This final rule is issued under Marketing Order No. 920 as amended (7 CFR part 920), regulating the handling of kiwifruit grown in California, hereinafter referred to as the “order.” The order is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”

The Department of Agriculture (USDA) is issuing this rule in conformance with Executive Order 12866.

This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is not intended to have retroactive effect.

The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the Act, any handler subject to an order may file with USDA a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. A handler is afforded the opportunity for a hearing on the petition. After the hearing, USDA would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review USDA's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling.

This final rule adds two new reporting requirements and two new forms to those currently specified in the order's administrative rules and regulations. These changes allow the Committee to collect annual, end-of-season price, shipment, and grower information (grower entity/farm name, mailing address, location of farm by county, shipments by pack style, and acreage) from all kiwifruit handlers. Under this regulation, both reports are due from each handler within 30 days after such handler has completed current season shipments. The Committee will use this information to determine appropriate grower representation on the Committee, to conduct grower nominations, to verify shipments for assessment collections, and to prepare the annual report and the annual marketing policy, as required under the order. This rule was unanimously recommended by the Committee at a meeting on March 17, 2011.

Section 920.12 of the order defines the Districts within the production area, and Section 920.20 provides, in part, that “* * * district representation on the committee shall be based upon the previous five-year average production in the district and shall be established so as to provide an equitable relationship between membership and districts.”

Section 920.22 of the order defines the nomination procedures, allowing for nominations to be conducted via mail, and provides that growers are eligible to participate in nominations in the district they produce kiwifruit.

Section 920.34 of the order requires that the Committee prepare an annual report for presentation to the Secretary and the industry. The annual report provides a cumulative review of industry statistics as well as information about program activities and expenditures.

Section 920.41 of the order provides authority to assess each person who first handles kiwifruit a pro rata share of the expenses which are reasonable and likely to be incurred by the Committee during a fiscal period.

Section 920.50 of the order requires the Committee to prepare an annual marketing policy for submission to the Secretary. The marketing policy describes expected kiwifruit production, quality, and marketing conditions. Along with other pertinent information, the marketing policy provides the basis for the recommendation of appropriate kiwifruit handling regulations for the upcoming season.

Section 920.60 of the order authorizes the Committee to require handlers to file reports and provide other information as may be necessary for the Committee to perform these duties.

Section 920.61 (Compliance) of the order provides that all handlers must conform to the provisions and regulations set forth in the order, and the Committee is to verify handler compliance with order provisions.

The Committee's current reporting requirements are specified in § 920.160 of the order's administrative rules and regulations. This section currently requires that handlers submit: (1) A report of shipment and inventory data which provides monthly data regarding the reporting period, name and identification of the shipper, and the number of containers by type and weight by shipment destination category of all kiwifruit; (2) a Kiwifruit Inventory Shipping System (KISS) form, which consists of three sections: KISS/Add Inventory, KISS/Deduct Inventory, and KISS/Shipment and which provides beginning inventory by size and container type, quantity of the fruit lost in repack or repacked into other container types, total domestic and export shipments by size and container type; and any other adjustments which increase or decrease handler inventory; (3) a Return Receipt of Kiwifruit to Grower Form which reports fruit returned by a handler to a grower(s); and (4) a KISS Price/Shipment report which contains handler information, reporting period, total fresh market shipments, and gross f.o.b. sales of non-organic kiwifruit by pack style and size.

Since 1984, the California Kiwifruit Commission (Commission) has collected end-of-season price, shipment, and grower information (grower entity/farm name, mailing address, location of farm by county, shipments by pack style, and acreage), on organic and non-organic kiwifruit via two Commission forms. The Commission has, through an agreement, shared this information with the Committee. The Committee previously used the majority of this information to determine appropriate grower representation on the Committee, to conduct grower nominations, to verify shipments for assessment collections, and to prepare the annual report and the annual marketing policy under the order.

The Commission ceased to exist as of September 30, 2011. Thus, the Committee no longer has access to this previously shared information. As the current reporting requirements under the order make no provisions for collecting end-of-season information previously provided by the Commission, and as the Committee would need this information from all handlers, including organic handlers, the Committee unanimously recommended adding these new reporting requirements and two new forms, the End-of-Season F.O.B. Sales Report and the Final Packout Report, to § 920.160 of the order's administrative rules and regulations.

Under this final rule, § 920.160 is revised by adding two new reporting requirements and two new forms, due by each handler (organic and non-organic) within 30 days after such handler has completed current season shipments. Kiwifruit shipments generally begin in September and continue through July. The information collected on the End-of-Season F.O.B. Sales Report includes data on gross f.o.b. sales value and number of containers for fresh market shipments by fruit size and pack style for the season. The information collected on the Final Packout Report includes containers shipped by pack style for fresh market shipments, for each grower entity during the season. The report also includes the grower entity and farm name, mailing address, the county where the farm is located, and total acreage. Both reports also show the company name, contact person, and phone number of the handler. The information obtained from both of the two new reports provides data to determine appropriate representation on the Committee, to conduct grower nominations, to verify shipments for assessment collections, and to prepare the annual report and annual marketing policy.

Section 8e of the Act provides that when certain domestically produced commodities, including kiwifruit, are regulated under a Federal marketing order, imports of that commodity must meet the same or comparable grade, size, quality, and maturity requirements. This rule only changes the reporting requirements under the domestic handling regulations. No changes to the import regulations will be made.

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) has considered the economic impact of this action on small entities. Accordingly, AMS has prepared this final regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of business subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and rules issued thereunder, are unique in that they are brought about through group action of essentially small entities acting on their own behalf.

Small agricultural service firms are defined by the Small Business Administration (SBA) (13 CFR 121.201) as those having annual receipts of less than $7,000,000, and small agricultural producers are defined as those having annual receipts of less than $750,000.

Based on Committee data, there are approximately 27 handlers of kiwifruit subject to regulation under the marketing order and approximately 176 kiwifruit growers in the production area.

The California Agricultural Statistical Service (CASS) reported total California kiwifruit production for the 2010-11 season at 32,700 tons with an average price of $768 per ton. Based on the average price, shipment, and grower information provided by the CASS and the Committee, it could be concluded that the majority of kiwifruit handlers would be considered small businesses under the SBA definition. In addition, based on kiwifruit production and price information, as well as the total number of California kiwifruit growers, the average annual grower revenue is less than $750,000. Thus, the majority of California kiwifruit producers may also be classified as small entities.

This final rule changes the reporting requirements currently prescribed under the order. This rule revises § 920.160 by adding two new reporting requirements and two new forms, due by handlers within 30 days after such handler has completed current season shipments. The information collected on the End-of-Season F.O.B. Sales Report includes data on gross f.o.b. sales value and number of containers for fresh market shipments by fruit size and pack style for the season. The information collected on the Final Packout Report includes containers shipped by pack style for fresh market shipments, for each grower entity during the season. The report also includes the grower entity and farm name, mailing address, the county where the farm is located, and total acreage. Both reports also show the company name, contact person, and phone number of the handler. The information obtained from both of the two new reports provides data to determine appropriate grower representation on the Committee, to conduct grower nominations, to verify shipments for assessment collections, and to prepare the annual report and annual marketing policy. This final rule revises § 920.160, which specifies the reporting requirements.

Requiring the price, shipment, and grower information at the end of the season imposes a minor increase in the reporting burden on all kiwifruit handlers. As this data was previously provided to the Commission and shared with the Committee, these two annual end-of-season reports do not significantly increase the handlers' record keeping burden because the primary source of data was already being recorded and maintained by handlers as a routine part of their daily business. The majority of handlers use computers to record their data, and this information can readily be accessed and summarized for these reports. Consequently, any additional costs associated with these changes are expected to be minimal. Also, the benefits of having consolidated end-of-season price, shipping, and grower data are expected to outweigh any costs associated with the increase in reporting burden. Further, the benefits of this rule are expected to be equally available to all industry members, regardless of their size. It is anticipated that the transmission of these reports from handlers to the Committee will be done by either email or facsimile (FAX) machines.

The Committee discussed alternatives to this action, including making no changes to the reporting requirements, but determined that in order to carry out the objectives of the marketing order, the information collected contained within these two new reports is necessary. Therefore, this alternative was rejected.

This final rule imposes additional reporting burdens on handlers of kiwifruit in California. This action requires two new Committee forms: The End-of-Season F.O.B. Sales Report and the Final Packout Report. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the order's information collection requirements have been previously approved by the Office of Management and Budget (OMB) and assigned OMB No. 0581-0189, Generic OMB Fruit Crops. As a result of this action, two new Committee forms would be created. They have been submitted to OMB for review.

As noted in the initial regulatory flexibility analysis, USDA has not identified any relevant Federal rules that duplicate, overlap or conflict with this rule.

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

Further, the Committee's meetings were widely publicized throughout the kiwifruit industry and all interested persons were invited to attend the meetings and participate in Committee deliberations on all issues. Like all Committee meetings, the March 17, 2011, meeting was a public meeting and all entities, both large and small, were able to express views on this issue.

A proposed rule concerning this action was published in the Federal Register on August 9, 2011 (76 FR 48742). Copies of the rule were mailed or sent via facsimile to all Committee members and kiwifruit handlers. Finally, the rule was made available through the Internet by USDA and the Office of the Federal Register. A 60-day comment period ending October 11, 2011, was provided to allow interested persons to respond to the proposal. No comments were received.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: www.ams.usda.gov/MarketingOrdersSmallBusinessGuide. Any questions about the compliance guide should be sent to Laurel May at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

After consideration of all relevant matter presented, including the information and recommendation submitted by the Committee and other available information, it is hereby found that this rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act.

It is further found that good cause exists for not postponing the effective date of this rule until 30 days after publication in the Federal Register (5 U.S.C. 553) because the Committee requires time to prepare and mail handler report packets, which should include the End-of-Season F.O.B. Sales Report and the Final Packout Report, prior to the beginning of shipments for the 2011-12 crop year. In addition, handlers are aware of this rule, which was recommended at a Committee meeting on March 17, 2011. Also, a 60-day comment period was provided in the proposed rule.

For the reasons set forth in the preamble, 7 CFR part 920 is amended as follows:

This final rule is issued under Marketing Agreement No. 97 and Order No. 948, both as amended (7 CFR part 948), regulating the handling of Irish potatoes grown in Colorado, hereinafter referred to as the “order.” The order is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”

The Department of Agriculture (USDA) is issuing this rule in conformance with Executive Order 12866.

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is not intended to have retroactive effect.

The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the Act, any handler subject to an order may file with USDA a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted there from. A handler is afforded the opportunity for a hearing on the petition. After the hearing, USDA would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review USDA's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling.

This final rule revises the size requirements for small U.S. No. 1 grade potatoes handled under the Colorado Area 3 handling regulations. The rule modifies the size requirements to establish allowable size ranges for potatoes that measure less than 1 7/8 inches. This rule allows potatoes that measure 3/4 inch minimum diameter to 1 7/8 inches maximum diameter to be handled if such potatoes otherwise meet the requirements of the U.S. No. 1 grade. In addition, U.S. No. 1 grade Size B potatoes (1 1/2 inches minimum diameter to 2 1/4 inches maximum diameter) are also allowed to be handled. The size requirements for U.S. No. 2 and better grade potatoes that are 1 7/8 inches minimum diameter and larger are not affected by this change. The rule was unanimously recommended by the Committee at a meeting on May 12, 2011. The changes are expected to enhance orderly marketing conditions and increase returns for producers and handlers.

Section 948.22 authorizes the issuance of grade, size, quality, maturity, pack, and container regulations for potatoes grown in the production area. Section 948.21 further authorizes the modification, suspension, or termination of requirements issued pursuant to § 948.22.

Section 948.40 provides that whenever the handling of potatoes is regulated pursuant to §§ 948.20 through 948.24, such potatoes must be inspected by the Federal-State Inspection Service and certified as meeting the applicable requirements of such regulations.

Under the order, the State of Colorado is divided into three separate regulatory areas for marketing order purposes. Area No. 1, commonly known as the Western Slope, includes and consists of the counties of Routt, Eagle, Pitkin, Gunnison, Hinsdale, La Plata, and all counties west thereof; Area No. 2, commonly known as the San Luis Valley, includes and consists of the counties of Saguache, Huerfano, Las Animas, Mineral, Archuleta, and all counties south thereof; and Area No. 3 includes and consists of all the remaining counties in the State of Colorado which are not included in Area No. 1 or Area No. 2. The order currently regulates the handling of potatoes grown in Areas No. 2 and No. 3 only; regulation for Area No. 1 is currently not active.

Grade, size, and maturity regulations specific to the handling of Colorado potatoes grown in Area No. 3 are contained in § 948.387 of the order's administrative rules and regulations. Prior to this action, § 948.387(a) required that all varieties of potatoes handled under the order be U.S. No. 2 or better grade and 1 7/8 inches minimum diameter or 4 ounces minimum weight, except that potatoes that meet the requirements of the U.S. No. 1 grade may be 3/4 inch minimum diameter.

The Committee met on May 12, 2011, to discuss revising the size requirements in the handling regulations. As a result of the deliberations, the Committee unanimously recommended modifying the size requirements for potatoes that meet U.S. No. 1 grade. Specifically, the Committee recommended establishing allowable size ranges for small size (under 1 7/8 inches in diameter) U.S. No. 1 grade and better potatoes. With this final rule, two allowable size ranges, 3/4 inch minimum diameter to 1 7/8 inches maximum diameter and Size B (1 1/2 inches minimum diameter to 2 1/4 inches maximum diameter), are established for potatoes that otherwise meet or exceed the minimum requirements of the U.S. No. 1 grade standard. The allowable size ranges replace the 3/4 inch minimum diameter size requirement allowance in effect prior to this action.

The Committee has observed in recent years that consumer demand has been increasing for smaller size potatoes and that those size potatoes often command premium prices. The Committee previously responded to this trend by modifying the size requirements in the handling regulations to allow for the handling of 3/4 inch minimum diameter and larger size potatoes, if the potatoes otherwise meet the requirements of the U.S. No. 1 grade. However, the 3/4 inch minimum size requirement had no other parameters associated with it and allowed for the commingling of small size potatoes (under 1 7/8 inches in diameter) with larger size potatoes (over 1 7/8 inches in diameter).

The Committee reiterated that quality assurance is important to the industry and to consumers. Providing consistent, high quality potatoes is necessary to maintain consumer confidence. The potential for mixing small size potatoes with larger size potatoes in the same container is perceived by the Committee as being contrary to the goals of maintaining orderly marketing conditions and ensuring that only consistent, high quality potatoes from the production area enter the market. As such, the Committee felt that implementing revisions to the size requirements helps to maintain the consistency and quality of the product while still allowing the industry the maneuverability to respond to changing consumer preferences.

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) has considered the economic impact of this action on small entities. Accordingly, AMS has prepared this final regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of business subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and rules issued thereunder, are unique in that they are brought about through group action of essentially small entities acting on their own behalf.

Based on Committee data, there are eight producers (the majority of whom are also handlers) in the regulated area and eight handlers (the majority of whom are also producers) subject to regulation under the order. Small agricultural producers are defined by the Small Business Administration (13 CFR 121.201) as those having annual receipts of less than $750,000, and small agricultural service firms are defined as those having annual receipts of less than $7,000,000.

According to the Committee, 981,609 hundredweight of Colorado Area No. 3 potatoes were produced for the fresh market during the 2009-2010 season. Based on National Agricultural Statistics Service (NASS) data, the average producer price for Colorado summer potatoes for that season was $6.90 per hundredweight. The average annual producer revenue for the eight Colorado Area No. 3 potato producers is therefore calculated to be approximately $846,637. Using Committee data regarding each individual handler's total shipments during the 2009-2010 fiscal period and a Committee estimated average f.o.b. price for 2010 of $9.10 per hundredweight ($6.90 per hundredweight producer price plus estimated packing and handling costs of $2.20 per hundredweight), none of the Colorado Area No. 3 potato handlers ship over $7,000,000 worth of potatoes. Thus, all of the handlers and many of the producers of Colorado Area No. 3 potatoes may be classified as small entities.

This final rule makes revisions to the size requirements contained in the order's handling regulations. The rule revises the size requirements to establish two allowable size ranges— 3/4 inch minimum to 1 7/8 inches maximum diameter and Size B—if such potatoes otherwise meet the requirements of the U.S. No. 1 grade standard. The revisions promote orderly marketing by ensuring that only potatoes of a similar size profile are shipped in the same container.

The authority for regulating grade and size is provided in § 948.22 of the order. Section 948.387(a) of the order's administrative rules and regulations prescribes the applicable size requirements.

This rule is expected to have a beneficial impact on handlers and producers by maintaining the superior reputation of the industry and ensuring that only consistent, high quality potatoes are shipped from the production area. There should be no extra cost to producers or handlers as a result of the changes because current harvesting and handling methods can accommodate the sorting of these smaller potatoes. The Committee believes that this revision will translate into greater returns for handlers and producers over time.

Neither NASS nor the Committee compiles statistics relating to the production of potatoes measuring less than 1 7/8 inches in diameter. The Committee has relied on information provided by producers and handlers familiar with the small potato market for its recommendation.

As small potatoes have grown in popularity with consumers, high quality potatoes from Colorado have been in demand. The Committee believes that modifying the size requirements for such small potatoes will help maintain their consistency and increase their quality reputation in the market. The changes are expected to increase sales of Colorado potatoes and to benefit the Colorado potato industry. The benefits of this rule are not expected to be disproportionately greater or lesser for small entities than for large entities.

The Committee discussed alternatives to this recommendation, including taking no action on the matter. One alternative discussed was to use size ranges other than the ranges that the Committee eventually recommended. The Committee felt that the size ranges established by this rule offer the best compromise between regulatory control and accommodation of the marketing needs of the handlers. Another alternative was to establish just one 3/4 inch to 1 7/8 inches size range for small potatoes. However, that alternative was rejected because it would not have accommodated the mid-size range potatoes (1 1/2 to 2 1/4 inches) that some handlers prefer to ship. Thus, the Committee unanimously agreed that their recommendation reflected the best alternative available to achieve the desired result.

In accordance with the Paperwork Reduction Act of 1995, (44 U.S.C. Chapter 35), the order's information collection requirements have been previously approved by the Office of Management and Budget (OMB) and assigned OMB No. 0581-0178. No changes in those requirements as a result of this action are necessary. Should any changes become necessary, they would be submitted to OMB for approval.

This action does not impose any additional reporting or recordkeeping requirements on either small or large potato handlers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies. In addition, USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this final rule.

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

In addition, the Committee's meeting was widely publicized throughout the potato industry, and all interested persons were invited to attend the meeting and participate in Committee deliberations. Like all Committee meetings, the May 12, 2011, meeting was a public meeting and all entities, both large and small, were able to express their views on this issue.

A proposed rule concerning this action was published in the Federal Register on August 30, 2011 (76 FR 53842). Copies of the rule were made available by Committee staff to all Committee members and potato handlers. Finally, the rule was made available through the Internet by USDA and the Office of the Federal Register. A 60-day comment period ending October 31, 2011, was provided to allow interested persons to respond to the proposal. No comments were received. Accordingly, no changes have been made to the rule as proposed.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: www.ams.usda.gov/ MarketingOrdersSmallBusinessGuide. Any questions about the compliance guide should be sent to Laurel May at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

After consideration of all relevant matter presented, including the information and recommendation submitted by the Committee and other available information, it is hereby found that this rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act.

It is further found that good cause exists for not postponing the effective date of this rule until 30 days after publication in the Federal Register (5 U.S.C. 553) because handlers are already shipping potatoes from the 2011-2012 crop and handlers want to take advantage of the revisions as soon as possible. Further, handlers are aware of this rule, which was recommended at a public meeting. Also, a 60-day comment period was provided for in the proposed rule.

For the reasons set forth in the preamble, 7 CFR part 948 is amended as follows:

This final rule is issued pursuant to the Dairy Production Stabilization Act (Dairy Act) of 1983 [7 U.S.C. 4501-4514], as amended.

The Office of Management and Budget has waived the review process required by Executive Order 12866 for this action.

This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. This final rule is not intended to have a retroactive effect. In accordance with section 4512(a) of the Dairy Act, this rule will not preempt or supersede any other program relating to dairy product promotion organized and operated under the laws of the United States or any State.

The Dairy Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 4509 of the Dairy Act, any person subject to the Dairy Order may file with the Secretary of Agriculture (Secretary) a petition stating that the Dairy Order, any provision of the Dairy Order, or any obligation imposed in connection with the Dairy Order is not in accordance with the law and request a modification of the Dairy Order or to be exempted from the Dairy Order. Such person is afforded the opportunity for a hearing on the petition. After a hearing, the Secretary would rule on the petition. The Dairy Act provides that the district court of the United States in any district in which the person is an inhabitant or has his principal place of business, has jurisdiction to review the Secretary's ruling on the petition, provided a complaint is filed not later than 20 days after the date of the entry of the ruling.

In accordance with the Regulatory Flexibility Act (5 U.S.C. 601-612), the Agricultural Marketing Service has considered the economic impact of this action on small entities and has certified that this final rule will not have a significant economic impact on a substantial number of small entities. The purpose of the Regulatory Flexibility Act is to fit regulatory actions to the scale of businesses subject to such actions so that small businesses will not be disproportionately burdened.

The Dairy Act authorizes a national program for dairy product promotion, research and nutrition education. Congress found that it is in the public interest to authorize the establishment of an orderly procedure for financing (through assessments on all milk produced in the United States for commercial use and on imported dairy products) and carrying out a coordinated program of promotion designed to strengthen the dairy industry's position in the marketplace and to maintain and expand domestic and foreign markets and uses for fluid milk and dairy products.

The Small Business Administration [13 CFR 121.201] defines small dairy producers as those having annual receipts of not more than $750,000 annually. Most of the producers subject to the provisions of the Dairy Order are considered small entities.

The final rule amends the Dairy Order by modifying the number of National Dairy Promotion and Research Board (Dairy Board) members in eight regions, merges Region 8 and Region 10, merges Region 12 and Region 13, and apportions Idaho as a separate region. The total number of domestic Dairy Board members remains the same at 36 and the total number of regions is reduced from 13 to 12. This modification was requested by the Dairy Board, which administers the Dairy Order, to better reflect the geographic distribution of milk production in the United States.

The Dairy Order is administered by a 38-member Dairy Board, 36 members representing 13 geographic regions within the United States and 2 representing importers. The Dairy Order provides in section 1150.131 that the Dairy Board shall review the geographic distribution of milk production throughout the United States and, if warranted, shall recommend to the Secretary a reapportionment of the regions and/or modification of the number of members from the regions in order to better reflect the geographic distribution of milk production volume in the United States. The Dairy Board is required to conduct the review at least every 5 years and not more than every 3 years. The Dairy Board was last modified in 2008 based on 2007 milk production.

Based on a review of the 2010 geographic distribution of milk production, the Dairy Board concluded that the number of Dairy Board members for eight regions should be changed. Additionally, the Dairy Board proposed to merge Region 8 and Region 10, merge Region 12 and Region 13, and apportion Idaho as a separate region.

This amendment will not have a significant economic impact on persons subject to the Dairy Order. The changes merely allow representation of the Dairy Board to better reflect geographic milk production in the United States.

In accordance with the Office of Management and Budget (OMB) regulation [5 CFR part 1320] which implements the Paperwork Reduction Act of 1995 [44 U.S.C. chapter 35], the information collection requirements and record keeping provisions imposed by the Dairy Order have been previously approved by OMB and assigned OMB Control No. 0581-0093. No relevant Federal rules have been identified that duplicate, overlap, or conflict with this rule.

The Dairy Order currently is administered by a 38-member Dairy Board, 36 members representing 13 geographic regions within the United States and 2 representing importers. The Dairy Order provides in section 1150.131 that the Dairy Board shall review the geographic distribution of milk production volume throughout the United States and, if warranted, shall recommend to the Secretary a reapportionment of regions and/or modification of the number of producer members from regions in order to best reflect the geographic distribution of milk production in the United States. The Dairy Board is required to conduct the review at least every 5 years and not more than every 3 years. The Dairy Board was last modified in 2008 based on 2007 milk production.

Since the Dairy Board's last reapportionment, the Dairy Order was amended by a final rule (importer final rule) [76 FR 14777, March 18, 2011] to implement an assessment on imported dairy products to fund promotion and research and to add importer representation, initially two members, to the Dairy Board. Additionally, the final rule amended the term “United States” in the Dairy Order to mean all States, the District of Columbia, and the Commonwealth of Puerto Rico. Assessments on producers in these areas were effective April 1, 2011. These amendments to the Dairy Order were implemented pursuant to the Farm Security and Rural Investment Act of 2008 (2008 Farm Bill) (Pub. L. 110-246).

In order to complement the current geographical makeup of the existing regions of the Dairy Board, the importer final rule added these four new jurisdictions to the region of closest proximity. Alaska was added to Region 1, currently comprised of Oregon and Washington; Hawaii was added to Region 2, currently California; and the District of Columbia and the Commonwealth of Puerto Rico were added to Region 10, currently comprised of Florida, Georgia, North Carolina, South Carolina and Virginia. These regional modifications were effective March 18, 2011, and were reflected in the importer final rule.

The importer final rule also modified the language in section 1150.131 of the Dairy Order to remove the specific formula for calculating the factor of pounds of milk per member, which divided total pounds of milk produced by 36, as the Dairy Board is now comprised of 38 members (36 domestic producers and 2 importer representatives). While the Dairy Order no longer specifies the procedure for calculating the factor of pounds of milk per member, for the purposes of the current reapportionment analysis, the procedure remains the same.

The importer final rule also added new language that requires the Secretary to review the average volume of imports of dairy products into the United States and, if warranted, reapportion the importer representation on the Dairy Board to reflect the proportional shares of the United States market served by domestic production and imported dairy products. This review will take place at least once every 3 years, after the initial appointment of importer representatives on the Dairy Board.

In 2010, total milk production was 193,468 million pounds and each of the Dairy Board members would represent 5,374 million pounds of milk. For 2007, total milk production was 185,558 million pounds of milk and each of the Dairy Board members represented 5,154 million pounds of milk.

Based on the 2010 milk production data, the Dairy Board proposed that member representation in Region 1 (Alaska, Oregon, and Washington) be increased by one member. Milk production in Region 1 increased to 8,307 million pounds in 2010, up from 7,764 million pounds in 2007, indicating two Dairy Board members (8,307 divided by 5,374 = 1.545) compared to one Dairy Board member based on 2007 milk production data.

Milk production in Region 2 (California and Hawaii) decreased from 40,683 million pounds in 2007 to 40,410 million pounds in 2010. The Dairy Board proposed that seven Dairy Board members (40,410 divided by 5,374 = 7.519) represent Region 2, compared to eight Dairy Board members based on 2007 milk production data.

Milk production in Region 3 (Arizona, Colorado, Idaho, Montana, Nevada, Utah, and Wyoming) increased from 21,212 million pounds in 2007 to 22,592 million pounds in 2010. Specifically, in Idaho, milk production increased from 10,905 million pounds in 2007 to 12,779 pounds in 2010 and represents more than half of the production of Region 3. Due to the increase in Idaho production, the Dairy Board proposed apportioning Idaho as its own region with two Dairy Board members.

Milk production in Region 8 (Alabama, Kentucky, Louisiana, Mississippi, and Tennessee) decreased from 3,119 million pounds in 2007 to 2,624 million pounds in 2010. The Dairy Board concluded that Region 8 no longer supports one Dairy Board member (2,624 divided by 5,374 = 0.488) and proposed to merge Region 8 into Region 10 (District of Columbia, Florida, Georgia, North Carolina, Puerto Rico, South Carolina, and Virginia) to create a new region with two Dairy Board members.

Similarly, milk production in Region 13 (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont) decreased from 4,046 million pounds in 2007 to 4,036 million pounds in 2010. The Dairy Board concluded that Region 13 no longer supports one Dairy Board member (4,036 divided by 5,374 = 0.751) and proposed to merge Region 13 into Region 12 (New York), creating a new region with three Dairy Board members.

Accordingly, Table 1 summarizes by region, the volume of milk production distribution for 2010, the percentage of total milk production and the adopted regions and number of Dairy Board seats for each region.

On August 30, 2011, the Department of Agriculture (Department) published in the Federal Register (76 FR 53844) a proposed rule to amend the Dairy Board as indicated above. Interested parties were provided an opportunity to file comments on the proposed rule on or before September 14, 2011. Two comments were received by the Department. One commenter expressed support for the proposed rule and noted that the proposal's criteria and methodology used to allocate board seats and resulting calculations for regional representation was consistent with the Dairy Order as recommended to the Secretary by the Dairy Board.

A second commenter suggested that milk production should not be the only criteria used in establishing regions. As noted in the proposed rule, the Dairy Act requires that Dairy Board members be nominated to represent specific geographical regions, and that each member represent an equal proportion of total U.S. milk production. No other criteria exist to be used in establishing regions, and therefore no other changes are made to the final rule based on this comment. Additionally, the commenter stated that when making appointments, the Secretary should consider geographical representation and select individuals based on their qualifications and experience in working within the dairy industry, dairy promotion, and commitment to serving the dairy farmers who contribute to the promotion and research program. AMS agrees with this assertion, as it is the Department's policy that board membership accurately reflects the diversity of the individuals served by the program.

This final rule adopts the proposed rule without change, and therefore member representation in Region 1 is increased from one member to two members; Region 2 representation is decreased from eight members to seven members; Region 3 is decreased from four members to two members; Region 8 and Region 10 are combined to create a new Region 10 with two members, and is comprised of Alabama, District of Columbia, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, Puerto Rico, South Carolina, Tennessee, Virginia; Region 8 is now comprised of the State of Idaho with two members; Regions 12 and 13 are combined to create a new Region 12 and is comprised of Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont with three members.

Pursuant to 5 U.S.C. 553, it is found and determined that good cause exists for not postponing the effective date of this rule until 30 days after publication in the Federal Register because this rule should be in effect as soon as possible to appoint Board members for the 2011-2014 term.

For the reasons set forth in the preamble, 7 CFR part 1150 is amended as follows:

The Office of Management and Budget (OMB) has determined that this rule does not constitute a “significant” regulatory action under Executive Order 12866. Therefore, a regulatory assessment is not required.

The Catalog of Federal Domestic Assistance number for the program impacted by this action is 10.860, Rural Business Investment Program.

Executive Order 12372 requires intergovernmental consultation with State and local officials. For the Rural Business Investment Program, the Agency will conduct intergovernmental consultation in the manner delineated in 7 CFR part 3015, subpart V, which contains the Agency's regulations for implementing Executive Order 12372.

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. The Agency has determined that this rule meets the applicable standards provided in section 3 of the Executive Order. Additionally, (1) all state and local laws and regulations that are in conflict with this rule will be preempted; (2) no retroactive effect will be given to the rule; and (3) administrative appeal procedures, if any, must be exhausted before litigation against the Department or its agencies may be initiated, in accordance with the regulations of the National Appeals Division of USDA at 7 CFR part 11.

The policies contained in this rule do not have any substantial direct effect on states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. Nor does this interim rule impose substantial direct compliance costs on state and local governments. Therefore, consultation with states is not required.

Between October 2010 and January 2011 the United States Department of Agriculture (USDA) hosted seven regional regulation Tribal consultation sessions to gain input by elected Tribal officials or their designees concerning the impact of this rule on Tribal governments, communities, and individuals. These sessions established a baseline of consultation for future actions, should any be necessary, regarding this rule. Reports from these sessions for consultation will be made part of the USDA annual reporting on Tribal Consultation and Collaboration. USDA will respond in a timely and meaningful manner to all Tribal government requests for consultation concerning this rule and will provide additional venues, such as webinars and teleconferences, to periodically host collaborative conversations with Tribal leaders and their representatives concerning ways to improve this rule in Indian country as needed. The policies contained in this rule do not have implications that preempt Tribal law.

Under section 605(b) of the Regulatory Flexibility Act, 5 U.S.C. 605(b), the Agency certifies that this rule will not have a significant economic impact on a substantial number of small entities. The Agency made this determination based on the fact that this regulation only impacts those who choose to participate in the program. Small entity applicants will not be impacted to a greater extent than large entity applicants.

This rule contains no Federal mandates (under the regulatory provisions of Title II of the Unfunded Mandates Reform Act of 1995) for State, local, and tribal governments or the private sector. Thus, this rule is not subject to the requirements of sections 202 and 205 of the Unfunded Mandates Reform Act of 1995.

The information collection requirements contained in this interim rule have been approved by the Office of Management and Budget (OMB) under OMB control number 0570-0051.

Rural Development is committed to complying with the E-Government Act, to provide increased opportunities for citizens to access Government information and services electronically.

This document has been reviewed in accordance with 7 CFR part 1940, subpart G, “Environmental Program.” The Agency has determined that this action does not constitute a major Federal action significantly affecting the quality of the human environment and, in accordance with the National Environmental Policy Act of 1969, 42 U.S.C. 4321 et seq., an Environmental Impact Statement is not required.

The granting or issuance of a license under the non-leveraged RBIP program is not considered a major federal action, as defined by Council on Environmental Quality at 40 CFR 1508.18, Regulations for Implementing the Procedural Provisions of the National Policy Act of 1969 (NEPA), and therefore does not require any further NEPA documentation.

On June 8, 2004, the Agency published an interim rule for the Rural Business Investment Program (RBIP) (69 FR 32200), a program to promote economic development and the creation of wealth and job opportunities among individuals living in rural areas and to help meet the equity capital investment needs primarily of smaller enterprises located in such areas. Under the RBIP, for-profit Rural Business Investment Companies (RBICs) make venture capital investments in rural areas with the objectives of fostering economic development in such areas and returning maximum profits to the RBIC's investors. The regulations set forth the criteria USDA uses to select and license RBICs, guarantee its debentures, and to make grants to RBICs.

Since the interim rule was published, the Food, Conservation, and Energy Program of 2008 (the 2008 Farm Bill) was enacted. The 2008 Farm Bill affects several provisions of the RBIP rule. Specifically, Section 6027 of the 2008 Farm Bill results in regulatory modifications associated with:

• Issuance and guarantee of trust certificates (7 U.S.C. 2009cc-5(b)(3)(A));

• Fees (7 U.S.C. 2009cc-6);

• Rural Business Investment Companies (7 U.S.C. 2009cc-8(c));

• Financial institution investments (7 U.S.C. 2009cc-9);

• Contracting of functions (7 U.S.C. 2009cc-16); and

• Funding (7 U.S.C. 2009cc-18).

In addition, the Agency is looking to amend the RBIP to allow RBICs to participate without financial leverage from the Agency. The Agency published an Advanced Notice of Proposed Rulemaking (ANPRM) on March 29, 2007, (72 FR 14712) requesting comments on operating the RBIP program to allow non-leveraged RBICs. Ten comment letters were received, which were generally supportive of the addition of non-leveraged RBICs to the program. The Agency also received seven comment letters on the Interim Rule, published on June 8, 2004 (69 FR 32200), implementing the Rural Business Investment Program. Of these seven letters, three mentioned a non-leveraged RBIC program and each was supportive of the Agency implementing a non-leveraged RBIC program.

The Agency is implementing a non-leveraged RBIC program because program funding for leveraged RBICs is not available at this time. However, the Agency believes the RBIP is a valuable program that will facilitate investment in rural areas even without federal financial assistance. The amendments implementing the non-leveraged RBIC provisions are similar to many of the provisions found in the U.S. Small Business Administration's (SBA) Small Business Investment Company (SBIC) non-leveraged program (7 CFR Part 107) and thus should be familiar to potential RBICs who may be interested in this program.

Lastly, the Agency is taking this opportunity to clarify several of the provisions of the regulation.

The RBIC program was modeled after SBA's SBIC program, which has been in effect for more than 40 years, and in 2005, as statutorily required, the Agency and SBA entered into an interagency agreement for SBA administrative support of the RBIP. To satisfy its requirements under the National Environment Policy Act (NEPA), SBA has in place a specific Categorical Exclusion (CatEx) for the SBIC program established under the SBA's Standard Operating Procedure Section 90 No. 57 in 7(f) (dated February 1, 1980). A categorical exclusion is a category of actions that do not individually or cumulative have a significant effect on the human environment. The SBIC CatEX provides that the following category of actions is categorically excluded from the preparation of Environmental Assessments or Environmental Impact Statements under NEPA:

Small Business Investment Company Program Actions. In those cases where the SBA is approving an SBIC action of financing construction of facilities or purchase of land, then the SBA may be required to prepare an environmental assessment.

Based upon the years of experience that SBA has had with the RBIP/SBIC program model, RBS is incorporating a similar CatEx into RBS's existing National Environmental Policy Act rule.

Because the overall RBIP approach is for a RBIC to provide working capital to its portfolio companies, there is little potential for on-the-ground impacts to the natural environment, while likely impacts to the human environment are increased employment and incomes to rural areas. To ensure that any investments will not result in project specific impacts to important resources, the CatEx provides for the preparation of an environmental assessment only “(i)n those cases where the Agency is approving an RBIP action of financing construction for facilities or purchase and development of land.” In addition, the Agency will not approve licenses for RBICs in only one geographic area, but will favor wide-spread areas for rural investments, thereby ensuring that no potential cumulative impacts might arise. In summary, the RBIP is a useful tool that helps the Agency accomplish one of its primary missions to advance rural development. The provision of a new CatEx for licensing RBIC's is justified by USDA's and SBA's experience with RBIC and SBIC investments which, thus far, have had no significant impact to the natural environment, individually or cumulatively.

The following paragraphs discuss the changes being made to the RBIP regulations. As noted above, these changes are the result of (1) conforming the regulation to the 2008 Farm Bill, (2) incorporating provisions to allow RBICs to participate without leveraging, and (3) clarifying the existing regulation.

A. The Agency is adding a new section, § 4290.15, Leveraged and Non-leveraged Rural Business Investment Companies, to clarify which provisions of this part apply to leveraged RBICs and which apply to non-leveraged RBICs.

B. In § 4290.50, the Agency is amending several existing definitions and adding several others, as discussed below.

Community Development Finance. The current definition of Community Development Finance makes it possible for commercial bankers to qualify, even if they lack experience in debt securities or with equity-type instruments. This is not the Agency's intent. Therefore, the Agency is replacing “debt” with “debt securities.”

Debenture. This definition is being revised to indicate that the debenture may be prepaid at any time without penalty. This change is being made in response to Section 6027(a) of the 2008 Farm Bill.

Includible Non-Cash Gains, Loans and Investments, Retained Earnings Available for Distribution, and Undistributed Net Realized Earnings. These definitions are being revised to make reference to “or other USDA-approved form(s)).” These definitions refer to specific SBA forms. The Agency may use other forms to implement this program in the future (for example, for non-leveraged RBICs). Thus, adding this phrase now will allow the Agency the flexibility to use other forms in the future should it so decide.

Institutional Investor. This definition is being revised, per Section 6027(d)(1) of the 2008 Farm Bill, to allow investment pools created entirely by a bank or savings association to be able to participate in the RBIP.

Leveraged RBIC and Non-leveraged RBIC. These terms are being defined in order to implement these regulations clearly as the result of the addition of provisions for non-leveraged RBICs.

Rural Area. This change is being made because the 2008 Farm Bill replaced the previous rural area definition specific to the RBIP with a new definition that applies to several Rural Development programs including the Business and Industry Guaranteed Loan program.

Secretary. This definition is being revised by adding “his or her designee” to provide flexibility in implementing the program.

State. This definition is being revised to conform to the latest definition being used in other Agency programs.

C. Section 4290.110 is being revised by adding the phrase “(and any other aspect identified by the USDA in a Federal Register notice).” This is being added to provide the Agency flexibility should other aspects associated with qualified management need to be considered.

D. Section 4290.200 is being clarified by replacing “§ 4290.200” with “§ 4290.210” so that the paragraph does not unnecessarily refer back to itself.

E. Under § 4290.210, the Agency is adding “Unless otherwise specified in a Federal Register notice” to paragraph (a) of this section. This is being done to provide the Agency flexibility to specify other Capital requirements, within the constraints of the authorizing statute, if it should subsequently determine such are needed for either leveraged RBICs or non-leveraged RBICs.

In addition, the Agency is adding a new paragraph that addresses the time frame that each RBIC will have to meet the capital requirements set forth in the section. This change is being made in response to Section 6027(c) of the 2008 Farm Bill.

F. In § 4290.300, the Agency is replacing “using the application packet” with “using an appropriate application packet.” This is being done because of the provisions for non-leveraged RBICs, which are likely to use a different application packet than leveraged RBICs.

G. In § 4290.330, the Agency is renaming the section to include reference to guarantees, so that the section applies to issuance fees for both grants and debenture guarantees. In addition, the section is being amended to set the amount of fee that the Agency will charge for the issuance of a grant or debenture guarantee at $500. This fee amount is also applicable if the Agency issues both a grant and debenture guarantee. These amendments are being made in response to Section 6027(b)(1) of the 2008 Farm Bill.

H. Section 4290.503(e)(2) is being revised to make reference to “or other USDA-approved form(s)” for the same reason cited earlier in paragraph B of the preamble. In addition, the SBA Web site reference in § 4290.503(a) has been updated.

I. Section 4290.504(a) is being revised by removing “for which you will receive the necessary software” because it is unnecessary to the implementation of the equipment and office requirements covered in this section.

J. Section 4290.509(a) is being clarified by adding the phrase “whichever is later.”

K. Several changes are being made to § 4290.550 as follows:

First. In paragraph (a), the Agency is replacing “In this 4290.550” with “For the purposes of this section,” to more appropriately characterize the applicability of the section.

Second. In paragraph (b), the Agency is adding “or other USDA-approved form(s)” for the same reasons cited in paragraph B of the preamble.

Third. In paragraph (c), the Agency is replacing “under this § 4290.550” with “under this section” to more appropriately characterize the application of the section.

Fourth. The Agency is adding the word “and” to the end of paragraph (d)(2) to clarify that all three conditions are to be met.

L. The SBA Web site reference in § 4290.600(a) and (d) have been updated.

M. Section 4290.610(b) is being amended to make reference to “or other USDA-approved form(s)” for the same reason cited earlier in paragraph B of the preamble.

N. Several paragraphs in § 4290.630, including the title to the section, and § 4290.640 and its title are being revised by either removing reference to a specific SBA form number or adding reference to “or other USDA-approved form(s)” for the same reasons cited in paragraph B of the preamble. In addition, the SBA Web site reference in § 4290.630(c) has been updated.

O. In § 4290.720, the Agency is making three changes as described below.

First. In the examples presented in paragraph (d)(1), the Agency is removing reference to “wind farms, or power facilities (including solar, geothermal, hydroelectric, or biomass power facilities)” because such enterprises are now integral to the Agency's mission for energy development in rural America.

Second. The Agency is changing paragraph (i) by replacing “15 percent” with “25 percent.” This change is being made in response to Section 6027(d)(2) of the 2008 Farm Bill.

Third. In paragraph (i), the Agency is replacing reference to “Regulatory Capital” with reference to the “ownership interests” of a RBIC, either alone or in conjunction with other System institutions. This change is being made to align the program with 7 U.S.C. 2009cc-9(c).

P. The Agency is revising § 4290.740 in two ways. First, the Agency is changing the calculation of the “overline” limitation by changing “20 percent” to read “10 percent” and changing the base that the 10 percent is calculated from just Regulatory Capital (with regulatory permitted Distributions) to Regulatory Capital (with regulatory permitted Distributions) and Leverage. Second, the Agency is changing “current cost” to read “original cost” in paragraph (b).

The Agency is making these changes for several reasons. First, the changes provide the RBIC with greater flexibility in making its portfolio investments without board approval, which is consistent with industry standards. Second, the changes make the RBIC program more consistent with the SBIC program, which implemented a similar provision in the SBIC program in 2009. Third, these changes further our efforts to model the RBIC program after the SBIC program, as directed in the Conference Report (H.R. 107-424) of the authorizing statute for the RBIC program (Farm Security and Rural Investment Act of 2002). Specifically the Conference Report stated that “It is the expectation of the Managers that a considerable share of the rules and operating procedures for this program will be the same as the rules and operating procedures for the Small Business Investment Company program.”

Q. The Agency is revising § 4290.815(b) to remove “If you have outstanding Leverage or plan to obtain Leverage” because this phrase is unnecessary for leveraged RBICs and could create confusion as whether the paragraph would apply to non-leveraged RBICs and, if so, how.

R. Section 4290.1220 is being revised to make reference to “or other USDA-approved form(s)” for the same reason cited paragraph B of the preamble.

S. Several paragraphs in § 4290.1230 are being revised by either removing reference to a specific SBA form number or adding reference to “or other USDA-approved form(s)” for the same reasons cited paragraph B of the preamble.

T. The Agency is revising § 4290.1600(d) by removing reference to “fees” in the list of items that the Secretary may establish and in its place adding a provision to allow agents of the Secretary to collect a fee of not more than $500 when they perform the functions described in 7 U.S.C. 2009cc-5(e)(2). These changes are being made in response to Section 6027(b)(2) of the 2008 Farm Bill.

U. The Agency is revising § 4290.1810(a) by replacing “By issuing Debentures” with “Upon acceptance of a license to operate as a RBIC” and adding “all documents relating to the license, including, without limitation, the Participation Agreement and.” These changes are being made so that these provisions are applicable to both leveraged RBICs and non-leveraged RBICs.

V. Lastly, the Agency is proposing to amend this part by adding a new subpart O to allow a RBIC to apply for a license without leverage. In response to the March 29, 2007, ANPRM, the Agency received 10 comment letters, which favored allowing non-leveraged RBICs under the RBIP. The Agency also had received comment letters on the RBIP Interim Rule, of which three addressed a non-leveraged RBIC program. All three comment letters encouraged the Agency to consider a non-leveraged RBIC program. The provisions in the subpart for non-leveraged RBICs are based primarily on comments received on the March 29, 2007, ANPRM and on similar provisions found in the SBA's SBIC non-leveraged program.

Some of the key aspects of the provisions for non-leveraged RBICs are:

• The Agency rather than SBA will be responsible for implementing the non-leveraged RBIC provisions.

• The Agency will announce in a Federal Register notice those types of investors in the RBIC that are eligible to participate as a non-leveraged RBIC. If the eligible categories/types of investors changes, the Agency will publish subsequent notices in the Federal Register updating the list. However, such changes will not be applied retroactively.

• Applications for non-leveraged status will be accepted at any time during the year.

• While the Agency may select one, more than one, or none of the applying RBICs for participation as a non-leveraged RBIC, such selection will not be made on a competitive basis.

Most of the provisions for leveraged RBICs would be applicable to non-leveraged RBICs. However, there are a number of provisions (either a section or a paragraph) for leveraged RBICs that will not be applicable to non-leveraged RBICs. There are also a number of leveraged RBIC provisions that have been modified as that provision would be applied to non-leveraged RBICs. Finally, there are two subparts (subpart J, Financial Assistance for RBICs, and subpart N, Operational Assistance Grants for RBICs) that would not be applicable in their entirety to non-leveraged RBICs.

A new paragraph (c)(7) is being added to 7 CFR 1940.310 to incorporate the new categorical exclusions for the RBIP. This new paragraph is set out in the regulatory text of this rule.

As noted above, this change is being made based on the RBIP being based its similarity to and derivation from the SBA's SBIC program, which has a similar CatEx provision for their SBIC program, and the experience of the SBIC program in which, thus far, no significant impact to the natural environment, individually or cumulatively, has occurred.

For the reasons stated in the preamble, part 1940 of Chapter XVIII and part 4290 of Chapter XLII of the Code of Federal Regulations are amended as follows:

NCUA continually reviews its regulations to “update, clarify and simplify existing regulations and eliminate redundant and unnecessary provisions.” NCUA Interpretive Ruling and Policy Statement (IRPS) 87-2, as amended by IRPS 03-2, Developing and Reviewing Government Regulations. Recently, NCUA internally reviewed its regulations and determined minor revisions to section 701.34 are necessary to reflect current agency practice.

The final rule amends section 701.34 of NCUA's regulations to make minor technical corrections. The corrections are necessary to update and conform the regulation to current agency practice. Specifically, the NCUA Board has delegated its authority for designations of low-income status to the Office of Consumer Protection. This authority previously sat with the regional directors. The final rule amends section 701.34 to remove references to “regional directors,” and to replace those references with “NCUA”.

This rule provides minor technical corrections and will not cause any substantive changes.

NCUA is issuing this rulemaking as a final rule, effective upon publication. Generally, the Administrative Procedure Act (APA) requires a rulemaking to be published as a notice of proposed rulemaking with the opportunity for public comment, unless the agency for good cause finds that notice and public comment are impracticable, unnecessary, or contrary to the public interest. 5 U.S.C. 553. NCUA believes good cause exists for issuing these amendments without notice and public comment. The amendments in this rule are not substantive but merely technical in that they make minor corrections to update the regulations and conform them to current agency practice.

Additionally, the APA requires that a final rule must have a delayed effective date of 30 days from the date of publication, except for good cause. 5 U.S.C. 553(d). NCUA also finds good cause to waive the customary 30-day delayed effective date requirement under the APA. 5 U.S.C. 553(d)(3). Again the technical change conforms the rule to current agency practice. The rule will, therefore, be effective immediately upon publication.

The Regulatory Flexibility Act requires NCUA to prepare an analysis to describe any significant economic impact a rule may have on a substantial number of small entities (primarily those credit unions under ten million dollars in assets). This rule does not impose any regulatory burden. It merely makes non-substantive technical changes to section 701.34 of NCUA's regulations. This rule will not have a significant economic impact on a substantial number of small credit unions. Therefore, a regulatory flexibility analysis is not required.

NCUA has determined that this rule will not increase paperwork requirements under the Paperwork Reduction Act of 1995 and regulations of the Office of Management and Budget.

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

NCUA has determined that this rule will not affect family well-being within the meaning of section 654 of the Treasury and General Government Appropriations Act, 1999, Public Law 105-277, 112 Stat. 2681 (1998).

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

For the reasons discussed above, NCUA amends 12 CFR part 701 of title 12, chapter VII, of the Code of Federal Regulations as follows:

Discussion

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to include an AD that would apply to the specified products. That NPRM was published in the Federal Register on August 31, 2011 (76 FR 54143). That NPRM proposed to correct an unsafe condition for the specified products. The MCAI states:

The corrective action includes daily checks for evidence of turbine damage, and removal of the engine from service before further flight if turbine damage is found. The corrective action also includes inspecting the configuration of the holes in the repaired 2nd stage turbine NGV. If the holes are non-conforming, then before further flight replacement of the 2nd stage turbine NGV, 1st stage turbine disc, and 2nd stage turbine disc, with discs eligible for installation, is required. You may obtain further information by examining the MCAI in the AD docket.

We gave the public the opportunity to participate in developing this AD. We received no comments on the NPRM.

We reviewed the available data and determined that air safety and the public interest require adopting the AD as proposed.

Based on the service information, we estimate that this AD affects about 20 Turbomeca Arriel 1B turboshaft engines installed on helicopters of U.S. registry. We estimate that it will take about 40 work-hours per engine to inspect a repaired 2nd stage turbine NGV for the non-conforming hole configuration. We also estimate that it will take about 60 work-hours to replace the NGV, the 1st stage turbine disc, and the 2nd stage turbine disc, and that one engine will require these replacements. The average labor rate is $85 per work-hour. Required parts cost about $19,889 per engine. Based on these figures, we estimate the cost of the AD on U.S. operators to be $92,989. Our cost estimate is exclusive of possible warranty coverage.

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

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

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

For the reasons discussed above, I certify this AD:

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

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

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

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

You may examine the AD docket on the Internet at http://www.regulations.gov; or in person at the Docket Operations office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Operations office (phone: (800) 647-5527) is provided in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt.

History

On November 28, 2011, the FAA published a final rule in the Federal Register amending Class D and E airspace at Martin State Airport, Baltimore, MD, and adjusting the geographic coordinates for the airport (76 FR 72837). This action further corrects the geographic coordinates to be in concert with the FAAs aeronautical database.

The Class D and E airspace designations are published in Paragraphs 5000, 6002 and 6004 of FAA order 7400.9V, dated August 9, 2011, and effective September 15, 2011, 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.

Accordingly, pursuant to the authority delegated to me, the geographic coordinates listed in the airspace designation for the Class D and Class E airspace areas at Martin State Airport, Baltimore, MD, as published in the Federal Register of November 28, 2011, 76 FR 72837, FR Doc. 2011-30489, are corrected as follows:

On October 18, 2011, the FAA published in the Federal Register a notice of proposed rulemaking to amend Class E airspace at Huntington, WV (76 FR 64295) Docket No. FAA-2011-1057. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received. Subsequent to publication, the FAA found that the geographic coordinates needed to be adjusted. This action makes that adjustment. Class E airspace designations are published in paragraph 6005 of FAA Order 7400.9V dated August 9, 2011, and effective September 15, 2011, which is incorporated by reference in 14 CFR Part 71.1. The Class E airspace designations listed in this document will be published subsequently in the Order. With the exception of editorial changes, and the changes described above, this rule is the same as that proposed in the NPRM.

This amendment to Title 14, Code of Federal Regulations (14 CFR) part 71 amends the Class E airspace extending upward from 700 feet above the surface at Huntington, WV to accommodate the new Standard Instrument Approach Procedures developed for Tri-State/Milton J. Ferguson Field Airport. The Huntt NDB has been decommissioned, and the NDB approach cancelled. The existing Class E airspace extending upward from 700 feet above the surface is modified for the safety and management of IFR operations. This action also updates the geographic coordinates to be in concert with the FAAs aeronautical database.

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, is non-controversial and unlikely to result in adverse or negative comments. It, therefore, (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a Regulatory Evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

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

This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it amends controlled airspace at Tri-State/Milton J. Ferguson Field Airport, Huntington, WV.

In consideration of the foregoing, the Federal Aviation Administration amends 14 CFR Part 71 as follows:

On September 26, 2011, the FAA published in the Federal Register a notice of proposed rulemaking (NPRM) to establish Class D and E airspace and amend existing Class E airspace at Punta Gorda, FL, to accommodate a new air traffic control tower at Punta Gorda Airport (76 FR 59306). Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received.

Class D and E airspace designations are published in Paragraphs 5000, 6002, 6004, and 6005, respectively, of FAA Order 7400.9V dated August 9, 2011, and effective September 15, 2011, which is incorporated by reference in 14 CFR 71.1. The Class D and E airspace designations listed in this document will be published subsequently in the Order.

This amendment to Title 14, Code of Federal Regulations (14 CFR) part 71 establishes Class D and Class E surface airspace extending upward from the surface to and including 2,500 feet MSL within a 4.5-mile radius of Punta Gorda Airport, Punta Gorda, FL. This action also establishes Class E surface airspace designated as an extension to Class D surface area. The existing Class E airspace area extending upward from 700 feet above the surface is amended to change the airport previously named Charlotte County Airport to Punta Gorda Airport, and adjusts the geographic coordinates to be in concert with the FAA's aeronautical database. Additional controlled airspace is necessary to support the new air traffic control tower and new standard instrument approach procedures developed for continued safety and management of IFR operations at Punta Gorda Airport.

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, is non-controversial and unlikely to result in adverse or negative comments. It, therefore, (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a Regulatory Evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

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

This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it establishes and amends controlled airspace at Punta Gorda Airport, Punta Gorda, FL.

In consideration of the foregoing, the Federal Aviation Administration amends 14 CFR Part 71 as follows:

On September 22, 2011, the FAA published in the Federal Register a notice of proposed rulemaking (NPRM) to establish Class E airspace at Oneonta, AL (76 FR 58728) Docket No. FAA-2011-0744. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received. Subsequent to publication, the FAA found a typographical error in the longitude coordinates of the airport. This action makes the correction. Class E airspace designations are published in paragraph 6005 of FAA Order 7400.9V dated August 9, 2011, and effective September 15, 2011, which is incorporated by reference in 14 CFR Part 71.1. The Class E airspace designations listed in this document will be published subsequently in the Order. With the exception of editorial changes, and the changes described above, this rule is the same as that proposed in the NPRM.

This amendment to Title 14, Code of Federal Regulations (14 CFR) part 71 establishes Class E airspace extending upward from 700 feet above the surface at Oneonta, AL, to provide the controlled airspace required to accommodate the new RNAV GPS Standard Instrument Approach Procedures developed for Robbins Field. This action is necessary for the safety and management of IFR operations at the airport. Also, the coordinates of the airport are corrected to be in concert with the FAAs aeronautical database.

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, is non-controversial and unlikely to result in adverse or negative comments. It, therefore, (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a Regulatory Evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

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

This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it establishes controlled airspace at Robbins Field, Oneonta, AL.

In consideration of the foregoing, the Federal Aviation Administration amends 14 CFR Part 71 as follows:

On July 21, 2010, President Obama signed the Dodd-Frank Act into law. 1 Title VII of the Dodd-Frank Act amends the CEA  2 to establish a comprehensive new regulatory framework for swaps. The legislation was enacted to reduce risk, increase transparency, and promote market integrity within the financial system by, among other things: (1) Providing for the registration and comprehensive regulation of swap dealers and major swap participants; (2) imposing clearing and trade execution requirements on standardized derivative products; (3) creating robust recordkeeping and real-time reporting regimes; and (4) enhancing the rulemaking and enforcement authorities of the Commission with respect to, among others, all registered entities and intermediaries subject to the Commission's oversight. 3

Section 754 of the Dodd-Frank Act states that, unless otherwise provided, the provisions of subtitle A of title VII of the Dodd-Frank Act  4 “shall take effect on the later of 360 days after the date of the enactment of this subtitle or, to the extent a provision of this subtitle requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of this subtitle.” Thus, the general effective date for provisions of title VII that do not require a rulemaking was July 16, 2011. This includes the provisions that repealed several provisions of the CEA as in effect prior to the Dodd-Frank Act that excluded or exempted, in whole or in part, certain transactions from Commission oversight. 5

Section 712(d)(1) of the Dodd-Frank Act requires the Commission and the SEC to undertake a joint rulemaking to “further define” certain terms used in title VII, including the terms “swap,” “swap dealer,” “major swap participant,” and “eligible contract participant.”  6 Section 721(c) requires the Commission to adopt a rule to “further define” the terms “swap,” “swap dealer,” “major swap participant,” and “eligible contract participant” to prevent evasion of statutory and regulatory obligations. 7 The Commission and the SEC have jointly issued two notices of proposed rulemaking that address these further definitions. 8

The Commission's final rulemakings further defining the terms in sections 712(d) and 721(c) were not expected to be in effect as of July 16, 2011 ( i.e., the general effective date set forth in section 754 of the Dodd-Frank Act). Accordingly, on July 14, 2011 the Commission exercised its exemptive authority under CEA section 4(c)  9 and its authority under section 712(f) of the Dodd-Frank Act by issuing the July 14 Order. 10 In so doing, the Commission sought to address concerns that had been raised about the applicability of various regulatory requirements to certain agreements, contracts, and transactions after July 16, 2011, and thereby ensure that current practices will not be unduly disrupted during the transition to the new regulatory regime. 11

The July 14 Order groups the relevant provisions of the Dodd-Frank Act into four categories and provides temporary exemptive relief, set to expire no later than December 31, 2011, with respect to Categories 2 and 3. A summary of the four categories of provisions follows.

Category 1 covers statutory provisions which by their express terms require a rulemaking. Because, under section 754 of the Dodd-Frank Act, these provisions do not become effective until at least 60 days after the final rule is published, no exemptive relief from the general effective date is necessary. Category 1 provisions include, among others, the further definitions of terms regarding swap entities or instruments as required by the Dodd-Frank Act (such as the terms “swap,” “swap dealer,” “major swap participant,” or “eligible contract participant”). Category 1 also includes, among others: (1) Registration, capital and margin requirements, and business conduct standards for swap dealers and major swap participants; (2) provisions prohibiting agricultural swaps except pursuant to CFTC rules; (3) rules regarding swap execution facilities; and (4) various swap data recordkeeping and reporting requirements. A complete list of the Category 1 provisions is included in the appendix to the July 14 Order.

The first part of the relief provided for in the July 14 Order reaches those Dodd-Frank Act provisions (“Category 2 provisions”) that are self-effectuating ( i.e., do not require a rulemaking) and that reference one or more of the terms for which the Commission and SEC are required to provide further definition, including “swap,” “swap dealer,” “major swap participant,” “eligible contract participant,” and “security-based swap agreement” (collectively, the “referenced terms”). These Category 2 provisions include, for example, the trade execution requirement of CEA section 2(h)(8), as amended by Dodd-Frank Act section 723. A complete list of the Category 2 provisions is included in the appendix to the July 14 Order. Because the Category 2 provisions would have taken effect on July 16, 2011 pursuant to section 754, the Commission granted temporary relief from those provisions, but only to the extent that the requirements in such provisions specifically relate to a referenced term that is not yet further defined. Thus, if a Category 2 provision also applies to futures or options on futures, the provision took effect on July 16 with respect to futures or options on futures. The exemption for Category 2 provisions expires on the earlier of: (1) The effective date of the applicable final rule further defining the relevant term; or (2) December 31, 2011.

In part two of the July 14 Order, the Commission provides temporary exemptive relief from the provisions of the CEA that may apply to certain agreements, contracts, and transactions in exempt or excluded commodities (generally, financial, energy and metals commodities) as a result of the repeal of the CEA exemptions and exclusions in former CEA sections 2(d), 2(e), 2(g), 2(h), and 5d as of July 16, 2011 pursuant to sections 723(a)(1) and 734(a) of the Dodd-Frank Act (the “Category 3 provisions”). As explained in the July 14 Order, this relief is based on the Commission's existing “part 35” exemptive rules. 12

Part 35 originally was promulgated in 1993 pursuant to, among others, the Commission's general exemptive authority in CEA section 4(c) and its plenary options authority under section 4c(b), 13 and provides a broad-based exemption from the CEA for “swap agreements” in any commodity. Specifically, part 35 exempts “swap agreements,” as defined therein, from most of the provisions of the CEA if: (1) They are entered into by “eligible swap participants” (“ESPs”);  14 (2) they are not part of a fungible class of agreements standardized as to their material economic terms; (3) the creditworthiness of any party having an actual or potential obligation under the swap agreement would be a material consideration in entering into or determining the terms of the swap agreement, including pricing, cost, or credit enhancement terms; and (4) they are not entered into or traded on a multilateral transaction execution facility.

Under part two of the relief provided for in the July 14 Order, the Commission stated that transactions in exempt or excluded commodities (and persons offering, entering into, or rendering advice or rendering other services with respect to such transactions) are temporarily exempt from provisions of the CEA that may apply to such transactions if such transactions comply with part 35, notwithstanding that: (1) The transaction may be executed on a multilateral transaction execution facility; (2) the transaction may be cleared; (3) persons offering or entering into the transaction may be eligible contract participants as defined in the CEA (prior to the enactment of the Dodd-Frank Act); (4) the transaction may be part of a fungible class of agreements that are standardized as to their material economic terms; and/or (5) no more than one of the parties to the transaction is entering into the transaction in conjunction with its line of business, but is neither an eligible contract participant nor an ESP, and the transaction was not and is not marketed to the public. 15

Thus, for certain transactions, the July 14 Order provides relief notwithstanding that the transaction may not satisfy certain part 35 requirements ( e.g., cleared, executed on a multilateral trade execution facility, entered into by certain persons that are not eligible contract participants, etc.). The Commission stated in the July 14 Order that this relief is limited to transactions in exempt and excluded commodities, and does not extend to transactions in agricultural commodities, because transactions in agricultural commodities were not covered by the applicable statutory exclusions and exemptions in effect prior to July 16, 2011. 16 The exemption in part two of the July 14 Order expires on the earlier of: (1) The repeal, withdrawal or replacement of part 35; or (2) December 31, 2011.

Category 4 contains those Dodd-Frank Act provisions for which the Commission determined not to issue relief, and which therefore went into effect on July 16, 2011. A complete list of the Category 4 provisions is included in the appendix to the July 14 Order.

The temporary exemptions issued in the July 14 Order are subject to several conditions. These conditions provide that the July 14 Order shall not: (1) Limit in any way the Commission's anti-fraud or anti-manipulation authority under the CEA; (2) apply to any provision of the Dodd-Frank Act or the CEA that became effective prior to July 16, 2011; (3) affect any effective date or compliance date set forth in any rulemaking issued by the Commission to implement provisions of the Dodd-Frank Act; (4) limit the Commission's authority under Dodd-Frank Act section 712(f) to issue rules, orders, or exemptions prior to the effective date of any provision of the Dodd-Frank Act and the CEA, in order to prepare for such effective date; and (5) affect the applicability of any provision of the CEA to futures contracts or options on futures contracts, or to cash markets. 17

On October 25, 2011, the Commission published in the Federal Register a Notice to amend the July 14 Order in two ways. 18 First, the Commission proposed to amend the July 14 Order to extend the potential latest expiry dates. With respect to provisions covered in the first part of the relief in the July 14 Order, the Commission proposed that the temporary exemptive relief expire upon the earlier of: (1) The effective date of the applicable final rule further defining the relevant referenced term; or (2) July 16, 2012. 19 This proposed amendment addressed the potential that, as of December 31, 2011, the CFTC-SEC joint rulemakings “further defining” the referenced terms will not yet be effective. The Commission also proposed to amend the July 14 Order to extend the expiry date of the second part of the relief in the July 14 Order until the earlier of: (1) July 16, 2012; or (2) such other compliance date as may be determined by the Commission. For the same reason stated by the Commission in issuing the second part of the relief provided in the July 14 Order, the Commission proposed extending this exemptive relief to “allow markets and market participants to continue to operate under the regulatory regime as in effect prior to July 16, 2011, but subject to various implementing regulations that the Commission promulgates and applies to the subject transactions, market participants, or markets.”  20

Second, the Commission proposed to include within the second part of the relief any agreement, contract or transaction that fully meets the conditions in part 35 as in effect prior to December 31, 2011. This proposed amendment addressed the fact that such transactions, which were not included within the scope of the July 14 Order because the exemptive rules in part 35 covered them at that time, now require temporary relief because part 35 will no longer be available as of December 31, 2011. 21 Accordingly, to ensure that the exemptive relief currently available for these transactions continues to be available after December 31, 2011, the Commission proposed to amend the July 14 Order to incorporate by reference the part 35 relief available prior to December 31, 2011. Whereas the relief provided in part two of the July 14 Order was (and would remain) limited to transactions in excluded or exempt commodities, the proposed amendment also would include, beginning on January 1, 2012, transactions in agricultural commodities that fully meet the conditions in part 35 as in effect prior to December 31, 2011. 22 The Commission proposed that this further amendment to the July 14 Order is necessary to ensure that the same scope of the exemptive relief available before December 31, 2011 is available to all swaps and extends through July 16, 2012, at the latest.

In proposing these amendments, the Commission sought to ensure that current practices will not be unduly disrupted during the transition to the new regulatory regime. As stated above, the proposed July 16, 2012 date coincides with the potential transitional period provided in sections 723(c) and 734(c) of the Dodd-Frank Act. 23 Further, the Commission stated that, should the Commission deem it appropriate to terminate or extend any exemptive relief under part two of the July 14 Order, it would be in a better position to comprehensively evaluate and consider any tailored exemption at that time.

The Commission received five comments in response to the Notice proposing to amend the July 14 Order. 24 The comments generally focused upon three issues: (1) The general expiration date of the relief to be provided by the proposed amendment; (2) the application of the proposed amendment to agricultural swaps; and, (3) the expiry date applicable to exempt commercial markets (“ECMs”) operating pursuant to grandfather relief authorized by section 723(c)(l)-(2) of the Dodd-Frank Act and their market participants and clearing organizations. The comments and Commission determinations regarding each of these issues is discussed in the sections that follow. In addition, the final order includes other technical, non-substantive changes to the wording of the proposed amended order.

Commenters were divided on whether the Commission should include an expiry or “sunset” date of July 16, 2012. For example, Better Markets stated that continuing to set outside dates for the exemptive relief, rather than granting open-ended exemptive relief, establishes important deadlines so that work can be prioritized and completed as quickly as prudently possible. 25 In contrast, CME Group and SIFMA recommended the Commission avoid setting a sunset provision date for the expiration of the temporary exemptive relief. 26 SIFMA stated that the Commission should instead provide exemptive relief that lasts on a provision-by-provision basis until related substantive requirements of the Dodd-Frank Act are implemented, as the SEC provided for in its parallel relief under subtitle B of title VII. 27 SIFMA said that avoiding the imposition of a sunset date would allow the Commission to adopt its final rules in a logical order that provides market participants with necessary legal certainty. 28

The Commission has determined to retain, as proposed, an outmost expiry date of July 16, 2012 for two reasons. First, the Commission continues to believe that it is appropriate and prudent to periodically review the extent and scope of any relief provided from the CEA, as amended by the Dodd-Frank Act. 29 The Commission anticipates that additional rulemakings to implement the Dodd-Frank Act will be completed during the extended period of exemptive relief between December 31, 2011 and July 16, 2012. During this period the Commission also will be considering the appropriate phase-in of the various regulatory requirements under the Dodd-Frank rulemakings. Accordingly, the Commission believes it appropriate to periodically re-examine the scope and extent of the proposed exemptive relief in order to ensure that the scope of relief is appropriately tailored to the schedule of implementation of the Dodd-Frank Act requirements. Second, particularly with respect to part two of the July 14 Order, the limitation of this extension of exemptive relief to no later than July 16, 2012 is consistent with the transitional relief provided by the Congress in section 723(c) of the Dodd-Frank Act regarding former CEA section 2(h) and section 734(c) of the Dodd-Frank Act regarding former CEA section 5d ( i.e., for “not longer than a 1-year period” following the general effective date of title VII). 30 As stated in the Notice, should the Commission deem it appropriate to terminate or extend any exemptive relief under part two of the July 14 Order, the Commission will be in a better position to comprehensively evaluate and consider any tailored exemption at that time. 31

CME sought clarification on the application of the proposed amendment to agricultural swaps. 32 CME stated that it was not clear from the Notice whether the proposed relief: (1) Would apply only to agricultural swaps that meet part 35 as in effect prior to December 31, 2011; or (2) includes agricultural swaps that meet part 35 as in effect prior to December 31, 2011 notwithstanding that: (i) The transaction may be executed on a multilateral transaction execution facility; (ii) the transaction may be cleared; (iii) persons offering or entering into the transaction may be eligible contract participants as defined in the CEA prior to July 16; (iv) the transaction may be part of a fungible class of agreements that are standardized as to their material economic terms; and/or (v) no more than one of the parties to the transaction is entering into the transaction in conjunction with its line of business, but is neither an eligible contract participant nor an ESP), and the transaction was not and is not marketed to the public. CME believes the latter is consistent with new Commission regulation § 35.1, and that the Commission should make this clear in the text of any final order issued pursuant to the Notice. 33

CME further stated that pursuant to the Notice and new regulation § 35.1, starting on January 1, 2012, swaps based on agricultural commodities, like swaps based on exempt and excluded commodities, may trade on either a DCM, ECM or exempt board of trade (“EBOT”) (until such time as status as a swap execution facility (“SEF”) is available). CME believes the Commission should make this clear in the text of any final order issued pursuant to the Notice. 34

Prior to the Dodd-Frank Act, the CEA did not permit transactions in agricultural commodities on ECMs or EBOTs. 35 Nothing in the Notice or the Commission's recently promulgated § 35.1 36 provide that agricultural swaps may trade on an ECM or EBOT. Rather, regulation § 35.1 allows agricultural swaps to transact subject to the laws and rules applicable to all other swaps, and to transact on DCMs, SEFs, “or otherwise” to the same extent that all other swaps are allowed to trade on DCMs, SEFs, “or otherwise.”  37 To interpret the phrase “or otherwise”, in conjunction with the exemptive relief issued herein, as expanding the permissible role for ECMs and EBOTs to agricultural commodities would be: (1) Contrary to the plain language of the pre-Dodd-Frank exemptions for ECMs and EBOTs; and (2) inconsistent with the intent underlying the July 14 Order to preserve the status quo during implementation of the new swap regulatory regime. 38 Accordingly, the Commission now clarifies that new part 35  39 and the exemptive relief issued herein, and any interaction of the two, do not operate to expand the pre-Dodd-Frank scope of transactions eligible to be transacted on either an ECM or EBOT to include transactions in agricultural commodities.

To clarify this point, and as compared to the proposed amended order, the Commission has reformatted this final order by moving the text addressing transactions that meet part 35 as in effect prior to December 31, 2011, to a paragraph separate from the text addressing transactions that meet part 35 as in effect prior to December 31, 2011 notwithstanding that: (i) The transaction may be executed on a multilateral transaction execution facility; (ii) the transaction may be cleared; (iii) persons offering or entering into the transaction may be eligible contract participants as defined in the CEA prior to July 16; (iv) the transaction may be part of a fungible class of agreements that are standardized as to their material economic terms; and/or (v) no more than one of the parties to the transaction is entering into the transaction in conjunction with its line of business, but is neither an eligible contract participant nor an ESP, and the transaction was not and is not marketed to the public.

Two commenters, Nodal Exchange and LCH, expressed concern with the expiry date of the second part of the relief contained in the proposed amended order  40 as it applies to ECMs that have petitioned for the grandfather relief authorized by section 723(c)(1)-(2) of the Dodd-Frank Act  41 and/or to such ECMs' market participants or clearing organizations. As set forth above, the Commission proposed to amend the July 14 Order to extend the expiry date of the second part of the relief until the earlier of: (1) July 16, 2012; or (2) such other compliance date as may be determined by the Commission.

Nodal Exchange is an ECM that has filed for grandfather relief under the ECM “Grandfather Order” issued by the Commission pursuant to the authority provided by section 723(c)(1)-(2) of the Dodd-Frank Act. 42 The ECM Grandfather Order permits ECMs that satisfy specified conditions to continue to operate pursuant to the provisions of former CEA section 2(h)(3)-(7) until July 15, 2012. Among the applicable conditions are the requirements that the ECM must have filed a formal SEF or DCM application with the Commission within sixty days after the effective date of final regulations implementing the provisions of either section 733 or section 735 of the Dodd-Frank Act, 43 whichever is applicable, and that the ECM's SEF or DCM application be pending before the Commission.

Nodal Exchange requested that the proposed amended order be modified in two ways. First, Nodal requested that “the Commission provide relief to ECMs compliant with the grandfathering provisions by extending the second part of the July 14 Order for these compliant ECMs until the latter of (1) July 16, 2012; or (2) such other compliance date as may be determined by the Commission.”  44 In support of its request, Nodal stated that “[s]ince the Dodd-Frank Act eliminates ECMs by no later than July 16, 2012, it would appear that Nodal Exchange must become a registered DCM or SEF by July 16, 2012.”  45 Nodal asserted, however, that it “appears highly unlikely that Nodal Exchange will be able to be either a registered DCM or SEF by July 16, 2012 because the rules for neither DCMs nor SEFs have been finalized” and because “based on the proposed rules for DCMs, the 180-day statutory review period will probably govern the application review process.”  46

Nodal claimed that its “markets will be disrupted if Nodal Exchange cannot be registered as a DCM or SEF by July 16, 2012, unless Nodal Exchange can be permitted to continue to operate as an ECM until the Commission grants appropriate registration.”  47 Nodal also claimed that “[w]ithout further guidance from the Commission consistent with the ECM transition period of section 723(c) of the Dodd-Frank Act,” the proposed amended order “creates unnecessary uncertainty for Nodal Exchange, its participants, its clearing house LCH.Clearnet, 48 and the LCH.Clearnet clearing members for Nodal Exchange participants.”  49

Second, Nodal asserted that with respect to non-ECM entities such as Nodal Exchange participants and their LCH clearing members, extending the relief in the July 14 Order until the earlier of: (1) July 16, 2012; or (2) such other compliance date as may be determined by the Commission “creates uncertainty in the timeline for compliance with the new regulatory regime,” noting that it is “unclear what circumstances could cause `such other compliance date' to be determined by the Commission.”  50 Accordingly, Nodal Exchange requested that the Commission provide exemptive relief to “non-ECM market participants” by extending the second part of the July 14 Order until July 16, 2012 without qualification. 51

In a related comment, LCH similarly requested that the Commission extend the exemptive relief in the second part of the July 14 Order to July 16, 2012 “without any qualification.”  52 LCH.Clearnet Limited, one of the LCH's operating companies, is registered with the Commission as a derivatives clearing organization (“DCO”) and provides clearing services for Nodal Exchange. According to LCH, the second part of the Commission's July 14 Order permits LCH.Clearnet Limited to continue to clear transactions for Nodal Exchange. 53 LCH acknowledged that LCH.Clearnet's “DCO designation must be amended before Nodal Exchange's change in registration [to a DCM or SEF] occurs.”  54

LCH commented that the Commission “created unnecessary uncertainty for LCH.Clearnet Limited, Nodal, and LCH.Clearnet clearing members for firms trading on Nodal by proposing that the extension of the July 14 Order would expire `upon the earlier of: (I) July 16, 2012; or (II) such other compliance date as may be determined by the Commission. ' ”  55 Stating that “no explanation for the `other compliance date' language” was provided, LCH maintained that the addition of this language “raises the spectre that the Commission could rescind the exemptive relief at any time for any reason or without allowing sufficient time for LCH.Clearnet Limited to apply for and receive an amended order of registration.”  56 LCH stated that extending the expiration date of the second part of the July 14 Order to July 16, 2012 without qualification would be “consistent with the transitional period for ECMs provided in section 723(c) of Dodd-Frank” and the Commission's goal of striving “to ensure that current practices will not be unduly disrupted during the transition to the new regulatory regime.”  57

Although these comments came from an ECM and its clearing organization, the points raised in these comments also are applicable to EBOTs that are operating under essentially the same Grandfather Order requirements as ECMs. 58 Accordingly, in modifying the proposed amended order to address the comments received regarding ECMs, the Commission also has determined to modify the proposed amended order to address EBOTs.

While the final order continues to provide that the exemption set forth in the second part of the order generally shall expire upon the earlier of July 16, 2012 or such other compliance date as may be determined by the Commission, it has been modified to provide that the exemption will not expire prior to July 16, 2012 in certain circumstances. Specifically, no other compliance date will be determined (and thus, the exemption will remain in effect until July 16, 2012) for agreements, contracts, and transactions (and for persons offering, entering into, or rendering advice or rendering other services with respect to, such agreements, contracts or transactions) that: (1) Are executed on an ECM or EBOT that is operating under the terms of the Commission's ECM/EBOT Grandfather Order and that complies with all of the applicable conditions of the ECM/EBOT Grandfather Order; and (2) are cleared by a Commission-registered DCO. This modification is narrow. It applies only to agreements, contracts, and transactions that are executed on a grandfathered ECM or EBOT and are cleared by a registered DCO, and it is restricted in scope to those specific requirements or provisions of the CEA (and relevant implementing regulations) that otherwise would apply to such agreements, contracts, and transactions and that are inconsistent with the ECM or EBOT Grandfather Order. 59

As noted by the commenters, the Commission, in proposing the amendments to the July 14 Order, sought to ensure that current practices will not be unduly disrupted during the transition to the new regulatory regime. 60 The Commission also stated that it believes it is in the interest of the public and market participants to continue to provide regulatory certainty regarding the applicability of title VII of the Dodd-Frank Act. 61 The modification contained in the final order will further these objectives by providing greater consistency between the expiration of this exemptive relief and the terms of the ECM/EBOT Grandfather Order authorized by Congress in sections 723(c) and 734(c) of the Dodd-Frank Act. It also will reduce the likelihood of legal uncertainty that could arise were the exemptive relief applicable to grandfathered ECMs and EBOTs that execute particular transactions and the DCOs that clear those same transactions subject to disparate expiration dates. In this way, ECMs and EBOTs that are compliant with the conditions contained in the ECM/EBOT Grandfather Order, their market participants, and their DCOs and clearing members, are more likely to operate without disruption through the end of the grandfather relief period authorized by the Dodd-Frank Act—July 16, 2012.

The Commission, though, has determined not to modify the expiration date of the second part of the proposed amended order to permit the relief to expire later than July 16, 2012 for the same reasons that it has decided to retain a “sunset” or expiration provision generally. First, the Commission continues to believe that it is appropriate and prudent to periodically review the extent and scope of any exemptive relief provided from the CEA, as amended by the Dodd-Frank Act. Second, the limitation of this exemptive relief to no later than July 16, 2012 is consistent with the transitional relief provided by Congress (i.e., for “not longer than a 1-year period”). Finally, should the Commission deem it appropriate to terminate or extend any exemptive relief under part two of the July 14 Order, the Commission will be in a better position to comprehensively evaluate and consider any tailored exemption at that time. 62

The Paperwork Reduction Act (“PRA”)  63 imposes certain requirements on Federal agencies (including the Commission) in connection with conducting or sponsoring any collection of information as defined by the PRA. These amendments to the July 14 Order will not require a new collection of information from any persons or entities that will be subject to the final order.

Section 15(a) of the CEA  64 requires the Commission to consider the costs and benefits of its action before issuing an order under the CEA. CEA section 15(a) further specifies that costs and benefits shall be evaluated in light of five broad areas of market and public concern: (1) Protection of market participants and the public; (2) efficiency, competitiveness, and financial integrity of futures markets; (3) price discovery; (4) sound risk management practices; and (5) other public interest considerations. The Commission may in its discretion give greater weight to any one of the five enumerated areas and could in its discretion determine that, notwithstanding its costs, a particular order is necessary or appropriate to protect the public interest or to effectuate any of the provisions or to accomplish any of the purposes of the CEA.

The Commission requested but received no comments on the consideration of costs and benefits of the proposed amendments discussed in the Notice. In the Notice, the Commission stated that the proposed amendments to the existing July 14 Order would not change the nature or limit the scope of relief granted. 65 The Commission continues to believe that these amendments do not change the nature or scope of the relief granted and, as such, impose no costs beyond the costs imposed by the July 14 Order. Rather, this final order confers an added benefit to market participants and the public by extending the relief provided for in the July 14 Order through no later than July 16, 2012. Accordingly, the consideration of costs and benefits set forth in the July 14 Order may be incorporated by reference in this final order.

The Commission amends the July 14 Order to read as follows:

The Commission, to provide for the orderly implementation of the requirements of Title VII of the Dodd-Frank Act, pursuant to sections 4(c) and 4c(b) of the CEA and section 712(f) of the Dodd-Frank Act, hereby issues this Order consistent with the determinations set forth above, which are incorporated in this final order, as amended, by reference, and:

(1) Exempts, subject to the conditions set forth in paragraph (4), all agreements, contracts, and transactions, and any person or entity offering, entering into, or rendering advice or rendering other services with respect to, any such agreement, contract, or transaction, from the provisions of the CEA, as added or amended by the Dodd-Frank Act, that reference one or more of the terms regarding entities or instruments subject to further definition under sections 712(d) and 721(c) of the Dodd-Frank Act, which provisions are listed in Category 2 of the Appendix to this Order; provided, however, that the foregoing exemption:

a. Applies only with respect to those requirements or portions of such provisions that specifically relate to such referenced terms; and

b. With respect to any such provision of the CEA, shall expire upon the earlier of: (i) the effective date of the applicable final rule further defining the relevant term referenced in the provision; or (ii) July 16, 2012.

(2) Exempts, subject to the conditions set forth in paragraph (4), all agreements, contracts, and transactions, and any person or entity offering, entering into, or rendering advice or rendering other services with respect to, any such agreement, contract, or transaction, from the provisions of the CEA, if the agreement, contract, or transaction complies with part 35 of the Commission's regulations as in effect prior to December 31, 2011. This exemption shall expire upon the earlier of (i) July 16, 2012; or (ii) such other compliance date as may be determined by the Commission.

(3) Exempts, subject to the conditions set forth in paragraph (4), all agreements, contracts, and transactions, and any person or entity offering, entering into, or rendering advice or rendering other services with respect to, any such agreement, contract, or transaction, from the provisions of the CEA, if the agreement, contract, or transaction complies with part 35 of the Commission's regulations as in effect prior to December 31, 2011, including any agreement, contract, or transaction in an exempt or excluded (but not agricultural) commodity that complies with such provisions then in effect notwithstanding that:

a. The agreement, contract, or transaction may be executed on a multilateral transaction execution facility;

b. The agreement, contract, or transaction may be cleared;

c. Persons offering or entering into the agreement, contract or transaction may not be eligible swap participants, provided that all parties are eligible contract participants as defined in the CEA prior to the date of enactment of the Dodd-Frank Act;

d. The agreement, contract, or transaction may be part of a fungible class of agreements that are standardized as to their material economic terms; and/or

e. No more than one of the parties to the agreement, contract, or transaction is entering into the agreement, contract, or transaction in conjunction with its line of business, but is neither an eligible contract participant nor an eligible swap participant, and the agreement, contract, or transaction was not and is not marketed to the public;

Provided, however, that:

a. Such agreements, contracts, and transactions in exempt or excluded commodities (and persons offering, entering into, or rendering advice or rendering other services with respect to, any such agreement, contract, or transaction) fall within the scope of any of the CEA sections 2(d), 2(e), 2(g), 2(h), and 5d provisions or the line of business provision as in effect prior to July 16, 2011; and

b. This exemption shall expire upon the earlier of: (i) July 16, 2012; or (ii) such other compliance date as may be determined by the Commission, except that the exemption shall not expire prior to July 16, 2012 with limited respect to the specific requirements or provisions of the CEA and regulations promulgated thereunder that otherwise would apply to such agreements, contracts, and transactions (and the persons offering, entering into, or rendering advice or rendering other services with respect to them) and that are inconsistent with the exempt commercial market (“ECM”)/exempt board of trade (“EBOT”) Grandfather Order if (I) such agreements, contracts, and transactions are executed on an ECM or an EBOT that is operating under the terms of, and compliant with the applicable conditions of, the Commission's ECM/EBOT Grandfather Order which became effective September 20, 2010; (II) such agreements, contracts, and transactions are cleared by a registered derivatives clearing organization; and (III) such ECM or EBOT complies with all other Commission regulations implementing the provisions of the Dodd-Frank Act that are listed in Category 1 of the Appendix to this Order.

(4) Provides that the foregoing exemptions in paragraphs (1), (2) and (3) above shall not:

a. Limit in any way the Commission's authority with respect to any person, entity, or transaction pursuant to CEA sections 2(a)(1)(B), 4b, 4o, 6(c), 6(d), 6c, 8(a), 9(a)(2), or 13, or the regulations of the Commission promulgated pursuant to such authorities, including regulations pursuant to CEA section 4c(b) proscribing fraud;

b. Apply to any provision of the Dodd-Frank Act or the CEA that became effective prior to July 16, 2011;

c. Affect any effective or compliance date set forth in any rulemaking issued by the Commission to implement provisions of the Dodd-Frank Act;

d. Limit in any way the Commission's authority under section 712(f) of the Dodd-Frank Act to issue rules, orders, or exemptions prior to the effective date of any provision of the Dodd-Frank Act and the CEA, in order to prepare for the effective date of such provision, provided that such rule, order, or exemption shall not become effective prior to the effective date of the provision; and

e. Affect the applicability of any provision of the CEA to futures contracts or options on futures contracts, or to cash markets.

In its discretion, the Commission may condition, suspend, terminate, or otherwise modify this Order, as appropriate, on its own motion. This final order, as amended, shall be effective immediately.

For the fourth time this year, 66 I am concurring with the Commission's decision to provide market participants with temporary relief from certain provisions of the Dodd-Frank Act. 67 Again, I am concurring despite my belief that this iteration of the final exemptive order (the “Second Iteration”) is deeply flawed—just like the July 14, 2011 final order (the “First Iteration”). By now, it is well known that I object to arbitrary sunsets. It is also well known that I object to the Commission's recalcitrance—despite Congressional direction—to set forth comprehensive rulemaking and implementation schedules. 68 I will not expound upon such objections here. Instead, I would like to focus on the Commission's dogmatic adherence to the exemptive approach taken by the First Iteration, even in light of known facts. Such adherence sets a troubling precedent for our Dodd-Frank outstanding proposals.

The First Iteration provided for the termination of exemptive relief on December 31, 2011, absent further Commission action (the “December Sunset”). The primary reason that the Commission advanced for the December Sunset was that “it would be appropriate to periodically re-examine the scope and extent of the proposed exemptive relief in order to ensure that the scope of relief is appropriately tailored to the schedule of implementation of the Dodd-Frank Act requirements.”  69

Let us now examine the facts. After all, hindsight should be 20/20. First, the December Sunset has done nothing to ensure that the Commission completes its Dodd-Frank rulemakings more expeditiously. Specifically, the Commission has not completed the definitional rulemakings that Category 2 provisions (as the First and Second Iterations define such term) require to become effective. Additionally, the Commission has not completed the rulemakings on designated contract markets and swap execution facilities that would enable Category 3 provisions (as the First and Second Iterations define such term) to become effective without disrupting existing markets.

Second, the December Sunset has not permitted the Commission to tailor the scope and extent of the current exemption. This is unsurprising. Market participants cannot reasonably comply with Category 2 or 3 provisions unless the Commission completes predicate rulemakings. An arbitrary sunset cannot change this fact. Hence, the Second Iteration emphasizes that “the proposed amendments to the existing July 14 Order would not change the nature or limit the scope of relief granted.”  70

As demonstrated above, the December Sunset achieved none of its goals. However, in formulating the Second Iteration, the Commission appears to have ignored inconvenient truths. The Second Iteration extends the December Sunset to July 16, 2012. Simultaneously, the Commission continues its refusal to provide market participants with its plan for the completion of Dodd-Frank rulemakings by July 16, 2012. In fact, at least one market participant has already indicated that—based on reasonable estimates of Commission progress—it would need exemptive relief beyond the new sunset. 71 I am already anticipating fifth and sixth votes on exemptive relief.

I support the Second Iteration because some certainty is better than no certainty. However, if the Commission is truly open to reconsidering its Dodd-Frank proposals—as some have indicated—the Second Iteration should have contained no arbitrary sunset. In the Second Iteration, the Commission displays a troubling willingness to adhere to prior convention. 72 By the fifth and sixth times I have to vote on temporary relief, I hope that the Commission will have agreed to grant market participants much-deserved certainty until applicable rulemakings become effective. Additionally, I hope that the Commission will have provided rulemaking and implementation schedules to market participants, so that they can plan to be in compliance when such rulemakings become effective. As Martin Luther King, Jr. has said: “We must accept finite disappointment, but never lose infinite hope.”

We may issue rules and regulations to administer the Social Security Act (Act). 42 U.S.C. 405(a), 902(a)(5), 810(a), and 1383(d)(1). We may issue regulations to recognize agents or other persons, other than attorneys, as claimant representatives. 42 U.S.C. 406(a)(1) and 1383(d)(2). Under the cited authority, we are revising our rules of conduct and standards of responsibility for representatives and other rules about the representation of parties in 20 CFR part 404 subparts J and R and part 416 subparts N and O.

We published a notice of proposed rulemaking (NPRM), Revisions to Rules on Representation of Parties, in the Federal Register on September 8, 2008. 73 FR 51963. We gave the public 60 days to comment on the NPRM. In these final rules, we are finalizing some of our proposed regulatory changes. We continue to consider the rest of our proposed regulatory changes, and we may publish additional final rules that address them.

We are revising our rules to state that we will notify a claimant and the person the claimant chooses to represent him or her if we decide not to recognize the person as a representative. We are also adding language to clarify our existing policy that we may refuse to recognize a person as a representative if he or she does not meet our requirements. We are adding this text in final 20 CFR 404.1705 and 416.1505.

We are also revising our rules in final 20 CFR 404.903(f) and 416.1403(f) to state that when we decide not to recognize a person as a representative, our action is not an initial determination that would allow the person the right to further administrative action and judicial review.

The vast majority of representatives conduct their business before us ethically and do a conscientious job in assisting their clients. Unfortunately, there are a few representatives whose behavior requires us to take action to prevent them from representing claimants before us. The number of representatives sanctioned each year is small when compared to the entire universe of representatives. For example, over 27,000 representatives were involved at the hearings level in Fiscal Year 2011, but we have sanctioned, on average, only 11 representatives per year since 2007. Nevertheless, our experience has convinced us that there are sufficient instances of questionable conduct to warrant additional regulatory authority to address representative conduct that is inappropriate.

In the NPRM, we proposed to revise our list of prohibited actions to include: (1) Violating any section of the Act for which a criminal or civil monetary penalty is prescribed; (2) refusing to comply with any of our rules or regulations; (3) suggesting, assisting, or directing another person to violate our rules or regulations; (4) advising any claimant or beneficiary not to comply with any of our rules or regulations; and (5) failing to comply with our decision about sanctions. We are adopting these revisions because they will help us ensure that representatives comply with our rules.

We are also adding an additional prohibited action: a representative may not help a suspended or disqualified person provide representational services. Specifically, the representative may not knowingly assist a suspended or disqualified person to provide representational services in a proceeding under titles II or XVI of the Act or to exercise the authority of a representative described in 20 CFR 404.1710 and 416.1510. In response to public comments, we are adopting final regulatory language different from that which we proposed for 20 CFR 404.1740(c)(12) and 416.1540(c)(12).

We are including these rules in final 20 CFR 404.1740 and 416.1540.

To reflect an internal reorganization and a revised delegation of authority, we are also changing references to agency titles in several sections. These include changing the “Deputy Commissioner for Disability and Income Security Programs” to the “General Counsel” and the “Associate Commissioner for Hearings and Appeals” to the “Deputy Commissioner for Disability Adjudication and Review.” We are adding these revisions and making other technical changes in final 20 CFR 404.1750, 404.1755, 404.1765, 404.1799, 416.1550, 416.1555, 416.1565, and 416.1599.

We are adding, moving, and revising three current definitions to final 20 CFR 404.1703 and 416.1503. These definitions are for: “Federal agency,” “Federal program,” and “representational services.” We revised the proposed definition for “representational services” in response to public comments.

Because we are adding the definition of “representational services” in final 20 CFR 404.1703 and 416.1503 from language in current 20 CFR 404.1735 and 416.1535, there would not be any regulatory text remaining in 20 CFR 404.1735 and 416.1535. Therefore, we are removing and reserving final 20 CFR 404.1735 and 416.1535.

Finally, we are making other minor conforming and nonsubstantive changes.

We published an NPRM in the Federal Register on September 8, 2008, and we gave the public 60 days to comment on our proposed rules. 73 FR 51963. We received comments from 66 individuals and organizations during this period. We carefully read and considered each of them. You can view the public comments at http://www.regulations.gov.

The comments we received were detailed and insightful, and they were extremely helpful to our deliberations. This final rule contains a number of changes from our NPRM and reflects the commenters' thoughtful input. Below, we discuss and respond to the significant comments related to the proposals on the recognition of representatives and our standards of conduct. We did not address comments that were beyond the NPRM's scope. We also did not address comments about the proposed regulatory changes that we are still considering and may adopt in future final rules.

Comment: One commenter said that our proposed rules of conduct and standards of responsibility for representatives made our process adversarial.

Response: Our claims process is nonadversarial, but actions brought under our rules of conduct for representatives are adversarial. These final rules do not change this distinction.

Comment: A few commenters asked us to clarify what we meant in proposed 20 CFR 404.1740(c)(12) and 416.1540(c)(12), which stated that a representative may not “[a]ssist another person whom we have suspended or disqualified.” A few commenters wanted us to allow representatives to accept cases from persons whom we have suspended or disqualified. Another commenter wanted us to allow representatives to employ a suspended or disqualified person if the suspended or disqualified person does not have direct client contact.

Response: We clarified this language to explain more clearly the types of activities that will violate our rules of conduct. We are adopting final 20 CFR 404.1740(c)(12) and 416.1540(c) (12) to state that a representative may not knowingly assist a person whom we suspended or disqualified to provide representational services in a proceeding under titles II or XVI of the Act, or to exercise the authority of a representative described in 20 CFR 404.1710 and 416.1510.

This language permits a representative to employ a suspended or disqualified person if the suspended or disqualified person does not provide any of the noted services. For example, a suspended or disqualified person may provide clerical help to a representative. However, a representative will likely violate our rules if the representative knowingly permits the suspended or disqualified person to have substantive client contact or to work on the substantive aspects of a claim.

Comment: One commenter stated that our proposed additional rules of conduct for representatives would deter potential representatives, such as attorneys, from representing claimants before us.

Response: We did not adopt this comment. Every representative has an interest in ensuring that only the most competent, knowledgeable, and principled individuals represent claimants before us. Individuals undertaking the responsibility of representing claimants before us should understand that we have an interest in protecting claimants and ensuring the integrity of our administrative process. Additional conduct rules should not deter these potential representatives.

Comment: A few commenters expressed concern that some of our regulatory language in proposed 20 CFR 404.1740 and 416.1540 was too vague. Some commenters mentioned specific language that they thought was too vague.

Response: We do not agree with these comments. Much of the language that the commenters cited is already part of our current rules, such as the terms “prompt and responsive answers,” “unreasonably delay,” and “threatening or intimidating language, gestures, or actions.” Current 20 CFR 404.1740(b)(3)(ii), (c)(4), (c)(7), 416.1540(b)(3)(ii), (c)(4), and (c)(7). We proposed changes to these sections only to clarify them. Because we did not propose other substantive changes to these rules, we do not believe that we should revise them now.

We believe that the remaining proposed regulatory language sufficiently describes and gives adequate notice of the types of actions that would violate our rules of conduct. These regulations are similar to other standards of conduct, such as the American Bar Association Model Rules, because they do not list every act or omission that might constitute a violation of the rules of conduct. Developing this type of list would be inappropriate and virtually impossible to complete because representing claimants involves limitless factual situations. Rather, we deal with each complaint on a case-by-case basis to determine whether a representative engaged in actionable misconduct under the attending circumstances. When we decide whether to bring an action against a representative, we consider whether a reasonable person, in light of all the circumstances, would consider the act or omission a violation of the relevant rule.

Comment: One commenter wanted our process to include a system of review and appeal.

Response: We already have an appeals process for actions brought under our rules of conduct for representatives. Either party to a representative disqualification or suspension action may ask the Appeals Council to review the hearing officer's decision. Current 20 CFR 404.1775 and 416.1575. The Appeals Council will assign a panel of three administrative appeals judges to consider and rule on the request for review. Current 20 CFR 404.1776 and 416.1576. These final rules do not change our current rules on this issue.

Comment: Several commenters wanted us to add the word “knowingly” to our proposed prohibited actions for representatives in proposed 20 CFR 404.1740(c)(8)-(13) and 416.1540(c)(8)-(13). They argued that we should only disqualify or suspend representatives who knowingly violate our rules.

Response: After careful consideration, we have adopted this comment for final 20 CFR 404.1740(c)(12) and 416.1540(c)(12). A representative will violate the rules of conduct for representatives if he or she knowingly assists a person, whom we suspended or disqualified, to provide representational services or to exercise the authority of a representative.

However, we did not adopt this comment for final 20 CFR 404.1740(c)(8)-(11) and (13) and 416.1540(c)(8)-(11) and (13) because each remaining prohibited action requires knowledge on the part of the representative. For example, one cannot unknowingly “refuse to comply with any of our rules or regulations.” Final 20 CFR 404.1740(c)(9) and 416.1540(c)(9). Moreover, the Act already states that only “knowing” violations will subject a representative to criminal and civil monetary penalties. See 42 U.S.C. 406(a)(5) and (b)(2), 408(a), 1011(a), 1307(a), and 1383a(a).

Comment: One commenter asked us to explain whether we will prohibit a representative from serving as a vocational expert or working for an insurance company if we deem them a “fiduciary” of a claimant in proposed 20 CFR 404.1740(a)(1) and 416.1540(a)(1).

Response: The term “fiduciary” exists in our current regulations. We proposed to clarify these sections in the NPRM. Our current rules do not specifically prohibit a representative from serving as a vocational expert or from working for an insurance company. However, we preclude a person from serving as a vocational expert in a claim in which the person is also the claimant's representative.

Comment: One commenter objected to our proposed language that required representatives to “provid[e] prompt and responsive answers to requests from the Agency for information pertinent to processing of the claim.” Proposed 20 CFR 404.1740(b)(3)(ii) and 416.1540(b)(3)(ii). The commenter asserted that representatives may be unable to comply with this requirement because third-party medical providers sometimes do not respond to properly submitted information requests.

Response: We added this affirmative duty to our regulations in 1998. 63 FR 41404. Our current rule requires a representative to: “Act with reasonable diligence and promptness in representing a claimant. This includes providing prompt and responsive answers to [our] requests [] for information pertinent to processing of the claim.” Current 20 CFR 404.1740(b)(3)(ii) and 416.1540(b)(3)(ii). These final rules do not require a representative to give us documents that the representative, despite diligent effort, could not obtain. We are not imposing any new or enhanced duties on representatives.

In the NPRM, we proposed to change punctuation in proposed 20 CFR 404.1740(b)(3)(ii) and 416.1540(b)(3)(ii) only to allow us to propose 20 CFR 404.1740(b)(3)(iii) and 416.1540(b)(3)(iii) (a proposed affirmative duty for representatives to maintain a paper copy of our appointment form, with original signatures, and to provide it to us on request). Since we are still considering whether to add this affirmative duty, we are not revising the current regulatory text at this time.

Comment: A few commenters thought our prohibited action in proposed 20 CFR 404.1740(c)(9) and 416.1540(c)(9) to “[r]efuse to comply with any of our rules or regulations” was overbroad. These commenters wanted an exception that would allow a representative to not comply with our rules and regulations if the representative is challenging the validity or applicability of the rule or regulation. Another commenter said that we should limit our proposed prohibited action to situations where there are no non-frivolous bases for the action. The commenter suggested that we look to Oregon's Rule of Professional Conduct 3.1 (Meritorious Claims and Contentions), which states that a lawyer must have a non-frivolous legal and factual basis for any action and must be able to make a good faith argument for the action.

Response: This proposed prohibited action comes directly from the Act: “The Commissioner * * * may, after due notice and opportunity for hearing, suspend or prohibit from further practice before the Commissioner any[one] * * * who refuses to comply with the Commissioner's rules and regulations or who violates any provision of this section for which a penalty is prescribed.” 42 U.S.C. 406(a)(1). Additionally, our current regulations state, “When we have evidence that a representative * * * has violated the rules governing dealings with us, we may begin proceedings to suspend or disqualify that individual from acting in a representational capacity before us.” Current 20 CFR 404.1745 and 416.1545.

Therefore, representatives are already on notice that we require them to comply with all of our rules, and we continue to believe that this is a reasonable requirement for representatives who want to practice before us. Our NPRM merely proposed to insert this statement of an existing requirement into our rules of conduct and standards of responsibility for representatives in proposed 20 CFR 404.1740 and 416.1540. Where our regulations conflict with a representative's State bar rules, our rules take precedence in our administrative proceedings. However, a representative should comply with a State bar rule that is more restrictive than our requirements.

We expect all representatives to comply with our rules and regulations. We currently assess each conduct complaint on its own merits to determine whether a person engaged in actionable misconduct. These final rules will not change this practice. A person may tell us that he or she is contesting a regulation's applicability or validity. If the person has a good faith, non-frivolous basis for refusing to follow one or more of our rules and regulations, we will seriously evaluate that basis before we decide whether to bring a disqualification or suspension proceeding.

We are therefore not adopting the commenters' suggested change in the final regulatory language.

Comment: One commenter asserted that several of our proposed prohibited actions sought to regulate speech in violation of the First Amendment to the Constitution and attorney-client privilege. Specifically, the commenter stated that our proposed 20 CFR 404.1740(c)(9)-(11) and 416.1540(c)(9)-(11) would interfere with the content of advice that an attorney could give a client.

Response: We disagree with these comments. Congress specifically authorized us to promulgate rules and regulations to administer the Act and to prescribe rules and regulations governing the recognition of agents who represent “claimants before the Commissioner of Social Security.” See 42 U.S.C. 405(a), 406(a), and 1383(d)(2). Congress further stated that, after receiving due notice and an opportunity for a hearing, the Commissioner may suspend or prohibit from further practice before the agency any representative who refuses to comply with the Commissioner's rules and regulations or who violates any provision of this section for which a penalty is prescribed.

Representatives may share their opinions and have frank discussions with their clients. Our rule will not limit the freedom of speech guaranteed in the First Amendment to the Constitution or interfere with the attorney-client relationship or client confidentiality. We are not asking anyone to disclose information protected by the attorney-client privilege or the attorney work-product doctrine. However, similar to a court's responsibility to regulate admission to the practice of law before it, and as was recognized by Congress, we have a responsibility to regulate those persons who represent claimants before us. “Membership in the bar” and the ability to practice before an administrative agency “is a privilege burdened with conditions.” Gentile v. State Bar of Nevada, 501 U.S. 1030, 1066 (1991). The Supreme Court recently cited with approval ABA Model Rule of Professional Conduct 1.2(d), which states that a `“lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law.'” Milavetz, Gallop & Milavetz, P.A. v. United States, 130 S. Ct. 1324, 1337-38 (2010). See Model Rules of Prof'l Conduct R. 1.2(d) (2011). While our rules and regulations govern more than just lawyers, the same principles apply to all representatives.

We have broad rulemaking authority to decide what types of representation-related misconduct are unacceptable. We decided that representatives cannot practice before us if they refuse to comply with our rules and regulations or advise claimants not to comply with our rules and regulations. These rules further our interest in regulating representatives, ensuring compliance with our laws and rules, and administering our programs efficiently.

Comment: One commenter wanted to know if our refusal to recognize a representative in one claim would apply to future cases in which a different claimant tries to appoint the same representative.

Response: As is our current process, we will reassess an individual's qualifications each time a claimant requests that individual to be a representative. Once the individual meets our criteria in final 20 CFR 404.1705 and 416.1505, we will recognize him or her as a representative. Once we recognize a person as a representative, additional claimants may appoint the recognized representative to serve as a representative.

Comment: A few commenters want our rules to clarify that a representative can appeal our refusal to recognize an appointment because the representative did not meet our criteria. Another commenter asserted that we must give a representative due process, notice, and the opportunity to respond if we refuse to recognize a claimant's appointment of a representative.

Response: The Act grants us authority to “prescribe rules and regulations governing the recognition of” non-attorney representatives. It also permits us to require representatives, before we recognize them, to “show that they are of good character and in good repute, possessed of the necessary qualifications to enable them to render such claimants valuable service, and otherwise competent to advise and assist such claimants in the presentation of their cases.” 42 U.S.C. 406(a)(1) and 1383a(a).

If a claimant submits a request to appoint a person as his or her representative and that person has not previously represented claimants before us, we will not recognize the appointment if we know that the person does not meet our requirements. Current 20 CFR 404.1705 and 416.1505. However, if we have previously allowed the person to represent a claimant, we will continue to allow the person to represent claimants until we obtain a final decision disqualifying or suspending the person from further representation before us, following notice and an opportunity for a hearing. Current 20 CFR 404.1705 and 416.1505. We are clarifying this distinction by revising our proposed regulatory language in these sections.

Our decision not to recognize a person as a representative is not an initial determination that would allow the person the right to further administrative action and judicial review. Current 20 CFR 404.903(f) and 416.1403(f). If we do not recognize a person as a representative, we will notify that person and the claimant of our action.

Comment: Two commenters thought our language in proposed 20 CFR 404.1705(c) and 416.1505(c) was confusing. One commenter asked which “requirements” we meant when we proposed: “We may refuse to recognize your appointed representative if the representative does not meet our requirements.” Another commenter proposed alternative regulatory language to clarify the persons whom we will notify of our refusal to recognize an appointment.

Response: We agree with the commenters that the proposed language was unclear. We revised these final sections to clarify that a claimant's chosen representative must meet our requirements in 20 CFR 404.1705 and 416.1505 before we recognize the appointment. We also revised these final sections to clarify that a person whose appointment we do not recognize is not a “representative” under our rules and that we will notify the claimant and the person the claimant attempted to appoint if we do not recognize the appointment.

Comment: One commenter opposed our proposal to move the definition of “disqualified” from current 20 CFR 404.1770(a)(2)(i) and 416.1570(a)(2)(i) to “disqualify” in proposed 20 CFR 404.1703 and 416.1503. The commenter said that this would cause confusion because our rules use the term in two different ways.

Response: We agree with this comment. We are keeping the definition in its current location in 20 CFR 404.1770(a)(2) and 416.1570(a)(2). However, we are adopting, with minor changes, our proposed definition for “disqualify” and are retaining our proposed language in 20 CFR 404.1770(a)(2) and 416.1570(a)(2).

We consulted with the Office of Management and Budget (OMB) and determined that these final rules meet the criteria for a significant regulatory action under Executive Order 12866, as supplemented by Executive Order 13563. Therefore, OMB reviewed them.

We certify that this final rule will not have a significant economic impact on a substantial number of small entities because it affects individuals only. Therefore, a regulatory flexibility analysis is not required under the Regulatory Flexibility Act, as amended.

These final rules contain information collection activities at 20 CFR 404.1755 and 404.1799. However, 44 U.S.C. 3518(c)(1)(B)(ii) exempts these activities from the OMB clearance requirements under the Paperwork Reduction Act of 1995.

For the reasons set out in the preamble, we are amending 20 CFR part 404 subparts J and R and part 416 subparts N and O as set forth below:

A notice of proposed rulemaking and notice of public hearing regarding additional guidance to improve compliance with, and administration of, the rules in connection with a cost sharing arrangement (CSA) were published in the Federal Register (70 FR 51116) (REG-144615-02) on August 29, 2005 (2005 proposed regulations). A correction to the notice of proposed rulemaking and notice of public hearing was published in the Federal Register (70 FR 56611) on September 28, 2005. A public hearing was held on December 16, 2005.

The Treasury Department and the IRS received numerous comments on a wide range of issues addressed in the 2005 proposed regulations. In response to these comments, temporary and proposed regulations were published in the Federal Register (74 FR 340-01 and 74 FR 236-01) (REG-144615-02) on January 5, 2009 (2008 temporary regulations). Corrections to the 2008 temporary regulations were published in the Federal Register on February 27, 2009 (74 FR 8863-01), March 5, 2009 (74 FR 9570-01, 74 FR 9570-02, and 74 FR 9577-01), and March 19, 2009 (74 FR 11644-01). A public hearing was held on April 21, 2009.

The Treasury Department and the IRS received comments on a range of issues addressed in the 2008 temporary regulations. Final regulations were issued in a previous issue of the Federal Register (REG-144615-02) (TD 9568) in December 2011 (“final regulations”). Certain guidance regarding discount rates was reserved in the final regulations because the Treasury Department and the IRS believe it is appropriate to solicit public comments on that subject matter. As explained herein, these temporary regulations provide a portion of that reserved guidance on discount rates. Simultaneous with these temporary regulations, the other portion of such reserved guidance concerning discount rates is being provided in proposed regulations elsewhere in this issue of the Federal Register (proposed regulations).

The Treasury Department and the IRS are aware that some taxpayers are taking unreasonable positions in applying the income method by using relatively low licensing discount rates, and relatively high cost sharing discount rates, without sufficiently considering the appropriate interrelationship of the discount rates and financial projections, thus deriving PCT Payments that are not in accordance with the arm's length standard.

In light of these concerns, the Treasury Department and the IRS are providing additional guidance as follows: (1) In the final regulations, further guidance on comparing the financial projections associated with the cost sharing alternative discounted at the rate appropriate for the cost sharing alternative with the financial projections associated with the licensing alternative discounted at the rate appropriate for the licensing alternative, and evaluating reliability considerations associated with such a comparison (§ 1.482-7(g)(4)(vi)(F)( 1 ) (Reflection of similar risk profiles in cost sharing alternative and licensing alternative)); (2) in these temporary regulations, further guidance on evaluating results of application of the income method (§ 1.482-7T(g)(2)(v)(B)( 2 ) (Implied discount rates) and (4)(vi)(F)( 2 ) (Use of differential income stream as a consideration in assessing the best method)); and (3) in proposed regulations, a new specified application of the income method for directly determining the arm's length charge for PCT Payments (§ 1.482-7(g)(4)(v) (Application of income method using differential income stream)).

As discussed in the Preamble to the final regulations, any difference, if any, in market-correlated risks between the licensing and cost sharing alternatives is due solely to the different effects on risks of the PCT Payor's making licensing payments under the licensing alternative on the one hand, and the PCT Payor's making cost contributions and PCT Payments under the cost sharing alternative on the other hand. Thus, the difference in risk between the two scenarios should reflect solely (1) the incremental risk, if any, associated with the cost contributions taken on by the PCT Payor in developing cost shared intangibles under the cost sharing alternative, and (2) any difference in risk associated with the particular payment forms of the licensing payments and the PCT Payments, in light of the fact that the licensing payments in the licensing alternative are partially replaced by cost contributions and partially replaced by PCT Payments in the cost sharing alternative, each with its own payment form. Accordingly, the final regulations added § 1.482-7(g)(4)(vi)(F)( 1 ) (Reflection of similar risk profiles in cost sharing alternative and licensing alternative), which provides that an analysis under the income method that uses a different discount rate for the cost sharing alternative than the licensing alternative will be more reliable the greater the extent to which any difference between the two discount rates reflects solely those differences in risk profiles of these two alternatives.

These temporary regulations build upon § 1.482-7(g)(4)(vi)(F)( 1 ) of the final regulations by providing additional guidance relating to analysis of the interrelationship between the discount rate for the cost sharing alternative and the discount rate for the licensing alternative, and evaluation of the reasonableness of the implied discount rate that may be derived from the differential income stream between the licensing alternative and the cost sharing alternative. The differential income stream is the difference between the PCT Payor's undiscounted operating income under the cost sharing alternative (before PCT Payments) and the PCT Payor's undiscounted operating income under the licensing alternative. This difference equals the licensing payments to be made under the licensing alternative minus the PCT Payor's cost contributions to be made under the cost sharing alternative. The differential income stream should be discounted at an appropriate rate in order to evaluate the reliability of a determination of the arm's length charge for the PCT Payment. Accordingly, these temporary regulations add § 1.482-7T(g)(4)(vi)(F)( 2 ), which provides that an analysis under the income method that uses a different discount rate for the cost sharing alternative than for the licensing alternative will be more reliable the greater the extent to which the implied discount rate for the projected present value of the differential income stream is consistent with reliable direct evidence of the appropriate discount rate applicable for activities reasonably anticipated to generate an income stream with a similar risk profile to the differential income stream (such as those of the uncontrolled companies described in § 1.482-7T(g)(4)(viii) Example 8 ). The Treasury Department and the IRS have added § 1.482-7T(g)(4)(viii) Example 8 to illustrate how § 1.482-7T(g)(4)(vi)(F)( 2 ) may be used to evaluate the reliability of a particular application of the income method.

The Treasury Department and the IRS are also proposing a new specified application of the income method in § 1.482-7(g)(4)(v), which provides that the determination of the arm's length charge for the PCT Payment can be derived by discounting the differential income stream at an appropriate rate. The differential income stream approach to determining PCT Payments depends on reliably determining the discount rate associated with the differential income stream. This, in turn, requires an understanding of the economic meaning of the differential income stream. For example, assume a CSA in which the PCT Payor does not contribute any platform or operating contributions, and undertakes only routine exploitation activities for which it anticipates a routine return. In such case, the total undiscounted anticipated profits (before PCT Payments) to the CSA in the PCT Payor's territory can be thought of as comprising the anticipated routine exploitation profits plus the anticipated profits associated with the development of the cost shared intangibles in the PCT Payor's territory. Under the licensing alternative, on the other hand, the PCT Payor's total undiscounted anticipated profits consist solely of the anticipated routine exploitation profits. Thus, the differential income stream conceptually corresponds to the anticipated development profits of the cost shared intangibles. For these reasons, an appropriate discount rate for the differential income stream might be determined based, for example, on the weighted average cost of capital of uncontrolled companies whose activities consist primarily of developing intangibles similar to the cost shared intangibles, and whose resources, capabilities, or rights are similar to the platform contributions and cost shared intangibles under the CSA. The proposed regulations also add § 1.482-7(g)(4)(viii) Example 9 to illustrate this newly specified application of the income method.

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 been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to this regulation, and because the regulation does 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 Internal Revenue Code, these regulations have been submitted to the Chief Counsel for Advocacy of the Small Business Administration (CCASBA) for comment on their impact on small business. CCASBA had no comments.

The principal authors of these regulations are Joseph L. Tobin and Mumal R. Hemrajani, Office of the Associate Chief Counsel (International). However, other personnel from the Internal Revenue Service and the Treasury Department participated in the development of the regulations.

Accordingly, 26 CFR part 1 is amended as follows:

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(d)(3), the Coast Guard finds good cause exists for making this rule effective less than 30 days after publication in the Federal Register . The details of the President's intended travel to Hawaii were not made available to the Coast Guard in sufficient time to issue a notice of proposed rulemaking. Due to the need for immediate action, the restriction of vessel traffic is necessary to protect the President and his family members; therefore, a 30-day notice period is impracticable. Delaying the effective date would be contrary to the security zone's intended objectives of protecting high-ranking officials, mitigating potential terroristic acts and enhancing public and maritime safety and security. Publishing a Notice of Public Rule Making (NPRM) and delaying the effective date would be contrary to the public interest since the occasion would occur before a notice-and-comment rulemaking could be completed, thereby jeopardizing the safety of the President of the United States, members of his family members, and other senior government officials. The COTP finds that this temporary security zone needs to be effective by December 21, 2011, to ensure the safety of the President of the United States and members of his official party visiting the Kailua Bay area on the eastern coast of Oahu, Hawaii.

From December 21, 2011, through January 7, 2012, the President of the United States and his family members plan to visit near the Kailua Bay shoreline on Oahu, Hawaii. This position is located adjacent to U.S. navigable waters in the Honolulu Captain of the Port Zone. The Coast Guard is establishing this security zone to ensure the safety of the President of the United States and his family members.

This temporary final rule is effective from 6 a.m. HST on December 21, 2011 through 8 p.m. HST on January 7, 2012. The security zone area is located within the Honolulu Captain of the Port Zone (See 33 CFR 3.70-10) and covers all U.S. navigable waters in the Kailua Bay on the west side of a line connecting Kapoho Point and continuing at a bearing of 222° (true) to Namala Place road; as well as the nearby channel from its entrance at Kapoho Point to a point 150-yards to the southwest of the N. Kalaheo Avenue Road Bridge. This zone extends from the surface of the water to the ocean floor. This zone will include the navigable waters of the channel beginning at point 21°24′56″ N, 157°44′58″ W, then extending to 21°25′26″ N, 157°44′21″ W (Kapoho Point) including all the waters to the west of a straight line to 21°24′58″ N, 157°44′35″ W (Namala Place), and then extending back to the original point 21°24′56″ N, 157°44′58″ W.

Three (3) yellow buoys will be placed in proximity of the security zone along the security zone boundary and one (1) yellow buoy will be placed at the channel boundary southwest of the N. Kalaheo Avenue Road Bridge as visual aids for mariners and the public to approximate the zone. An illustration of the security zone will be made available on www.regulations.gov in docket for this rulemaking, USCG-2011-1142.

In accordance with the general regulations in 33 CFR Part 165, Subpart D, no person or vessel will be permitted to transit into or remain in the zone except for authorized support vessels, aircraft and support personnel, or other vessels authorized by the Captain of the Port. Any Coast Guard commissioned, warrant, or petty officer, and any other Captain of the Port representative permitted by law, may enforce the zone. Vessels, aircraft, or persons in violation of this rule would be subject to the penalties set forth in 33 U.S.C. 1232 and 50 U.S.C. 192.

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 under the regulatory policies and procedures of DHS is unnecessary. This expectation is based on the limited duration of the zone, the limited geographic area affected by it, and the lack of commercial vessel traffic affected by the zone.

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

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

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

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

If the rule will affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact LCDR Scott O. Whaley at (808) 522-8264 ext. 352. The Coast Guard will not retaliate against small entities that question or complain about this temporary final rule or any policy or action of the Coast Guard.

This rule will call 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 (adjusted for inflation) 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 cause 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 will not create an environmental risk to health or risk to safety that might disproportionately affect children.

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

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 Department of Homeland Security Management Directive 023-01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have made a determination that this action is one of a category of actions which do not individually or cumulatively have a significant effect on the human environment. This rule is categorically excluded, under figure 2-1, paragraph (34)(g), of the Instruction. This regulation establishes one security zone. A final “Environmental Analysis Check List” and a final “Categorical Exclusion Determination” are available in the docket where indicated under ADDRESSES .

For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:

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

The Ohio EPA submitted its request on December 9, 2010, and IDEM submitted its request on January 25, 2011, to redesignate their respective portions of the Cincinnati-Hamilton nonattainment area to attainment for the 1997 annual PM 2.5 NAAQS, and for EPA approval of both states' SIP revisions containing maintenance plans for the area. In an action published on October 19, 2011 (76 FR 64825), EPA proposed approval of Ohio and Indiana's plans for maintaining the 1997 annual PM 2.5 NAAQS, including the emissions inventories submitted pursuant to CAA section 172(c)(3); and the NO X and PM 2.5 MVEBs for the Ohio and Indiana portions of the Cincinnati-Hamilton area as contained in the maintenance plan. Additional background for today's action is set forth in EPA's October 19, 2011, notice of direct final rulemaking, which EPA withdrew on December 6, 2011, following receipt of adverse comments.

EPA has determined that the entire Cincinnati-Hamilton area is attaining the 1997 annual PM 2.5 standard (76 FR 60373) and that the Ohio and Indiana portions of the area have met the requirements for redesignation under section 107(d)(3)(E) of the CAA. Thus, EPA is approving the requests from the states of Ohio and Indiana to change the legal designation of their portions of the Cincinnati-Hamilton area from nonattainment to attainment for the 1997 annual PM 2.5 NAAQS. This action does not address the Kentucky portion of the Cincinnati-Hamilton area. EPA is also taking several additional actions related to Ohio's and Indiana's PM 2.5 redesignation requests, as discussed below.

EPA is approving Indiana's and Ohio's PM 2.5 maintenance plans for the Cincinnati-Hamilton area as revisions to the Ohio and Indiana SIP (such approval being one of the CAA criteria for redesignation to attainment status). The maintenance plans are designed to keep the Cincinnati-Hamilton area in attainment of the 1997 annual PM 2.5 NAAQS through 2021.

EPA is approving 2005 emissions inventories for primary PM 2.5 , 1 NO X , and sulfur dioxide (SO 2 ), 2 documented in Ohio's and Indiana's PM 2.5 redesignation request submittals. These emissions inventories satisfy the requirement in section 172(c)(3) of the CAA for a comprehensive, current emission inventory.

Finally, EPA finds adequate and is approving Ohio's and Indiana's 2015 and 2021 primary PM 2.5 and NO X MVEBs for the Cincinnati-Hamilton area. These MVEBs will be used in future transportation conformity analyses for the area. Further discussion of the basis for these actions is provided below.

EPA received two sets of comments submitted by Robert Ukeiley on behalf of Sierra Club: The first set, dated October 19, 2011, and the second set dated November 18, 2011. A summary of the comments and EPA's responses are provided below.

Comment 1a: The comment contends that it is inappropriate for EPA to redesignate these areas to attainment at this time, claiming that EPA is illegally delaying issuing a final rule to revise the annual PM 2.5 NAAQS, and that EPA's Clean Air Science Advisory Committee (CASAC) has recommended adoption of a lower NAAQS. The Commenter alleges that EPA is removing the protection of a scientifically inadequate NAAQS, while not adopting a more protective standard.

Response 1a: This redesignation does not remove the protection of the 1997 annual PM 2.5 NAAQS. This redesignation does not concern the new NAAQS, addresses only the 1997 annual PM 2.5 NAAQS, and has no impact on EPA's actions with respect to a revised NAAQS.

Comment 1b: The Commenter claims that “EPA has failed to conduct an adequate analysis under Clean Air Act Section 110(l) on what effect redesignation will have on the 2006 24-hour PM 2.5 NAAQS, the 1-hour NO X NAAQS, the 1-hour SO 2 NAAQS and the 1997 and 2008 75 parts per billion ozone NAAQS.” In subsequent comments, the Commenter also states, “EPA has not conducted an adequate analysis of the effect redesignation will have on other National Ambient Air Quality Standards”.

Response 1b: Section 110(l) provides in part: “the Administrator shall not approve a revision of a plan if the revision would interfere with any applicable requirement concerning attainment and reasonable further progress * * *, or any other applicable requirement of this chapter.” As a general matter, EPA must and does consider section 110(l) requirements for every SIP revision, including whether the revision would “interfere with” any applicable requirement. See, e.g., 70 FR 53, 57 (January 3, 2005); 70 FR 17029, 17033 (April 4, 2005); 70 FR 28429, 28431 (May 18, 2005); and 70 FR 58119, 58134 (October 5, 2005). Neither Ohio's nor Indiana's redesignation request and maintenance plan for the 1997 annual PM 2.5 NAAQS revises or removes any existing emissions limit for any NAAQS, nor does it alter any existing control requirements. On that basis, EPA concludes that the redesignations will not interfere with attainment or maintenance of any of these air quality standards. The Commenter does not provide any information in its comment to indicate that approval of these redesignations would have any impact on the Area's ability to comply with on the 2006 24-hour PM 2.5 NAAQS, the 1-hour NO 2 NAAQS, the 1-hour SO 2 NAAQS or the 1997 8-hour ozone NAAQS and 2008 75 parts per billion ozone NAAQS. In fact, the maintenance plans provided with both states' submissions demonstrate a decline in the direct PM 2.5 and PM 2.5 precursor emissions over the timeframe of the initial maintenance period. As a result, the redesignations do not relax any existing rules or limits, nor will the redesignation alter the status quo air quality. 3 The Commenter has not explained why the redesignation might interfere with attainment of any standard or with satisfaction of any other requirement, and EPA finds no basis under section 110(l) for EPA to disapprove the SIP revision at issue or to redesignate the area as requested.

Comment 1c: The Commenter elaborates on the first comment in the second set of comments submitted, claiming “For example, but this is only one example, as explained below the Ohio and Indiana SIPs do not currently have Reasonable Available Control Technology (RACT) standards in place for PM 2.5. Implementing these RACT standards would have reduced NO X and SO 2 which would have a co-benefit of helping with the 2006 24-hour PM 2.5 NAAQS, the 1-hour NO X NAAQS, the 1-hour SO 2 NAAQS, and the 1997 and 2008 ozone NAAQS as well as visibility. EPA needs to demonstrate that removing this co-benefit will not interfere with attainment, reasonable further progress and any other applicable requirement.”

Response 1c: This example is fallacious, for reason given in response 6(b) below—no RACT is required because the area is attaining the standard.

Comment 2a: The Commenter argues that EPA has not established that any of the emission reductions did not come from the NO X SIP Call, CAIR (the Clean Air Interstate Rule), and CSAPR (the Cross-State Air Pollution Rule, also known as the Transport Rule).

Response 2a: EPA disagrees with the Commenter's assertion. EPA and the states have shown that emission reductions arose both from the transport regulations listed above and from other regulatory requirements. The Cincinnati-Hamilton area contains various sources of emissions (point source, area, and mobile), and emission reductions from the nonattainment year of 2005 to the attainment year of 2008 are attributed to many permanent and enforceable measures. The NO X SIP Call, CAIR, and CSAPR are all measures that have resulted in emission reductions from point source Electric Generating Units (EGUs). In addition, emission reduction from mobile sources, which account for 53% of NO X emissions and 58% of direct PM 2.5 for the nonattainment year of 2005, are attributed to permanent and enforceable engine and fuel standards. Due to these permanent and enforceable measures, mobile sources reduced their emissions by 9,367 tons of NO X, and 792 tons of direct PM 2.5 between the years of 2005 to 2008.

Comment 2b. The Commenter asserts that emission reductions pursuant to NO X SIP Call, CAIR and CSAPR programs are not permanent and enforceable because these programs are cap and trade programs. The Commenter further opines that any source which reduced its actual emissions pursuant to one of these programs could at any time in the future choose to increase their emissions by purchasing emission credits.

Response 2b. Contrary to the Commenter's statement, EPA did establish in the proposal notice that at least part of the emission reductions that helped the area achieve attainment came from programs other than the NO X SIP Call, CAIR and CSAPR. The notice lists several permanent and enforceable reductions in emissions resulting from implementation of the Ohio and Indiana SIPs, applicable Federal air pollution control regulations, and other reductions that are not “cap and trade” programs. Those programs include Tier 2 vehicle standards, heavy-duty gasoline and diesel highway vehicle standards, nonroad spark-ignition engines and recreational engines standards, large nonroad diesel engine standards, open burning bans, and fugitive emissions standards. See 76 FR 65465.

Further, EPA disagrees with the Commenter's conclusion that emission reductions associated with trading programs such as the NO X SIP Call, CAIR, and CSAPR are not permanent and enforceable simply because the underlying program is an emissions trading program. The Commenter appears to be arguing that these reductions cannot be considered permanent and enforceable within the meaning of section 107(d)(3)(E)(iii) of the CAA. This section 107(d)(3)(E)(iii) requires that, in order to redesignate an area to attainment, the Administrator must determine that “the improvement in air quality is due to permanent and enforceable reductions in emissions resulting from implementation of the applicable SIP and applicable federal air pollutant control regulations and other permanent and enforceable reductions.” EPA disagrees with the Commenter's conclusion that reductions from trading programs can't be considered permanent and enforceable because these programs allow individual sources to choose between purchasing emission credits and reducing emissions.

The final CSAPR allows sources to trade allowances with other sources in the same or different states while firmly constraining any emissions shifting that may occur by requiring a strict emission ceiling in each state (the budget plus variability limit). As explained in EPA's proposed redesignation notice for the Ohio and Indiana portions of the Cincinnati-Hamilton area, the emission reduction requirements of CAIR are enforceable through the 2011 control period, and because CSAPR has now been promulgated to address the requirements previously addressed by CAIR and gets similar or greater reductions in the relevant areas in 2012 and beyond, EPA considers the emission reductions that led to attainment in the Cincinnati-Hamilton area to be permanent and enforceable. The emission ceilings within each state are a permanent requirement of the CSAPR and are made enforceable through the associated Federal Implementation Plans.

EPA responded to a similar comment in its “Approval and Promulgation of Air Quality Implementation Plans; Redesignation of the Evansville area to attainment of the Fine Particulate Matter Standard” 76 FR 59527, 59529/1, September 27, 2011. In that notice, EPA discusses several factors which support EPA's determination that the SO 2 reductions in the Evansville area are permanent and enforceable, and which also apply to the Cincinnati area. First, given the mandates under CSAPR, any utility that has already spent the hundreds of millions of dollars to install scrubbers will find continued effective operation of those controls to be far more cost-effective than disregarding this investment and either expending similar capital installing replacement scrubbers elsewhere or purchasing credits at a price equivalent to that capital already spent. In short, any utility in a state covered by CSAPR provisions related to PM 2.5 that has installed scrubbers is almost certain under CSAPR to retain the scrubbers and operate them effectively. Second, any action by a utility that increases its emissions, requiring the purchase of allowances, necessitates a corresponding reduction by the utility that sells the allowances. Given the regional nature of particulate matter, this corresponding emission reduction will have an air quality benefit that will compensate at least in part for the impact of any emission increase from utility companies outside but near the Cincinnati-Hamilton area. In accordance with the opinion of the Court of Appeals for the District of Columbia Circuit, CSAPR includes assurance provisions to ensure that the necessary emission reductions occur within each covered state.

The recent proposed rule revision referenced by the Commenter would amend the CSAPR assurance penalty provisions for all states within the program so they start in 2014 instead of 2012. 76 FR 63860, October 14, 2011. As explained in the proposal, which was subject to public review and comment, this revision would promote the development of allowance market liquidity, thereby smoothing the transition from the CAIR programs to the CSAPR programs in 2012.

Further, Ohio's and Indiana's maintenance plans provide for verification of continued attainment by performing future reviews of triennial emissions inventories and also for contingency measures to ensure that the NAAQS is maintained into the future if monitored increases in ambient PM 2.5 concentrations occur. 76 FR 64825. For this and the above reasons, EPA disagrees that the Commenter has identified a basis on which EPA should disapprove this SIP revision.

Comment 3: The Commenter asserts that “Emissions calculations for on-road mobile sources fail to consider 15% ethanol in gasoline.”

Response 3: Ethanol 15 (E15) is not mandated by EPA. EPA granted a partial waiver for vehicles model years 2001 and newer, light duty vehicles (76 FR 4662) to be able to use E15. To receive a waiver under CAA section 211(f)(4), a fuel or fuel additive manufacturer must demonstrate that a new fuel or fuel additive will not cause or contribute to the failure of engines or vehicles to achieve compliance with the emission standards to which they have been certified over their useful life. Data used to act upon the approval of the E15 partial waiver showed that model year 2001 and newer vehicles would still meet their certified engine standards for emissions for both short and long term use, and use of E15 would not significantly increase the emission from these engines. EPA's partial waiver for E15 is based on extensive studies done by the Department of Energy, as well as the Agency's engineering assessment to determine the effects of exhaust and evaporative emissions for the fleet prior to the partial waiver. The criteria for granting the waiver was not that there are no emission impacts of E15, but rather that vehicles operating on it would not be expected to violate their emission standards in-use. As discussed in the waiver decision, there are expected to be some small emission impacts. E15 is expected to cause a small immediate emission increase in NO X emissions. However, due to its lower volatility than the E10 currently in-use, its use is also expected to result in lower evaporative VOC emissions. Any other emissions impacts related to E15 would be a result of misfueling of E15 in model year 2000 and older vehicles, and recreational or small engines. EPA has approved regulations dealing specifically with the mitigation of misfueling and reducing the potential increase in emissions from misfueling (76 FR 44406).

The partial waivers that EPA has granted to E15 do not require that E15 be made or sold. The waivers merely allow fuel or fuel additive manufacturers to introduce E15 into commerce if they meet the waivers' conditions. Other Federal, state and local requirements must also be addressed before E15 may be sold. The granting of the partial waivers is only one of several requirements for registration and distribution of E15.

Since E15 may never be used in Ohio and Indiana, and even if it is, due to the small and opposite direction of emission impacts of E15, the limited vehicle fleet which can use it, and the measures required to avoid mitigating misfueling, EPA believes that any potential emission impacts of E15 will be less than the maintenance plan safety margin by which Ohio and Indiana show maintenance.

Comment 4a: The Commenter contends that the “Ohio and Indiana maintenance plans will not provide for maintenance for ten years after the redesignation,” based on the Commenter's belief that EPA will be unable to finalize its approval of the requests for redesignation by the end of 2011.

Response 4a: Since EPA has promulgated its approvals of the redesignation requests of Ohio and Indiana by the end of 2011, and the maintenance plans provide for maintenance through the end of 2021, it is evident that the Commenter's concern was misplaced, and that the maintenance plans do provide for a ten-year maintenance period in accordance with CAA section 175A.

Commment 4b: The Commenter asserts that the Ohio and Indiana maintenance plans are deficient in part because the contingency measures they include provide for their implementation within 18 months of a monitored violation, if one occurs. The Commenter claims that as a consequence, the “contingency measures do not provide for prompt correction of violations.”

Response 4b: The Commenter overlooks the provisions of the CAA applicable to contingency measures. Section 175A(d) provides that “[e]ach plan revision submitted under this section shall contain such contingency provisions as the Administrator deems necessary to assure that the state will promptly correct any violation of the standard which occurs after the redesignation of the area as an attainment area.” (emphasis added). Thus Congress gave EPA discretion to evaluate and determine the contingency measures EPA “deems necessary” to assure that the state will promptly correct any subsequent violation. EPA has long exercised this discretion in its rulemakings on section 175A contingency measures in redesignation maintenance plans, allowing as contingency measures commitments to adopt and implement in lieu of fully adopted contingency measures, and finding that implementation within 18 months of a violation complies with the requirements of section 175A. See recent redesignations, e.g. Indianapolis PM 2.5 annual standard (76 FR 59512), Lake and Porter 8-hour ozone standard (75 FR 12090), and Northwest Indiana PM 2.5 annual standard (76 FR 59600). Section 175A does not establish any deadlines for implementation of contingency measures after redesignation to attainment. It also provides far more latitude than does section 172(c)(9), which applies to a different set of contingency measures applicable to nonattainment areas. Section 172(c)(9) contingency measures must “take effect * * * without further action by the State or [EPA].” By contrast, section 175A confers upon EPA the discretion to determine what constitutes adequate assurance, and thus permits EPA to take into account the need of a state to assess, adopt implement contingency measures if and when a violation occurs after an area's redesignation to attainment. Therefore, in accordance with the discretion accorded it by statute, EPA may allow reasonable time for states to analyze data and address the causes and appropriate means of remedying a violation. In assessing what “promptly” means in this context, EPA also may take into account time for adopting and implementation of the appropriate measure. In the case of the Cincinnati-Hamilton area, EPA reasonably concluded that, 18 months constitutes a timeline consistent with prompt correction of a potential monitored violation. This timeframe also conforms with EPA's many prior rulemakings on acceptable schedules for implementing section 175A contingency measures.

Comment 4c: The Commenter asserts that the contingency measures contained in the maintenance plans are “too vague”.

Response 4c: As discussed above in response to comment 4(b), the CAA does not specify the requisite nature, scope, specificity, or number of contingency measures to be included in a maintenance plan under section 175A. It is for EPA to determine whether the state has given adequate assurance that it can promptly correct a violation. Both Ohio and Indiana have submitted contingency measures that EPA deems adequate. They have committed to remedy a future violation, and have included measures to address potential violations from a range of sources and a timeline for promptly completing adoption and implementation. The states have identified measures that are sufficiently specific but which allow for latitude in potential scope. This will enable the states to address a range of potential sources and differing degrees and types of violations. EPA believes that the contingency measures set forth in the submittal, combined with the states' commitment to an expeditious timeline and process for implementation, provide assurance that the states will promptly correct a future potential violation. Given the uncertainty as to timing, degree and nature of any future violation, EPA believes that the contingency measures set forth adequately balance the need for flexibility in the scope and type of measure to be implemented with the need for expeditious state action.

Comment 5: The Commenter asserts that the Ohio and Indiana Startup, Shutdown, Malfunction, and/or Maintenance provisions (SSM) are inconsistent with the Act and EPA policy because they provide that excess emissions are not violations. The Commenter also claims that the regulation is ambiguous because it lacks procedural specifications indicating whether it is to be interpreted as a “qualified exemption” or an “affirmative defense.” In the second set of comments received, the Commenter asserts, “The Ohio and Indiana SIPs contain impermissible provisions governing startup, shutdown, malfunctions and scheduled maintenance.”

Response 5: The CAA sets forth the general criteria for redesignation of an area from nonattainment to attainment in section 107(d)(3)(E). Specifically, that section identifies five criteria, including that “the Administrator has fully approved the applicable implementation plan for the area under section 7410(k) of this title.” 42 U.S.C. 7407(d)(3)(E)(ii). Although the Commenter does not specifically cite to section 107(d)(3)(E)(ii), the language used in the comment (“fully approved adequate SIP”) appears to derive from this section of the CAA (and the Commenter does later cite to section 107(d)(3)(E) in the concluding paragraph of the comment letter). As a preliminary matter, the issue before EPA in the current rulemaking action is a redesignation for the Ohio and Indiana portions of the Cincinnati-Hamilton area to attainment for the 1997 PM 2.5 standard, including the maintenance plan. The SIP provisions identified in the Commenter's letter are not currently being proposed for revision as part of the redesignation submittals. Thus, EPA's review here is limited to whether the already approved provisions affect any of the requirements for redesignation in a manner that would preclude EPA from approving the redesignation requests. Because the rules cited by the Commenter are not pending before EPA and/or are not the subject of this rulemaking action, EPA did not undertake a full SIP review of the individual provisions. It has long been established that EPA may rely on prior SIP approvals in approving a redesignation request plus any additional measures it may approve in conjunction with a redesignation action. See e.g., page 3 of the September 4, 1992, John Calcagni Memorandum; Wall v. EPA, 265 F.3d 426 (6th Cir. 2001); 68 FR 25413, 25426 (May 12, 2003).

Additionally, the comment inserted the word “adequate” into the phrase “fully approved SIP” (which is the language of Section 107(d)(3)(E)(ii)), such that the Commenter stated that Ohio and Indiana must have a “fully approved adequate SIP.” Clearly the word “adequate” is not included in Section 107(d)(3)(E)(ii), and its inclusion substantially alters the plain text of the CAA. Furthermore, while the Commenter opines that the cited-to provisions of the Ohio and Indiana rules result in a “regulatory structure that is inconsistent with the fundamental requirement that all excess emissions be considered violations,” Commenter does not link this concern with deficiencies in Ohio's and Indiana's redesignation submittals for the Ohio and Indiana portions of the Cincinnati-Hamilton area. There is no information in the comment indicating that Ohio or Indiana has excused violations and that such actions result in Ohio or Indiana failing to meet a requirement for redesignation. Furthermore, there is no information in the comment indicating that even if Ohio or Indiana were to excuse such violations that such violations would not be actionable by EPA or citizens. For Indiana's SIP, 326 IAC 1-6-4 was formerly codified as 325 IAC 1.1-5. When EPA approved that rule in 1984, it noted Indiana's clarification that any malfunction causing excess emissions would be treated as a SIP violation; and that the rule's criteria would be used in determining an appropriate enforcement response. (February 14, 1984, 49 FR 5618). This constitutes an “enforcement discretion” approach, acceptable under EPA's applicable policies. EPA also noted that it had independent authority under Section 113 of the CAA to determine whether enforcement discretion was an appropriate response in a particular case.

On June 30, 2011, Sierra Club filed a “Petition to Find Inadequate and Correct Several State Implementation Plans under Section 110 of the Clean Air Act Due to Startup, Shutdown, Malfunction, and/or Maintenance Provisions”. EPA has agreed to respond to this petition by August 31, 2012 as part of settlement of a lawsuit. See Sierra Club et al. v. Jackson, No. 3:10-cv-04060-CRB (N.D. Cal). At this time, with regards to the redesignation of the Ohio and Indiana portion of the Cincinnati-Hamilton area, EPA does not agree that the Commenter has raised a basis on which EPA could disapprove the redesignation. Ohio and Indiana have fully approved SIPs consistent with applicable requirements.

Comment 6a: The Commenter asserts that the Ohio SIP does not meet the requirement of section 107(d)(3)(E)(ii) because EPA has disapproved Ohio's “good neighbor provision” Section 110(a)(2)D)(i)(I).

Response 6a: The requirements applicable for purposes of redesignation are those which at a minimum are linked to the attainment status of the area being redesignated. As noted in the proposal (76 FR 64825), all areas, regardless of their designation as attainment or nonattainment, are subject to section 110(a)(2)(D). The applicability of this provision is not connected with nonattainment plan submissions or with the attainment status of an area. A nonattainment area remains subject to the requirements of section 110(a)(2)(D) after it has been redesignated to attainment. Therefore EPA has long interpreted the 110(a)(2)(D) requirements as not applicable requirement for purposes of redesignation. EPA has leeway to determine what constitutes an “applicable” requirement under section 107(d)(3)(E), and EPA's interpretation is entitled to deference. Sierra Club v. EPA, 375 F.3d 537 (7th Cir. 2004).

EPA has consistently interpreted only those section 110 requirements that are linked with a particular area's designation as the requirements to be considered in evaluating a redesignation request. See, e.g., EPA's positions on the applicability of conformity, oxygenated fuels requirements for purposes of redesignations. See Reading, Pennsylvania, proposed and final rulemakings (61 FR 53174-53176, October 10, 1996, and 62 FR 24826, May 7, 1997); Cleveland-Akron-Lorain, Ohio, final rulemaking (61 FR 20458, May 7, 1996); and Tampa, Florida, final rulemaking (60 FR 62748, December 7, 1995). See also the discussion on this issue in the Cincinnati, Ohio 1-hour ozone redesignation (65 FR 37890, June 19, 2000), and in the Pittsburgh, Pennsylvania 1-hour ozone redesignation (66 FR 50399, October 19, 2001).

Comment 6b: The Commenter contends that the Ohio and Indiana SIPs do not have approved RACT rules.

Response 6b: EPA interprets RACT for PM 2.5 as linked to attainment needs of the area. If an area is attaining the PM 2.5 standard, it clearly does not need further measures to reach attainment. Therefore, under EPA's interpretation of the RACT requirement, as it applies to PM 2.5, Ohio and Indiana have satisfied the RACT requirement without need for further measures. On May 22, 2008, EPA issued a memorandum that clarified its position with respect to the relationship between PM 2.5 attainment and RACT requirements.

“Memorandum from William T. Harnett, Director, Air Quality Policy Division to Regional Air Division Directors, PM 2.5 Clean Data Policy Clarification.” This memorandum explained that 40 CFR 51.1004(c) provides that a determination that an area that has attained the PM 2.5 standard suspends the requirements to submit RACT and RACM requirements.

Section 51.1010 provides in part: `For each PM 2.5 nonattainment area, the state shall submit with the attainment demonstration a SIP revision demonstrating that it has adopted all reasonably available control measures (including RACT for stationary sources) necessary to demonstrate attainment as expeditiously as practicable and to meet any RFP requirements.'

Thus the regulatory text defines RACT as included in RACM, and provides that it is required only insofar as it is necessary to advance attainment. See also section 51.1010(b). The Commenter claims that Wall v. EPA, 265 F.3d 426, 442 (6th Cir. 2001), establishes that fully adopted RACT is nonetheless required. The Wall case, however, is not applicable to RACT requirements for the PM 2.5 standard. The Wall decision addressed entirely different statutory provisions for ozone RACT under CAA Part D subpart 2, which do not apply or pertain to the subpart 1 RACT requirements for PM 2.5 .

Comment 6c: The Commenter asserts that the Ohio and Indiana SIPs lack PM 2.5 nonattainment New Source Review (NSR) programs. The Commenter also contends that the prevention of significant deterioration (PSD) program is part of the SIP that an area being redesignated needs to have to ensure that the area will stay in attainment. The Commenter takes the position that EPA cannot approve the redesignation requests because Ohio and Indiana do not have adequate PM 2.5 PSD programs. The Commenter bases its conclusion that Ohio and Indiana's PSD programs are inadequate for PM 2.5 on the contention that the programs do not contain significant emission rates for PM 2.5 and its precursors, and that the programs do not include PM 2.5 increments.

Response 6c: Both Ohio and Indiana have approved nonattainment NSR programs in their SIPs. EPA approved Ohio's current NSR program on January 10, 2003 (68 FR 1366). EPA approved Indiana's current NSR program on October 7, 1994 (59 FR 51108). Nonetheless, since PSD requirements will apply after redesignation, the area need not have a fully-approved NSR program for purposes of redesignation, provided that the area demonstrates maintenance of the NAAQS without part D NSR. A detailed rationale for this view is described in a memorandum from Mary Nichols, Assistant Administrator for Air and Radiation, dated October 14, 1994, entitled, “Part D New Source Review Requirements for Areas Requesting Redesignation to Attainment.” The memo states, “[EPA] * * * is establishing a new policy under which nonattainment areas may be redesignated to attainment notwithstanding the lack of a fully-approved part D NSR program, provided the program is not relied upon for maintenance.” In this case, neither Ohio nor Indiana has relied upon NSR to maintain the standard.

Ohio and Indiana also each have an EPA approved PSD program that includes PM 2.5 as a NSR pollutant. While the Commenter is correct in stating that both Ohio and Indiana's approved PSD SIPs do not include specific significant emissions rates for PM 2.5 or its precursors, the Ohio and Indiana SIPs do include a provision that sets “any emission rate” as the significant emission rate for any regulated NSR pollutant that does not have a specific significant emission rate listed in the state rule. Under Indiana's rule, a regulated NSR pollutant includes a pollutant, for which a NAAQS has been promulgated, and constituents or precursors for the pollutants identified as a NAAQS by EPA.

Therefore, any increase in direct PM 2.5 emissions or emissions of its precursors (SO 2 and NO X ) will trigger the requirements to obtain a PSD permit; to perform an air quality analysis that demonstrates that the proposed source or modification will not cause or contribute to a violation of the PM 2.5 NAAQS; and to apply best available control technology (BACT) for direct PM 2.5 and/or the pertinent precursor.

In addition, the fact that Ohio's and Indiana's approved PSD SIPs lack PM 2.5 increments does not prevent the program from addressing and helping to assure maintenance of the PM 2.5 standard in accordance with CAA section 175A. A PSD increment is the maximum increase in concentration that is allowed to occur above a baseline concentration for a pollutant. Even in the absence of an approved PSD increment, the approved PSD program prohibits air quality from deteriorating beyond the concentration allowed by the applicable NAAQS. Thus Ohio's and Indiana's approved PSD programs are adequate for purposes of assuring maintenance of the 1997 annual PM 2.5 standard as required by section 175A.

EPA notes that Indiana has adopted emergency rules containing significant emissions rates of 10 tons per year for direct PM 2.5 and 40 tons per year for sulfur dioxide and nitrogen oxide (as PM 2.5 precursors). The emergency rules also contain maximum allowable PM 2.5 increments of 4 micrograms per cubic meter (µg/m 3 ) for the annual standard and 9 µg/m 3 for the 24-hour standard. 4 The state is currently implementing the emergency rules at the state level and is in the process of adopting permanent rules for submission to EPA.

Irrespective of the state's emergency rules, EPA concludes that the features of Indiana's currently approved PSD program cited by the Commenter do not detract from the program's adequacy for purposes of maintenance of the standard and redesignation of the area. As it stands, the currently approved PSD program is sufficient for the purposes of maintaining the 1997 annual PM 2.5 NAAQS in the Cincinnati-Hamilton area.

EPA has determined that the Cincinnati-Hamilton area has attained the 1997 annual PM 2.5 NAAQS. EPA has also determined that all other criteria have been met for the redesignation of the Ohio and Indiana portions of the Cincinnati-Hamilton area from nonattainment to attainment of the 1997 annual PM 2.5 NAAQS. See CAA section 107(d)(3)(E). The detailed rationale for EPA's findings and actions is set forth in the proposed rulemaking of October 19, 2011 (76 FR 64825) and in this final rulemaking.

EPA has previously made the determination that the Cincinnati-Hamilton area has attained the 1997 annual PM 2.5 standard (76 FR 60373). EPA is determining that the area continues to attain the standard and that the Ohio and Indiana portions of the area meet the requirements for redesignation to attainment of that standard under section 107(d)(3)(E) of the CAA. Thus, EPA is approving the requests from Ohio and Indiana to change the legal designation of their portions of the Cincinnati-Hamilton area from nonattainment to attainment for the 1997 annual PM 2.5 NAAQS. EPA is approving Ohio's and Indiana's 1997 annual PM 2.5 maintenance plans for the Cincinnati-Hamilton area as revisions to the respective SIPs because the plans meet the requirements of section 175A of the CAA. EPA is approving the 2005 emissions inventories for primary PM 2.5 , NO X , and SO 2 , documented in Indiana's and Ohio's December 9, 2010, and January 25, 2011, submittals as satisfying the requirement in section 172(c)(3) of the CAA for a comprehensive, current emission inventory. Finally, EPA finds adequate and is approving 2015 and 2021 primary PM 2.5 and NO X MVEBs submitted from each state for the Ohio and Indiana portions of the Cincinnati-Hamilton area. These MVEBs will be used in future transportation conformity analyses for the area after the effective date for the adequacy finding and approval.

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

Under the CAA, redesignation of an area to attainment and the accompanying approval of the maintenance plan under CAA section 107(d)(3)(E) are actions that affect the status of geographical area and do not impose any additional regulatory requirements on sources beyond those required by state law. A redesignation to attainment does not in and of itself impose any new requirements, but rather results in the application of requirements contained in the CAA for areas that have been redesignated to attainment. Moreover, 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 CAA. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For these reasons, these actions:

• Are 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);

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

• Are 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. );

• Do 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);

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

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

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

• Are 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 CAA; and,

• Do 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).

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).

Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by February 21, 2012. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. ( See section 307(b)(2)).

40 CFR parts 52 and 81 are amended as follows:

The information presented in this preamble is organized as follows:

The EPA is publishing these amendments without a prior proposed rule because we view this as a noncontroversial action and anticipate no adverse comment. However, in the “Proposed Rules” section of today's Federal Register, we are publishing a separate document that will serve as the proposed rule to revise certain provisions of the final area source rule for prepared feeds manufacturing published on January 5, 2010, (75 FR 522) if adverse comments are received on this direct final rule. If we receive adverse comment on a distinct provision of this direct final rule, we will publish a timely withdrawal in the Federal Register indicating which provisions we are withdrawing. The provisions that are not withdrawn will become effective on the date set out above, notwithstanding adverse comment on any other provision. Any parties interested in commenting must do so at this time. For further information about commenting on this rule, see the ADDRESSES section of this document.

As explained below, this action revises the generally available control technology (GACT) standard for pelleting operations at large, existing prepared feeds manufacturing facilities, specifically removal of the cyclone 95 percent design efficiency requirement, as well as associated requirements for compliance demonstration, monitoring, reporting, and recordkeeping; clarification of the requirement that doors be kept closed in areas where materials containing chromium and manganese are stored, used, or handled; and clarification of the requirement to install a device at the point of bulk loadout to minimize emissions.

Regulated Entities. The regulated categories and entities potentially affected by the rule include:

This table is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this action. To determine whether your facility is regulated by this action, you should examine the applicability criteria in 40 CFR 63.11619, subpart DDDDDDD (NESHAP for Area Sources: Prepared Feeds Manufacturing). If you have any questions regarding the applicability of this action to a particular entity, consult either the state delegated authority or the EPA regional representative, as listed in 40 CFR 63.13 of subparts A (General Provisions).

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

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

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

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

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

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

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

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

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

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

Electronic Access. In addition to being available in the docket, an electronic copy of this direct final action will also be available on the Worldwide Web (WWW) through the Technology Transfer Network (TTN). Because this is an amendment of regulatory language through rulemaking, a redline version of the regulatory language has been created and has been placed in the docket ( http://www.regulations.gov, see Docket No. EPA-HQ-OAR-2008-0080) to aid the public's ability to comment on the regulatory text. Following signature, a copy of this final action will be posted on the TTN's policy and guidance page for newly proposed or promulgated rules at the following address: http://www.epa.gov/ttn/oarpg. The TTN provides information and technology exchange in various areas of air pollution control.

On January 5, 2010 (75 FR 522), the EPA promulgated the NESHAP for area source prepared feeds manufacturing facilities as subpart DDDDDDD in 40 CFR part 63. Existing affected sources (i.e., construction or reconstruction of the facility began on or before July 27, 2009) must comply with the rule by January 5, 2012, while new affected sources (i.e., construction or reconstruction of the facility began after July 27, 2009) were required to comply by January 5, 2010, or upon startup, whichever is later.

Today's action consists of three revisions and clarifications. The rule requires that pelleting operations at large, prepared feeds manufacturing facilities (i.e., those facilities with an average daily feed production level exceeding 50 tons per day) use cyclones. In the final rule, these cyclones were required to have a 95-percent design efficiency. This action revises this requirement for existing sources only. 2 Such sources must use cyclones, and those cyclones must be operated in accordance with good air pollution control practices and manufacturer's specifications and operating instructions, if available, or standard operating procedures must be developed by the facility owner or operator to ensure proper operation and maintenance of the cyclone.

In the preamble to the final rule, we recognized that the cyclones employed on pelleting operations at existing, large prepared feeds manufacturing facilities were generally available and provided effective Hazardous Air Pollutant (HAP) emissions control (75 FR 533). We added the 95-percent design efficiency requirement in the final rule because we thought, based on limited data from sources that did not have cyclones, that a large percentage of existing cyclones at large facilities already met that design efficiency (75 FR 544). In assessing the costs of the design efficiency requirement, as part of our GACT analysis, we estimated that few existing sources (approximately 2 percent) did not have cyclones and would need to install them to meet the requirement (Economic Impact Analysis for the Prepared Feeds Manufacturing Area Source NESHAP, June 17, 2009, Docket No. EPA-HQ-OAR-2008-0080-0036). We also explained in the final rule that it was not our intent to force prepared feed manufacturers to replace older, well-designed, and properly operating cyclones with new high-efficiency cyclones (75 FR 533). Indeed, we recognized that requiring the replacement of older, well designed, properly operating cyclones was not cost effective, because the incremental emission reductions would be very low and the costs would be high (75 FR 533).

The EPA included in the final rule three different mechanisms by which a source could demonstrate compliance with the design efficiency requirement. 40 CFR 63.11621(e)(1)-(3). A source could show compliance by having either cyclone manufacturer certification/specifications, a certification by a professional engineer or responsible official, or a Method 5 performance test that indicates whether PM is being released from the system (Appendix A to part 60) (which determines the particulate matter mass rate at the inlet and outlet of the cyclone). The EPA has recently learned that most existing sources would need to install new cyclones to provide the required documentation for demonstrating compliance with the final rule. (Material presented by prepared feeds industry representatives at the January 25, 2011, meeting with EPA staff, and Request for Administrative Stay and Reconsideration—June 10 2011, both of which are included in Docket No. EPA-HQ-OAR-2008-0080). That was not the intent of the final rule, and this result cannot be reconciled with the GACT analysis underlying the final rule.

As noted above, we premised the design efficiency requirement in the final rule for existing sources on the assumption that all but a few cyclones were meeting that requirement and that only a few sources would need to install new cyclones. Our cost analysis in the final rule tracked this assumption. We now recognize that this assumption was incorrect, and that our regulations, as written, would require many existing facilities to replace existing cyclones, which is contrary to our GACT analysis. As explained in the final rule, the replacement of older, well designed, properly operating cyclones is not cost effective (75 FR at 533). We are therefore revising the requirement of the final rule for pelleting operations at existing large prepared feeds manufacturing facilities (i.e., those facilities with an average daily feed production level exceeding 50 tons per day) to require the use of cyclones. We are also requiring that the cyclones be operated in accordance with good air pollution control practices and manufacturer's specifications and operating instructions, if available, or standard operating procedures must be developed by the facility owner or operator to ensure proper operation and maintenance of the cyclone. These revisions are wholly consistent with the record supporting the final rule, including the cost analysis and our determination that cyclones are generally available for existing sources and effectively control HAP emissions.

Further, the EPA is revising the requirements for demonstration of compliance, monitoring, and the notification, reporting and recordkeeping requirements for existing sources only, consistent with the removal of the design efficiency requirement for those sources. This rule would amend the notification of compliance status requirements such that the cyclone manufacturer's operating specifications or standard operating procedures developed by the prepared feeds manufacturer be required as part of the record instead of one of the cyclone parameters as specified in the final rule (i.e., inlet flow rate, inlet velocity, pressure drop, or fan amperage range). The revised annual compliance certification would include all instances when the cyclone does not operate according to manufacturer specifications or the standard operating procedures. This would replace the requirement for existing sources to include in the annual compliance certification the cyclone parameters listed in the final rule. We are also revising the recordkeeping requirements for existing sources to require the owner or operator to record the results of weekly visual inspections. This would replace the requirement in the January 5, 2010, final rule for existing sources to record the daily inlet flow rate, inlet velocity, pressure drop, or fan amperage.

This action also clarifies that the requirement to keep doors closed in areas where materials containing manganese and chromium are stored, used, or handled does not apply to areas where finished prepared feeds product is stored in closed containers, since there are no HAP emissions in these areas. See 40 CFR 63.11621(a)(iii).

Finally, there has been some confusion regarding the type of device needed to comply with the bulk loadout provision at 40 CFR 63.11621(d). These amendments clarify that any type of device may be used to minimize the distance between the place where bulk loadout occurs and the vehicle being loaded. The distance may also be minimized by the design of the loadout process itself (e.g., the loadout arm positioned directly above the vehicle being loaded).

These revisions and clarifications will become effective on February 21, 2012 without further notice, unless EPA receives adverse comment by January 23, 2012. If we receive adverse comment on a distinct provision of this direct final rule, we will publish a timely withdrawal in the Federal Register indicating which provisions we are withdrawing. The provisions that are not withdrawn will become effective on the date set out above, notwithstanding adverse comment on any other provision.

This action is not a “significant regulatory action” under the terms of Executive Order 12866 (58 FR 51735, October 4, 1993) and is therefore not subject to review under Executive Orders 12866 and 13563 (76 FR 3821, January 21, 2011).

This action does not impose an information collection burden above that required in the original rule. The revisions do not require additional information collection requirements and may result in an overall reduction of the information collection burden. Therefore, the information collection requests are not being amended. The Office of Management and Budget (OMB) previously approved the information collection request (ICR) contained in the existing regulations (subpart DDDDDDD, 40 CFR part 63) under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and has assigned OMB control number 2060-0635 (ICR 2354.02). The OMB control numbers for EPA's regulations in 40 CFR are listed in part 9.

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

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

After considering the economic impacts of this action on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities. This final rule will not impose any requirements on small entities. This action does not impose any additional costs over those in the final rule published on January 5, 2010 (75 FR 522). In fact, the clarifications contained in this action are expected to reduce costs for some small businesses that would otherwise have installed control equipment, but that would not be required to do so as a result of these amendments.

This action contains no Federal mandate under the provisions of title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1531-1538 for state, local, or tribal governments, or the private sector. This action imposes no enforceable duty on state, local, or tribal governments, or the private sector. Therefore, this action is not subject to the requirements of sections 202 and 205 of the UMRA.

This action is also not subject to the requirements of section 203 of UMRA because it contains no regulatory requirements that might significantly or uniquely affect small governments. This action imposes no obligations upon them.

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

This action does not have tribal implications, as specified in Executive Order 13175 (65 FR 67249, November 9, 2000). This direct final rule imposes no requirements on tribal governments. Thus, Executive Order 13175 does not apply to this action.

The EPA interprets EO 13045 (62 FR 19885, April 23, 1997) as applying to those regulatory actions that concern health or safety risks, such that the analysis required under Section 5-501 of the Order has the potential to influence the regulation. This action is not subject to EO 13045 because it is based solely on technology performance.

This action is not subject to Executive Order 13211 (66 FR 28355, May 22, 2001) because it is not a significant regulatory action under Executive Order 12886.

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

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

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

The EPA has determined that this direct final rule will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations because it does not affect the level of protection provided to human health or the environment. This direct final rule makes revisions and clarifications to the rule and should not result in increased emissions beyond those described in the final rule.

The Congressional Review Act, 5 U.S.C. 801, et seq., as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of Congress and to the Comptroller General of the United States. The EPA will submit a report containing these revisions 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).

For the reasons stated in the preamble, the Environmental Protection Agency is amending 40 CFR, part 63, as follows:

NMFS manages the groundfish fishery in the GOA exclusive economic zone according to the Fishery Management Plan for Groundfish of the Gulf of Alaska (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.

NMFS closed directed fishing for Pacific cod by vessels catching Pacific cod for processing by the inshore component in the Central Regulatory Area of the GOA under § 679.20(d)(1)(iii) on October 9, 2011 (76 FR 63564, October 13, 2011).

As of December 15, 2011, NMFS has determined that approximately 1,390 metric tons remains in the directed fishing allowance for Pacific cod by vessels catching Pacific cod for processing by the inshore component in the Central Regulatory Area of the GOA. Therefore, in accordance with § 679.25(a)(1)(i), (a)(2)(i)(C), and (a)(2)(iii)(D), and to fully utilize the 2011 TAC of Pacific cod by vessels catching Pacific cod for processing by the inshore component in the Central Regulatory Area of the GOA, NMFS is terminating the previous closure and is reopening directed fishing of Pacific cod by vessels catching Pacific cod for processing by the inshore component in the Central Regulatory Area of the GOA. The Administrator, Alaska Region (Regional Administrator) considered the following factors in reaching this decision: (1) The current catch of Pacific cod by vessels catching Pacific cod for processing by the inshore component in the Central Regulatory Area of the GOA and, (2) the harvest capacity and stated intent on future harvesting patterns of vessels in participating in this fishery.

This action responds to the best available information recently obtained from the fishery. The Assistant Administrator for Fisheries, NOAA (AA), finds good cause to waive the requirement to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B) as such requirement is impracticable and contrary to the public interest. This requirement is impracticable and contrary to the public interest as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would delay the opening in the Pacific cod by vessels catching Pacific cod for processing by the inshore component in the Central Regulatory Area of the GOA. Immediate notification is necessary to allow for the orderly conduct and efficient operation of this fishery, to allow the industry to plan for the fishing season, and to avoid potential disruption to the fishing fleet and processors. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of December 16, 2011.

The AA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment.

Without this inseason adjustment, NMFS could not allow of Pacific cod by vessels catching Pacific cod for processing by the inshore component in the Central Regulatory Area of the GOA to be harvested in an expedient manner and in accordance with the regulatory schedule. Under § 679.25(c)(2), interested persons are invited to submit written comments on this action to the above address until January 4, 2012.

This action is required by § 679.25 and is exempt from review under Executive Order 12866.