On March 31, 2008, we issued a proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an AD that would apply to certain Cessna Models 175 and 175A airplanes. This proposal was published in the Federal Register as a notice of proposed rulemaking (NPRM) on April 8, 2008 (73 FR 19017). The NPRM proposed to require you to check the airplane logbook to determine if the original engine mounting brackets have been replaced. If the original engine mounting brackets are still installed, the NPRM proposed to require you to repetitively inspect those brackets for cracks and replace any cracked engine mounting bracket. After replacing all four original engine mounting brackets, no further action would be required by the NPRM.

We provided the public the opportunity to participate in developing this AD. We received no comments on the proposal or on the determination of the cost to the public.

We have carefully reviewed the available data and determined that air safety and the public interest require adopting the AD as proposed except for minor editorial corrections. We have determined that these minor corrections:

• Are consistent with the intent that was proposed in the NPRM for correcting the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM.

We estimate that this AD affects 1,218 airplanes in the U.S. registry.

We estimate the following costs to do the inspection:

We estimate the following costs to do any necessary replacements:

On Thursday, May 29, 2008, the FAA proposed to amend part 71 of the Federal Aviation Regulations (14 CFR part 71) to establish Class E airspace upward from 700 ft. and 1,200 ft. above the surface at Venetie, AK (73 FR 30820). The action was proposed in order to create Class E airspace sufficient in size to contain aircraft while executing instrument procedures for the Venetie Airport. Class E controlled airspace extending upward from 700 ft. and 1,200 ft. above the surface in the Venetie Airport area is established by this action.

Interested parties were invited to participate in this rulemaking proceeding by submitting written comments on the proposal to the FAA. No comments were received. The rule is adopted as proposed.

The area will be depicted on aeronautical charts for pilot reference. The coordinates for this airspace docket are based on North American Datum 83. The Class E airspace areas designated as 700/1,200 ft. transition areas are published in paragraph 6005 of FAA Order 7400.9R, Airspace Designations and Reporting Points, signed August 15, 2007, and effective September 15, 2007, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designations listed in this document will be published subsequently in the Order.

This amendment to 14 CFR part 71 establishes Class E airspace at the Venetie Airport, Alaska. This Class E airspace is established to accommodate aircraft executing instrument procedures, and will be depicted on aeronautical charts for pilot reference. The intended effect of this rule is to provide adequate controlled airspace for Instrument Flight Rules (IFR) operations at the Venetie Airport, Venetie, Alaska.

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

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle 1, section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority.

This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart 1, Section 40103, Sovereignty and use of airspace. Under that section, the FAA is charged with prescribing regulations to ensure the safe and efficient use of the navigable airspace. This regulation is within the scope of that authority because it creates Class E airspace sufficient in size to contain aircraft executing instrument procedures for the Venetie Airport and represents the FAA's continuing effort to safely and efficiently use the navigable airspace.

Before Commissioners: Joseph T. Kelliher, Chairman; Suedeen G. Kelly, Marc Spitzer, Philip D. Moeller, and Jon Wellinghoff.

1. The Federal Energy Regulatory Commission (Commission) is amending its regulations under the Federal Power Act (FPA)  1 to incorporate by reference the latest version (Version 001) of certain business practice standards concerning the Open Access Same-Time Information Systems (OASIS) and gas/electric coordination and four business practice standards relating to reliability issues adopted by the Wholesale Electric Quadrant (WEQ) of the North American Energy Standards Board (NAESB). These revised standards update earlier versions of these standards that the Commission previously incorporated by reference into its regulations at 18 CFR 38.2 in Order Nos. 676, 676-B, and 698. 2 In addition, in this Final Rule, the Commission is amending its regulations under the FPA to incorporate by reference NAESB's new standards on transmission loading relief (TLR) for the Eastern Interconnection and on public key infrastructure (PKI) and to add a new OASIS implementation guide.

2. NAESB is a non-profit standards development organization established in January 2002 that serves as an industry forum for the development of business practice standards that promote a seamless marketplace for wholesale and retail natural gas and electricity. 3 Since 1995, NAESB and its predecessor, the Gas Industry Standards Board, have been accredited members of the American National Standards Institute (ANSI), complying with ANSI's requirements that its standards reflect a consensus of the affected industries. 4

3. NAESB's standards include business practices that streamline the transactional processes of the natural gas and electric industries, as well as communication protocols and related standards designed to improve the efficiency of communication within each industry. NAESB supports all four quadrants of the gas and electric industries—wholesale gas, wholesale electric, retail gas, and retail electric. All participants in the gas and electric industries are eligible to join NAESB and participate in standards development. 5

4. NAESB's procedures are designed to ensure that all industry members can have input into the development of a standard, whether or not they are members of NAESB, and each standard NAESB adopts is supported by a consensus of the relevant industry segments. 6

5. On December 26, 2007, NAESB submitted a report detailing its new and revised Version 001 business practice standards dated October 31, 2007 with minor corrections applied on November 16, 2007. 7 These standards update the standards that we incorporated by reference into our regulations in Order Nos. 676, 676-B and 698, add a new OASIS implementation guide, and add new standards to: (1) Provide additional functionality for OASIS transactions; (2) provide business practice standards for TLR in the Eastern Interconnection; and (3) provide business practice standards governing PKI.

6. On April 21, 2008, the Commission issued a Notice of Proposed Rulemaking, wherein we proposed to incorporate by reference into the Commission's regulations the WEQ Version 001 Standards (with certain exceptions) including NAESB's new standards on TLR, PKI, and the new OASIS implementation guide. 8 In response to the WEQ Version 001 NOPR, ten comments were filed. 9

7. In this Final Rule, the Commission is amending its regulations under the FPA to incorporate by reference the NAESB WEQ Version 001 standards that the Commission proposed to incorporate in the WEQ Version 001 NOPR. 10 While many of the standards simply revise or update existing standards, some of the standards address new business practices. For example, NAESB adopted new business practice standards for resales and transfers to standardize secondary transmission service on the OASIS. These standards also standardize how resales and transfers are conducted off the OASIS. NAESB also adopted PKI standards to create greater security for business transactions taking place over the Internet. In addition, NAESB has revised and added standards establishing business practices related to the North American Electric Reliability Corporation (NERC) reliability standards. 11 For example, NAESB has adopted standards governing TLR that specify business practices for cutting transmission services in the event of a TLR, consistent with the NERC reliability standards.

8. In the NOPR, we asked for comment on differences in definitions in a few of the NERC's and NAESB's TLR standards. The comments indicate that NERC and NAESB have formed a subcommittee to ensure that their definitions are complementary in the future. We are very pleased that NERC and NAESB have taken active steps to ensure that their respective definitions are harmonized so as to ensure that these standards will operate efficiently in the future.

9. The specific NAESB standards that we are incorporating by reference in this Final Rule are:

• Business Practices for Open Access Same-Time Information Systems (OASIS), Version 1.4 (WEQ-001, Version 001, Oct. 31, 2007, with minor corrections applied on Nov. 16, 2007) including Standards 001-0.2 through 001-0.8, 001-0.14 through 001-0.20, 001-2.0 through 001-9.6.2, 001-9.8 through 001-12.5.2, and 001-A and 001-B;  12

• Business Practices for Open Access Same-Time Information Systems (OASIS) Standards & Communication Protocols, Version 1.4 (WEQ-002, Version 001, Oct. 31, 2007, with minor corrections applied on Nov. 16, 2007) including Standards 002-0.1 through 002-5.10;

• Open Access Same-Time Information Systems (OASIS) Data Dictionary, Version 1.4 (WEQ-003, Version 001, Oct. 31, 2007, with minor corrections applied on Nov. 16, 2007) including Standard 003-0;

• Coordinate Interchange (WEQ-004, Version 001, Oct. 31, 2007, with minor corrections applied on Nov. 16, 2007) including Purpose, Applicability, and Standards 004-0.1 through 004-17.2, and 004-A through 004-D; 13

• Area Control Error (ACE) Equation Special Cases Standards (WEQ-005, Version 001, Oct. 31, 2007, with minor corrections applied on Nov. 16, 2007) including Purpose, Applicability, and Standards 005-0.1 through 005-3.1.3, and 005-A;

• Manual Time Error Correction (WEQ-006, Version 001, Oct. 31, 2007, with minor corrections applied on Nov. 16, 2007) including Purpose, Applicability, and Standards 006-0.1 through 006-12;

• Inadvertent Interchange Payback (WEQ-007, Version 001, Oct. 31, 2007, with minor corrections applied on Nov. 16, 2007) including Purpose, Applicability, and Standards 007-0.1 through 007-2, and 007-A;

• Transmission Loading Relief—Eastern Interconnection (WEQ-008, Version 001, Oct. 31, 2007, with minor corrections applied on Nov. 16, 2007) including Purpose, Applicability, and Standards 008-0.1 through 008-3.11.2.8, and 008-A through 008-D; 14

• Gas/Electric Coordination (WEQ-011, Version 001, Oct. 31, 2007, with minor corrections applied on Nov. 16, 2007) including Standards 011-0.1 through 011-1.6; 15

• Public Key Infrastructure (PKI) (WEQ-012, Version 001, Oct. 31, 2007, with minor corrections applied on Nov. 16, 2007) including Recommended Standard, Certification, Scope, Commitment to Open Standards, and Standards 012-0.1 through 012-1.26.5; and

• Business Practices for Open Access Same-Time Information Systems (OASIS) Implementation Guide, Version 1.4 (WEQ-013, Version 001, Oct. 31, 2007, with minor corrections applied on Nov. 16, 2007) including Introduction and Standards 013-0.1 through 013-4.2.

10. The Commission will also require public utilities to modify their open access transmission tariffs (OATTs) to include the WEQ standards that we are incorporating by reference the next time they make any unrelated filing to revise their OATTs. 16 As we did in Order No. 676, 17 we clarify that, to the extent a public utility's OASIS obligations are administered by an independent system operator or regional transmission operator (RTO) and are not covered in the public utility's OATT, the public utility will not need to modify its OATT to include the OASIS standards.

11. NAESB approved the standards under its consensus procedures. 18 Adoption of consensus standards is appropriate because the consensus process helps ensure the reasonableness of the standards by requiring that the standards draw support from a broad spectrum of all segments of the industry. Moreover, since the industry itself has to conduct business under these standards, the Commission's regulations should reflect those standards that have the widest possible support. In section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTT&AA), Congress affirmatively requires federal agencies to use technical standards developed by voluntary consensus standards organizations, like NAESB, as a means to carry out policy objectives or activities. 19

12. Comments in response to the WEQ Version 001 NOPR were filed by ten commenters. While some of these comments raise concerns about specific standards, none of the ten comments filed raise any general objection to the Commission's proposal to incorporate by reference the WEQ standards into the Commission's regulations.

13. Lafayette and LEPA are concerned that the cost of obtaining the NAESB standards impedes dissemination and understanding of the applicable requirements. Lafayette and LEPA claim that incorporating by reference standards necessarily purchased at not insubstantial costs imposes a burden on small entities, particularly where issues of interpretation of the standards arise.

14. In Order No. 676, the Commission explained that standards organizations are permitted to charge for standards incorporated by reference into federal government regulations. 20 Under the Freedom of Information Act, to be eligible for incorporation by reference, standards must be reasonably available to the class of persons affected by their publication. 21 The NAESB standards are reasonably available to all industry members. The cost for obtaining the NAESB standards for non-members is $100 for the printed standards booklet and $300 for the CD-ROM of the standards. NAESB members can obtain the standards on-line at no cost.

15. The arguments raised here by Lafayette and LEPA are identical to those that the Commission considered and rejected in Order No. 676, which became a final determination when no party filed a request for rehearing of Order No. 676 objecting to the Commission's finding on this issue. None of the arguments raised here by Lafayette and LEPA lead us to reverse the determination that the Commission previously reached on this issue in Order No. 676, i.e., that the standards are reasonably available to all industry members. Furthermore, the Commission finds that the benefits to both the industry and the public that have resulted from the adoption of an industry-driven approach to standards development outweigh the cost of the fees required to obtain the NAESB standards. If industry participants remain concerned about the accessibility of the standards, these concerns should be addressed through the NAESB process.

16. LEPA requests that the Commission clarify that it will interpret NAESB standards in accordance with the principles underlying the OATT. In particular, LEPA requests that the Commission clarify that it is not, by incorporating the NAESB standards, intending to override settled matters of contract law or the Commission policies underlying open access transmission service.

17. The NAESB standards are incorporated by reference in the regulations and therefore must be followed to the same extent as other regulations and policies of the Commission. The Commission's regulations require compliance with both the pro forma OATT (18 CFR 35.28) and the NAESB standards that the Commission has incorporated by reference (18 CFR 38.2) and that must be included in the utility's OATT. If LEPA is concerned that there are inconsistencies between specific NAESB standards and the Commission's open access transmission service regulations, it can seek an interpretation of the standards from NAESB and can make appropriate filings with the Commission.

18. The Midwest ISO is concerned that the cost of complying with and implementing some of the WEQ-001 NAESB standards (for example, standards WEQ-001-9.4.3  22 and WEQ-001-12 23  ) will be greater than the benefits that will result. The Midwest ISO believes it would be unreasonable and unduly discriminatory to adopt a business practice that results in substantial compliance costs while producing only negligible benefits for a particular NAESB segment or a group of industry participants and states that the Commission has the authority to determine what costs are considered just and reasonable through rulemaking. Thus, Midwest ISO is not, at this time, requesting a waiver of specific standards (such as WEQ-001-9.4.3 and WEQ-001-12) but is asking that the Commission provide a waiver option and that NAESB be directed to review this entire topic. The Midwest ISO wants consideration to be given to the relative costs and benefits of the standards for entities such as the Midwest ISO or to allow affected entities to seek waivers. 24

19. NAESB's stakeholder process for adopting standards ensures that an industry consensus is necessary before any standard is approved. This process helps to ensure that all approved standards are beneficial to the industry. However, as we explained in order No. 676, each public utility that wants a waiver of any standard we are incorporating by reference in this Final Rule may file a request for waiver, supported by the reasons it believes a waiver is warranted. 25 To the extent that implementation of certain standards will result in substantial compliance costs for small industry participants, we have in the past considered waivers of extensions of compliance obligations where granting such requests would not noticeably diminish the expected benefits to the rest of the industry that would derive from compliance with the standard. Any such waiver requests should specifically detail the expected compliance costs and the reasons why a waiver would not diminish the overall expected benefits from compliance with the standard. Therefore, we will incorporate these standards in our regulations, as proposed in the WEQ Version 001 NOPR.

20. PJM argues that in order to implement the Resale and Transfer functionality required by WEQ-001, PJM will have to develop the internal business documentation, develop the software modifications, and test those modifications. To provide sufficient time to implement the necessary scheduling and settlements application changes, PJM requests an implementation date of January 31, 2009 or later for WEQ-001. NYISO agrees with PJM's comment and requests that the Commission institute an effective date of January 31, 2009 or later for compliance with WEQ-001.

21. In order to allow adequate time to implement the new Resale and Transfer standards in WEQ-001, the Commission will provide for an implementation date for the WEQ-001 standards of January 31, 2009, as requested.

22. WEQ-001-0.5 defines identical service requests as “those OASIS transmission service requests that have exactly the same values” for certain OASIS template Data Elements. The standard also states, “Service requests where any combination of PATH, POR and/or POD represent exactly the same commercial transmission elements shall be considered as `having the exact same value.' ”

23. Bonneville is concerned that no other OASIS template Data Elements are subject to the qualifying language “having the exact same value” included in the Data Elements of PATH, POR, and POD. Bonneville seeks clarification that “identical service requests” includes multiple transmission service requests that have substantially similar start times and stop times even if those elements are not exactly the same.

24. Bonneville's requested clarification would change the meaning of this standard. The standard as adopted by NAESB requires that “identical service requests” must have “exactly the same values” for start time and stop time, not “substantially similar start times and stop times.” Bonneville has not provided us with sufficient evidence that the standard needs to be modified as it suggests. If Bonneville believes the standard should be modified, it should, as we stated in Order No. 676, seek such a change through NAESB. 26

25. WEQ-001-1.5(d) provides, in part:

26. Bonneville asserts that the Responsible Party should have the right to determine whether the inefficient access of an OASIS node “seriously degrades” the performance of the node and recommends that WEQ-001-1.5(d) be revised.

27. We are not incorporating WEQ-001-1.5(d) by reference in our regulations, because the standard is one of several that restate the Commission's regulations, in this case § 37.5(d) of the Commission's regulations. As we stated in Order No. 676, the proper function of the NAESB business practice standards is to provide business practice standards that implement the Commission's regulations, not merely restate them. 27

28. WEQ-001-11 states:

29. Duke argues for the modification of WEQ-001-11, which establishes a two-party transaction on OASIS between the reseller and the assignee for resale transactions. Duke claims that, because the transmission provider is permitted to annul the transaction if the assignee does not execute the required service agreement, an inappropriate burden is placed on the transmission provider to intervene in a transaction to which it is not a party. Duke recommends that this standard be revised to provide for a three-party transaction, similar to the one presented in WEQ 001-12.1.2.

30. In addition, Duke asserts that, although WEQ-001-11 provides for the resale of both Firm Point-to-Point and Non-Firm Point-to-Point scheduling rights and permits the use of a blanket service agreement, the form of Service Agreement for resales that appears in the pro forma OATT refers only to firm sales. Duke suggests that this form may require revision to include non-firm sales.

31. Duke also requests guidance, in the form of examples of an Electric Quarterly Report (EQR) filing, of multiple resale transactions under a blanket agreement. Alternatively, Duke suggests that the Commission could rescind its requirement that the transmission provider report resale transactions in its EQR filings and substitute a requirement that summary reports showing a compilation of OASIS Resale reservations be posted quarterly on OASIS.

32. The standard Duke refers to as a model for revising the standards for resales to provide for a three-party transaction  28 specifies that a transfer must be agreed to by the reseller, the assignee and the transmission provider. Transfers are distinct from resales because transfers result in a full conveyance of rights and obligations from the original transmission customer to the assignee. In the case of both a resale and transfer, however, the assignee must first execute a service agreement with the transmission provider. 29 In both instances, the transmission provider therefore has an opportunity to ensure that the assignee meets the transmission provider's credit requirements and is otherwise committed to abide by the terms and conditions of the transmission provider's OATT governing the reassignment of transmission service.

33. The Commission considers it reasonable for the industry to reach consensus through the NAESB process to require transaction-specific approval by the transmission provider for transfers, but not for resales. In a resale, the original transmission customer's service agreement remains in place and any default by the assignee does not relieve the original customer of its obligation to pay for service. 30 That may not be the case in a transfer  31 and, therefore, it is reasonable to provide transmission providers with additional protection in the form of the right to review and approve the transfer. Therefore, we see no need to modify the standards for resales as suggested by Duke and will incorporate these standards by reference as we proposed in the WEQ Version 001 NOPR.

34. In addition, Duke's concern regarding the reference to firm sales in the title of the Form of Service Agreement in Attachment A-1 of the pro forma OATT has been resolved by the Commission in Order No. 890-A. There the Commission revised Attachment A-1 to the pro forma OATT to clarify that the use of a blanket service agreement for resales is similar to the use of a blanket service agreement for primary capacity. 32 The specification sheet for long-term reassignments was retained, consistent with the use of a specification sheet for long-term sales of primary capacity. 33

35. Finally, Duke's comments on the transmission provider's EQR obligations are beyond the scope of this rulemaking. The Commission adopted the EQR reporting requirement for reassigned capacity in the Order No. 890 proceeding, in which Duke actively participated, and Duke has failed to justify here rescission of that reporting requirement. 34 Should Duke or any other transmission provider have particular concerns regarding how to comply with its reporting obligation, it should bring the matter to the Commission's attention for resolution. 35

36. WEQ-001-11.2.1 states:

37. The Midwest ISO is concerned that WEQ-001-11.2.1 introduces a high risk of financial exposure to the transmission provider in the event that the assignee defaults on payment. The Midwest ISO believes that the RTO should not have to bear the financial risk associated with an assignee defaulting on usage-based market charges. Furthermore, the Midwest ISO is concerned that this standard does not address the allocation and ownership of Financial Transmission Rights/Auction Revenue Rights. To address these concerns, the Midwest ISO recommends that WEQ-001-11 be revised to include prior validation requirements, similar to those mandated by the Commission in Order Nos. 890 and 890-A in the context of service agreements. Alternatively, the Midwest ISO requests clarification and assurance that those standards are to be interpreted such that transmission providers will not be held liable in the event of nonperformance of a resale obligation.

38. The Commission does not interpret WEQ-001-11.2.1 to expose a transmission provider to high financial risks in an event an assignee defaults on usage-based charges. At least 24 hours prior to any resale an Assignee must execute a service agreement with the Transmission Provider under WEQ-001-11.1.7. The Commission has held that this service agreement is a requirement meant to commit the Assignee to abide by the terms and conditions of the Transmission Provider's OATT governing the reassignment of transmission service. 36 The assignee therefore must comply with all creditworthiness requirements required for signing a service agreement. If an Assignee were to default on its usage-based charges or overuse penalties, it would still be subject to its service agreement with the Transmission Provider, and the Transmission Provider would have access to any collateral or other assurances required under its OATT. Furthermore, Midwest ISO itself points out the Commission's policy in Order No. 890-A that allows a transmission provider to take action against the Assignee as it would any other default under the pro forma OATT, as well as transfer to the reseller its legal rights to enforce the Assignee's payment obligations. 37 We find that these procedural protections, coupled with NAESB standard WEQ-001-11.2.1.1, which grants the Transmission Provider the right to nullify the Resale in the event the service agreement is not executed, address the concerns of Midwest ISO regarding its comments on financial exposure and the request for prior validation. The Commission will therefore incorporate this standard into the Commission's regulations by reference as we proposed in the WEQ Version 001 NOPR.

39. Standards WEQ-001-11.3 through WEQ-001-11.3.3 describe the service attributes and timing of resales. These standards read as follows:

WEQ-001-11.3:

WEQ-001-11.3.1:

WEQ-001-11.3.2:

WEQ-001-11.3.3:

40. Southern Companies recommends that the Commission reject the portions of WEQ-001-11.3 through WEQ-001-11.3.3 that seem to require transmission providers to provide hourly firm service to assignees. Southern Companies argues that these provisions are inconsistent with the provisions of Order No. 890, the pro forma OATT, and the Commission's regulations.

41. First, Southern Companies states that, in Order No. 890, the Commission determined that transmission providers are not required to provide hourly firm service; it argues, therefore, that portions of WEQ-001-11.3 through WEQ-001-11.3.3 are in conflict with Order No. 890 and therefore should be rejected. Second, Southern Companies states that, in the pro forma OATT, the minimum term of firm point-to-point transmission service that is required to be offered is one day.

42. Lastly, Southern Companies points out that the Commission's regulations mandate that a reseller choosing to use OASIS to offer for resale transmission capacity must post relevant information on the same OASIS as used by the transmission provider from whom the reseller purchased the transmission capacity and in the same manner that the transmission provider posts its own information. Southern Companies argues that, if a reseller is allowed to sell hourly firm service when the transmission provider does not offer it, then the reseller will be unable to comply with the Commission's regulations regarding the posting of relevant information because the transmission provider will not have display pages, tables, etc., that are designed for hourly firm service.

43. Duke recommends against the adoption of WEQ-001-11.3.2 due to the administrative difficulties that the aggregation of multiple resale reservations could create. Duke argues that the value of this practice to its customers is nominal relative to the billing complexities that could be involved.

44. A consensus of the electric industry has found that allowing customers the ability to resell scheduling rights on less than daily basis will increase the flexibility of resales and better serve the needs of customers. We agree that providing such enhanced flexibility is desirable.

45. We also find no inconsistency between these standards and Order No. 890, the pro forma OATT, or the Commission's regulations. Southern Companies appears to be confusing its obligation to offer transmission service with the resale of scheduling rights by customers that have previously reserved service. When a customer reserves daily transmission service, it is given the right to schedule the use of transmission capacity up to the amount reserved in every hour of that day (subject to OATT scheduling deadlines). The customer is not required to schedule use in each hour of the day and, in fact, could use as little as a single hour of the reserved service.

46. The assumption of a customer's scheduling rights by an assignee for one or more hours does not mean the transmission provider is offering hourly service to the assignee. As the Commission explained in Order No. 890-A, the reassignment of transmission capacity simply results in the reseller obtaining the right to schedule the reserved capacity during the period of the reassignment, consistent with the original customer's reservation. 38 Indeed, permitting such resales is consistent with the Commission's determination in Order No. 888 that “a public utility's tariff must explicitly permit voluntary reassignment of all or a part of a holder's firm transmission capacity rights to any eligible customer.”  39 We therefore find that WEQ-001-11.3.1 and WEQ-001-11.3.3 are not inconsistent with Order Nos. 888 and 890 and provide customers with additional flexibility to obtain capacity in competition with the transmission provider. 40

47. WEQ-001-11.5.3 states:

48. Southern Companies recommends that the Commission reject WEQ-001-11.5.3. Southern Companies claims that forcing resales to be converted to an hourly price is meaningless, particularly when transmission providers are not required to provide hourly firm service. Furthermore, Southern Companies claims that this provision is inconsistent with both the pro forma OATT and the Commission's regulations. Reassigned service is governed by the transmission provider's OATT, and Southern Companies claims that in order to be consistent with the transmission provider's OATT, the price of a resale should be based upon the increments of service that are set forth in that OATT and agreed to by the reseller and assignee. Furthermore, Southern Companies cites section 23.1 of the pro forma OATT, which mandates that assignees receive the same services and priority of service as did the reseller, and that the assignee is subject to all the terms and conditions of the tariff. Lastly, the Commission's regulations state that the transmission provider must post OASIS information for third parties in the same way that it posts its own information. Southern Companies argues that the transmission provider would be unable to comply with this regulation if WEQ-001-11.5.3 is adopted and the transmission provider does not offer hourly firm service because the transmission provider would be required to post prices in units different from the units in which it reports its own prices if they are based on the increments of service provided. Southern Companies notes that they raised these concerns throughout the NAESB process of developing the standards.

49. Bonneville argues that because resales may be of different increments of service, the pricing for the different increments must be permitted to vary to reflect these increments. Furthermore, Bonneville claims that the term “Price units” in proposed WEQ-001-11.5.3 is inconsistent with the definition of “PRICE_UNITS” in the OASIS Data Dictionary, WEQ-003-0. Bonneville recommends that WEQ-001-11.5.3 read as follows:

50. Duke supports the adoption of WEQ-001-11.5.3. Duke claims that this requirement both simplifies the calculation of bills and provides the Commission with a consistent price format for the comparison of resale transactions. If the pricing methodology prepared by NAESB is not acceptable, then Duke would support a requirement that the total resale price be included in the reservation, with the Transmission Provider billing the total amount to the Assignee in one bill and crediting the total amount to the Reseller in a single credit, regardless of the duration of the resale reservation.

51. The Commission in Order No. 890 did not address whether the price for resales must be stated in a particular unit of measure, such as $/MW-Hour. Instead, the Commission left to negotiating parties the determination of the price for a particular reassignment of transmission capacity. It is not unreasonable for the industry to have reached consensus that the price of resales should be stated in $/MW-Hour. The Commission agrees with Duke that having a consistent price format for all resale transactions will make it easier for the Commission to compare such transactions to each other. This requirement also will improve the transparency and openness of resales of transmission service, allowing potential reassignment customers to better understand the comparative value of assigned transmission service. Therefore, we will incorporate this standard by reference as we proposed in the WEQ Version 001 NOPR.

52. Neither Southern Companies nor Bonneville stated a compelling reason as to why the Commission should not accept the proposed NAESB standard. It is the obligation of the parties negotiating the reassignment to state the price for the transaction and, pursuant to this standard, all such prices will be in a consistent format. We recognize that this may result in the posting of Resale prices that are not in the same unit of measure as the original reservation under which the Resale is accomplished. Nothing in Order No. 890 or our regulations prohibits this approach, which we conclude will permit customers to better compare prices for different transactions on the same transmission system, as well as transactions across transmission providers.

53. WEQ-001-11.1.7 states that “[t]he Assignee must execute a service agreement with the Transmission Provider that will govern the provision of reassigned service no later than twenty-four hours prior to the scheduling deadline applicable for the commencement of the reassigned service. The Transmission Provider may establish a blanket service agreement to include Resale transactions.”

54. WEQ-001-11.7 states that “[i]n the event a Transmission Provider requires that a higher priority, competing transmission service request must displace all or a portion of a confirmed lower priority reservation, the TP shall have the right to nullify any Resales that reference the displaced reservation as their Parent.”

55. WEQ-001-11.7.1 states that “[o]nce the conditional window on the Parent Reservation has closed, Resales for firm service are not subject to displacement in accordance with Standard WEQ-001-11.”

56. Duke strongly recommends that the resale of Conditional Long Term Firm reservations be prohibited so that transmission providers can effectively manage these reservations and assure the reliable operation of the transmission grid. In the event that the resale of these reservations is permitted, Duke argues that they should only be permitted during periods in which the reservations are unconditionally firm and such resales should be restricted to the remaining portion of the biennial reassessment period, where applicable.

57. Furthermore, Duke argues that although WEQ-001-11.1.7 permits the use of blanket service agreements, if the resale of Conditional Long Term Firm reservations is allowed, then the use of a blanket service agreement as specified in WEQ-001-11.1.7 would not be permitted under Order No. 890. Duke states that, pursuant to Order No. 890, transmission providers and assignees are to execute a non-conforming Service Agreement for resales that specifies either specific system conditions during which conditional curtailment may occur or annual number of curtailment hours during which conditional curtailment may occur. 41

58. Bonneville also recommends that the Commission adopt a provision at WEQ-001-11.7 preventing transmission customers from initiating any resale during the conditional window because permitting this practice could allow resales initiated prematurely to impose risks on all parties involved in the transaction and could lead to inefficiencies in the resale market.

59. As the Commission explained in Order No. 890-A, and reiterates above, the reassignment of transmission capacity results in the reseller obtaining the right to schedule the reserved capacity during the period of the reassignment consistent with the original customer's reservation. 42 This applies equally to long-term firm point-to-point service using the conditional firm option adopted in Order No. 890. We conclude that the NAESB standards adequately address resales of conditional firm transactions. WEQ-001-11.1 makes clear that confirmation of a resale “shall also convey any outstanding conditions that may exist on the Parent Reservation (such as conditional approval pursuant to section 13.2(ii) of the OATT).” WEQ-001-11.7 and WEQ-001-11.7.1 also address the transmission provider's right to nullify resale transactions when a higher priority transaction displaces a lower priority transaction and when those rights apply to conditional firm transactions.

60. Since these standards permit resales of conditional firm transactions and give the transmission provider the right to nullify resales of displaced transactions, we find that the standards address the concerns of Duke and Bonneville about the effective management of conditional firm transactions. If Duke and Bonneville believe that these standards are not workable upon implementation, they may submit a request to NAESB to modify these standards based on their experience with these standards.

61. The Commission finds no reason to reject the industry's decision to permit a transmission provider to develop a blanket service agreement for resales of conditional firm service. Order No. 890 required only that an original conditional firm service contract would be nonconforming in every case, and thus, would be required to be filed with the Commission for approval. However, we see no reason to prohibit the use of a blanket service agreement for the resale of conditional firm service, since the resale only provides the right to schedule service consistent with the original transmission customer's reservation, which will be on file with the Commission. We agree with NAESB that the development of a blanket agreement for resales is beneficial because it will help encourage and expedite the processing of resales.

62. WEQ-004 provides the NAESB business practice standards for coordinate interchange. These standards are designed to facilitate the transfer of electric energy between entities responsible for balancing load and generation.

63. WEQ-008 provides the NAESB business practice standards to complement the transmission loading relief procedures needed for curtailment and reloading of interchange transactions to relieve overloads on transmission facilities modeled for the eastern interconnection.

64. In the WEQ Version 001 NOPR, the Commission raised three questions concerning reliability-related standards and sought comments in response to these questions. First, as to WEQ-004, the Commission asked whether passive approval (also referred to as confirmation by silence) is appropriate for a business practice intended to complement a reliability standard. 43 Second, the Commission also asked a question about e-tagging. 44 Third, as to WEQ-008, the Commission asked whether the differences in NAESB and NERC definitions are significant and whether a single definition for reliability-related terms should be adopted in future standards. 45

65. In response to the Commission's request for comments regarding whether confirmation by silence is appropriate for a business practice intended to complement a reliability standard, NERC claims that it does not create a reliability impact and that the NAESB Standard does not alter the NERC Reliability Standards requirements, which require active response by the Balancing Authority and Transmission Service Provider.

66. In response to the Commission's request for comments on whether the differences in the definition used by NAESB and NERC are significant and whether a single definition for reliability-related terms should be adopted in future standards, NERC asserts that the definitions do not affect the industry's ability to successfully implement the standards as written and reports that it is working with NAESB to develop more in-depth coordination procedures to ensure that definitions are consistent between both organizations. This task has been assigned to a newly formed Standards Committee Process Subcommittee.

67. Regarding the Commission's request for comment concerning the differences in the reliability-related definitions used by NAESB and NERC, the Midwest ISO states that it will rely on an effort undertaken by NAESB to resolve these differences and assumes that the Commission will direct that NAESB and NERC use the same definitions. SPP concurs with and endorses the comments submitted by the Midwest ISO on whether the differences in reliability-related definitions are significant and whether single definitions should be adopted in future standards.

68. The Midwest ISO is concerned that the inclusion of the Regional Difference in Appendix D of WEQ-008 Transmission Loading Relief—Eastern Interconnection results in overlapping requirements, since the same Regional Difference appears as Section E in the NERC TLR Standard IRO-006-04—Reliability Coordination—Transmission Loading Relief. NERC retains responsibility for the Regional Difference Section of the NERC TLR Standard (section E) while a field test permitting PJM, Midwest ISO, and SPP market flows to use a three percent threshold is being conducted; however, when the field test and an evaluation of the results are completed and a recommendation on the proper curtailment threshold that will be included in the Regional Difference is approved based on the results, the Regional Difference will be transferred to NAESB and removed from the NERC TLR Standard. In Order No. 693, 46 the Commission stated that it would neither approve nor remand the waiver of the regional difference to NERC TLR Standard IRO-006-03 while the field test was being conducted, and the Midwest ISO requests that the Commission take a similar action regarding WEQ-008 Appendix D, neither approving it nor remanding it while the field test is being conducted.

69. As stated above, NAESB and NERC have agreed to establish a subcommittee to ensure that their definitions are consistent. Since all industry segments indicate that any existing differences in terms used by NAESB and NERC will not affect reliability or the ability to implement these standards, we will incorporate these standards. 47

70. While we will adopt the Regional Differences Section in Appendix D of the WEQ-008 TLR—Eastern Interconnection standards, we will not require it to be implemented until after the completion of the field tests within PJM, Midwest ISO, and SPP. Currently, the Regional Differences Section is housed in the NERC Reliability Standards and will remain so until the completion of the field tests. 48 NERC states that, at that time, Section E of the NERC TLR Standard will be deleted from its Reliability Standards and transferred to the NAESB Business Practice Standards.

71. The Commission is mindful of Midwest ISO's concern regarding overlapping requirements, and therefore will postpone the implementation of Appendix D until after the field tests are over and NERC has transferred its responsibility to NAESB. This transfer will leave the responsibility for the Regional Differences Section in only one party's hands at a given time, and alleviate Midwest ISO's concerns.

72. Regarding the Commission's request for comments concerning passive approval, NERC replied that it does not believe NAESB's standard allowing confirmation by silence creates a detrimental effect on reliability. In addition, NAESB's standard does not alter or interfere with any of the reliability requirements for the NERC Reliability Standard. Therefore, we will accept the NAESB standard.

73. WEQ-012-1.5 provides that the WEQ authorized certification authority may impose a “reasonable fee” for the issuance or renewal of certificates and other services and may not impose a fee to revoke certificates, for access to the subscriber's certificate, or for access to an authorized certification authority's published certificate revocation list. 50

74. The Midwest ISO is concerned about the provision in WEQ-012-1.5, stating that the provisions allowing a “reasonable fee” for the issuance or renewal of certificates and other services could lead to arbitrary fees and undue discrimination, because it: does not define what constitutes a “reasonable fee,” does not establish a methodology for determining whether or not a fee is reasonable, and does not establish what entity has the responsibility of deciding what constitutes a reasonable fee. Furthermore, the Midwest ISO is concerned that the standard does not identify how often certificates must be renewed, which results in ambiguity regarding how often fees would be charged. Lastly, the Midwest ISO is concerned that because the standard allows for imposing “reasonable fees” for other services, additional fees may be charged. To address these concerns, the Midwest ISO requests that the Commission direct NAESB to modify WEQ-012-1.5 to remove the ambiguities and recommends that all fees charged by a NAESB WEQ Certification Authority be approved by the Commission.

75. The Commission will incorporate the standard. In order to implement PKI encryption companies are required to use a Certification Authority, and the company can choose among potential certifiers who offer electronic certificates that meet the NAESB PKI Standards. 51 Competition among the Certification Authorities should ensure that fees are reasonable. In any event, the fees charged by a Certification Authority for PKI are not subject to the Commission's jurisdiction, because they are not fees for the transmission or sale at wholesale of electric energy in interstate commerce.

76. In their comments, Bonneville  52 and Duke  53 request modifications to numerous NAESB standards, and suggests the addition of two new standards. Bonneville's comments do not object to the incorporation by reference of these standards, nor allege that the standards are inconsistent with Commission policy, but in main part offer editorial suggestions that in Bonneville's view will make the standards clearer or clarify how they will play out in specific situations. For example, Bonneville's Attachment A suggests a number of revisions that attempt to make certain standards clearer by adding qualifications already implicit in NAESB's adopted standards. 54

77. The Commission will not modify the various NAESB standards as requested by Bonneville and Duke. The task before the Commission in this Final Rule is to review the standards recently adopted by NAESB, and to decide whether to incorporate those standards by reference into the Commission's regulations as mandatory standards that must be complied with by public utilities. Our task is not to rewrite NAESB's standards to make editorial revisions and enhancements, even if commenters correctly observe and point out some improvement that could be added to the standards. If the Commission finds NAESB's standards inadequate or finds that they conflict with the Commission's policies or regulations, we will decline to incorporate that standard by reference into our regulations and on occasion we may provide NAESB with guidance as to revisions NAESB might make to that standard to make it acceptable to the Commission.

78. While it is appropriate for commenters who object to the Commission's incorporation by reference of a standard to raise those arguments with the Commission, Bonneville should direct any proposed modifications or additions to NAESB's standards to NAESB for consideration. Following this procedure, Bonneville's proposed changes can receive proper consideration from all industry segments before they are acted on. 55

79. Duke also suggests that WEQ-001-12 be modified so as to revise the procedure established in Order No. 890-A for the pricing of reassigned transmission. But, as Duke concedes, WEQ-001-12 does not address the issue of pricing reassigned transmission. Duke is attempting to use the adoption of WEQ-001-12 as a pretext to collaterally attack an issue already determined by Order No. 890-A.

80. The standards incorporated by reference in this Final Rule must be implemented by October 1, 2008, with the following exceptions:

81. To reduce the burden on filers, as we did in Order No. 676, although public utilities must fully comply with the requirements of this Final Rule in accordance with the implementation schedule above, we are not requiring public utilities immediately to file revised OATTs incorporating these changes.

82. The Commission is also requiring, consistent with our regulation at 18 CFR 35.28(c)(vi), each electric utility to revise its OATT to include the Version 001 WEQ standards we are incorporating by reference herein. For standards that do not require implementing tariff provisions, the Commission will allow the utility to incorporate the WEQ standard by reference in its OATT. We are not, however, requiring a separate tariff filing to accomplish this change. Consistent with our prior practice, we will allow public utilities the option of including these changes as part of an unrelated tariff filing. 56 However, consistent with our prior practice, as of the implementation dates above, public utilities must abide by these standards even before they update their tariffs to incorporate these changes.

83. If adoption of these standards does not require any changes or revisions to existing OATT provisions, public utilities may comply with this rule by adding a provision to their OATTs that incorporates the standards adopted in this rule by reference, including the standard number and Version 001 to identify the standard. To incorporate these standards into their OATTs, public utilities must use the following language in their OATTs:

• Business Practices for Open Access Same-Time Information Systems (OASIS), Version 1.4 (WEQ-001, Version 001, Oct. 31, 2007, with minor corrections applied on Nov. 16, 2007) including Standards 001-0.2 through 001-0.8, 001-0.14 through 001-0.20, 001-2.0 through 001-9.6.2, 001-9.8 through 001-12.5.2, and 001-A and 001-B;

• Business Practices for Open Access Same-Time Information Systems (OASIS) Standards & Communication Protocols, Version 1.4 (WEQ-002, Version 001, Oct. 31, 2007, with minor corrections applied on Nov. 16, 2007) including Standards 002-0.1 through 002-5.10;

• Open Access Same-Time Information Systems (OASIS) Data Dictionary, Version 1.4 (WEQ-003, Version 001, Oct. 31, 2007, with minor corrections applied on Nov. 16, 2007) including Standard 003-0;

• Coordinate Interchange (WEQ-004, Version 001, October 31, 2007, with minor corrections applied on Nov. 16, 2007) including Purpose, Applicability, and Standards 004-0.1 through 004-17.2, and 004-A through 004-D;

• Area Control Error (ACE) Equation Special Cases Standards (WEQ-005, Version 001, Oct. 31, 2007, with minor corrections applied on Nov. 16, 2007) including Purpose, Applicability, and Standards 005-0.1 through 005-3.1.3, and 005-A;

• Manual Time Error Correction (WEQ-006, Version 001, Oct. 31, 2007, with minor corrections applied on Nov. 16, 2007) including Purpose, Applicability, and Standards 006-0.1 through 006-12;

• Inadvertent Interchange Payback (WEQ-007, Version 001, Oct. 31, 2007, with minor corrections applied on Nov. 16, 2007) including Purpose, Applicability, and Standards 007-0.1 through 007-2, and 007-A;

• Transmission Loading Relief—Eastern Interconnection (WEQ-008, Version 001, Oct. 31, 2007, with minor corrections applied on Nov. 16, 2007) including Purpose, Applicability, and Standards 008-0.1 through 008-3.11.2.8, and 008-A through 008-D;

• Gas/Electric Coordination (WEQ-011, Version 001, Oct. 31, 2007, with minor corrections applied on Nov. 16, 2007) including Standards 011-0.1 through 011-1.6;

• Public Key Infrastructure (PKI) (WEQ-012, Version 001, Oct. 31, 2007, with minor corrections applied on Nov. 16, 2007) including Recommended Standard, Certification, Scope, Commitment to Open Standards, and Standards 012-0.1 through 012-1.26.5; and

• Business Practices for Open Access Same-Time Information Systems (OASIS) Implementation Guide, Version 1.4 (WEQ-013, Version 001, Oct. 31, 2007, with minor corrections applied on Nov. 16, 2007) including Introduction and Standards 013-0.1 through 013-4.2.

84. If a public utility requests waiver of a standard, it will not be required to comply with the standard until the Commission acts on its waiver request. Therefore, if a public utility has obtained a waiver or has a pending request for a waiver, its proposed revision to its OATT should not include the standard number associated with the standard for which it has obtained or seeks a waiver. Instead, the public utility's OATT should specify those standards for which the public utility has obtained a waiver or has pending a request for waiver. Once a waiver request is denied, the public utility will be required to include in its OATT the standard(s) for which waiver was denied.

85. Office of Management and Budget Circular A-119 (section 11) (February 10, 1998) provides that when a federal agency issues or revises a regulation containing a standard, the agency should publish a statement in the Final Rule stating whether the adopted standard is a voluntary consensus standard or a government-unique standard. In this rulemaking, the Commission is incorporating by reference voluntary consensus standards developed by the WEQ.

86. OMB's regulations in 5 CFR 1320.11 (2005) require that it approve certain reporting and recordkeeping requirements (collections of information) imposed by an agency. Upon approval of a collection of information, OMB assigns an OMB control number and an expiration date. Respondents subject to the filing requirements of this Final Rule will not be penalized for failing to respond to this collection of information unless the collection of information displays a valid OMB control number.

87. This Final Rule will affect the following existing data collections: Standards for Business Practices and Communication Protocols for Public Utilities (FERC-717) and Electric Rate Schedule Filings (FERC-516).

88. The following burden estimate is based on the projected costs for the industry to implement revisions to the WEQ Standards currently incorporated by reference into the Commission's regulations at 18 CFR 38.2 and to implement the new standards adopted by NAESB that we are incorporating by reference in this Final Rule.

Total Annual Hours for Collection: (Reporting and Recordkeeping, (if appropriate)) = 2816 hours.

Information Collection Costs: The Commission seeks comments on the costs to comply with these requirements. It has projected the average annualized cost for all respondents to be the following:  57

This document contains final regulations that amend the Income Tax Regulations (26 CFR Part 1) under section 408A of the Code relating to Roth IRAs. Section 408A of the Code, which was added by section 302 of the Taxpayer Relief Act of 1997, Public Law 105-34 (111 Stat. 788), establishes the Roth IRA as a type of individual retirement plan, effective for taxable years beginning on or after January 1, 1998.

The identifying characteristic of Roth IRAs is that all contributions to Roth IRAs are after-tax contributions (that is, an IRA owner cannot take a deduction for a contribution made to a Roth IRA) but qualified distributions are tax-free. A qualified distribution from a Roth IRA is a distribution that is made: (1) at least 5 years after the account owner (or the account owner's spouse) made a Roth IRA contribution, and (2) after age 59 1/2 , after death, on account of disability, or for a first-time home purchase.

A taxpayer whose modified adjusted gross income for a year does not exceed $100,000 (and who, if married, files jointly)  1 may convert an amount held in a non-Roth IRA (that is, a traditional IRA or SIMPLE IRA) to an amount held in a Roth IRA. If a taxpayer converts an amount held in a non-Roth IRA to a Roth IRA, the taxpayer must include the value of the non-Roth IRA being converted in gross income (to the extent the conversion is not a conversion of basis in the non-Roth IRA).

A conversion may be accomplished by means of a rollover, trustee-to-trustee transfer, or account redesignation. Regardless of the means used to convert, any amount converted from a non-Roth IRA to a Roth IRA is treated as distributed from the non-Roth IRA and rolled over to the Roth IRA. In the case of a conversion involving property, the conversion amount generally is the fair market value of the property on the date of distribution or the date the property is treated as distributed from the traditional IRA.

Final regulations regarding Roth IRAs were published in the Federal Register on February 4, 1999 (64 FR 5597). On August 19, 2005, the IRS issued temporary regulations under section 408A (70 FR 48868) relating to conversions involving annuities. These temporary regulations were also issued in identical form as proposed regulations (70 FR 48924).

Rev. Proc. 2006-13 (2006-1 CB 315), which was issued on January 17, 2006, in response to several comments received on the temporary and proposed regulations, provided interim guidance with respect to the temporary regulations. See § 601.601(d)(2)(ii)( b ). After consideration of all comments received on the proposed regulations, these final regulations adopt the provisions of the proposed regulations with certain modifications described in the Explanation of Provisions.

Like the proposed regulations, these final regulations clarify that when a non-Roth individual retirement annuity is converted to a Roth IRA, the amount that is treated as distributed is the fair market value of the annuity contract on the date the annuity contract is converted. Similarly, when a non-Roth individual retirement account holds an annuity contract as an account asset and the account is converted to a Roth IRA, the amount that is treated as distributed with respect to the annuity contract is the fair market value of the annuity contract on the date the annuity contract is converted (that is distributed or treated as distributed from the non-Roth IRA).

One commentator suggested that the final regulations should clarify that where a conversion is made by surrendering an annuity without retaining or transferring rights, the amount converted, and hence the amount that must be included in income as a result of the conversion, is limited to the surrendered cash value (the actual proceeds to be deposited into the Roth IRA). Rev. Proc. 2006-13 provided that, in such a case, the valuation methods in the temporary regulations do not apply.

The final regulations adopt this suggestion. Thus, to the extent an individual retirement annuity or an annuity contract held by an individual retirement account is surrendered with no retained or transferred rights, the amount treated as a distribution is limited to the surrendered cash value (the actual proceeds available to be deposited into the Roth IRA).

The proposed regulations used a methodology from the gift tax regulations (§ 25.2512-6) to determine fair market value of an annuity contract. Those rules depend on how soon after purchase the contract was converted and whether future premiums were to be paid. The different time periods were “soon after” the contract was sold and after the contract “has been in force for some time.” A commentator stated that these terms are not defined and do not lend themselves to clear or uniform interpretation.

In response to these comments, the final regulations modify the application of the valuation rules taken from the gift tax regulations (collectively referred to under these regulations as the gift tax method). The applicability of one valuation rule within the gift tax method is based upon whether the company which sold the initial contract sells comparable annuities. If there is such a comparable contract currently being sold, the fair market value of the contract is determined as the price of the comparable contract. For example, assume a taxpayer who is age 60 at the time of the conversion had purchased from an insurance company a contract at an earlier age which will pay him $500 per month for life beginning at age 70. If the insurance company is selling contracts that will provide a taxpayer who is age 60 $500 per month for life at age 70, then the fair market value of the taxpayer's contract, for purposes of determining the amount converted, is the current price of the similar contract. (If the conversion occurs soon after the annuity was sold, the comparable contract is the annuity itself and, thus, the fair market value of the annuity is established by the actual premiums paid for such contract.) This comparable contract valuation rule subsumes the first two methods under the proposed regulations.

The gift tax method under the final regulations includes a second alternative for situations where there is no comparable contract. If no comparable contract is available to make a comparison, the fair market value is established through an approximation that is based on the interpolated terminal reserve at the date of the conversion, plus the proportionate part of the gross premium paid before the date of the conversion which covers the period extending beyond that date. This reserve alternative is the same as the third method under the proposed regulations, except that it applies whenever there is no comparable contract.

Rev. Proc. 2006-13 provided an alternative to the valuation method in the proposed regulations based on the accumulation of premiums and this alternative is included in the final regulations. Under this “accumulation method”, the fair market value of an annuity contract is permitted to be determined using the methodology provided in § 1.401(a)(9)-6, A-12, with the following modifications. First, all front-end loads and other non-recurring charges assessed in the twelve months immediately preceding the conversion must be added to the account value. Second, future distributions are not to be assumed in the determination of the actuarial present value of additional benefits. Finally, the exclusions provided under § 1.401(a)(9)-6, A-12(c)(1) and (c)(2), are not to be taken into account.

These final regulations also provide authority for the Commissioner to issue additional guidance regarding the fair market value of an individual retirement annuity, including formulas to be used for determining fair market value.

These regulations are applicable to any Roth IRA conversion where an annuity contract is distributed or treated as distributed from a traditional IRA on or after August 19, 2005. However, taxpayers may instead apply the valuation methods in the temporary regulations and Rev. Proc. 2006-13 for annuity contracts distributed or treated as distributed from a traditional IRA on or before December 31, 2008. See § 601.601 (d)(2)(ii)(b). Thus, for example, the adoption of these final regulations does not eliminate the special rule for 2005 conversions set forth in section 4 of Rev. Proc. 2006-13.

It has been determined that these final regulations are 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 final regulations and because these regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Code, the proposed regulations preceding these final regulations were submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.

The principal authors of these regulations are William Douglas Gibbs and Cathy V. Pastor of the Office of the Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the IRS and Treasury Department participated in the development of these regulations.

The final and temporary regulations that are the subjects of this document are under sections 367, 954, and 956 of the Internal Revenue Code.

As published, final and temporary regulations (TD 9406) contain an error that may prove to be misleading and is in need of clarification.

This document contains amendments to the Income Tax Regulations (26 CFR Part 1) relating to the low-income housing credit under section 42 of the Internal Revenue Code (Code). On June 19, 2007, the IRS and Treasury Department published in the Federal Register proposed regulations under section 42(g)(2)(B)(ii) (72 FR 33703). Written and electronic comments responding to the proposed regulations were received and a public hearing was held on the proposed regulations on October 9, 2007. After consideration of all the comments, the proposed regulations are adopted as amended by this Treasury decision.

Section 42(a) provides that, for purposes of section 38, the amount of the low-income housing credit determined under section 42 for any taxable year in the credit period is an amount equal to the applicable percentage of the qualified basis of each qualified low-income building. A qualified low-income building is defined in section 42(c)(2) as any building that is part of a qualified low-income housing project.

A qualified low-income housing project is defined in section 42(g)(1) as any project for residential rental property if the project meets one of the following tests elected by the taxpayer: (1) At least 20 percent of the residential units in the project are rent-restricted and occupied by individuals whose income is 50 percent or less of area median gross income; or (2) at least 40 percent of the residential units in the project are rent-restricted and occupied by individuals whose income is 60 percent or less of area median gross income. If a taxpayer does not meet the elected test, the project is not eligible for the section 42 credit.

Under section 42(g)(4), section 142(d)(2)(B) applies when determining whether any project is a qualified low-income housing project under section 42(g)(1). Section 142(d)(2)(B) provides that the income of individuals and area median gross income is determined by the Secretary in a manner consistent with determinations of lower income families and area median gross income under section 8 of the United States Housing Act of 1937. Under Rev. Rul. 94-57 (1994-2 CB 5), taxpayers may rely on a list of income limits released by the Department of Housing and Urban Development (HUD) until 45 days after HUD releases a new list of income limits, or until HUD's effective date for the new list, whichever is later.

In order to qualify as a rent-restricted unit within the meaning of section 42(g)(2), the gross rent for the unit must not exceed 30 percent of the imputed income limitation applicable to the unit. Section 42(g)(2)(B)(ii) requires the inclusion in gross rent of a utility allowance determined by the Secretary after taking into account the determinations under section 8 of the United States Housing Act of 1937.

Section 1.42-10(a) provides that if utility costs (other than telephone) for a residential rental unit are paid directly by the tenant, then the gross rent for that unit includes the applicable utility allowance as determined under § 1.42-10. Section 1.42-10(b) provides rules for calculating the appropriate utility allowance based upon whether (1) the building receives rental assistance from the Farmers Home Administration (FmHA), now known as the Rural Housing Service; (2) the building has any tenant that receives FmHA rental assistance; (3) the building is not described in (1) or (2) above and the building's rents and utility allowances are reviewed by HUD on an annual basis; or (4) the building is not described in (1), (2), or (3) above (other buildings).

Currently, under § 1.42-10(b)(4), other buildings generally use the applicable Public Housing Authority (PHA) utility allowance established for the Section 8 Existing Housing Program or use a local utility company estimate. The local utility company estimate may be obtained by any interested party (including a low-income tenant, a building owner, or a State or local housing credit agency (Agency)).

The proposed regulations proposed two additional options for calculating utility allowances. The first option would permit a building owner to obtain a utility estimate for each unit in a building from the Agency that has jurisdiction over the building (the Agency estimate). The Agency estimate must take into account the local utility rates data, property type, climate variables by region in the State, taxes and fees on utility charges, and property building materials and mechanical systems. An Agency may also use actual utility company usage data and rates for the building. The second option would permit a building owner to calculate utility allowances using the “HUD Utility Schedule Model” found on the Low-Income Housing Tax Credits page at http://www.huduser.org/datasets/lihtc.html (or successor URL). The HUD Utility Schedule Model is based on data from the Residential Energy Consumption Survey (RECS) conducted by the Department of Energy. RECS data provides energy consumption by structure for heating, air conditioning, cooking, water heating, and other electric (lighting and refrigeration). The HUD Utility Schedule Model incorporates building location and climate.

Prior to these final regulations, § 1.42-10(a) provided for the exclusion of telephone costs in determining the amount of the utility allowance to be included in gross rent. The proposed regulations excluded cable television costs as well as telephone costs. The final regulations retain the exclusions for cable television and telephone costs and also exclude Internet costs. The IRS and Treasury Department believe it is appropriate to exclude cable television and Internet costs as comparable to telephone costs.

Commentators stated that the Agency estimate in the proposed regulations may be administratively burdensome for some Agencies. As an alternative, commentators suggested adding an option that would allow utility estimates to be calculated by a state-certified engineer or other qualified professional. The commentators specified that, under this option, computer software could be developed that would estimate the energy or water and sanitary sewer service cost for each type of unit in a building. The estimates would be determined based on the applicable current local utility billing rate schedule and would be applied to all comparable units in the building using specific information about the design, materials, equipment, and location of the building.

A computer software model that incorporates specific information about the design and location of the building for which the utility allowances are being developed, and that can be updated with actual consumption data and with consumption estimates as new efficiency measures and improvements are undertaken, would provide more accurate estimates of utility consumption. Therefore, the final regulations also include a new option allowing building owners to retain the services of a qualified professional to calculate utility allowances based on an energy consumption model.

The use of this new option is subject to several special rules. First, the energy consumption model must, at a minimum, take into account specific factors including, but not limited to, unit size, building orientation, design and materials, mechanical systems, appliances, and characteristics of the building location. Second, the utility estimates must be calculated by either (1) a properly licensed engineer or (2) a qualified professional approved by the Agency that has jurisdiction over the building (together, qualified professional). The qualified professional and the building owner must not be related within the meaning of section 267(b) or 707(b). Third, the building owner must furnish a copy of the estimates derived from the energy consumption model to the Agency and make copies of the estimates available to all tenants in the building. Finally, the building owner must pay for all costs incurred in obtaining the utility estimates from the qualified professional and providing the estimates to the Agency and tenants.

One commentator suggested that the final regulations should provide a default option because, in the absence of a definitive standard for determining utility allowances, building owners would use the option that yields the lowest utility estimates. Commentators further requested clarification as to which option should be used when multiple options are available, whether building owners may use different options for different utilities, and whether owners may change the options used for calculating utilities from time to time.

An energy consumption model developed by a qualified professional that takes into account specific information about the design and location of the building for which the utility allowances are being developed should produce the most accurate utility estimates. It is expected that this more accurate model will be the model most commonly used by most building owners, particularly those with buildings that are not very old. However, if a building owner selects an option that yields higher utility allowances, the building owner should be free to accept a lower amount of rent from tenants. Therefore, there is no need for a stated default option or option ordering rule. Further, the final regulations neither prohibit using different options for different utilities nor prohibit changing the options used for calculating utilities. If an Agency determines that a building owner has understated the utility allowances for the building under the particular option chosen by the owner for calculating the utility allowance, and the building's units are not rent-restricted units under section 42(g)(2) as a result, the Agency must report the noncompliance on Form 8823, Low-Income Housing Credit Agencies Report of Noncompliance or Building Disposition.

Under current § 1.42-10(c) of the regulations, if the applicable utility allowance for units changes, the new utility allowance must be used to compute gross rent of rent-restricted units due 90 days after the change (the 90-day period). The proposed regulations limited the effective date of any new utility allowances to the earlier of the date the building has achieved 90 percent occupancy for a period of 90 consecutive days or the end of the first year of the credit period. The proposed regulations also modified § 1.42-10(c) by requiring that a building owner must review at least annually the basis on which utility allowances have been established and must update the applicable utility allowance. The review must take into account any changes to the building such as any energy conservation measures that affect energy consumption and changes in utility rates.

Commentators suggested that building owners should be obligated to adjust utility allowances when utility rates increase by a stated percentage, for example, 10 percent, which is the rule for revising utility allowance schedules for PHAs under 24 CFR 982.517(c). This HUD rule provides that a PHA must review its schedule of utility allowances each year and revise its allowance for a utility category if the utility rate has changed by 10 percent or more since the utility allowance schedule was last revised. The commentators did not address decreases in utility rates. A commentator also suggested that the final regulations should require an Agency to review or have owners review local utility rates quarterly to determine if rates have increased sufficiently to require an adjustment. A different commentator suggested limiting reviews to no more than once per year.

The IRS and Treasury Department do not believe that fluctuations in utility rates within a given year should trigger recalculations of utility allowances more than once a year. The IRS and Treasury Department do not believe that the additional burden of updating the utility allowances more than once a year is warranted at this time. Utility rates generally do not change more than once a year, and yearly updated utility allowances would reflect average rates applicable to all tenants in a building from year to year. Therefore, the final regulations require building owners to calculate new utility allowances once during the calendar year regardless of any percentage change in utility rates. Building owners may choose, however, to calculate new utility allowances more frequently than once during the calendar year provided the owner complies with the requirements of these regulations, including the notification requirements to the Agency and tenants.

Another commentator suggested that new utility allowances should be implemented within 90 days after HUD publishes its annual income limits (which are used in determining section 42 rents), but in no case later than June 30 of any year. Section 42 rents under section 42(g)(2) may or may not increase depending on HUD's calculation of area median gross income. Therefore, the IRS and Treasury Department do not believe that the rules should require that the effective date of any new utility allowance coincide with the section 42 effective date of HUD's income lists. Building owners, however, may choose to implement any new utility allowances on the section 42 effective date of HUD's income lists.

To bring financial stability to a project during the beginning of its operations, the final regulations clarify that the building owner is not required to review the utility allowances, or implement new utility allowances, until the earlier of the date the building has achieved 90 percent occupancy for a period of 90 consecutive days or the end of the first year of the credit period.

One commentator made several recommendations regarding procedural safeguards for tenants including: Owners should be required to give tenants 30 days notice before the effective date of any utility allowance; tenants should be provided with all information used in calculating the utility allowances; tenants should be given the opportunity to comment on the proposed allowances; and owners should be required to review those comments prior to the utility allowances becoming effective. The commentator believed that the new options for determining utility allowances should be available only after one full year of occupancy and one full year after the building is placed in service. A commentator also recommended that a building owner should be allowed to use the new options only if the owner provides all data to the Agency no later than February 15 and the Agency informs the owner whether the proposed utility allowances are approved by March 31.

To provide tenants with the opportunity to comment on proposed utility allowances to the Agency and building owner, the final regulations apply the existing disclosure requirement under current § 1.42-10(b)(4)(ii)(B) (regarding the utility company estimate) to an owner using a utility company estimate, the HUD Utility Schedule Model, or an energy consumption model. Therefore, an owner must submit copies of the proposed utility allowances to the Agency and make the proposed utility allowances available to all tenants in the building at the beginning of the 90-day period before the utility allowances are used in determining the gross rents of rent-restricted units. Similarly, the final regulations require that any utility estimates obtained under the Agency estimate option must be made available to all tenants in the building at the beginning of the 90-day period. An Agency may continue to require additional information from the owner during the 90-day period.

Commentators suggested that the final regulations should limit the use of the HUD Utility Schedule Model to data for a twelve-month period ending in the most recent calendar year and require the owner to certify the accuracy of the data and the calculations of the utility allowances. However, the HUD Utility Schedule Model already incorporates consumption data derived from RECS data. Thus, building owners using this option need not be required to use consumption data for any particular twelve-month period. These final regulations, however, provide that the use of the energy consumption model is limited to consumption data for a twelve-month period ending no earlier than 60 days prior to the beginning of the 90-day period. In the case of newly constructed or renovated buildings with less than twelve months of consumption data, the energy consumption model allows a qualified professional to use consumption data for the twelve-month period of units of similar size and construction in the geographic area in which the building containing the units is located. Further, the final regulations require that utility rates used for the HUD Utility Schedule Model, the Agency estimate option, and the energy consumption model must be no older than the rates in place 60 days prior to the beginning of the 90-day period.

In addition to these safeguards, if an Agency determines that a building owner has understated the utility allowances for the owner's building under the particular option chosen, and, therefore, some or all of the units in the building are not rent-restricted units under section 42(g)(2), then the Agency must report the noncompliance to the Service on Form 8823, Low-Income Housing Credit Agencies Report of Noncompliance or Building Disposition.

Commentators requested that building owners should be required to certify the estimate and the accuracy of the data used under the new options. Because Agencies may request additional information at any time during their mandatory review of proposed utility allowances, and must report any noncompliance to the Service, the final regulations do not require building owners to provide such certification.

One commentator suggested that the calculation of utility allowances should take into account any special needs tenants such as people with disabilities who require high energy consumption equipment. Section 42 does not require that the owner's calculation of utility allowances be based on a tenant's particular use of utility services. If such a requirement were imposed, owners and Agencies would have to determine the utility allowance for the tenants in each unit, as opposed to allowances based on the size of the unit, which would greatly increase burden. Additionally, it is unclear whether it is appropriate to implement rules that might encourage tenants to be indifferent to their energy consumption. Such indifference could lead to cost overruns by owners, and the viability of low-income housing could be jeopardized. Therefore, the final regulations do not require the calculation of utility allowances based on consumption by particular tenants.

Section 1.42-10(b)(4)(ii)(B) currently provides that any interested party (including an owner, low-income tenant, or Agency) may obtain a local utility company estimate for a unit. The estimate is obtained when the interested party receives, in writing, information from a local utility company providing the estimated cost of that utility for a unit of similar size and construction for the geographic area in which the building containing the units is located. In light of utility services deregulation, the proposed regulations proposed to amend this option by requiring the interested party to obtain cost estimates from the local utility company that include combined rate charges from multiple utility companies.

Commentators thought this proposed amendment would require the interested party to obtain utility consumption estimates from every utility company providing the same utility service and stated that this would present an unworkable administrative burden in deregulated jurisdictions with multiple utility providers. In some jurisdictions, many utility providers may be available for a given building. The proposed amendment was not intended to require the interested party to obtain utility consumption estimates from every utility company providing the same utility service. The amendment was proposed to address deregulation by requiring the interested party to obtain estimates for all the components of the utility service if the service is divided between two or more types of service providers (for example, electric generation and electric transmission). The final regulations clarify that, in the case of deregulated utility services, the interested party is required to obtain an estimate from only one utility company even if multiple companies can provide the same utility service to a unit. However, the utility company furnishing the estimate must offer utility services to the building in order for that utility company's rates to be used in calculating utility allowances. The estimate should include all component charges for providing the utility service.

One commentator requested that specific language be added to address when Agencies may charge a reasonable fee for making a determination pursuant to the Agency estimate option, and who bears the fee when a particular option is used. The proposed regulations provided that costs incurred in obtaining an Agency estimate are borne by the building owner. The final regulations adopt this provision, and further require building owners to pay for all costs incurred in obtaining the estimates under the HUD Utility Schedule Model and the energy consumption model and in providing estimates to Agencies and tenants.

The proposed regulations were proposed to be effective for taxable years beginning on or after the date of publication of the final regulations in the Federal Register . A commentator suggested that the final regulations be effective earlier on the basis that if they are published after 2007, they would not be effective until 2009 for calendar year taxpayers. The IRS and Treasury Department believe that the burden associated with an earlier effective date is not warranted. Therefore, the final regulations do not adopt this suggestion. However, in order to allow a building owner to implement the utility allowances as of the first day of the owner's taxable year beginning on or after July 29, 2008, the final regulations provide that taxpayers may rely on the rules for determining utility allowances before the first day of the owner's taxable year beginning on or after July 29, 2008 provided that any utility allowances so calculated are effective no earlier than the first day of the owner's taxable year beginning on or after July 29, 2008.

It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. It is hereby certified that the collection of information in these regulations will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that the information has previously been reviewed and approved under OMB control number 1545-1102, and that the information required by these final regulations adds no new burden to the existing requirements. Accordingly, a Regulatory Flexibility Analysis under the provisions of the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the Code, the notice of proposed rulemaking was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

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

Regulatory Information

The Coast Guard is issuing this temporary final rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule. The logistics of these events were not provided to the Coast Guard with sufficient time to publish a NPRM and still ensure that this temporary final rule would be effective by August 9, 2008, the start of the events. These safety zones are needed to protect the event participants and maritime public by ensuring that large numbers of swimmers remain separate and safe from vessel traffic.

Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . Immediately implementing this rule promotes the public interest by protecting the maritime public and participants.

The “Greater Burlington YMCA Lake Swim,” “Tri for a Cure,” “Y-Tri Triathlon Swim,” “Sprucewold Cabbage Island Swim,” and “Rockland Breakwater Swim” are annual marine swimming events held in the month of August. This rule creates safety zones from 8 a.m. to 6 p.m. EDT on August 9, 2008 for 33 CFR 165.T01-0695(a) (“Greater Burlington YMCA Lake Swim”), 7:30 a.m. to 9:30 a.m. EDT on August 9, 2008 for 33 CFR 165.T01-0695(b) (“Tri for a Cure”), 9 a.m. to 10 a.m. EDT on August 9, 2008 for 33 CFR 165.T01-0695(c) (“Y-Tri Triathlon”), 3 p.m. to 4 p.m. EDT on August 9, 2008 for 33 CFR 165.T01-0695(d) (“Sprucewold Cabbage Island Swim”), and 10 a.m. to 12 p.m. on August 23, 2008 for 33 CFR 165.T01-0695(e) (“Rockland Breakwater Swim”).

This rule establishes fixed safety zones for each of these events in the locations and at the times listed in the regulatory text. During the effective period of the safety zones, vessel traffic will be prohibited from entering the affected locations during the marine events, unless specifically authorized by the Captain of the Port Sector Northern New England. These safety zones are needed to safeguard the maritime public and the participants from the hazards associated with this type of large scale swimming event.

The Captain of the Port anticipates negligible negative impact on vessel traffic from these temporary safety zones as they will be in effect only for a short duration. The zones are not expected to affect commercial vessels transiting in or out of the port. The zones around the events will only be enforced while the participants are in the water. The enhanced safety to life and property provided by this rule greatly outweighs any potential negative impacts. Public notifications will be made during the entire effective period of these safety zones via marine information broadcasts.

We developed this rule after considering numerous statutes and executive orders related to rulemaking. Below we summarize our analyses based on 13 of these statutes or executive orders.

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

The Coast Guard expects the economic impact of this rule to be so minimal that a full regulatory evaluation is unnecessary. The effect of this rule will not be significant for the following reasons: the safety zones will be of limited duration; the events are designed to avoid, as much as practicable, deep draft, fishing, and recreational boating traffic routes; vessels may be authorized to transit the zone with permission of the COTP; and, advance notice of the zones will be provided via marine broadcast.

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

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

This rule may affect the following entities, some of which may be small entities: The owners or operators of vessels intending to transit the safety zones. However, this rule will not have a significant economic impact on a substantial number of small entities due to the minimal time that vessels will be restricted from the areas, the ample space available for vessels to maneuver and navigate around the zones, and advance notifications will be made to the local community by marine information broadcasts.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we offer to assist small entities in understanding the rule so that they can better evaluate its effects on them and participate in the rulemaking process.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

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

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

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

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

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

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

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

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

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

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

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

A final environmental analysis checklist and a final categorical exclusion determination are available in the docket where indicated under ADDRESSES .

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 Montana mean the State of Montana, unless the context indicates otherwise.

On December 8, 1997, the State of Montana submitted a SIP revision for EPA's approval. The revision added subsection (6) to section 17.8.316 (Incinerators) of the Administrative Rules of Montana (ARM), chapter 8 (Air Quality), subchapter 3 (Emission Standards). Subsection (6) exempts incinerators from the requirements of ARM 17.8.316, including the particulate matter emissions standard of 0.10 grains per cubic foot and the 10% opacity standard, if these sources have been issued a Montana air quality permit under 75-2-215, MCA, and ARM 17.8.706(5). 1   2

The revision also included wording changes to ARM 17.8.316. Most are minor editorial or technical corrections and do not change the substance of the rule. One of the changes was to substitute the words “solid and hazardous waste” for the word “refuse” in the rule. The effect of this change was to extend the rule requirements to incinerators burning solid or hazardous waste, not just refuse. The full text of the changes can be found in our Technical Support Document (TSD), which is contained in the Docket for this action.

We interpret ARM 17.8.316(6) to allow terms of a permit to override a requirement that has been approved as part of the SIP (i.e., the provisions in ARM 17.8.316(1)-(5)). Therefore, an analysis was needed to show that this new rule would not interfere with compliance with the National Ambient Air Quality Standards (NAAQS) or Prevention of Significant Deterioration (PSD) increments. Section 110(l) of the CAA states that EPA cannot approve a SIP revision that would interfere with any applicable requirement concerning attainment or reasonable further progress, as defined in section 171 of the CAA, or any other applicable requirements of the CAA. Montana did not provide any demonstration in its December 8, 1997 submittal that ARM 17.8.316(6) meets these criteria. Subsequent to the State's submittal, we requested information from the Montana Department of Environmental Quality (DEQ) in order to conduct our own analysis on the impact of ARM 17.8.316(6) on the attainment and maintenance of the NAAQS for particulate matter with an aerodynamic diameter less than or equal to 10 and 2.5 micrometers (PM-10 and PM-2.5) and compliance with the PSD PM-10 increments. Based on this analysis, we have determined that this specific change to a SIP requirement will not adversely impact the attainment and maintenance of the PM-10 and PM-2.5 NAAQS, or compliance with the PM-10 increments, in Montana. Our analysis of this revision's impact is contained in the TSD for this action. In addition, the TSD discusses our verification that ARM 17.8.316(6) will not impact compliance with, or the ability to enforce, the Federal New Source Performance Standards (NSPS) or Maximum Achievable Control Technology (MACT) regulations. Based on a letter from the Montana DEQ dated October 2, 2007, and our own consideration of the rule change, we have determined that ARM 17.8.316(6) will not interfere with, supersede, or replace any NSPS or MACT requirements for sources, or affect in any way the State's, EPA's, or any other person's ability to enforce such NSPS or MACT requirements. The TSD and the DEQ letter are available for review as part of the Docket for this action.

On August 25, 2004, the State of Montana submitted for our approval a revision to subsection (5) to ARM 17.8.316 (Incinerators). This revision makes a minor change to the third sentence of subsection (5), from: “Testing shall be conducted in accordance with ARM 17.8.106 and the Montana Source Testing Protocol and Procedures Manual”; to: “Testing shall be conducted in accordance with ARM 17.8.106 and the Montana Source Test Protocol and Procedures Manual.”

On May 28, 2003, the State of Montana submitted for our approval a revision to ARM 17.8.316(6). This revision makes minor changes to subsection (6), from: “This rule does not apply to incinerators for which an air quality preconstruction permit has been issued under 75-2-215, MCA, and ARM 17.8.706(5)”; to: “This rule does not apply to incinerators for which a Montana air quality permit has been issued under 75-2-215, MCA, and ARM 17.8.770.”

Our review of the revisions to ARM 17.8.316 indicates that they are consistent with the CAA. Thus, we are approving the revisions to ARM 17.8.316, submitted on December 8, 1997, May 28, 2003, and August 25, 2004, into the Montana SIP.

Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:

• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Order 12866 (58 FR 51735, October 4, 1993);

• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq. );

• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. );

• 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);

• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);

• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);

• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);

• Is not subject to requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act; and

• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).

In addition, this rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), because the SIP is not approved to apply in Indian country located in the state, and EPA notes that it will not impose substantial direct costs on tribal governments or preempt tribal law.

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 action 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).