On April 4, 2012, at 77 FR 20319, the Federal Register published our notice of proposed rulemaking (NPRM), which proposed to amend 14 CFR part 39 to include an AD that would apply to all Eurocopter France (EC) Model SA-365N, SA-365N1, SA-366G1, AS-365N2, AS 365 N3, EC 155B, and EC155B1 helicopters. That NPRM proposed to require replacing the main rotor mast nut with an airworthy main rotor mast nut to prevent failure of the main rotor mast and subsequent loss of control of the helicopter.

The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA AD No.: 2006-0368R1, dated December 2, 2010, and corrected December 8, 2010 (AD 2006-0368R1), to correct an unsafe condition for the EC Model SA 365 N, SA 365 N1, AS 365 N2, AS 365 N3, SA 366 G1, EC 155 B, and EC 155 B1 helicopters.

EASA advises that a cracked (partially failed) main rotor mast nut was discovered during a complete overhaul of a main rotor mast. The start of the crack was related to circular scoring found in the nut threads. EASA states that this condition, if not corrected, “could lead to complete failure of the mast nut, possibly resulting in failure of the rotor mast and consequent loss of control of the helicopter.” To address this unsafe condition, EASA issued Emergency AD 2006-0368-E, dated December 6, 2006 (AD 2006-0368-E), to require repetitive inspections of the mast nut, and replacement of the nut if cracked. Since issuance of AD 2006-0368-E, EC has developed modification (MOD) 0762C42 to improve the strength of the mast nut by changing its material. Replacing mast nut part number (P/N) 360A31-1020-20 with mast nut P/N 365A31-2060-20 or 365A31-2060-21 (as applicable to helicopter type) “constitutes an optional terminating action” for the repetitive inspection requirements. For this reason, EASA issued AD 2006-0368R1 “to inform which helicopters remain subject to inspections and replacement requirements” of the AD.

We gave the public the opportunity to participate in developing this AD, but we did not receive any comments on the NPRM.

These helicopters have been approved by the aviation authority of France and are approved for operation in the United States. Pursuant to our bilateral agreement with France, EASA, its technical representative, has notified us of the unsafe condition described in the EASA AD. We are issuing this AD because we evaluated all information provided by EASA and determined the unsafe condition exists and is likely to exist or develop on other helicopters of these same type designs and that air safety and the public interest require adopting the AD requirements as proposed.

The EASA AD allows for either inspecting the mast nut at regular intervals or replacing the mast nut, while this AD requires replacing the mast nut. The EASA AD uses flight hours of the main rotor mast assembly, while this AD uses TIS of the helicopter.

We reviewed EC Alert Service Bulletin (ASB) No. 62.00.23, Revision 1, for Model SA-365N, SA-365N1, AS-365N2, and AS 365 N3 helicopters; EC ASB 62.12, Revision 1, for Model SA-366G1 helicopters; and EC ASB 62A014, Revision 1, for Model EC 155B and EC155B1 helicopters, all dated October 27, 2010. The ASBs contain procedures for repetitively inspecting the mast nut for a crack or failure. The ASBs remove any helicopter with MOD 0762C42 incorporated from the applicability of the ASB. EASA classified this ASB as mandatory and issued AD 2006-0368R1 to ensure the continued airworthiness of these helicopters.

We estimate that this AD affects 30 helicopters of U.S. registry. We estimate that replacing the mast nut with an airworthy mast nut will require 32 work-hours, at an average labor cost of $85 per work-hour. Parts will cost about $3,100. Based on these costs, we estimate a total cost per helicopter of $5,820, and a total cost for the U.S. operator fleet of $174,600.

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 helicopters identified in this rulemaking action.

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 that this AD:

(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);

(3) Will not affect intrastate aviation in Alaska to the extent that it justifies making a regulatory distinction; and

(4) 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 an economic evaluation of the estimated costs to comply with this AD and placed it in the AD docket.

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

On July 21, 2010, President Obama signed the Dodd-Frank Act. 1 Title VII of the Dodd-Frank Act  2 amended the CEA  3 to establish a comprehensive new regulatory framework for swaps and security-based swaps. The goal of this legislation was 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 (SDs) and major swap participants (MSPs); (2) imposing clearing and trade execution requirements on standardized derivative products; (3) creating robust recordkeeping and real-time reporting regimes; and (4) enhancing the Commission's rulemaking and enforcement authorities with respect to, among others, all registered entities and intermediaries subject to the oversight of the Commission. Among the changes made by the Dodd-Frank Act to the CEA were to include within the CPO definition the operator of a collective investment vehicle that trades swaps, and to include within the CTA definition a person who provides advice concerning swaps. 4

Part 4 of the Commission's regulations sets forth a comprehensive regulatory framework for the operations and activities of CPOs and CTAs. It includes disclosure, reporting and recordkeeping requirements for registered CPOs and CTAs, registration and compliance exemptions for CPOs and CTAs, and other provisions, including anti-fraud provisions, applicable to CPOs and CTAs, regardless of registration status. To ensure that the Part 4 regulations applied to CPOs and CTAs in the context of these intermediaries' involvement with swap transactions, on March 3, 2011, the Commission proposed certain amendments to Part 4 (Proposal). 5

As the Commission explained in the Proposal, because many of the existing Part 4 regulations generally applied to CPOs and CTAs, they would continue to be applicable to CPOs and CTAs with respect to their swap activities without the need for amendment thereto. The Commission noted that in other instances, however, the text of certain existing Part 4 regulations was specific to activities involving futures contracts, commodity options, and off-exchange retail foreign currency (“commodity interests”), and it did not include, refer to or otherwise take account of swap activities. As the Commission stated: “The Proposal [was] intended to clarify and ensure that the requirements governing the operations and activities of CPOs and CTAs continue to apply for these intermediaries in the context of their involvement with swap transactions.”  6 Accordingly, the Commission proposed to amend Regulations 4.7, 4.10, 4.22, 4.23, 4.24 4.30, 4.33 and 4.34 to include in each of these regulations a reference to swaps or swap activities.

The Commission received two comment letters on the Proposal, 7 each of which supported the Proposal. One of these letters stated that the Proposal “should act to reduce risk and increase its transparency, and promote market integrity by ensuring that all entities are consistently regulated to the extent that their trading and other activities pertain to swaps.”  8 The other letter urged the Commission “to work quickly and diligently on writing these rules and putting them in place as soon as possible.”  9

In light of the supportive comments it received, with one exception the Commission is adopting the amendments to the Part 4 regulations it proposed. That exception concerns the proposed amendment to Regulation 4.10(a) that, for the purposes of Part 4, would have expanded the definition of the term “commodity interest” to include “swaps.” This proposal was superseded by a proposed amendment to Regulation 1.3(yy) that, for the purposes of all of the Commission's regulations, would define the term “commodity interest” to include “swaps.”  10 Accordingly, the Commission is considering the proposed definition of the term “commodity interest” in connection with its consideration of the comment letters it received on its proposed amendment to Regulation 1.3(yy).

As proposed, the Commission is inserting “swap,” “swap transaction” or a similar term at various regulations throughout Part 4. See the amendments to Regulations 4.23(a)(1), 4.24(g), (h)(1), and (i)(2) for CPOs and Regulations 4.34(g) and 4.34(i)(2) for CTAs. For example, Regulation 4.23(a)(1) is being amended to include “swap type and counterparty” in the itemized daily record that a CPO must make and keep with respect to a pool's commodity interest transactions.

At other Part 4 regulations, the Commission has included as proposed the term “swap dealer” among the persons for whom a CPO or CTA must provide information in its Disclosure Document and for whom a CPO must provide information in a pool's periodic Account Statement. See the amendments to Regulations 4.22(a)(3), 4.24(j)(1), (j)(3), (l)(1), and (l)(2) for CPOs and Regulations 4.34(j)(1), (j)(3), (k)(1) and (k)(2) for CTAs. For example, Regulations 4.24(j) and 4.34(j) are being amended to include SDs in the group of persons as to which conflicts of interest must be disclosed by CPOs and CTAs.

Similarly, the Commission has included as proposed “a registered swap dealer” among the persons listed in Regulation 4.7(a)(2) that do not have to satisfy a portfolio requirement in order to be a qualified eligible person (QEP), such that a CPO or CTA that has claimed relief under Regulation 4.7 may accept the SD as a pool participant or advisory client without regard to the size of its investment portfolio. As the Commission explained, “this would be consistent with the current treatment of other financial intermediaries registered with the Commission (such as futures commission merchants [FCMs] and retail foreign exchange dealers [RFEDs]) as QEPs under Regulation 4.7(a)(2).”  11

The Commission has adopted as proposed amendments to Part 4 that require a CPO or CTA to make and keep certain books and records generated by the swap transactions in which it engages on behalf of not only its pool participants and clients, but also itself. See the amendments to Regulations 4.23(a)(7) and (b)(1) for CPOs and Regulations 4.33(a)(6) and (b)(1) for CTAs. The amendments to Regulations 4.23(a)(7) and 4.33(a)(6) require CPOs and CTAs to retain each acknowledgment of a swap transaction received from an SD. The amendments to Regulations 4.23(b)(1) and 4.33(b)(1) make clear that if a CPO or CTA was a counterparty to a swap transaction, then it would be subject to the swap data recordkeeping and reporting requirements of Part 45 of the Commission's regulations, as applicable. 12

Subject to certain exceptions, Regulation 4.30 provides that no CTA may solicit, accept or receive from an existing or prospective client funds, securities or other property in the trading advisor's name (or extend credit in lieu thereof) to purchase, margin, guarantee or secure any commodity interest of the client.

The Commission proposed to amend Regulation 4.30 by adding to the list of intermediaries then excepted from the foregoing prohibition— i.e., registered FCMs, leverage transaction merchants and RFEDs—a registered SD in connection with a swap that was not cleared through a derivatives clearing organization. The Commission explained that this amendment to Regulation 4.30 was necessary “[b]ecause swap dealers will generally fall within the statutory definition of CTA, and because a swap dealer engaging in uncleared swap transactions may be accepting funds or other property from its counterparties as variation and initial margin payments.”  13

Subsequently, the Commission amended Regulation 4.6 to provide therein for an exclusion from the definition of the term “commodity trading advisor” for an SD, provided the commodity interest and swap advisory activities of the SD are solely incidental to the conduct of its business as an SD. 14 Because not all SDs may always meet the “solely incidental” proviso, the Commission has determined to amend Regulation 4.30 as proposed, such that any registered SD who is a CTA is not subject to the regulation's operational prohibition.

The Commission has deleted as proposed Regulation 4.32, which concerned trading by a registered CTA on or subject to the rules of a derivatives transaction execution facility (DTEF) for non-institutional customers. As the Commission explained:

The Regulatory Flexibility Act (“RFA”)  16 requires federal agencies to consider the impact of those rules on small businesses. 17 A regulatory flexibility analysis or certification typically is required for “any rule for which the agency publishes a general notice of proposed rulemaking pursuant to” the notice-and-comment provisions of the Administrative Procedure Act, 5 U.S.C. 553(b). 18 The amendments to the Part 4 regulations contained herein will affect CPOs and CTAs. The Commission stated in the Proposal that:

The Commission did not receive any comments regarding its RFA analysis in the Proposal. Accordingly, pursuant to 5 U.S.C. 605(b), the Chairman, on behalf of the Commission, certifies that the amendments to the Part 4 regulations being published today by this Federal Register release will not have a significant economic impact on a substantial number of small entities.

The Paperwork Reduction Act of 1995 (PRA)  20 imposes certain requirements on Federal agencies (including the Commission) in connection with their conducting or sponsoring any collection of information as defined by the PRA. The amendments to the Part 4 regulations will not require any new collection of information from any entity that is subject to them. Additionally, the Commission did not receive any comments regarding its PRA analysis in the Proposal. Accordingly, for purposes of the PRA, the Chairman, on behalf of the Commission, certifies that the amendments to the Part 4 regulations being published today by this Federal Register release will not impose any new reporting or recordkeeping requirements.

Prior to the passage of the Dodd-Frank Act, the Part 4 regulations did not apply to swap-related activities. This pre-Dodd-Frank Act construct provides a useful reference point from which to compare the costs and benefits of the proposed regulations to the alternative where the Commission would not be taking any action to incorporate swap-related information into Part 4.

As a result of the Dodd-Frank Act including swap-related activities among the activities on which the CPO and CTA definitions are based, CPOs and CTAs who engage in swap-related activities are now subject to Part 4. In various places, however, the wording of particular provisions of Part 4 was incomplete or inconsistent in the context of CPOs and CTAs involved with swap transactions; there is no regulatory need for the prohibition in Regulation 4.30 against directly accepting margin payments to apply to an SD; and the subject matter of Regulation 4.32 (trading on DTEFs) was rendered moot by the Dodd-Frank Act. Under such a scenario, the costs to the public of inaction would be, in qualitative terms, failure to receive Part 4 disclosure, reporting and recordkeeping protections from their CPOs and CTAs with regard to their swap activities, an unnecessary burden on SDs, and regulatory text that is obsolete. The costs of these amendments, if any, will be minimal—limited to the costs associated with including information related to swaps in the Disclosure Documents, Account Statements and books and records already required of CPOs and CTAs under existing Part 4 regulations. Moreover, this information should be readily available to CPOs and CTAs. The costs cannot be feasibly quantified or estimated, because they will vary according to each registrant's internal processes and registration category. In contrast, the amendments will yield significant if unquantifiable benefit to the public, relative to inaction, by clarifying the application of Part 4 and the obligations of CPOs and CTAs to their participants and clients, respectively.

In the CEA, 21 Congress provided the Commission with the authority to promulgate regulations that, among other things, are reasonably necessary to effectuate any of the provisions or to accomplish any of the purposes of the CEA. In accordance with Section 15(a) of the CEA, it is in this post-Dodd-Frank Act environment that the Commission considers the costs and benefits of its actions before promulgating a regulation under the CEA or issuing an order.

Section 15(a) specifies that the costs and benefits shall be evaluated in light of the following 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.

In light of the provisions of the Dodd-Frank Act that expand the “commodity pool operator” and “commodity trading advisor” definitions to include swap-related activities, these amendments incorporate into the existing Part 4 framework regulations to take account of the swap-related activities of CPOs and CTAs. Specifically, the amendments subject CPOs and CTAs when involved with swap transactions to the same Part 4 requirements that apply when they are involved with commodity interest transactions, to the extent regulations in place at the time of the enactment of the Dodd-Frank Act did not clearly do so. 22 The revision to Regulation 4.30 excepts SDs from the prohibition on accepting margin to treat them equivalently with FCMs and RFEDs. In addition, these amendments delete Regulation 4.32, pertaining to trading by registered CTAs on DTEFs, given the repeal by the Dodd-Frank Act of CEA Section 5a, which authorized such trading facilities.

In the Proposal the Commission sought public comment on the costs and benefits of its contemplated amendments to Part 4. 23 The Commission did not receive any comments in response to this request.

(1) Protection of market participants and the public.

The Commission believes the amendments to the Part 4 regulations will provide protection to market participants and the public by requiring CPOs and CTAs to include information on swap intermediaries and activities in the disclosure, reporting and recordkeeping framework under Part 4. For example, Regulation 4.24(j) has provided protections to commodity pool participants by requiring their CPO to disclose any actual or potential conflict of interest with any FCM with whom their pool was required to maintain its account. The amendment to Regulation 4.24(j) the Commission has adopted will provide similar protections, by requiring the CPO to disclose any actual or potential conflict of interest with any SD with whom their pool maintains its swap positions.

(2) Efficiency, competitiveness, and financial integrity of the futures markets.

The Commission does not expect the amendments to Part 4 to have an impact on the efficiency, competitiveness and financial integrity of the commodity interest markets.

(3) Price Discovery.

The Commission does not expect the amendments to Part 4 to have an impact on the market's price discovery functions.

(4) Sound risk management practices.

The Commission does not expect the amendments to Part 4 to have an impact on risk management practices by CPOs, CTAs and other Commission registrants. However, the requirement that CPOs and CTAs account for SD, MSP and swap activities when complying with their disclosure, reporting and recordkeeping requirements under Part 4 will benefit prospective and actual pool participants and clients by ensuring that these participants and clients are afforded the same customer protections as participants and clients in all other commodity pools and managed account programs.

(5) Other public interest considerations.

The Commission has not identified any other public interest considerations regarding the costs and benefits of the amendments to Part 4.

For the reasons presented above, the Commission hereby amends Chapter I of Title 17 of the Code of Federal Regulations as follows:

Purpose: Section 41(f) of Title 35 of the United States Code provides the USPTO with the authority to adjust certain statutory patent fees to reflect fluctuations during the preceding twelve months in the Consumer Price Index (CPI). The purpose of this provision is to allow the USPTO to recover higher costs of providing services as reflected by the CPI. This final rule sets forth which fees will be adjusted and how the adjustment is calculated based on the current fluctuation in the CPI over the twelve months preceding this notice.

Summary of Major Provisions: The USPTO is adjusting certain patent fees in accordance with 35 U.S.C. 41(f), as amended by the Consolidated Appropriations Act (Pub. L. 108-447, 118 Stat. 2809 (2004)) and the Leahy-Smith America Invents Act (Pub. L. 112-29). The fee increase helps the USPTO to meet its strategic goals and maintain effective and efficient operation of the patent system.

Costs and Benefits: This rulemaking is not economically significant as that term is defined in Executive Order 12866 (Sept. 30, 1993).

Statutory Provisions: Patent fees are set by or under the authority provided in 35 U.S.C. 41, 119, 120, 132(b), 156, 157(a), 255, 302, 311, 376, section 532(a)(2) of the Uruguay Round Agreements Act (URAA) (Pub. L. 103-465, § 532(a)(2), 108 Stat. 4809, 4985 (1994)), and section 4506 of the American Inventors Protection Act of 1999 (AIPA) (Pub. L. 106-113, 113 Stat. 1501, 1501A-565 (1999)). For fees paid under 35 U.S.C. 41(a) and (b) and 132(b), independent inventors, small business concerns, and nonprofit organizations who meet the requirements of 35 U.S.C. 41(h)(1) are entitled to a fifty-percent reduction.

The USPTO published a notice proposing to adjust the patent fees charged under 35 U.S.C. 41(a) and (b) for fiscal year 2013 to reflect fluctuations in the CPI on May 14, 2012.

The fiscal year 2005 Consolidated Appropriations Act (section 801 of Division B) provided that 35 U.S.C. 41(a), (b), and (d) shall be administered in a manner that revises patent application fees (35 U.S.C. 41(a)) and patent maintenance fees (35 U.S.C. 41(b)), and provides for a separate filing fee (35 U.S.C. 41(a)), search fee (35 U.S.C. 41(d)(1)), and examination fee (35 U.S.C. 41(a)(3)) during fiscal years 2005 and 2006. See Public Law 108-447, 118 Stat. 2809, 2924-30 (2004). The Omnibus Appropriations Act, 2009, extended the patent and trademark fee provisions of the fiscal year 2005 Consolidated Appropriations Act through September 30, 2011. See Public Law 112-4, 125 Stat. 6 (2011); Public Law 111-322, 124 Stat. 3518 (2010); Public Law 111-317, 124 Stat. 3454 (2010); Public Law 111-290, 124 Stat. 3063 (2010); Public Law 111-242, 124 Stat. 2607 (2010); Public Law 111-224, 124 Stat. 2385 (2010); Public Law 111-117, 123 Stat. 3034 (2009); Public Law 111-8, 123 Stat. 524 (2009); Public Law 111-6, 123 Stat. 522 (2009); Public Law 111-5, 123 Stat. 115 (2009); Public Law 110-329, 122 Stat. 3574 (2008); Public Law 110-161, 121 Stat. 1844 (2007); Public Law 110-149, 121 Stat. 1819 (2007); Public Law 110-137, 121 Stat. 1454 (2007); Public Law 110-116, 121 Stat. 1295 (2007); Public Law 110-92, 121 Stat. 989 (2007); Public Law 110-5, 121 Stat. 8 (2007); Public Law 109-383, 120 Stat. 2678 (2006); Public Law 109-369, 120 Stat. 2642 (2006); and Public Law 109-289, 120 Stat. 1257 (2006). The Leahy-Smith America Invents Act, enacted September 16, 2011, codified the patent and trademark fee provisions of the fiscal year 2005 Consolidated Appropriations Act.

Section 11 of the Leahy-Smith America Invents Act provides for a surcharge of fifteen percent, rounded by standard arithmetic rules, on all fees charged or authorized by 35 U.S.C. 41(a), (b), and (d)(1), as well as by 35 U.S.C. 132(b). Section 11 of the Act provides that this fifteen percent surcharge is effective ten days after the date of enactment ( i.e. , September 26, 2011). Section 11 also provides that this fifteen percent surcharge shall terminate, with respect to a fee to which the surcharge applies, on the effective date of the setting or adjustment of that fee pursuant to the exercise of the authority under section 10 of the Act for the first time with respect to that fee. Section 10 fee-setting will be implemented in a future separate rulemaking.

As for this rulemaking, Section 41(f) of Title 35, United States Code, provides that fees established under 35 U.S.C. 41(a) and (b) may be adjusted on October 1, 1992, and every year thereafter, to reflect fluctuations in the Consumer Price Index over the previous twelve months. If the annual change in CPI is one percent or less, no fee adjustment for CPI fluctuations will be pursued.

This CPI increase will be implemented on October 1, 2012. This interim increase in fees is necessary to allow the USPTO to meet its strategic goals within the time frame outlined in the FY 2013 President's Budget. The interim fee increase is a bridge to provide resources until the USPTO exercises its fee-setting authority and develops a new fee structure that will provide sufficient financial resources in the long term. An adequately funded USPTO will optimize the administration of the U.S. intellectual property system, and thereby move innovation to the marketplace more quickly, creating and sustaining U.S. jobs and enhancing the health and living standards of Americans.

Fee Adjustment Level: The patent statutory fees established by 35 U.S.C. 41(a) and (b) are adjusted to reflect the most recent fluctuations occurring during the twelve-month period prior to publication of the final rule implementing this CPI adjustment, as measured by the Consumer Price Index for All Urban Consumers (CPI-U). The Office of Management and Budget (OMB) has advised that in calculating these fluctuations, the USPTO should use CPI-U data as determined by the Secretary of Labor, which is found at “ http://www.bls.gov/cpi/”. In accordance with the above description of the statutory fee adjustment, the USPTO is adjusting patent statutory fee amounts based on the Administration's CPI-U for the twelve-month period ending June 30, 2012.

The fees other than small entity patent statutory fees have been adjusted based on the June 2011 to June 2012 annual CPI-U increase of 1.7%. These fee amounts were then rounded by applying standard arithmetic rules so that the resulting amounts will be consistent to the user. Fees for other than a small entity of $100 or more were rounded to the nearest $10. Fees of less than $100 were rounded to the nearest even number so that any comparable small entity fee will be a whole number. The small entity fee amounts are 50% of the other than small entity fee amounts.

General Procedures: Any fee amount adjusted by the final rule that is paid on or after the effective date of the fee adjustment enacted by the final rule is subject to the new fees in effect. The amount of the fee to be paid for a given item will be determined by the time of filing of that item with the Office. The time of filing will be determined either according to the date of receipt in the Office (37 CFR 1.6) or the date reflected on a proper Certificate of Mailing or Transmission, where such a certificate is authorized under 37 CFR 1.8. Use of a Certificate of Mailing or Transmission is not authorized for items that are specifically excluded from the provisions of 37 CFR 1.8. Items for which a Certificate of Mailing or Transmission under 37 CFR 1.8 is not authorized include, for example, filing of national and international applications for patents. See 37 CFR 1.8(a)(2).

Patent-related correspondence delivered by the “Express Mail Post Office to Addressee” service of the United States Postal Service (USPS) is considered filed or received in the USPTO on the date of deposit with the USPS. See 37 CFR 1.10(a)(1). The date of deposit with the USPS is shown by the “date-in” on the “Express Mail” mailing label or other official USPS notation.

To ensure clarity in the implementation of the new fees, a discussion of specific sections is set forth below.

37 CFR 1.16 National application filing, and examination fees: Section 1.16, paragraphs (a) through (e), (h) through (j) and (o) through (s), is revised to adjust fees established therein to reflect fluctuations in the CPI-U. See Table 1.

37 CFR 1.17 Patent application and reexamination processing fees: Section 1.17, paragraphs (a)(1) through (a)(5), (l), and (m), is revised to adjust fees established therein to reflect fluctuations in the CPI-U. See Table 1.

37 CFR 1.18 Patent post allowance (including issue) fees: Section 1.18, paragraphs (a) through (c), is revised to adjust fees established therein to reflect fluctuations in the CPI-U. See Table 1.

37 CFR 1.20 Post issuance fees: Section 1.20, paragraphs (c)(3)-(c)(4), and (d) through (g), is revised to adjust fees established therein to reflect fluctuations in the CPI-U. See Table 1.

37 CFR 1.492 National stage fees: Section 1.492, paragraphs (a), (c)(2), (d) through (f) and (j), is revised to adjust fees established therein to reflect fluctuations in the CPI-U. See Table 1.

37 CFR 41.20 Fees: Section 41.20, paragraphs (b)(1) through (b)(3), is revised to adjust fees established therein to reflect fluctuations in the CPI-U. See Table 1.

Fee Amount Adjustments: Table 1 shows the adjusted patent statutory fee amounts and fee adjustments based on the June 2011 to June 2012 annual CPI-U increase of 1.7%. The other than small entity fee amounts have been adjusted by 1.7%. These fee amounts were then rounded by applying standard arithmetic rules. Fees for other than a small entity of $100 or more were rounded to the nearest $10. Fees of less than $100 were rounded to the nearest even number. The small entity fee amounts are 50% of the large entity fee amounts.

Comment and Response to Comment: The USPTO published a notice proposing to adjust the patent fees charged under 35 U.S.C. 41(a) and (b) for fiscal year 2013 to reflect fluctuations in the CPI. The Office received one comment in response to the proposed rule. The commenter supports the proposed CPI adjustment of fees for FY 2013 as an interim fee increase until the USPTO exercises its fee-setting authority under Section 10 of the AIA. However, because of the significant administrative burdens on corporations and patent law firms to adjust their internal systems for paying fees and correctly advising clients of fee increases, it is suggested there should not be more than one fee adjustment per year. The commenter suggests that in future years, CPI adjustments and Section 10 adjustments should be timed so as to avoid having two separate adjustments in the same year. The Office's response is patent fees are being set under 35 U.S.C. 41(a) and (b) to ensure proper funding for effective operations. As previously discussed, this interim increase in fees is necessary to allow the USPTO to meet its strategic goals within the time frame outlined in the FY 2013 President's Budget. In the future, the USPTO does not anticipate routinely adjusting patent fees more than once per fiscal year.

The Office has prepared the following Final Regulatory Flexibility Analysis.

1. Description of the reasons that action by the agency is being considered: The USPTO is adjusting the patent fees set under 35 U.S.C. 41(a) and (b) to ensure proper funding for effective operations. The patent fee CPI adjustment under 35 U.S.C. 41(f) is a routine adjustment that has generally occurred on an annual basis when necessary to recover the higher costs of USPTO operations that occur due to the increase in the price of products and services.

2. Statement of the objectives of, and legal basis for, the final rule: Patent fees are set by or under the authority provided in 35 U.S.C. 41, 119, 120, 132(b), 156, 157(a), 255, 302, 311, 376, section 532(a)(2) of the URAA, and 4506 of the AIPA. The objective of the change is to adjust patent fees set under 35 U.S.C. 41(a) and (b) as an annual, routine step in order to recover the higher costs of USPTO operations as reflected by the CPI. 35 U.S.C. 41(f) provides that fees established under 35 U.S.C. 41(a) and (b) may be adjusted every year to reflect fluctuations in the CPI over the previous twelve months.

3. Statement of Significant Issues Raised by the Public Comments in Response to the IRFA and the Office's Response to Such Issues: The Office received no comments concerning the Initial Regulatory Flexibility Act analysis.

4. Description and estimate of the number of affected small entities: The Small Business Administration (SBA) small business size standards applicable to most analyses conducted to comply with the Regulatory Flexibility Act are set forth in 13 CFR 121.201. These regulations generally define small businesses as those with fewer than a maximum number of employees or less than a specified level of annual receipts for the entity's industrial sector or North American Industry Classification System (NAICS) code. The USPTO, however, has formally adopted, with SBA approval, an alternate size standard as the size standard for the purpose of conducting an analysis or making a certification under the Regulatory Flexibility Act for patent-related regulations. See Business Size Standard for Purposes of United States Patent and Trademark Office Regulatory Flexibility Analysis for Patent-Related Regulations, 71 FR 67109 (Nov. 20, 2006), 1313 Off. Gaz. Pat. Office 60 (Dec. 12, 2006). This alternate small business size standard is the previously established size standard that identifies the criteria entities must meet to be entitled to pay reduced patent fees. See 13 CFR 121.802. If patent applicants identify themselves on the patent application as qualifying for reduced patent fees, the USPTO captures this data in the Patent Application Location and Monitoring (PALM) database system, which tracks information on each patent application submitted to the USPTO.

Unlike the general SBA small business size standards set forth in 13 CFR 121.201, USPTO's approved alternative size standard is not industry-specific. Specifically, the USPTO definition of small business concern for Regulatory Flexibility Act purposes is a business or other concern that: (1) Meets the SBA's definition of a “business concern or concern” set forth in 13 CFR 121.105; and (2) meets the size standards set forth in 13 CFR 121.802 for the purpose of paying reduced patent fees, namely, an entity: (a) Whose number of employees, including affiliates, does not exceed 500 persons; and (b) which has not assigned, granted, conveyed, or licensed (and is under no obligation to do so) any rights in the invention to any person who made it and could not be classified as an independent inventor, or to any concern which would not qualify as a non-profit organization or a small business concern under this definition. See Business Size Standard for Purposes of United States Patent and Trademark Office Regulatory Flexibility Analysis for Patent-Related Regulations, 71 FR at 67112 (November 20, 2006), 1313 Off. Gaz. Pat. Office at 63 (December 12, 2006).

The changes in this final rule will apply to any small entity that files a patent application, or has a pending patent application or unexpired patent. The changes in this final rule will specifically apply when an applicant or patentee pays an application filing or national stage entry fee, search fee, examination fee, extension of time fee, notice of appeal fee, appeal brief fee, request for an oral hearing fee, petition to revive fee, issue fee, or patent maintenance fee.

The USPTO has been advised that a number of small entity applicants and patentees do not claim small entity status for various reasons. See Business Size Standard for Purposes of United States Patent and Trademark Office Regulatory Flexibility Analysis for Patent-Related Regulations, 71 FR at 67110 (November 20, 2006), 1313 Off. Gaz. Pat. Office at 61 (December 12, 2006). Therefore, the USPTO is also considering all other entities paying patent fees to be small entities as well in an effort to capture the impact on all small entity applicants whether they claim that status or not. While the USPTO does not record the number of small entity filers in a given year, the USPTO estimates that in FY 2011, of the patent fees where a small entity discount is available, 3,980,519 patent fees were paid, out of which 1,190,558 fees claimed the small entity discount.

5. Description of the reporting, recordkeeping and other compliance requirements of the final rule, including an estimate of the classes of small entities which will be subject to the requirement and the type of professional skills necessary for preparation of the report or record: This final rule does not require any reporting or recordkeeping or incorporate other compliance requirements. This final rule only adjusts patent fees (as discussed previously) to reflect changes in the CPI.

6. Description of any significant alternatives to the final rule which accomplish the stated objectives of applicable statutes and which minimize any significant economic impact of the rule on small entities: The alternative of not adjusting patent fees would have a lesser economic impact on small entities, but would not accomplish the stated objectives of the applicable statutes. The USPTO is making a small adjustment to patent fees, under 35 U.S.C. 41(f), to ensure proper funding for effective operations in light of changes in the CPI. The patent fee CPI adjustment is a routine adjustment that has generally occurred on an annual basis to recover the higher costs of USPTO operations that occur due to increases in the price of products and services. This CPI adjustment helps the Office maintain effective operations and decrease patent pendency levels.

7. Identification, to the extent practicable, of all relevant Federal rules which may duplicate, overlap or conflict with the final rule: The USPTO is the sole agency of the United States Government responsible for administering the provisions of Title 35, United States Code, pertaining to examination and granting patents. Therefore, no other Federal, state, or local entity shares jurisdiction over the examination and granting of patents and there are no duplicative, overlapping or conflicting rules.

Other countries, however, have their own patent laws, and an entity desiring a patent in a particular country must make an application for patent in that country, in accordance with the applicable law. Although the potential for overlap exists internationally, this cannot be avoided except by treaty (such as the Paris Convention for the Protection of Industrial Property, or the Patent Cooperation Treaty (PCT)). Nevertheless, the USPTO believes that there are no other duplicative or overlapping rules.

This rulemaking does not contain policies with federalism implications sufficient to warrant preparation of a Federalism Assessment under Executive Order 13132 (Aug. 4, 1999).

This rulemaking has been determined to be significant for purposes of Executive Order 12866 (Sept. 30, 1993), as amended by Executive Order 13258 (Feb. 26, 2002), and Executive Order 13422 (Jan. 18, 2007).

The Office has complied with Executive Order 13563. Specifically, the Office has, to the extent feasible and applicable: (1) Made a reasoned determination that the benefits justify the costs of the rule; (2) tailored the rule to impose the least burden on society consistent with obtaining the regulatory objectives; (3) selected a regulatory approach that maximizes net benefits; (4) specified performance objectives; (5) identified and assessed available alternatives; (6) involved the public in an open exchange of information and perspectives among experts in relevant disciplines, affected stakeholders in the private sector, and the public as a whole, and provided on-line access to the rulemaking docket; (7) attempted to promote coordination, simplification, and harmonization across government agencies and identified goals designed to promote innovation; (8) considered approaches that reduce burdens and maintain flexibility and freedom of choice for the public; and (9) ensured the objectivity of scientific and technological information and processes.

This rulemaking will not: (1) Have substantial direct effects on one or more Indian tribes; (2) impose substantial direct compliance costs on Indian tribal governments; or (3) preempt tribal law. Therefore, a tribal summary impact statement is not required under Executive Order 13175 (Nov. 6, 2000).

This rulemaking is not a significant energy action under Executive Order 13211 because this rulemaking is not likely to have a significant adverse effect on the supply, distribution, or use of energy. Therefore, a Statement of Energy Effects is not required under Executive Order 13211 (May 18, 2001).

This rulemaking meets applicable standards to minimize litigation, eliminate ambiguity, and reduce burden as set forth in sections 3(a) and 3(b)(2) of Executive Order 12988 (Feb. 5, 1996).

This rulemaking does not concern an environmental risk to health or safety that may disproportionately affect children under Executive Order 13045 (Apr. 21, 1997).

This rulemaking will not effect a taking of private property or otherwise have taking implications under Executive Order 12630 (Mar. 15, 1988).

Under the Congressional Review Act provisions of the Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq. ), the USPTO has submitted a report containing the final rule and other required information to the U.S. Senate, the U.S. House of Representatives and the Comptroller General of the Government Accountability Office. The changes in this final rule will not result in an annual effect on the economy of 100 million dollars or more, a major increase in costs or prices, or significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of United States-based enterprises to compete with foreign-based enterprises in domestic and export markets. Therefore, this final rule is not a “major rule” as defined in 5 U.S.C. 804(2).

The changes in this final rule do not involve a Federal intergovernmental mandate that will result in the expenditure by State, local, and tribal governments, in the aggregate, of 100 million dollars (as adjusted) or more in any one year, or a Federal private sector mandate that will result in the expenditure by the private sector of 100 million dollars (as adjusted) or more in any one year, and will not significantly or uniquely affect small governments. Therefore, no actions are necessary under the provisions of the Unfunded Mandates Reform Act of 1995. See 2 U.S.C. 1501 et seq.

This rulemaking will not have any effect on the quality of environment and is thus categorically excluded from review under the National Environmental Policy Act of 1969. See 42 U.S.C. 4321 et seq.

The requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) are inapplicable because this rulemaking does not contain provisions which involve the use of technical standards.

This final rule involves information collection requirements which are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

The collections of information involved in this final rule have been reviewed and approved by OMB. The Office is not resubmitting information collection requests to OMB for its review and approval at this time but will update the fee amounts for existing information collection requirements associated with the information collections under OMB control numbers 0651-0016, 0651-0021, 0651-0024, 0651-0031, 0651-0032, 0651-0033, 0651-0063, and 0651-0064. The USPTO will submit to OMB fee revision changes for OMB control numbers 0651-0016, 0651-0021, 0651-0024, 0651-0031, 0651-0032, 0651-0033, 0651-0063, and 0651-0064 at the time these collections are submitted to OMB for renewal.

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

For the reasons set forth in the preamble, 37 CFR parts 1 and 41 are to be amended as follows:

Section 7332(a)(1) of title 38, United States Code, affords special protection against the disclosure of VA medical “[r]ecords of the identity, diagnosis, prognosis, or treatment of any patient or subject which are maintained in connection with the performance of any program or activity (including education, training, treatment, rehabilitation, or research) relating to drug abuse, alcoholism or alcohol abuse, infection with the human immunodeficiency virus, or sickle cell anemia.” However, an exception in section 7332(e) states: “The prohibitions of this section shall not prevent any interchange of records—(1) within and among those components of [VA] furnishing health care to veterans, or determining eligibility for benefits under this title; or (2) between such components furnishing health care to veterans and the Armed Forces.”

VA implemented section 7332(e) in 38 CFR 1.461(c)(1); however, in so doing, we imposed an additional restriction on the scope of information that may be exchanged between VA and DoD, limiting it to only “information pertaining to a person relating to a period when such person is or was subject to the Uniform Code of Military Justice.” This restriction was narrower than the statutory restriction, and it impeded VA's ability to share with DoD important medical information pertaining to veterans and to coordinate their care and treatment. Further, the restriction impeded VA's ability to fully engage in Presidential- and Congressional-supported interoperability initiatives with DoD, such as electronic health record initiatives. This regulatory limitation was not intended to have these negative results on VA's ability to provide comprehensive high-quality health care to veterans and, where applicable, to support DoD in similarly caring for servicemembers and military retirees.

On October 20, 2011, VA published in the Federal Register, at 76 FR 65133, an interim final rule that amended 38 CFR 1.461(c)(1) to better conform to authority granted to VA by Congress. Interested persons were invited to submit comments on or before December 19, 2011, and we received a total of 3 comments. All of the issues raised by the commenters are addressed below.

Two commenters stated general concerns regarding access to electronic medical records by DoD and the security of those records from inappropriate disclosure or access. VA is committed to the appropriate protection, use, and disclosure of information maintained and exchanged by VA in the course of official business and to ensuring the security of that information. The amendment to 38 CFR 1.461(c)(1) allows VA to fulfill Congress' clear intention that VA and DoD engage in the exchange of records, but does not affect the requirement of 38 U.S.C. 7332(e)(2) that limits VA disclosures to components of DoD that are “furnishing health care to veterans.” We do not make any changes based on these comments.

One commenter asserted that this regulation would create a breach of confidentiality by allowing DoD to access a veteran's health information without authorization by the veteran. However, the commenter also agreed that it is important that VA and DoD have access to veterans' medical information to ensure continuity of care, safety, and for the provision of benefits. This regulation will ensure that this access is provided for those reasons by removing a specific restriction that was not required by the statutory authority. In addition, VA will continue to comply with all other applicable laws and regulations regarding access to medical records, including those that limit the use and disclosure of information to specifically authorized disclosures. We do not make any changes based on this comment.

One commenter suggested that additional language be included in the final rule to prevent the misuse of information “for unintended, alterative [sic] purposes beyond medical care.” Otherwise, disclosure of information for purposes other than medical care “may deter veterans from seeking care and/or disability compensation” from VA. The suggested language focuses on the intended use of the information accessed under the rule. As we noted above, the amendment to the rule complies with the section 7332 limitations on the nature and purpose of information to be disclosed. Health care professionals, such as those accessing information through this provision, are already duty-bound to access health information consistent with law and professional standards. This rule does not limit or otherwise affect the enforcement of those laws and professional standards. Because we believe the suggested language is redundant of existing protections and because other laws and regulations govern such use and disclosure, we decline to further amend the regulation. We do not make any changes based on this comment.

Based on the rationale set forth here, and in the interim final rule, we adopt the interim final rule as a final rule without any changes.

The Code of Federal Regulations, as revised by this final rule, represents the exclusive legal authority on this subject. No contrary rules or procedures are authorized. All VA guidance will be read to conform with this rulemaking if possible or, if not possible, such guidance is superseded by this rulemaking.

This rule contains no collections of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521).

The Secretary hereby certifies this regulatory amendment will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-612. This rule will not directly affect any small entities; only individuals could be directly affected. Therefore, pursuant to 5 U.S.C. 605(b), this rule is exempt from the initial and final regulatory flexibility analysis requirements of sections 603 and 604.

Executive Orders 13563 and 12866 direct agencies to assess the costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). Executive Order 13563 (Improving Regulation and Regulatory Review) emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Executive Order 12866 (Regulatory Planning and Review) defines a “significant regulatory action,” which requires review by the Office of Management and Budget (OMB) unless OMB waives such review, as “any regulatory action that is likely to result in a rule that may: (1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this Executive Order.”

The economic, interagency, budgetary, legal, and policy implications of this final rule have been examined, and it has been determined not to be a significant regulatory action under Executive Order 12866.

The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before issuing any rule that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any one year. This rule will have no such effect on State, local, and tribal governments, or on the private sector.

The Catalog of Federal Domestic Assistance numbers and titles for the programs affected by this document are: 64.008, Veterans Domiciliary Care; 64.009, Veterans Medical Care Benefits; 64.010, Veterans Nursing Home Care; 64.011, Veterans Dental Care; 64.012, Veterans Prescription Service; and 64.013, Veterans Prosthetic Appliances.

The Secretary of Veterans Affairs, or designee, approved this document and authorized the undersigned to sign and submit the document to the Office of the Federal Register for publication electronically as an official document of the Department of Veterans Affairs. John R. Gingrich, Chief of Staff, Department of Veterans Affairs, approved this document on August 29, 2012, for publication.

On June 16, 2011, VA published in the Federal Register (76 FR 35162) a proposed rule to amend VA regulations to broaden and clarify current benefits to veterans with guide dogs, and to establish new benefits related to service dogs. Pursuant to 38 U.S.C. 1714(b) and (c), VA may provide to veterans enrolled under 38 U.S.C. 1705 guide dogs trained for the aid of people who are blind and service dogs trained for the aid of the hearing impaired or persons with a spinal cord injury or dysfunction or other chronic impairment that substantially limits mobility. Under section 1714(d), VA is also authorized to provide certain travel expenses related to the provision of such dogs.

In 1961, VA promulgated 38 CFR 17.118(a) (recodified as current 38 CFR 17.154(a) in 1996) restating the statutory language, which at that time limited VA's authority to the provision of guide dogs for blind veterans. In 2001, Congress amended section 1714 to authorize VA to provide service dogs for veterans with other disabilities. See Department of Veterans Affairs Health Care Programs Enhancement Act of 2001, Public Law 107-135, title II, § 201. This rule implements that authority and establishes a single regulation relating to the provision of guide and service dog benefits by VA.

Interested persons were invited to submit comments to the proposed rule on or before August 15, 2011, and we received 98 comments. All of the issues raised by the commenters that concerned at least one portion of the rule can be grouped together by similar topic, and we have organized our discussion of the comments accordingly. For the reasons set forth in the proposed rule and below, we are adopting the proposed rule as final, with changes, explained below, to proposed § 17.148(b)(2), (d), (d)(1)(ii), and (d)(3) and § 17.154.

Section 17.148(a) defines “service dogs” as “guide or service dogs prescribed for a disabled veteran under [§ 17.148].” Multiple commenters argued that this definition is circular, and further contended that the omission of mental health impairments in § 17.148(b)(1) violates basic protections set forth in regulations implementing the Americans with Disabilities Act of 1990 (ADA). See 28 CFR 36.104 (specifically recognizing service dogs trained to assist individuals with mental impairments and defining “service animal” to mean “any dog that is individually trained to do work or perform tasks for the benefit of an individual with a disability, including a physical, sensory, psychiatric, intellectual, or other mental disability”). These commenters advocated that VA should use the definition of “service animal” set forth in the regulations implementing the ADA. We make no changes based on these comments.

The requirements in the ADA and regulations implementing the ADA are applicable only to “public entities,” and Federal Government agencies such as VA are not included in the ADA definition of a public entity. See 42 U.S.C. 12131(1). Thus, the specific requirements set forth in the ADA are not applicable to VA. Although this does not prevent VA from adopting, through regulation, a definition of “service animal” consistent with 28 CFR 36.104, it would be inappropriate to do so for the purposes of the programs regulated by this rule. The ADA and its implementing regulations exclusively address the issue of access to public facilities by individuals with disabilities, whereas the purpose of this rule is to authorize benefits to a veteran with a service dog. Access is not discussed in § 17.148 or § 17.154. Conversely, the ADA and its implementing regulations are neither controlling nor informative with regard to the administration of benefits to veterans with service dogs. The definition of “service dogs” in § 17.148(a) is reasonable because it is not overly broad for the purpose of the rule, and is appropriate to effectuate Congressional intent. Cf. 38 U.S.C. 1714(c) (providing authority for 38 CFR 17.148 and authorizing VA to “provide service dogs trained for the aid of” those veterans with hearing impairments, mobility impairments, etc., but not addressing access to VA facilities by persons accompanied by service dogs). The concerns from commenters were that § 17.148 “reinvents the wheel” by establishing a new definition for a term that is already defined in Federal regulation, and further that § 17.148 was unlawful under such regulation. However, as discussed above, the ADA definition of “service animal” is not applicable, and also is not helpful in determining the circumstances under which VA will provide the benefits described in § 17.148.

Commenters asserted that VA should use the term “assistance animal” instead of “service dog” because, they assert, the term “service dog” is understood more narrowly in the service dog industry to refer only to those dogs that assist with mobility impairments, whereas § 17.148(a) defines “service dogs” to mean dogs that aid with mobility impairments, visual impairments, and hearing impairments. By contrast, commenters stated that “assistance animal” is an industry term that encompasses dogs that assist with mobility, visual, and hearing impairments, and in turn should be used by VA in § 17.148(a). We make no changes based on these comments.

We disagree that every person in the service dog industry would understand what an “assistance animal” is in the way described by the commenter. Moreover, our regulations are written for a broader audience than those who may own or train service dogs, to include VA employees who administer benefits in accordance with our regulations. We believe that “assistance animal” in fact could be interpreted to have multiple colloquial meanings, and specifically may be likely to suggest that VA will provide benefits for animals other than dogs. We do not believe, as suggested by commenters, that our use of the term “service dogs” to encompass guide dogs for visual impairments and service dogs for hearing and mobility impairments would confuse veterans seeking benefits under the rule. Most importantly, § 17.148(a) clearly defines the term and states that the definition therein applies “[f]or the purposes of” § 17.148. In applying for this benefit, veterans would be expected to understand that the regulatory definition applies, and not any other definition that may be set forth elsewhere or understood in common parlance.

Multiple commenters contended that the certificate requirement in § 17.148(c)(1) as proposed would violate their access rights under the regulations implementing the ADA. See 28 CFR 36.302 (stating that “[a] public accommodation shall not require documentation, such as proof that the animal has been certified, trained, or licensed as a service animal”). We reiterate that this rulemaking does not address the issue of access to VA health care facilities by individuals accompanied by service dogs, and will not be used to determine whether a particular service dog will be allowed to enter a VA facility. Comments that allege unlawful violations of access rights or raise other issues relating to access to VA facilities, therefore, are beyond the scope of this rule. Therefore, we make no changes based on these comments. A certificate is required under § 17.148(c)(1) only to enable the veteran to receive service dog benefits, but is not required to gain entry to VA facilities. This rulemaking does not permit or prohibit the access of service dogs to VA health care facilities.

Access to VA facilities by service dogs accompanying individuals with disabilities is controlled by 40 U.S.C. 3103, which states: “Guide dogs or other service animals accompanying individuals with disabilities and especially trained and educated for that purpose shall be admitted to any building or other property owned or controlled by the Federal Government on the same terms and conditions, and subject to the same regulations, as generally govern the admission of the public to the property.” 40 U.S.C. 3103(a). The VA regulation that currently controls the access of animals to VA facilities is found at 38 CFR 1.218(a)(11), and we are in the process of amending § 1.218(a)(11) to be fully compliant with 40 U.S.C. 3103(a).

Multiple commenters asserted that the exclusion of benefits to mental health service dogs is unlawfully discriminatory because it creates a different standard for treatment options between those veterans with mental health impairments and those veterans without mental health impairments. One commenter specifically alleged that not providing benefits for service dogs that mitigate the effects of mental health illnesses, while providing benefits for service dogs that mitigate the effects of other impairments, may be a violation of Section 504 of the Rehabilitation Act (Section 504). Section 504 provides:

We agree that the benefits administered under this rule are subject to Section 504, but disagree that not providing benefits for mental health service dogs violates Section 504. VA is not restricting service dog benefits based on disability. VA is providing benefits to both physically and mentally disabled veterans for the same purpose, which is to provide assistance for the use of a particular device (a service dog) when a service dog is clinically determined to be the optimal device to help a veteran manage a visual impairment, a hearing impairment, or a chronic impairment that substantially limits mobility. All veterans will receive equal consideration for benefits administered for these service dogs, provided all other criteria in § 17.148 are met, regardless of accompanying mental health diagnosis. Veterans diagnosed with a hearing or visual impairment will certainly not be deemed ineligible for service dog benefits because they also have a mental health impairment. We also note that mobility impairments under § 17.148 are not specifically limited to traumatic brain injuries or seizure disorders in § 17.148(b)(3). Some commenters misinterpreted the rule to contain such a limitation and argued that other mental impairment may produce mobility impairment. To clarify, if a veteran's mental impairment manifests in symptoms that meet the definition of “chronic impairment that substantially limits mobility” in § 17.148(b)(3) and a service dog is clinically determined to be the optimal device to manage that mobility impairment, then such a veteran will be awarded service dog benefits. The rule does not prevent such individualized assessments of veterans with mental health impairments, as long as the service dog would be evaluated as a device to mitigate the effects of a visual, hearing, or mobility impairment. If this requirement is met, VA would not deny service dog benefits simply because the service dog may also assist with mental impairment that does not cause a limitation identified in § 17.148(b).

The rule prevents the administration of benefits for a dog to mitigate the effects of a mental illness that are not related to visual, hearing, or mobility impairments, but this restriction is not discriminating based on the fact that a veteran has a mental disability. This restriction is based on a lack of evidence to support a finding of mental health service dog efficacy. In contrast, VA's shared national experience has been to directly observe positive clinical outcomes related to the use of service dogs and increased mobility and independent completion of activities for veterans with visual, hearing, and mobility impairments. Our observations are bolstered by the existence of nationally established, widely accepted training protocols for such dogs that enable the dogs to perform a variety of tasks directly related to mitigating sensory and mobility impairments (such as alerting to noise, opening doors, turning on light switches, retrieving the telephone, picking up objects, etc.). We are unaware of similarly vetted and accepted training protocols for mental health service dogs, or how assistance from such dogs could be consistently helpful for veterans to mitigate mental health impairments.

Although we do not disagree with some commenters' subjective accounts that mental health service dogs have improved the quality of their lives, VA has not yet been able to determine that these dogs provide a medical benefit to veterans with mental illness. Until such a determination can be made, VA cannot justify providing benefits for mental health service dogs.

Several commenters asserted that limiting § 17.148 to veterans diagnosed as having visual, hearing, or substantial mobility impairments violates 38 U.S.C. 1714, which was amended in 2009 to authorize VA to provide “service dogs trained for the aid of persons with mental illnesses, including post-traumatic stress disorder, to veterans with such illnesses who are enrolled under section 1705 of this title.” 38 U.S.C. 1714(c)(3). Though multiple commenters stressed that this rule's exclusion of mental health service dogs violates 38 U.S.C. 1714(c)(3), we reiterate as stated in the proposed rule that under the statutory language VA may provide or furnish a guide dog to a veteran but we are not required to do so. See 38 U.S.C. 1714 (c)(1)-(3) (noting that “[t]he Secretary may, in accordance with the priority specified in section 1705 of this title, provide” [service dogs]). As we explained in the proposed rule, this rulemaking expands part 17 of 38 CFR, which already addressed guide dogs for the blind, to now authorize benefits for hearing disabled and substantially mobility impaired veterans, because we have an adequate basis of clinical experience and evidence to suggest service dog efficacy for veterans with these impairments. Therefore, we make no changes based on the above comments.

Commenters contended that VA is acting against its own practices in administering benefits by requiring completion of a congressionally mandated service dog study prior to determining whether to administer mental health service dog benefits. Commenters asserted that while most VA regulations only rely on medical judgment or medical need to justify the provision of medical benefits, in this instance VA is without reason requiring a higher standard of clinical evidence. As stated by one commenter:

This is not an accurate statement. Current VA regulations do not discuss whether there is evidence to support the provision of a particular therapy or treatment method, but this does not support the inference that our regulations discount the need for evidence to support the provision of such therapy or treatment. Indeed, if we ultimately determine that mental health dogs are appropriate treatment tools for mental health impairments, we will amend our regulations to authorize benefits for such dogs. VA is currently evaluating the efficacy of mental health service dogs, pursuant to the National Defense Authorization Act for Fiscal Year 2010, Public Law 111-84, § 1077(a) (2009) (the NDAA), which states that “the Secretary of Veterans Affairs shall commence a three-year study to assess the benefits, feasibility, and advisability of using service dogs for the treatment or rehabilitation of veterans with physical or mental injuries or disabilities, including post-traumatic stress disorder.” All participants in this study are veterans with mental health disabilities who are receiving service dog benefits similar to those described in this rulemaking, but the service dogs for these veterans assist specifically with the effects of mental illness. Although the NDAA provided that effectiveness of dogs for physical disabilities could additionally be evaluated in the study, we have chosen to limit this study's focus to mental health disabilities. However, we do not believe this limitation supports commenters' assertions that VA is creating an unreasonable double standard with regard to the need for clinical evidence, prior to administering benefits for mental health service dogs. The NDAA study is limited to veterans with mental health illness because VA has already determined from a clinical standpoint that service dogs are effective for assisting veterans with physical disabilities and mobility impairments. Moreover, we believe that the use of the word “or” in the NDAA makes the focus of the service dog study discretionary, and further that Congress clearly intended that VA must specifically evaluate the efficacy of mental health service dogs: “The Secretary shall ensure that at least half of the participants in the study are veterans who suffer primarily from a mental health injury or disability.” Public Law 111-84, § 1077(c)(4). There is no similar criterion in the law to compel that any portion of the participants must be veterans who suffer primarily from a physical injury or disability.

Though many commenters asserted that there is sufficient clinical evidence that VA could presently use to support administering mental health service dog benefits, the only evidence submitted in support of this assertion were anecdotal accounts of subjective benefits, including: Decreased dependence on medications; increased sense of safety or decreased sense of hyper-vigilance; increased sense of calm; and the use of the dog as a physical buffer to keep others at a comfortable distance. Again, we do not discount commenters' personal experiences, but we cannot reasonably use these subjective accounts as a basis for the administration of VA benefits. This is the precise reason VA is currently gathering evidence in the NDAA study—to determine how, exactly, service dogs may perform specific tasks or work that mitigates the effects of mental health disabilities.

Finally, we respond to multiple commenters' concerns with the manner in which VA is currently conducting the mandatory NDAA study. Essentially, these commenters stated that VA's conducting of the study is unreasonable because either the methodology is flawed, or VA's service dog organization partners in the study are inappropriate. Particularly, commenters alleged that VA has partnered exclusively with Assistance Dogs International (ADI) and ADI-accredited organizations in conducting the study, and further that ADI is not a proponent of psychiatric service dogs; such commenters accused VA of making adverse determinations regarding the efficacy of mental health service dogs before the study is complete. Generally, we find these comments to be beyond the scope of this rule, because VA is not basing any decisions in this rulemaking on any outcomes of the mandatory study, as the study has not yet been completed. However, we will note that VA has not partnered exclusively with ADI or ADI-accredited organizations to conduct the mandatory study. All relevant Federal requirements concerning research studies were followed by VA as relates to this study; an abstract of the study to include listed eligibility and exclusion parameters is available for public viewing at http://clinicaltrials.gov/ct2/show/study/NCT01329341. Therefore, we make no changes based on the above comments.

Multiple commenters argued that VA should remove the requirement in § 17.148(c) as proposed that a service dog complete ADI training and be ADI certified before a veteran with a substantial mobility impairment can begin receiving benefits under § 17.148(d). These commenters put forth many reasons in support of removing this requirement, which we will specifically address in the following discussion. We make no changes to the rule based on these comments. In administering service dog benefits, VA must ensure that tested and proven criteria regarding service dog training and behavior are in place to ensure the integrity of the service dog benefits administered, and the safety of veterans and others who might come in contact with the veteran or the dog. There are no Federal standards for service dog training that we can apply, and VA does not have the expertise to design its own accreditation program or standards. ADI and IGDF are national, industry-recognized organizations with established and proven training criteria. Commenters offered many anecdotal observations concerning the quality and reliability of non-ADI organizations to train service dogs, but no commenters offered concrete, supportive evidence to persuade us that there are any organizations other than ADI or IGDF that have an established history and national credibility such that they should be recognized in § 17.148(c).

The reliance on ADI and IGDF accreditation is no different than our reliance on other nationally standardized criteria to ensure safe, high quality health care across all settings. For instance, VA relies on the Centers for Medicare and Medicaid Services (CMS) Resident Assessment Instrument/Minimum Data Set as the comprehensive assessment for all veterans in VA Community Living Centers (long term care facilities). See Veterans Health Administration (VHA) Directive 2008-007. In addition, VA requires States to rely on this tool for veterans in State homes receiving per diem payments from VA for the provision of nursing home care. See 38 CFR 51.110(b)(1)(i). Similarly, VA relies on and enforces by regulation National Fire Protection Association (NFPA) safety standards in all VA community residential care facilities, contract facilities for outpatient and residential treatment services for veterans with alcohol or drug dependence or abuse disabilities, and State homes. See 38 CFR 17.63, 17.81(a)(1), 17.82(a)(1), and 59.130(d)(1). We rely on various private, State, and local certifications concerning professional expertise. See, e.g., 38 CFR 3.352(b) (predicating aid and attendance allowance on need for care from health-care professional licensed to practice by a State or political subdivision thereof), § 17.81(a)(3) (conditioning VA authority to contract with residential treatment facilities that are “licensed under State or local authority”), § 17.900 (recognizing certification of health care providers issued by, inter alia, The Joint Commission as well as specified government organizations including CMS). Thus, VA reliance on the recognized expertise of a public or private organization is not uncommon, nor is it illegal or questionable, so long as the basis for the reliance is well-reasoned and articulated.

Despite the negative comments that asserted that ADI is an inefficient organization or is inadequate in some respects, other commenters recognized that there are no other national organizations that perform a similar function, and that there are very few individuals who can accurately assess the quality of a service dog's training. Some commenters praised ADI, stating that ADI certification is “the best route to go” and that the requirement will ensure that VA is not paying for dogs of “questionable value to our vet[eran]s.” If at some point in the future we discover an efficient way to assess the quality of training provided by non-ADI and non-IGDF dog providers, we will of course amend the rule; however, at this time, ADI and IGDF accreditation is the best guarantee we have that our veterans will be provided with safe, high quality service dogs.

We now specifically address comments that requiring certification from an ADI-accredited organization effectively creates a sole source contract, in violation of the general requirement for open and fair competition in Federal Acquisition Regulations. See 48 CFR 6.101. Multiple commenters further alleged that § 17.148(c) as proposed would violate a “performance-based” assessment requirement under Federal Acquisition Regulations for service contracts, because it emphasizes the source of service dog training rather than the result of that training. See 48 CFR 37.600 et seq. Without discussing under what circumstances VA may be permitted to enter into sole source contracts, we clarify for commenters that VA is not contracting with ADI or IGDF generally or with any ADI-accredited or IGDF-accredited organization to purchase service dogs for veterans under this rule. There is no fiscal conflict of interest or violation of Federal Acquisition Regulations because the rule does not authorize any financial arrangement whatsoever with ADI or IGDF.

Multiple commenters stated that the ADI limitation in § 17.148(c) is inefficient and ineffective for veterans by asserting that, compared to non-ADI organizations: There are not enough ADI-accredited organizations around the United States to meet veteran demand for service dogs; the cost to purchase ADI-certified service dogs is prohibitive; and the wait to receive a service dog from an ADI-accredited organization is too long. We make no changes based on these comments.

We acknowledge that not all States have registered ADI-accredited or IGDF-accredited organizations; however, § 17.148(d)(3) does provide for the reimbursement of travel expenses associated with the training a veteran must complete as offered by an ADI-accredited or IGDF-accredited organization. Therefore, there will be no out of pocket travel costs for veterans who must travel out of state to obtain a dog after a service dog is prescribed. Thus, we do not believe the absence of ADI-accredited or IGDF-accredited organizations in a particular State will serve as a barrier to obtaining a service dog.

Regarding the cost to obtain a service dog, we did not receive any concrete evidence from commenters that non-ADI accredited or non-IGDF accredited organizations are on average less expensive. Rather, commenters offered anecdotal claims that non accredited organizations are less expensive in some cases. A few commenters asserted that non-ADI accredited and non-IGDF accredited providers have less overhead costs because those organizations do not have to spend money to acquire or maintain accreditation. The ADI accreditation fee is $1000.00 paid every 5 years, with annual fees of approximately $50.00. The cost of IGDF accreditation is a one-time fee of $795, with an annual fee of $318 and a per unit fee of $39.45. We do not believe that these costs would necessitate an increased cost being passed to veterans specifically. ADI accreditation and IGDF accreditation are the only reasonable means we have of ensuring that an organization is using tested, standardized training and behavior criteria prior to a service dog being placed with a veteran. We view the cost of ADI and IGDF accreditation, therefore, as necessary and reasonable in order to ensure that we administer benefits in a safe and consistent manner. We clarify for one commenter that VA only intends to recognize those service dog organizations that have full membership in ADI or IGDF, or that are fully ADI or IGDF accredited, versus those organizations in the process of becoming ADI or IGDF accredited. This is consistent with our goal of ensuring VA only administers benefits for use of high quality service dogs that were subject to standardized training protocols.

Regarding the wait time to obtain a dog, commenters did not provide evidence to support that on average ADI-accredited organizations take longer than non-ADI accredited organizations to place service dogs with veterans. Many commenters instead provided anecdotal accounts of non-ADI organizations not utilizing ADI-specific training, and in turn training dogs faster than ADI organizations. Non-ADI organizations that facilitate “owner training” were especially noted by commenters as being faster and more effective for veterans, whereby the veteran would directly train the service dog. Again, we do not believe that we should administer benefits under the rule unless we can ensure that the service dogs for which we pay benefits are all subject to the same set of tested standards, to ensure safety and consistent quality. We do not believe this level of safety and quality can be met without accreditation based on nationally applicable criteria. This practice follows the same process VA uses with every other product, device, or treatment modality provided to our veterans.

Some commenters argued that VA could use other nationally recognized, performance based tests instead of requiring ADI certification to demonstrate that service dogs are safe and appropriately trained to mitigate effects of substantial mobility impairments. These commenters stated that submission to VA of a service dog's performance on a Public Access Test (PAT) or the American Kennel Club's Canine Good Citizen (CGC) test, in combination with statements indicating the level of the service dog's training and confirming the dog's good health, would provide sufficient objective evidence that service dogs are suitable for provision of benefits under the rule. Nationally recognized temperament tests such as a PAT or the CGC may indicate whether a service dog is stable and unobtrusive to the public to justify access (and, again, § 17.148 does not concern access), but these tests do not communicate the level of a service dog's specific training, or whether the service dog should be prescribed for a veteran as an assistive device. An accompanying statement submitted to VA that subjectively attests to a service dog's training is similarly inadequate, as VA seeks to administer benefits uniformly under the rule and therefore must ensure that all service dogs are subject to the same performance based standards. We make no changes based on these comments.

One commenter expressed support of VA's decision to specifically include seizure disorder as a covered impairment, and requested that VA more clearly indicate in the final rule which tasks a service dog may complete for such an eligible veteran. We reiterate that we require ADI and IGDF certification specifically because VA does not have the expertise, experience, or resources to develop independent criteria. For this reason, we make no changes to the rule to provide specific examples of tasks which any service dog may perform for a veteran. ADI has developed training protocols for service dogs to complete work and tasks for impairments as described in the rule, to include seizure disorders.

Finally, multiple commenters contended that VA could adopt independent training programs to internally produce service dogs for veterans, versus relying on certificates from external ADI-accredited service dog organizations. One commenter stated that VA should initiate an independent training program whereby veterans with post traumatic stress disorder (PTSD) participate in training service dogs for the intended beneficiaries of this rule, i.e., veterans with visual, hearing, or substantial mobility impairments. This commenter compared such an internal training program to a program developed by the Denver VA Medical Center and Denver VA Regional Office in 2009, called “Operation Freedom,” in which veterans assisted in advancing dogs through CGC test training for 6 weeks as a component of the veterans' mental health treatment plans. After completion of this 6 week basic obedience training program, the dogs were trained by an external ADI-accredited organization in a rigorous 7 month regimen to become service dogs, and were placed with other veterans with disabilities. The initial pairing of the dogs with veterans during basic obedience training, as a treatment modality for mental health illnesses, provided those veterans with opportunities in skills development and community reintegration. Particularly, the program provided a bridge to community involvement through a meaningful volunteer opportunity that served other disabled veterans.

Though VA is not opposed to such training opportunities as a component of a treatment plan for a particular veteran, Operation Freedom is not an example of an independent and internal training program to train or produce service dogs for veterans. As the commenter correctly stated, the dogs involved in Operation Freedom were actually trained to become service dogs by an external ADI-accredited organization, over an extended period of time and subject to ADI standards as adopted and applied by that organization. We additionally clarify that even the initial basic obedience training that veterans assisted in providing to dogs was not provided on VA property, but rather on the property of the ADI-accredited organization, because the goal of Operation Freedom was to provide community reintegration opportunities for participating veterans as part of those veterans' treatment plans. The goal of Operation Freedom was ultimately not to produce service dogs for veterans, and we therefore do not find this example as provided by the commenter to be illustrative as to what VA should enact with regards to independent and internal service dog training programs. As stated previously, because VA does not have the expertise, experience, or resources to develop independent training criteria or otherwise train or produce service dogs for veterans, we require that service dogs be trained and placed with veterans by ADI-accredited and IGDF-accredited organizations. However, this in no way limits any veteran's personal choice to undertake any training experiences with any service dog organization, nor does it prevent VA from conducting programs similar to Operation Freedom. The commenter also noted potential cost savings for VA to conduct internal service dog training programs that employ PTSD veterans, but as explained earlier VA is not purchasing service dogs from ADI-accredited or IGDF-accredited organizations, and such cost comparisons are therefore not relevant. We make no changes based on the above comments.

One additional commenter suggested that instead of requiring ADI certification, that VA should hire professional service dog trainers to join rehabilitation therapy departments (e.g., to join Occupational and Physical Therapy departments) as VA staff, and that this would enable VA to professionally train service dogs at a higher output and with less cost than paying for ADI-certified service dogs. We make no changes based on this comment, as such cost considerations are not relevant because VA is not purchasing service dogs. VA does not have the expertise, experience, or resources to develop independent training criteria, and VA will not adopt or initiate internal training programs, as this would effectively make VA act as a professional service dog certifying body. VA's lack of expertise in this area is exactly why we have mandated ADI or IGDF certification.

Under § 17.148(b)(2), we require that the service dog must be the “optimal” device for the veteran to manage his or her impairment and live independently, and service dog benefits will not be provided if other assistive means or devices would provide the same level of independence as a service dog. Several commenters asserted that the use of one assistive device does not necessarily obviate the need for other assistive devices, and therefore that § 17.148(c) as proposed should not be used to exclude the prescription of a service dog if other devices may assist the veteran. We agree in part with the comments, but make no change to the regulation because the regulation does not prevent veterans from using multiple assistive devices.

For purposes of § 17.148(b)(2), an eligible veteran may be prescribed both a service dog and another assistive device, as long as each provides a distinct type of assistance, or if, without each of the devices, the veteran would be unable to complete tasks independently. For instance, for a veteran with a mobility impairment that is characterized by loss of balance and subsequent falls, both a balance cane and a service dog might assist a veteran with balance and walking; the cane might be optimal for assistance with walking, but the service dog may be the optimal means for that veteran to regain a standing position and stabilize after a fall. In such a case, the service dog may be prescribed to the veteran, as well as the balance cane. Similarly, a veteran with multiple impairments may be prescribed assistive devices to assist with one impairment and a service dog to assist with another. The “optimal” limitation in § 17.148(b)(2) will not limit the prescription of a service dog when necessary for the veteran to manage the impairment and live independently, but it will prevent the provision by VA of multiple assistive devices that serve the same purpose. By avoiding duplication of benefits in this manner, we maximize the amount of resources available to veterans and ensure that benefits are provided in a responsible manner.

Commenters stated that the “optimal” criterion in § 17.148(b)(2) as proposed would be used to ensure that service dogs are prescribed as assistive devices only as a “last resort.” A service dog is not a “last resort” in the sense inferred by the commenters. VA will not use the “optimal” requirement in such a way as to deprive any veteran of an assistive device that would best mitigate the effects of a veteran's impairment and provide the veteran the highest level of independence. The rule is designed, however, to promote the use of service dogs only when it is clinically determined that other devices will not adequately enable the veteran to live independently. This rationale of promoting service dogs secondary to other assistive devices is not without reason. A service dog is a long term commitment that requires tremendous dedication and effort on the part of the veteran, as well as significant costs—only part of which would be paid for by VA under § 17.148. A service dog must be fed, exercised, groomed, nursed when ill, and integrated into the veteran's family as a necessary partner in the veteran's daily life. If the extent of the veteran's mobility impairment is such that the only tasks requiring assistance are picking up or reaching items, then a device that is not a service dog that fully accomplishes these tasks is not only sufficient, but also is not unduly burdensome for the veteran. We make no changes based on these comments.

Commenters argued that the rule should contain additional criteria that would objectively measure a veteran's level of independence between different devices, instead of the single “optimal” criterion. We believe, however, that because these are clinical determinations based on “medical judgment” under § 17.148(b)(2), additional criteria are unnecessary and unhelpful. Therefore, we make no changes based on these comments. It is clear in § 17.148(b)(2) that devices, including a service dog, will be clinically evaluated to determine which are necessary and most beneficial for the veteran to manage an impairment and live independently. We stressed the importance of this clinical determination in the proposed rule:

One commenter additionally noted that the above rationale from the proposed rule presumed that higher cost technologies offer a higher standard of care. We clarify that the intent of this rationale was to support VA's use of clinical judgment to determine what device allows the veteran to function most independently, and not have such a determination influenced by factors such as cost.

Some commenters asserted that while another device may provide the exact same functions in mitigating the effects of mobility impairments as a service dog, service dogs nonetheless should be considered optimal and be prescribed because they uniquely provide certain ancillary benefits, including: Subjective feelings of increased personal comfort and understanding; an increased sense of purpose for the veteran in having to care for a living thing; an increased sense of self-esteem and overall psychological well-being; and improved social and community reintegration skills. We do not dispute these subjective accounts from commenters; however, we believe Congress authorized VA to provide service dogs to veterans with disabilities as a means of mitigating the effects of a disability—and not for the purpose of companionship or emotional support. Therefore, we make no changes based on these comments. The authorizing statute links the provision of service dogs to their having been trained “for the aid of” veterans with hearing impairments, mobility impairments, etc.; the statute does not suggest that ancillary benefits are to be considered. 38 U.S.C. 1714(c). Therefore, § 17.148 does not authorize benefits based on ancillary benefits that service dogs may provide but that are not specific to mitigating the effects of a veteran's disability, and which are not the product of specific training. Though dogs may generally tend to engender in their owners subjective feelings of improved well being, this is not the intended effect of service dog assistance under 38 U.S.C. 1714(c) or § 17.148.

As proposed, the determination that the service dog is “optimal” for the veteran under § 17.148(b)(2) was to be made by a VA clinician using medical judgment. Multiple commenters objected to this standard, for various reasons. Chiefly, commenters claimed that a VA clinician would not have the requisite expertise related to service dogs to properly compare their unique characteristics and benefits to other assistive devices. Instead, these commenters asserted that the decision-making process should involve either a local evaluation board or interdisciplinary team, in which prosthetic staff and other rehabilitative therapy staff is represented. We agree, and have amended the first sentence of § 17.148(b)(2) from the proposed rule to require “[t]he VA clinical team that is treating the veteran for such impairment” to assess whether it is appropriate to prescribe a service dog for that veteran. The “VA clinical team” will include, by virtue of being the clinical staff that is treating the veteran for the qualifying visual, hearing, or mobility impairment, the veteran's primary healthcare provider, and any other relevant specialty care providers and professional staff, to include prosthetic and rehabilitative therapy staff. Thus, the first sentence of § 17.148(b)(2) now reads: “The VA clinical team that is treating the veteran for such impairment determines based upon medical judgment that it is optimal for the veteran to manage the impairment and live independently through the assistance of a trained service dog.”

We also recognize that ensuring that VA clinical staff is knowledgeable regarding service dog utilization is critical to the successful partnering of veterans with service dogs. VA is developing and will disseminate educational tools and training opportunities that will assist VA clinical staff to obtain this knowledge. In preparation for the effective date of this rulemaking, we have drafted clinical practice recommendations and have produced a video presentation for dissemination to every VA health facility in the country. Both the clinical recommendations and the video communicate to clinical staff the traits, capabilities, tasks, and utility of service dogs for mobility, hearing, and vision impairments. These and other training materials will include professional education credits, so clinical staff will have incentive to participate, and some training opportunities will be required training for a veteran's clinical team when it is necessary to determine if an assistive device is needed. The training provided at local facilities will ensure the veteran's treatment team will be qualified to evaluate between various assistive means, to include understanding the abilities of service dogs, and then be able to prescribe the most appropriate assistive device.

Multiple commenters criticized the rule for disregarding the expertise of service dog organizations. It is true that for a veteran to receive benefits under the rule, a service dog must be prescribed by the veteran's clinical team, and that decision is made without consulting the service dog organization from which a veteran ultimately obtains a service dog. However, the prescription of a service dog is a treatment decision made by the VA clinical team that is treating the veteran for the qualifying impairment, and we believe that consultation with a private organization that has no clinical expertise as to the medical treatment for a specific veteran is inappropriate. Therefore, we make no changes based on these comments. At the same time, service dog organizational expertise and experience are essential to the process whereby a service dog is placed with a veteran. After a clinical decision is made to prescribe a service dog, a service dog organization will use its professional judgment to make independent decisions concerning whether a service dog will actually be placed with the veteran. The ADI-accredited or IGDF-accredited organization conducts its own assessments based on national criteria and its specialized experience in the field, and the veteran must complete the service dog organization's evaluation and training before that organization will match the veteran with a service dog and place that dog in the veteran's home.

VA's role in the service dog organization's assessment and evaluation is purely supportive. For instance, VA will assist the veteran with obtaining medical and psychological reports and other documentation that the service dog organization may request from VA (if approved for release by the veteran). VA will additionally provide assistance to veterans in locating a service dog organization, if requested. In response to one commenter, however, VA will not formally refer veterans to specific ADI-accredited or IGDF-accredited organizations, or initiate a process whereby a veteran may consent to have VA act as an intermediary between the veteran and the service dog organization. We believe such a referral system would blur the distinct line that should exist between VA's responsibility to determine whether a service dog may be clinically necessary for a veteran, and the service dog actually being placed with the veteran. The clinical practice recommendations and other guidance VA has developed will alert VA staff to commonly available resources that would aid the veteran in locating service dog organizations, and this information could be provided to the veteran (e.g., the Web site to find the nearest ADI-accredited or IGDF-accredited organization). VA will additionally assist the veteran in obtaining medical information the service dog organization may require.

In response to the same commenter, VA will not develop a standard form to be certified or otherwise completed by the service dog organization, for the veteran to submit to VA under § 17.148(c)(1)-(2) to receive benefits. Instead, VA will accept a certificate as required under § 17.148(c)(1)-(2) in all forms as issued to the veteran from the individual service dog organizations. Such certificates must indicate that an adequate training program has been completed to warrant receipt of benefits under the rule. VA's lack of expertise in certifying whether appropriate training has been completed is the precise reason VA has required ADI or IGDF certification for all service dogs acquired on or after the effective date of the final rule.

Some commenters stated that only the service dog organizations themselves should be the designated decision makers under § 17.148, arguing that only these organizations could properly compare service dogs to other assistive devices and determine what is the most “optimal” means to assist a veteran. We do not believe a service dog organization would be so qualified, as they do not have the expertise of licensed VA clinicians to clinically assess or treat a specific veteran, nor do they have the clinical responsibility of VA clinicians to evaluate assistive device options other than service dogs. Additionally, as the benefits under the rule are to be administered incident to a veteran's medical treatment, only the veteran's clinical team may be designated decision makers regarding the initial clinical assessment. Therefore, we make no changes based on these comments.

Commenters asserted that having VA clinicians make the determination whether a service dog is optimal discounts the veteran's input into their own treatment options, and instead advocated that the decision should be solely between the veteran and the service dog organization. In keeping with VA's policy of providing patient centered care, VA clinicians do not discount the input of veterans regarding treatment options. As with any other medical care VA provides, the prescription of a service dog for a veteran would be the recommended course of treatment only after the veteran's clinical team considers all relevant factors, to include veteran preference in treatment options. A veteran's preference for a service dog, therefore, would certainly be a factor in a determination to prescribe a service dog. We make no changes based on these comments.

Several commenters objected to a basic premise in this rule, which is that VA will assist veterans in determining whether a service dog is an appropriate treatment option and will maintain service dogs through the provision of veterinary and other benefits, but VA will not actually purchase or obtain service dogs for veterans. We make no changes based on these comments. As explained in the proposed rulemaking, we reiterate that we interpret the “may * * * provide” language in 38 U.S.C. 1714(c) to mean that VA need not actually purchase or acquire dogs for eligible veterans. 76 FR 35162. This is consistent with VA policy, extant prior to the promulgation of this rule, concerning guide dogs for the visually impaired; VA does not purchase or obtain such dogs on behalf of veterans under the similar authority (“may provide”) in 38 U.S.C. 1714(b). As stated previously, we simply lack the facilities and expertise to purchase or obtain, or to train service dogs for placement with veterans, and we will continue to rely on independent organizations that have been recognized as having such expertise. VA has opted instead to offer other benefits to facilitate the provision of service dogs to veterans.

One commenter asserted that VA purchases other “devices” for veterans, and further that VA categorizes service dogs as “devices,” and therefore that this rulemaking must address how VA plans to purchase service dogs for veterans from service dog organizations. We make no changes based on this comment. The commenter did not specify what type of “devices” VA purchases for veterans as a comparison to service dogs, but we assume the intended reference was to prosthetic devices or appliances that may be provided to certain veterans under 38 CFR 17.38 and 17.150. Although we have stated in this rulemaking that we view a service dog as a surrogate for another assistive device, we clarify that with regards to VA procurement policy, we do not treat service dogs in the same manner as prosthetic devices that are purchased for veterans. Unlike prosthetic devices that are provided by VA to veterans at VA expense, the actual placement of a service dog with a veteran is not VA's decision, and ultimately is not a clinical decision—the actual placement is the decision of a service dog organization, subject to that organization's own non-clinical assessment and training standards. VA is unable to provide training and fitting of a service dog for a veteran, as we provide for prosthetic devices that are purchased for veterans, again because VA at this time lacks this expertise.

Notwithstanding VA's lack of expertise in purchasing or obtaining service dogs to provide directly to veterans, several commenters asserted that VA should cover a veteran's out of pocket costs to independently purchase a service dog. We reiterate that the rule is designed to support service dogs only when it is clinically determined that other assistive devices will not adequately enable the veteran to live independently, because a service dog is a long term commitment that requires tremendous dedication and effort on the part of the veteran, as well as potentially significant continuing costs for veterans that will not be paid by VA (e.g., non-prescription food, over-the-counter medications). VA will therefore not directly purchase service dogs for veterans. VA will not potentially incentivize the independent purchase of service dogs by veterans by creating an expectation that the purchase costs will be covered.

Another commenter asserted that VA should establish a “fee for service” program to purchase service dogs for veterans, because such remuneration would increase availability of service dogs as well as decrease potential wait times for veterans to obtain service dogs. We do not agree that the availability of service dogs specifically for veterans is impeded by veterans' inability to cover purchasing costs, because we understand that a majority of service dogs are acquired by veterans with little or no out of pocket cost. Therefore, we make no changes based on this comment. Additionally, we do not believe that a veteran's inability to purchase a service dog would contribute to any potential wait time for that veteran to obtain a service dog. Rather, we believe that the only factors that would contribute to potential wait times for veterans to obtain service dogs would be the supply of trained and available service dogs, which is unaffected by whether such dogs can be purchased or by whom.

Commenters asserted that VA should pay for certain expenses associated with a service dog that would be excluded under § 17.148(d)(4) as proposed. Specifically, commenters argued that VA should pay for grooming, nail trimming, non-sedated teeth cleaning, nonprescription medications, and nonprescription food and dietary supplements, because commenters asserted that these services are directly related to the dog's ability to provide assistive services, and therefore should be considered covered by VA. See 76 FR 35164 (explaining that the restrictions expressed in § 17.148(d)(4) are present to “ensure that the financial assistance provided by VA would not be used to provide services that are not directly related to the dogs' ability to provide assistive service.”). Commenters stated that these excluded services are directly related to the dog's ability to provide assistive services because they are either necessary to ensure a service dog's longevity and reliable working service to the veteran, or are necessary to maintain the higher standards of cleanliness service dogs must maintain. We make no changes to the rule based on these comments, but reiterate our general policy as stated in the proposed rule that we regard the service dog as a surrogate for another assistive device, and require that the veteran therefore utilize the service dog responsibly and provide general care and maintenance. As with prosthetic devices prescribed by VA, the veteran is expected to maintain equipment by ensuring it is cared for, cleaned, serviced, and protected from damage. In the case of prosthetic devices, VA repairs broken equipment, and provides annual servicing and replacement parts such as hearing aid batteries or oxygen tank refills, when needed. In the case of a service dog, VA believes this equates to repairing and or replacing harnesses or other hardware, providing annual and emergent veterinary care, providing prescription medications, or paying for other services when prescribed by a veterinarian. In the same way VA would expect a veteran to protect and utilize his or her wheelchair in order to keep it in good working condition, or keep his or her prosthetic limb clean and functioning, VA expects that a veteran will generally maintain the service dog with daily feeding, regular grooming, and by covering any other expenses which are not clinically prescribed by a veterinarian.

Grooming and other excluded services in § 17.148(d)(4) are important for the general health of a service dog as an animal, and may affect a service dog's ability to provide services. However, services excluded in § 17.148(d)(4) are not uniquely required by a service dog to perform the work and specific tasks for which they were trained. Services excluded in § 17.148(d)(4) are general care and maintenance services that all dogs require for general good health and well being, and we therefore do not believe they are directly related to the specific assistance provided by a service dog. For instance, service dogs surely must have their nails maintained at an appropriate length to prevent certain maladies and discomfort associated with overgrowth or damage. However, the exact same need exists for nonservice dogs as well, such that all dogs' general ability to walk and maneuver is affected by maintenance of their nails. Unlike a specialized harness provided by VA, nail grooming is not uniquely required by a service dog to perform the work and specific tasks for which they were trained, and hence is not covered under the rule. We apply this same rationale for other items, such that VA will not pay for standard, nonspecialized leashes and collars, or nonprescription food or medications, or any other basic requirements mandated by State governments for dog ownership generally, such as dog licenses. Again, such standard needs are not unique to service dogs—it is for the overall health and well being of all dogs as domestic animals that they be adequately controlled by their owners, are routinely fed and kept free of pests such as fleas and ticks, etc.

Commenters stated that service dogs are subject to heightened standards of cleanliness by virtue of being permitted access to public areas, which in turn creates a greater need for grooming services. Commenters asserted further that individuals with substantial mobility impairments may not be able to complete necessary grooming to ensure service dogs may gain access to public areas, and specifically stated the inability of these individuals to complete grooming tasks would be exacerbated by the fact that most ADI-certified dogs are large dog breeds with long hair. However, we are not aware of any rules regarding service dog access to public places that hold service dogs to heightened standards of cleanliness that would not otherwise be appropriate for a dog living in a home and assisting a disabled veteran, nor did the commenters offer any specific examples of such heightened standards. Nonetheless, we do not believe that an ADI-accredited or IGDF-accredited service dog organization would place a service dog with an individual who could not demonstrate an ability to provide for the basic maintenance and care of the service dog, to include required grooming sufficient to allow the dog access to a public area. We make no changes based on these comments.

A few commenters noted specifically that many of the services excluded in § 17.148(d)(4) as proposed are discounted for members of the International Association of Assistance Dog Partners (IAADP), and that VA should in turn pay for IAADP memberships for veterans with approved service dogs. We make no changes to the rule based on these comments. The sole cost savings associated with IAADP membership as described by commenters was related to prescription medications, which are covered under § 17.148(d)(1)(ii). Additionally, because the veteran must be generally responsible for expenses related to the nonmedical daily care and maintenance of a service dog, the veteran would also be responsible for membership in any organization that may assist in covering such expenses. One commenter additionally advocated for VA to initiate a service dog support group, and likened the benefits of such a support group to the benefits individuals may receive as IAADP members. For instance, the commenter suggested that such a VA support group should have a membership requirement, and would be a more cost effective way to use VA funds for service dogs as well as promoting socialization and education. Although we do not disagree with the commenter on the potential value of such a support group, we make no changes to this rule based on the same rationale related to IAADP membership as expressed above.

Commenters asserted that a requirement in § 17.148(d) as proposed, that benefits would only be provided for “one service dog at any given time” is too restrictive. Commenters stated that many service dogs continue to live with veteran owners after being replaced by a new service dog, and opined that the veteran should continue to receive benefits to relieve the financial burden of continuing to care for the retired service animal. We make no changes based on these comments. A retired service dog would no longer be providing specific assistance to the veteran to mitigate the effects of a disability, and VA would therefore lack authority to continue to provide benefits to the veteran based on his or her medical need for the service dog. To the extent that keeping a retired service dog could be a financial strain on a veteran, all ADI-accredited and IGDF-accredited organizations offer the option for owners to place retired service dogs in the homes of volunteers.

Commenters also stated that the restriction of benefits to only one service dog at a time does not properly consider the extended training periods often required to obtain replacement service dogs, and will create an undue lapse in service dog benefits for those veterans whose current service dogs will soon be retired. Essentially, commenters asserted that the restriction creates a costly choice for a veteran to either apply benefits under the rule towards obtaining a replacement service dog, or continue to have benefits apply to a current service dog until it is officially retired. We agree that it is important that veterans do not experience a lapse in service dog benefits when obtaining a replacement service dog, and did not intend for the limitation in paragraph (d) to cause such a lapse. Therefore, we have added to paragraph (d)(3) the following note: “VA will provide payment for travel expenses related to obtaining a replacement service dog, even if the veteran is receiving other benefits under this section for the service dog that the veteran needs to replace.” To emphasize this clarification, we have added to the introductory text of paragraph (d) a sentence to explain that there is an exception in paragraph (d)(3) to the “one service dog at any given time” provision in the rule. This exception will only apply to travel benefits under paragraph (d)(3), because the organization that is training the replacement service dog would be responsible for other benefits under § 17.148(d) as needed by the replacement dog, until the veteran actually acquires the replacement dog from the organization. At the time the veteran acquires the replacement service dog, the veteran would in effect be retiring the former service dog, and would apply all service dog benefits under this section to the replacement dog.

Multiple commenters interpreted § 17.148(c)(2) as proposed to compel veterans who obtained non-ADI or non-IGDF certified service dogs before the effective date of the final rule to undergo the certification process with an ADI-accredited or IGDF-accredited organization prior to being eligible for benefits. This is not the intent or function of § 17.148(c)(2), in all cases. The rule clearly states that for veterans to receive benefits for service dogs obtained before the effective date of the rule, veterans may submit proof from a non-ADI or non-IGDF organization that the service dog completed a training program offered by that organization. See § 17.148(c)(2) (explaining that it is only when a veteran may not be able to attain such proof from a non-ADI or non-IGDF organization that “[a]lternatively, the veteran and dog [could obtain the certification from ADI or IGDF]”). We make no changes based on these comments.

Commenters asserted that for previously obtained dogs, the final rule must establish criteria in § 17.148(c)(2) to allow VA to determine whether the training courses certified by non-ADI or non-IGDF organizations were adequate to produce a well trained dog capable of assisting the veteran. We make no changes based on these comments. As stated in the proposed rule, we do not have the expertise, experience, or resources to develop independent criteria to assess the efficacy of service dog training programs. Additionally, we do not want those veterans with existing service dogs to be subjected to new requirements which could prevent their receipt of benefits. Therefore, we accept a certificate from a non-ADI or non-IGDF organization that existed before the effective date of the final rule as proof that the veteran's service dog has successfully completed an adequate training program, and that a veteran who otherwise meets the criteria in the rule may receive applicable benefits. Essentially, we are “grandfathering in” service dogs acquired before the effective date of the final rule by not requiring such dogs to have ADI or IGDF certification.

We further clarify for one commenter that the 1 year limitation in § 17.148(c)(2) to obtain a certificate that the veteran's service dog has successfully completed an adequate training program only applies if the certificate comes from the original non-ADI or non-IGDF organization. The 1 year limitation is not applicable for a veteran who must, because they cannot obtain a certificate from the original non-ADI or non-IGDF organization, undergo new training with an ADI-accredited or IGDF-accredited organization. See § 17.148(c)(2) (explaining that the 1 year limitation applies when a certificate is obtained from a non-ADI organization, or “[a]lternatively, the veteran and dog [could obtain the certification from ADI or IGDF]”). We make no changes to the rule text based on this comment because the language is clear. In response to commenters' concerns that ADI-accredited organizations will not certify service dogs that were not also initially trained there, VA will ensure through continued workings with ADI-accredited and IGDF-accredited organizations that there exists a mechanism to provide for such certification.

Lastly, one commenter advocated specifically that veterans who currently receive VA benefits for guide dogs should not be required to undergo the clinical determination process in § 17.148(b)(2) to now receive benefits under § 17.148(d). We make no changes based on this comment, as all veterans who would seek to receive benefits under § 17.148(d) must be subject to the same requirements, to ensure equitable administration of benefits. However, we note that for any veteran who is currently receiving guide dog benefits from VA, that veteran has already undergone the same type of clinical evaluation to determine efficacy of the dog, and would have a history of medical documentation supporting the use of the dog as indeed the most optimal device to manage the veteran's impairment. Effectively then, the veterans already receiving guide dog benefits from VA would not be subject to a new clinical evaluation process under § 17.148(b)(2), as this would be duplicative and unnecessary.

Section 17.148(d)(1) as proposed would provide an insurance policy to veterans with prescribed service dogs that guarantees coverage of all veterinary treatment considered medically necessary. Commenters urged that § 17.148(d)(1) as proposed should be revised for multiple reasons, with a majority of commenters stating that certain processes involved in payment for veterinary care should be clarified. Under § 17.148(d)(1)(i), VA “will be billed for any premiums, copayments, or deductibles associated with the policy” negotiated and offered by VA to veterans with prescribed service dogs. VA will only pay premiums and other costs as specified in § 17.148(d)(1)(i) for the commercially available policy that VA provides to the veteran, and not for any other policy that a veteran may obtain independently. The insurance company that holds the VA-provided policy will attain appropriate contractor status under Federal acquisition standards by registering with the Central Contractor Registration (CCR) to bill VA for costs specified in § 17.148(d)(1)(i), and will be subject to the same quality standards as other VA contractors.

Multiple commenters stated that the type of insurance coverage that VA would provide in § 17.148(d)(1) as proposed was inadequate, as all commercially available insurance policies for service dogs rely on a reimbursement model whereby veterans would pay the out of pocket cost for veterinary treatment, prior to filing a claim with and being reimbursed by the insurance company. Commenters stated that VA should, instead, establish a system where VA pays for treatment costs, such as providing veterans with prescribed service dogs some type of debit card to be used for veterinary care. The rule clearly states that VA, “and not the veteran,” will be billed directly for all costs for which VA is responsible under § 17.148(d)(1)(i). The rule also states that the policy will guarantee coverage for the types of treatment determined by a veterinarian to be medically necessary in § 17.148(d)(1)(ii), but, as proposed, paragraph (d)(1)(ii) did not bar billing a veteran for treatment costs. Our intent has always been to negotiate and procure a contract, to the extent that is commercially feasible, for an insurance policy that will not require the veteran to pay any out of pocket costs for covered veterinary care and treatment costs. VA has researched the commercial market and anticipates that VA will be able to contract for this requirement on VA's terms. In response to these comments and to further ensure that the regulation effectuates our intent, we have revised the language of § 17.148(d)(1)(ii) from the proposed rule so that it bars the billing of veterans for covered costs.

Based on the foregoing, we do not believe that there is a need to clarify any of the payment processes that are authorized by the regulation or to provide in regulation any specific procedures that will be established in accordance with the insurance policy for service dogs, so long as the basic requirements in § 17.148(d)(1) are met concerning not billing veterans. For instance, this rule will not specify that the insurance provider must be registered in the CCR, because it is a requirement under separate Federal Acquisition Regulations that all Federal contractors must be registered in CCR. See 48 CFR 4.1102.

Commenters also criticized that typical insurance policies that would be commercially available would not provide the scope of coverage required to adequately care for a service dog, as the medical needs of a service dog are higher due to the level of physical work a service dog completes on a regular basis. We clarify that the rule intends that VA will select a policy with broad coverage, to ensure that all services which are likely to be considered medically necessary by a veterinarian who meets the requirements of the insurer are in fact covered. VA will consult with ADI, IGDF, and the American Veterinary Medical Association to ensure that the most comprehensive policy, specific to the needs of service dogs, is chosen. Additionally, in response to commenter concerns that such a policy is not likely to be accepted widely across the nation, VA will consider geographic availability when choosing the policy.

Commenters argued that § 17.148(d)(3) as proposed was vague regarding reimbursement and eligibility for travel expenses, and should more specifically indicate the type of travel expenses covered, to include lodging and expenses related to training and retraining/recertification of service dogs. We make no changes to the rule based on these comments. The rule is clear in § 17.148(d)(3) that any veteran who is prescribed a service dog under § 17.148(b) will be eligible to receive payments for travel expenses. We reiterate from the proposed rule that § 17.148(d)(3) is intended to implement 38 U.S.C. 1714(d), “which allows VA to pay travel expenses `under the terms and conditions set forth in [38 U.S.C. 111]' for a veteran who is provided a service dog.” See 76 FR 35164. We believe that the language of section 1714(d) can be read to interpret obtaining a dog as “examination, treatment, or care” under section 111, but we would not make payment of section 1714(d) benefits contingent upon the separate eligibility criteria in section 111. This interpretation facilitates administration of section 1714(d) benefits by allowing VA to avoid additional expenses associated with establishing a new means of administering travel benefits outside of section 111 mechanisms.

We clarify that all travel costs associated with obtaining the service dog, to include all necessary initial and follow up training, are covered. Additionally, all types of travel costs which are considered reimbursable in 38 U.S.C. 111 and 38 CFR part 70 are considered reimbursable in this rule, to include approved lodging.

Commenters also indicated that VA should not require a prescription for a service dog before authorizing travel reimbursement related to procurement. We disagree and make no changes based on these comments. We will pay travel benefits only if it is determined by the veteran's clinical team that a service dog is appropriate under § 17.148; otherwise, we would be paying costs related to procuring an assistive device that may not ultimately be approved for the veteran.

Commenters asserted that the benefit to provide service dog hardware under § 17.148(d)(2) as proposed would be too restrictive. Commenters stated that veterans should be reimbursed for payments made to non-VA third party vendors to provide, repair, and replace such hardware, instead of the current requirement that the hardware be obtained from a Prosthetic and Sensory Aids Service at the veteran's local VA medical facility. We make no changes to the rule based on these comments. We believe that hardware should only be provided, repaired, and replaced through VA, to ensure that our clinical and safety standards are met. Merely reimbursing third-party providers does not permit VA to oversee hardware provision to ensure that it is “clinically determined to be required by the dog to perform the tasks necessary to assist the veteran with his or her impairment,” as required in § 17.148(d)(2). A clinical determination that covered hardware must be task-specific for the type of assistance a service dog provides is essential, or VA would be employing its professional clinical staff to provide and repair common items related to dog ownership generally, such as collars or leashes. The purpose of § 17.148(d)(2) is not to cover all equipment that a dog generally may require, but rather to ensure that the veteran is not burdened in finding, obtaining, or having to repair or replace certain special hardware that a trained service dog requires to provide specific assistance. We believe that allowing third party vendors would also increase administrative burden for veterans, as this would require the vendor to undergo a separate, extensive, and highly regulated Federal process to identify, select, and utilize third party vendors, which would cause an undue delay for veterans in obtaining necessary hardware.

Section 17.148(e) provides that for veterans to continue to receive benefits under the rule, the service dog must continue to function as a service dog, and that VA may terminate benefits if it learns from any source that the dog is medically unable to maintain that role, or a clinical determination is made that the veteran no longer requires the service dog. A few commenters objected to the “any source” criterion in § 17.148(e), stating that VA should restrict sources of information to a veteran's medical provider with regards to a veteran's continued clinical need for the service dog, and to the service dog's veterinarian with regards to the service dog's fitness to continue providing assistance. We make no changes to the rule based on these comments. We first clarify that VA will only consider the veteran's clinical team as a source of information to determine whether the veteran continues to require the service dog; this is contemplated in paragraph (e), which states that “VA makes a clinical determination that the veteran no longer requires the dog.” With regards to the medical fitness of a service dog, VA must be permitted to receive information from a broad number of sources in a continuous manner while benefits are administered, for the safety of veterans and to ensure that benefits are administered equitably. The “any source” criterion as well reduces administrative burden for veterans, in that VA would otherwise need to prescribe a specific and regular means of evaluating whether a service dog has maintained its ability to function as a service dog.

The broad “any source” criterion in paragraph (e) does not mean that VA will rely upon information from any source to terminate service dog benefits without considering the source of the information, and first allowing veterans to submit contrary information. The 30 days notice prior to termination of benefits provided for in paragraph (e) allows the veteran ample time to present contrary information, if VA should receive information that a service dog is not able to maintain its function as a service dog.

Commenters additionally stated that VA should exclude any insurance company with which VA contracts to cover veterinary care costs as a source of information concerning the medical fitness of a service dog. The commenters, however, did not provide a rationale for such an exclusion. To the extent that the commenters may be concerned that an insurance company would seek to have service dogs deemed medically unfit to avoid excess expenditures, we do not believe any incentive exists to do so. As we stated in the proposed rule, our understanding is that annual caps on expenditures are a common limitation in insurance policies that cover service dog care, and § 17.148(d)(1)(ii) specifically provides for such caps to be considered in the administration of veterinary care benefits. We reiterate that VA must be permitted to consider information from a broad number of sources, and do not see any inherent reasons that this specific limitation should be implemented. Therefore, we make no changes based on these comments.

In response to commenter concerns that the rule does not detail an appeals process for a veteran whose service dog benefits are to be terminated, or for a veteran who is not prescribed a service dog and cannot obtain service dog benefits, we do not believe VA must prescribe a new appellate mechanism in this rulemaking. All decisions under this rule, whether decisions to prescribe a service dog and initiate service dog benefits, or decisions to terminate such benefits, are clinical determinations and therefore subject to the clinical appeals procedures in VHA Directive 2006-057. It is VHA policy under this appeals process that patients and their representatives have access to a fair and impartial review of disputes regarding clinical determinations or the provision of clinical services that are not resolved at a VHA facility level. This clinical appeals process will be sufficient to resolve conflicts related to the provision or termination of service dog benefits, without prescribing a new appellate mechanism in this rulemaking.

One commenter requested that we further revise § 17.154 as proposed to delete the reference to “ex-members of the Armed Services” and replace it with a reference to “veterans.” We agree and have revised the language of § 17.154 from the proposed rule to read: “VA may furnish mechanical and/or electronic equipment considered necessary as aids to overcoming the handicap of blindness to blind veterans entitled to disability compensation for a service-connected disability.” The term “veteran” has always been used in 38 U.S.C. 1714, and the regulatory term should follow the statute. In other contexts, there may be a difference between an “ex-member of the Armed Forces” and a “veteran” because the definition of “veteran” in title 38 of the United States Code requires discharge or release from service “under conditions other than dishonorable,” 38 U.S.C. 101, whereas no such limitation would appear to apply to an “ex-member of the Armed Forces.” In the context of 38 CFR 17.154, however, the change does not alter the meaning of the regulation because § 17.154 refers to an “ex-member” who is entitled to service-connected disability compensation and who, therefore, must be a veteran (because such compensation is offered only to veterans discharged or released under conditions other than dishonorable).

The proposed rule estimated that 100 new service dogs would be provided to veterans each year. Multiple commenters objected to this statement, asserting that this number was far too low of an estimate, and further was not a reflection of veteran need for service dogs but rather a reporting of the number of service dogs that ADI could feasibly provide to veterans each year. The estimated burden of 100 is not an estimate of the number of veterans who may need a service dog. Rather, this number is an estimate of the number of new veterans each year that VA expects to present a certificate showing successful completion of training in order to establish a right to obtain benefits under § 17.148(d). This number was based on the number of veterans who sought to receive new guide dog benefits in fiscal year 2010 under § 17.154 (2010), which was 66, plus an additional number of veterans we estimated who would seek to receive new § 17.148 service dog benefits for hearing and mobility impairments. We estimated the number of veterans who would seek new § 17.148 benefits as a one third increase over confirmed guide dogs for which VA provided benefits the previous fiscal year, and based upon a projection for multiple fiscal years, we arrived at 100 new veterans each year seeking benefits under § 17.148. The estimated number of respondents is not, as theorized by commenters, based on the anticipated supply of service dogs that could be provided annually by ADI-accredited organizations.

Other commenters asserted that the number of estimated respondents at 100 was underreported in the proposed rule for financial reasons, or that VA could only afford to purchase 100 dogs per year for veterans. We reiterate that under the rule, VA is not actually purchasing the service dogs from any ADI-accredited or IGDF-accredited service dog organization, and we have no financial motive to underreport the estimated number of respondents.

Multiple commenters asserted that the proposed rule underreported the expected burden time on veterans to complete necessary administrative requirements to receive benefits under the rule. We clarify that the burden time of less than 5 minutes as stated in the proposed rule only contemplates the submission by the veteran of the certification from the service dog organization that indicates certain training requirements have been met, as required by § 17.148(c). The burden time does not reflect any of the time required for VA to conduct its clinical evaluation to determine whether a service dog would optimally benefit a veteran, nor the independent assessments that a service dog organization conducts thereafter to place a service dog with a veteran. Such time is not part of the veteran's burden to respond to our collection by submitting a certificate. We have intentionally kept paperwork to a minimum in obtaining this benefit because veterans in need of service dogs are generally seriously disabled and because veterans applying for these benefits will already be enrolled in the VA health care system.

One commenter alleged that the rule should be considered significant under Executive Order 12866, because by limiting the source of service animals to ADI-accredited or IGDF-accredited organizations, VA effectively creates a sole-source contract with those agencies that will have a major impact on the service animal industry. We interpret this commenter's statement to mean that because they believe VA will be purchasing guide and service dogs, that such purchasing will adversely affect in a material way the nature of competition with non-ADI and non-IGDF organizations. We reiterate that VA will not be contracting with any ADI or IGDF organization to actually purchase guide or service dogs, and make no changes to the rule based on this comment.

Multiple commenters argued that the rule would have a significant economic impact on a substantial number of small service dog organizations that are either ineligible for membership in the identified accreditation groups because they do not qualify for tax-exempt status (in the case of ADI accreditation), or because they cannot afford the costs and effort that accreditation entails. We assume that commenters believe that VA will be purchasing the service dogs, and therefore that these nonaccredited organizations would be economically disadvantaged unless they comply with the rule's accreditation requirements. As VA will not be actually purchasing service dogs, we do not believe any non-ADI or non-IGDF organization, as small entities, would experience a significant economic impact. This rule does not prevent individuals from acquiring service dogs from any organization, but only establishes criteria that must be met if VA is then going to provide certain benefits related to those service dogs.

We acknowledge that we require all service dogs obtained after the effective date of the rule to be ADI or IGDF certified, and as such veterans may opt to seek the assistance of ADI or IGDF organizations over other nonaccredited organizations in obtaining such dogs. However, there is no indication that nonaccredited organizations rely on veterans as an essential part of their business. In fact, multiple commenters who themselves were nonaccredited organizations, and who objected to the ADI accreditation standard in the rule, reported providing service dogs to veterans free of charge. There is no evidence to suggest that a substantial number of nonaccredited service dog organizations will be detrimentally affected by a financial incentive for veterans to seek to obtain service dogs from accredited service dog organizations. Even if a substantial number of nonaccredited service dog organizations significantly rely on veterans to buy their service dogs, there is also no evidence to suggest that the cost of obtaining ADI or IGDF certification is beyond the reach of a substantial number of non-accredited organizations.

Commenters questioned the reasoning in the proposed rule for our belief that most service dog providers that provide dogs to veterans are already accredited by ADI or IGDF. See 76 FR 35166. Based on multiple commenters who themselves were non-ADI service dog organizations and who did provide service dogs to veterans, we retract the rationale that “[w]e believe that most service-dog providers that provide dogs to veterans are already accredited in accordance with the final rule” and also retract the accompanying statement that “[t]he vast majority of accredited programs do not provide dogs to veterans.” However, in view of our conclusion that gaining accreditation should not result in a significant financial burden as explained in the proposed rule notice, 76 FR 35166, this does not change our analysis that the rule does not have a significant economic impact on a substantial number of small entities.

Multiple commenters stated that VA should abandon this rulemaking, and that it should begin again with a new proposed rule. One commenter further stated that VA should initiate a public hearing, or should initiate formal rulemaking procedures related to the administration of service dog benefits. We decline to pursue either of these actions, as all affected parties were put on proper notice of the intended provisions in the proposed rule, and there were no significant reasons that commenters put forward to require a new regulatory action that were not addressed in this final rule. We believe we have addressed all significant comments and made changes where appropriate, or have reasonably supported why changes were not made.

For all the reasons noted above, VA is adopting the proposed rule as final with changes as noted to § 17.148(b)(2), (d), (d)(1)(ii), and (d)(3) and § 17.154.

Title 38 of the Code of Federal Regulations, as revised by this rulemaking, represents VA's implementation of its legal authority on this subject. Other than future amendments to this regulation or governing statutes, no contrary guidance or procedures are authorized. All existing or subsequent VA guidance must be read to conform with this rulemaking if possible or, if not possible, such guidance is superseded by this rulemaking.

This final rule at § 17.148 contains new collections of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521). On June 16, 2011, in a proposed rule published in the Federal Register , we requested public comments on the new collections of information. We received multiple comments in response to this notice. A majority of the commenters alleged the collection was an illegal restriction of the access rights of individuals with disabilities. The response, as also stated in the preamble to this final rule, is that a certificate showing adequate service dog training is not necessary to gain access to VA facilities, but rather is only necessary to receive benefits under this rule. Some commenters stated that the number of respondents for this collection was underreported, because more than 100 veterans need service dogs each year. The response, as also stated in the preamble to this final rule, is that the estimated burden of 100 is not an estimate of the number of veterans who may need a service dog, but rather is an estimate of the number of new veterans each year that VA expects to present a certificate showing successful completion of training to obtain benefits. Finally, some commenters asserted that the expected burden time for this collection was underreported. The response, as also stated in the preamble to this final rule, is that the burden time of less than 5 minutes only contemplates the submission of the required certificate, and does not reflect any of the time required for VA to conduct its clinical evaluation to determine if a service dog would optimally benefit a veteran, nor the independent assessments that a service dog organization conducts thereafter to place the service dog with the veteran. Therefore, we make no changes to this collection.

The Office of Management and Budget (OMB) has approved the additional collections in part 17 under OMB Control Number 2900-0785. We are adding a parenthetical statement after the authority citations to the section in part 17 for which new collections have been approved so that the control number is displayed for each new collection.

The Secretary hereby certifies that this final rule will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-612. We do not believe that gaining accreditation should result in a significant financial burden, as the standards for approval by ADI and IGDF are reasonable thresholds that are generally expected and accepted within the industry. The approximate cost to be an accredited organization by IGDF is a one-time fee of $795, with an annual fee of $318 and a per unit fee of $39.45. The approximate cost to be an accredited organization by ADI is $1000 every 5 years with annual fees of approximately $50. Therefore, pursuant to 5 U.S.C. 605(b), this final rule is exempt from the initial and final regulatory flexibility analysis requirements of sections 603 and 604.

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, and other advantages; distributive impacts; and equity). Executive Order 13563 (Improving Regulation and Regulatory Review) emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Executive Order 12866 (Regulatory Planning and Review) defines a “significant regulatory action,” which requires review by the OMB, as “any regulatory action that is likely to result in a rule that may: (1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this Executive Order.”

The economic, interagency, budgetary, legal, and policy implications of this final rule have been examined and it has been determined to not be a significant regulatory action under Executive Order 12866.

The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before issuing any rule that may result in an expenditure by state, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any given year. This final rule will have no such effect on state, local, and tribal governments, or on the private sector.

The Catalog of Federal Domestic Assistance numbers and titles are 64.009 Veterans Medical Care Benefits, 64.010 Veterans Nursing Home Care, and 64.011 Veterans Dental Care.

The Secretary of Veterans Affairs, or designee, approved this document and authorized the undersigned to sign and submit the document to the Office of the Federal Register for publication electronically as an official document of the Department of Veterans Affairs. John R. Gingrich, Chief of Staff, Department of Veterans Affairs, approved this document on July 30, 2012, for publication.

For the reasons stated in the preamble, VA amends 38 CFR part 17 as follows:

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

On March 21, 2012 (77 FR 16509), EPA proposed to approve the following rules as part of the five districts' title V operating permit programs.

We proposed to approve these rules because we determined that they complied with the relevant CAA requirements. Our proposed action contains more information on the rules and our evaluation.

EPA's proposed action provided a 30-day public comment period. During this period, we did not receive any comments on our proposal.

We did not receive any comments that change our assessment that the submitted rules are consistent with Title V of the Clean Air Act and 40 CFR part 70. Therefore EPA is approving these revisions to the five districts' title V operating permits programs.

Today's action merely approves State law as meeting Federal requirements and does not impose additional requirements beyond those imposed by State law. For that reason, this action:

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

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

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

• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);

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

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

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

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

• Does not provide EPA with the discretionary authority to address disproportionate human health or environmental effects with practical, appropriate, and legally permissible methods under Executive Order 12898 (59 FR 7629, February 16, 1994).In addition, this action does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), because the action is not approved to apply in Indian country located in the State, and EPA notes that it will not impose substantial direct costs on tribal governments or preempt tribal law.

Part 70, chapter I, title 40 of the Code of Federal Regulations is amended as follows:

This action could affect you if you produce or import new heavy-duty diesel engines which are intended for use in highway vehicles such as trucks and buses or heavy-duty highway vehicles. The table below gives some examples of entities that may be affected by these regulations. However, because these are only examples, you should carefully examine the regulations in 40 CFR part 86. If you have questions, call the person listed in the FOR FURTHER INFORMATION CONTACT section above.

Section 206(g) of the Clean Air Act (the Act), 42 U.S.C. 7525(g), directs EPA to promulgate regulations permitting manufacturers of heavy-duty engines or heavy-duty vehicles to receive a certificate of conformity for engines or vehicles that exceed an EPA emissions standard if the manufacturer pays a nonconformance penalty (NCP). This action adopts NCPs for MY2012 and later heavy heavy-duty diesel engines (HHDDE) with respect to the NO X emissions standards applicable to these engines. Engine manufacturers will be able to receive a certificate of conformity based on either demonstrating compliance with the 0.20 g/bhp-hr NO X emission standard, or paying NCPs under the penalty formula established in this rule. This provides an alternative compliance option in situations where, as here, EPA has determined that the criteria for establishing NCPs have been met.

EPA proposed that the criteria for setting NCPs had been met for the 0.20 g/bhp-hr NO X emission standard for HHDDEs, and we are setting NCPs for these diesel engines in this final action. 1 The final NCPs for HHDDE are approximately twice the values proposed. This difference is primarily because of new information received during the public comment period related to fuel and diesel exhaust fluid (DEF) prices. The derivation of the final penalties is described in a support document titled “Nonconformance Penalties for 2012 and later Highway Heavy-Duty Diesel Engines: Technical Support Document” (Technical Support Document), which is available in the public docket for this rulemaking. Under the final penalty regulations, nonconforming manufacturer with engines at the upper NO X limit of 0.50 g/bhp-hr would pay a penalty of $3,775 for each model year 2012 engine it produces. Manufacturers would pay a lesser penalty if the NO X emissions of the engine are lower. For example, the penalty for a 2012 engine with NO X emissions at 0.30 g/bhp-hr would be $1,259.

NCPs have a small environmental impact. We expect relatively few engine families to be certified under these provisions. Any impacts should be short-term in nature because the penalties are structured to increase over time to discourage use in later model years and because the penalty figures are high enough, such that the increase in the maximum penalty in later model years will likely limit the practical availability of NCPs in future years. In addition, Navistar, the only company that has requested certificates based on the use of NCPs, has publicly announced it will introduce new technology engines in 2013 which will meet the 0.20 g/hp-hr NO X standard without the need for NCPs.

NCPs generally also have minimal adverse economic impacts. Their use is optional, and manufacturers have historically chosen to use NCPs only when they are otherwise unable to comply with emissions standards. Manufacturers that choose to make use of the NCPs will incur those costs, which are based on the cost of complying with the emission standards.

Section 206(g) of the Clean Air Act (the Act), 42 U.S.C. 7525(g), directs EPA to promulgate regulations permitting manufacturers of heavy-duty engines (HDEs) or heavy-duty vehicles (HDVs) to receive a certificate of conformity for HDEs or HDVs that exceed a Federal emissions standard if the manufacturer pays a nonconformance penalty (NCP). Congress adopted section 206(g) in the Clean Air Act Amendments of 1977 as a response to a concern about manufacturers unable to comply with technology-forcing emissions standards for heavy-duty engines in the lead-time provided for the emissions standards. NCPs were intended to remedy this concern, while ensuring that conforming manufacturers would not suffer a competitive disadvantage compared to nonconforming manufacturers.

The first NCP rule, sometimes referred to as the “generic” NCP rule, established three basic criteria for determining the emission standards for which nonconformance penalties would be established in any given model year. 50 FR 35374 (August 30, 1985). The first criterion is that the emission standard in question is a new emission standard or that the standard is an existing standard and becomes more difficult to meet. This can occur in two ways, either by the emission standard itself becoming more stringent, or due to its interaction with another emission standard that has become more stringent. Second, EPA must find that substantial work is required in order to meet the emission standard. Third, EPA must find that it is likely that a manufacturer will be unable to comply by the end of the lead time provided for technological reasons (referred to in earlier rules as a “technological laggard”). The first NCP rule also established the formula for determining the amount of an NCP. In subsequent NCP rules, EPA made determinations about which emissions standards met the criteria for establishing NCPs, and specified the values for various parameters that are used in the formula to calculate the dollar value of a manufacturer's NCP. The regulations addressing these provisions are in Subpart L of 40 CFR part 86.

EPA proposed that these criteria had been met for the 0.20 g/bhp-hr NO X emission standard for heavy heavy-duty diesel engines. 77 FR 4736 (January 31, 2012). 2 Although we did not identify the technological laggard in the NPRM, we have since identified Navistar as the manufacturer that needs NCPs. We proposed to establish NCPs because Navistar was unable to achieve the 0.20 g/bhp-hr NO X standard and did not have sufficient emission credits to cover the 2012 model year. At the time of the proposal, Navistar was attempting to meet the NO X emission standard with a technology that is different than the approach used by other engine manufacturers. However, Navistar recently announced that it would switch its approach to use the same general technology as the other engine manufacturers—a catalytic approach called selective catalytic reduction (SCR). As described in Section IV. C., we have determined that Navistar will be unable to apply this technology to all of its engine families sold in the U.S. to achieve 0.20 g/hp-hr NO X for at least several months, and will need NCPs until it completes its transition to the new technology.

We proposed to base the calculation of the NCPs on the existing regulatory framework, revising only the upper limit and the cost parameters. We also proposed to set the upper limit at 0.50 g/bhp-hr, which means that no manufacturer paying NCPs would be allowed to certify engines with NO X emissions above this limit. The proposed penalty for HHDDEs at that limit was $1,919 for model year 2012. Consistent with the provisions of the existing regulations, this value reflected our best estimate of the near-worst case cost difference between an engine with NO X emissions at the upper limit and a compliant engine. The regulations contain provisions to increase the penalties each year for later model years.

The NCPs being finalized for HHDDE are approximately twice the values proposed. This difference is primarily because of new information received during the public comment period related to fuel and diesel exhaust fluid (DEF) prices. The derivation of the final penalties is described in a support document titled “Nonconformance Penalties for 2012 and later Highway Heavy-Duty Diesel Engines: Technical Support Document” (Technical Support Document), which is available in the public docket for this rulemaking.

It is important to note that the NCP parameters being finalized were developed using the same basic methodology described in the NPRM. As in all NCP rules, the final NCPs are based on the estimated difference in compliance costs for engines at the upper limit and engines at the standard. Thus, engines with emissions at the upper limit can be considered to be baseline engines for the analysis. These baseline engines also represent the engines against which complying engines could compete in the marketplace.

As shown in Figure 1, a nonconforming manufacturer with engines at the upper NO X limit of 0.50 g/bhp-hr would pay a penalty of $3,775 for each model year 2012 engine it produces. For later model years, this maximum penalty will increase by several hundred dollars per year as specified in 40 CFR 86.1113-87. While the exact rate of increase will depend on the number of engines for which NCPs are used, the penalty for engines at the upper limit could be more than $5,000 by 2015. Manufacturers would pay a lesser penalty if the NO X emissions of the nonconforming engine are lower. For example, the penalty for a 2012 engine with NO X emissions at 0.30 g/bhp-hr would be $1,259.

We received numerous comments on our proposal to establish NCPs. Our detailed analysis of these comments is contained in the Response to Comments document for this rulemaking. The major comments are summarized briefly below.

• Several commenters questioned whether the regulatory criteria for establishing NCPs had been met. These comments are addressed in Section IV.

• Several commenters addressed the level of the penalty, mostly claiming that the penalty needed to be higher to meet the statutory requirement to remove the competitive disadvantage for complying manufacturers. These comments are addressed in Section V.

• The few comments we received on the upper limit supported setting it at 0.50 g/bhp-hr. These comments are addressed in Section V. A.

• Comments on the methodology used to calculate costs addressed both our proposed methodology and alternative methodologies. Comments on our proposed methodology are discussed in Section V. B. and comments on alternative methodologies are discussed in Section V. D.

NCPs have a small environmental impact. We expect relatively few engine families to be certified under these provisions. Any impacts should be short-term in nature because the increase in the maximum penalty in later model years will likely limit the practical availability of NCPs in future years. The structure of the penalties, by increasing over time, discourages use in later model years; and because the penalty figures are high enough, such that use in later model years is unlikely to be a viable option for any manufacturer.

NCPs generally also have minimal adverse economic impacts. Their use is optional, and manufacturers have historically chosen to use NCPs only when they are otherwise unable to comply with emissions standards. Manufacturers that choose to make use of the NCPs will incur those costs, which are based on the cost of complying with the emission standards.

Section 553(d) of the Administrative Procedure Act (APA), 5 U.S.C. chapter 5, generally provides that rules may not take effect earlier than 30 days after they are published in the Federal Register . APA section 553(d) excepts from this provision any action that grants or recognizes an exemption or relieves a restriction. Since today's action can be considered to relieve a restriction that would otherwise prevent a manufacturer from certifying, EPA is making this action effective immediately upon publication. This Final Rule does not set new requirements, but rather creates an optional path by which a manufacturer unable to meet the NO X standard may obtain a certificate of conformity that they could not otherwise obtain without this Final Rule. Thus, the NCPs promulgated in this Final Rule will apply for all engines introduced into commerce on or after September 5, 2012.

Section 206(g) of the Act, 42 U.S.C. 7525(g), directs EPA to promulgate regulations permitting manufacturers of heavy-duty engines (HDEs) or heavy-duty vehicles (HDVs) to receive a certificate of conformity for HDEs or HDVs that exceed a Federal emissions standard, but do not exceed an upper limit associated with that standard, if the manufacturer pays a nonconformance penalty (NCP) . Congress adopted section 206(g) in the Clean Air Act Amendments of 1977 as a response to a concern with requiring technology-forcing emissions standards for heavy-duty engines. The concern was if strict technology-forcing standards were promulgated, then some manufacturers might be unable to comply in the lead-time provided for the emissions standards and would be forced out of the marketplace. NCPs were intended to remedy this concern. The nonconforming manufacturers would have a temporary alternative that would permit them to receive a certificate of conformity by payment of a penalty, allowing the engines or vehicles to be introduced into commerce and sold. At the same time, conforming manufacturers would not suffer compared to nonconforming manufacturers, because the NCPs would remove the competitive disadvantage to them. NCPs would be based, in part, on money saved by the nonconforming manufacturer. Providing this relief facilitated EPA's authority to set technology forcing standards. Without this relief, EPA may have needed to be more cautious in setting standards, given the possibility that a lagging manufacturer might not be able to meet the standards in the lead-time provided.

Under section 206(g)(1), NCPs may be offered for HDVs or HDEs. The penalty may vary by pollutant and by class or category of vehicle or engine. No NCP-based certificate may be issued if the engine or vehicle exceeds the degree of reduction determined by the Administrator to be practicable. This emission level is identified in the regulations as the upper limit. Section 206(g)(3) requires that NCPs:

• Account for the degree of emission nonconformity;

• Increase periodically to provide incentive for nonconforming manufacturers to achieve the emission standards; and

• Remove the competitive disadvantage to conforming manufacturers.

Section 206(g) authorizes EPA to require testing of production vehicles or engines in order to determine the emission level upon which the penalty is based. If the emission level of a vehicle or engine exceeds an upper limit of nonconformity established by EPA through regulation, the vehicle or engine would not qualify for an NCP under section 206(g) and no certificate of conformity could be issued to the manufacturer. If the emission level is below the upper limit but above the standard, that emission level becomes the “compliance level,” which is also the benchmark for warranty and recall liability. The manufacturer who elects to pay the NCP is liable for vehicles or engines that exceed the compliance level in use. The manufacturer does not have in-use warranty or recall liability for emissions levels above the standard but below the compliance level.

Since the promulgation of the first NCP rule in 1985, subsequent NCP rules generally have been described as continuing “phases” of the initial NCP rule. The first NCP rule (Phase I), sometimes referred to as the “generic” NCP rule, established three basic criteria for determining the eligibility of emission standards for nonconformance penalties in any given model year. 50 FR 35374 (August 30, 1985). When adopted in 1985, EPA intended to use the criteria of 40 CFR 86.1103-87 in determining whether to establish NCPs. They were included in the regulations to clarify that EPA's obligation under the generic rule to establish NCPs only applied where these criteria were met. As described in Section V. of this Final Rule, we have determined that these criteria have been met. 3

The first criterion is that the emission standard in question is a new emission standard or that the standard is an existing standard and becomes more difficult to meet. This can occur in two ways, either by the emission standard itself becoming more stringent, or due to its interaction with another emission standard that has become more stringent. Under the second criterion, EPA must find that substantial work is required in order to meet the emission standard. As described in § 86.1103-87(b), EPA considers “substantial work” to mean the application of technology not previously used in that vehicle or engine class/subclass, or a significant modification of existing technology, in order to bring that vehicle/engine into compliance. EPA does not consider minor modifications or calibration changes to be classified as substantial work. EPA considers that substantial work is required if such work is needed to bring emissions from the level of the previous standard to the level of the new or revised standard, even if at the time the NCP rulemaking is taking place, some manufacturers have already completed that work. Third, EPA must find that a manufacturer is likely to be noncomplying for technological reasons (referred to in earlier rules as a “technological laggard”). Prior NCP rules have considered such a technological laggard to be a manufacturer who cannot meet a particular emission standard due to technological (not economic) difficulties and who, in the absence of NCPs, might be forced from the marketplace.

The criteria and methodologies established in the 1985 NCP rule have since been used to determine eligibility and to establish NCPs for a number of heavy-duty emission standards. Phases II, III, IV, V, and VI published in the period from 1985 to 2002, established NCPs that, in combination, cover the full range of heavy-duty; from heavy light-duty trucks (6,000-8,500 pounds gross vehicle weight) to the largest diesel truck and urban bus engines. NCPs have been established for hydrocarbons (HC), carbon monoxide (CO), nitrogen oxides (NO X ), and particulate matter (PM). The most recent NCP rule (67 FR 51464, August 8, 2002) established NCPs for the 2004 and later model year NO X standard for heavy-duty diesel engines (HDDEs). The NCP rulemaking phases are summarized in greater detail in the Technical Support Document for this rulemaking.

The 0.20 g/bhp-hr NO X standard that applies for current and future heavy-duty engines was adopted January 18, 2001 (66 FR 5001), and first applied in the 2007 model year. However, because of phase-in provisions adopted in that rule and use of emission credits generated by manufacturers for early compliance, manufacturers have been able to continue to produce engines with NO X emissions greater than 0.20 g/bhp-hr. Most engines during the phase-in had NO X emissions near 1.2 g/bhp-hr. The phase-in provisions ended after model year 2009 so that the 0.20 g/bhp-hr NO X standard was fully phased-in for model year 2010. Equally important, the cap applicable to Family Emission Limits (FELs)  4 for credit-using engine families was lowered to 0.50 g/bhp-hr beginning in model year 2010. Because of these changes that occurred in model year 2010, the 0.20 g/bhp-hr NO X emission standard is often referred to as the 2010 NO X emission standard, even though it applied to engines as early as model year 2007.

On January 31, 2012, EPA simultaneously published an Interim Final Rule establishing interim NCPs for heavy heavy-duty engines and a parallel Notice of Proposed Rulemaking (NPRM). The NCPs in this Final Rule will supersede the NCPs that were promulgated in the Interim Final Rule as of September 5, 2012.

Several engine manufacturers petitioned EPA to rescind that Interim Final Rule. These petitions and EPA's responses denying them have been placed into the Docket for this rule.

These engine manufacturers also filed judicial challenges to the Interim Final Rule. Mack Trucks, et al. v. EPA, No. 12-1077 (DC Cir). They challenged EPA's decision to establish NCPs in an interim final rule without going through notice and comment. They also challenged our finding that the regulatory criteria had been met to promulgate NCPs for the 2010 NO X standard, as well as our conclusion that the interim NCP levels removed the competitive disadvantage for complying manufacturers. On June 12, 2012, the Court of Appeals for the DC Circuit issued an opinion holding that EPA violated the procedural requirements for rulemaking because EPA did not have good cause to issue the rule without providing notice and opportunity for comment. Id., 2012 U.S. App. LEXIS 11851 (June 12, 2012). The Court did not rule on the merits of EPA's findings about the regulatory criteria or the level of the NCP. Nevertheless, it stated in dicta its concerns about these issues, which are discussed below in Sections IV. (NCP Eligibility) and V. (Penalty Rates).

Section II. C. of this Final Rule notes that EPA regulations provide for three criteria to be met in order to determine that an NCP should be established in any given model year. As is described below, these three criteria address different aspects of the appropriateness of NCPs, and it is important to consider each criterion separately in its own proper context. In general, the first two criteria address whether the standard in question created the possibility that a technological laggards could develop, while the third criterion addresses the likelihood that there will be a technological laggard. For the 2010 NO X standard, we find that these criteria have been met for heavy heavy-duty diesel engines, and it is therefore appropriate to establish NCPs for this standard for the current model year and later.

The first criterion requires that the emission standard in question must be more stringent than the previous standard. This is the case with the 2010 NO X standard. The previous emission standard for this category is a combined NMHC + NO X standard of 2.4 g/bhp-hr, or optionally a 2.5 g/bhp-hr NMHC + NO X with a limit of 0.5 g/bhp-hr NMHC. 5 The 2010 ( i.e., current) standards are 0.20 g/bhp-hr for NO X and 0.14 g/bhp-hr for NMHC.

Some commenters argued that this standard should no longer be considered a new standard because it went into full effect two model years ago. We did not promulgate NCPs for the 2010 and 2011 model years because we had no basis for concluding it was likely that any manufacturer would qualify as a technological laggard, as all manufacturers met the standard either directly or through application of credits. However, the fact that we did not promulgate NCPs for the first year a standard went into effect does not preclude us from promulgating NCPs for such standard at a later time, when it is determined the regulatory criteria have been met. While it is not a path we have generally taken, nothing in the statute or in our regulations, which refer to new or revised standards, precludes EPA from promulgating NCPs after the first year a new or revised standard goes into effect. See 50 FR 35374, 35376 (August 30, 1985), and 50 FR 9204, 9206 (March 6, 1985).

The first criterion, as with the other two criteria, reflects the key concepts underlying the NCP program—NCPs are designed to address situations where technological laggards are likely to develop in response to the adoption of technology forcing emission standards for this sector under CAA section 202(a)(3)(A). One purpose of section 206(g) is to avoid, at least temporarily, the problem of technological laggards being driven out of the market because of their inability to meet technology forcing emission standards in the lead-time provided. 50 FR 9204, 9205 (March 6, 1985), 50 FR 35375 (August 30, 1985) (“The possibility of a technological laggard is a key concept in the NCP availability scheme.”). The first criterion is directly linked to this—“This condition creates the possibility for a technological laggard to exist.” 50 FR 9204, 9206 (March 6,1985).

Given this purpose, the appropriate way to consider whether the new or revised standard is more stringent is to consider it from the point of adoption of the standard, by comparing it to the prior standard. It is at the point that EPA has adopted a standard that may force technology changes, and it is the difference in stringency between the old and the new or revised standard, that raises the possibility of a technological laggard. The passage of time after adoption of the standard does not change the analysis of whether the new or revised standard is or is not more stringent than the previous standard. 50 FR 9204, 9206 (March 6, 1985). Even if EPA considers NCPs some model years after adoption of the standard the comparison under the first criterion is still between the new or revised standard and the prior standard, and their relative stringency.

The first criterion establishes one circumstance that must occur to establish NCPs under the generic rule: a new or revised standard must be more stringent than the previous standard for the pollutant, or an existing standard must become more difficult to achieve. The passage of time by itself, from MY2010 to MY2012, does not change the fact that the MY2010 NO X standard was and continues to be more stringent than the standard applicable to model years before 2010, and this increase in stringency created the possibility for a technological laggard to exist. The first criterion is thus more in the nature of a static or historic fact, a threshold determination typically made based on the facts in existence at the time of adoption of the new or revised standard, a comparison of the stringency of the previous and the new or revised standard.

Based on this, EPA rejects commenters' arguments. Even though the determination on the first criterion is not being made until some model years after adoption of the 2010 standard, the 2010 NO X standard has always been a new or revised standard compared to the prior standard, and the 2010 standard was and continues to be more stringent than the preexisting NO X standard. The passage of time does not change the fact that adoption of a more stringent standard for MY2010 created the possibility for a technological laggard to exist. The 2010 standard is certainly a new or revised standard and certainly is more stringent than the previous standard for NO X . The fact that we are now in MY2012 does not change this conclusion.

Under the second criterion, substantial work must be required to meet the standard. When we first established the 2010 NO X standard, we considered it to be a technology-forcing standard and subsequent history has shown that substantial work has been required to meet this emission standard. More importantly, all heavy heavy-duty diesel engines currently certified to the 0.20 g/bhp-hr standard without using credits are using new aftertreatment systems (that were generally not used in 2009) to meet this standard. 6 Indeed, even Navistar substantially redesigned its emission control system in its attempt to achieve lower emissions without NO X aftertreatment. This work clearly meets the definition of substantial work, as it involves the use of either: New catalytic controls and related technology not previously used in these engines, or the significant modification of existing EGR and related technology. None of the complying manufacturers dispute that they have done substantial work to achieve the 0.20 g/bhp-hr NO X standard. In fact, they emphasized in their comments how much work they have done to meet the standard.

The second criterion builds on the first criterion, as it involves an evaluation of the nature and degree of the technological challenge of the new or revised standard. If the new or revised standard increases the stringency to such a degree that it cannot be met by simple modifications to existing technology ( i.e., that substantial work will be required to comply), then this criterion is satisfied. Like the first criterion, the second criterion reflects the key concern with the issue of a technological laggard—“When manufacturers must perform substantial work, it is possible that at least one will be unsuccessful and will become a laggard.” 50 FR 9204, 9206 (March 6,1985). Like the first criterion, it is a determination of circumstances that establish a threshold or baseline for setting NCPs under the generic rule. It identifies circumstances that mean there is a possibility that a laggard may exist.

Given this purpose, the appropriate way to consider the second criterion is to evaluate all of the work that must be accomplished to move from compliance with the previous standard to compliance with the new or revised standard. The possibility of a technological laggard is created by this entire amount of work that must be done, not any one subset or increment of the work. Thus, if EPA evaluates this criterion at some point after adoption of the new or revised standard, EPA still considers all of the work to go from the previous to the new or revised standard, and not just the work remaining as of the date the determinations are made about compliance with the criteria under the generic NCP rule.

While commenters did not dispute that substantial work was required to meet the 2010 standard, some commenters claim it is no longer true that substantial work is required because some manufacturers have met the standard. Some commented that these determinations must be based on the factual circumstances at the time of the NCP rulemaking and not the time the revised standard was issued. We disagree with these claims for two reasons.

First, this criterion is to be evaluated based on the total amount of work needed to go from meeting the previous standard to meeting the current standard, regardless of the timing of such changes. Indeed, the commenters' approach would seem to be directly contrary to the purpose of the statute. The NCP program is designed to allow technological laggards to be able to certify engines even if other manufacturers have met the standard. There is a clear expectation that some manufacturers might be technological laggards. 50 FR 9204, 9206 (March 6,1985) (“When manufacturers must perform substantial work, it is possible that at least one will be unsuccessful and will become a laggard.”) Where there is a technological laggard, it is the typical situation that other manufacturers have already complied or will comply on time. The fact that some manufacturers have surpassed the technological hurdles and achieved compliance with the new or revised standard does not in any way show that there is or cannot be a technological laggard who at least temporarily has not surpassed the technological hurdles. Refusing to establish NCPs solely because some manufacturers comply at the time NCPs are established would frustrate Congress' purpose by preventing establishment of NCPs when there is a technological laggard who temporarily can not comply with the standards and cannot certify engines without the NCP program.

Thus, EPA bases the determination of substantial work on the total amount of work to go from compliance with the prior standard to compliance with the new standard, even if at the time of the NCP rulemaking some manufacturers have already completed some or all of such work. Under this criterion, the important question is whether manufacturers who were using technology that met the previous standard would need to conduct significant work to develop new technology or to build upon/change the old technology to meet the revised standard. Questions about work that still needs to be done at the point EPA begins an NCP rulemaking are relevant only in the context of the third criterion, whether there is likely to be a technological laggard. To avoid this confusion for future NCPs, we are clarifying in the regulatory text that this criterion is to be evaluated based on the need for new or modified technology or design to meet the new or revised standard regardless of the timing for such changes.

Second, even under the current circumstances, we find that Navistar has needed to do substantial work to meet the standard. This is the case whether one considers the total amount of work to go from the previous standard to the MY2010 NO X standard, or whether one only considers the amount of work to go from the current status of its technology to compliance with the MY2010 standard. See the discussion below concerning the work conducted by Navistar to date and expected in the future.

We informed engine manufacturers in 2010 that we believed the first two criteria had been met. 7 We note that the commenters now questioning whether these criteria have been met did not dispute our earlier view that we could have set NCPs at that time had we determined that a technological laggard was likely to develop. At that point, EPA was clear that the reason we were not establishing NCPs at that time was because we had not determined that a technological laggard was likely to develop.

Under the third criterion, EPA considers all of the circumstances to determine whether there is likely to be a technological laggard. In the 1985 generic rule EPA indicated that:

One of the concepts underlying a technological laggard is that a manufacturer faced with a new or revised standard, especially one that is technology forcing, will direct substantial resources and effort to develop and employ technology aimed at achieving compliance with the more stringent standard. Whether the manufacturer develops and employs the same or different technology than other manufacturers, there is a possibility that such a manufacturer will be temporarily unable to achieve the emissions standard in the lead time provided based on technological reasons. Instead of refusing to certify the manufacturer's engines, and driving them out of the market, the NCP program is specifically designed to provide a temporary path for certification until the remaining technological issues are resolved and the manufacturer achieves the standard. 50 FR 9204 (March 6,1985). The third criterion is designed to implement this concept, based on EPA's evaluation of all of the circumstances.

In this case, all of the circumstances indicate that there is more than a likelihood that there is an engine manufacturer that has not yet achieved the MY2010 NO X standard for technological reasons—we have determined that Navistar is in fact such a manufacturer. Unlike the rest of the industry, Navistar attempted to comply without SCR to reduce NO X emissions. 8 However, to date Navistar has not succeeded in reaching the 0.20 g/bhp-hr emission level. At this time, the only engine families Navistar has certified since the MY2010 standard took effect have used advanced EGR technology, and have been certified based on either banked emission credits or on Navistar's payment of the interim NCPs. Navistar does not have sufficient credits to cover its entire model year 2012 production without NCPs. Navistar has acknowledged in its public comments on this rule that it is effectively a technological laggard. On July 6, 2012, Navistar announced that it has begun the process of redesigning its trucks to use SCR engines in addition to their in-cylinder emission control technology. Navistar expects the SCR engines to be available beginning in early 2013. We have determined that Navistar will need access to NCPs to lawfully produce engines during this multi-month transition process.

Several commenters noted that Navistar cannot be a technological laggard as it has applied for certification of an engine family using this technology, seeking a certificate for a 0.20 g/bhp-hr engine that complies without the use of credits. However, Navistar has withdrawn that application based on EPA concerns that the engine design (with its current hardware) does not meet the 0.20 g/bhp-hr NO X standard.

While Navistar has announced that it will switch to SCR-based emission controls, we have determined that the work needed for Navistar to redesign all of its U.S. engines and vehicles for its announced alternate compliance path based on SCR cannot be completed immediately. Thus, Navistar will need NCPs during this transition period. These limitations are technological rather than economic in nature. Among the steps Navistar must complete, it must:

Several commenters argued Navistar voluntarily chose a different technology path than other manufacturers, and could have complied in the lead time provided if it had developed and employed SCR technology from the beginning. Since Navistar chose what the commenters consider to be the wrong technology path, they argue it is a laggard based on its own business decision and not technological limitations. They stated that NCPs should not be established under these circumstances. We generally would agree with commenters' assertions that Navistar presumably could have chosen the same SCR technology path as other manufacturers some time ago, and presumably could have already achieved compliance with the MY2010 standard in the same timeframe they did. If that had occurred, there would be no basis for establishing NCPs. However, we disagree with commenters' conclusions that NCPs should not be established based on this difference in choice of technology pathway.

Navistar made a decision to attempt to meet the emission standard using a different technology path, without SCR. As with most of EPA's mobile source emissions standards, the MY2010 emission standard is a performance standard, and does not specify what technology must be used or require that all manufacturers use the same technology. Commenters' approach would penalize a manufacturer who attempts to innovate and develop a technology pathway different from its competitors. This would effectively discourage technological innovation by requiring all manufacturers to use the same technology once one manufacturer has met the standard using that technology. Otherwise they would risk being driven from the market as no NCPs would be established. Such an interpretation would undercut the purpose of technology forcing standards—to adopt standards where manufacturers may have to develop advanced technology or technology that is at the cutting edge of emissions control. This interpretation would suppress technological innovation out of fear that a wrong technological choice will lead to having to leave a market without the temporary benefit of NCPs. This approach would also ignore the premise of promulgating NCPs, which is that they are appropriate when one or more manufacturers have not met the standard, while one or more others have. Whether the laggard is not able to achieve compliance because of a technological hurdle in developing the same or different technology as their competitors, the result is the same—they risk being removed from the market based on technological issues, if NCPs are not established. EPA does not see a valid basis for drawing such a distinction between technology pathways in deciding whether there is likely to be a technological laggard.

As discussed later, in Section V. on the penalty rate, the provision of NCPs is only a temporary solution for the noncomplying technological laggard. The first-year penalty rate is designed to remove the economic disadvantage for the complying manufacturers, preventing harm to the competitors. The NCP rate also increases over time, such that in a short period of time the noncomplying manufacturer needs to achieve compliance or the increasing penalty rate will in effect drive it from the market. Since the NCP protects a complying manufacturer from a competitive disadvantage irrespective of the technology path chosen by its competitor, it is appropriate that EPA not draw a distinction based on whether the technological laggard chose the same or a different technology path than the complying manufacturers. This helps to preserve the nature of EPA's standards as technology forcing performance standards that promote technological innovation across this sector of industry.

Having made its decision to pursue a non-SCR technology to meet the standards, Navistar has not been able to produce engines that have been certified to meet the 0.020 standard without credits. The evidence is clear that Navistar chose to develop a different technological solution than other manufacturers, and that technological issues concerning this solution have delayed Navistar's ability to meet the standard. It is for this technological reason that Navistar cannot meet the standard, not for economic reasons.

As noted above, in Mack Trucks, et al. v. EPA, No. 12-1077 (DC Cir), the court included comments in its opinion, in dicta, concerning the appropriateness of NCPs under the circumstances presented in the Interim Final Rule. The court stated that:

The court noted that NCPs are intended to be a temporary bridge to compliance for manufacturers who have “made every effort to comply” and are not designed for manufacturers that voluntarily choose, for whatever reason, not to adopt an existing, compliant technology. EPA agrees with these general concepts, but they do not apply in this case. The court's comments concern the issue of whether substantial work is needed to achieve compliance with the MY2010 NO X standard, and whether Navistar is properly considered likely to be a technological laggard in achieving compliance with this standard in light of the technology pathway it chose. Based on all of the circumstances before EPA, it is reasonable to determine that Navistar has made every effort to comply, for the technology pathway it chose. The need for NCPs is based on the failure to achieve the emissions standards using this technology. This failure is based on technological reasons, and not other reasons.

The court's statement that NCPs were intended for manufacturers that “made every effort to comply” ( United States v. Caterpillar, Inc., 227 F. Supp. 2d 73, 88 (D.D.C. 2002)) was made in a different context and does not apply here. This comment was in response to a suggestion from Caterpillar in that earlier case that the consent decree at issue should have been interpreted in a certain way (or modified) as EPA failed to issue an NCP rule with enough lead time. Caterpillar argued that it was harmed by this delay because the purpose of the NCPs was to allow a manufacturer to weigh the costs of compliance against the costs of paying NCPs. The court rejected this view, as it would allow “engine manufacturers * * * to calibrate the intensity of their compliance efforts to the NCP for each new standard, allowing them to opt for noncompliance when compliance becomes more expensive than the NCP. This kind of second-guessing, however, was clearly not Congress' intent in providing for NCPs.” 227 F.Supp. at 88. The court noted that “[i]nstead, NCPs were intended to give a manufacturer that has made every effort to comply, but has been unable to achieve compliance, a chance to continue to participate in the market. Thus, NCPs serve their purpose even if promulgated after a company has made its engine design decisions, since those decisions should be based on whether compliance can be achieved, not on whether compliance is less expensive than paying NCPs.” Id. at 88-89.

In that context, it is clear that the court's prior statement addressed the claim that a manufacturer should be able to base their engine design decisions on the availability of NCPs, weighing which costs more and deciding based on this whether to pursue a technology pathway to compliance or pay NCPs. The court made clear that providing this kind of economic choice on compliance is not the purpose of an NCP. The court specifically noted that NCPs are appropriate in a case where the failure to achieve compliance is based on technological concerns encountered along the path to achieving compliance—that is, in circumstances like those in this current rulemaking.

The court's statement was not related to whether, evaluating in retrospect at the point an NCP is established, a manufacturer had made every effort to comply prior to adoption of the NCPs. Navistar chose to pursue an engine emissions control design that is non-SCR based several years before NCPs were proposed. NCPs would be used by Navistar while it addresses the technology-based hurdles it now faces in switching to SCR controls. It faces these technology hurdles now as a result of the technology pathway it chose years before the NCP was adopted. The NCPs would not be used, as Caterpillar asked the court to allow in the earlier case, to decide what technology path to follow and how hard to pursue it based on the economics of the cost of NCPs. In this case, Navistar made considerable efforts to develop and employ the non-SCR technology. Its choice of technological pathway to compliance was not based on weighing the costs of compliance with the cost of NCPs. The court's concerns in Caterpillar are not applicable to the facts in this NCP rulemaking.

The court also quoted from the generic 1985 rulemaking, noting that NCPs would not be appropriate if “many manufacturers were already meeting the standard, or could do so with relatively minor calibration changes or modifications.” This language from the 1985 rulemaking refers to the second criterion, whether substantial work is required to achieve compliance with the more stringent new or revised standard. As discussed above, this is based on all of the work that must be done to move from the previous standard to the more stringent new or revised standard. This criterion is to be evaluated based on actual work needed to go from meeting the previous standard to meeting the current standard, regardless of the timing of such changes. Based on this, the amount of work remaining to be done when the NCP rulemaking occurs is not relevant to the second criterion. Likewise, whether some manufacturers have already achieved compliance at the time of the NCP rulemaking is also not relevant to determining whether the second criterion has been met. As noted above, it is not unexpected that at the time of this NCP rulemaking that “many manufacturers' vehicles/engines were already meeting the revised standard or could do so with relatively minor calibration changes or modifications.” However, rejecting NCPs solely because some manufacturers have achieved or are on a path to achieve compliance, while one or more other manufacturers are not in the same position, would prevent lagging manufacturers from certifying in exactly those circumstances Congress contemplated providing for NCPs—some manufacturers are able to achieve compliance in the lead time provided, but for technological reasons others are not. NCPs are designed to address just this situation, to temporarily avoid driving these manufactories out of the market. 50 FR 35374 (August 30,1985).

Clearly, in this case, substantial work was required to meet the 0.20 g/bhp-hr standard. Every manufacturer has included (or will soon include) for the first time NO X aftertreatment (selective catalytic reduction), on their engines to meet the standard. Prior to deciding to change its technology approach, Navistar also greatly modified its exhaust gas recirculation (EGR) system to reduce NO X emissions and would likely have needed to do significantly more work to further reduce its NO X emissions to meet the standard. These are substantial changes to the emission control systems of these engines. While several manufacturers are currently using SCR systems, they were not doing so until they were required to meet the 2010 NO X standard. Therefore, it is clear that substantial work was needed to go from the previous standard to achieve compliance with the 2010 NO X standard, and the second criterion is satisfied.

The court also noted that NCPs are not intended in a situation where the failure to achieve compliance is not related to technological reasons, but to a manufacturer's choosing to not employ an available complying technology. As discussed above, EPA agrees that the basis for establishing NCPs must be a technological based laggard. The reasons for not achieving the emissions standard in the lead time provided must be based on a technological failure in developing and employing the chosen technology pathway. The court refers to a statement made by EPA when discussing the relationship between NCPs for the 2010 NO X standard and credits for the CO 2 emissions standards adopted for heavy-duty engines and trucks. 10 77 FR 4739 (January 31, 2012). EPA stated it was not providing NCPs for the new CO 2 emissions standard as it was not in a position to determine that a technological laggard was likely to develop for that CO 2 standard. In that context, EPA also determined that an engine that was certified to the 2010 NO X standard using NCPs should not be able to generate credits at the same time under the CO 2 emissions standards. EPA recognized that there was an interplay between NO X control and CO 2 control, such that higher levels of NO X could lead to lower levels of CO 2 emissions. Under those circumstances, providing credits for the CO 2 program could provide an incentive for a manufacturer to increase NO X emissions but still certify an engine using NCPs, where they could otherwise achieve the NO X standard without NCPs. That manufacturer could then generate credits under the CO 2 program for the decrease in CO 2 emissions resulting from the increase in NO X emissions. Thus, the manufacturer would be choosing to not comply with a standard for which it was technologically capable of complying, and would be doing so to generate emission credits that would provide it some advantage in the future. This would not be consistent with either the purpose of the CO 2 credit program (to provide an incentive for manufacturers to take technological and other efforts to over comply with the CO 2 standard) or the purpose of the NCP program (to provide relief to manufacturers that fail to achieve the standard on time for technological reasons, not for other reasons such as the economic benefit of generating CO 2 credits by voluntarily increasing emissions of NO X ).

EPA's observation in the proposal confirmed that the basic purpose of NCPs is to provide relief where there is a laggard for technological reasons, not other reasons. The concerns raised regarding CO 2 credits and NO X NCPs are not related to our finding that Navistar is a technological laggard. No one argues that Navistar has failed to achieve a technological solution because of a decision to generate credits or reap economic benefits elsewhere. Instead Navistar's failure to achieve the standard as of this date is based on technological and not other reasons.

This is similar to the circumstances in 2002 when Caterpillar developed its “ACERT” technology rather than use cooled EGR technology, which it had been developing until 2001. It needed to use NCPs because of delays in developing ACERT. In that case, Caterpillar did not dispute that cooled-EGR would achieve the necessary emission reductions; rather it chose to attempt to meet the standard using what it believed to be a superior technology.

The court also noted its concern with the level of the penalty in the Interim Final Rule, and whether it adequately removed the economic disadvantage to conforming manufacturers. That issue is addressed in Section V. below.

This rulemaking is the most recent in a series of NCP rulemakings. These are referred to as Phases and are referenced below. 11 The discussions of penalty rates and related reports and analyses in those rulemakings are incorporated by reference. This section briefly reviews the penalty rate formula originally promulgated in the Phase I rule (currently found at 40 CFR 86.1113-87) and discusses how EPA arrived at the penalty rates in this Final Rule.

The penalty rates being established in this rule rely on the existing NCP regulatory structure. Only a few changes are being made to the regulations. As proposed, we are setting of the upper limit at 0.50 g/hp-hr and are clarifying in § 86.1104-91 that EPA may set the upper limit at: (1) a level below the previous standard if we determine that the lower level is achievable by all engines, or (2) a level above the previous standard if we determine that the standard is not achievable by all engines. We also proposed cost parameters to reflect the compliance costs for the 2010 standards and are finalizing these cost parameters, after revising them based on comments. Finally, in response to comments, we are clarifying that the second NCP criterion is to be evaluated without regard to the specific timing of the NCP rule.

We received many comments supporting higher or lower penalties for a variety of reasons. However, the most important criteria in evaluating the penalties are how they conform to the statutory requirements and how they conform to the regulatory requirements. With respect to the statutory requirements for the penalties in the first year, we note that the purpose of adopting NCPs is to allow a noncompliant manufacturer to continue selling its engines, provided it pays the penalty. However, section 206(g) of the Clean Air Act directs EPA to set the NCPs at a level that will “remove any competitive disadvantage” to complying manufacturers. Contrary, to what some commenters suggested, this first year penalty level is not intended to punish the noncomplying manufacturer beyond the level needed to remove any competitive disadvantage for complying manufacturers.

EPA has also set regulatory requirements for penalty levels. Most significantly, the regulations require that penalties be based on total incremental costs of compliance relative to engines at the upper limit, which we have done. In the first NCP rule, it was determined that compliance cost differences between engines at the upper limit and engines at the standard would be appropriate measures of the competitive disadvantage for complying manufacturers. 12 We believe that the final NCPs being established conform to both the regulatory requirements and the statutory requirements.

The NCP rates being adopted in this FRM are specified for model year 2012. As required by section 206(g) of the Act, the existing regulations include a formula that increases (or “escalates”) the penalty rates with each new model year. The purpose of the escalator is to provide an incentive for manufacturers who use NCPs for more than one model year to achieve compliance quickly rather than continuing to use NCPs for multiple model years.

As proposed, we will apply this annual adjustment formula to the NCPs by setting the 2012 model year as year number one. This is consistent with the existing regulatory text that states that year one is the first year that NCPs are available (see 40 CFR 1113-87(a)(4)). Traditionally, when NCPs are adopted, they are available the first model year the new or revised emission standard applies and there is no question about which model year should be year one for purposes of the annual escalator. However, this is less straightforward for this NCP rule. First, the 0.20 g/bhp-hr first applied beginning in the 2007 model year, as part of a phase-in, but did not take full effect until MY2010. In addition, we are adopting NCPs more than two model years later. While we received comments supporting setting 2010 as the base year, we continue to believe the 2012 model year is the correct year for the first year of the escalator calculation. As discussed further in the Response to Comments document, we are not revising the regulatory text that specifies that year one is the first year that NCPs are available. Using the first year of NCP availability as the first year for the escalator calculation, the initial NCPs ( i.e., NCPs during the first model year of availability) remove the disadvantage for the complying manufacturers, as Congress intended. Under this approach, the escalator would apply staring in MY2013, the earliest that any manufacturers could be using NCPs for more than one model year. This ties the initiation of the escalator, and the start of the economic incentive it provides, to the first year in which circumstances that call for such an incentive can exist—the second year of availability. MY2013 is the first year any manufacturer could use this NCP for multiple years. Adding an extra penalty equivalent to two years of escalation is contrary to the intent for this escalation. No manufacturer had access to NCPs prior to 2012, and requiring an escalator based on the two previous years of the standard would treat a manufacturer who uses NCPs in either 2012 or 2013 as if they had already used NCPs for several more years than the actual usage. The additional escalator and related additional incentive is more than is needed to meet the objective of the escalator provision, and therefore is consistent with the purpose of the escalator provision.

We are specifying the NCP formula using the normal NCP parameters: COC 50 , COC 90 , MC 50 , F, and UL. The NCP formula is the same as that promulgated in the Phase I rule. As was done in previous NCP rules, we consider incremental manufacturer costs and incremental owner costs (for complying engines relative to the upper limit), but do not consider certification costs because both complying and noncomplying manufacturers must incur certification costs. COC 50 is an estimate of the industry-wide average incremental cost per engine (references to engines are intended to include vehicles as well) associated with meeting the standard for which an NCP is established, compared with meeting the upper limit. COC 90 is an estimate of the 90th percentile incremental cost per engine associated with meeting the standard for which an NCP is established, compared with meeting the associated upper limit. Conceptually, COC 50 represents costs for a typical or average manufacturer, while COC 90 represents costs for the manufacturers with the highest compliance costs.

MC 50 is an estimate of the industry-wide average marginal cost of compliance per unit of reduced pollutant associated with the least cost effective emission control technology installed to meet the new standard. MC 50 is measured in dollars per g/bhp-hr for heavy-duty engines. F is a factor used to derive MC 90 , the 90th percentile marginal cost of compliance with the NCP standard for engines in the NCP category. MC 90 defines the slope of the penalty rate curve near the standard and is equal to MC 50 multiplied by F. UL is the upper limit above which no engine may be certified.

The derivation of the cost parameters is described in a support document titled “Technical Support Document: Nonconformance Penalties for 2012 and later Highway Heavy-Duty Diesel Engines” (Technical Support Document), which is available in the public docket for this rulemaking. All costs are presented in 2011 dollars. The Technical Support Document also includes alternative cost analyses that were considered. These alternative analyses are discussed in Section V.D of this preamble.

The upper limit (UL) is the emission level established by regulation above which NCPs are not available. A heavy duty engine cannot use NCPs to be certified for a level above the upper limit. CAA section 206(g)(2) refers to the upper limit as a percentage above the emission standard, set by regulation, that corresponds to an emission level EPA determines to be “practicable.” The upper limit is an important aspect of the NCP regulations not only because it establishes an emission level above which no engine may be certified using NCPs, but it is also a critical component of the cost analysis used to develop the penalty rates. The regulations specify that the relevant costs for determining the COC 50 and the COC 90 factors are the difference between an engine at the upper limit and one that meets the applicable standards (see 40 CFR 86.1113-87).

The regulatory approach adopted under the prior NCP rules sets the upper limit at the prior emission standard when a prior emission standard exists and is then changed to become more stringent. EPA concluded that this upper limit should be reasonably achievable by all manufacturers with engines or vehicles in the relevant class. It should be within reach of all manufacturers of HDEs or HDVs that are currently allowed so that they can continue to sell their engines and vehicles while finishing their development of fully complying engines. A manufacturer of a previously certified engine or vehicle should not be forced to immediately remove an HDE or HDV from the market when an emission standard becomes more stringent. The prior emissions standard generally meets these goals because manufactures have already certified their vehicles to that standard.

In the NPRM, we proposed to revise the regulations in § 86.1104-91 to clarify that EPA may set the upper limit at a level below the previous standard if we determine that the lower level is achievable by all engines or vehicles in the relevant subclass. That provision of the regulations was not opposed by any commenters and is included in this final rule. We are also finalizing the upper limit at 0.50 g/bhp-hr, which was widely supported by commenters. For this rule, all manufacturers are currently certifying all of their engines at or below the 0.50 g/bhp-hr FEL cap, providing clear evidence that this level can be met by all manufacturers. The reason EPA has rejected past suggestions that the upper limit should be more stringent than the prior emission standard does not apply here, as there is no difficulty in this case in identifying a limit that could be met by all manufacturers. See 50 FR 35377 (August 30, 1985). Thus, setting the upper limit for this NCP rule at 0.50 g/bhp-hr NO X conforms to the purpose of the upper limit in setting NCPs.

As proposed, we are also specifying that EPA could set the upper limit at a level above the previous standard in unusual circumstances, such as where a new standard for a different pollutant or other requirement effectively increases the stringency of the standard for which NCPs would apply. This occurred for heavy heavy-duty engines with the 2004 standards. While this change would not apply for this current NCP rulemaking, we proposed to add this clarification to make the regulations consistent with past practices.

The regulations being adopted specify that the values in Table 1 be used in the NCP formula for the 2012 and later model year NO X standard of 0.20 g/bhp-hr for heavy heavy-duty diesel engines. The basis is summarized here. The complete derivation of these parameters and a discussion of other approaches that were considered are described in the Technical Support Document for this rulemaking.

Some commenters argued that EPA should not deviate from prior precedents for calculating costs. However, EPA has not used the same methodology in calculating costs in each of the previous NCP rules. In each of our six previous NCP rulemakings, we estimated costs using a methodology appropriate for the specific circumstances that applied at the time. None were approached in exactly the same way. In each case we considered key factors such as differences in calibration, hardware, and operating costs, but there have been some NCP calculations where other potential individual cost or cost saving elements have been included or excluded for various reasons. In determining how to calculate costs of compliance, EPA considers not only what data are available, but also the extent to which each cost element may affect the competitive balance of the market.

The NCP parameters being finalized were developed using the same basic methodology described in the NPRM. As in all NCP rules, the final NCPs are based on the estimated difference in compliance costs for engines at the upper limit and engines at the standard. Thus, engines with emissions at the upper limit can be considered to be baseline engines for the analysis. These baseline engines also represent the engines against which complying engines could compete in the marketplace. In this analysis, the most important baseline engine is the engine used as the baseline for calculating the nominally worst case compliance costs (COC 90 ). As is described later, because the penalty curve being finalized in this NCP rule is a straight line, the value of COC 50 does not affect the penalty curve.

The cost parameters being finalized are higher than the values proposed. These changes reflect new information received during the public comment period, most notably new updated information about fuel and DEF prices that was not available at the time we completed the cost analysis for the proposal. EPA also received comments suggesting that the effectiveness of the heavy heavy-duty NCPs in meeting the statutory requirement to remove competitive disadvantage for complying manufacturer needs to be evaluated relative to engines that could be developed in the near term (such as a reoptimized SCR engine). In response to these comments and the new information received, EPA is revising the COC 90 baseline engine because we believe that the revised baseline engine better represents an optimized engine than the baseline engine used for the proposal. These changes are discussed in more detail below.

The Clean Air Act's requirements to “remove any competitive disadvantage” to complying manufacturers effectively requires EPA to consider not only existing engines with NO X emissions over the standard, but also engines that could reasonably be developed during the period in which NCPs are available. Thus, the NCPs must be high enough to protect complying manufacturers from a competitive disadvantage relative both to SCR engines that are optimized to emit NO X at a level of 0.50 g/bhp-hr and to engines without SCR that emit at that level. We considered several methodologies for estimating the incremental compliance costs between the upper limit and the standard and selected the approach that best removes the potential competitive disadvantage for complying manufacturers. See Section V. D. for additional discussion of these alternate approaches.

It is important to note that while we received comments stating that the level of our proposed NCP was not high enough to remove the competitive advantage Navistar has selling non-SCR engines, none of the commenters provided evidence that this was the case (such as evidence of increased market share or increased profits for Navistar). None of the commenters provided any method by which the value of Navistar's actual competitive advantage could be calculated. Nevertheless, we have determined based on the information available to us that Navistar's competitive advantage is not greater than the competitive advantage based on compliance costs that we calculated relative to the reoptimized SCR baseline engine we have used as the basis of our COC 90 costs.

Our approach to estimating compliance costs differs slightly from that used in recent NCP rules, where EPA based the NCPs directly on the actual compliance cost increases associated with meeting the standard for complying manufacturers (borne by the complying manufacturers and the operators who purchase their compliant engines), whether provided by the manufacturers or estimated by EPA. This was appropriate in those prior rules because each of the manufacturers had actually produced engines at the upper limit (which was usually the previous emission standard) and had reengineered those engines to meet the new or revised standard, so the costs associated with that change were straightforward to calculate. We determined that the manufacturers' input accurately reflected the manufacturers' actual costs because the costs were derived directly from actual in-production engine information. In the case of this NCP rule, however, compliant manufacturers have generally not designed and optimized their in-production engines for the U.S. market at 0.50 g/bhp-hr NO X (the upper limit) and then reengineered their engines to meet the 0.20 g/bhp-hr standard. 13 Thus, a compliance cost estimate based directly on actual experience for the full range of in-production engines was not available for this NCP rule.

Instead of averaging actual cost increases relative to the upper limit (because none were available), the NCP penalty formulas for this rule are based primarily on EPA's estimate of the cost difference between a hypothetical engine emitting at the upper limit (the “baseline engine”) and one emitting at the standard (the “compliant engine”). We received compliance cost information from several engine manufacturers, both before the proposal and during the comment period, and used that information to inform our own analysis of compliance costs, as described in the Technical Support Document.

It is worth noting that each of the engine manufacturers that provided cost information before the proposal considered baseline engines with different technology packages. However in their comments on the proposal, complying manufacturers based their compliance costs on either a baseline engine equipped with similar hardware as EPA's revised baseline engine, or based on a pre-2010 non-SCR engine with NO X emissions near 1.2 g/bhp-hr. See Section V. D. of this notice for a discussion of why using the 1.2 g/bhp-hr baseline engine is not appropriate.

As noted earlier, with NCPs available, a complying manufacturer could compete against not only EGR-equipped engines, but also against SCR-equipped engines that could be reoptimized to emit at 0.50 g/hr-hr. Since engine manufacturers are not currently producing SCR-equipped heavy heavy-duty engines at the upper limit, such engines must be considered based on our best estimate of how such an engine would be manufactured. Based on our review of the various hypothetical baseline engine designs, we proposed to use as a baseline engine our best estimate of an optimized SCR engine, because we believed it would be the most competitive 0.50 g/bhp-hr engine. Information available at that time projected little difference when comparing fuel and DEF prices, so for the proposal we assumed the baseline engine would have been optimized to use less DEF compared to 0.20 g/bhp-hr engines but had the same fuel consumption rates. 14 We did not believe there would be a significant difference in costs using a baseline engine optimized for better fuel consumption, because we projected that fuel savings would have been offset by increased DEF costs. As is described in the Technical Support Document, for the proposal we also believed estimating costs by this approach was the least speculative method to determine compliance costs, and we did not believe there were competing designs that were substantially more competitive based on the compliance cost inputs we used.

In this document EPA denies an objection by the Natural Resources Defense Council (NRDC) concerning EPA's denial of NRDC's petition to revoke pesticide tolerances. This action may also be of interest to agricultural producers, food manufacturers, or pesticide manufacturers. Potentially affected entities may include, but are not limited to those engaged in the following activities:

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

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

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

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

You may access a frequently updated electronic version of EPA's tolerance regulations at 40 CFR part 180 through the Government Printing Office's e-CFR site at http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?&c=ecfr&tpl=/ecfrbrowse/Title40/40tab_02.tpl.

In this order, EPA is issuing a revised denial of an objection to an earlier EPA order, (72 FR 68662, December 5, 2007), denying a petition to revoke all tolerances established for the pesticide dichlorvos (DDVP) under the Federal Food, Drug, and Cosmetic Act (FFDCA), 21 U.S.C. 346a. Both the objection as well as the petition was filed with EPA by NRDC. (Refs. 1 and 2). EPA had previously denied this objection, (73 FR 42683, July 23, 2008), but that order was vacated, in part, by the United States Court of Appeals for the Second Circuit. ( NRDC v. US EPA, 658 F.3d 200 (2d Cir. 2011)).

NRDC's petition, filed on June 2, 2006, pursuant to FFDCA section 408(d)(1), asserted numerous grounds as to why the dichlorvos tolerances allegedly fail to meet the FFDCA's safety standard. This petition was filed as EPA was completing its reassessment of the safety of the dichlorvos tolerances pursuant to FFDCA section 408(q). (Ref. 3). In response to the petition, EPA undertook an extensive review of its dichlorvos safety evaluation in the tolerance reassessment decision. Based on this extensive review, EPA concluded that dichlorvos met the FFDCA safety standard and, therefore, denied the petition. (72 FR 68695). NRDC then filed objections with EPA to the petition denial order and requested a hearing on its objections. The objections narrowed NRDC's claims to two main assertions—that, in assessing the risk to dichlorvos, EPA unlawfully reduced the statutory tenfold (10X) additional safety factor for the protection of infants and children and EPA unlawfully relied on a human toxicity study (the Gledhill study). After carefully reviewing the objections and hearing requests, EPA determined that NRDC's hearing requests did not satisfy the regulatory requirements for such requests and that its substantive objections were without merit. (73 FR 42709-42711). NRDC sought review of EPA's decision in the United States Court of Appeal for the Second Circuit. As noted, the Second Circuit court vacated a portion of EPA's order finding that “[b]ecause EPA failed to explain why it did not use a 10X children's safety factor for dichlorvos risk assessments that relied on the Gledhill study, EPA acted in an arbitrary and capricious manner.” (658 F.3d at 218). Specifically, the court vacated “those portions of EPA's July 23, 2008 order assessing the risk of dichlorvos based on the Gledhill study * * * ” (Id.). The court remanded the matter to EPA. (Id. at 219).

On remand, EPA has carefully examined the court's opinion and has reconsidered that portion of its prior decision that relied on the Gledhill study in assessing dichlorvos risk. Because the court found this portion of EPA's order to be arbitrary and capricious due to its absence of an adequate explanation on the additional safety factor for the protection of infants and children, EPA focused on a reexamination of what additional safety factor for the protection of infants and children should be applied for the assessments based on the Gledhill study. EPA concludes, like it did in the July 23, 2008 order, that a threefold (3X) additional safety factor will protect the safety of infants and children. Accordingly, EPA again denies NRDC's objections as to those portions of the July 23, 2008 order that were vacated. Although EPA reaches the same conclusion on remand on the additional safety factor for the protection of infants and children, EPA has provided a revised, more extensive explanation for its position. Because this revised explanation addresses the court's reason for finding portions of the July 23, 2008 order to be arbitrary and capricious, EPA has not otherwise reopened or reconsidered that prior order.

NRDC petitioned to revoke the dichlorvos tolerances pursuant to the petition procedures in FFDCA section 408(d)(1). (21 U.S.C. 346a(d)(1)). Under section 408(d), EPA may respond to such a petition by either issuing a final or proposed rule modifying or revoking the tolerances or issuing an order denying the petition. (21 U.S.C. 346a(d)(4)). Here, EPA responded by issuing an order under section 408(d)(4)(iii) denying the petition. (72 FR 68622, December 5, 2007).

Orders issued under section 408(d)(4)(iii) are subject to a statutorily-created administrative review process. (21 U.S.C. 346a(g)(2)). Any person may file objections to a section 408(d)(4)(iii) order with EPA and request a hearing on those objections. (Id.). EPA is required by section 408(g)(2)(C) to issue a final order resolving the objections to the section 408(d)(4)(iii) order. (21 U.S.C. 346a(g)(2)(C)). NRDC filed objections to EPA's denial of its dichlorvos petition and EPA issued a section 408(g)(2)(C) order denying NRDC's objections. (73 FR 42683, July 23, 2008). EPA's order denying NRDC's objections was vacated, in part, and remanded to EPA. This revised order on remand is also being issued under section 408(g)(2)(C).

In this Unit, EPA provides background on the relevant statutes and regulations governing the matter on remand as well as a much-abbreviated discussion on pertinent Agency risk assessment policies. A full discussion of EPA's approach to pesticide risk assessment is included in EPA's prior order on NRDC's objections. (73 FR 42685-42688). Because the court's decision focused on the explanation offered by EPA for its use of safety factors, this Unit includes an expanded discussion on use of safety or uncertainty factors, including the additional safety factor required by the FQPA for the protection of infants and children. Further, because Benchmark Dose Methods analysis is discussed for the first time in this revised order, a short section explaining that concept is included.

1. In general. EPA establishes maximum residue limits, or “tolerances,” for pesticide residues in food and feed commodities under section 408 of the FFDCA. (21 U.S.C. 346a). Without such a tolerance or an exemption from the requirement of a tolerance, a food containing a pesticide residue is “adulterated” under section 402 of the FFDCA and may not be legally moved in interstate commerce. (21 U.S.C. 331, 342). Monitoring and enforcement of pesticide tolerances are carried out by the U.S. Food and Drug Administration (FDA) and the U.S. Department of Agriculture (USDA). Section 408 was substantially rewritten by the Food Quality Protection Act of 1996 (FQPA), which added the provisions discussed below establishing a detailed safety standard for pesticides, additional protections for infants and children, and the endocrine disrupting substances screening program. (Pub. L. 104-170, 110 Stat. 1489 (1996)).

EPA also regulates pesticides under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), (7 U.S.C. 136 et seq). While the FFDCA authorizes the establishment of legal limits for pesticide residues in food, FIFRA requires the approval of pesticides prior to their sale and distribution, (7 U.S.C. 136a(a)), and establishes a registration regime for regulating the use of pesticides. FIFRA regulates pesticide use in conjunction with its registration scheme by requiring EPA review and approval of pesticide labels and specifying that use of a pesticide inconsistent with its label is a violation of Federal law. (7 U.S.C. 136j(a)(2)(G)).

2. Safety standard for pesticide tolerances. A pesticide tolerance may be promulgated or left in effect by EPA only if the tolerance is “safe.” (21 U.S.C. 346a(b)(2)(A)(i)). This standard applies when responding both to petitions to establish and petitions to revoke tolerances. “Safe” is defined by the statute to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” (21 U.S.C. 346a(b)(2)(A)(ii)).

Risks to infants and children are given special consideration. Providing additional protection to infants and children was a particular focus of the FQPA. Section 408(b)(2)(C) requires EPA to make a specific determination regarding the safety of tolerances to infants and children and to consider, among other things, information “concerning the special susceptibility of infants and children to the pesticide chemical residues * * *.” (21 U.S.C. 346a(b)(2)(C)(i)(II) and (ii)(II)). This provision also creates a presumptive additional safety factor for the protection of infants and children. Specifically, it directs that “[i]n the case of threshold effects, * * * an additional tenfold margin of safety for the pesticide chemical residue and other sources of exposure shall be applied for infants and children to take into account potential pre- and post-natal toxicity and completeness of the data with respect to exposure and toxicity to infants and children.” (21 U.S.C. 346a(b)(2)(C)). EPA is permitted to “use a different margin of safety for the pesticide chemical residue only if, on the basis of reliable data, such margin will be safe for infants and children.” (Id.). For convenience's sake, the legal requirements regarding the additional safety margin for infants and children in section 408(b)(2)(C) are referred to throughout this Order as the “FQPA safety factor for the protection of infants and children” or simply the “FQPA safety factor.”

3. Procedures for establishing, amending, or revoking tolerances. Tolerances are established, amended, or revoked by rulemaking under the unique procedural framework set forth in the FFDCA. Generally, a tolerance rulemaking is initiated by the party seeking to establish, amend, or revoke a tolerance by means of filing a petition with EPA. (See 21 U.S.C. 346a(d)(1)). EPA publishes in the Federal Register a notice of the petition filing and requests public comment. (21 U.S.C. 346a(d)(3)). After reviewing the petition, and any comments received on it, EPA may issue a final rule establishing, amending, or revoking the tolerance, issue a proposed rule to do the same, or deny the petition. (21 U.S.C. 346a(d)(4)).

Once EPA takes final action on the petition by establishing, amending, or revoking the tolerance or denying the petition, any party may file objections with EPA to EPA's decision on the petition and seek an evidentiary hearing on those objections. (21 U.S.C. 346a(g)(2)). Objections and hearing requests must be filed within 60 days. (Id.). The statute provides that EPA shall “hold a public evidentiary hearing if and to the extent the Administrator determines that such a public hearing is necessary to receive factual evidence relevant to material issues of fact raised by the objections.” (21 U.S.C. 346a(g)(2)(B)). EPA regulations make clear that hearings will only be granted where it is shown that there is “a genuine and substantial issue of fact,” the requestor has identified evidence that “would, if established, resolve one or more of such issues in favor of the requestor,” and the issue is “determinative” with regard to the relief requested. (40 CFR 178.32(b)). Further, a party may not raise issues in objections unless they were part of the petition and an objecting party must state objections to the EPA decision and not just repeat the allegations in its petition. Corn Growers v. EPA, 613 F.2d 266 (D.C. Cir. 2010), cert. denied, 131 S. Ct. 2931 (2011). EPA's final order on the objections is subject to judicial review. (21 U.S.C. 346a(h)(1)).

1. The safety determination—risk assessment. To assess risk of a pesticide tolerance, EPA combines information on pesticide toxicity with information regarding the route, magnitude, and duration of exposure to the pesticide. The risk assessment process involves four distinct steps: (1) Identification of the toxicological hazards posed by a pesticide; (2) determination of the “level of concern” with respect to human exposure to the pesticide; (3) estimation of human exposure to the pesticide; and (4) characterization of risk posed to humans by the pesticide based on comparison of human exposure to the level of concern.

Toxicological hazards posed by a pesticide are identified through use of testing in laboratory animals or humans. Generally, EPA will use the lowest “no observed adverse affect level” (NOAEL) or “lowest observed adverse effect level” (LOAEL) from the available studies or a calculated value called a Benchmark Dose as a starting point (called “the Point of Departure”) in estimating the “level of concern” for human exposure to the pesticide. Points of Departure and levels of concern will be identified for all exposure routes to the pesticide (oral, dermal, and inhalation) and durations of exposure (acute, short-term, intermediate-term, and chronic). Another critical aspect of the “level of concern” determination involves the use of safety or uncertainty factors to compensate for the limitations of toxicology testing. Safety and uncertainty factors are discussed in detail in Unit III.B.2. below. Having identified a pesticide's hazards, the Point(s) of Departure, and level(s) of concern, EPA then estimates exposure to the pesticide taking into account the various routes of exposure, how exposures vary over time, and the differences in exposure to different subpopulations. Finally, EPA combines information on hazard, level of concern, and exposure to produce a characterization of the risk posed by the pesticide. Risks are calculated for all of the various routes and durations of exposure scenarios associated with a pesticide. These risk assessment scenarios may be calculated separately for different age-based population groups (e.g., non-nursing infants) or applied to all population groups, including infants and children, depending on information on the potential for exposure and data on differential sensitivity. A more comprehensive discussion of this risk assessment process is presented in EPA's previous order denying objections. (73 FR 42685-42689).

Before turning to a detailed discussion of safety and uncertainty factors, EPA's risk characterization process is briefly summarized because it is frequently referred to in this order. For pesticides that pose a risk over a certain threshold of exposure, EPA's characterization of risk is presented in one of two ways: Either using the Reference Dose (RfD) approach or the Margin of Exposure (MOE) approach. Importantly, these different approaches do not render substantively different results. Both approaches use the same data—the Point of Departure, the applicable safety/uncertainty factors, and human exposure to the pesticide; they just express the characterization of risk in a different metric. Under the RfD approach, EPA directly extrapolates a dose from an animal or human study to an overall safe dose for humans. An RfD is calculated by dividing all applicable safety/uncertainty factors into the level of exposure from animal or human studies determined appropriate for assessing risk (i.e., the “Point of Departure”). Estimated human exposure to the pesticide is then compared to the RfD to determine if it is excessive. Under the Margin of Exposure (MOE) approach, EPA does not calculate a safe dose in humans but rather focuses on the margin of exposure between a dose from an animal or human study and human exposure to the pesticide. A MOE is calculated by dividing human exposure to the pesticide into the Point of Departure. To determine whether that MOE is considered sufficiently protective of humans, EPA compares it to the product of all applicable safety/uncertainty factors, referred to as the target MOE. MOEs that are less than the target MOE indicate a risk of concern. At bottom, both approaches extrapolate a safe measure of human exposure from animal or human studies using a mixture of uncertainty/safety factors.

2. Safety and uncertainty factors. i. History. It has long been a standard risk assessment practice to use numerical factors in conjunction with experimental toxicity data in assessing risk to humans from exposure to chemical substances. (Ref. 4). These numerical factors are designed to provide an additional margin of safety so that risks to the populations covered by an assessment are not understated. The practice was first developed by the Food and Drug Administration (FDA) in the middle part of the last century. (Ref. 5). An influential 1954 paper by two FDA scientists called for a hundredfold margin of safety when extrapolating from long-term animal experiments to calculate safe doses in humans. (Ref. 6). The paper justified this safety factor on the basis of, among other things, potential differences in sensitivity between humans and laboratory animals as well as potential variations in sensitivity within humans. Accordingly, the paper recognized that a smaller factor would be appropriate where adequate human data are available. An explicit recommendation for a factor “as low as 10” was made by the Joint Food and Agricultural Organization/World Health Organization (FAO/WHO) Meeting on Pesticide Residues in 1965 for circumstances where human data was relied upon. (Ref. 7 at 12). Eventually, it became common regulatory practice to treat the hundredfold margin of safety as comprised of two tenfold factors: The first addressing the potential difference in sensitivity between humans and experimental animals ( i.e., interspecies sensitivity) and the second addressing variation within the human population ( i.e., intraspecies sensitivity). The rationale for these two factors is concisely summarized in a recent publication from the International Programme on Chemical Safety:

EPA, as well as other Federal and international regulatory bodies, also will, where appropriate, apply additional numerical factors to take into account chemical-specific considerations affecting the risk assessment. (Ref. 9) Use of these additional factors is further explained in Unit III.B.2.v., vi, and vii.

ii. Terminology. Different terminology has been used to label numerical factors used in calculating safe doses of chemical substances. As noted, they were first referred to as “safety” factors. The terminology has evolved over the decades, however, such that what was once generally called a safety factor has come to be generally referred to as an uncertainty factor. (Ref. 10 at A-3). The rationale for the change was that, although the use of such factors does promote safety, there was a concern that the use of the term “safety” implied that these factors provided absolute safety. (Ref. 11). The FQPA reintroduced the term “safety” factors with its reference to a “margin of safety.” 21 U.S.C. 346a(b)(2)(C). Subsequent to the passage of FQPA, EPA's Office of Pesticide Programs (OPP) has used the terms safety factor and uncertainty factor interchangeably. Both terms have been criticized by the National Academy of Sciences (NAS). The NAS explained that the terms safety and uncertainty imply that factors “are simply added on for safety or because of a lack of knowledge or confidence in the process.” (Ref. 12 at 132). To the contrary, according to the NAS, these factors are scientifically-based and used “to adjust for differences in individual human sensitivities, for humans' generally greater sensitivity than test animals' on a milligram-per-kilogram basis, for the fact that chemicals typically induce harm at lower doses with longer exposures, and so on.” (Id.).

iii. Scientific basis for inter- and intraspecies factors. Only limited scientific data, involving differing sensitivity of humans and animals, are cited in the 1954 article in justification of the recommendation for a hundredfold safety factor. Subsequent investigations of both animal and human toxicity data, however, have provided general support for the protectiveness of the tenfold factors for interspecies and intraspecies sensitivity differences if an adequate toxicity database is available. (Refs. 9, 13, 14, and 15). The interspecies factor has been investigated through comparisons of toxicity testing in laboratory animals and humans. (Refs. 15 and 16). The protectiveness of the human intraspecies factor has been assessed through examining sub-population differences both among various human age groups (the young, adults, and elderly) as revealed in pharmaceutical trials and between juvenile and adult laboratory animals identified in toxicity testing. (Ref. 13 at 211 (“For substances other than pharmaceuticals, age-related differences in toxicity have been primarily investigated in rodent studies.”); Ref. 17 at 462-463 (describing pharmaceutical trials involving humans and comparative studies in juvenile and adult laboratory animals)). For example, the NAS, in its report “Pesticides in the Diets of Infants and Children,” looked to both human data and animal data in evaluating the potential for increased sensitivity in infants and children to pesticides. (Ref. 18 at 344-345).

iv. Adjustment of inter- and intraspecies factors. In addition to evaluating the protectiveness of the intra- and interspecies uncertainty factors, scientists have also examined both generic biological as well as chemical-specific factors that may affect intra- and interspecies variability with the aim of deriving more accurate uncertainty factor values than the default tenfold values.

One reason humans are considered to be potentially more sensitive to toxic agents than laboratory animals is that otherwise equivalent external doses of such agents for humans and animals on a milligram-per-kilogram of body weight basis may result in a greater internal dose for humans. This is due to species differences in general metabolic processes—commonly referred to as toxicokinetics—and “is thought to be related to species differences in exchange surfaces and distribution networks that constrain concentration and flux of metabolic reactants.” (Ref. 19 at 4-35; see Ref. 15 at 228).

In addition to toxicokinetic effects on internal dose, differences between humans and laboratory animals are also driven by toxicodynamic factors. Toxicodynamics refers to the manner in which the target tissue and body respond to the toxic agent. Thus, interspecies differences are a factor of both differences in the internal dose received by humans and animals and differences in how humans and animals react to the internal dose received. Similarly, sensitivity differences between juveniles and adults, whether humans or animals, are also considered to be tied to toxicokinetic and toxicodynamic factors. Accordingly, both the inter- and intraspecies uncertainty factors are considered to have toxicokinetic and toxicodynamic components. EPA typically has considered both the tenfold (10X) inter- and intraspecies factors to be roughly equally divided on a logarithmic basis (i.e., 10 0.5 or roughly a 3X factor) between toxicokinetics and toxicodynamics. (Ref. 19 at 4-29; see also Ref. 19 at 4-40 (explaining why two 3X factors [technically, 3.16X] would be equivalent to a 10X factor)). Other organizations have recommended that, while toxicokinetics and toxicodynamics play an equal role in intra-human variability, toxicokinetics has a greater effect on interspecies differences and thus recommend that the tenfold interspecies factor be divided into a fourfold factor for toxicokinetics and 2.5-fold factor for toxicodynamics. (Ref. 8 at 17; see Ref. 14).

Of the toxicokinetic and toxicodynamic differences between humans and animals and among various human subgroups, the most is known about the toxicokinetic differences between humans and animals. For inhalation exposures, EPA has used toxicokinetic information on humans and animals to create generic dosimetric adjustment factors that replace that portion of the interspecies factor tied to toxicokinetic differences. (Refs. 19 at 4-29; 20). Where such dosimetric adjustment factor is used, the interspecies factor is reduced to 3X.

EPA guidance entitled “A Review of the Reference Dose and Reference Concentration Processes” (“RfD Guidance”) also urges that data be developed to support substitution of chemical-specific adjustment factors (sometimes referred to as data-derived factors) for the default 10X uncertainty factors for inter- and intraspecies variability. (Ref. 19 at xviii -xix, 4-47). This guidance recognizes that chemical-specific data from both humans and animals has been relied upon by EPA to adjust the human intraspecies uncertainty factor citing an article by Dourson et al. That article collects instances in which EPA has adjusted uncertainty factors on a chemical-specific basis. (Ref. 9). For example, Dourson et al. point to a 1996 EPA assessment of Aroclor that reduced the human intraspecies factor to 3X given that the Point of Departure came from a sensitive animal population—there, infant rhesus monkeys. In discussing the Dourson et al. article, the RfD Guidance notes that:

In sum, the 10X inter- and intraspecies factors are default values. Although there is substantial scientific support for these default values, chemical-specific human and animal data may be relied upon in reducing, confirming, or increasing these default values.

v. Additional Safety/Uncertainty Factors. In addition to the inter- and intraspecies factors, risk assessors from EPA as well as other Federal and international regulatory agencies also apply “additional” or “modifying” safety/uncertainty factors based on specific circumstances related to the toxicity data, particularly with regard to deficiencies in that data. Like the inter- and intra-species factors, these additional factors help to ensure that risks to populations covered by an assessment are not understated. Additional factors are applied to address: (1) An absence of critical toxicity data; (2) the failure of a study to identify a NOAEL; (3) the necessity of using sub-chronic data to choose a Point of Departure for estimating chronic risk; and (4) results in a study that suggest the inter- or intraspecies factors may not be sufficient (sometimes referred to as a “modifying factor”). (Ref. 10 at 9). Generally, a safety factor value of 10X or 3X (which is considered to be one-half of 10X on the logarithmic scale) is used to address these concerns.

The protectiveness of these default values has also been the subject of scientific examination. Studies have been done on the variations in the levels of NOAELs in the databases for various pesticides. They confirm the need for an additional factor when core data are lacking. (Ref. 22). Examination of the completeness of the animal database remains important even when human data are used as the Point of Departure for calculating the RfD. The latest EPA guidance on RfDs emphasizes that in these circumstances “[i]nformation on life stages and organ systems may come from either animal or human studies.” (Ref. 19 at 4-45). The guidance notes that “the lack of a two-generation animal reproduction study might be considered a deficiency even if the reference value is based on human data.” (Id.). Similarly, research has been conducted on existing databases to determine the adequacy of uncertainty factors used to address reliance on a LOAEL instead of a NOAEL, or subchronic data to estimate chronic risk. (Refs. 9 and 15).

Selection of particular values for these additional uncertainty values depends on what is known from the full body of information about the chemical, including both data from testing with animals and humans, about the chemical. For example, as EPA's RfD Guidance advises: “the size of the database factor to be applied will depend on other information in the database and on how much impact the missing data may have on determining the toxicity of a chemical and, consequently, the POD [Point of Departure].” (Ref. 19 at 4-45). With regard to an additional factor for extrapolation of a NOAEL from a LOAEL, Dourson et al. report that “[a]nalysis of several data bases suggest that a factor of 10 or lower is adequate and that use of data does support a lower factor with certain chemicals.” (Ref. 9 at 112). The critical consideration, according to Dourson et al., is the severity of the effect at the LOAEL: “The data indicate that when faced with a LOAEL and not a NOAEL, the choice of uncertainty factor should generally depend on the severity of the effect at the LOAEL.” (Id.). Specifically, Dourson et al. note that “[l]ess severe effects would not require a large factor, because, presumably, the LOAEL is closer to the unknown NOAEL.” (Id.).

vi. FQPA safety factor—integration with traditional uncertainty factors. EPA's safety/uncertainty factor practice with regard to pesticides was altered to a degree by the Food Quality Protection Act (FQPA). (Ref. 10). That Act established a presumptive additional “safety” factor of 10X to protect infants and children. The additional factor was designed to account for the completeness of the toxicity and exposure databases and the potential for pre- and post-natal toxicity. EPA has interpreted this legislation as both a “codification and expansion” of prior EPA practice with regard to additional safety/uncertainty factors. (Ref. 10 at A-3—A-5). It codified EPA's prior practice by requiring the additional presumptive factor to address toxicity data completeness issues (i.e., absence of a particular study, lack of a NOAEL in a completed study, or absence of chronic data). These traditional additional uncertainty factors became FQPA safety factors for the protection of infants and children. This accords greater protection to infants and children because for FQPA safety factors, unlike pre-FQPA additional factors, there is a presumption, which can only be overcome by reliable data, that they will be applied. At the same time, EPA concluded that Congress had not intended EPA to double-up on safety factors by, for example, applying an additional uncertainty factor due to missing data, and applying an FQPA additional safety factor as well to address the same missing data. (Ref. 10 at A-4). Congress expanded EPA's prior practice by providing that the additional FQPA safety factor for the protection of infants and children was designed to address not just toxicity data deficiencies but exposure data deficiencies as well and by its emphasis on protecting against potential pre- and post-natal toxicity. In theory, EPA could have, prior to the enactment of the FQPA, used an “additional” or “modifying” factor to address health risks to children not otherwise protected by the interspecies, intraspecies, or data deficiency safety factors, but use of such a factor was not common. The FQPA also modified the status quo by making the additional safety factor for infants and children presumptive in nature.

The narrowly-focused and highly-prescriptive nature of the FQPA safety factor provision has required careful integration with pesticide risk assessment approaches under other statutes and, more generally, with Agency risk assessment practices. As noted above, the FQPA, with regard to the assessment of risks to infants and children, essentially codified EPA's prior risk assessment practice as to additional uncertainty factors and it expanded the use of additional uncertainty factors into new areas. The FQPA, however, did not speak to use of traditional (non-additional) uncertainty factors (i.e., the inter- and intraspecies factors). Thus, the end result was that some uncertainty factors for FFDCA pesticides remained unaffected by the new statutory requirements (the inter- and intraspecies factors), some uncertainty factors became FQPA safety factors (additional uncertainty factors that addressed toxicity data deficiencies), and some safety factors that either had previously never existed or were at least extremely rare were created as a statutory phenomenon (a factor to address exposure data base deficiencies and a factor to address potential pre- and post-natal toxicity). This selective inter-weaving of statutory requirements with Agency science policy made FFDCA risk assessments for pesticides unique compared to general Agency risk assessment practice.

Pesticide risk, however, is not regulated under a single statute. Risks to workers or the environment from pesticide use are regulated by EPA under FIFRA, not the FFDCA. Further, EPA may address risks posed by pesticide contamination of the environment under several other statutes, including the Safe Drinking Water Act, 42 U.S.C. 300f et seq., the Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq., and the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. 9601 et seq. Prior to enactment of the FQPA's specific provisions on pesticide risk assessment, a pesticide risk assessment performed by EPA's Office of Pesticide Programs under the aegis of FFDCA section 408 could generally be easily translated for use by the Office of Pesticide Programs under FIFRA, or by the other media offices within EPA for use under other statutes. However, once pesticide risk assessment under the FQPA became not simply a matter of good scientific practice but was channeled by explicit statutory requirements, it became incumbent upon the Office of Pesticide Programs to prepare its FFDCA pesticide risk assessments in a manner that clearly delineated what aspects of the assessment were driven solely by science and what aspects primarily by FQPA statutory requirements. Specifically, the Office of Pesticide Programs had to be transparent with regard to whether it was relying on FQPA safety factors based on unique FQPA requirements (exposure database deficiencies and potential pre- and post-natal toxicity) or FQPA safety factors that are essentially a codification of prior general EPA “additional” safety/uncertainty factor practice.

EPA addressed these transparency issues at length in its 2002 policy statement on the FQPA safety factor. To clarify how the FQPA safety factor provision left a portion of prior safety/uncertainty practice unchanged, codified another portion, and also expanded the use of safety factors, EPA explained the overlap between the FQPA safety factor and additional safety factors in depth and included the following figure to graphically illustrate the issue:

With regard to providing transparency on the FQPA safety factor decisions, EPA took two steps. First, it adopted a new term, the “special” FQPA safety factor, for children safety factors that were based solely on the new FQPA requirements. Second, it adopted the approach of calculating two different safe doses for a pesticide: one that excluded any “special” FQPA safety factors and one that included them. The former was referred to, in line with standard EPA policy, as a Reference Dose (RfD), and the latter as a Population Adjusted Dose (PAD). Introducing the new terminology on FQPA safety factors into long-established safety factor practice has proved challenging. EPA staff on occasion drafted documents that (1) claimed no FQPA safety factor was needed but applied an additional uncertainty factor to address the completeness of the toxicity data base or reliance on a LOAEL; or (2) treated the “special” FQPA safety factor as the only type of FQPA safety factor. However, as EPA's policy made clear, EPA interpreted FFDCA section 408(b)(2)(C) as codifying prior practice as to additional uncertainty factors such that these factors became FQPA factors. The mislabeling of uncertainty factors did not substantively change risk assessment outcomes but it did raise the confusion level on an already complex topic. Eventually, EPA determined that the term “special” FQPA safety factor caused more problems than it solved and abandoned it. However, EPA has retained the approach of continuing to calculate both a safe dose with, and without, what was once referred to as “special” FQPA safety factors.

vii. FQPA safety factor—decision-making guidance. In 2002, EPA issued detailed policy guidance for Agency risk assessors on decision-making under the FQPA safety factor provision. The purpose of this guidance was concisely set forth by EPA: “[T]his guidance explains how OPP intends to `take into account * * * potential pre- and post-natal toxicity and completeness of the data with respect to exposure and toxicity to infants and children” as directed by FFDCA section 408(b)(2)(C)(i).' ” (Ref. 10 at ii). Although the guidance is structured around these statutory considerations, EPA also emphasizes throughout that the FQPA safety factor decision is a weight-of-the-evidence decision that must consider all available data. Thus, the policy specifies that “[b]efore any decisions are made on the appropriate FQPA safety factor applied to ensure the safety of infants and children from the use of a particular pesticide, all of the relevant submitted data for the pesticide should be assembled and reviewed by Agency scientists.” (Id. at 8).

This emphasis on the broadness of the inquiry is repeated in the discussion of the statutory consideration related to the completeness of the toxicity database. According to EPA, this consideration should not be narrowly focused on EPA's existing database requirements. Rather, “the `completeness' inquiry should be a broad one that takes into account all data deficiencies.” (Ref. 10 at 23). At the same time, the guidance stresses that “a determination of the possible need for and size of the database uncertainty factor will necessarily involve an assessment that considers the overall weight-of-evidence to evaluate the significance of the data deficiency.” (Id. at 26).

With regard to potential pre- and post-natal toxicity, the policy emphasizes that evaluation of this consideration cannot be divorced from the existing process for choosing levels of concern (i.e., RfDs, PADs, and target MOEs). Thus, EPA instructs risk assessors to evaluate the concern with data showing pre- and post-natal toxicity by considering, among other things, “the degree to which protection for infants and children is provided by the standard approach for deriving RfDs through the application of traditional uncertainty factors.” (Id. at 29). The guidance stresses that “[i]n particular, the risk assessor should consider the protection accorded infants and children by the intraspecies uncertainty factor.” (Id.). EPA notes that the scientific literature as well as the National Academy of Sciences has concluded that the intraspecies factor is generally adequate to protect infants and children; however, the policy points out that certain chemicals may display greater than 10X age-related variability. For this reason, EPA reiterates that “[t]he adequacy of the standard intraspecies factor to address the potential for greater sensitivity or susceptibility of children should be considered in the context of evidence on potential pre- and post-natal toxicity as discussed below.” (Id.; see also Id. at 51-52). The policy paper went on to provide numerous examples of weight-of-the-evidence considerations relevant to evaluation of human and animal data on pre- and post-natal toxicity. (Id. at 30-33).

The discussion on the completeness of the exposure database focuses on whether the various approaches EPA uses to assess exposure are likely to understate it. Risk assessors are to evaluate whether their assessments “have addressed all significant exposure routes” and whether “there may be uncertainty about whether OPP's approach to estimating exposure for a particular use pattern, pathway, or aggregate exposure is sufficiently health protective.” (Id. at 48).

3. Benchmark dose approach. As indicated above, EPA has traditionally used a NOAEL or LOAEL as a Point of Departure in estimating an exposure level of concern for a pesticide or other substance. Increasingly, however, EPA uses a more sophisticated modeling tool known as the Benchmark Dose approach as an alternative to using NOAELs or LOAELs for Point of Departure selection. (Refs. 23). A benchmark dose, or BMD, is a point estimate along a dose-response curve that corresponds to a specific response level. For example, a BMD 10 represents a 10% change from the background level (the background level is typically derived from the control group). In addition to a BMD, a confidence limit may also be calculated. Confidence limits express the uncertainty in a BMD that may be due to sampling and/or experimental error. The lower confidence limit on the BMD is termed the benchmark dose limit (BMDL). Use of a BMD or BMDL for deriving the Point of Departure allows more precise estimates of the Point of Departure, resulting in tighter confidence intervals. Use of the BMDL also helps ensure with high confidence (e.g., 95% confidence) that the selected percentage of change from background is not exceeded. Numerous scientific peer review panels over the last decade have supported the Agency's application of the BMD approach as a scientifically supportable method for deriving Point of Departures in human health risk assessment, and as an improvement over the historically applied approach of using NOAELs or LOAELs. (Refs. 24, 25, and 26). The NOAEL/LOAEL approach can look at the dose response at only the few doses used in a study, and is therefore limited by the characteristics of the study design, such as dose selection, dose spacing, and sample size. (Ref. 23 at 3-5). With the BMD approach, all the dose response data are used to derive a dose response curve. For all of these reasons, BMD analysis is preferred by EPA to the NOAEL/LOAEL approach of selecting a Point of Departure from studies when the available data are amenable to BMD modeling consistent with the biological processes relevant to the study in question.

Dichlorvos is a chlorinated organophosphate pesticide that inhibits plasma, red blood cell (RBC), and brain cholinesterase in a variety of species. (Ref. 3 at 122-123). Cholinesterase inhibition is a disruption of the normal process in the body by which the nervous system chemically communicates with muscles and glands. Although cholinesterase inhibition in the nervous system is not itself regarded as a direct adverse effect, it is “generally accepted as a key component of the mechanism of toxicity leading to adverse cholinergic effects.” (Ref. 27 at 25; see 73 FR 42688-42689). Inhibition of blood cholinesterase “is not an adverse effect, but may indicate a potential for adverse effects on the nervous system” and thus serves as a “surrogate” for cholinesterase inhibition in the nervous system (Ref. 27 at 28). Subchronic and chronic oral dichlorvos exposures to rats and dogs as well as chronic inhalation dichlorvos exposure to rats resulted in significant decreases in plasma, RBC, and/or brain cholinesterase activity. Repeated, oral subchronic dichlorvos exposures in male humans were associated with statistically and biologically significant decreases in RBC cholinesterase inhibition. These cholinesterase effects occurred at dose levels below levels at which any other adverse effect was seen. Generally, there was no evidence of increased sensitivity to young animals following exposure to dichlorvos. No evidence of increased sensitivity to young animals was seen following in utero dichlorvos exposure to rat and rabbit fetuses as well as pre/post natal dichlorvos exposure to rats in developmental, reproduction, and comparative cholinesterase studies. The only evidence of sensitivity in the young was seen in one parameter, auditory startle amplitude, in a developmental neurotoxicity study; however, the effects in the rat pups in that study were at levels well above levels that result in RBC cholinesterase inhibition.

Because inhibition of cholinesterase activity was identified as the most sensitive effect, it was selected as the toxicity endpoint for assessment of risks for all acute and chronic dietary exposures, as well as short-, intermediate-, and long-term (chronic) dermal, inhalation, and incidental oral residential exposures. For each risk assessment scenario, EPA selected a Point of Departure based on either an animal or human study taking into account the duration of the study and the route of exposure used in the study. (Ref. 3 at 130-135). These Points of Departure were used in calculating RfD/PADs and acceptable MOEs. Due to the lack of sensitivity differences between adults and juveniles, the resulting RfD/PADs and acceptable MOEs were designated as applicable to all population subgroups, including infants and children. Animal studies were used in choosing levels of concern for evaluating risk from acute and chronic dietary exposure; acute dermal exposure; and acute and chronic inhalation exposure. A human study (the Gledhill study) was used in evaluating risk from short-term incidental oral exposure; short-, intermediate-, and long-term dermal exposure; and short- and intermediate-term inhalation exposure. All of the studies from which a Point of Departure was selected were conducted in adults (adult humans or adult animals). (See Table 1).

Safety factor determinations used in determining the level of concern for each risk assessment scenario differed based on whether EPA relied on one of several different animal studies or a human study for the Point of Departure for that scenario. For levels of concerns derived from a Point of Departure from an animal study, EPA generally applied a 100X safety factor (10X for interspecies variability and 10X for intraspecies variability). Based on a weight-of-the-evidence evaluation, EPA removed the 10X FQPA safety factor for risk assessments based on an animal study. (See Table 1). EPA's weight-of-the-evidence evaluation concluded that (1) the toxicity database was complete; (2) most of the data indicated no increased sensitivity in the young and the only evidence of increased sensitivity occurred at levels well above the Points of Departure used for establishing the levels of concern; and (3) its estimate of human exposure to dichlorvos was not understated.

For levels of concerns derived from a Point of Departure from the human study, EPA applied a 10X safety factor for intraspecies variability and a 3X FQPA safety factor. (72 FR 68694-68695). No interspecies factor was applied because EPA was not extrapolating a level of concern in humans from a dose in an animal study. The weight-of-the-evidence balance for the FQPA safety factor was slightly different for risk assessments relying on the Gledhill human study for the Point of Departure. In addition to all of the considerations pertaining to the assessments with an animal-derived Point of Departure, the Gledhill-based risk assessments introduced another factor to consider—namely, that the Gledhill study raised a data completeness issue due to the fact that it only identified a LOAEL. This latter factor convinced EPA to retain a portion of the FQPA safety factor when relying on the human study for the Point of Departure. EPA concluded, however, that reliable data supported reduction of the 10X factor to 3X because the effect seen at the LOAEL in that study was so marginal (16 percent RBC cholinesterase inhibition) that a lower dose would have been unlikely to detect any adverse effect. (72 FR 68694-68695; see Table 1).

On June 2, 2006, the NRDC filed a petition with EPA which, among other things, requested that EPA conclude the dichlorvos tolerance reassessment process by August 3, 2006, with a finding that the dichlorvos tolerances do not meet the FFDCA safety standard and issue a final rule by August 3, 2006, revoking all dichlorvos tolerances. NRDC's petition contained dozens of claims as to why dichlorvos' FFDCA tolerances should be revoked. After carefully considering all of NRDC's claims, the public comment received on the petition, and a revised risk assessment EPA conducted in response to the petition, EPA issued an order pursuant to FFDCA section 408(d)(4)(iii) denying the request to revoke dichlorvos' FFDCA tolerances. (72 FR 68662, December 5, 2007).

On February 1, 2008, NRDC filed, pursuant to FFDCA section 408(g)(2), objections to EPA's denial of its tolerance revocation petition and requested a hearing on those objections. NRDC's objections and requests for hearing included two main claims: (1) That EPA has unlawfully failed to retain the full 10X safety factor for the protection of infants and children; and (2) that it was unlawful for EPA to rely on a toxicity study for dichlorvos (the Gledhill study) that was conducted with humans. Because NRDC did not seek judicial review on EPA's substantive conclusions on the latter issue but only challenged EPA's denial of a hearing on the issue, and because the Second Circuit court on review did not reach the hearing issue, the Gledhill study is further discussed only to the extent it bears on the FQPA safety factor decision.

NRDC cited several grounds for its assertion that EPA unlawfully lowered the 10X children's safety factor. However, only two of its arguments were later raised in NRDC's judicial challenge to EPA's decision. First, NRDC claimed that EPA lacked adequate data on dichlorvos' potential effects on the endocrine system because EPA had not received data on endocrine effects through the Endocrine Disruptor Screening Program. Second, NRDC argued that EPA's choice of a 3X additional safety factor was based on generic data and “not [ ] on any data specific to DDVP.” (Ref. 1 at 5).

EPA denied both of NRDC's reasons for its objection to the choice of a 3X FQPA factor. EPA rejected NRDC's endocrine data argument on both legal and factual grounds. EPA concluded that the statute gave it broad discretion to determine what data are needed in making a determination on the FQPA safety factor and that nothing in section 408(p), creating the Endocrine Disruptor Screening Program, overrode that broad discretion. As a factual matter, EPA found that it had adequate data on endocrine effects from the existing dichlorvos database. (73 FR 42697-42698).

EPA also rejected NRDC's claim that it relied on wholly generic data, rather than dichlorvos-specific data, in choosing a 3X FQPA factor. NRDC's argument here was that EPA chose 3X because EPA considers 3X to be a half-value of a 10X factor rather than on data pertaining to dichlorvos. In response, EPA noted that its petition denial order had comprehensively restated its basis for its FQPA safety factor decision, and that restatement focused in great detail on the toxicology data for dichlorvos, particularly, the data on the sensitivity of the young. (73 FR 42695). EPA further pointed out that although the statutory considerations underlying the FQPA safety factor generally supported removal of the 10X additional factor, the reason EPA chose to retain a 3X FQPA safety factor for some assessments was directly tied to a deficiency in a dichlorvos study (the Gledhill study) that is critical to those assessments. (Id.). Thus, there was no basis for NRDC's claim that EPA had not relied on dichlorvos-specific data in making its FQPA safety factor decision.

NRDC petitioned the Second Circuit court for review of EPA's denial of certain of its objections and hearing requests. As to its hearing requests, NRDC argued that EPA improperly denied its request for a hearing on statistical and informed consent issues presented by the Gledhill study. As to its objections, NRDC asserted (1) that, as a legal matter, EPA was required to retain the 10X FQPA factor if it did not have data from the Endocrine Disruptor Screening Program; and (2) that EPA's choice of a 3X FQPA factor was arbitrary and capricious because EPA had relied upon “generic assertions that unlawfully fail to take into account any dichlorvos-specific information for infants and children.” (Ref. 28 at 37). NRDC supported the latter argument in the following fashion. First, it argued that EPA chose 3X solely because it was half of 10X. Second, NRDC asserted that EPA's consideration of the Gledhill study did not constitute “dichlorvos-specific information for infants and children” because the Gledhill study was conducted with adults. Third, NRDC dismissed EPA's reliance on dichlorvos developmental studies in animals on the ground that a prior case had held that EPA had not, in that particular case, offered an adequate explanation of how the data on developing animals supported the FQPA factor chosen.

In response, EPA explained that NRDC's focus on EPA's discussion of why 3X is considered half of 10X ignored the central part of EPA's analysis: An assessment of whether the dichlorvos data showed 3X would be safe. EPA responded to the claim of a failure to consider “dichlorvos-specific information for infants and children” by noting that the Gledhill study had not been considered in isolation in the decision on the FQPA safety factor but in the context of “the animal data showing no difference in adult-young sensitivity” because it was “that very data that shows why the Gledhill study is appropriate for the entire population * * *” (Ref. 29 at 63). Further, EPA noted that NRDC's argument that EPA reliance on animal sensitivity data does not justify a choice of 3X contradicted the core of NRDC's claim—that EPA had not considered “dichlorvos-specific information for infants and children.” (Id. at 62).

On review, the Second Circuit court addressed three issues: (1) Was EPA legally compelled to retain the 10X FQPA safety factor in the absence of obtaining data from the Endocrine Disruptor Screening Program; (2) did EPA adequately explain its decision on the FQPA safety factor; and (3) was NRDC entitled to an evidentiary hearing with regard to its claims regarding the alleged statistical and informed consent deficiencies in the Gledhill study.

1. Endocrine data. The court held that EPA was not statutorily required to retain the 10X FQPA factor in circumstances where it has not obtained the data required under the Endocrine Disruptor Screening Program. (658 F.3d at 219). The court found “no indication in the statute or legislative history that Congress * * * intended the children's safety factor to be mandatory in assessing the risks of all pesticides until EPA completed the estrogen disruptor screening program * * *” (Id.). According to the court, “Congress allowed EPA to determine, based on all available data, whether there was `reliable data' supporting a reduced or waived children's safety factor * * *” (Id.).

2. FQPA safety factor. Contrary to the narrow FQPA safety factor issue presented to EPA in NRDC's objections—did EPA's decision on the FQPA safety factor rely on “a generic assertion [instead of being] based on any data specific to DDVP”?—the court framed the issue on the FQPA factor more broadly: “NRDC now seeks review of that EPA order, arguing in part that EPA failed to explain why, when assessing the safety of dichlorvos for certain exposure scenarios, EPA did not apply an additional tenfold children's safety factor, to account for potential pre- and post-natal toxicity and completeness of data with respect to exposure and toxicity to infants and children.” (Id. at 201).

The court found that, for risk assessments relying on the Gledhill study in deriving the Point of Departure, EPA had provided essentially no explanation with regard to the FQPA safety factor. The court noted that EPA had retained an additional 3X safety factor for these risk assessments but the court concluded that it was EPA's express position that this factor was not based on any evaluation of the risks to infants and children but rather was intended to address the lack of NOAEL in the Gledhill study only. According to the court, “[i]n EPA's IRED and two published orders, EPA consistently reiterated this position and declined to claim that the 3X factor was based on any evaluation of the risk to infants and children.” (Id. at 216). Further, the court concluded that, unlike the risk assessments that were not based on the Gledhill study, EPA did not rely on the developmental animal studies showing no differential sensitivity between adult and juvenile animals. According to the court, “EPA explicitly stated that it did not rely on any animal studies.” (Id. at 217). The court thought this abnegation of reliance of animal studies was confirmed by EPA's decision not to apply an interspecies factor to the Gledhill-based assessments. (Id.). Although the court noted that EPA called the 3X factor a FQPA factor, the court found that label to be insufficient absent an explanation “[i]n []either its IRED []or its two orders [of] how the 3X factor was designed `to take into account potential pre- and post-natal toxicity and completeness of the data with respect to infants and children.' ” (Id.). The court held that EPA's reasoning concerning the marginal effects seen at the LOAEL in the Gledhill study did not constitute a sufficient explanation because EPA did not relate that reasoning “to `potential pre- and post-natal toxicity and completeness of the data with respect to infants and children.' ” (Id.). Finally, the court questioned EPA's analysis that the effects at the LOAEL were marginal suggesting that EPA had not done a proper statistical analysis. (Id. at 218).

Accordingly, the court concluded that, as to risk assessments that used the Gledhill study to derive the Point of Departure, EPA's order was arbitrary and capricious due to EPA's failure to provide an adequate explanation with regard to its decision on the FQPA safety factor. (Id.). Given this conclusion, the court vacated the aspect of EPA's order pertaining to risk assessments based on the Gledhill study and remanded the matter to EPA. (Id. at 220).

3. Evidentiary hearing. With regard to NRDC's request for an evidentiary hearing on issues it raised concerning the Gledhill study, the court determined that it did not need to resolve this question given its disposition of the FQPA safety factor issue. As the court pointed out, “EPA may decide, on remand, not to rely on the Gledhill study or to rely on the study in a different manner or for different reasons.” (Id. at 219).

FFDCA section 408(b)(2)(C) expressly requires EPA to apply a default additional 10X safety factor for the protection of infants and children unless EPA determines, based on reliable data, that a different factor would be safe. Under the terms of the statute, this additional safety factor is imposed “to take into account potential pre- and post-natal toxicity and completeness of the data with respect to exposure and toxicity to infants and children.” (21 U.S.C. 346a(b)(2)(C)). To implement these statutory commands, EPA has released detailed guidance that advises EPA risk assessors in making decisions on the FQPA safety factor to focus on potential pre- and post-natal toxicity and the completeness of the toxicity and exposure databases. In the dichlorvos IRED and the two orders responding to NRDC'S dichlorvos petition, EPA devoted several pages to explaining how its decision to apply a 3X FQPA safety factor complied with the statutory directives on the FQPA safety factor and was consistent with its policy guidance document. (See Ref. 3 at 128-132; 72 FR 68694-68695; 73 FR 42695-42696). From start to finish this discussion centered on the issues of completeness of the toxicity and exposure databases for dichlorvos and the potential increased sensitivity of infants and children to dichlorvos from pre- and post-natal toxicity.

Nevertheless, in vacating, in part, EPA's dichlorvos order, the Second Circuit court held that there was a complete absence of an explanation from EPA as to how EPA's choice of a safety factor protected infants and children. As the court repeatedly stated, “EPA did not explain why a children's safety factor less than 10X would `take into account potential pre- and post-natal toxicity and completeness of the data with respect to infants and children.' ” (658 F.3d at 217). In fact, the court rejected EPA's claim to have applied any FQPA safety factor at all. According to the court, the additional safety factor applied by EPA could not be considered a FQPA safety factor given what the court viewed as EPA's denial that the additional safety factor had anything to do with infants and children. (Id. at 211, 216).

Following a close review of EPA's prior explanations and the court's opinion, EPA now recognizes that the discussion of the FQPA safety factor in its dichlorvos IRED and orders was less than transparent. EPA's explanation for its position on the FQPA safety factor used, at times, a form of short-hand that hid rather than elucidated its reasoning. In particular, EPA's short-hand appears to have led the court to the following two misunderstandings: (1) That EPA's use of a 3X safety factor to address the lack of a NOAEL in the Gledhill study had nothing to do with the safety of infants and children; and (2) that EPA did not consider the animal developmental data in making a determination on the FQPA safety factor for assessments relying on the Gledhill study. Clarification of EPA's position on these two issues is critical to an understanding of EPA's FQPA safety factor decision. Accordingly, on remand, EPA has first addressed how the Gledhill-based assessments relate to protection of infants and children and how EPA used animal developmental data in these assessments. Only then does EPA offer its explanation as to how, in light of the court's opinion, its choice of a FQPA safety factor for the Gledhill-based risk assessment is protective of the safety of infants and children, as required by FFDCA section 408(b)(2)(C).

1. Applying a FQPA safety factor to address the lack of a NOAEL in the Gledhill Study. Numerous times in the IRED as well as its dichlorvos orders, EPA stated that an additional 3X safety factor was applied in risk assessments using the LOAEL in the Gledhill study as the Point of Departure due to a “lack of a NOAEL” in the study. (Ref. 3 at 133; 658 F.3d at 217 (collecting cites)). EPA explained that the safety factor was used to project a NOAEL for the study. The court interpreted these statements as meaning the 3X factor had nothing to do with the protection to infants and children. According to the court, “EPA explained that the 3X factor [used in conjunction with the Gledhill study] was not based on any risk to children or infants, but accounted for EPA's `failure to identify a NOAEL in the [Gledhill] study.' ” (Id. at 214). Certainly, the narrow issue addressed by the use of the 3X factor was the lack of a NOAEL in the Gledhill study. However, extrapolating a NOAEL through use of a safety factor is not an end in itself. Rather, the safety factor was used to ensure that dichlorvos risk assessments relying on the LOAEL in the Gledhill study adequately protect the population groups covered by those assessments. Importantly, the population groups covered by the Gledhill-based assessments include infants and children. Thus, the 3X factor to account for the lack of a NOAEL in the Gledhill study was critical to protecting infants and children. However, EPA's orders and IRED failed to make this linkage between the 3X factor and the safety of infants and children clear. That linkage is fleshed out in detail below.

As discussed in Unit III.B.2.v., prior to the passage of FQPA, EPA had applied an additional uncertainty factor to address a data deficiency such as when adverse effects were seen in the lowest dose of a toxicological study ( i.e., when the study did not provide a NOAEL). Such a factor is used to essentially extrapolate a NOAEL for the study. Without an additional safety factor, there is uncertainty as to whether reliance on the LOAEL as a Point of Departure in calculating a RfD/PAD or MOE is adequately protective of the populations covered by the risk assessment scenario relying on that RfD/PAD or MOE.

EPA has interpreted the FQPA as codifying this LOAEL-to-NOAEL uncertainty factor as a FQPA safety factor when the factor is used in a portion of a risk assessment (i.e., in a particular exposure scenario) that assesses, at least in part, the risk to infants and children. (Ref. 10 at 11-16, A-3—A-4). The logic here is straightforward. A study that fails to produce a NOAEL is considered to be a data deficiency that affects the completeness of the toxicity database. The statute specifically references completeness of the toxicity database as a reason for requiring an additional safety factor for the protection of infants and children. Thus, when the LOAEL from a study that lacks a NOAEL is chosen for the Point of Departure for a risk assessment applying to infants, children, or women of child-bearing age (for the purpose of protecting fetuses), the safety factor used to address this data deficiency is a FQPA safety factor for the protection of infants and children. This is the case whether or not the Point of Departure is used for infants, children, or women of child-bearing age only or for both adults and all other population groups, including infants and children. Many risk assessments for particular exposure scenarios use the same Point of Departure for both adults and infants and children because frequently the relevant toxicity data show a lack of differential sensitivity between adults and the young. However, use in a risk assessment of the same Point of Departure for both adults and the young does not make the FQPA safety factor provision inapposite. EPA's position is that any assessment of risk for a particular exposure scenario that includes, at least in part, an assessment of risks to infants and children triggers the FQPA safety factor provision. Nothing in section 408(b)(2)(C) limits the safety factor provision only to situations where infants or children are more sensitive than adults. For similar reasons, it is also irrelevant to application of the FQPA safety factor provision whether the Point of Departure is from a study involving juveniles or adults. Points of Departure for assessing risks to infants and children are based on the studies showing the most sensitive effects, whether the studies are conducted in adults or juveniles. (See Ref. 17 at 452 (“[C]hronic and subchronic tests in [adult animals] have value in assessing potential risks to children by, for example, identifying target sites for toxicity and providing dose-response information that may be useful for human safety assessment, irrespective of life stage.”). The critical factor for the FQPA safety factor provision is whether the study is being used for a Point of Departure for assessing risk to infants and children.

With this background, the connection between the use of a 3X safety factor to address the Gledhill study LOAEL and the protection of the infants and children can now be explicated. Because the Gledhill study produced cholinesterase effects at the lowest level in the subchronic studies in the dichlorvos database and the database showed no age-related sensitivity, (see discussion in Unit VII.C.), EPA chose the Gledhill LOAEL as the Point of Departure for assessing risks for short- and intermediate-term exposure scenarios to all population groups, including infants and children. In other words, the Gledhill LOAEL was selected as the Point of Departure for all population groups for these exposure scenarios because the dichlorvos database demonstrated that the Gledhill study not only provided the best measure of cholinesterase inhibition for protecting adults but that it was the best measure for protecting infants and children. Nonetheless, EPA also recognized that the data deficiency in the Gledhill study—the failure of the Gledhill study to identify a NOAEL—raises uncertainty as to what that study indicates regarding the threshold below which exposure to dichlorvos will not result in cholinesterase inhibition. To address this uncertainty and thus protect the safety of all population groups covered by the risk assessments, including infants and children, EPA chose to apply an additional safety factor of 3X. This choice of a safety factor was made under the rubric of the FQPA safety factor provision because the uncertainty raised by reliance on a LOAEL both (1) affected the assessment of the risk to infants and children; and (2) was driven by a data deficiency affecting the completeness of the toxicity database. (73 FR 42695; 72 FR 68694-68695; Ref. 3 at 133, 134). Thus, the additional 3X safety factor used in assessments relying on the Gledhill study was not simply to address the lack of a NOAEL in that study but rather to ensure the protection of infants and children (among others) given that a LOAEL was used as the Point of Departure for assessing risk to infants and children for several exposure scenarios. Regrettably, the connection between a safety factor used to address the lack of a NOAEL in a study in adults and the protection of infants and children was not transparent in EPA's IRED or its denial of NRDC's petition and objections. That linkage should now be clear.

2. Reliance on animal developmental data. EPA's FQPA safety factor policy emphasizes the importance of considering the “weight-of-evidence analyses for the completeness of the toxicity database, the degree of concern for pre- and postnatal toxicity, and results of the exposure assessments” in making a safety factor determination. (Ref. 10 at 50). In particular, the policy stresses “taking into account all pertinent information in evaluating potential pre- and postnatal toxicity.” (Id. at 29). The policy recognizes that human data on pre- and postnatal toxicity is “difficult to obtain” and for that reason discusses, in detail, how animal developmental data should be considered in evaluating the potential for pre- and post-natal toxicity in humans. (Id. at 28-31). Although EPA did discuss the animal data on juvenile sensitivity in its FQPA safety factor determination, (72 FR 68694-68695), the court concluded that EPA had not considered that data in making a determination on the FQPA safety factor for assessments relying on the Gledhill study for the Point of Departure.

To support this conclusion, the court opined that EPA's orders specifically referenced the animal developmental studies in conjunction with the safety factor determination for the non-Gledhill-based assessments but had not done so as to the Gledhill-based assessments. The court is correct that EPA did not clearly explain that its discussion of the animal developmental data related both to the assessments based on a Point of Departure from animal data as well as the assessments relying on the Gledhill study for the Point of Departure. EPA's discussion of the Gledhill study, and the data deficiency therein, followed the analysis of the animal developmental data but did not directly reference that data or the statutory considerations bearing on the FQPA safety factor decision. (Id.). To avoid this error in its revised safety factor finding below, EPA has included a discussion of the data deficiency in the Gledhill study under the topic of “completeness of the data with respect to * * * toxicity” and also explicitly discussed how the statutory consideration pertaining to the potential for pre- or post-natal toxicity, and the animal data bearing on this issue, was considered in the context of the Gledhill-based assessments.

The court also concluded that “EPA explicitly stated that it did not rely on any animal studies” in connection with the Gledhill-based assessments, (658 F.3d at 217), citing to language in the IRED that specified that where the Point of Departure was chosen from the Gledhill study “there was no need to account for interspecies extrapolation * * * [s]ince the study was conducted in human subjects.” (Ref. 3 at 133, 134). According to the court, “[w]hen EPA did rely on the animal studies * * * [it] properly applied a safety factor of `10X for interspecies differences.' ” (658 F.23d at 217). The court appears to have drawn the conclusion that the interspecies factor should be applied whenever EPA considers animal studies in any aspect of the risk assessment. Thus, the court reasoned that because EPA did not apply an interspecies factor for the Gledhill-based assessments, it could not have considered the animal developmental data in the FQPA safety factor determination for dichlorvos.

The court has misapprehended the reason EPA uses an interspecies factor in risk assessments. The factor is not automatically applied whenever animal data are considered in any aspect of a risk assessment. Rather, as explained in Unit III.B.2., the interspecies factor is used when extrapolating from a dose in an animal study (generally a NOAEL or LOAEL) on a milligram-per-kilogram of body weight basis to a dose in humans. (See Ref. 10 at 10 (an interspecies factor is used “if animal data have been used as the basis for deriving the hazard values”). The interspecies factor is designed to account for possible toxicokinetic and toxicodynamic differences in humans and laboratory animals that may result in differences in internal dose and organ sensitivity between humans and animals. Thus, in the dichlorvos animal assessments in which EPA relied on animal data for the Point of Departure, EPA did apply an interspecies factor. For those assessments, EPA was either extrapolating a RfD for humans from animal data or comparing the margin between human exposure and the dose in animals that was judged to be a NOAEL. No interspecies factor was necessary in assessments based on the LOAEL from the Gledhill study because EPA was not extrapolating from a NOAEL or LOAEL in laboratory animals to humans or comparing human exposure to a dose from an animal study. Rather, EPA had data in humans—the Gledhill study—and was relying on that data for the Point of Departure. There was no need to account for the toxicokinetic and toxicodynamics differences between humans and animals when deriving a safe dose for humans from a study conducted with humans.

EPA, however, did rely on the animal developmental data in the FQPA safety factor determination for the Gledhill-based assessments. But that reliance was for a purpose distinct and separate from use of the data for extrapolating a dose from animals to humans. In accordance with Agency FQPA safety factor policy, EPA considered the dichlorvos animal developmental data with regard to the important information it provides on whether the 10X intraspecies factor for dichlorvos is protective of infants and children. (Ref. 10 at 29). A primary focus of the animal developmental data (the rat and rabbit developmental studies, the rat reproduction study, the rat developmental neurotoxicity study, and comparative cholinesterase studies) is on the relative sensitivity of adult and juvenile animals. Because EPA would rarely have data on the relative sensitivity among different age groups of humans to a pesticide, these animal data help inform, as EPA policy makes clear, whether the 10X intraspecies factor is sufficiently protective of infants and children. (Id.).

Considering animal developmental data in evaluating the intraspecies factor is a standard part of EPA's risk assessment process. As discussed in Unit III.B.2 and above, animal developmental data are central both to establishing the justification for the 10X default value for the intraspecies factor and for evaluating the protectiveness of this default value for specific chemicals. Although broad-based surveys of data on adult/juvenile sensitivity in both humans and animals generally support the use of a 10X default value for the intraspecies factor, there is wide recognition that the possibility of heightened sensitivity in infants and children warrants obtaining particularized data on juvenile/adult animal sensitivity for individual chemical risk assessments. When these data are available, they may indicate that there is no heightened concern warranting an additional safety factor or that an additional factor is necessary above and beyond the default 10X value for the intraspecies factor. In a few cases, EPA has even relied, at least in part, on animal data as supporting a reduction in the default 10X intraspecies factor.

Yet, despite the centrality of animal data to the justification for and selection of the intraspecies factor, EPA is not aware of any instance where an interspecies factor has been applied solely for reliance on animal data on adult-juvenile sensitivity to evaluate the protectiveness of the human intraspecies factor. For example, EPA's long-established and consistent practice is not to apply an interspecies factor when relying on a human study for the Point of Departure even though a decision on the intraspecies factor is still an essential part of such assessments. Dourson et al. collected a summary of all EPA's RfDs on EPA's Integrated Risk Information System (IRIS) as of May 2000 that used human data for the Point of Departure. (Ref. 17). All 24 such assessments identified used an interspecies factor of 1X ( i.e., no factor). EPA has identified 9 additional such risk assessments on IRIS post-dating May 2000, and each one of those also does not apply an interspecies factor. (Ref. 30). Even more on point are EPA pesticide risk assessments relying on human data. Since the promulgation of the 2006 Human Research Rule, EPA has accepted 10 human studies for use in pesticide risk assessments other than the Gledhill study. (Id.). A Point of Departure was selected from 9 of those 10 studies. 1 Yet, in none of those assessments did EPA apply an interspecies factor in conjunction with a Point of Departure from a human study even though the assessments do not focus on the human data exclusively. Animal developmental data play a critical part in these assessments, particularly where a FQPA safety factor analysis is required.

This is a summary of the Commission's document, FCC 12-87, adopted and released on August 3, 2012. The full text of this document is available for inspection and copying during normal business hours in the FCC Reference Information Center, Room CY-A257, 445 12th Street SW., Washington, DC 20554. The complete text of the Backhaul Second Report and Order, Order on Reconsideration, and Memorandum Opinion and Order ( Backhaul 2nd R&O, OOR, and MO&O ) and related Commission documents may be purchased from the Commission's duplicating contractor, Best Copy and Printing, Inc. (BCPI), Portals II, 445 12th Street SW., Room CY-B402, Washington, DC 20554, (202) 488-5300 or (800) 387-3160, contact BCPI at its Web site: http://www.bcpiweb.com . When ordering documents from BCPI, please provide the appropriate FCC document number, for example, FCC 12-87. The complete text of the Backhaul 2nd R&O, OOR, and MO&O is also available on the Commission's Web site at http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-12-87A1.doc . Alternative formats (computer diskette, large print, audio cassette, and Braille) are available by contacting Brian Millin at (202) 418-7426, TTY (202) 418-7365, or via email to bmillin@fcc.gov .

1. In the Backhaul 2nd R&O, OOR, and MO&O, we take further steps to remove regulatory barriers and lower costs for the wireless microwave backhaul facilities that are an important component of many mobile wireless networks. Broadband is indispensable to our digital economy, and wireless technology is an increasingly important source of broadband connectivity. Microwave backhaul facilities are often used to transmit data between cell sites, or between cell sites and network backbones. Service providers' use of microwave links as an alternative to traditional copper circuits and fiber optic links has been increasing. Microwave is a particularly important high-capacity backhaul solution in certain rural and remote locations.

2. In this Backhaul 2nd R&O, OOR, and MO&O, we continue our efforts to increase flexibility in the use of microwave services licensed under our part 101 rules. The steps we take will remove regulatory barriers that today limit the use of spectrum for wireless backhaul and other point-to-point and point-to-multipoint communications. We also take actions that will reduce costs of deploying wireless backhaul in rural areas. By enabling more flexible and cost-effective microwave services, the Commission can help foster deployment of broadband infrastructure across America.

3. On August 9, 2011, the Commission made additional spectrum available for Fixed Service (FS) use and provided additional flexibility to enable FS licensees to reduce operational costs, facilitating the use of wireless backhaul in rural areas. Specifically, in the R&O, the Commission allowed FS to share the 6875-7125 MHz and 12700-13150 MHz bands currently used by the Broadcast Auxiliary Service (BAS) and the Cable Television Relay Service (CARS). In addition, the Commission eliminated the “final link” rule that prohibits broadcasters from using FS stations as the final radiofrequency (RF) link in the chain of distribution of program material to broadcast stations. The Commission also modified the part 101 minimum payload capacity rule to allow temporary operations below the minimum capacity under certain circumstances, enabling FS links—in particular long links in rural areas—to maintain critical communications during periods of fading.

4. In the companion FNPRM, the Commission sought comment on additional proposals to remove regulatory barriers and facilitate backhaul deployment. Specifically, the Commission sought comment on (1) Allowing smaller antennas in the 6, 18, and 23 GHz bands without materially increasing interference; (2) exempting licensees in non-congested areas from the efficiency standards and allowing other licensees to seek relief from these standards; (3) allowing microwave operators to create higher capacity links by licensing 60 and 80 megahertz channels in the 6 and 11 GHz microwave bands, respectively; (4) revising our rule that requires microwave stations that point near the geostationary arc to obtain a waiver to conform our rule to International Telecommunications Union (ITU) regulations; and (5) modifying the definition of payload capacity in our part 101 rules to account for Internet protocol radio systems.

5. Additionally, four parties filed petitions for reconsideration of the R&O and/or MO&O: Engineers for the Integrity of Broadcast Auxiliary Services Spectrum (EIBASS), the Fixed Wireless Communications Coalition (FWCC), Motorola Solutions, Inc./Cambium Networks (Cambium), and Wireless Communications Association International, Inc. (WCAI).

6. We adopt, with minor variations, the FNPRM's proposal to allow smaller antennas in the 6, 18, and 23 GHz bands. The record demonstrates that smaller antennas can be accommodated without materially increasing the interference risk to other licensees. Clearwire cites “technology advancements and more sophisticated band sharing techniques” as developments that would allow us to loosen the Category B antenna standards without an increased risk of interference. Furthermore, a variety of operators who use microwave support the proposed standards. Under our rules, if smaller antennas would cause an interference conflict with another applicant or licensee, the applicant proposing the smaller antenna must upgrade its antenna. Allowing smaller antennas will facilitate wireless backhaul deployments in two ways. As discussed in greater detail below, smaller antennas allow significant cost savings because they are cheaper to manufacture, install, and maintain. Smaller antennas also allow existing towers to accommodate more antennas and allow installations at sites that would not otherwise be able to accommodate larger antennas. Indeed, there could be instances where allowing the use of smaller antennas may be critical in allowing the use of wireless backhaul by broadband operators.

7. We adopt Comsearch's proposal to implement the proposed standards as Category B2 and keep the existing standards as Category B1, allowing applicants to choose between those standards. That approach will maximize flexibility for applicants and allow existing licensees to keep their antennas. We also adopt FWCC's and Comsearch's proposal to slightly loosen the proposed antenna standards for the 18 GHz band. No party argued that the revised standards would raise any interference concerns in any of the relevant bands.

8. We do not adopt Comsearch's proposal to adopt a power limit on licensees using smaller antennas. Adopting a power limit may artificially limit path length because path length is directly related to the EIRP. A particular path will require operation at the same EIRP whether the operator uses a Category A antenna or a Category B antenna. When EIRP is equivalent, a Category B antenna will radiate more energy in the side lobes than a Category A antenna. In areas where another operator is not in proximity, for example, rural and other uncongested areas, the extra side lobe radiation will not cause any additional interference. In those areas, a licensee can use a smaller and cheaper antenna without harming other FS operators. If we were to restrict power across the board, there may be instances where operators may not be able to realize the full benefits of smaller antennas. We find that our existing rules are sufficient to protect against the potential for increased side lobe radiation. If interference occurs, the rules require the licensee to upgrade its antenna if the upgrade would mitigate the interference.

9. We find that permitting smaller antennas in the 6, 18 and 23 GHz bands will benefit operators and consumers alike and that these benefits outweigh any potential costs. Our actions today will enable these spectrum bands to be used more intensively for wireless backhaul, public safety, and other critical uses. Even for a single link, which consists of two transmitters and two antennas, the cost savings from allowing smaller antennas can be substantial. Savings in installation costs for the link would likely be over $2,000 for two antennas. MetroPCS estimates that if a smaller antenna eliminates the need for wind loading studies or structural changes to a tower, the cost savings could run “into the tens of thousands, if not hundreds of thousands, of dollars.” There would also be savings in operational costs. For example, if an operator using a 6 GHz link is able to use 3-foot antennas instead of 6-foot antennas, its site rental costs could decrease by $7,200 each year. There are also additional cost savings noted by FiberTower and others. When those cost savings are multiplied by the thousands of links that are authorized in the 6 GHz band each year, even if a relatively small percentage of authorized links could use smaller antennas, there could be many instances where operators could recognize cost savings. While the cost savings in the 18 and 23 GHz bands would be smaller, since there is less difference in the size of antennas, there would still be cost savings. On the other hand, there is some risk that a carrier taking advantage of these new rules may have to upgrade to a Category A antenna later. We believe that in many cases, this potential cost will be discovered and avoided in the coordination process. We also note that licensees are not required to use smaller antennas.

10. To promote efficient frequency use for various channel sizes in certain part 101 frequency bands, § 101.141(a)(3) of the Commission's rules requires FS operators to establish minimum payload capacities (in terms of megabits per second) and minimum traffic loading payloads (as a percentage of payload capacity). That rule lists a “minimum payload capacity” for various nominal channel bandwidths. The term “payload capacity” is not defined. The same rule also defines “typical utilization” of the required payload capacity for each channel bandwidth as multiples of the number of voice circuits a channel can accommodate.

11. The FNPRM sought comment on changes to modernize the payload capacity rule, particularly on a proposal made by Comsearch to de-emphasize the legacy voice-based data rates and instead emphasize a consistent efficiency requirement in terms of bits-per-second-per-Hertz (“bps/Hz”). Comsearch also asked the Commission to define “payload capacity” as “the bit rate available for transmission of data over a radiocommunication system, excluding overhead data generated by the system.” Comsearch argued that, while the examples based on voice-based data rates were typical when the rule was written, they are becoming outdated as systems support other interfaces such as the Internet Protocol. Comsearch also argued that the rule should be changed because the bandwidth efficiency requirements vary (from 2.46 to 4.47 bps/Hz) based on channel bandwidth, rather than having a uniform requirement for all channel bandwidths. Comsearch asked the Commission to obtain input from equipment manufacturers and other interested parties to develop an appropriate efficiency rate in terms of bits-per-second-per-Hertz.

12. The FNPRM asked whether the Commission should adopt Comsearch's definition of payload capacity, adopt an alternative definition or leave the term undefined. The FNPRM asked commenters to identify advantages and disadvantages to defining the efficiency requirement in terms of bits-per-second-per-Hertz or in terms of some other metric. It sought input on an appropriate benchmark value to use in the event the agency decided to define the efficiency requirement in terms of bits-per-second-per-Hertz. The Commission further inquired whether the value should be the same across all frequency bands and across urban as well as rural areas. It also asked for comments on whether there is any need to consider how the definition should be applied to legacy systems, i.e., whether there would be a need to grandfather equipment that is currently installed or equipment that is currently on the market.

13. FWCC had originally recommended adoption of the efficiency requirements using bits/second/Hertz values adopted by Industry Canada, with appropriate adjustments for bands where Canada does not have FS services. Comsearch supported those standards. FWCC subsequently proposed an adjustment that would continue to express the standards based on bits/second/Hertz but tighten the standards for certain channel bandwidths in the 11 GHz and 13 GHz bands.

14. First, we convert the current voice-circuit based efficiency standards to bit/second/Hertz standards using standards recently proposed by FWCC. Commenters generally support the idea of replacing our existing payload capacity requirements with efficiency requirement expressed in terms of bits-per-second-per-Hertz. We have reviewed the most recent standards proposed by FWCC, and find that they closely approximate what our current rules require and are otherwise appropriate. This action will allow our payload capacity requirements to reflect modern technologies. Furthermore, if we allow new channel bandwidths in microwave bands, a bit/second/Hertz standard will automatically accommodate new channel bandwidths.

15. FWCC and Comsearch support the proposed definition of payload capacity as consistent with industry practice. We adopt the proposed definition because it is useful to define that term in our rules and the proposed definition is appropriate.

16. A second and related issue is the definition of “throughput” for purposes of the efficiency standards. The definition is important because FS operators use a variety of network configurations, and using an unnecessarily restrictive definition of throughput can prevent operators from using some of those network configurations. We consider two proposals offered by commenters and adopt an approach that meets both of their objectives.

17. Clearwire supports the idea of adjusting the minimum payload requirements to account for the increased capacity that would be available with wider bandwidth channels. It expresses concern, however, that simply establishing a bits/second/Hertz standard may not be appropriate for modern network topologies. Clearwire uses an Ethernet-based microwave mesh that relies on a ring topology to provide 99.999 percent network availability by providing redundant link diversity from every cell site location. Normally, a ring is split in half with traffic travelling clockwise on one half and counterclockwise on the other half. If a radio fails on a link, the traffic is aggregated and re-routed around the failed/downed link. Because each link must be designed to carry enough data to accommodate failures elsewhere in the system, the links must be designed to be less than fully loaded during normal operation. Clearwire proposes that the Commission require applicants to designate each of its links with respect to its generic network topology. For example, a link would be certified as either a ring, mesh, or other resilient network path (links), or as a linear (nonresilient) network topology path. If the link were part of a ring, mesh, or other resilient network topology, the applicant would have to identify the link as either a “traffic bearing link” or a “management/resiliency link.” Under Clearwire's proposal, “management/resiliency links” would be exempt from the efficiency standards, while other links would have to comply with the applicable standards.

18. FWCC recommends a different approach. FWCC asks that we drop the voice circuit designations in § 101.141(a)(6) and (7) of the Commission's rules, which define “loading” for purposes of existing rules, and replace them with a new § 101.141(a)(6) to read as follows: “Digital systems using bandwidths of 10 megahertz or larger will be considered 50% loaded when at least 50% of their total payload capacity is being used.”

19. We believe the objectives behind the Clearwire and FWCC proposals can be met through a simpler approach. Therefore, we update our existing traffic loading requirements, which are not expressed in terms of actual data throughput but in terms of the capacities of multiplexers attached to the transmitters. The definition we adopt today will ensure the efficient use of spectrum while allowing operators to use network configurations with redundant links in order to maintain continuity of service if a link fails. While we update our definition to take into account current technologies, the definition we adopt uses an approach that is consistent with our current rule.

20. To harmonize the proposals and respond to concerns expressed by Comsearch, FWCC, Clearwire and other commenters, we replace § 101.141(a)(6) and (7) with the following new § 101.141(a)(6) to read as follows: “Digital systems using bandwidths of 10 MHz or larger will be considered 50 percent loaded when at least 50 percent of their total capacity is being used. For purposes of this subsection, a Fixed Service channel is being used if it is attached to a communications system that is capable of providing data to it at a rate that is sufficient to occupy at least 50 percent of the payload capacity of the Fixed Service channel, after header compression is applied.”

21. This definition should ensure that FS systems will be designed to carry the amount of data that is likely to be transmitted over them after IP radio systems remove extraneous header data, to the extent licensees use transmission systems that remove such data. It should also accommodate the needs of operators that deploy FS links in ring topologies, where excess capacity is needed to ensure network reliability.

22. In the FNPRM, the Commission sought comment on exempting licensees from complying with the efficiency standards if the environment was sufficiently noncongested to allow the use of antennas meeting performance Standard B. The Commission noted that Sprint Nextel Corporation, Cielo Networks, and Aviat Networks contended that providing relief from efficiency standards in rural areas could reduce the costs of deployments and allow for more microwave backhaul in rural areas. The Commission suggested that relaxing efficiency standards might substantially increase possible path lengths and thereby dramatically improve the business case for deploying microwave backhaul facilities in certain rural areas. The Commission noted that general relief may not be appropriate in congested areas because lowering efficiency standards could result in inefficient use of spectrum. In congested areas requiring use of antennas meeting performance Standard A, the Commission sought comment on allowing applicants to obtain relief from the efficiency standards if they show that: (1) The efficiency standards prevent the deployment of the requested link for economic or technical reasons; (2) the applicant does not have any reasonable alternatives ( e.g., use of different frequency bands, use of fiber); and (3) relaxing the efficiency standards would result in tangible and specific public interest benefits.

23. We adopt a new policy, the Rural Microwave Flexibility Policy, designed to provide operators relief, through our waiver process, from the efficiency standards that may not be necessary in noncongested rural areas. Granting licensees in noncongested areas relief from these efficiency standards can facilitate the use of microwave backhaul in rural areas by allowing substantial cost savings in deployment. Indeed, granting relief from the efficiency standards could allow the use of microwave in areas where such use would not be economically feasible under the current rules. In adopting this policy, we take into consideration concerns raised by commenters and institute a series of criteria to ensure that relief is appropriately tailored. If experience with this Policy suggests that a rule change is warranted in the future, we will reconsider that possibility at the appropriate time.

24. Exempting licensees from the efficiency standards in noncongested areas can reduce the cost of deploying microwave backhaul facilities and substantially increase possible path lengths, thereby spurring deployment of broadband in rural areas. The benefits of relaxing efficiency standards in rural areas could be considerable. For example, in 2010, Sprint, FiberTower, and the Rural Telecommunications Group estimated the cost of deploying and operating a 6 GHz link covering 100 miles and requiring four different relay towers would be over $3 million. Additionally, FWCC has demonstrated that allowing a 6 GHz licensee to vary its modulation between 256 Quadrature Amplitude Modulation (a throughput of 208 Mbps) and Quadrature Phase Shift Keying (a throughput of 45 Mbps, about one-fifth of the throughput of 256 QAM) could extend the usable length of a link from 24.56 kilometers to 66.45 kilometers, because the lower throughput allows the operator to maintain reliability over a longer distance.

25. An increase in usable path length would allow some operators to replace multiple paths with single paths. For each intermediate relay station that could be eliminated, the operator would save the cost of a transmitter, antenna, and site rental for that relay site. If one uses the $3 million cost estimate provided by Sprint, FiberTower, and the Rural Telecommunications Group, and assumes that each station contributes equally to the overall cost of the link (two end stations and four intermediate relay stations), the cost of each intermediate relay station would be approximately $500,000. A review of our licensing data shows that there are over 22,000 stations in the 6 GHz and 11 GHz bands that currently use Category B antennas that would potentially be eligible for such relief. Moreover, there may be many more sites where microwave service is not yet deployed because of the prohibitive cost of multiple hops. In these cases, a more flexible policy could spur increased broadband “middle mile” deployment.

26. Even if an intermediate relay station cannot be eliminated, providing relief from the minimum payload capacity rule can result in cost savings. Allowing use of lower data rates could allow licensees to use less expensive transmitters and lower power, both of which would result in cost savings. Under the revised minimum capacity requirements that we are adopting in this order, for example, a transmitter operating with a bandwidth of five megahertz in congested areas must have a minimum capacity of 22 megabits per second (Mbits/s). By looking to publicly available sources of equipment pricing, it appears that an operator could realize significant cost savings.

27. Several commenters express concerns about the proposal in the FNPRM for an exemption from the efficiency standards. Comsearch believes that the Commission's actions in allowing use of adaptive modulation and allowing the use of smaller antennas in microwave bands provide sufficient cost savings such that relief from the efficiency standards would be unnecessary. FWCC believes that granting relief from the efficiency standards could “lock in” inefficient usage if an area subsequently becomes congested. Comsearch and FWCC believe that basing relief from the efficiency standards on the use of a Category B antenna could provide operators with incentives to use less efficient Category B antennas and lower capacity radio equipment and may punish applicants who have other reasons for using Category A antennas. As an alternative, Comsearch and FWCC propose granting relief from the traffic loading requirements in noncongested areas. FiberTower and US Cellular also support granting relief from the traffic loading requirements. FWCC also proposes a set of conditions for areas eligible for relaxed rural efficiency rules. These conditions are designed to ensure that such deployments do not occur in areas that may become congested, thereby protecting against the “lock in” problem.

28. We recognize commenters' concerns about the impact of providing relief from efficiency standards in rural areas, but we find there is a better approach than the alternatives presented. FWCC and Comsearch are concerned that providing relief from the minimum payload capacity requirements will provide incentives for licensees to use Category B antennas, which can increase interference. We do not agree with FWCC and Comsearch that allowing adaptive modulation and smaller antennas can be a substitute for relief from efficiency standards, because granting appropriate relief from the efficiency standards can result in much greater cost savings in rural areas. We disagree with those commenters who suggest that granting relief from the traffic loading standards would be an adequate substitute for granting relief from the minimum payload capacity requirements. If we merely provided relief from the traffic loading requirements, FS operators would have to build links that were fully capable of meeting the minimum payload capacity requirements. Denying permission to reduce payload capacities in such areas would all but eliminate any cost savings that would otherwise be made possible by reducing loading percentages alone, because most of the savings associated with granting relief from the efficiency standards would result from reduced up front equipment costs, as opposed to operating costs.

29. Given the concerns presented in the record, we opt to implement our proposal as a policy, listing specific criteria under which we will favorably consider waivers of the efficiency standards, as opposed to a blanket rule exempting licensees from those criteria. This approach responds to the concerns raised by Comsearch and FWCC. More specifically, the policy will not “lock in” inefficient usage because licensees will be required to upgrade facilities to use Category A antennas and comply with the efficiency standards if needed to accommodate new FS applicants (or to avoid interference). Furthermore, the criteria we establish will ensure that relief is limited to areas where the use of lower capacity radio equipment will be appropriate. This policy will provide a meaningful opportunity for relief for rural operators. Adopting relief as waiver policy will allow us to consider individual circumstances and to gain more information on when relief from the efficiency standards would be appropriate. As we gain more experience with such waiver filings, we may consider refining the criteria or codifying the policy as a Commission rule.

30. Specifically, we adopt a Rural Microwave Flexibility Policy and direct the Wireless Telecommunications Bureau (“Bureau”) to favorably consider waivers of the payload capacity requirements if the applicants demonstrate compliance with the following criteria:

• The interference environment would allow the applicant to use a less stringent Category B antenna (although the applicant could choose to use a higher performance Category A antenna);

• The applicant specifically acknowledges its duty to upgrade to a Category A antenna and come into compliance with the applicable efficiency standard if necessary to resolve an interference conflict with a current or future microwave link pursuant to § 101.115(c);

• The applicant uses equipment that is capable of readily being upgraded to comply with the applicable payload capacity requirement, and provide a certification in its application that its equipment complies with this requirement;

• Each end of the link is located in a rural area (county or equivalent having population density of 100 persons per square mile or less);

• Each end of the link is in a county with a low density of links in the 4, 6, 11, 18, and 23 GHz bands;

• Neither end of the link is contained within a recognized antenna farm; and

• The applicant describes its proposed service and explains how relief from the efficiency standards will facilitate providing that service ( e.g., by eliminating the need for an intermediate hop) as well as the steps needed to come into compliance should an interference conflict emerge.

31. By establishing our Rural Microwave Flexibility Policy, we do not intend to restrict licensees' ability to obtain such relief under §§ 1.925 and 1.3 of our rules. We direct the Bureau to carefully consider requests for waiver of the efficiency standards filed under the general waiver standard, consistent with the Commission's duty to take a “hard look” at applications for waiver and consider all relevant factors when determining if a grant of relief is warranted. The Bureau should not reject a waiver showing under the general waiver standard merely because the applicant has not shown all of the factors listed above. We would anticipate that as an applicant demonstrated compliance with more of the factors listed above, that an applicant would be more likely to have made the requisite showing in support of a waiver. We also direct the Bureau to consider other factors in support of a waiver request, if appropriate.

32. We agree with Comsearch and FWCC that licensees who could use Category B antennas but choose to use Category A antennas should not be foreclosed from seeking waiver relief under the waiver policy we establish today because of their voluntary decision to use a higher performance antenna. Accordingly, we clarify that licensees who could use Category B antennas are eligible for relief from the minimum payload capacity requirements, even if they choose to use a Category A antenna, so long as they meet all of the criteria specified in the Rural Microwave Flexibility Policy we adopt today.

33. Our action today will provide major benefits to FS operators in rural areas. Providing relief from the efficiency standards may allow longer path links, which can eliminate the need for intermediate relay stations. As noted above, the cost of operating an intermediate relay station can be up to $500,000. Furthermore, providing relief from efficiency standards can also allow the use of less expensive transmitters and lower power. In theory, there are two types of costs that could result from today's action. First, a licensee who took advantage of the relief today could later be required to upgrade and comply with the efficiency standards. Second, the presence of a lower efficiency system using a Category B antenna could make it more difficult for other operators to share the spectrum in the same area. Under our rules, however, the decision to use a Category B antenna is voluntary, and existing operators must upgrade their antennas to Category A antennas if necessary to resolve interference conflicts. Accordingly, we anticipate that any costs will be outweighed by the benefits of our action.

34. The FNPRM invited comments on FWCC's request that the Commission allow FS operators to combine adjacent channels in the 5925-6425 MHz (Lower 6 GHz band) and 10700-11700 GHz band (11 GHz band), respectively, to form 60 and 80 megahertz wide channels, where the maximum authorized channel bandwidths at present are 30 and 40 megahertz, respectively. The FNPRM acknowledged that the proposal had the potential to allow backhaul operators to handle more capacity and offer faster data rates but noted that the record on this issue was otherwise quite limited.

35. Commenters generally support FWCC's proposal, primarily on the ground that smart phones and other mobile devices are generating increased data demands for cellular backhaul. Comsearch and US Cellular advise proceeding cautiously because the conventional approach to assigning channels of 30 megahertz bandwidth in the 6 GHz band and of 30 or 40 megahertz in the 11 GHz band has been to follow an adjacent-channel alternating-polarization (“ACAP”) plan. Comsearch states that this kind of cross-polarization is worth up to a 35 dB reduction in interference when compared with the amount of interference that a signal on the same polarization would cause. If we allow 60 or 80 megahertz channels to be assigned on a single license, it becomes harder to maintain the ACAP licensing plan, particularly when the wider channels are overlaid on existing 30 or 40 megahertz channels. Ultimately, however, in light of the potential cost savings, Comsearch supports allowing wider channels in the 6 and 11 GHz bands “subject to appropriate safeguards.”

36. In response to FWCC's petition for rulemaking, NSMA suggested that the Commission should consider: (1) “Requiring a showing of necessity and availability for applications planning use of more than one or two 60/80 MHz wide channels on any one path”; (2) designating certain slots as “preferred” slots for wider bandwidth channels ( e.g., starting at one of the band edges, so all licensees would first attempt use of these channels on the same frequencies); (3) adjusting the minimum payload requirements to account for the higher capacity capabilities of the wider bandwidth channels; and (4) adopting methods to better assure high utilization with more tightly drawn regulations. The FNPRM sought comment on NSMA's suggestion.

37. We find that allowing 60 megahertz and 80 megahertz channels in the 6 GHz and 11 GHz bands, respectively, would serve the public interest by allowing backhaul operators to handle more capacity and offer faster data rates. In light of the explosive growth in demand for broadband services, we believe it is important to provide operators with the capability to offer faster services wherever possible. Allowing wider channels can also result in more efficient spectrum utilization.

38. The only concern, which was raised by Comsearch and US Cellular, was whether wider channels would be consistent with assigning channels using ACAP. Neither of those parties opposes allowing wider channels, however, so long as appropriate safeguards are instituted against warehousing and inefficient use of spectrum. Commenting parties support the conditions suggested by NSMA. After reviewing the conditions, we will adopt NSMA's suggestion that wideband channels be assigned by preference to the highest available channels in the relevant bands, except where such a choice would impede the efficiency of local frequency coordination efforts. We also adopt today a broader revision of our payload efficiency rules to apply uniform bits-per-second-per-Hertz requirements across multiple bands and bandwidths. Together, we believe those actions will ensure that the 6 and 11 GHz bands are used efficiently while allowing licensees to benefit from wider channels.

39. To protect receivers on geostationary satellites from the potential for interference from FS transmitters, § 101.145 of the Commission's rules requires a waiver filing for: (1) FS transmitters in the 2655-2690 MHz and 5925-7075 MHz bands with an antenna aimed within 2° of the geostationary arc; and (2) FS transmitters in the 12700-13250 MHz range with an antenna aimed within 1.5° of the geostationary arc. To be approved, a waiver request must show, among other factors, that the transmitter EIRP is below listed limits. In contrast, Article 21 of the ITU Radio Regulations places the 2° restriction on the pointing azimuth of antennas of FS transmitters in the 1-10 GHz band only if the EIRP is greater than 35 dBW, and the 1.5° restriction on the azimuth of antennas in the 10-15 GHz band only if the EIRP is greater than 45 dBW.

40. The FNPRM sought comment on a Comsearch proposal to amend § 101.145 of the Commission's rules to require a waiver filing for FS facilities pointing near the geostationary arc only if the EIRP is greater than the values listed in the ITU Radio Regulations. Comsearch contends that the existing, more restrictive requirement in § 101.145 primarily protects satellites located over Europe, Africa, or the Atlantic or Pacific Oceans. Comsearch further believes that, because the ITU has determined that FS transmitters with EIRPs below the values listed in Article 21 are unlikely to cause interference to geostationary satellites, amending the Commission's rules would improve the administrative efficiency of licensing FS links for backhaul without any corresponding harm.

41. We adopt the proposal to require that a waiver filing be necessary for FS facilities pointing near the geostationary arc only if the FS station's EIRP is greater than the values listed in the ITU Radio Regulations. As noted in the FNPRM, this action can facilitate microwave deployments by allowing affected licensees to deploy more quickly, explaining that the Commission's rules provide many applicants with conditional authority to begin service immediately, without waiting for final approval from the Commission, once they complete frequency coordination, with the stipulation that they must take their stations down if the Commission later rejects their applications. The change will harmonize the Commission's regulations with international regulations, and as explained further below, can apparently do so without creating any increased risk of interference to satellite services. That rule change will limit the circumstances in which applicants will have go through the burden and expense of filing waiver requests and the associated waiver fee.

42. We do not change the requirement that FS facilities protect previously authorized satellite facilities. Nor do we limit the right of satellite licensees to file petitions to deny or informal objections against FS facilities that they believe would cause interference to their facilities. The only change from the viewpoint of satellite providers is that FS operators proposing power below the limits contained in ITU regulations will now be able to operate pursuant to conditional authority.

43. Sirius XM Radio, Inc. (Sirius XM) is the only commenter to oppose the proposed change. Sirius XM operates feeder links in the 7025-7075 MHz band to uplink its digital radio transmissions to its satellites. It also has telemetry, tracking and control links in that band. Sirius XM expresses concern that, even if no single FS transmitter were to interfere with one of its satellites under the proposed rule change, several FS transmitters together might do so. On that basis, Sirius XM urges the Commission to establish a numeric limit on the aggregate amount of interference that FS transmitters impinge upon the geostationary satellite arc. In reply, Comsearch provides a detailed technical analysis demonstrating that it would be extremely rare for terrestrial microwave antennas in this country to be directed towards either of Sirius XM's satellite positions.

44. Comsearch's showing that there are currently only three microwave antennas in this country pointed toward one of Sirius XM's satellites demonstrates that the aggregate incremental effect of such multiple exposures is likely to be quite low. While the Commission is prepared to consider showings based on aggregate interference in appropriate circumstances, we decline to adopt Sirius XM's proposal at this time.

45. We find that reducing the circumstances under which FS operators must seek waivers when pointing towards the geostationary arc will produce substantial benefits. Each private FS applicant must pay an application fee of $180 when seeking a waiver. In 2011, we granted 275 applications requesting a waiver of § 101.145 of the Commission's rules where the EIRP was below the limits contained in the ITU Radio Regulations and the applicant had to pay a waiver fee. The total application costs associated with those waivers would be $49,500. Furthermore, each applicant must prepare a waiver exhibit at additional expense. Furthermore, every time a waiver is requested, the applicant cannot commence service until the waiver and applications are granted. While the cost of such delays cannot be quantified based on this record, it is apparent that such delays may be costly to FS providers and their customers. On the other hand, we find that the potential for increased interference or other costs would be minimal from this action. Accordingly, we find that the benefits of the Commission's actions outweigh the costs.

46. In the R&O, the Commission authorized FS use of the 6875-7125 MHz and 12700-13150 MHz bands in areas where television pickup licenses are not authorized in those bands. The Commission prohibited FS paths from crossing the service areas of TV pickup authorizations in order to avoid interference. FWCC asks the Commission to limit the exclusion of FS from vacant 13 GHz channels in areas served by BAS and CARS to co-channel operations. In other words, under FWCC's proposal, FS could be licensed in areas where BAS and CARS have operations so long as the FS operations are not on the same channels as any licensed BAS or CARS stations.

47. The National Association of Broadcasters (NAB) and the Society of Broadcast Engineers, Inc. (SBE) contend that the “introduction of new wireless backhaul operations would be incompatible with effective, unpredictable itinerant newsgathering and news reporting, and it would disserve the public if ENG services at the scene of breaking news were undermined by interference concerns caused by the presence of nearby wireless backhaul operations.” NAB and SBE are also concerned that it would not be feasible to mix the formal coordination process used by FS applicants with the more informal coordination process used by broadcasters, because FS applicants do not have the same incentives as broadcasters to accommodate the needs of TV pick-up operations.

48. We decline to adopt FWCC's proposal to permit FS operations in channels adjacent to BAS/CARS operations at this time, for three reasons. First, as a technical matter, microwave signals that are being transmitted on adjacent channels can interfere with each other under some circumstances and, for that reason, require frequency coordination. Second, as discussed in the R&O, BAS operators are motivated to coordinate spectrum with each other rapidly and cooperatively because they engage in similar activities, such as covering breaking news events, and share a common motivation to ensure that spectrum continues to be made available for such activities on short notice. Allowing FS applicants into areas where BAS is authorized would necessitate a more formal coordination process, which we do not believe is compatible with the dynamic and rapidly changing nature of electronic newsgathering (ENG) operations. Finally, § 74.24 of the Commission's rules allows BAS licensees to engage in short-term operations on unlicensed BAS channels for as many as 720 hours annually per frequency. Therefore, in some locations, BAS operators could be making extensive short-term use of unlicensed BAS channels in the geographic areas where they have BAS licenses for other channels. Allowing FS operations to use these frequencies could result in interference and disruption to these operations.

49. In comments filed during an earlier phase of this proceeding, EIBASS asked the Commission to prohibit newcomer Private Operational Fixed Service (POFS) stations in the 7 and 13 GHz bands from degrading the noise threshold of any existing electronic newsgathering-receive only (ENG-RO) site by more than 0.5 dB, citing as precedent the Commission's decision to apply that standard to Department of Defense uplinks when determining whether or not they are providing adequate protection to ENG-RO sites in the 2 GHz band. The R&O acknowledged that EIBASS's proposal might be an appropriate standard for evaluating a proposed FS facility but declined to adopt it as a rule, explaining that, in lieu of mandating specific interference criteria in our rules, we expect applicants and licensees to work out interference issues in the frequency coordination process. In a petition for partial reconsideration of the R&O, EIBASS now reiterates its request, arguing that a vague frequency coordination benchmark does neither the incumbent nor the newcomer any favor, because of the uncertainty it generates.

50. EIBASS's proposal is unnecessary because we are upholding the Commission's prior decision to prohibit the paths of FS stations operating in the 7 and 13 GHz bands from crossing the service areas of TV pickup authorizations. The transmission paths of part 101 FS stations are fixed. That makes it possible for FS applicants to provide licensees and other applicants with detailed notifications that include proposed transmission azimuths, among other technical parameters, and to allow the other affected parties 30 days to respond. Although our rules provide for the Commission to resolve any differences that the parties are unable to resolve by reasoned discussions with each other, it is hardly ever necessary for the Commission to intervene in the frequency coordination process among parties that are subject to our part 101 coordination procedures. The chances that the affected parties would reach an impasse seem particularly remote under these circumstances, where FS paths are barred from crossing any of the geographic areas where ENG-RO stations are licensed. Further, there is no evidence in the record that EIBASS's proposal would reduce the costs associated with the coordination process. For those reasons, we remain confident that the existing frequency coordination procedures will ensure that part 101 FS operators will not interfere with ENG-RO operations in the 6875-7125 MHz and 12700-13150 MHz bands. We therefore decline to adopt EIBASS's proposal.

51. FWCC notes that the R&O did not specify a minimum throughput for the 13 GHz frequencies newly authorized for Fixed Service use. FWCC recommends that we set the same throughput requirements for 13 GHz as apply to the 11 GHz band, and that we augment those requirements to include capacity and loading requirements for transmitters using channel bandwidths of 12.5 megahertz.

52. Section 101.141(a)(3) of our rules applies minimum payload capacities to digital microwave transmitters operating in the 11 GHz band, depending upon their bandwidths. We agree with FWCC that the same standards should be applied to the 13 GHz band. Our decision above adopting the proposal in the FNPRM to apply uniform bits-per-second-per-Hertz requirements to all frequencies between 10,550 MHz and 13,150 MHz includes the frequencies in FWCC's request, and thus renders the request moot.

53. The R&O retained the 25 megahertz bandwidth limit that presently applies to the 7 GHz band because of the limited amount of spectrum available in that band, but it raised the maximum permissible bandwidth in the 13 GHz band to 50 megahertz. Cambium Networks (Cambium) urges that we also allow the 7 GHz band to accommodate 50 megahertz bandwidths. The NAB and SBE oppose this proposal on the ground that it would reduce the number of available channels for new ENG use. Cambium counters the broadcasters' concern by citing the R&O's observation that BAS and CARS operations have not been expanding geographically in recent years, with only one new BAS TV pickup license granted in the 7 GHz and 13 GHz bands in the past two years.

54. We deny the Cambium Petition because the benefits of allowing 50 megahertz channels in the 7 GHz band appear to be quite limited and because operators needing wider channels have alternatives. If we allowed 50 megahertz channels in the 7 GHz band, there would only be two channel pairs available in the 7 GHz band. Allowing 50 megahertz channels could limit the availability of FS spectrum for other operators who need narrower channels. Furthermore, operators who need 50 megahertz or wider channels have alternative options available. Today, we are allowing 60 megahertz channels in the 6 GHz band and 80 megahertz channels in the 11 GHz band. For shorter paths, 50 megahertz channels are available in the 18 GHz and 23 GHz bands. Under those circumstances, we believe the better use of the 7 GHz band would be to accommodate narrower band operations. We therefore deny the Cambium Petition.

55. The “final link rule” prohibited broadcasters from using part 101 stations as the final radiofrequency (RF) link in the chain of distribution of program material to broadcast stations. Concurrent with the Commission's decision to allow FS to share in the 7 and 13 GHz BAS and CARS bands, the R&O eliminated the final link rule. In doing so, the Commission noted that FS licensees were not objecting to elimination of the rule so long as FS were granted access to BAS and CARS spectrum in the 7 and 13 GHz bands.

56. In a petition for reconsideration, FWCC argues that the final link rule should only be eliminated in areas where the Fixed Service can use the 7 or 13 GHz bands. FWCC argues that a key rationale for the change was “sharing of spectrum the other way”—i.e., a quid pro quo for opening the 7 and 13 GHz BAS/CARS bands for use by part 101 FS operators—but that excluding FS operators from geographic areas where BAS and CARS operations are licensed leaves FS with very limited access to those bands. The NAB and SBE oppose FWCC's petition, arguing that the convergence of digital video with digital data transmission has eliminated any technological reasons for broadcasters to maintain facilities to carry program material to transmitter sites that are separate from microwave transmission systems that handle other kinds of data. Reinstating the final link rule would therefore result in a duplication of facilities that would otherwise be unnecessary, they contend.

57. In the R&O, the Commission found that there would be significant benefits and no costs to eliminating the final link rule. It noted that no commenter had identified any cognizable harm that would result from eliminating the rule and concluded that, with increasing adoption of digital technologies, the final link rule had become an outdated regulation that imposed unnecessary, duplicative costs on broadcasters. That conclusion is consistent with one of the fundamental purposes of this proceeding: removing regulatory barriers that limit the use of spectrum for wireless backhaul and other point-to-point and point-to-multipoint communications.

58. The Commission's action maximized the ability of both FS operators and broadcasters to use the 7 and 13 GHz bands. While it is true that the Commission did not make those bands available for FS use everywhere, that decision was based on the fact that fixed links and ENG operations are different and difficult to coordinate with each other. In contrast, there is no technical reason why broadcasters, cable operators and part 101 FS operators cannot share the same spectrum when transmitting microwave signals between fixed locations.

59. The Commission's actions maximized the amount of spectrum available to both FS licensees and broadcasters. Furthermore, FWCC does not allege any harm from eliminating the final link rule; and therefore, the Commission's conclusion that there would be significant benefits and no costs to eliminate the final link rule remains unchanged. We therefore deny FWCC's Petition on this issue.

60. In reply comments to the NOI, NSMA argued that in determining whether 24 GHz, 39 GHz, and Local Multipoint Distribution Service (LMDS) licensees have offered substantial service, the Commission fails to positively consider “basic and important steps that lead to successful band utilization.” It gives the following examples of such activity: (1) Spending significant resources producing Requests for Proposals (RFPs) to develop equipment in its band; (2) utilizing the Secondary Markets rules to offer spectrum leases throughout the license area; (3) submitting proposals to carrier, government, or enterprise customers that rely on utilizing the wide-area license; and/or (4) building several links, but not yet meeting the safe harbor criterion (typically four links per million of population). NSMA asked the Commission to “track and credit” such activities.

61. The Commission rejected NSMA's request in the MO&O. The Commission concluded that NSMA's arguments ignored one of the Commission's overriding purposes of buildout requirements: providing “a clear and expeditious accounting of spectrum use by licensees to ensure that service is indeed being provided to the public.” It approved the Wireless Telecommunications Bureau rejection of substantial service showings based on preparatory activities of the type described by NSMA where there is no actual service being provided to the public. It noted that safe harbors are merely one means of demonstrating substantial service, and that given an appropriate showing, a level of service that does not meet a safe harbor may still constitute substantial service. It also emphasized that all substantial service showings that do not meet an established safe harbor would be evaluated on a case-by-case basis.

62. In a petition for reconsideration of the MO&O, the Wireless Communications Association International, Inc. (WCAI) challenges the Commission's decision to address that issue in this proceeding. WCAI argues that the Commission's consideration of this issue violates the Administrative Procedure Act because the issue was not raised in the NPRM. WCAI believes substantial service rules and policies relating to wireless backhaul should be addressed in the broader proceeding seeking to harmonize renewal standards for wireless radio services (WT Docket No. 10-112) that is currently pending.

63. WCAI argues that standards currently applicable to fixed point-to-point services, which require a certain number of links based on population, do not in fact promote service to the public because it requires operators to either build uneconomic links in the absence of demand for backhaul services or lose their licenses. According to WCAI, the standards create “substantial investor uncertainty about the amount of capital required to preserve a license in the millimeter wave bands.” WCAI asks the Commission to adopt an “offer-based” standard that would “require only that an area-wide millimeter wave band licensee offer FP2P service or spectrum leases on commercially reasonable terms and conditions to commercial or government fixed or mobile telephony/broadband service providers or to the licensee's internal network planners.” FWCC and Mary J. Kuiken support WCAI's Petition.

64. WCAI has filed its substantial service proposal for wireless backhaul in WT Docket No. 10-112 and we will consider it in that proceeding, consistent with WCAI's request. The Memorandum Opinion and Order merely explained the Commission's decision not to initiate a rulemaking to address NSMA's substantial service proposal that NSMA presented in reply comments filed in response to the NOI, and thus did not violate the notice-and-comment requirements of the APA, which are applicable to rulemaking proceedings, or prejudice our consideration of substantial service issues in WT Docket No. 10-112. The Commission's decision to dispose of NSMA's request also was appropriate because many LMDS and 39 GHz licensees were facing a June 1, 2012 deadline for providing substantial service. The Commission's response to NSMA's petition thus restated the applicable rules and policies in advance of that deadline and allowed licensees to plan accordingly. In explaining its decision, we note that the MO&O accurately stated the Commission's current policy, and we direct the Bureau to apply that policy to the June 1, 2012 substantial service filings made by LMDS and 39 GHz licensees. We also agree with the observation in the MO&O that any substantial service standard must provide “a clear and expeditious accounting of spectrum use by licensees to ensure that service is indeed being provided to the public.” Our action today is without prejudice to subsequent consideration of these issues in WT Docket No. 10-112.

65. In this MO&O, we address various other proposals and issues that we believe are best considered in other contexts or do not require Commission consideration and therefore will not be considered in this proceeding at this time.

66. FWCC asks that the Commission authorize smaller antennas in the 71-76 and 81-86 GHz bands. We decline to initiate a rulemaking because we do not believe that FWCC has provided sufficient information to justify further action at this time in the context of this proceeding. The current antenna specifications for those bands were adopted after a detailed discussion of the tradeoffs involved. FWCC has not provided sufficient information to demonstrate that smaller antennas could be allowed without increasing interference. Our action today is without prejudice to consideration of a more detailed submission on this issue.

67. EIBASS, which supports the R&O's requirement that BAS licensees in the 7 and 13 GHz bands register their fixed receive sites, asks various questions about the effective date and other aspects of the requirement. Staff from the Bureau has met with broadcasters to discuss implementation of that requirement. We do not see the need for Commission intervention at this time, but we direct the Bureau to continue working with broadcasters on implementing the registration requirement.

68. Comsearch and FWCC ask the Commission to streamline application processing when applicants intend to use adaptive modulation by allowing adaptive modulation frequencies to be filed as a single row, as opposed to requiring each combination of modulation, capacity, bandwidth, and transmitter power to be licensed individually. No rule change is required to implement this change, and Bureau staff has started the process of modifying the Universal Licensing System to allow this change.

69. Comsearch and FWCC ask that the Commission eliminate the provision in the rules that allows operation of low power, limited coverage systems in the 23 GHz band because the rules are allegedly unnecessary and allow the use of inefficient antennas. According to Comsearch, that provision was used in the past for low cost analog video systems for purposes such as surveillance. Comsearch describes such systems as “outmoded” and claims to be unaware of any current usage of such systems. The frequencies in question are particularly important and most used in the 23 GHz band because they are available for conditional authority under § 101.31(b) of the Commission's rules. Clearwire also asks the Commission to allow licensees to aggregate channels in the 18 GHz and 23 GHz bands to allow 80 megahertz, 100 megahertz, 120 megahertz, or 150 megahertz channels.

70. We believe these requests should be considered together with other filings relating to the 23 GHz band and therefore defer consideration of them. FWCC has filed a petition for reconsideration of the Commission's order authorizing conditional authority for additional channels in the 23 GHz band which raises the issue of authorizing low power systems on those additional channels. FWCC has also filed a petition for rulemaking asking that conditional authority be authorized throughout the 23 GHz band and seeking changes to the mechanism for coordinating operation with the National Telecommunications and Information Administration (NTIA). In light of the common issues raised by each of those pleadings, we believe those requests should be considered together, in consultation with NTIA. We therefore defer consideration of these requests.

71. We recognize that there are other pending matters and proceedings relating to wireless backhaul that are not addressed in this item. Those matters and proceedings include: (1) A petition for rulemaking asking that the 7125-8500 MHz band be allocated for non-federal use and allotted for FS use, (2) a request made in this proceeding to revise the Commission's policy of allowing a satellite earth station to coordinate for the full 360-degree azimuth range of the earth station even when it is communicating with only one satellite in a limited segment of the band, and (3) a petition for rulemaking asking that the Commission establish service rules for FS use in the 42-42.5 GHz band. We defer consideration of these issues and will address them separately or in future orders in this proceeding.

72. This document contains an information collection requirement subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. It will be submitted to the Office of Management and Budget (OMB) for review under section 3507 of the PRA. Prior to submission to OMB, the Commission will publish a notice in the Federal Register seeking public comment on the modified information collection requirement. In addition, that notice will also seek comment on how the Commission might “further reduce the information collection burden for small business concerns with fewer than 25 employees” pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4). The information collection contained in this order will not go into effect until OMB approves the collection. We will publish a notice in the Federal Register announcing the effective date of the information collection.

73. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), we incorporated an Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on a substantial number of small entities by the policies and rules proposed in the Notice of Proposed Rulemaking (NPRM). No comments were filed addressing the IRFA. Because we amend the rules in this Second Report and Order, we have included this Final Regulatory Flexibility Analysis (FRFA). This present FRFA conforms to the RFA.

74. In this Second Report and Order, we make four changes to our rules involving microwave stations. These changes are described in further detail below. First, we allow the use of smaller antennas in the 5925-6875 MHz band (6 GHz band), 17700-18300 MHz and 19300-19700 MHz bands (18 GHz band), and 21200-23600 MHz band (23 GHz band) fixed service (FS) bands. Second, we add a definition of “payload capacity” to our rules, and update our capacity and loading requirements to bits/second/Hertz standards reflect the increasing use of interfaces such as Internet Protocol. Third, we widen the permissible maximum channel size in the 5925-6425 GHz Band (Lower 6 GHz Band) (to allow 60 megahertz channels) and in the 10700-11700 MHz band (11 GHz Band) (to allow 80 megahertz channels) to allow faster data rates. Finally, we propose to revise the criteria under which microwave stations that are pointing in the direction of geostationary satellites must seek a waiver prior to operating to expedite service.

75. With respect to the first proposal, § 101.115(b) of the Commission's rules establishes directional antenna standards designed to maximize the use of microwave spectrum while avoiding interference between operators. The rule on its face does not mandate a specific size of antenna. Rather, it specifies certain technical parameters—maximum beamwidth, minimum antenna gain, and minimum radiation suppression—that, depending on the state of technology at any point in time, directly affect the size of a compliant antenna. Smaller antennas have several advantages. They cost less to manufacture and distribute, are less expensive to install because they weigh less and need less structural support, and cost less to maintain because they are less subject to wind load and other destructive forces. In addition, the modest weight of small antennas makes them practical for installation at sites incapable of supporting large dishes, including many rooftops, electrical transmission towers, water towers, monopoles and other radio towers. Smaller antennas raise fewer aesthetic objections, thereby permitting easier compliance with local zoning and homeowner association rules and generating fewer objections. On the other hand, smaller antennas have increased potential to cause interference because smaller antennas result in more radiofrequency energy being transmitted in directions away from the actual point-to-point link. We conclude that we can allow smaller antennas in the 6, 18 and 23 GHz bands without producing harmful interference.

76. Second, we add a definition of “payload capacity” to our rules, and update our capacity and loading standards to take into account the increasing use of interfaces such as Internet Protocol. Currently, § 101.141(a)(3) of the Commission's rules lists a “minimum payload capacity” for various nominal channel bandwidths. The same rule also defines “typical utilization” of the required payload capacity for each channel bandwidth as multiples of the number of voice circuits a channel can accommodate. These definitions are becoming outdated as systems support interfaces such as Internet Protocol. Accordingly, we update our rules to add a definition of payload capacity. We also revise our efficiency requirements to define those requirements in terms of bits-per-second-per-Hertz (“bps/Hz”) across all bands. Such changes could make our rules clearer and would be consistent with modern digital technologies.

77. Third, we allow the use of wider channels in the Lower 6 GHz Band and 11 GHz Band. Specifically, we allow 60 megahertz channels in the Lower 6 GHz Band and 80 megahertz channels in the 11 GHz Band. That action will allow backhaul operators to handle more capacity and offer faster data rates.

78. Finally, we amend § 101.145 of the Commission's rules to limit the circumstances under which fixed service transmitters must obtain a waiver in order to point near the geostationary arc. Specifically, we propose to require a waiver only if the EIRP is greater than 35 dBW for the 5925-7075 MHz band and is greater than 45 dBW in the 12700-13250 MHz band. Limiting the circumstances where a waiver is necessary will be beneficial. Once the frequency coordination process is completed, the Commission's rules provide many applicants with conditional authority to begin service immediately, without waiting for final approval from the Commission, and with the stipulation that they must take their stations down if the Commission later rejects their applications. Conditional authority is not available, however, to applicants that must request waivers of existing rules. Accordingly, limiting the circumstances under which a waiver is needed will allow more applicants to rapidly commence service. Furthermore, we conclude that such a change would be consistent with international regulations and can be made without any increased risk of interference to satellite services.

79. The actions are authorized pursuant to sections 1, 2, 4(i), 7, 201, 301, 302, 303, 307, 308, 309, 310, 319, 324, 332, and 333 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 152, 154(i), 157, 201, 301, 302, 303, 307, 308, 309, 310, 319, 324, 332, and 333, and section 706 of the Telecommunications Act of 1996, as amended, 47 U.S.C. 1302.

80. The RFA directs agencies to provide a description of, and, where feasible, an estimate of the number of small entities that may be affected by the proposed rules and policies, if adopted. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. A “small business concern” is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the SBA.

81. Small Businesses, Small Organizations, and Small Governmental Jurisdictions. Our action may, over time, affect small entities that are not easily categorized at present. We therefore describe here, at the outset, three comprehensive, statutory small entity size standards. First, nationwide, there are a total of approximately 27.5 million small businesses, according to the SBA. In addition, a “small organization” is generally “any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.” Nationwide, as of 2007, there were approximately 1,621,315 small organizations. Finally, the term “small governmental jurisdiction” is defined generally as “governments of cities, towns, townships, villages, school districts, or special districts, with a population of less than fifty thousand.” Census Bureau data for 2011 indicate that there were 89,476 local governmental jurisdictions in the United States. We estimate that, of this total, as many as 88,506 entities may qualify as “small governmental jurisdictions.” Thus, we estimate that most governmental jurisdictions are small.

82. Wireless Telecommunications Carriers (except satellite). The appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees. Census Bureau data for 2007, which now supersede data from the 2002 Census, show that there were 3,188 firms in this category that operated for the entire year. Of this total, 3,144 had employment of 999 or fewer, and 44 firms had employment of 1,000 employees or more. Thus under this category and the associated small business size standard, the Commission estimates that the majority of wireless telecommunications carriers (except satellite) are small entities that may be affected by our proposed action.

83. Fixed Microwave Services. Microwave services include common carrier, private-operational fixed, and broadcast auxiliary radio services. At present, there are approximately 31,549 common carrier fixed licensees and 89,633 private and public safety operational-fixed licensees and broadcast auxiliary radio licensees in the microwave services. Microwave services include common carrier, private-operational fixed, and broadcast auxiliary radio services. They also include the Local Multipoint Distribution Service (LMDS), the Digital Electronic Message Service (DEMS), and the 24 GHz Service, where licensees can choose between common carrier and non-common carrier status. The Commission has not yet defined a small business with respect to microwave services. For purposes of the IRFA, the Commission will use the SBA's definition applicable to Wireless Telecommunications Carriers (except satellite)— i.e., an entity with no more than 1,500 persons is considered small. For the category of Wireless Telecommunications Carriers (except Satellite), Census data for 2007, which supersede data contained in the 2002 Census, show that there were 1,383 firms that operated that year. Of those 1,383, 1,368 had fewer than 100 employees, and 15 firms had more than 100 employees. Thus under this category and the associated small business size standard, the majority of firms can be considered small. The Commission notes that the number of firms does not necessarily track the number of licensees. The Commission estimates that virtually all of the Fixed Microwave licensees (excluding broadcast auxiliary licensees) would qualify as small entities under the SBA definition.

84. This Report and Order adopts no new reporting or recordkeeping requirements.

85. The RFA requires an agency to describe any significant alternatives that it has considered in reaching its proposed approach, which may include the following four alternatives (among others): (1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (3) the use of performance, rather than design, standards; and (4) an exemption from coverage of the rule, or any part thereof, for small entities.

86. The actions taken in the Report and Order would provide additional options to all licensees, including small entity licensees. Such actions will serve the public interest by allowing use of smaller antennas, allow the use of wider channels in the Lower 6 and 11 GHz bands, eliminate the need for unnecessary waivers, and update our minimum payload capacity rules to reflect current technology. The rules will therefore open up beneficial economic opportunities to a variety of spectrum users, including small businesses. Because the actions in the Report and Order will improve beneficial economic opportunities for all businesses, including small businesses, a detailed discussion of alternatives is not required.

87. With respect to the proposal to allow smaller antennas in the 6 GHz band, an alternative approach would be to establish technical criteria that would allow the use of 4-foot antennas, as opposed to the 3-foot antennas proposed. Such an approach would reduce the cost savings FS licensees could realize. We conclude that limiting relief to 4-foot antennas is unnecessary to reduce the potential for interference.

88. None.

89. It is further ordered that the rules adopted herein will become effective October 5, 2012. It is further ordered that the Rural Microwave Flexibility Policy, which contains new information collection requirements that require approval by the Office of Management and Budget (OMB) under the Paperwork Reduction Act (PRA), will become effective after the Commission publishes a notice in the Federal Register announcing such approval and the relevant effective date.

90. It is further ordered, pursuant to sections 1, 2, 4(i), 7, 201, 301, 302, 303, 307, 308, 309, 310, 319, 324, 332, and 333 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 152, 154(i), 157, 201, 301, 302, 303, 307, 308, 309, 310, 319, 324, 332, and 333, and section 706 of the Telecommunications Act of 1996, as amended, 47 U.S.C. 1302, that this Memorandum Opinion and Order is hereby adopted.

91. It is further ordered, pursuant to sections 1, 2, 4(i), 7, 201, 301, 302, 303, 307, 308, 309, 310, 319, 324, 332, 333, and 405 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 152, 154(i), 157, 201, 301, 302, 303, 307, 308, 309, 310, 319, 324, 332, 333, and 405, and section 706 of the Telecommunications Act of 1996, as amended, 47 U.S.C. 1302, that this Order on Reconsideration is hereby adopted.

92. It is further ordered that the Commission shall send a copy of this Report and Order to Congress and the Government Accountability Office pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).

93. It is further ordered that the Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, shall send a copy of this Second Report and Order, Order on Reconsideration, and Memorandum Opinion and Order, including the Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration.

For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR part 101 as follows:

Why we need to publish a rule. This is a final rule to list Arctostaphylos franciscana as an endangered species under the Endangered Species Act. Under the Act, if a species is determined to be an endangered or threatened species we are required to promptly publish in the Federal Register and make a determination on our proposal within one year. We were petitioned in 2010 to list A. franciscana as an endangered or threatened species. We determined in our 12-month finding that listing was warranted, and we proposed to list the species as an endangered species in September 2001. This final rule constitutes our final determination for this species as required by the Act.

The basis for our action. Under the Endangered Species Act, we are required to determine whether a species is endangered or threatened because of any of the following factors: (A) The present or threatened destruction, modification, or curtailment of its habitat or range; (B) overutilization for commercial, recreational, scientific, or educational purposes; (C) disease or predation; (D) the inadequacy of existing regulatory mechanisms; or (E) other natural or manmade factors affecting its continued existence. We reviewed all available scientific and commercial information pertaining to these factors in our status review of the species and determined that the species was limited to one plant remaining in the wild. We proposed that the species was endangered due to threats in the five factors, as follows. The primary threat to Arctostaphylos franciscana is from the present or threatened destruction, modification, or curtailment of the species' habitat or range. All original occupied habitat of the species has been lost, and its current range has been reduced to a single location that supports a single A. franciscana plant. Furthermore, limited suitable habitat remains available to support a viable population of the species. The remaining plant is vulnerable to overcollection or damage if visitors harvest cuttings or seeds. Sudden oak death, which is caused by the pathogen Phytophthora cinnamomi, and infections caused by other Phytophthora species are serious threats to Arctostaphylos franciscana because only one plant occurs in the wild and the diseases are easily spread. Predation is an ongoing but lesser threat. Additional threats include climate change, altered fire regime, soil compaction from visitor use, vandalism, loss of genetic diversity, loss of pollinators, stochastic events, effects of small population size, and hybridization. In the proposed rule, we considered these threats to be significant and ongoing, but we did not find that we had sufficient information to determine critical habitat at the time. In this final rule, we utilize public comments and peer review to inform our final determination, as required under the Act.

Peer review and public comments. In this final rule, we present and respond to peer reviewer and public comments. We obtained peer reviews from knowledgeable individuals with the scientific expertise to review our technical assumptions, analysis, adherence to regulations, and whether or not we had used the best available information. These peer reviewers generally concurred with our methods and conclusions, and they provided additional information, clarifications, and suggestions to improve this final rule. In particular, peer reviewers provided information on the physical and biological features required by the species, and on locations of remnant natural habitat that retained these features, suggesting that proposal of critical habitat would be determinable and prudent. Accordingly, a proposed rule to designate critical habitat is being published concurrently with this final rule to list the species as endangered.

It is our intent to discuss only those topics directly relevant to the listing of Arctostaphylos franciscana under the Act (16 U.S.C. 1531 et seq. ) in this final rule. For further information on the species' biology and habitat, population abundance and trend, distribution, demographic features, habitat use and conditions, threats, and conservation measures, please see the September 8, 2011, proposed listing for the species (76 FR 55623) published in the Federal Register , or the Recovery Plan for Coastal Plants of the Northern San Francisco Peninsula (Service 2003). These documents are available from the Environmental Conservation Online System (ECOS) ( http://ecos.fws.gov/ecos ), the Sacramento Fish and Wildlife Office Web site ( http://www.fws.gov/sacramento/ ), or from the Federal eRulemaking Portal ( http://www.regulations.gov ).

In our proposed listing rule for Arctostaphylos franciscana (76 FR 55623; September 8, 2011), we stated that we believed that critical habitat was not determinable at the time of the proposal due to a lack of knowledge of what physical or biological features were essential to the conservation of the species, or what other areas outside the site that is currently occupied may be essential for the conservation of the species. Subsequently, we requested information from the public during the public comment period and solicited information from peer reviewers on whether the determination of critical habitat was prudent and determinable. We also asked for information about the physical or biological features that are essential to the conservation of the species and what areas contained those features or were otherwise essential for the conservation of the species. Based on the information we received on the physical or biological features for A. franciscana, and information on areas otherwise essential for the species, we have determined that the designation of critical habitat is prudent and determinable. We are therefore proposing critical habitat elsewhere in today's Federal Register . For more information regarding our determination to designate critical habitat please see our response to comments below and the proposed rule to designate critical habitat for A. franciscana published in the Proposed Rules section of today's Federal Register .

Arctostaphylos franciscana is a low, spreading-to-ascending, evergreen shrub in the heath family (Ericaceae) that may reach 0.6 to 0.9 meters (m) (2 to 3 feet (ft)) in height when mature (Chasse et al. 2009, p. 5). Its leaves are about 1.5 to 2 centimeters (cm) (0.6 to 0.8 inches (in)) long, are isofacial (have the same type of surface on both sides), and are oblanceolate (longer than they are wide and wider towards the tip) (Eastwood 1905, p. 201; Chasse et al. 2009, p. 39). Its mahogany brown fruits are about 6 to 8 millimeters (mm) (0.24 to 0.32 in) wide, while its urn-shaped flowers measure about 5 to 7 mm (0.2 to 0.28 in) long (Wallace 1993, p. 552; Service 2003, p. 57).

A closely related species, Arctostaphylos hookeri ssp. ravenii (Presidio or Raven's manzanita), which was federally listed as endangered on October 26, 1979 (44 FR 61909), looks similar but has a growth habit that is more prostrate, leaves that are more rounded, fruits that are smaller and less red in color, and flowers that are smaller and more spherical (Service 2003, pp. 55, 57). Arctostaphylos hookeri ssp. ravenii has recently undergone a taxonomic revision to A. montana ssp. ravenii, and we will be referring to the listed species by this name throughout this rule (see Genetics and Taxonomy section below). Another somewhat similar appearing species, though not as closely related, is A. uva-ursi (bearberry), which can be distinguished by its lack of isofacial leaves (Chasse et al. 2009, p. 39).

In the wild, Arctostaphylos franciscana is an obligate-seeding species (it reproduces primarily from seed rather than from burls) (Vasey 2010, p. 1). Arctostaphylos (manzanita) species are members of the chaparral plant community, which have a variety of triggers for seed germination including heat, smoke, and light (Keeley 1987, p. 434). Arctostaphylos species have germinated after being exposed to charate (ground charred wood) (Keeley 1987, pp. 435, 440), which suggests that fire or conditions that simulate fire stimulate germination of the seeds.

Based on work with other species of Arctostaphylos, the establishment of successful populations of A. franciscana may require the presence of a pollinator community (primarily bumblebees ( Bombus spp.) but also other insects), a fruit dispersal community (primarily rodents), and a mutually beneficial soil mycorrhizal fungi community (see Historical Distribution and Habitat below) (Parker 2011, p. 1). The seeds of Arctostaphylos are dispersed primarily by rodents that consume the fruits, but also by other mammals, including coyotes ( Canis latrans ) and foxes (T. Parker 2011, pers. comm.; Vasey 2011a, p. 1). Seed-eating animals such as coyotes, gray foxes ( Urocyon cinereoargenteus ), red foxes ( Vulpes vulpes ), raccoons ( Procyon lotor ), California quail ( Callipepla californica ), and rodents such as the California vole ( Microtus californicus ) are known to occur on the Presidio of San Francisco (Presidio), a unit of the National Park System, on the San Francisco peninsula where A. franciscana is found (National Park Service (NPS) 2012). Animals such as coyotes and foxes eat the Arctostaphylos fruit and may travel long distances before depositing their scat. Any undigested fruit left in the scat can then be harvested by rodents and either eaten or buried. Parker (2010b, p. 1) found that 70 percent of the fruits buried by rodents were located deeper than 2 cm (0.78 in), which is the maximum soil depth at which seeds are typically killed by wildfire. Seed has been removed from the wild plant, and, although it has not been directly observed, California voles have been trapped near the wild plant and are likely responsible for the seed harvesting (Carlen 2012, p. 1; Estelle 2012d, p. 1).

The Arctostaphylos franciscana plants that exist in cultivation fall into three categories: (1) Cuttings and rooted specimens collected from the Laurel Hill Cemetery and transplanted to various managed botanical gardens in San Francisco, Berkeley, and Claremont prior to 1947; (2) specimens currently propagated in greenhouses from cuttings and layers taken from the wild plant in 2010; and (3) specimens, some of which may be of unknown origin, sold in the nursery trade or transplanted into home gardens. We consider the single wild plant and plants identified in (1) and (2) above to be the listed entity under the Act. Our rationale for not including plants identified in item (3) above is outlined below.

The Arctostaphylos franciscana plants found in botanical gardens may represent from one to six genetically distinct plants other than the single wild plant (Chasse et al. 2009, p. 7; Chasse 2011a, p. 1; Chasse 2011b, p. 1; Vasey 2011b, pp. 2, 3), and cuttings from those plants may contribute genetic material to efforts to expand the number of wild plants. The botanical garden plants are not considered part of the wild population and, therefore, are not considered in the assessment of species status, although they will be considered to be listed when this final rule becomes effective (see the DATES section above). The cuttings and layers collected from the wild plant currently propagated in greenhouses are being considered in the assessment of the species' status. These cuttings from the wild plant will be planted with A. franciscana specimens propagated in botanical gardens to establish additional populations of the species. We have concluded that the third category of plants, those cultivated for private or commercial uses, will not aid in the conservation or recovery of the species in the wild because some cultivated plants may be hybrids and bred for landscape use and thus offer minimal contribution to conservation.

In October 2009, an ecologist identified a plant growing in a concrete-bound median strip along Doyle Drive in the Presidio as Arctostaphylos franciscana (Chasse et al. 2009, pp. 3, 4; Gluesenkamp 2010, p. 7). The plant's location was directly in the footprint of a roadway improvement project designed to upgrade the seismic and structural integrity of the south access to the Golden Gate Bridge (California Department of Transportation (Caltrans) et al. 2009, p. 1; Chasse et al. 2009, p. 10).

Several agencies, including the Service, established a Memorandum of Agreement (MOA) and conservation plan for the species (see Previous Federal Actions section below) (Caltrans et al. 2009). The conservation partners concluded that leaving the plant undisturbed at its original site would compromise public safety and cultural resources by the potential curtailment or redesign of the roadway improvement project (Chasse et al. 2009, pp. 9, 10).

The conservation plan evaluated potential translocation sites, established procedures for preparation of the new site and for the translocation itself, and called for management and monitoring (both short- and long-term) of the translocated plant, with the goal of eventually establishing self-sustaining populations of the species in the wild (Chasse et al. 2009, pp. 23-27, 29-30). Following recommendations in the conservation plan, the Arctostaphylos franciscana plant was moved successfully to a new site within the Presidio in January 2010. The Presidio site was chosen after careful consideration of its appropriate soil type and the management and monitoring capabilities of the NPS and the Presidio Trust. Subsequent monitoring reports indicate the translocated plant continues to do well at its new location (Yam 2010, pp. 1, 3-14; Young 2010a, p. 1; Young 2012, p. 1).

Known historical occurrences and collections of Arctostaphylos franciscana are from serpentine maritime chaparral, a plant community dominated by Arctostaphylos and Ceanothus (California lilac) species, on the San Francisco peninsula. This area is part of a region that Willis Linn Jepson named the Franciscan Area, one of 10 areas he considered to have the highest concentration of endemic plant species in California (Jepson 1925, pp. 11-14). An endemic species is one that is native to, and restricted to, a particular geographical area. Native habitats on the San Francisco peninsula have been largely converted to urban areas of the City of San Francisco, and habitat that might have supported A. franciscana is now mostly lost to development or habitat conversion from the introduction of nonnative plant species (Chasse 2010, p. 2; Gluesenkamp 2010, p. 7; Chasse 2011c, p. 1).

Chasse (2009, pp. 6, 7) has noted that information on the plant community that historically included Arctostaphylos franciscana is largely missing from the literature. Early records describe the species as growing “on rocky ground” (Eastwood 1905, p. 202), on “bare, stony bluff on Laurel Hill Cemetary [sic]” (Brandegee 1908), and with coast live oak ( Quercus agrifolia ), coast blue blossom ( Ceanothus thyrsiflorus ), and coyote brush ( Baccharis pilularis ) (Wieslander 1938). Arctostaphylos franciscana was also observed “forming flat masses over serpentine outcroppings and humus-filled gravel and flopping down over the sides of gray and chrome rocks. Ericameria, Baccharis, Ferns, Buckwheats, and Golden Yarrow grow among it; and over it stand Toyons and Live Oaks.” Additionally, A. montana ssp. ravenii was found at nearly all A. franciscana locations. These observations, along with the geology and climate of historical sites, indicate that the species' historical community likely consisted of a mosaic of coastal scrub, barren serpentine maritime chaparral, perennial grassland, and occasional woodlands of coast live oak and toyon shrubs and small trees (Chasse 2009, pp. 6, 7).

Arctostaphylos franciscana is considered to be endemic to the San Francisco peninsula, and historically occurred in areas with serpentine soils, bedrock outcrops, greenstone, and mixed Franciscan rock, typically growing in mixed populations with A. montana ssp. ravenii (Service 2003, pp. 95, 96; Chasse et al. 2009, p. 6). The Doyle Drive A. franciscana site was comprised of disturbed soil over serpentinite (Chasse et al. 2009, p. 3). Serpentine soil restricts the growth of many plants due to its high nickel and magnesium concentrations, and thus tends to support unique plant communities (Brooks 1987, pp. 19, 53; Service 2003, p. 16) because relatively few plant species can tolerate such soil conditions. These conditions generally result in semibarren soil and a lack of competing plants, which benefits serpentine-tolerant plants (Bakker 1984, p. 79) such as A. franciscana.

The coastal upland habitat of Arctostaphylos franciscana is influenced by cool, humid conditions and frequent summer fog. Summer fog is important to upland coastal vegetation and partly determines the distribution of coastal species (Johnstone and Dawson 2010, p. 4533). Besides serpentine soil and cool air temperatures (Parker 2010c, p. 1), summer fog is one of the primary habitat requirements for A. franciscana (Vasey 2010, p. 1). Summer fog results from two phenomena upwelling of cold coastal ocean water and temperature inversion of hot air flowing toward the ocean over a cool humid marine air layer below (Johnstone and Dawson 2010, p. 4533; Vasey 2010, p. 1). Fog reduces sunlight and air temperature, and raises humidity. Summer fog provides a source of water for plants, including Arctostaphylos species, by condensing in the plant canopy and falling directly as water to the soil where it is taken up by the plant's roots or directly by leaves (Johnstone and Dawson 2010, p. 4533; Vasey 2010, p. 1).

Historically, the maritime serpentine chaparral plant community, of which Arctostaphylos franciscana is a part, may have been present in the southeastern portion of the San Francisco area (for example, Potrero Hill and Bayview Hill), but the cumulative effects of burning by native Americans, grazing during the Spanish/Mexican period, and later more grazing and firewood gathering during the U.S. military period may have converted the maritime chaparral to grassland or depauperate coastal scrub (Chasse 2010, p. 2). Prior to 1947, A. franciscana was known from three locations: the Masonic and Laurel Hill Cemeteries in San Francisco's Richmond District, and Mount Davidson in south-central San Francisco (Service 2003, pp. 16, 62, 95; Chasse et al. 2009, p. 4). Unconfirmed sightings were also noted at a possible fourth location near Laguna and Haight Streets (Chasse 2012, p. 1). By 1947, the Masonic and Laurel Hill Cemetery sites were removed and the grounds were destroyed in preparation for commercial and urban development (Chasse et al. 2009, p. 7). The Mount Davidson and Laguna and Haight Streets locations were lost to urbanization as well. Until October 2009, A. franciscana had not been recorded in the wild since 1947 (Chasse et al. 2009, pp. 3, 7), although no systematic surveys are known to have taken place to search for potential remaining individuals (Chasse 2010, p. 1).

Between 1930 and 1947, prior to the loss of the wild plants, botanists collected cuttings and rooted specimens from confirmed wild Arctostaphylos franciscana plants, possibly representing between one and six distinct genotypes, and propagated them in botanical gardens (Chasse et al. 2009, p. 7; Chasse 2011a, p. 1; Chasse 2011b, p. 1; Service 2003, p. 96; Vasey 2011b, p. 2). The number of distinct genotypes depends on whether the botanical garden specimens were started from cuttings of the same individual (which would mean multiple plants have identical genotypes (genetic constitutions)), or whether each specimen originated from a separate plant (in which case they would have different genotypes) (Chasse 2011a, p. 1; Chasse 2011b, p. 1; Vasey 2011b, pp. 2, 3).

Modern collections of this plant at East Bay Regional Park District's Botanical Garden at Tilden Regional Park, San Francisco Botanical Garden (formerly known as Strybing Arboretum), Rancho Santa Ana Botanic Garden, Claremont, and University of California (UC) Berkeley Botanical Garden include some of the original specimens from Laurel Hill, as well as specimens propagated vegetatively after the species was thought to be extinct in the wild (Chasse et al. 2009, pp. 6-8). Accession records for the botanical garden specimens indicate that some specimens collected and planted prior to 1947 did not survive and others are duplicates of original collections, leaving possibly only two specimens confirmed to have been original plants transplanted from Laurel Hill (Chasse 2011b, p. 1; Smisko 2012, p. 1). Further genetic work will verify whether plants with differing morphological features prove to be additional Arctostaphylos franciscana individuals. Although some of the botanical garden specimens may have different genotypes, which is generally the result of sexual reproduction (sprouting from seed) rather than clonal reproduction (vegetative reproduction from cuttings or plant parts other than seeds), all of the botanical garden specimens are considered to be A. franciscana until further genetic work can be conducted. The number of existing distinct genotypes cannot currently be determined because a suitable genetic sampling technique has not yet been developed (Chasse 2011a, p. 1).

Under the conservation plan for the relocated wild plant, cuttings and rooted specimens from the wild plant are also being cultivated. Cuttings from the plant, both nonrooted stems and layering stems (stems that have rooted at their leaf nodes), were taken for vegetative propagation prior to translocation of the Arctostaphylos franciscana plant in January 2010 (Chasse et al. 2009, pp. 10-16, 40-42, Young 2010a, p. 1). This material was distributed to seven locations, including UC Berkeley Botanic Garden, Regional Parks Botanic Garden, UC Santa Cruz Botanical Garden, San Francisco Botanical Garden, Cal Flora Nursery, Presidio Nursery, and the Presidio Trust Forester (Young 2011, p. 1 of attachment 2). As of February 2012, 351 clones continue to survive at these locations (Young 2012, p. 1). A total of 1,346 A. franciscana seeds were collected from the plant in 2009, before it was transplanted; an estimated 2,100 seeds were collected in July and August 2010; and 19 seeds were collected in 2011 (Frey 2010, p. 1; Young 2010a, p. 1; Young 2012, p. 1). The numbers of seeds collected are estimates based on weight of seed collected (Laskowski 2012, p. 1). No attempts have yet been made to germinate A. franciscana seeds (Young 2012, p. 1). Two rooted A. franciscana cuttings were outplanted to managed sites at the UC Santa Cruz Arboretum in January 2011 (Kriegar 2011, unpaginated). The conservation plan calls for eventual propagation of seeds (including any seeds collected from the soil around the plant's original location), and for genetic testing of resulting plants. Seeds fertilized in the wild could result from cross-pollination from another individual Arctostaphylos franciscana or a closely related species to produce a genetically unique individual (Chasse et al. 2009, p. 13). Additionally, because the roots of most Arctostaphylos individuals establish a mutually beneficial association with mycorrhizal fungi in the soil, the conservation plan establishes means by which the soil for propagating cuttings and seeds should be inoculated with spores from such fungi (Chasse et al. 2009, p. 9). Propagation of A. franciscana seed and inoculation of seeds and cuttings by mycorrhizal fungi have not yet occurred. Soil surrounding the wild plant has been examined for presence of a seedbank, but no A. franciscana seeds have been found (Young 2011, p. 1; Young 2012, p. 1).

At one time Arctostaphylos franciscana and A. montana ssp. ravenii were considered to be subspecies of A. hookeri (Hooker's manzanita). However, recent taxonomic revisions have established A. montana ssp. ravenii and A. franciscana as separate species. These revisions have been based primarily on genetic comparisons, including the fact that A. franciscana is diploid while A. montana ssp. ravenii is tetraploid (having four sets of chromosomes, 26 chromosome pairs) (Service 2003, p. 95; Parker et al. 2007, pp. 149, 150; Chasse et al. 2009, p. 6). The identification of the wild plant as A. franciscana has since been confirmed with 95 percent confidence based on morphological characteristics (Chasse et al. 2009, pp. 3, 4; Vasey and Parker 2010, pp. 1, 5). Additional tests indicate that the plant is diploid, consistent with A. franciscana (Vasey and Parker 2010, p. 6). Molecular genetic data also indicate that the plant is A. franciscana (Parker 2010a). Based on the best available scientific information, we consider the individual found along Doyle Drive in October 2009 to be A. franciscana (Vasey and Parker 2010, pp. 1, 5-7).

Arctostaphylos franciscana was originally proposed for listing as an endangered species under the Act in 1976 (41 FR 24524; June 16, 1976). In 1980, it was included in the list of Category 1 candidates for listing as one of the taxa retaining a high priority for addition to the list, subject to confirmation of extant wild populations. At that time, the species was thought to be extinct in the wild, although it was known to be extant in cultivation (45 FR 82479; December 15, 1980). It was included as a species of concern in the Recovery Plan for Coastal Plants of the Northern San Francisco Peninsula (Service 2003, pp. 95-96).

On December 23, 2009, we received a petition dated December 14, 2009, from Wild Equity Institute, Center for Biological Diversity, and California Native Plant Society requesting that Arctostaphylos franciscana be listed as endangered on an emergency basis under the Act and that critical habitat be designated. Included in the petition was supporting information regarding the species' taxonomy and ecology, historical and current distribution, present status, and actual and potential causes of decline. On January 26, 2010, we acknowledged the receipt of the petition in a letter to Wild Equity Institute. In that letter, we responded that we had reviewed the information presented in the petition and determined that issuing an emergency rule to temporarily list the species, under section 4(b)(7) of the Act, was not warranted. Our rationale for this determination was that, although only a single plant of this species remained in the wild, the individual had recently been transplanted to a new location on Federal land. Additionally, a conservation plan (Chasse et al. 2009, pp. 1-44) and associated MOA (cited herein as Caltrans et al. 2009) signed by five Federal and State wildlife and land management agencies (conservation partners) successfully addressed the concerns raised by the petition to the extent that none of those concerns constituted an “emergency posing a significant risk to the well-being of the species” (50 CFR 424.20(a)). The Federal agencies participating in the MOA are the NPS and the Service. The State of California is represented by Caltrans and the California Department of Fish and Game (CDFG). The Presidio Trust, a wholly owned government corporation that jointly manages the Presidio with NPS, also participates (71 FR 10608; March 2, 2006).

The transplanted plant is considered to be the single remaining plant in the wild, despite having been transplanted to the Presidio. The original habitat of the plant was threatened by the ongoing redevelopment of Doyle Drive, but that threat was removed by moving the plant to a new location (translocation). Potential immediate threats in the new location, including the danger that the plant might not survive the move and transplantation, were addressed by provisions in the conservation plan for collecting and propagating rooted clones, seeds, and cuttings from the original plant prior to translocation. The conservation plan provides for the long-term propagation, and eventual reestablishment in wild populations, of all remaining genetic lines, including those from the surviving wild plant and from the individuals located in two botanical gardens, which were collected from historically confirmed locations. It also includes long-term monitoring provisions. While these provisions do not remove the need for further review of the species' status, they appear to be effective for protecting the species in the short term.

We published a 90-day finding in the Federal Register on August 10, 2010 (75 FR 48294), in which we found that the petition presented substantial scientific or commercial information indicating that listing this species may be warranted. On June 14, 2011, Wild Equity Institute filed a complaint that alleged that, given our 90-day finding, the Service had failed to make the required 12-month finding on the petition in a timely manner. On September 8, 2011, we published a combined 12-month finding and proposed rule in the Federal Register in which we determined that listing Arctostaphylos franciscana was warranted, and, as a result, we proposed to list the species as endangered (76 FR 55623). We also stated that we did not find critical habitat to be determinable at that time, and requested information and comments on whether designation of critical habitat for the species was prudent and determinable.

The Presidio is under joint management by the Golden Gate National Recreation Area (GGNRA), a part of NPS, and the Presidio Trust. The wild Arctostaphylos franciscana plant is located in the portion of the Presidio managed by the Presidio Trust. The plant is considered to be wild because it has been moved to an undeveloped area of the Presidio that is managed as natural habitat. Although the plant is currently receiving care (monitoring and insect removal) associated with its transplantation and recent infestation by insects, it is not receiving the level of protection, water, or nutrients given to the plants in botanical gardens or to those within the nursery trade.

In the proposed rule published on September 8, 2011 (76 FR 55623), we requested that all interested parties submit written comments on the proposal by November 7, 2011. We also contacted appropriate Federal and State agencies, scientific experts and organizations, and other interested parties and invited them to comment on the proposal. A newspaper notice inviting general public comment for a period of 15 days was published in the San Francisco Chronicle on June 5, 2012. A question and answer sheet and news release regarding the species was posted online on our Web site for the public. We did not receive any requests for a public hearing.

During the comment periods for the proposed rule, we received eight comment letters directly addressing the proposed listing of Arctostaphylos franciscana as endangered. All public commenters supported listing the species as endangered. Three commenters supported designation of critical habitat and provided opinions on the value of critical habitat designation and the threats resulting from lack of this designation. One commenter opposed critical habitat designation. All substantive information provided during the comment periods has either been incorporated directly into this final determination or is addressed below.

In accordance with our peer review policy published on July 1, 1994 (59 FR 34270), we solicited expert opinion from five knowledgeable individuals with scientific expertise that included familiarity with Arctostaphylos franciscana and its habitat, biological needs, and threats. We received responses from four of the peer reviewers.

We reviewed all comments received from the peer reviewers for substantive issues and new information regarding the listing and critical habitat of Arctostaphylos franciscana. The peer reviewers generally concurred with our methods and conclusions regarding listing and provided additional information, clarifications, and suggestions to improve the final rule; however, three reviewers disagreed with our comments that designation of critical habitat was not prudent or determinable, and they provided supporting information regarding critical habitat. The fourth peer reviewer indicated that publicizing the location of the transplanted plant could increase the threat of infection by Phytophthora species. Additionally, this peer reviewer noted that the threat to A. franciscana was greater than stated in the proposed rule due to the presence of other species of Phytophthora in the San Francisco Bay area. Peer reviewer comments are addressed in the following summary and incorporated into the final listing rule as appropriate. A proposed rule to designate critical habitat for A. franciscana is published in the Proposed Rules section of today's Federal Register . Please see that proposed rule for information on submitting a comment on our proposed designation of critical habitat for A. franciscana.

(1) Comment: All peer reviewers provided comments on conservation measures, recommendations for outplanting cuttings and selection of planting sites, and additional information on threats to the species from the five factors discussed below in Summary of Factors Affecting the Species .

Our Response: Recommendations regarding outplanting and selection of planting sites have been reviewed for the proposed critical habitat and will be considered during the development of a recovery plan. All other appropriate information was incorporated into this final rule.

(2) Comment: Three peer reviewers and three public commenters stated that designation of critical habitat is prudent and determinable.

Our Response: Critical habitat is defined in section 3 of the Act as: (1) The specific areas within the geographical area occupied by the species, at the time it is listed in accordance with the Act, on which are found those physical or biological features that are essential to the conservation of the species, and which may require special management considerations or protection; and (2) specific areas outside the geographical area occupied by the species at the time it is listed, upon a determination that such areas are essential for the conservation of the species. The peer reviewers provided information on the ecological requirements of Arctostaphylos franciscana and areas with the highest potential for establishing new populations. Based on this information, we have determined that the designation of critical habitat is prudent and determinable. All known remaining historic locations as well as the site of the transplanted wild plant have been evaluated, and the areas that have met our criteria to be included as proposed critical habitat have been identified. We are proposing to designate critical habitat for the species concurrently with this final rule. That proposal is published in the Proposed Rules section of today's Federal Register . Please see that proposed rule for information on submitting a comment on our proposed designation of critical habitat for A. franciscana.

(3) Comment: Two peer reviewers disagreed with our statement that small sites on the order of 0.4 hectare (ha) (1 acre (ac)) may not be suitable for Arctostaphylos franciscana. One peer reviewer stated that while small sites may facilitate the growth of nonnative plant species, A. franciscana would be started from cuttings, not from seed, and management efforts could easily accommodate competition from nonnative plants, as established woody species are not easily displaced by weeds. The second peer reviewer noted that there are many natural occurrences of rare Arctostaphylos species existing in small, isolated remnants of habitat where soils and climate are suitable.

Our Response: Some invasive plant species in the Presidio and in other San Francisco peninsula areas have been shown to be difficult to control. For example, on Mount Davidson, which previously supported a population of Arctostaphylos franciscana, invasive plant species, including Eucalyptus spp., invasive ivy, and other species, have largely displaced native vegetation on portions of the site . We agree that some rare species of Arctostaphylos have persisted on small parcels of suitable habitat; however, in order to maximize the potential of establishing multiple, successful populations of A. franciscana, selection of suitable sites that require the least amount of long-term maintenance and promise the greatest opportunity for growth is necessary. However, we will evaluate small sites during our process to designate critical habitat for the species.

(4) Comment: Two peer reviewers questioned our statement under Factor A in the proposed rule that small, isolated areas of habitat can be drier than larger ones due to evaporation and lack of surrounding vegetation. One reviewer stated that this does not apply to small urban or near-urban sites because hard surfaces such as asphalt and cement provide additional runoff and available moisture in these areas.

Our Response: Many of the remnant parcels of potential habitat on the peninsula are isolated and surrounded by urban development or nonnative landscaping rather than native vegetation. One of the general effects of this abrupt transition from natural habitat to urban landscape or hard surfaces is a change in the abundance and distribution of species in the natural habitat due to physical conditions near the edge (the edge effect). These conditions include desiccation and changes in wind and light. We agree with one peer reviewer's premise that hard surfaces such as rooftops, streets, and parking lots increase urban runoff; however, our understanding is that when rain or irrigation water falls on urban hard surfaces, it flows predominately into storm water control systems, including gutters and storm drains, and is carried away from urban areas rather than being absorbed into the soil and providing more moisture to plants.

(5) Comment: We stated under Factor A that remaining areas of greenstone and serpentine habitat on the peninsula are frequently 0.4 ha (1 ac) or less in size and may no longer be appropriate sites for re-establishment of Arctostaphylos franciscana due to fragmentation and loss of native plant diversity in the small remnant areas. One peer reviewer pointed out the loss of native diversity in existing stands of vegetation is not a relevant argument because new populations of A. franciscana would be newly created in the small sites.

Our Response: We appreciate the reviewer's point and agree that if small remnant habitat areas were to support Arctostaphylos franciscana, it would be through restoration with newly assembled populations of the species, which could permit establishment of other naturally co-occurring natives. However, we remain concerned that small sites may insufficiently support the pollinator, fruit-dispersal, and mycorrhizal communities that are thought to contribute to successful establishment of the species. We will be looking at all potential sites when selecting locations for outplanting.

(6) Comment: One peer reviewer noted that the threat to Arctostaphylos franciscana from nonnative, root-rotting Phytophthora species is greater than noted under Factor C in the proposed rule. He noted that species of Phytophthora differ in their ecological requirements, such as optimum temperature range. Several species of Phytophthora have become established in a variety of San Francisco Bay area microclimates and could be introduced to the vicinity of A. franciscana. He also noted that other factors discussed under Factor E, including climate change, soil compaction, and low genetic diversity, have the potential to increase the risk to the existing wild plant from P. cinnamomi and other Phytophthora species.

Our Response: This information has been incorporated into this final rule. Please see Factor C discussion on threats to Arctostaphylos franciscana associated with disease below.

(7) Comment: One peer reviewer noted that the general strategy to recover Arctostaphylos franciscana should be two-fold: (A) Identify other genotypes of A. franciscana that have been cultivated in botanical gardens and use their cuttings to propagate large numbers of plants for future outplantings in restored habitats, and (B) identify and secure sites for outplanting these clones and create as many populations within the historical range as feasible.

Our Response: This information has been incorporated into this final rule where appropriate and will be considered during development of the proposed critical habitat and recovery actions for the species.

(8) Comment: One peer reviewer noted that the potential risks of failure of small, restored populations are outweighed by benefits of having a large number of isolated populations within the range of Arctostaphylos franciscana. These populations would buffer the wild A. franciscana from the threats noted in this rule, including disease, disturbance, predation, and climate change. The peer reviewer further noted that having many scattered populations will optimize the potential for at least some populations to adjust to climate change.

Our Response: We concur with this opinion and are considering this during our development of proposed critical habitat and recovery actions for the species.

Section 4(i) of the Act states, “the Secretary shall submit to the State agency a written justification for his failure to adopt regulations consistent with the agency's comments or petition.” No comments were received from the State regarding the proposal to list Arctostaphylos franciscana as an endangered species.

No comments were received from any Federal agencies.

(9) Comment: All seven commenters noted that the species should be listed and protected in the wild because only one plant is known to exist.

Our Response: Comments noted.

(10) Comment: One commenter noted that not all nursery stock of Arctostaphylos franciscana is of unknown origin. The commenter stated that UC Berkeley Arboretum and Yerba Buena Nursery sell plants of known origin. Plants from Yerba Buena Nursery have been planted in Golden Gate Park Arboretum, which validates their legitimacy. The commenter further stated that specimens from verified sources are a vital repository and should not be disregarded.

Our Response: The UC Berkeley Botanical Garden does not sell Arctostaphylos franciscana plants; however, their stock was originally from the Laurel Hill Cemetery and may have been the source for plants sold by California Native Plant Society (Forbes 2012, p. 1). We agree that some A. franciscana plants in the nursery trade originated from plants salvaged from the Laurel Hill Cemetery prior to its destruction in 1947; however, it is difficult to trace the lineage of all nursery plants in the intervening 65 years. Some currently available, nursery-grown A. franciscana plants could be cultivars selected for specific growth characteristics, and others could be the product of hybrid seed. Plants from Yerba Buena Nursery that were planted at Golden Gate Park Arboretum, now known as the San Francisco Botanic Garden, are believed to be A. franciscana (D. Mahoney 2012, pers. comm.). We encourage the use of plants that are proven to be A. franciscana to generate stock for additional populations of A. franciscana. However, introgression (the spread of genes of one species into the gene pool of another by hybridization) could occur if hybrid nursery stock is outplanted near the wild plant and cross-fertilization occurs. Because of the uncertainty of the origin or subsequent hybridization, we currently only consider the plants of confirmed origin at East Bay Regional Parks Botanic Garden at Tilden Regional Park and at UC Botanical Garden at Berkeley, and the wild plant on the Presidio to be A. franciscana and the listed entity.

(11) Comment: One commenter noted that there is no apparent incentive for anyone to poach or vandalize plants in natural settings that are available in the nursery trade.

Our Response: Plants have been vandalized in Golden Gate Park, including species that are also available in nurseries such as elm and sycamore trees, and rose bushes (King 2010, unpaginated; Gordon 2010, unpaginated). The fact that a plant is available in the nursery trade does not protect it from being vandalized or poached.

(12) Comment: A commenter noted that leaving the nursery trade specimens of Arctostaphylos franciscana unlisted may result in introgression. The commenter suggests that including nursery stock in the listed entity will help to regulate this threat.

Our Response: Arctostaphylos franciscana has been available to the public in the nursery trade for many years, and introgression of this species with other manzanitas may have already occurred. Including A. franciscana nursery stock as part of the listed entity will have no effect on controlling hybridization of these plants. Only the removal of A. franciscana from nursery production could minimize its hybridization with other species of Arctostaphylos while in the nursery setting.

(13) Comment: A commenter noted that if the Arctostaphylos franciscana plants in the nursery trade are not considered to be the listed species, they should be protected under the similarity of appearance provisions of the Act.

Our Response: We acknowledge that similarity of appearance is a tool available to us under the Act. Section 4(e) of the Act states that the Secretary may treat any species as an endangered species or threatened species even though it is not listed pursuant to section 4 of the Act if he finds that: (1) Such species so closely resembles in appearance, at the point in question, a species which has been listed that enforcement personnel would have substantial difficulty in attempting to differentiate between the listed and unlisted species; (2) the effect of this substantial difficulty is an additional threat to an endangered or threatened species; and (3) such treatment of an unlisted species will substantially facilitate the enforcement and further the policy of the Act. It should be noted, however, that the basic intent of section 4(e) of the Act is to prevent the inadvertent harm to the listed species in the wild resulting from its similarity to a different species that is not protected by the Act. The Arctostaphylos franciscana plants in the nursery trade do not need the protection of the Act, and including them in this listing under section 4(e) will provide no or minimal benefit to the wild specimen or any future outplantings of the listed entity. Similarity of appearance protections can be effective in situations where collection of a species is highly desirable (such as for insects or butterflies) and such collection is the primary threat or a threat of such an extent that not including the similar species with the listed entity would greatly affect the listed species' status. Although collection of the remaining wild plant and any future outplantings is a potential threat, no known collection has occurred to date, and we would not consider this threat to be of such a high level as to greatly affect the species' status. As a result, we have determined that treating A. franciscana plants in the nursery trade as endangered under section 4(e) of the Act would not substantially facilitate enforcement or the policy of the Act, and the Secretary is not invoking section 4(e) of the Act for A. franciscana.

(14) Comment: One commenter disagreed with information we reported, which indicated that lands in Area B of the Presidio, which are managed by the Presidio Trust, could be dispersed to the private sector and become available for development if the Presidio Trust is not financially self-sufficient by 2013. Further, the commenter does not agree that differences in the missions of the Presidio Trust and NPS would cause uncertainty in the future management of the Arctostaphylos franciscana and its habitat.

Our Response: The Presidio Trust Act of 1996 states in section 105(b) that the Presidio Trust must be self-sufficient within 15 complete fiscal years of the first meeting of the Presidio Board of Directors, thereby requiring that the Trust be self-sufficient by 2013 (Presidio Trust Act, p. 9; Presidio Trust Management Plan 2002, p. 1). Because this timeframe extends into the future, there is no assurance that this goal will be met. The Presidio Trust, as stated in the Presidio Trust Management Plan (2002, pp. 1, 12), is directed to preserve natural, scenic, cultural, and recreation resources, and at the same time ensure that the Presidio becomes financially self-sufficient. Again, as stated in the Presidio Trust Management Plan (2002, pp. 1, 12), “Congress gave the Trust the authority to lease property and generate revenues, and required the Presidio to be financially self-sufficient by 2013. Once appropriations cease, the Trust must use the park's building assets to fund its rehabilitation and to pay for its ongoing operation. No other area within the National Park System is managed in the same way or operates under the same financial requirement.” The mission of NPS on the Presidio, as stated in the Golden Gate National Recreation Area Addition Act of 1992 (16 U.S.C. 460bb), while similar to the Presidio Trust Act in protecting values and resources, does not include the mandate that the public lands under NPS authority become financially self-sufficient.

(15) Comment: One commenter stated that there are no remaining landfill remediation sites on the Presidio that have the potential to impact Arctostaphylos franciscana, and that all waste material has been removed from the landfill remediation site closest to where the wild plant is located. The commenter noted that this work was completed without impacts to A. franciscana and asked that we delete the text under Factor A that refers to the Presidio Environmental Remediation Program.

Our Response: Remediation of the landfill site closest to the Arctostaphylos franciscana on the Presidio is being completed without apparent impact to the wild plant, and no further remediation projects are located within the vicinity of the plant. Remediation of this landfill site has been deleted as a current threat from the Factor A discussion.

(16) Comment: A commenter noted that under Factor E we stated that the Arctostaphylos franciscana plant is located near an area available for public events and threatened by foot traffic. The commenter stated that this area is available one afternoon per week for wedding ceremonies and does not present a threat to the plant, and requested that reference to this event space be removed as a threat.

Our Response: As stated in the proposed rule, the Presidio is a highly popular, easily accessible National Park contiguous with the City of San Francisco, which receives 5 million visitors each year. The public area described in the proposed rule, which is available for public events, provides views of the San Francisco Bay and the City of San Francisco, and attracts a large number of visitors year round. The best information available to us indicates that the public has unrestricted access to this area 24 hours a day, every day of the year; therefore, this site may be a different location than that referred to by the commenter. Additionally, the Arctostaphylos franciscana plant has been located near common-use trails with unrestricted access. Because of its proximity to these heavily used areas, the plant could be damaged accidentally or intentionally by park users. The Presidio Trust and NPS are concerned that authorized and unauthorized group tours by plant enthusiasts could overwhelm the plant and compact the soil (T. Thomas, pers. comm., 2011).

(17) Comment: One public commenter stated that designation of critical habitat is not prudent or determinable for the reasons stated in the proposed rule.

Our Response: As noted in our response to comment 2, the peer reviewers provided information on the ecological requirements of Arctostaphylos franciscana and areas with the highest potential for establishing new populations. Based on this information, we have determined that the designation of critical habitat is prudent and determinable. As a result, a proposed rule to designate critical habitat for A. franciscana is published in the Proposed Rules section of today's Federal Register . Please see that proposed rule for information on submitting a comment on our proposed designation of critical habitat for A. franciscana.

Based on peer review and public comments (see comments 1, 6, 7, and 15 in the Summary of Comments and Recommendations section above), and monitoring of the wild plant, we have added new information in the Species Information section and additional threats information in the Summary of Factors Affecting the Species section to better characterize our knowledge of the species' habitat requirements and threats. After input from peer reviewers and public comment, we have determined that the designation of critical habitat is prudent and determinable, and we are proposing to designate critical habitat, as described in a separate proposed critical habitat rule in today's Federal Register .

Section 4 of the Act and its implementing regulations (50 CFR part 424) set forth the procedures for adding species to the Federal Lists of Endangered and Threatened Wildlife and Plants. A species may be determined to be an endangered or threatened species due to one or more of the five factors described in section 4(a)(1) of the Act: (A) The present or threatened destruction, modification, or curtailment of its habitat or range; (B) overutilization for commercial, recreational, scientific, or educational purposes; (C) disease or predation; (D) the inadequacy of existing regulatory mechanisms; or (E) other natural or manmade factors affecting its continued existence. Listing actions may be warranted based on any of the above threat factors, singly or in combination. Each of these factors is discussed below.

All areas of habitat originally known to be occupied by Arctostaphylos franciscana have been lost to urban development or to habitat conversion through the introduction of nonnative plant species (Chasse et al. 2009, pp. 4, 7; Chasse 2011c, p. 1). The largest historical occurrence was at the quarry area of the former Laurel Hill Cemetery in San Francisco (Chasse 2011c, p. 1). Most of this area was converted to residential housing and city streets after the late 1940s. A small remaining area of open space at Laurel Hill is dominated by ornamental shrubs and invasive understory plants, although serpentine rock is visible in several openings (Chasse 2011c, p. 1). Lawns, pathways, and buildings, part of the University of San Francisco campus, now occupy the location of the Masonic Cemetery occurrence (Chasse 2011c, p. 2). The precise location of the third historical occurrence of A. franciscana, at Mount Davidson, is unknown but thought to be on one of the greenstone outcrops (Chasse 2011c, p. 2). The upper portions of Mount Davidson are covered with nonnative trees and invasive understory species; some grassland and scrub persist on the south and northeast sides (Chasse 2011c, p. 2). The species' range is now limited to the single transplanted location on the Presidio. In January 2010, after the newly discovered wild plant was moved to the Presidio, the plant's habitat at Doyle Drive was destroyed as part of a Caltrans highway improvement project.

Past urban development on the San Francisco peninsula has limited the remaining areas of potential habitat for Arctostaphylos franciscana by habitat conversion and habitat degradation and, to a lesser degree, habitat fragmentation. Some of these small remnant areas may no longer be suitable for reestablishment of A. franciscana due to factors such as dominance by other plant species (Chasse pers. comm., 2011). Currently, these small, isolated parcels are subject to edge effects, such as changes in soil moisture, changes in light, and potential increased invasion of weed species that would compete with A. franciscana for limited resources (water, nutrients, space).

Urban barriers, such as streets and buildings, have been found to impose a high degree of isolation on chaparral species and, over time, to result in decreased numbers of native plant species and concurrent increased numbers of nonnative plant species in the habitat fragments (Alberts et al. (unpubl.) as cited in Soule et al. 1992, p. 41; Soule et al. 1992, pp. 41-43). These effects of urbanization on the San Francisco peninsula are expected to continue to affect these remnant parcels into the future, and to pose a threat to the establishment of additional Arctostaphylos franciscana plants, without assistance to restore suitable habitat conditions and to restore plants to suitable locations.

Additionally, nitrogen deposition may modify habitat by increasing soil nutrients, thus posing a current and continuing threat to remnant habitat that might otherwise be suitable for Arctostaphylos franciscana. Weiss and Luth (2003, p. 1) have conducted research on the effects of nitrogen deposition in a serpentine grassland south of the San Franciscan peninsula. They found that nitrogen deposition from automobiles on Highway 280 (a north-south oriented highway on the peninsula) was responsible for higher nitrogen levels in the soil within 400 m (1,312 ft) on the west side and 100 m (328 ft) on the east side of the roadway. Nitrogen deposition was correlated with increased nonnative grass cover in these areas, resulting in competition for space for native plants. Native species within this zone are thought to be at long-term risk from invasions of nitrogen-loving grasses and other weedy plant species (Weiss and Luth 2003, p. 1). An increase in nonnative grass cover through changed habitat conditions could threaten the wild A. franciscana by competing for soil moisture and nutrients and could inhibit successful germination of A. franciscana seed. The entire northern San Francisco peninsula, with the exception of the Presidio and Golden Gate Park, has been urbanized, and four major highways (Highways 1, 101, 280, and 480) and other urban roadways dissect the peninsula. Urban areas and roadways are a continuous source of nitrogen deposition from automobiles, trucks, and industrial and home heating (Weiss 1999, p. 1477). Invasions of nitrogen-loving plants into nitrogen-limited grasslands and shrublands appears to be a common response to atmospheric nitrogen deposition (Weiss and Luth 2003, p. 1), and may partly explain why the ecosystem that existed on the San Francisco peninsula has been so altered.

The one remaining wild Arctostaphylos franciscana plant is subject to multiple threats. The Presidio Trust Act contains a sunset clause that could result in the transfer of Presidio holdings to the General Services Administration (GSA) for disbursement if the Presidio Trust operations are not self-sufficient by 2013 (the Presidio Trust Act is discussed under Factor D below). In the unlikely event that the Presidio Trust is not self-sufficient within that timeframe, the potential that lands could be transferred and become available for development presents a threat of additional habitat loss in the future.

Based on the best scientific and commercial information available, we consider the present or threatened destruction, modification, or curtailment of the species' habitat or range to be a high-magnitude and ongoing threat to the wild population of Arctostaphylos franciscana. The current fragmented and degraded condition of most remaining serpentine or greenstone soil habitat on the San Francisco peninsula threatens the ability of Arctostaphylos franciscana to expand its range. The threats of possible development and change in management of the habitat may further limit the species' propagation and expansion, and could potentially threaten the only remaining wild plant. The loss of the plant's native serpentine chaparral habitat to development and the curtailment of its range restrict the species' current and future ability to naturally reproduce and expand its range.

Overutilization of Arctostaphylos franciscana is possible due to its popularity for landscape use, as evidenced by the widespread use of cultivars of this species in the commercial nursery trade. Arctostaphylos franciscana is specifically recommended for use in erosion control on steep slopes (Theodore Payne Foundation 2009, p. 1; Sierra Club 2011, p. 1).

The attention and media coverage generated by the discovery of a species thought to be extirpated from the wild may result in efforts by the public to visit the plant and possibly collect cuttings or seed. Although the location of the transplanted plant has not been disclosed, it was planted in a heavily used area in the Presidio, near common-use trails with unrestricted access by the public. The Presidio is a National Park and is part of the GGNRA; it is open to the public 24 hours a day, every day of the week and receives 5 million visitors annually. The Presidio receives heavy use because of its proximity to the City of San Francisco, and because the National Park has no entrance fees and contains restaurants, trails, and businesses that can be accessed by car, foot, or public transport. The Presidio Trust and NPS are making serious efforts to avoid disclosing the location of the translocated plant. The Presidio Trust and NPS are concerned that public knowledge of the plant's location would lead to authorized and unauthorized group tours by plant enthusiasts (T. Thomas, pers. comm., 2011).

No damage to the plant has been observed to date; however, trampling or the taking of cuttings could occur if the identification and location of the plant becomes known. Similarly, another extremely rare plant, Arctostaphylos montana ssp. ravenii, is also located on the Presidio. Although it was federally listed in 1979, its location has not been revealed to the public by the Presidio Trust or NPS in order to protect the plant from vandalism. There has been no evidence of cuttings being taken from A. franciscana or the similar A. montana ssp. ravenii (Chasse 2011c, p. 3); however, the fact that the sole remaining wild A. franciscana is located in a heavily used public area subjects this species to the threat of collection.

Based on the best scientific and commercial information available, we consider overutilization for commercial and recreational purposes to be a threat to the wild Arctostaphylos franciscana plant. Although nursery-grown A. franciscana are available to residents for use in private gardens, collection of the wild plant is a threat to the species, and we expect it may be a threat in the future, particularly if the location of the plant becomes known to the public.

Transplantation of the single wild Arctostaphylos franciscana plant may have caused stress to the plant, and thereby made it more susceptible to predation and disease. In transplanted plants, stress and root damage may occur from a variety of factors, including soil compaction from foot traffic around the plant (Hammitt and Cole 1998, p. 52), too little or too much water, and improper planting depth; these stressors may result in increased susceptibility to disease (see further discussion in Visitor Use section below). A fungal infection called twig blight, usually caused by Botryosphaeria species in Arctostaphylos, is also a potential concern, particularly during wet years (Service 2003, p. 69). Twig blight was observed in the wild plant during the winter of 2009-2010, but it subsided during the dry summer months (Chasse 2010, p. 2). These fungi can cause both twig blighting and perennial branch cankers that can eventually kill large branches (Swiecki 2011, p. 1). While these pathogens would not likely pose a serious threat to a large population, they could threaten A. franciscana because the wild population is limited to a single plant, and infection by this group of fungi is one of the major factors leading to the decline of older Arctostaphylos sp. plants (Swiecki 2011, p. 1). Additionally, cankers caused by Botryosphaeria are more severe in plants that are stressed by lack of water. The transplanted plant may have experienced water stress due to loss of roots during the transplanting process (Swiecki 2011, p. 1).

Arctostaphylos franciscana is also threatened by various pathogens in the genus Phytophthora. An oak tree infected with sudden oak death disease was discovered on the Presidio in 2010 (Fimrite 2011). Sudden oak death is caused by Phytophthora ramorum. Phytophthora is a fungus-like organism most closely related to diatoms and kelp (Kingdom Stramenopila) rather than to the true fungi (Kingdom Fungi or Eumycota). Phytophthora ramorum has so far been observed to cause only a foliar blight in species of Arctostaphylos, rather than the lethal bark cankers that occur on members of the black oak group (Swiecki 2012a, p. 1). However, a related species, P. cinnamomi has presented a serious threat to other Arctostaphylos species and is expected to be a serious threat to A. franciscana. Phytophthora cinnamomi, a soil-borne pathogen, has long been known as a world-wide threat to commercial and ornamental plants. It is an introduced exotic pathogen in North America; its native range is unknown, but is suspected to be southeast Asia. Human-related activities, including the international plant trade, have facilitated the spread of P. cinnamomi into many habitats worldwide (Swiecki et al. in press, p. 3). Phytophthora cinnamomi was introduced to California early in the 20th century, and recently has been identified as a serious threat to the State's native plants and their habitats (Swiecki et al. in press, p. 3).

Phytophthora cinnamomi has been the cause of the decline and death of rare Arctostaphylos species, including the federally threatened A. pallida (pallid manzanita) in the Oakland Hills of the East San Francisco Bay region and the federally threatened A. myrtifolia (Ione manzanita) near Ione in the Sierra Nevada foothills of Amador County. The pathogen is also noted in the decline of other woody native species in the San Francisco Bay area (Swiecki et al. in press, pp. 3-5). The organism causes root decay but can also kill above-ground portions of some plants (Swiecki et al. in press, p. 3). Phytophthora cinnamomi is persistent in soil, and once introduced to native habitat it cannot be eradicated (Swiecki et al. in press, p. 3). Phytophthora cinnamomi is transmitted by contaminated shoes, tools, and infested soil clinging to tires, and by contaminated nursery stock, including native plant stock. Many areas showing plant mortality caused by P. cinnamomi are associated with hiking trails, landscapes with ornamental plants, and, in one case at the Apricum Hill Preserve in Amador County, California, use by visitors, including researchers, agency personnel, students, and the general public (Swiecki et al. in press, p. 4).

Phytophthora cinnamomi poses a significant current and future threat to Arctostaphylos franciscana because of the potential for infestation caused by the public and staff who regularly work with the plant. It is not possible to predict if or when the pathogen might infect the wild plant because the disease is generally transmitted directly or indirectly by humans or human activity. The pathogen could be introduced from soil on contaminated shoes and tools, or from cuttings of A. franciscana plants currently grown in a number of San Francisco Bay area nurseries that could become contaminated. Swiecki et al. (in press, p. 6) tested A. menziesii plants purchased from four nurseries and found them to be infested with four Phytophthora species that cause root infections or stem cankers, including P. cinnamomi. Crown rot, which is caused by P. cinnamomi, is known to occur in A. myrtifolia and A. viscida (Swiecki et al. in press, p. 3), and is a concern when outplanting nursery-grown plants to wild locations (Chasse et al. 2009, p. 17). However, crown rot has not been observed in the wild A. franciscana plant (Chasse 2010, p. 2).

Conservation proposals include recommendations that Arctostaphylos franciscana cuttings be planted with the transplanted A. franciscana to facilitate cross-pollination of the different genotypes. Should the wild plant become contaminated with P. cinnamomi, the result would be the decline and death of the wild plant and permanent contamination of the soil and seedbank beneath the plant. Any seedlings that germinate from this seedbank would also very likely be contaminated and not survive. Any cuttings that become contaminated are also expected to die of the pathogen. The Golden Gate National Parks Conservancy Nurseries staff in charge of propagation and care of A. franciscana cuttings are aware of the threat of contamination and rigorously follow clean procedures to prevent infection to the cuttings or the wild plant; however, a risk of contamination continues to exist because current fungicides do not eradicate 100 percent of Phytophthora spores (Young 2010b, p. 1). The cuttings and layers from the single wild plant have been dispersed to seven different locations and growers, which, while decreasing the risk of complete loss of plant material, also increases the risk of exposure to disease.

Phytophthora cinnamomi is not the only introduced soil-borne Phytophthora species that may threaten Arctostaphylos franciscana. Swiecki (2011, p. 1; 2012b, p. 1) notes that at least five other species of Phytophthora associated with the decline and death of woody plants have been found in the Crystal Springs watershed 27 to 40 kilometers (km) (17 to 25 miles (mi)) south of the Presidio. These nonnative Phytophthora species include P. cambivora, P. cactorum, and P. megasperma; all are known to occur in natural and cultivated landscapes and are common in nursery stock (Swiecki 2011, p. 1). Phytophthora cinnamomi and P. cambivora have been detected in China Camp State Park, 22.4 km (14 mi) north of the Presidio, and P. cinnamomi has been found in the East Bay area 24 km (15 mi) east of the Presidio. Because several of these soil-borne pathogens have become established in the San Francisco Bay area, the likelihood is increased that one or more could be introduced to the vicinity of the wild Arctostaphylos franciscana plant (Swiecki 2011, p. 1).

After being transplanted, the wild plant became severely infested with the larvae of a native leaf roller moth ( Argyrotaenia franciscana ) (Estelle 2010, p. 1). Treatment for the infestation was hand removal of the larvae and all infected leaves, which resulted in the removal of some of the new growth on the plant (Estelle 2010, p. 1; Young 2010a, p. 1). A parasitic wasp emerged from one captured leaf roller moth larva, indicating that the moth has natural enemies (Frey 2010, p. 2). The moth has not been known to kill plants and does not appear to be a serious threat at this time; however, the moth species was found to have five overlapping generations in a year (Estelle 2010, p. 1). Monthly removal of moth larvae and pupae is conducted as needed (Estelle 2012a, p. 1). The leaf roller moth infestation in early 2010 did not permanently damage the plant, and new growth was observed (Frey 2010, p. 2). Fewer leaf roller moth larvae were seen on the wild plant in 2011 than in 2010 (Estelle 2012a, p. 1).

Damage to Arctostaphylos franciscana branches by California voles has been observed by Presidio Trust staff (Chasse 2011c, p. 2). Several voles have been observed in and around the wild A. franciscana plant, and some branch dieback has been attributed to gnawing by voles and other rodents (Chasse 2011c, p. 2).

Based on the best scientific and commercial information available we consider the effects from disease and predation to be a threat to Arctostaphylos franciscana. Infection of the plant by Phytophthora cinnamomi or other Phytophthora species has been determined to be a serious threat to A. franciscana because only one plant occurs in the wild, the disease is easily and quickly spread by multiple vectors, and at least six species of Phytophthora are known to be present in the vicinity of the San Francisco peninsula. Additionally, we consider predation to be a relatively minor but ongoing threat to the wild population of the species. Although the leaf roller moth has not been known to kill Arctostaphylos species, the moth produces five overlapping generations per year and severely damaged the leaves in 2010. Predation on branches by California voles has occurred and is also relatively minor but ongoing threat.

Regulatory mechanisms protecting Arctostaphylos franciscana derive primarily from the location of the single known wild plant on GGNRA lands on the Presidio, which are administered by the Presidio Trust. The Presidio Trust was established by the Presidio Trust Act of 1996 to manage the leasing, maintenance, rehabilitation, repair, and improvement of property within the Presidio (Presidio Trust Act, as amended, sec. 104(a)). The Presidio Trust is directed to preserve the natural, scenic, cultural, and recreational resources on the Presidio, but also is directed to ensure that the Presidio becomes financially self-sufficient by 2013 (Presidio Trust 2002, pp. 1, 2, 12). The Presidio Trust Act directed that the Presidio Trust design a management program to reduce NPS expenditures and increase revenues to the Federal Government to the maximum extent possible (Presidio Trust Act, pp. 5, 6). The Presidio Trust Management Plan was published in May 2002. The Presidio Trust manages most of the Presidio (Area B), and NPS retains jurisdiction over Area A as defined in the Presidio Trust Management Plan (Presidio Trust 2001, p. 3). The Presidio Trust and NPS coauthored the Presidio Vegetation Management Plan. For special status plants, the plan provides an objective to preserve and enhance rare plant habitats by evaluating species-specific habitat needs, giving high priority to actions that preserve and enhance those habitats (Presidio Trust 2001, Chapter 3, unpaginated).

Federal regulations for the Presidio Trust, which offer some protection to Arctostaphylos franciscana, include prohibitions on disturbing, injuring, removing, possessing, digging, defacing, or destroying from its natural state, any plant or parts thereof. Unauthorized introduction of plants and plant seeds is also prohibited, offering limited protection against invasive, nonnative species. Additional regulations require that special events be permitted by the Presidio Trust, and provide for restricting visitor use to address resource conflicts (36 CFR part 1002).

The Presidio Trust is a new model for National Park management in that the Presidio Trust is directed to preserve the natural, scenic, cultural, and recreational resources on the Presidio and at the same time ensure that the Presidio becomes financially self-sufficient by 2013 (Presidio Trust 2002, pp. 1, 12). This means that generation of revenue is a consideration for the Presidio Trust's activities, as well as resource protection. The cost of operation and care are higher for this park than for most National Parks because of the Presidio's large number of structures and cultivated landscapes (Presidio Trust 2011, unpaginated). The mission of NPS on the Presidio, as stated in the Golden Gate National Recreation Area Addition Act of 1992 (16 U.S.C. 460bb), although similar to the Presidio Trust Act regarding the protection of natural, historic, scenic, and recreational values, does not include the mandate to ensure that the Presidio becomes financially self-sufficient.

The future status of the Presidio as National Park land is uncertain, as explained in the Presidio Trust Act's section 104(o) (Reversion), which states: “If, at the expiration of 15 years, the Trust has not accomplished the goals and objectives of the plan required in section 105(b) of [the Presidio Trust Act], then all property under the administrative jurisdiction of the Trust pursuant to section 103(b) of [the Presidio Trust Act] shall be transferred to the Administrator of the General Services Administration to be disposed of in accordance with the procedures outlined in the Defense Authorization Act of 1990 (104 Stat. 1809), and any real property so transferred shall be deleted from the boundary of the Golden Gate National Recreation Area. In the event of such transfer, the terms and conditions of all agreements and loans regarding such lands and facilities entered into by the Trust shall be binding on any successor in interest.” This clause indicates that lands currently considered National Parks lands could be disbursed to the private sector and subject to development within the near future. The Presidio Trust states, however, that since 2004, the Trust's earned revenue has offset operating costs and expects that the Presidio will meet the goal of being a self-sustaining National Park in 2012 (Middleton 2011, p. 2).

Arctostaphylos franciscana is not listed under the California Endangered Species Act. The conservation plan and MOA are not regulatory in nature and not legally enforceable by third parties (Caltrans 2009, p. 8; Chasse et al. 2009, p. 3), limiting their usefulness in enforcing protections for the plant. Although general protections are provided for plants on National Parks, no regulatory language in any Park Service or Presidio Trust documents specifically addresses protection of A. franciscana.

Based on the best scientific and commercial information available, we consider the inadequacy of existing regulatory mechanisms not to be a threat to the species.

Potential threats to Arctostaphylos franciscana include changes in environmental conditions resulting from climate change, trampling or disturbance by people visiting the Presidio, altered fire regime, loss of genetic diversity, loss of pollinators, and stochastic (chance) events.

Our analyses under the Act include consideration of ongoing and projected changes in climate. The terms “climate” and “climate change” are defined by the Intergovernmental Panel on Climate Change (IPCC). “Climate” refers to the mean and variability of different types of weather conditions over time, with 30 years being a typical period for such measurements, although shorter or longer periods also may be used (IPCC 2007, p. 78). The term “climate change” thus refers to a change in the mean or variability of one or more measures of climate (e.g., temperature or precipitation) that persists for an extended period, typically decades or longer, whether the change is due to natural variability, human activity, or both (IPCC 2007, p. 78). Various types of changes in climate can have direct or indirect effects on species. These effects may be positive, neutral, or negative and they may change over time, depending on the species and other relevant considerations, such as the effects of interactions of climate with other variables ( e.g., habitat fragmentation) (IPCC 2007, pp. 8-14, 18-19). In our analyses, we use our expert judgment to weigh relevant information, including uncertainty, in our consideration of various aspects of climate change.

Changes in environmental conditions resulting from climate change may cause presently suitable habitat to become unsuitable for endemic California plants, due to projected changes in temperature and rainfall (Loarie et al. 2008, pp. 1-2). A U.S. Geological Survey (USGS) study in National Park lands in northern California and Oregon is underway to examine trends in climate, ocean conditions, and other features (Madej et al. 2010, p. 7). In these National Park lands, variation in abiotic factors (for example, precipitation, fog, and air and ocean temperatures) regulates many ecological processes, including the distribution of vegetation and frequency of disturbance from fires, floods, landslides, and pest species. The preliminary results of the USGS study show an increase in average maximum summer air temperatures at GGNRA, near the Presidio (Madej et al. 2010, p. 24).

Summer fog and overcast along the California coast has been identified as ecologically important to endemic plant species by increasing water availability during the dry summer months, reducing loss of water from leaves (evapotranspiration), and decreasing the frequency of drought stress (Fischer et al. 2009, pp. 792-794). Fog frequency along the Pacific coast is highest in north and central California and declines in Oregon and southern California (Johnstone and Dawson 2010, p. 4534). Climate change may be affecting the amount and duration of fog and cloud cover along the California coast including within the San Francisco Bay area. Mean fog frequency in the California region, quantified by cloud ceiling height measured at airports, has decreased since 1951 (Johnstone and Dawson 2010, p. 4535). Research by Vasey (2010, p. 1) suggests that most coastal endemic Arctostaphylos species are more vulnerable to drought stress than those found in interior California, and could be threatened by a decrease in coastal summer fog. He found that obligate-seeding Arctostaphylos species, such as A. franciscana, are better hydrated in areas that receive fog. He also found that coastal obligate-seeding species are more vulnerable to vascular cavitation (blockage forming in water vessels in the plant) when the rate of water loss through the leaves becomes too great, such as during drought (Vasey 2010, p. 1). This disruption of water flow can lead to branch death and possibly death of the entire plant (Vasey 2010, p. 1).

Reduced soil moisture from decrease in summer fog may also result in reduced seed germination and seedling survival. Additionally, the ability of Arctostaphylos franciscana to respond to future climate changes by establishing new plants in new habitat may be limited because of the plant's association with serpentine and greenstone bedrock outcrops (Service 2003, pp. 95, 96), and because soils derived from serpentine and greenstone bedrock on the peninsula are limited in area and largely fragmented (Chasse 2010, p. 1). Natural movement of the species by seed dispersal to reach cooler, moister areas to the north would be impeded by barriers such as the San Francisco Bay.

Increased temperatures within Arctostaphylos franciscana habitat could also result in higher soil temperatures that would favor Phytophthora cinnamomi, which reproduces best at warmer soil temperatures. Higher temperatures would also increase the likelihood of water stress on A. franciscana, increasing its susceptibility to other Phytophthora species (Swiecki 2011, p. 1).

In addition to soil type and climate, fire plays a critical role in the determination of plant distribution (Keeley 2007, p. 19). The chaparral plant community, of which Arctostaphylos is an important member, is adapted to specific fire regimes that vary in different parts of California. In the San Francisco East Bay region, the current fire return interval is estimated at about 100 years (Keeley 2007, p. 20). Factors that affect the fire frequency in the San Francisco Bay area include a short fire season, moist climate, the local human population density, and changes in human behavior. Due to prevailing ocean winds and frequent fogs, the average relative humidity along the coast is moderate to high throughout the year. The exceptions typically occur in the fall, when changing prevailing weather patterns allow dry northeasterly winds from the State's interior to reduce humidity in the coastal area to around 20 percent, thereby creating dry and windy conditions that typify high fire danger (GGNRA 2005, pp. 136, 140).

Fire frequency in the San Francisco Bay area has varied substantially in the last several thousand years. Not only have the fire regimes changed with changing climate, fire regimes have changed as patterns of human utilization of the landscape have changed. Disturbances by fire occurred at long intervals in the prehuman period, then at shorter intervals during the late Native American and Spanish-Mexican periods, and at moderate intervals during the European settlement period. Fire disturbance intervals since the 1900s have generally returned to long intervals in the modern period due to active fire suppression (GGNRA 2005, pp. 144-147). The natural fire regime has been heavily altered by the urbanization of San Francisco and fragmentation of remaining undeveloped lands. Nearly all land within the City of San Francisco has been developed, with the exception of small, isolated parcels and undeveloped hilltops. Lands administered by NPS and the Presidio Trust are surrounded by other land uses, and are close to the wildland-urban boundary where landscape plants and nonnative plants contribute to vegetative buildup (GGNRA 2005, pp. 130-131) that can increase fire danger. Additionally, fire suppression over the last 100 years has led to an increase in crown and surface fuels, which contribute to high-intensity fires (GGNRA 2005, p. 147). In spite of the increased fire danger on these managed lands, they could eventually be identified as suitable for outplanting Arctostaphylos franciscana seedlings due to the limited amount of remaining habitat.

As stated above in the Species Information section above, Arctostaphylos franciscana is an obligate-seeding species and reproduces primarily from seed rather than from burls after a fire (Vasey 2010, p. 1). Two opposing types of changes in fire frequency can threaten chaparral species such as Arctostaphylos franciscana. First, “senescence risk” occurs when too little fire leads to the loss of a species dependent on fire for regeneration. The second, “immaturity risk,” is a threat primarily to obligate-seeding species such as A. franciscana. In this case, wildfires that occur too frequently may kill plants before they can reach reproductive maturity and produce seed (Keeley 2007, p. 18). Wildfire can substantially reduce the number of live seeds in the soil (Odion and Tyler 2002, p. 1). Odion and Tyler (2002 p. 1) found that a controlled burn in a 40-year-old stand of A. morroensis (Morro manzanita), a species also occurring in maritime chaparral, reduced the seedbank to 33 percent of that which had accumulated in the soil since the previous burn 40 years earlier. Three years after the burn, the new population of A. morroensis that had germinated from the seedbank was less than half the size of the original population (Odion and Tyler 2002, p. 1). Odion and Tyler (2002 p. 2) concluded that if viable seed densities in the soil are low because fires are too frequent to allow seeds to accumulate in the soil, the population may risk extinction.

The fire return interval for this general area, and, therefore, for Arctostaphylos franciscana, is currently approximately 100 to 125 years (Parker pers. comm., 2011; Vasey 2011a, p. 1). The long fire return interval is not thought to be a threat to the mature A. franciscana plant at the Presidio or to any seedlings likely to be outplanted on the Presidio in the future. Infrequent fire would allow the mature plant at the Presidio to produce seed and build up a sufficiently large seedbank to withstand seed loss from wildfire, and would allow the growth of outplantings in other suitable areas. However, if fire continues to be excluded from the plant's location at the Presidio and the fire return interval greatly exceeds the natural return interval, over time the loss of fire may also result in the loss of the mature plant and individual outplanted seedlings due to competition by other plants, including nonnative plants, that could encroach upon the manzanita.

Other aspects of the altered fire regime within the remaining undeveloped lands of San Francisco pose greater threats to the species. Alteration of the fire regime has led to an increase in crown and surface fuels in some areas, leading NPS fire planners to conclude that it is difficult to predict the effects of the changed fire regime, given the trend to warmer and drier climate conditions (Johnstone and Dawson, 2010, p. 4535; Madej et al. 2010, p. 24) and the relationship between climate and fire frequency (GGNRA 2005, pp. 147, 148). In the past, large fires have occurred within areas that are typically subject to maritime climatic conditions. Such fires include the 1923 Berkeley Fire, the October 1991 Oakland Fire (Keeley 2005, p. 286) that burned 607 ha (1,500 ac), the October 1995 fire at Point Reyes National Seashore that burned 4,999 ha (12,354 ac) (GGNRA 2005, p. 151), and the 1,133-ha (2,800-ac) 2009 Lockheed Fire north of the City of Santa Cruz (The Associated Press 2009). On the Presidio, fire history data show that 17 fires occurred between 2000 and 2009, with no fires in some years and as many as 5 fires in other years. All fires were contained at 0.04 ha (0.1 ac) or less (A. Forrestel, pers. comm., 2011a, 2011b). In the same period, approximately four wildfires occurred in the Marin Headlands, directly north of the Presidio across the Golden Gate, while recent fire history records for all areas of the GGNRA show the potential for larger wildfires in the maritime zone (GGNRA 2005, pp. 150-155).

Although the Presidio is located within a highly urbanized setting, substantial areas of open space within the Presidio itself and within the adjacent GGNRA lands contain an interspersed mixture of vegetative types, including native vegetation, landscaped grounds, and forest (GGNRA 2005, pp. 190-199; Presidio Trust 2011, unpaginated). Grasslands are now dominated by nonnative annual grasses and forbs, which burn with greater intensity and at a more rapid rate of spread than grasslands dominated by native species (GGNRA 2005, p. 192). According to a fire model prepared by the GGNRA, areas that they manage on the western and southwestern borders of Presidio Trust lands present a moderate and moderate-high fire hazard (GGNRA 2005, p. E-7). The altered fire regime may result in infrequent fires that burn larger and hotter than previously, with the potential for greater loss of the seedbank. Alternatively, the incidence of wildfire could increase, which would be detrimental to Arctostaphylos franciscana by killing mature plants, seedlings, and seeds in the seedbank. In obligate-seeding species, such as A. franciscana, fire normally kills the adult plants, which are then replaced by plants that germinate from seed in the soil seedbank. A wildfire that would kill the single wild A. franciscana plant would be an especially serious threat to the future of the species because no A. franciscana seedbank has been found in soil collected from the area beneath the wild plant (Young 2011, p. 1).

Impacts due to visitor use could harm the wild plant. The translocated wild plant has been planted in an active native plant management area that receives heavy public use, although it is protected from public access by a post and cable fence and is monitored (Chasse et al. 2009, pp. 20-28). The post and cable fence is placed along an adjacent trail so that people do not enter the immediate area around the plant; however, an event in which a visitor treads on the plant could result in damage to the wild plant. Over time, incremental damage could result in the decline of the plant. The fence appears to be effective, although its wire mesh has been bent either by employees and volunteers or by the general public crossing the fence (Estelle 2012b, p. 2). Presidio Trust staff has stated that, on a few occasions, volunteers and members of the general public have asked permission to visit and photograph the plant, and that volunteers who work with the plant have been requested to not disclose its location (Estelle 2012c, p. 1). As noted under Factor B, the Presidio Trust and NPS have made serious efforts not to reveal the location of Arctostaphylos franciscana because they are concerned that public knowledge of its location would attract large numbers of plant enthusiasts who may damage the A. franciscana and compact the soil (Thomas, pers. comm., 2011). If trampling of the A. franciscana occurs, the Presidio Trust could take three protective actions: a fence could be placed around the plant, interpretive signs could be placed near the plant, and volunteers or interns could be made available to talk to visitors (Thomas, pers. comm., 2012).

The wild Arctostaphylos franciscana plant may be susceptible to damage from soil compaction due to foot traffic. Roots grow into soil to maintain stability and extract water and nutrients; however, soil compaction increases the resistance of the soil to root penetration and thus diminishes the plant's ability to extract sufficient water and nutrients (Hammitt and Cole 1998, p. 52). Soil compaction also reduces water infiltration rates and soil aeration by collapsing the larger pores in the soil. Reduced soil oxygen levels from loss of soil pores also can impact root growth, which would further reduce water and nutrient uptake (Hammitt and Cole 1998, p. 52). Additionally, soil compaction has been found to cause considerable damage to mycorrhizal fungi in seedling roots (Waltert et al. 2002, p. 1). As noted in the Historical Distribution and Habitat section, most Arctostaphylos species form strong symbiotic associations with soil mycorrhizal fungi, which develop an external sheath surrounding the plant's roots. All water and nutrients pass through this sheath to the plant's roots rather than directly from the soil to the plant's roots (Chasse 2009, p. 12). Damage from soil compaction would not only impact the wild plant by reducing its ability to take up water and nutrients, but could also reduce the survival of seedlings near the wild plant.

Soil compaction also favors the growth of Phytophthora. Poor drainage resulting from compaction facilitates the dispersal of swimming zoospores that infect the host plant (Swiecki 2011, p. 2). Additionally, anaerobic (lack of oxygen) stress associated with saturated soil conditions increases the susceptibility of roots to Phytophthora infections (Swiecki 2011, p. 2).

The location of the Arctostaphylos franciscana plant within the Presidio is near common-use trails and an area available for private and public events. Threats to A. franciscana include damage from vandalism. Vandalism to trees was reported in the Presidio in the early 2000s (Thomas pers. comm. 2011). Severe vandalism was observed in Golden Gate Park, located approximately 1.5 mi (2.4 km) south of the Presidio, in summer 2010, when more than 40 trees and 30 rose bushes were destroyed by unknown persons for unknown reasons (Gordon 2010, unpaginated; King 2010, unpaginated). The post and cable fence that protects the wild A. franciscana plant is approximately 30 ft (9.1 m) from the plant and is not constructed to completely exclude visitors. In the unlikely event that vandalism occurs, the results could be serious because there is only one wild plant.

Chance events constitute a serious threat to Arctostaphylos franciscana. Because the known population of A. franciscana in the wild is currently limited to a single plant, the species is extremely vulnerable to stochastic events—normal but damaging environmental perturbations and catastrophes such as droughts, storm damage, disease outbreaks, and fires, from which large, wide-ranging populations can generally recover, but which may lead to extirpation of small, isolated populations (Gilpin and Soule 1986, pp. 25-31). The majority of the remaining habitat associated with A. franciscana occurs within rock outcrops on hilltops or slopes surrounded by development or along coastal cliffs. These areas, because of their limited size and proximity to developed areas, are more likely to experience inadvertent fire or environmental degradation (altered hydrologic regime; increased introduction of nonnative, invasive plants; and increased spread of disease). The nature of the habitat associated with A. franciscana (rock outcrops, thin soils, sloped or hilltop terrain) may also increase the effects of drought. By nature these habitats generally do not have the water-holding capacity of deeper soiled, level habitats. Because some of the remaining habitat associated with the species is along coastal bluffs or on hillsides, these areas may also be more susceptible to landslides or erosion during excessively wet precipitation events. As a result, we consider stochastic events to be of significant threat for this species.

Any new population that starts from the single wild plant is likely to have reduced genetic variation compared to historical populations. Even if the number of plants increases, it may not reverse the previous genetic loss, known as the bottleneck effect (Allendorf and Luikart 2007, p. 158). Bottlenecks generally have a greater and more lasting effect on the loss of genetic variation in species with slow growth rates (long-lived species with few offspring) (Allendorf and Luikart 2007, p. 133). The age of the single wild Arctostaphylos franciscana plant is estimated at 60 years, and no other A. franciscana plants or seedlings were found associated with the wild plant. Reduced genetic variation may result in the inability of future generations of the plant to adapt to changes in habitat, such as decrease in fog and increase in temperature (see Climate Change discussion above) or loss of pollinators (see discussion below). While Arctostaphylos franciscana may be capable of self-pollination, in general, self-pollination results in decreased genetic variation in the offspring of a plant (Allendorf and Luikart 2007, p. 123). Therefore, loss of genetic variation is expected if A. franciscana is dependent on self-pollination to produce seed. Based on the above discussion, we have determined that the loss of genetic variation is a significant threat for this species.

The wild plant is also threatened by the Allee effect, a decline in population growth rate due to declining plant density (Akçakaya et al. 1999, p. 86). For the wild Arctostaphylos franciscana plant, the Allee effect may result from a lack of other available A. franciscana plants with which to cross-pollinate and produce viable seed. The wild plant, the single remaining individual of its species in the wild, is currently dependent on its ability to self-pollinate, which may be limited, and the efforts of researchers and Presidio staff to provide additional plants of different genotypes (if they are proven to be A. franciscana ) from botanical garden specimens to cross-pollinate with the wild plant to produce new individuals and populations.

Suitable pollinators may be critical for seed production for this obligate-seeding species. If pollinators are absent, or present in insufficient numbers, there may be a lack of viable seeds to develop and maintain the seedbank. In a study of the effects of habitat fragmentation on a non-self-pollinating plant (Lennartsson 2002, pp. 3065, 3066, 3068), the author found that fragmented populations exhibited dramatically reduced seed set and population viability, both of which were caused by a reduction in the number of pollinators.

Pollinators have been observed on the wild A. franciscana plant; however, no surveys have been completed to identify the most important pollinators. The most frequent pollinators seen have been bees and bumblebees. Hummingbirds and butterflies have also been observed visiting the flowers, likely because few other plants are blooming during the winter months when A. franciscana blooms (Vasey, pers. comm. 2010). Although the loss of seed produced in a single year would not likely lead to the extirpation of the species, the continued reduction of the seed crop or dependence on self-pollination would reduce the seedbank, genetic variation, and the potential for population expansion.

Cultivars of Arctostaphylos franciscana are used in the commercial nursery trade. The cultivars (varieties of a plant produced and maintained by cultivation) are likely descended from some of the last wild A. franciscana plants known to exist in the 1940s, and are located in at least four botanical gardens (Chasse et al. 2009, pp. 7, 8). Because hybridization between diploid species of Arctostaphylos is well recognized (Chasse et al. 2009, p. 5), there is a good chance that many of these commercially available specimens have resulted from hybrid seed. Because of the threat of cross-pollination from hybrids or other species (Allendorf et al. 2001, pp. 613, 618-621), any propagation or reintroduction programs for A. franciscana must account for subsequent contamination of the A. franciscana gene pool. The conservation plan takes this into account by recommending that future outplantings of nursery-raised cuttings or seedlings of the recently discovered A. franciscana plant avoid areas that could facilitate cross-pollination (Chasse et al. 2009, p. 31). Appropriate outplanting areas will be determined by A. franciscana experts, in cooperation with NPS, the Presidio Trust, and the Golden Gate National Parks Conservancy (Chasse et al. 2009, p. 31). Although cross-pollination of the wild plant with hybrids and the production of hybrid seed is possible, we do not know if this is a substantial threat to the species.

Based on the best scientific and commercial information available, we consider that Arctostaphylos franciscana is negatively impacted by other natural or manmade factors affecting its continued existence which include changes in environmental conditions resulting from climate change, altered fire regime, soil compaction from visitor use, vandalism, loss of genetic diversity, loss of pollinators, stochastic events, effects of small population size, and hybridization. Cumulatively, we consider these threats to be significant and ongoing.

Some of the threats discussed in this finding could work with one another to cumulatively create situations that potentially impact Arctostaphylos franciscana beyond the scope of the individual threats we have already analyzed. In particular, climate change may exacerbate many of the threats discussed in this final rule. For example, warmer, drier conditions in the range of the species could result in not only less summer fog and increased water stress leading to plant death, but could also create more suitable conditions for infection by Phytophthora species and result in more fires. The loss of native habitat due to urban development within the range of A. franciscana has likely reduced pollinator nesting areas and numbers of native plants that provide nectar and pollen. Climate change could increase the loss of pollinators if the abundance of flowers preferred by pollinators decreases and the synchrony of bloom periods and pollinator emergence is disrupted. Although there currently are no data available regarding changes in plant bloom periods or emergence dates of pollinators in the Presidio in response to climate change, Forister and Shapiro (2003, p. 1130) found that over a period of 31 years warmer and drier winter conditions were associated with earlier butterfly appearance in the Central Valley of California. The ability of A. franciscana to self-pollinate may be limited (Parker 2011, p. 1); therefore, we expect that bumblebees, bees, and other insects are likely needed for A. franciscana to produce seed. Nitrogen enrichment of the soil from atmospheric deposition may encourage the growth of nonnative, invasive grasses in the vicinity of the wild plant. The grasses could, in turn, provide additional habitat for rodents such as California voles that feed on the wild plant.

We have carefully assessed the best scientific and commercial information available regarding past, present, and future threats to Arctostaphylos franciscana. The primary threat to A. franciscana is from the present or threatened destruction, modification, or curtailment of the species' habitat or range (Factor A). All original occupied habitat of the species has been lost, and its current range has been reduced to a single location that supports a single A. franciscana plant. The last wild plant was moved from its native habitat, which was subsequently destroyed during a highway construction project, and transplanted to natural habitat on the Presidio in San Francisco. Limited remaining suitable habitat is available to support a viable population of the species. Although greenstone and serpentine soils remain on the peninsula, the majority of this land has been fragmented and may be subject to edge effects and nitrogen deposition. Additionally, the possible transfer of Presidio lands to the GSA and the private sector may result in potential future loss of the plant or modification of its habitat.

Overutilization (Factor B) is a threat because the current known wild population consists of one individual plant, and Arctostaphylos plants are popular for landscaping and other horticultural purposes. Arctostaphylos franciscana is thus vulnerable to overcollection or damage if visitors harvest cuttings or seeds.

Disease and predation (Factor C).is also a threat to Arctostaphylos franciscana. Stress from transplanting the wild plant may have weakened the plant and made it more susceptible to disease and predation. The plant was heavily infested with a native leaf roller moth after being transplanted; however, the caterpillars and damaged foliage were removed and the plant has produced new foliage and flowers. Minor damage to Arctostaphylos franciscana branches from gnawing by California voles and other rodents has also been observed. Twig blight, a fungal infection, was observed on the plant during the winter of 2009-2010, but the infection subsided during the dry season. Infection by Phytophthora species, especially Phytophthora cinnamomi, is a serious and lethal problem among Arctostaphylos species in the wild and in the native plant nursery trade. Phytophthora cinnamomi cannot be controlled once introduced to a plant or habitat, and results in plant death. Many A. franciscana cuttings are being grown in commercial or university nurseries for outplanting with the wild plant. Although the use of clean propagation techniques has been requested by the staff in charge of the project, the risk of infection of the cuttings and wild plant by P. cinnamomi is still a threat. At least six other species of Phytophthora are also found south of the San Francisco peninsula and could be introduced into the vicinity of the wild plant. In addition, the pathogen that causes sudden oak death has been discovered in the Presidio; however, the threat of this disease to A. franciscana is likely not severe.

Existing regulatory mechanisms (Factor D) afford certain protections for Arctostaphylos franciscana because the plant is located on lands administered by NPS, GGNRA, and the Presidio Trust. However, as mentioned above, these protections are not specific to A. franciscana. Because no existing regulatory mechanisms exist specific to A. franciscana, we do not consider the existing regulatory mechanisms to be inadequate to protect the species.

Other natural or manmade factors affecting Arctostaphylos franciscana's continued existence (Factor E) include environmental effects resulting from climate change, alteration of the natural fire regime, soil compaction from visitor use, vandalism, loss of genetic diversity, stochastic events, small population size, loss of pollinators, and hybridization are also threats to this species. Changes in the climate are expected to include increased air temperature and reduced summer fog, both resulting in warmer and drier conditions to which the plant may be less well-adapted. Additionally, climate change may result in divergence between the timing of flowering of A. franciscana and the availability of suitable pollinators, negatively affecting the plant's ability to set seed. Climate change may also reduce pollinator species and numbers. Warming and drying of the plant's habitat would likely also increase the frequency of wildfire, which could result in death of the wild plant and its future seedlings if fire occurred before the plants were able to produce viable seeds. Loss of mature Arctostaphylos plants to fire is a natural phenomenon; however, this species is currently represented by a single mature plant. Therefore, to our knowledge, the loss of the plant would result in extinction of the species in the wild. Loss of genetic diversity has likely already occurred due to the reduction of the species to a single wild plant and is expected to continue because this generally outcrossing species will be limited to self-pollination. Reduced genetic diversity may also limit the species' ability to adapt to changes in habitat, such as those resulting from climate change or loss of pollinators. The species is extremely vulnerable to stochastic events such as droughts, storm damage, and fires, from which large wide-ranging populations can generally recover, but which would likely drive a species consisting of a single plant to extinction.

Based on our evaluation of the best available scientific and commercial information regarding the past, present, and future threats faced by Arctostaphylos franciscana, we have determined that the continued existence of A. franciscana is threatened by overutilization for commercial and recreational purposes, disease, and predation, climate change, alteration of the natural fire regime, soil compaction from visitor use, vandalism, loss of genetic diversity, stochastic events, small population size, loss of pollinators, and hybridization. Because the species faces these threats throughout its extremely limited range, we find that A. franciscana is in danger of extinction throughout its entire range and, therefore, it is unnecessary to analyze its status in any significant portion of its range.

The Act defines an endangered species as one that is in danger of extinction throughout all or a significant portion of its range. A threatened species is one that is likely to become an endangered species in the foreseeable future throughout all or a significant portion of its range. The species in the wild currently exists as a single plant on the San Francisco Presidio. Because the range of the species is restricted to a single plant, the risks presented by the threats discussed herein are more intensified than they would be were the species more widespread or numerous. Based on our evaluation of the best available scientific and commercial information, and given the current population size (one wild plant) and severely limited distribution throughout its historical range, we have determined the species is currently on the brink of extinction in the wild and therefore is in danger of extinction throughout all of its range. As a result, this species meets the definition of an endangered species under the Act. Because the species is in danger of extinction now due to its limited population size and the severity of existing threats, as opposed to in the foreseeable future, A. franciscana meets the definition of an endangered species rather than a threatened species. On the basis of our careful evaluation of the best available scientific and commercial information regarding the past, present, and future threats to the species as discussed above relative to the listing factors, we are listing Arctostaphylos franciscana as an endangered species throughout its range.

Conservation measures provided to species listed as endangered or threatened under the Act include recognition, recovery actions, requirements for Federal protection, and prohibitions against certain practices. Recognition through listing results in public awareness and conservation by Federal, State, and local agencies; private organizations; and individuals. The Act encourages cooperation with the States and requires that recovery actions be carried out for all listed species. The protection measures required of Federal agencies and the prohibitions against certain activities are discussed, in part, below.

Section 7(a) of the Act requires Federal agencies to evaluate their actions with respect to any species that is proposed or listed as endangered or threatened and with respect to its critical habitat, if any is designated. Regulations implementing this interagency cooperation provision of the Act are codified at 50 CFR part 402. Section 7(a)(4) of the Act requires Federal agencies to confer with the Service on any action that is likely to jeopardize the continued existence of a species proposed for listing or result in destruction or adverse modification of proposed critical habitat. If a species is listed subsequently, section 7(a)(2) of the Act requires Federal agencies to ensure that activities they authorize, fund, or carry out are not likely to jeopardize the continued existence of the species or destroy or adversely modify its critical habitat. If a Federal action may affect a listed species or its critical habitat, the responsible Federal agency must enter into formal consultation with the Service.

Federal agency actions within the species' habitat that may require conference or consultation or both, as described in the preceding paragraph, include land management, road construction, and any other landscape altering activities, such as invasive tree and plant removal, within the known range of the species or within any designated critical habitat.

The Act and its implementing regulations set forth a series of general prohibitions and exceptions that apply to endangered plants. All prohibitions of section 9(a)(2) of the Act, implemented by 50 CFR 17.61, apply. When this final rule becomes effective (see DATES section above), Arctostaphylos franciscana, the last wild specimen (including any plants propagated from the wild plant) and the botanical garden specimens (those plants previously collected from the wild and subsequently propagated), will be protected by all prohibitions of section 9(a)(2) of the Act, which protects listed plants in areas of Federal jurisdiction such as the Presidio. Plants that have been or are being sold in the nursery trade or have been transplanted into home gardens will not be considered part of the listed entity.

These prohibitions, in part, make it illegal for any person subject to the jurisdiction of the United States to import or export, transport in interstate or foreign commerce in the course of a commercial activity, sell or offer for sale in interstate or foreign commerce, or remove and reduce the species to possession from areas under Federal jurisdiction. In addition, for plants listed as endangered, the Act prohibits the malicious damage or destruction on areas under Federal jurisdiction and the removal, cutting, digging up, or damaging or destroying of such plants in knowing violation of any State law or regulation, including State criminal trespass law. Certain exceptions to the prohibitions apply to agents of the Service and State conservation agencies.

A rctostaphylos franciscana has not been listed by the State of California. Listing also requires Federal agencies to avoid actions that might jeopardize the species (16 U.S.C. 1536(a)(2)), and provides opportunities for funding of conservation measures and land acquisition that would not otherwise be available to them (16 U.S.C. 1534, 1535(d)).

We may issue permits to carry out otherwise prohibited activities involving endangered and threatened wildlife species under certain circumstances. Regulations governing permits are codified at 50 CFR 17.62 for endangered plants, and at 17.72 for threatened plants. With regard to endangered plants, a permit must be issued for the following purposes: for scientific purposes or for enhancing the propagation or survival of the species, and for take to to prevent undue economic hardship (see 50 CFR 17.63).

This rule does not contain any new collections of information that require approval by Office of Management and Budget (OMB) under the Paperwork Reduction Act. This rule will not impose recordkeeping or reporting requirements on State or local governments, individuals, businesses, or organizations. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.

We have determined that environmental assessments and environmental impact statements, as defined under the authority of the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq. ), need not be prepared in connection with regulations pursuant to section 4(a) of the Act. We published a notice outlining our reasons for this determination in the Federal Register on October 25, 1983 (48 FR 49244).

A complete list of all references cited in this rule is available on the Internet at http://www.regulations.gov or upon request from the Field Supervisor, Sacramento Fish and Wildlife Office (see ADDRESSES ).

The primary authors of this document are the staff members of the Sacramento Fish and Wildlife Office (see ADDRESSES ).

Accordingly, we amend part 17, subchapter B of chapter I, title 50 of the Code of Federal Regulations, as follows:

The Migratory Bird Treaty Act (MBTA) of July 3, 1918 (40 Stat. 755; 16 U.S.C. 703 et seq. ), authorizes and directs the Secretary of the Department of the Interior, having due regard for the zones of temperature and for the distribution, abundance, economic value, breeding habits, and times and lines of flight of migratory game birds, to determine when, to what extent, and by what means such birds or any part, nest, or egg thereof may be taken, hunted, captured, killed, possessed, sold, purchased, shipped, carried, exported, or transported.

In the August 16, 2012, Federal Register (77 FR 49680), we proposed special migratory bird hunting regulations for the 2012-13 hunting season for certain Indian tribes, under the guidelines described in the June 4, 1985, Federal Register (50 FR 23467). The guidelines respond to tribal requests for Service recognition of their reserved hunting rights, and for some tribes, recognition of their authority to regulate hunting by both tribal members and nonmembers on their reservations. The guidelines include possibilities for:

(1) On-reservation hunting by both tribal members and nonmembers, with hunting by nontribal members on some reservations to take place within Federal frameworks but on dates different from those selected by the surrounding State(s);

(2) On-reservation hunting by tribal members only, outside of usual Federal frameworks for season dates and length, and for daily bag and possession limits; and

(3) Off-reservation hunting by tribal members on ceded lands, outside of usual framework dates and season length, with some added flexibility in daily bag and possession limits.

In all cases, the regulations established under the guidelines must be consistent with the March 10-September 1 closed season mandated by the 1916 Migratory Bird Treaty with Canada. We have successfully used the guidelines since the 1985-86 hunting season. We finalized the guidelines beginning with the 1988-89 hunting season (August 18, 1988, Federal Register [53 FR 31612]).

In the April 17, 2012, Federal Register (77 FR 23094), we requested that tribes desiring special hunting regulations in the 2012-13 hunting season submit a proposal including details on:

(a) Harvest anticipated under the requested regulations;

(b) Methods that would be employed to measure or monitor harvest (such as bag checks, mail questionnaires, etc.);

(c) Steps that would be taken to limit level of harvest, where it could be shown that failure to limit such harvest would adversely impact the migratory bird resource; and

(d) Tribal capabilities to establish and enforce migratory bird hunting regulations.

No action is required if a tribe wishes to observe the hunting regulations established by the State(s) in which an Indian reservation is located. On August 16, 2012, we published a proposed rule (77 FR 49680) that included special migratory bird hunting regulations for 30 Indian tribes, based on the input we received in response to the April 17, 2012, proposed rule. All the regulations contained in this final rule were either submitted by the tribes or approved by the tribes and follow our proposals in the August 16 proposed rule.

Although the August 16 proposed rule included generalized regulations for both early- and late-season hunting, this rulemaking addresses only the early-season proposals. Therefore, it includes information for only 21 tribes. The letter designations for the paragraphs pertaining to each tribe in this rule are discontinuous because they follow the letter designations for the 30 tribes discussed in the August 8 proposed rule, which set forth paragraphs (a) through (dd). Late-season hunting will be addressed in late September. As a general rule, early seasons begin during September each year and have a primary emphasis on such species as mourning and white-winged doves. Late seasons begin about October 1 or later each year and have a primary emphasis on waterfowl.

Information on the status of waterfowl and information on the status and harvest of migratory shore and upland game birds, including detailed information on methodologies and results, is available at the address indicated under FOR FURTHER INFORMATION CONTACT or from our Web site at http://www.fws.gov/migratorybirds/NewsPublicationsReports.html.

For the 2012-13 migratory bird hunting season, we proposed regulations for 30 tribes and/or Indian groups that followed the 1985 guidelines. Only 26 tribes were considered appropriate for final rulemaking because we did not receive proposals from 4 of the tribes for whom we had proposed regulations. Some of the tribal proposals had both early- and late-season elements. However, as noted earlier, only those with early-season proposals are included in this final rulemaking; 21 tribes have proposals with early seasons. The comment period for the proposed rule, published on August 16, 2012, closed on August 27, 2012. Because of the necessary brief comment period, we will respond to any comments on the proposed rule and/or these regulations postmarked by August 27, but not received prior to final action by us, in the September late-season final rule. At this time, we have received three comments.

We received two comments on GLIFWC's initial proposal from the State of Wisconsin and the Mississippi Flyway Council (MFC). We also received a subsequent comment from the GLIWFC in response to our August 16 proposed rule.

The State of Wisconsin, Department of Natural Resources (WIDNR) and MFC noted the long history of working cooperatively with GLIFWC and individual tribes in the conservation of Wisconsin's waterfowl and wetland resources. However, WIDNR and MFC believed the most significant problem with the GLIFWC proposal was the request to allow tribal members to hunt with the use of electronic calls for ducks and geese within the ceded territory. WIDNR and MFC believe that, since the ceded territory covers one-third of the State of Wisconsin, one-half of the State of Michigan, significant areas of Minnesota, and significant areas of public hunting grounds and waters in those States, the use of electronic calls by tribal hunters would put any nontribal hunters in violation of the law when hunting in these areas. Thus, GLIFWC's proposal would, in effect, close public lands to hunting, increase conflicts among the hunting public, and create a safety concern and an unmanageable law enforcement environment. WIDNR and MFC also opposed the extension of shooting hours to 60 minutes past sunset and removing species restrictions from the daily bag limit because of safety and resource concerns. WIDNR and MFC also believe that GLIFWC's proposal to remove all species restrictions in hunting regulations fails to recognize the different status and regulations of each species and as such is inconsistent with established cooperative management practices. WIDNR and MFC believe that management decisions could not be honored without species-level restrictions. WIDNR and MFC believe that a tribal tundra swan hunting season in the ceded territory should not be implemented in 2012 because additional biological evaluation and harvest planning should be conducted, especially in light of the trumpeter swan issues. WIDNR asks that the same criteria of not implementing duck hunting seasons prior to September 15 because of impacts to breeding ducks in Wisconsin be applied to tribal seasons as well. WIDNR also opposes the tribes being exempt from decoy restrictions.

GLIWFC reiterated that their proposal was consistent with their underlying treaty rights and values, and that their proposals were biologically sound and culturally appropriate. More specifically, they proposed allowing the use of electronic calls for geese from September 1 to 21, and for ducks from September 4 to 21 in the 1837 and 1842 Treaty areas. They stated that the proposed revision to their initial proposal would minimize any user conflicts since waterfowl seasons in Michigan, Minnesota, and Wisconsin are closed. They also offered to conduct a post-season harvest survey on the use of and harvest associated with electronic calls.

Regarding expanded shooting hours, GLIFWC proposed to extend shooting hours from 45 minutes before sunrise to 45 minutes after sunset, a reduction of 15 minutes from their initial proposal. They stated that this proposal was consistent with other Service-approved tribal proposals (69 FR 53990; September 3, 2004) and was consistent with recent changes in Wisconsin allowing the harvest of wolves at night.

GLIWFC also proposed changes to the swan hunting proposal. They requested the establishment of an experimental season in Ashland, Bayfield, Forest, and Oneida Counties in Wisconsin with a 2-bird daily bag limit, mandatory registration, and carcass verification.

Lastly, GLIFWC proposed to correct an oversight in the initial season proposal pertaining to mergansers and woodcock seasons. They amended the proposed season opening dates in the 1836 Treaty area for both species from September 4, rather than September 15.

Service Response: The GLIFWC 2012 proposal, and subsequent proposed revisions, had several significant changes from regulations approved last season. In the 1837 and 1842 Treaty Areas, the GLIFWC proposal would allow the use of electronic calls in September; would extend shooting hours by 15 minutes in both the morning and the evening to 45 minutes before sunrise and 45 minutes after sunset; would increase the daily bag limits to 50 ducks and remove all species restrictions within the daily bag limit for ducks; would allow the first harvest of sandhill cranes and tundra swans; would open the season (other than for geese) on September 4; and would remove restrictions for decoy use in Wisconsin. In the 1836 Treaty Area, the GLIFWC proposal would remove all species restrictions within the daily bag limit for ducks.

GLIFWC states that the regulatory changes are intended to provide tribal members a harvest opportunity within the scope of rights reserved in their various treaties and increase tribal subsistence harvest opportunities, while protecting migratory bird populations. Under the GLIFWC proposed regulations, GLIFWC expects total ceded territory harvest to be approximately 1,575 ducks, 300 geese, 50 sandhill cranes, and 50 tundra swans, which is roughly similar to anticipated levels in previous years for those species for which seasons were established. GLIWFC further anticipates that tribal harvest will remain low given the small number of tribal hunters and the limited opportunity to harvest more than a small number of birds on most hunting trips.

Recent GLIFWC harvest surveys (1996-98, 2001, 2004, 2007-08, and preliminary 2011) indicate that tribal off-reservation waterfowl harvest has averaged less than 1,050 ducks and 200 geese annually. In the latest survey year for which we have specific results (2004), an estimated 53 hunters took an estimated 421 trips and harvested 645 ducks (1.5 ducks per trip) and 84 geese (0.2 geese per trip). Analysis of hunter survey data over 1996-2004 indicates a general downward trend in both harvest and hunter participation.

Many of the components of the GLIFWC proposal are acceptable to the Service and are adopted in this rule. However, a number of the components are not in the best interest of the conservation of migratory birds. More specific discussion follows below.

As we stated last year (76 FR 54676, September 1, 2011), the issue of allowing electronic calls and other electronic devices for migratory game bird hunting has been highly debated and highly controversial over the last 40 years, similar to other prohibited hunting methods such as baiting. Electronic calls, i.e. , the use or aid of recorded or electronic amplified bird calls or sounds, or recorded or electrically amplified imitations of bird calls or sounds to lure or attract migratory game birds to hunters, was Federally prohibited in 1957 because of its effectiveness in attracting and aiding the harvest of ducks and geese and is generally not considered a legitimate component of hunting. In 1999, after much debate, the migratory bird regulations were revised to allow the use of electronic calls for the take of light geese (lesser snow geese and Ross geese) during a light-goose-only season when all other waterfowl and crane hunting seasons, excluding falconry, were closed (64 FR 7507, February 16, 1999; 64 FR 71236, December 20, 1999; and 73 FR 65926, November 5, 2008). The regulations were subsequently changed also in 2006 to allow the use of electronic calls for the take of resident Canada geese during Canada-goose-only September seasons when all other waterfowl and crane seasons, excluding falconry, were closed (71 FR 45964, August 10, 2006). In both instances, these changes were made in order to significantly increase the take of these species for population management due to either serious population overabundance, or depredation issues, or public health and safety issues, or both.

Available information from the use of additional hunting methods, such as electronic calls, during the special light-goose seasons indicate that total harvest increased approximately 50-69 percent. On specific days when light-goose special regulations were in effect, the mean light goose harvest increased 244 percent. One research study found that lesser snow goose flocks were 5.0 times more likely to fly within gun range (≤50 meters) in response to electronic calls than to traditional calls and the mean number of snow geese killed per hour per hunter averaged 9.1 times greater for electronic calls than for traditional calls. While these results are only directly applicable to light geese, we believe these results are applicable to most waterfowl species, and indicative of some likely adverse harvest impacts on other geese and ducks.

Removal of the electronic call prohibition would be inconsistent with our long-standing conservation concerns. Given available evidence on the effectiveness of electronic calls, and the large biological uncertainty surrounding any widespread use of electronic calls, we believe the potential for overharvest could contribute to long-term population declines. Further, migratory patterns, distribution, and localized abundance of migratory birds could be affected and it is possible that hunter participation could increase beyond GLIFWC's estimates (50 percent) and could result in additional conservation impacts, particularly on local breeding populations. Thus, we do not support allowing the use of electronic calls in the 1837 and 1842 Treaty Areas.

Additionally, given the fact that tribal waterfowl hunting covered by this proposal would occur on ceded lands that are not in the ownership of the Tribes, we believe the use of electronic calls to take waterfowl would lead to confusion on the part of the public, wildlife-management agencies, and law enforcement officials in implementing the requirements of 50 CFR part 20. Restricting the proposal to September 4-21 does not alleviate these concerns. Similar to the impacts of baiting, uncertainties concerning the zone of influence attributed to the use of electronic calls could potentially increase harvest from nontribal hunters operating within areas electronic calls are being used, or were used, thereby posing risks to the migratory patterns and distribution of migratory waterfowl.

Lastly, we remind GLIFWC that electronic calls are permitted for the take of resident Canada geese during Canada-goose-only September seasons when all other waterfowl and crane seasons are closed. In the case of GLIFWC's proposed seasons, electronic calls could only be used September 1-3 for resident Canada geese (as GLIFWC's duck and crane season begins September 4, as they proposed). This specific regulatory change was implemented in 2006 in order to significantly control resident Canada geese due to widespread population overabundance, depredation issues, and public health and safety issues..

Normally, shooting hours for migratory game birds are one-half hour before sunrise to sunset. A number of reasons and concerns have been cited for extending shooting hours past sunset. Potential impacts to some locally breeding populations ( e.g. , wood ducks), hunter safety, difficulty of identifying birds, retrieval of downed birds, and impacts on law enforcement are some of the normal concerns raised when discussing potential expansions of shooting hours. However, despite these concerns, in 2007, we supported the expansion of shooting hours by 15 minutes after sunset in the 1837, 1842, and 1836 Treaty Areas (72 FR 58452, October 15, 2007). We had previously supported this expansion in other tribal areas and have not been made aware of any wide-scale problems. At that time, we further believed that the continuation of a specific species restriction within the daily bag limit for mallards, and the implementation of a species restriction within the daily bag limit for wood ducks, would allay potential conservation concerns for these species. We supported the increase with the understanding that we would need to closely monitor tribal harvest through either GLIFWC's own increased harvest surveys or GLIFWC's assisting the Service to survey tribal hunters.

Last year, in deference to tribal traditions and in the interest of cooperation, we approved shooting 30 minutes after sunset (an extension of 15 minutes from the then-current 15 minutes after sunset) (76 FR 54676, September 1, 2011). This was consistent with other Tribes in the general area (Fond du Lac, Leech Lake, Oneida, Sault Ste Marie, and White Earth). Extending shooting hours on both the front end and the back end of the day to 45 minutes before sunrise and 45 minutes after sunset as GLIWFC has proposed would be contrary to public safety and only heightens our previously identified concerns. It is widely considered dark 45 minutes after sunset (and 45 minutes before sunrise), and we see no viable remedies to allay our concerns. Shooting this early or late would also significantly increase the potential take of non-game birds. Thus, we cannot support increasing the shooting hours by 15 minutes in the 1837 and 1842 Treaty Areas (to 45 minutes before sunrise and 45 minutes after sunset).

Regarding GLIFWC's comments concerning our consistency with other previous tribal proposals and recent changes in Wisconsin wolf hunting regulation, we note that the referenced approval of shooting hours 45 minutes after sunset was for on-reservation hunting only at Sokaogon Chippewa Community in Cranston, Wisconsin. Ceded lands were not part of the Sokaogon's proposal or our approval. Lastly, we view the State of Wisconsin's allowance for the hunting of wolves at night as a State prerogative and not germane to the hunting of migratory birds (to improve public safety, the Wisconsin Department of Natural Resources has imposed additional restrictions for night wolf hunting to include: (1) Using bait or predator call ,which the Service prohibits for waterfowl; and (2) from a stationary position). We also note that 29.185(6)(d) (published April 16, 2012) limits wolf night hunting until after the close of the deer season for safety concerns. This new State allowance does not alleviate our previously identified concerns.

Based on the proposed increased daily bag limits (from 30 to 50 ducks per day in the 1837 and 1842 Treaty Areas), GLIFWC is estimating a relatively small additional duck harvest (1,050 to 1,575 ducks). While it is possible that hunter participation and harvest could increase beyond their estimates (50 percent), we do not anticipate such an increase given their relatively small average daily harvest (2.2 ducks per day) and the GLIWFC proposals we are adopting. Further, GLIFWC reports that the largest number of ducks reportedly harvested in a single day was 20. Thus, we do not anticipate any large-scale harvest shifts or significant biological conservation impacts with GLIFWC's proposal. However, we also note that GLIFWC's own dated harvest data indicates that present daily bag limits do not appear to be a hindrance or limiting factor for Tribal harvest, and increasing the daily bag limit to 50 ducks from the present 30-duck daily bag limit would be far in excess of anything we currently have experience with regarding tribal migratory bird hunting regulations. We further note that in 2007, in an effort to obtain the necessary information, we implemented a pilot expansion of the daily bag limit for ducks to 30 birds per day in the 1837 and 1842 Treaty Areas. We supported this change with the understanding that we would need to closely monitor tribal harvest through either GLIFWC's own increased harvest surveys or GLIFWC's assisting the Service to survey tribal hunters. We have reiterated our request over the past several years for GLIFWC to continue their current harvest survey based on our implementation of this pilot bag limit increase for ducks in the 1837 and 1842 Treaty Areas in 2007, particularly for species such as mallards, the bag limits for which were subsequently significantly increased in 2008 (from 10 to 30 per day). To date, we have not been presented with any new final reports since the 2008 harvest survey results.

In Wisconsin, State law requires that decoys may not be placed more than an hour before legal shooting hours or left out more than 20 minutes after legal shooting hours. As we stated last year concerning a similar decoy restriction in Michigan (76 FR 54676, September 1, 2011), while we believe that there may be safety concerns with elimination of such a restriction, we take no position on the relative need or lack of need for such a restriction. Other than regulations on National Wildlife Refuges and other Federal lands, there are no Federal restrictions requiring the removal of unattended decoys.

Additionally, given the fact that tribal waterfowl hunting covered by this rule would occur on ceded lands that are not in the ownership of the Tribes, we believe the use of unattended decoys to “reserve” hunting areas in public waters ( i.e. , those lands in the ceded territories outside of lands directly controlled by the Tribes) could lead to confusion and frustration on the part of the public, hunters, wildlife-management agencies, and law enforcement officials due to the inherent difficulties of different sets of hunting regulations for different areas and groups of hunters. However, we view this issue as a Tribal-State issue, and the Service takes no position on it in this rule.

We have several concerns with GLIFWC's proposal to remove all species restrictions within the overall duck daily bag limits in the 1837 and 1842 Treaty Areas. We have a number of duck species that are either showing long-term downward population trends (pintails and black ducks), or other species for which an increased daily bag limit of 50 birds per day could potentially have conservation impacts (scaup, canvasbacks), particularly on locally breeding ducks (mallards and wood ducks). Overharvest of these species in localized areas due to removal of species restrictions could contribute to long-term declines. However, while we believe the proposal to eliminate all species restrictions within the daily bag limit for ducks could potentially have resource conservation impacts on locally breeding duck populations, and would prefer not to implement such a change at this time, we are willing to remove the restrictions for tribal harvest in the 1836, 1837, and 1842 ceded areas. As we stated last year regarding the removal of possession limits (76 FR 54676, September 1, 2011), we make this change with some trepidation. However, we see no significant conservation implications given the relatively small numbers of tribal hunters, and in the interest of our long-term relationship with GLIWFC and the high importance GLIWFC has placed on this issue, we would agree with this important change. We note that, should resource conservation impacts be discovered, or should a particular species” population status warrant action, we would expect that the lack of species restrictions would be revisited and adjusted accordingly, especially if a particular species warranted a nationwide closed season ( e.g. , canvasbacks).

The Migratory Bird Treaty allows the hunting of migratory game birds beginning September 1. Generally, we have tried to guide Tribes to select an opening date for duck hunting of no earlier than September 15. This guidance is based on our concern that hunting prior to September 15 significantly increases the potential for taking ducks that have not yet fully fledged (normally the result of late-nesting or renesting hens) or species misidentification due to the fact that some species and/or sexes are not yet readily distinguishable. While these impacts primarily concern locally breeding ducks, the potential does exist for the take of molt migrants, i.e. , birds that have specifically migrated to an area to complete the molting process. We would prefer that GLIFWC adhere to this guidance and would prefer not to implement such a change at this time. However, we see no significant conservation implications given the relatively small numbers of tribal hunters and are willing to allow GLIFWC to begin the duck season on September 4 in the 1836, 1837, and 1842 ceded areas. We are implementing this change in the interest of our long-term relationship with GLIWFC and the understanding that if significant conservation impacts are discovered, we would adjust the duck season opening date accordingly.

We have no objections to the establishment of a sandhill crane season in the 1837 and 1842 Treaty Areas. We note that at least one other Tribe currently has a sandhill crane season (see (c) Fond du Lac Band of Lake Superior Chippewa in Minnesota elsewhere in this rule) and another proposed establishing a new season this year (see (d) Grand Traverse Band of Ottawa and Chippewa in Michigan elsewhere in this rule). All cranes in these current and new hunt areas are Eastern Population (EP) sandhill cranes. EP sandhill cranes rebounded from near extirpation in the late 1800s to more than 30,000 cranes by 1996. As of last year, the current 3-year average population index for EP cranes was 51,217 cranes. As a result of this rebound and their continued range expansion, the Atlantic and Mississippi Flyway Councils developed a cooperative management plan for this population, and criteria were developed describing when hunting seasons could be opened. The State of Kentucky held its first hunting season on this population in 2011-12 and harvested 50 cranes. Further, allowance for Tribal harvest is specifically considered in the EP plan.

GLIFWC estimates that no more than 50 cranes will be harvested during the season. We note that two cranes were harvested last year in the inaugural Fond du Lac sandhill crane season. We support the establishment of GLIFWC's new sandhill crane season. However, given the need to closely monitor the harvest of this species, we requested that GLIFWC implement either a special crane harvest tag or crane harvest reporting system/survey to track crane harvest, similar to that implemented by Fond du Lac last year, and requested of Grand Traverse this year (see (d) Grand Traverse Band of Ottawa and Chippewa Indians in Michigan elsewhere in this rule).

As we stated with sandhill cranes, we are not opposed to the establishment of a tundra swan season in Wisconsin. However, unlike the sandhill crane issue, the establishment of a new tundra swan season in the ceded territory areas in question involves several significant concerns and special considerations. We believe these concerns need further study and consideration before any implementation of a new tundra swan season in the ceded territories.

First, the GLIFWC proposed areas in question are also home to trumpeter swans. Many cooperators, including GLIFWC, worked together to reestablish a breeding trumpeter swan population in the Great Lakes. These efforts have been largely successful with the removal of this species from the Wisconsin endangered species list in 2009. After a 25-year recovery program, there are currently about 200 breeding pairs in Wisconsin. However, it is very difficult to distinguish between tundra and trumpeter swans unless swans vocalize in flight. We have significant concerns over the accidental harvest of trumpeter swans by tribal hunters hunting during a tundra swan season. Further, within Wisconsin, the northern ceded territory is an area of high trumpeter swan use containing over 80 percent of the breeding pairs. We believe such areas should be avoided either temporally or geographically to the extent possible. When a hunting season on tundra swans is ultimately implemented, we believe it would be best to focus hunting efforts on the primary tundra swan migration concentration areas while avoiding areas of significant trumpeter swan numbers. Unfortunately, most such areas are located outside of the ceded territories of northern Wisconsin.

In addition to the concerns about potential impacts to trumpeter swans, we believe it is imperative that any tribal tundra swan hunting proposal follow the Eastern Population of tundra swans management plan including a quota permit system and harvest reporting. The EP tundra swan management plan was cooperatively developed by the Atlantic, Central, and Mississippi Flyway Councils in 2007 and guides the management and harvest of EP tundra swans.

While we appreciate GLIFWC's proposed revisions to their initial tundra swan season proposal (area restrictions, mandatory registration, and carcass verification), we continue to believe that a tribal tundra swan hunting season in the ceded territory should not be implemented this year. Given that all these concerns can be worked through over the next year, we do not believe that implementation of a tundra swan season next season is unrealistic. We note that both the Service and the State wildlife agencies have considerable trumpeter swan information that would be helpful in conducting additional biological evaluation and harvest planning and are available to work with GLIFWC on resolution of these issues. We would prefer that all these issues be carefully considered and resolved by all involved parties to ensure that whatever action permitted for tundra swans in the future is not detrimental to trumpeter swans. We encourage GLIFWC to contact the Service early next year to cooperatively work through the issues involved with implementing a tundra swan season in the ceded territories.

As we stated regarding the earlier duck season opening date, while we would prefer that GLIFWC not implement such a change at this time, we see no significant conservation implications given the relatively small numbers of tribal hunters and are willing to allow GLIFWC to begin both the merganser and woodcock seasons on September 4 in the 1836 Treaty ceded areas. We are implementing this change in the interest of our long-term relationship with GLIWFC and the understanding that if significant conservation impacts are discovered, we would adjust the season opening dates accordingly.

NEPA considerations are covered by the programmatic document “Final Supplemental Environmental Impact Statement: Issuance of Annual Regulations Permitting the Sport Hunting of Migratory Birds (FSES 88-14),” filed with the Environmental Protection Agency on June 9, 1988. We published a notice of availability in the Federal Register on June 16, 1988 (53 FR 22582). We published our Record of Decision on August 18, 1988 (53 FR 31341). In addition, an August 1985 environmental assessment entitled “Guidelines for Migratory Bird Hunting Regulations on Federal Indian Reservations and Ceded Lands” is available from the address indicated under the caption FOR FURTHER INFORMATION CONTACT .

In a notice published in the September 8, 2005, Federal Register (70 FR 53376), we announced our intent to develop a new Supplemental Environmental Impact Statement (SEIS) for the migratory bird hunting program. Public scoping meetings were held in the spring of 2006, as detailed in a March 9, 2006, Federal Register (71 FR 12216). We released the draft SEIS on July 9, 2010 (75 FR 39577). The draft SEIS is available either by writing to the address indicated under FOR FURTHER INFORMATION CONTACT or by viewing our Web site at http://www.fws.gov/migratorybirds.

Section 7 of the Endangered Species Act, as amended (16 U.S.C. 1531-1543; 87 Stat. 884), provides that, “The Secretary shall review other programs administered by him and utilize such programs in furtherance of the purposes of this Act” (and) shall “insure that any action authorized, funded, or carried out * * * is not likely to jeopardize the continued existence of any endangered species or threatened species or result in the destruction or adverse modification of [critical] habitat. * * *.”

Consequently, we conducted formal consultations to ensure that actions resulting from these regulations would not likely jeopardize the continued existence of endangered or threatened species or result in the destruction or adverse modification of their critical habitat. Findings from these consultations are included in a biological opinion, which concluded that the regulations are not likely to jeopardize the continued existence of any endangered or threatened species. Additionally, these findings may have caused modification of some regulatory measures previously proposed, and the final frameworks reflect any such modifications. Our biological opinions resulting from this section 7 consultation are public documents available for public inspection at the address indicated under ADDRESSES .

Executive Order 12866 provides that the Office of Management and Budget's (OMB) Office of Information and Regulatory Affairs (OIRA) will review all significant rules. OIRA has determined that this rule is significant because it will have an annual effect of $100 million or more on the economy.

Executive Order 13563 reaffirms the principles of E.O. 12866 while calling for improvements in the Nation's regulatory system to promote predictability, to reduce uncertainty, and to use the best, most innovative, and least burdensome tools for achieving regulatory ends. The executive order directs agencies to consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public where these approaches are relevant, feasible, and consistent with regulatory objectives. E.O. 13563 emphasizes further that regulations must be based on the best available science and that the rulemaking process must allow for public participation and an open exchange of ideas. We have developed this rule in a manner consistent with these requirements.

An economic analysis was prepared for the 2008-09 season. This analysis was based on data from the 2006 National Hunting and Fishing Survey, the most recent year for which data are available (see discussion in Regulatory Flexibility Act section below). This analysis estimated consumer surplus for three alternatives for duck hunting (estimates for other species are not quantified due to lack of data). The alternatives are (1) Issue restrictive regulations allowing fewer days than those issued during the 2007-08 season, (2) Issue moderate regulations allowing more days than those in alternative 1, and (3) Issue liberal regulations identical to the regulations in the 2007-08 season. For the 2008-09 season, we chose alternative 3, with an estimated consumer surplus across all flyways of $205-$270 million. We also chose alternative 3 for the 2009-10 and the 2010-11 seasons. At this time, we are proposing no changes to the season frameworks for the 2012-13 season, and as such, we will again consider these three alternatives. However, final frameworks for waterfowl will be dependent on population status information available later this year. For these reasons, we have not conducted a new economic analysis, but the 2008-09 analysis is part of the record for this rule and is available at http://www.fws.gov/migratorybirds/NewReportsPublications/SpecialTopics/SpecialTopics.html#HuntingRegs or at http://www.regulations.gov at Docket No. FWS-R9-MB-2012-0005.

The annual migratory bird hunting regulations have a significant economic impact on substantial numbers of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). We analyzed the economic impacts of the annual hunting regulations on small business entities in detail as part of the 1981 cost-benefit analysis. This analysis was revised annually from 1990-95. In 1995, the Service issued a Small Entity Flexibility Analysis (Analysis), which was subsequently updated in 1996, 1998, 2004, and 2008. The primary source of information about hunter expenditures for migratory game bird hunting is the National Hunting and Fishing Survey, which is conducted at 5-year intervals. The 2008 Analysis was based on the 2006 National Hunting and Fishing Survey and the U.S. Department of Commerce's County Business Patterns, from which it was estimated that migratory bird hunters would spend approximately $1.2 billion at small businesses in 2008. Copies of the Analysis are available upon request from the Division of Migratory Bird Management (see ADDRESSES ) or from our Web site at http://www.fws.gov/migratorybirds/NewReportsPublications/SpecialTopics/SpecialTopics.html#HuntingRegs or at http://www.regulations.gov at Docket No. FWS-R9-MB-2012-0005.

This rule is a major rule under 5 U.S.C. 804(2), the Small Business Regulatory Enforcement Fairness Act. For the reasons outlined above, this rule will have an annual effect on the economy of $100 million or more. However, because this rule establishes hunting seasons, we are not deferring the effective date under the exemption contained in 5 U.S.C. 808(1).

We examined these regulations under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ). The various recordkeeping and reporting requirements imposed under regulations established in 50 CFR part 20, subpart K, are utilized in the formulation of migratory game bird hunting regulations. Specifically, OMB has approved the information collection requirements of our Migratory Bird Surveys and assigned control number 1018-0023 (expires 4/30/2014). This information is used to provide a sampling frame for voluntary national surveys to improve our harvest estimates for all migratory game birds in order to better manage these populations. A Federal agency may not conduct or sponsor and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number.

We have determined and certify, in compliance with the requirements of the Unfunded Mandates Reform Act, 2 U.S.C. 1502 et seq. , that this rulemaking will not impose a cost of $100 million or more in any given year on local or State government or private entities. Therefore, this rule is not a “significant regulatory action” under the Unfunded Mandates Reform Act.

The Department, in promulgating this rule, has determined that this rule will not unduly burden the judicial system and that it meets the requirements of sections 3(a) and 3(b)(2) of Executive Order 12988.

In accordance with Executive Order 12630, this rule, authorized by the Migratory Bird Treaty Act, does not have significant takings implications and does not affect any constitutionally protected property rights. This rule will not result in the physical occupancy of property, the physical invasion of property, or the regulatory taking of any property. In fact, this rule allows hunters to exercise otherwise unavailable privileges and, therefore, reduce restrictions on the use of private and public property.

Executive Order 13211 requires agencies to prepare Statements of Energy Effects when undertaking certain actions. While this rule is a significant regulatory action under Executive Order 12866, it is not expected to adversely affect energy supplies, distribution, or use. Therefore, this action is not a significant energy action and no Statement of Energy Effects is required.

In accordance with the President's memorandum of April 29, 1994, “Government-to-Government Relations with Native American Tribal Governments” (59 FR 22951), Executive Order 13175, and 512 DM 2, we have evaluated possible effects on Federally-recognized Indian tribes and have determined that there are no effects on Indian trust resources. However, in the April 17 Federal Register , we solicited proposals for special migratory bird hunting regulations for certain Tribes on Federal Indian reservations, off-reservation trust lands, and ceded lands for the 2012-13 migratory bird hunting season. The resulting proposals were contained in a separate August 16, 2012, proposed rule (77 FR 49680). By virtue of these actions, we have consulted with Tribes affected by this rule.

Due to the migratory nature of certain species of birds, the Federal Government has been given responsibility over these species by the Migratory Bird Treaty Act. We annually prescribe frameworks from which the States make selections regarding the hunting of migratory birds, and we employ guidelines to establish special regulations on Federal Indian reservations and ceded lands. This process preserves the ability of the States and tribes to determine which seasons meet their individual needs. Any State or Indian tribe may be more restrictive than the Federal frameworks at any time. The frameworks are developed in a cooperative process with the States and the Flyway Councils. This process allows States to participate in the development of frameworks from which they will make selections, thereby having an influence on their own regulations. These rules do not have a substantial direct effect on fiscal capacity, change the roles or responsibilities of Federal or State governments, or intrude on State policy or administration. Therefore, in accordance with Executive Order 13132, these regulations do not have significant federalism effects and do not have sufficient federalism implications to warrant the preparation of a federalism summary impact statement.

The rulemaking process for migratory game bird hunting must, by its nature, operate under severe time constraints. However, we intend that the public be given the greatest possible opportunity to comment. Thus, when the preliminary proposed rulemaking was published, we established what we believed were the longest periods possible for public comment. In doing this, we recognized that when the comment period closed, time would be of the essence. That is, if there were a delay in the effective date of these regulations after this final rulemaking, States and Tribes would have insufficient time to select season dates and limits; to communicate those selections to us; and to establish and publicize the necessary regulations and procedures to implement their decisions. We therefore find that “good cause” exists, within the terms of 5 U.S.C. 553(d)(3) of the Administrative Procedure Act, and these seasons will, therefore, take effect less than 30 days after the date of publication.

Accordingly, with each participating Tribe having had an opportunity to participate in selecting the hunting seasons desired for its reservation or ceded territory on those species of migratory birds for which open seasons are now prescribed, and consideration having been given to all other relevant matters presented, certain sections of title 50, chapter I, subchapter B, part 20, subpart K, are hereby amended as set forth below.

Accordingly, part 20, subchapter B, chapter I of title 50 of the Code of Federal Regulations is amended as follows: