops. Consolidating subsections (a)(1) and (a)(2) and removing the transgenic restriction would address the lack of tolerances for non-transgenic field corn, canola, and soybean.

EPA initially concluded that two tolerance expressions were appropriate for plants: non-transgenic (40 CFR 180.473 (a)(1)) with glufosinate ammonium and 3-methylphosphinico-propionic acid and transgenic crops (40 CFR 180.473 (a)(2)) with glufosinate ammonium, N -acetyl-glufosinate, and 3-methylphosphinico-propionic acid. Subsequent to this decision, based upon a petition from Bayer, EPA modified the tolerance expressions in subsections (a)(1) and (a)(2) so that they are identical for transgenic and non-transgenic crops. 68 FR 55833 (September 29, 2003). This modification was done because EPA concluded that a single tolerance expression for both transgenic crops and non-transgenic crops (i.e. glufosinate ammonium, N-acetyl-glufosinate, and 3-methylphosphinico-propionic acid) was appropriate for the following reasons: 1) Enforcement laboratories do not know if a sample is derived from transgenic or non-transgenic crop and 2) the enforcement method quantifies glufosinate ammonium and N -acetyl-glufosinate together (both are devitalized to the same compound). As a result of the decision, the tolerance expression for 40 CFR 180.473 (a)(1) was altered to include N -acetyl-glufosinate; however, the tolerances in 40 CFR 180.473 (a)(2) remains. EPA has determined that consolidating the existing glufosinate tolerances in subsections (a)(1) and (a)(2) and removing the transgenic crop restriction, where applicable, is safe and is appropriate. Tolerance levels will not need to be increased with the addition of a pre-plant burn down use because the same seasonal amount limitations are being retained. Given that foliar applications would result in higher residue levels than pre-plant burn down, allocation of a portion of the permitted application to the pre-plant burn down use will not increase the residue level that could be present.

Section 408(b)(2)(A)(i) of FFDCA allows EPA to establish a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the tolerance is “safe.” Section 408(b)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and in residential settings, but does not include occupational exposure. Section 408(b)(2)(C) of FFDCA requires EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue. . . .” These provisions were added to FFDCA by the Food Quality Protection Act (FQPA) of 1996.

Consistent with FFDCA section 408(b)(2)(D), and the factors specified in FFDCA section 408(b)(2)(D), EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure for the petitioned-for proposal to place all the commodities listed in 180.473 (a)(1) and 180.473 (a)(2) together in paragraph 180.473(a) based on the rationale for having a single tolerance expression is appropriate. Tolerance levels for combined residues of glufosinate-ammonium are unchanged. EPA's assessment of exposures and risks associated with establishing the tolerance follows.

EPA has evaluated the available toxicity data and considered its validity, completeness, and reliability as well as the relationship of the results of the studies to human risk. EPA has also considered available information concerning the variability of the sensitivities of major identifiable subgroups of consumers, including infants and children. Specific information on the studies received and the nature of the adverse effects caused by glufosinate-ammonium as well as the no-observed-adverse-effect-level (NOAEL) and the lowest-observed-adverse-effect-level (LOAEL) from the toxicity studies.

Specific information on the studies received and the nature of the toxic effects caused by glufosinate ammonium as well as the no-observed-adverse-effect-level (NOAEL) and the lowest-observed-adverse-effect-level (LOAEL) from the toxicity studies are discussed in the final rule published in the Federal Register of September 29, 2003 (68 FR 55833) (FRL-7327-9).

For hazards that have a threshold below which there is no appreciable risk, the toxicological level of concern (LOC) is derived from the highest dose at which no adverse effects are observed (the NOAEL) in the toxicology study identified as appropriate for use in risk assessment. However, if a NOAEL cannot be determined, the lowest dose at which adverse effects of concern are identified (the LOAEL) is sometimes used for risk assessment. Uncertainty/safety factors (UFs) are used in conjunction with the LOC to take into account uncertainties inherent in the extrapolation from laboratory animal data to humans and in the variations in sensitivity among members of the human population as well as other unknowns. Safety is assessed for acute and chronic risks by comparing aggregate exposure to the pesticide to the acute population adjusted dose (aPAD) and chronic population adjusted dose (cPAD). The aPAD and cPAD are calculated by dividing the LOC by all applicable UFs. Short-term, intermediate-term, and long-term risks are evaluated by comparing aggregate exposure to the LOC to ensure that the margin of exposure (MOE) called for by the product of all applicable UFs is not exceeded.

For non-threshold risks, the Agency assumes that any amount of exposure will lead to some degree of risk and estimates risk in terms of the probability of occurrence of additional adverse cases. Generally, cancer risks are considered non-threshold. For more information on the general principles EPA uses in risk characterization and a complete description of the risk assessment process, see http://www.epa.gov/fedrgstr/EPA-PEST/1997/November/Day-26/p30948.htm .

A summary of the toxicological endpoints for glufosinate ammonium used for human risk assessment is discussed in Unit III.B. of the final rule published in the Federal Register of September 29, 2003 (68 FR 55833) (FRL-7327-9).

EPA concludes that the tolerance levels for combined residues of Glufosinate-ammonium are unchanged. The exposure assumptions discussed in the final rule published in the Federal Register of September 29, 2003 (68 FR 55833) (FRL-7327-9) remain the same.

A summary of the safety factor for infants and children for glufosinate ammonium is discussed in Unit III.D. of the final rule published in the Federal Register of September 29, 2003 (68 FR 55833) (FRL-7327-9)

Safety is assessed for acute and chronic risks by comparing aggregate exposure to the pesticide to the aPAD and cPAD. The aPAD and cPAD are calculated by dividing the LOC by all applicable UFs. For linear cancer risks, EPA calculates the probability of additional cancer cases given aggregate exposure. Short-term, intermediate-term, and long-term risks are evaluated by comparing aggregate exposure to the LOC to ensure that the MOE called for by the product of all applicable UFs is not exceeded.

Consistent with FFDCA section 408(b)(2)(D), and the factors specified in section 408(b)(2)(D), EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure for the petitioned-for revision in the tolerance expressions for combined residues of glufosinate-ammonium and its metabolites. EPA's assessment of exposures and risks associated with establishing the tolerance are discussed in the Federal Register of September 29, 2003 (68 FR 55833) (FRL-7327-9).

Accordingly EPA concludes that there is a reasonable certainty that no harm will result to the general population and to infants and children from aggregate exposure to glufosinate-ammonium residues.

Adequate enforcement methodology gas chromatography is available to enforce the tolerance expression. The method may be requested from: Chief, Analytical Chemistry Branch, Environmental Science Center, 701 Mapes Rd., Ft. Meade, MD 20755-5350; telephone number: (410) 305-2905; e-mail address: residuemethods@epa.gov .

Since tolerances levels remain the same and since there are no new tolerances established, harmonization with CODEX, Canada or Mexico's MRLs is impacted.

Public comments were received from B. Sachau who objected to the proposed tolerances because of the amounts of pesticides already consumed and carried by the American population. She further indicated that testing conducted on animals have absolutely no validity and are cruel to the test animals. B. Sachau's comments contained no scientific data or evidence to rebut the Agency's conclusion that there is a reasonable certainty that no harm will result from aggregate exposure to glufosinate ammonium, including all anticipated dietary exposures and all other exposures for which there is reliable information. EPA has responded to B. Sachau's generalized comments on numerous previous occasions. (January 7, 2005, 70 FR 1349) (October 29, 2004, 69 FR 63083).

Therefore, the tolerance regulation for the combined residues of glufosinate-ammonium and its metabolites expressed as butanoic acid, 2-amino-4-(hydroxymethylphosphinyl)-, monoammonium salt, 2-acetamido-4-methylphosphinico-butanoic acid and 3-methylphosphinico-propionic acid (expressed as glufosinate free acid equivalents), are revised by placing all the commodities listed §180.473 (a)(1) and (a)(2) together in §180.473 (a).

This final rule establishes a tolerance under section 408(d) of FFDCA in response to a petition submitted to the Agency. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled Regulatory Planning and Review (58 FR 51735, October 4, 1993). Because this rule has been exempted from review under Executive Order 12866, this rule is not subject to Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use (66 FR 28355, May 22, 2001) or Executive Order 13045, entitled Protection of Children from Environmental Health Risks and Safety Risks (62 FR 19885, April 23, 1997). This final rule does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA), 44 U.S.C. 3501 et seq ., nor does it require any special considerations under Executive Order 12898, entitled Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations (59 FR 7629, February 16, 1994).

Since tolerances and exemptions that are established on the basis of a petition under section 408(d) of FFDCA, such as the tolerance in this final rule, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq .) do not apply.

This final rule directly regulates growers, food processors, food handlers, and food retailers, not States or tribes, nor does this action alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of section 408(n)(4) of FFDCA. As such, the Agency has determined that this action will not have a substantial direct effect on States or tribal governments, on the relationship between the national government and the States or tribal governments, or on the distribution of power and responsibilities among the various levels of government or between the Federal Government and Indian tribes. Thus, the Agency has determined that Executive Order 13132, entitled Federalism (64 FR 43255, August 10, 1999) and Executive Order 13175, entitled Consultation and Coordination with Indian Tribal Governments (65 FR 67249, November 6, 2000) do not apply to this rule. In addition, This rule does not impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) (Public Law 104-4).

This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law 104-113, section 12(d) (15 U.S.C. 272 note).

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 is a synopsis of the letter from Peter H. Doyle, Chief, Audio Division, Media Bureau to Liberty Productions, a Limited Partnership, et al., released December 11, 2007, (DA 07-4945). The full text of this letter is available for inspection and copying during normal business hours in the FCC Reference Information Center at Portals l1, CY-A257, 445 12th Street, SW., Washington, DC 20554. The complete text of this decision may also be purchased from the Commission's copy contractor, Best Copying and Printing, Inc., 445 12th Street, SW., Room CY-B402, Washington, DC 20554, telephone 1-800-378-3160 or http://www.BCPIWEB.com. The Commission, is, therefore, not required to submit a copy of this Letter pursuant to the Government Accountability Office, pursuant to the Congressional Review Act, see 5 U.S.C. 801 (a)(1)(A), because the Petition for Reconsideration was dismissed.

The proposed rule for Framework 20 was published in the Federal Register on October 30, 2007 (72 FR 61320). Comments were accepted through November 14, 2007. By approving Framework 20 this action adjusts measures approved as part of Framework 18 to the FMP (Framework 18) (71 FR 33211, June 8, 2006), and maintains the provisions of the interim action that: (1) Reduce the number of trips from five trips to three trips for full-time scallop vessels in the ETAA (scallop possession limit would remain at 18,000 lb); (2) reduce the number of trips from three trips to two trips (for all access areas) for part-time scallop vessels in the ETAA (scallop possession limit for part-time vessels would be increased from 16,800 lb (7,620 kg) per trip to 18,000 lb (8,165 kg) per trip); (3) reduce the occasional vessel possession limit from 10,500 lb (4,763 kg) per trip to 7,500 lb (3,402 kg) per trip; (4) reduce the general category scallop fleet ETAA trip allocation from 1,360 trips to 865 trips; and (5) prohibit the retention of more than 50 U.S. bushels (17.62 hL) of in-shell scallops outside of the boundaries of the ETAA ( or deckloading, i.e., leaving a high volume of scallops on deck after leaving an access area so that the scallops can be shucked on the way back to port).

The Council developed Framework 20 to prevent the Framework 18 measures from going back into effect when the interim measures expire on December 23, 2007. If this were to happen, it would restore the higher trip allocations and allow additional effort by the fleet, resulting in overfishing for the last 2 months (January and February 2008) of the 2007 fishing year (FY). Such an outcome would undermine the effect of the interim measures in preventing overfishing.

In the proposed rule, NMFS requested comments on all proposed management measures, and received one comment on the proposed rule. The approved management measures are discussed below. No measures in Framework 20 were disapproved. Details concerning the Council's development of these measures were presented in the preamble of the proposed rule and are not repeated here.

This action maintains the reduction in the number of trips from five trips to three trips for full-time scallop vessels in the ETAA (scallop possession limit would remain at 18,000 lb (8,165 kg)); the reduction in the number of trips from three trips to two trips (for all access areas) for part-time scallop vessels in the ETAA (scallop possession limit for part-time vessels remains at 16,800 lb (7,620 kg) per trip); and the reduction in the occasional vessel possession limit from 10,500 lb (4,763 kg) per trip to 7,500 lb (3,402 kg) per trip. The regulations at § 648.60(a)(5) published for Framework 18 specified that an occasional vessel's possession limit is 7,500 lb (3,402 kg) per trip. However, Framework 18 intended and analyzed a possession limit of 10,500 lb (4,763 kg) per trip for the 2007 FY. This action also maintains the reduction in the general category scallop fleet trip allocation from 1,360 to 865 trips in the ETAA.

Reducing the number of trips for scallop vessels in the ETAA addresses the concern that overfishing of the scallop resource may occur in 2007. Although the biomass in the ETAA remains very high relative to the rest of the scallop resource, it is less abundant than was projected in Framework 18. As a result, even though the fishing mortality is expected to be lower than the target fishing mortality in the area, it would be high enough at the lower biomass to contribute to overfishing in 2007. Part-time vessels have a trip reduction with an increase in the possession limit to ensure that the total access area catch for part-time vessels remains at 40 percent of the full-time access area catch, as intended by the FMP. Occasional vessels have one trip to any access area, but have a possession limit of 7,500 lb (3,402 kg) for the trip, ensuring that the total access area catch for occasional vessels remains at 8.3 percent of the full-time access area catch. Reducing trips in the ETAA was contemplated in Framework 18 and the potential impacts of the trip reductions were fully analyzed in Framework 18.

This action maintains the prohibition on the retention of more than 50 U.S. bushels (17.62 hL) of in-shell scallop outside of the boundaries of the ETAA for vessels on ETAA trips. Deckloading is the practice of loading the deck of a vessel with the scallop catch from several tows and shucking the scallops while steaming back to port. If allowed to deckload, vessel could leave the area, and the vessel crews can spend the time steaming home sorting and shucking scallops, thereby reducing overall trip costs. This can result in a vessel having more scallops on board than are necessary to achieve the possession limit. The excess scallops are discarded. In addition, due to deckloading, scallops remain on deck longer, increasing discard mortality. In the ETAA, deckloading may cause even higher scallop mortality, since catch rates are expected to be very high, there is a mix of scallop sizes in the area, and scallop crews may discard smaller scallops in favor of larger scallops. Although the amount of additional mortality cannot be precisely estimated, prohibiting deckloading on ETAA trips is a complementary measure that will help prevent additional scallop mortality.

This final rule implements a regulatory change making the regulations consistent with the original intent of Amendment 4 to the FMP (Amendment 4) (59 FR 2757, January 19, 1994) . Amendment 4 intended that general category scallop vessels cannot land scallops on more than one trip per calendar day. NMFS implemented the scallop regulations consistent with this intent until it was recently discovered that the regulations, as written, prohibit such vessels from “fishing for” scallops more than once per calendar day. This prohibited a vessel from leaving on a scallop trip on a calendar day if scallops had previously been landed that calendar day. The general category scallop industry is concerned that interpreting the regulation this way may encourage unsafe fishing behavior to complete as many trips as possible while avoiding the “one trip per calendar day” restriction. For example, if a vessel owner has to wait a full calendar day to set sail on a subsequent trip, he/she may sail despite hazardous weather. To make the regulations consistent with Amendment 4, NMFS implements the regulatory change in this final rule that prohibits a general category scallop vessel from landing scallops on more than one trip per calendar day, but allows vessels to depart on a subsequent scallop trip on the same calendar day that the vessel landed scallops.

The trip allocations and possession limits for the ETAA in 2007 are intended to be effective for the remainder of the 2007 fishing year. However the FMP currently specifies that if framework measures to change annual scallop measures are not implemented by March 1 of each fishing year, the scallop DAS and access area allocations remain in effect until replaced by new measures. Therefore, if Framework 19 to the FMP (adopted by the Council in October 2007) is not completed by March 1, 2007, the trip allocations and possession limits for the ETAA in 2007 will remain in effect until modified by Framework 19 measures. The prohibition on deckloading and the regulatory change to the “one per calender day” landing restriction is permanent, unless modified by the Council and NMFS through subsequent action.

NMFS received one comment on the proposed rule to implement Framework 20 that was in favor of extending DAS limitations on scallop fishing for the purpose of preventing overfishing. This comment did not address any specific measures in Framework 20 and therefore was not pertinent to the decision to implement this action.

NMFS has determined that this final rule is consistent with the FMP and has determined that the rule is consistent with the Magnuson-Stevens Act and other applicable laws.

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

The Assistant Administrator for Fisheries, NOAA, finds good cause to waive the 30-day delay in effective date under authority contained in 5 U.S.C. 553(d)(3) for this rule because provisions in this rule are critical for the sustainable management of the scallop resource and need to be implemented in a timely manner. This action extends interim measures for the Elephant Trunk Access Area (ETAA), implemented in December 2006 to reduce overfishing for the 2007 fishing year (March 1, 2007, through February 29, 2008). If this rule is implemented after December 23, 2007 Framework 18 measures will come into effect, which would likely cause overfishing in the 2007 fishing year as a result of the higher trip allocations. Overfishing of the scallop resource in the 2007 fishing year would make future measures already developed by the Council for the 2008 and 2009 fishing years less likely to achieve their goals of preventing overfishing and providing for optimum yield to the industry on a continuing basis. In turn, the Council would likely have to consider more restrictive measures to account for the unexpected overfishing in 2007, which would likely cause short term losses for the industry. In addition, this action extends measures currently in place and does not implement any new compliance requirements on the scallop industry.

NMFS, pursuant to section 604 of the Regulatory Flexibility Act has prepared a FRFA in support of Framework 20. The FRFA describes the economic impact that this final rule, along with other non-preferred alternatives, will have on small entities.

The FRFA incorporates the economic impacts and analysis summarized in the IRFA for the proposed rule to implement Framework 20 (72 FR 61320, October 30, 2007), the comments and responses in this final rule, and the corresponding economic analyses prepared for Framework 20 (e.g., the EA and RIR). The contents of these incorporated documents are not repeated in detail here. A copy of the IRFA, the RIR and the EA are available on request (see ADDRESSES ). A description of the reasons for this action, the objectivs of the action, and the legal basis for this final rule are found in Framework 20 and the preamble to the proposed and final rules.

The purpose of this action is to prevent the Framework 18 measures from reverting back into effect when the interim measures expire on December 23, 2007. If this were to happen, it would restore the higher trip allocations and allow additional effort by the fleet, resulting in overfishing for the last 2 months of the 2007 fishing year (FY). Such an outcome would undermine the effect of the interim measures in preventing overfishing.

The regulations associated with Framework 20 will affect vessels with limited access scallop and general category permits. According to NMFS Northeast Region permit data as of October 2006, 351 vessels were issued limited access scallop permits, with 318 full-time, 32 part-time, and 1 occasional limited access permit issued. In addition, 2,501 open access general category permits were issued. All of the vessels in the Atlantic sea scallop fishery are considered small business entities because all of them grossed less than $3 million according to landings data for the period 2004 to 2006. Therefore, there will be no differential impact from this action between large and small entities. According to this information, annual revenue from scallops averaged over a million dollars per limited access vessel in 2005. Total revenues per vessel were higher when revenues from species other than scallops were included, but still averaged less than $3 million per vessel. Average scallop revenue per general category vessel was $88,702 in 2005, though it exceeded $240,000 when revenue from other species was included.

There are no new reporting, recordkeeping, or other compliance requirements associated with the measures proposed in Framework 20.

The regulations implementing Framework 20 were developed to ensure that scallop landings and economic benefits would be kept to sustainable levels. Therefore, overall positive economic impacts are expected as a result of preventing overfishing. The prohibition on deckloading on ETAA trips is expected to help prevent additional scallop mortality associated with discards and thus would improve yield, revenues, and economic benefits from the resource. The owners of vessels that fish for scallops would benefit over the long-term if overfishing is prevented. There was strong industry support for the proposed action in public testimony before the Council at the meeting when it adopted Framework 20.

While a range of alternatives were considered in Framework 18, which established the management measures for 2006 and 2007, the only other alternative the Council considered in Framework 20 was to take no action. If no action had been taken, the Framework 18 measures would revert into effect, with the potential that fishing activity during January and February 2008 would lead to overfishing in the 2007 FY. Overfishing would have had negative impacts on scallop biomass, with landings, revenues and economic benefits likely to decline in future years as a result. The Council found this to be unacceptable and adopted Framework 20 to prevent this outcome. Other alternatives that the Council could have considered included overall reductions in effort or reductions in trip allocations in other areas. Such actions would have had other negative economic impacts since reductions in DAS or trip allocations would still have been necessary. In addition, these actions would have been more suitable for an annual adjustment rather than the extension of interim measures through Framework 20. The Council therefore did not consider and analyze these alternatives.

This action is authorized by regulations implementing the Pacific Coast Groundfish Fishery Management Plan (FMP), which governs the groundfish fishery off Washington, Oregon, and California.

The 2007 non-tribal commercial OY for whiting is 208,091 mt. Regulations at 50 CFR 660.323(a)(4) divide the commercial whiting optimum yield (OY) into separate allocations for the catcher/processor, mothership, and shore-based sectors. The catcher/processor sector is composed of vessels that harvest and process whiting. The mothership sector is composed of catcher vessels that harvest whiting and mothership vessels that process, but do not harvest whiting. The shore-based sector is composed of vessels that harvest whiting for delivery to land-based processors. Each commercial sector receives a portion of the commercial OY. For 2007 the catcher/processors received 34 percent (70,751 mt), motherships received 24 percent (49,942 mt), and the shore-based sector received 42 percent (87,398 mt).

The best available information on November 28, 2007, indicated that 6,000 metric tons (mt) of the 87,398 mt shore-based sector's allocation would not be used by December 31, 2007. Therefore, automatic action was taken to reapportion the surplus whiting. Such reapportionments are generally disbursed to the other sectors in the same proportion as each sector's allotted portion of the commercial OY. However, the mothership sector did not express an interest in harvesting reapportioned whiting in 2007. Therefore, all surplus whiting from the shore-based sector was reallocated to the catcher/processor sector. Facsimiles directly to fishing businesses and postings on the Northwest Regions internet site were used to provide actual notice to the affected fishers.

This action announces the reapportionment of 6,000 mt of whiting from the shore-based sector to the catcher/processor sector at noon local time November 28, 2007. The revised Pacific whiting allocations by sector for 2007 are: catcher/processor, 76,751 mt; mothership, 49,942 mt; and shore-based, 81,398 mt.

The determination to take this action is based on the most recent data available. The aggregate data upon which the determination is based are available for public inspection at the Office of the Regional Administrator (see ADDRESSES ) during business hours.

This action is authorized by the regulations implementing the FMP. The determination to take this action is based on the most recent data available. The Assistant Administrator for Fisheries, NMFS, finds good cause to waive the requirement to provide prior notice and opportunity for comment on this action pursuant to 5 U.S.C. 553 (3)(b)(B), because providing prior notice and opportunity would be impracticable. It would be impracticable because of the need for immediate action. NMFS has determined that providing an opportunity for prior notice and comment would be impractical and contrary to public interest. Delay of this action would leave whiting unharvested. Unlike the catcher/processors, the smaller shore-based and mothership sectors are comprised of smaller catcher vessels that are less likely to operate in inclement fall and winter weather. The agency believes this constitutes good cause to waive the 30-day delay in effectiveness. In addition, the catcher/processors need an immediate reallocation if they are to keep their workers employed. This actions is taken under the authority of 50 CFR 660.323(a)(2), and are exempt from review under Executive Order 12866. Actual notice of the reapportionment was provided to the affected fishers.