I. Background

The Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit Card Act) was signed into law on May 22, 2009. Public Law 111-24, 123 Stat. 1734 (2009). The Credit Card Act primarily amended the Truth in Lending Act (TILA) and instituted new substantive and disclosure requirements to establish fair and transparent practices for open-end consumer credit plans.

The Credit Card Act added TILA section 127(n)(1), which states that “[i]f the terms of a credit card account under an open end consumer credit plan require the payment of any fees (other than any late fee, over-the-limit fee, or fee for a payment returned for insufficient funds) by the consumer in the first year during which the account is opened in an aggregate amount in excess of 25 percent of the total amount of credit authorized under the account when the account is opened,” then “no payment of any fees (other than any late fee, over-the-limit fee, or fee for a payment returned for insufficient funds) may be made from the credit made available under the terms of the account.” 15 U.S.C. 1637(n)(1).

On January 12, 2010, the Board of Governors of the Federal Reserve System (Board) issued a final rule implementing new TILA section 127(n) in 12 CFR 226.52(a). See 75 FR 7658, 7819 (Feb. 22, 2010) (January 2010 Final Rule). Section 226.52(a) limits the total amount of fees that a credit card issuer may require a consumer to pay with respect to an account to “25 percent of the credit limit in effect when the account is opened.” Id. Under the Board's January 2010 Final Rule, this limitation applied only during the first year after account opening. Id. This rule became effective on February 22, 2010. On April 8, 2011, the Board issued a final rule expanding § 226.52(a) to apply to fees the consumer is required to pay with respect to an account prior to account opening. 1 The change was based on the Board's understanding that certain credit card issuers were “requiring consumers to pay application or processing fees prior to account opening that, when combined with other fees charged to the account after account opening, exceed 25 percent of the account's initial credit limit.” 76 FR at 22977. The Board viewed this practice as “inconsistent with the intent of [TILA] [s]ection 127(n)(1) insofar as it alters the statutory relationship between the costs and benefits of opening a credit card account.” Id. The Board's change to § 226.52(a) was scheduled to become effective on October 1, 2011. Id. at 22948.

On July 20, 2011, a credit card issuer filed a lawsuit in the United States District Court for the District of South Dakota, alleging that the Board exceeded its authority by expanding § 226.52(a) to apply to fees the consumer is required to pay prior to account opening. See First Premier Bank v. U.S. Consumer Fin. Prot. Bureau, 819 F. Supp. 2d. 906 (D.S.D. Sept. 23, 2011). On July 21, 2011, the Board's rulemaking authority to implement the provisions of TILA transferred to the Bureau pursuant to sections 1061 and 1100A of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Public Law 111-203 (2010). 2 On August 5, 2011, the card issuer filed a motion for a preliminary injunction, asking the court to postpone the October 1, 2011 effective date with respect to the application of § 226.52 to fees paid prior to account opening. The district court granted the motion for a preliminary injunction on September 23, 2011. First Premier Bank, 819 F. Supp. 2d. at 923 (South Dakota litigation). As a result of the court's order, the portion of the Board's 2011 final rule applying § 226.52(a) to pre-account opening fees has not become effective.

On December 22, 2011, the Bureau published in the Federal Register an interim final rule to reflect its assumption of rulemaking authority over Regulation Z. 76 FR 79768 (Dec. 22, 2011). The interim final rule made only technical changes to Regulation Z, such as noting the Bureau's authority and renumbering Regulation Z as 12 CFR Part 1026. Accordingly, the provision addressed in this rulemaking and in the litigation discussed above is properly cited as 12 CFR 1026.52(a).

On April 12, 2012, the Bureau issued a proposal to amend 12 CFR 1026.52(a), and associated Official Interpretations, to provide that the fee limit of 25 percent of the credit limit in effect when the account is opened applies only during the first year after account opening. 77 FR 21875 (Apr. 12, 2012) (April 2012 Proposed Rule). The Bureau issued the April 2012 Proposed Rule to resolve the uncertainty created by the South Dakota litigation discussed above. The comment period closed on June 11, 2012.

In response to the April 2012 Proposed Rule, the Bureau received over 50 electronically submitted comments, as well as approximately 1,000 mailed form letters, prior to the comment closing date. The majority of the comment letters were submitted by members of the public, although the Bureau also received comments from industry, consumer advocacy groups, and the New York State Office of the Attorney General.

Many members of the public opposed the April 2012 Proposed Rule, arguing that amending 12 CFR 1026.52(a) would reduce protections for vulnerable consumers. Consumer advocates and the New York State Office of the Attorney General expressed similar views. Some of these commenters suggested that the Bureau pursue other means of limiting pre-account opening fees, such as writing additional rules, coordinating examination activities, or bringing enforcement actions. Industry representatives, however, supported the proposed rule as a more accurate implementation of the Credit Card Act and an effective way to resolve the current litigation.

The Bureau is issuing this final rule pursuant to its authority under TILA and the Dodd-Frank Act. Effective July 21, 2011, section 1061 of the Dodd-Frank Act transferred to the Bureau the “consumer financial protection functions” previously vested in certain other Federal agencies. The term “consumer financial protection functions” is defined to include “all authority to prescribe rules or issue orders or guidelines pursuant to any Federal consumer financial law, including performing appropriate functions to promulgate and review such rules, orders, and guidelines.”  3 TILA is a Federal consumer financial law. 4 Accordingly, effective July 21, 2011, except with respect to persons excluded from the Bureau's rulemaking authority by section 1029 of the Dodd-Frank Act, the authority of the Board to issue regulations pursuant to TILA transferred to the Bureau.

TILA, as amended by the Dodd-Frank Act, authorizes the Bureau to “prescribe regulations to carry out the purposes of [TILA].” Public Law 111-203, Section 1100A(2); 15 U.S.C. 1604(a). These regulations may contain such classifications, differentiations, or other provisions, and may provide for such adjustments and exceptions for any class of transactions, that in the Bureau's judgment are necessary or proper to effectuate the purpose of TILA, facilitate compliance with TILA, or prevent circumvention or evasion of TILA. Id.

The Bureau is amending § 1026.52(a) to provide that the limitation on credit card fees applies only during the first year after account opening. The Bureau is also amending the Official Interpretations of § 1026.52(a) to reflect this change and to correct a mathematical error present in the Board's Official Staff Interpretations, and now the Bureau's Official Interpretations, since the Board's January 2010 Final Rule.

The Bureau takes seriously the concerns raised by commenters, particularly with respect to the effect that the rule may have on vulnerable consumers. The Bureau believes, however, that the final rule is necessary to resolve the uncertainty created by the South Dakota litigation discussed above. The Bureau will continue to monitor the credit card market to determine if it should take further action to protect consumers, using one or more of its powers under TILA, the Credit Card Act, or the Dodd-Frank Act.

In developing the final rule, the Bureau has conducted an analysis of potential benefits, costs, and impacts, 5 and has consulted or offered to consult with the prudential regulators and the Federal Trade Commission, including regarding consistency with any prudential, market, or systemic objectives administered by such agencies.

The final rule provides that the limitation on credit card account fees in § 1026.52(a) applies only during the first year after account opening. Thus, once the final rule takes effect, fees that a consumer is required to pay prior to account opening are not subject to the limitation in § 1026.52(a).

The Bureau believes that the final rule may impose potential costs on consumers by permitting a creditor to collect fees that would have been disallowed under the Board's April 2011 Final Rule. Card issuers should benefit from clarification of the scope of § 1026.52(a), which will resolve any uncertainty created by the South Dakota litigation. The final rule also permits card issuers to collect fees that were previously prohibited. The Bureau does not expect the final rule to impose costs on card issuers or to cause a reduction in consumer access to credit. All methods of compliance under previous regulation remain available to card issuers. Thus, a card issuer who was previously in compliance with § 1026.52(a) need not take any additional action to remain so.

The final rule has no unique impact on insured depository institutions or insured credit unions with $10 billion or less in assets as described in section 1026 of the Dodd-Frank Act, nor does the final rule have a unique impact on rural consumers.

The Regulatory Flexibility Act (RFA) generally requires an agency to conduct an initial regulatory flexibility analysis (IRFA) and a final regulatory flexibility analysis (FRFA) of any rule subject to notice-and-comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities, including small businesses, small governmental units, and small not-for-profit organizations. 6 The RFA defines a “small business” as a business that meets the size standard developed by the Small Business Administration pursuant to the Small Business Act. 7 The Bureau also is subject to certain additional procedures under the RFA involving the convening of a panel to consult with small business representatives prior to proposing a rule for which an IRFA is required. 5 U.S.C. 609.

In the April 2012 Proposed Rule, the Bureau did not conduct an IRFA because the Bureau concluded that the proposed rule, if finalized, would not have a significant economic impact on any small entities. The Bureau reasoned that it did not expect the proposal to impose costs on card issuers because if the Bureau adopted the proposal as written, all previous methods of compliance would remain available to small entities. Thus, a small entity already in compliance need not take any additional action. The undersigned therefore certified that the proposed rule would not have a significant economic impact on a substantial number of small entities. 77 FR 21875, 21877 (Apr. 12, 2012). The Bureau did not receive comment with respect to this certification or its underlying reasoning.

The Bureau reiterates its previous conclusion that the overall effect of the final rule is to narrow the compliance obligations under § 1026.52(a) for card issuers and to give card issuers additional certainty about how to comply with § 1026.52(a). Accordingly, the undersigned certifies that this final rule will not have a significant economic impact on a substantial number of small entities.

The collection of information related to this final rule has been previously reviewed and approved by the Office of Management and Budget (OMB) in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) and assigned OMB Control Number 3170-0015 (Expiration Date 11/30/15). The Bureau determined that the April 2012 Proposed Rule would not impose any new recordkeeping, reporting, or disclosure requirements on covered entities or members of the public that would constitute collections of information requiring approval under the Paperwork Reduction Act, 44 U.S.C. 3501, et seq. The Bureau did not receive any comments regarding this conclusion, to which the Bureau adheres. The Bureau concludes that the final rule, which adopts the proposal in relevant respects, also imposes no new information collection requirements subject to the Paperwork Reduction Act.

With this final rule, card issuers subject to § 1026.52(a) will not have to comply with its fee limitations with respect to fees the consumer is required to pay prior to account opening. The Bureau believes that any burden associated with updating compliance under the final rule is already accounted for in the previously approved burden estimates associated with the collection in Regulation Z under the Board's January 2010 Final Rule. That rule imposed a similar limitation on fees. 8 Accordingly, for the reasons stated above, the Bureau estimates that there is no increase in the one-time or ongoing burden to comply with the requirements under § 1026.52(a).

The Bureau has a continuing interest in the public's opinions of its collections of information. At any time, comments regarding the burden estimate, or any other aspect of this collection of information, including suggestions for reducing the burden, may be sent to: Consumer Financial Protection Bureau, Attention: PRA Office, 1700 G Street NW., Washington, DC 20552, or by the internet to CFPB_Public_PRA@cfpb.gov .

For the reasons set forth in the preamble, the Bureau amends Regulation Z, 12 CFR part 1026, as set forth below:

On November 30, 2012, the FAA published in the Federal Register a notice of proposed rulemaking (NPRM) to amend Class E airspace for the West Union, IA, area, creating additional controlled airspace at George L. Scott Municipal Airport (77 FR 71361) Docket No. FAA-2011-1434. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received. Class E airspace designations are published in paragraph 6005 of FAA Order 7400.9W dated August 8, 2012, and effective September 15, 2012, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designations listed in this document will be published subsequently in the Order.

This action amends Title 14 Code of Federal Regulations (14 CFR) Part 71 by amending Class E airspace extending upward from 700 feet above the surface at George L. Scott Municipal Airport, West Union, IA. Decommissioning of the West Union non-directional beacon (NDB) at George L. Scott Municipal Airport has made reconfiguration necessary for standard instrument approach procedures and for the safety and management of Instrument Flight Rule (IFR) operations within a 6.4-mile radius of the airport.

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

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the U.S. Code. Subtitle 1, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it amends controlled airspace at George L. Scott Municipal Airport, West Union, IA.

The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1E, “Environmental Impacts: Policies and Procedures,” paragraph 311a. This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exist that warrant preparation of an environmental assessment.

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

On November 30, 2012, the FAA published in the Federal Register a notice of proposed rulemaking (NPRM) to amend Class E airspace for the Superior, WI, area, creating additional controlled airspace at Richard I. Bong Airport (77 FR 71363) Docket No. FAA-2012-0656. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received. Class E airspace designations are published in paragraph 6005 of FAA Order 7400.9W dated August 8, 2012, and effective September 15, 2012, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designations listed in this document will be published subsequently in the Order.

This action amends Title 14 Code of Federal Regulations (14 CFR) Part 71 by amending Class E airspace extending upward from 700 feet above the surface to ensure that required controlled airspace exists from the 6.7-mile radius of the airport to 12.2 miles southeast of the airport to contain aircraft executing new standard instrument approach procedures at Richard I. Bong Airport, Superior, WI. This action enhances the safety and management of IFR operations at the airport. Geographic coordinates of the airport are also updated to coincide with the FAA's aeronautical database.

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

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the U.S. Code. Subtitle 1, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it amends controlled airspace at Richard I. Bong Airport, Superior, WI.

The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1E, “Environmental Impacts: Policies and Procedures,” paragraph 311a. This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exist that warrant preparation of an environmental assessment.

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

On November 30, 2012, the FAA published in the Federal Register a notice of proposed rulemaking (NPRM) to amend Class E airspace for the Decorah, IA, area, creating additional controlled airspace at Decorah Municipal Airport (77 FR 71362) Docket No. FAA-2011-1433. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received. Class E airspace designations are published in paragraph 6005 of FAA Order 7400.9W dated August 8, 2012, and effective September 15, 2012, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designations listed in this document will be published subsequently in the Order.

This action amends Title 14 Code of Federal Regulations (14 CFR) part 71 by amending Class E airspace extending upward from 700 feet above the surface at Decorah Municipal Airport, Decorah, IA. Decommissioning of the Decorah NDB at Decorah Municipal Airport has made reconfiguration necessary for standard instrument approach procedures and for the safety and management of IFR operations at the airport.

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

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the U.S. Code. Subtitle 1, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it amends controlled airspace at Decorah Municipal Airport, Decorah, IA.

The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1E, “Environmental Impacts: Policies and Procedures,” paragraph 311a. This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exist that warrant preparation of an environmental assessment.

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

On November 30, 2012, the FAA published in the Federal Register a notice of proposed rulemaking (NPRM) to establish Class E airspace at Chase Industrial Airport, Beeville, TX (77 FR 71365) Docket No. FAA-2012-0821. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received. Class E airspace designations are published in paragraph 6005 of FAA Order 7400.9W dated August 8, 2012, and effective September 15, 2012, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designations listed in this document will be published subsequently in the Order.

This action amends Title 14 Code of Federal Regulations (14 CFR) Part 71 by establishing Class E airspace extending upward from 700 feet above the surface within a 6.8-mile radius of Chase Field Industrial Airport, Beeville, TX, to ensure that required controlled airspace exists to contain new standard instrument approach procedures at the airport. This action enhances the safety and management of IFR operations at the airport.

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

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the U.S. Code. Subtitle 1, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it establishes controlled airspace at Chase Field Industrial Airport, Beeville, TX.

The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1E, “Environmental Impacts: Policies and Procedures,” paragraph 311a. This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exist that warrant preparation of an environmental assessment.

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

On November 30, 2012, the FAA published in the Federal Register a notice of proposed rulemaking (NPRM) to amend Class E airspace for the Tecumseh, NE, area, creating additional controlled airspace at Tecumseh Municipal Airport (77 FR 71368) Docket No. FAA-2012-1098. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received. Class E airspace designations are published in paragraph 6005 of FAA Order 7400.9W dated August 8, 2012, and effective September 15, 2012, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designations listed in this document will be published subsequently in the Order.

This action amends Title 14 Code of Federal Regulations (14 CFR) Part 71 by establishing Class E airspace extending upward from 700 feet above the surface within a 6.3-mile radius of the airport to ensure that required controlled airspace exists to contain new standard instrument approach procedures at Tecumseh Municipal Airport, Tecumseh, NE. Controlled airspace enhances the safety and management of IFR operations at the airport.

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

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the U.S. Code. Subtitle 1, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it establishes controlled airspace at Tecumseh Municipal Airport, Tecumseh, NE.

The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1E, “Environmental Impacts: Policies and Procedures,” paragraph 311a. This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exist that warrant preparation of an environmental assessment.

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

This rule amends Title 14, Code of Federal Regulations, Part 97 (14 CFR part 97) by amending the referenced SIAPs. The complete regulatory description of each SIAP is listed on the appropriate FAA Form 8260, as modified by the National Flight Data Center (FDC)/Permanent Notice to Airmen (P-NOTAM), and is incorporated by reference in the amendment under 5 U.S.C. 552(a), 1 CFR part 51, and § 97.20 of Title 14 of the Code of Federal Regulations.

The large number of SIAPs, their complex nature, and the need for a special format make their verbatim publication in the Federal Register expensive and impractical. Further, airmen do not use the regulatory text of the SIAPs, but refer to their graphic depiction on charts printed by publishers of aeronautical materials. Thus, the advantages of incorporation by reference are realized and publication of the complete description of each SIAP contained in FAA form documents is unnecessary. This amendment provides the affected CFR sections and specifies the types of SIAP and the corresponding effective dates. This amendment also identifies the airport and its location, the procedure and the amendment number.

This amendment to 14 CFR part 97 is effective upon publication of each separate SIAP as amended in the transmittal. For safety and timeliness of change considerations, this amendment incorporates only specific changes contained for each SIAP as modified by FDC/P-NOTAMs.

The SIAPs, as modified by FDC P-NOTAM, and contained in this amendment are based on the criteria contained in the U.S. Standard for Terminal Instrument Procedures (TERPS). In developing these changes to SIAPs, the TERPS criteria were applied only to specific conditions existing at the affected airports. All SIAP amendments in this rule have been previously issued by the FAA in a FDC NOTAM as an emergency action of immediate flight safety relating directly to published aeronautical charts. The circumstances which created the need for all these SIAP amendments requires making them effective in less than 30 days.

Because of the close and immediate relationship between these SIAPs and safety in air commerce, I find that notice and public procedure before adopting these SIAPs are impracticable and contrary to the public interest and, where applicable, that good cause exists for making these SIAPs effective in less than 30 days.

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

Accordingly, pursuant to the authority delegated to me, Title 14, Code of Federal regulations, Part 97, 14 CFR part 97, is amended by amending Standard Instrument Approach Procedures, effective at 0901 UTC on the dates specified, as follows:

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

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

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

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

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

Accordingly, pursuant to the authority delegated to me, Title 14, Code of Federal Regulations, Part 97 (14 CFR part 97) is amended by establishing, amending, suspending, or revoking Standard Instrument Approach Procedures and/or Takeoff Minimums and/or Obstacle Departure Procedures effective at 0902 UTC on the dates specified, as follows:

Background

The Entity List (Supplement No. 4 to Part 744) notifies the public about entities that have engaged in activities that could result in an increased risk of the diversion of exported, reexported, or transferred (in-country) items to weapons of mass destruction (WMD) programs. Since its initial publication, grounds for inclusion on the Entity List have expanded to include activities sanctioned by the State Department and activities deemed contrary to the United States' national security or foreign policy interests, including terrorism-related activities and export control-related violations involving abuse of human rights. Certain exports, reexports, and transfers (in-country) to entities identified on the Entity List require licenses from BIS and are usually subject to a policy of denial. The availability of license exceptions in such transactions is very limited. The license review policy for each entity is identified in the License Review Policy column on the Entity List and the availability of license exceptions is published in the Federal Register notices adding persons to the Entity List. BIS places entities on the Entity List based on certain sections of part 744 (Control Policy: End-User and End-Use Based) of the EAR.

The ERC, composed of representatives of the Departments of Commerce (Chair), State, Defense, Energy and, where appropriate, the Treasury, makes all decisions regarding additions to, removals from, or other modifications to the Entity List. The ERC makes all decisions to add an entry to the Entity List by majority vote and all decisions to remove or modify an entry by unanimous vote.

This rule implements the decision of the ERC to add eighteen persons under nineteen entries to the Entity List on the basis of § 744.11 (License requirements that apply to entities acting contrary to the national security or foreign policy interests of the United States) of the EAR. The eighteen persons under nineteen entries consist of two entities in China, one entity in Germany, four entities in Hong Kong, one entity in Ukraine and eleven entities in the United Arab Emirates (U.A.E.). The ERC reviewed § 744.11(b) (Criteria for revising the Entity List) in making the determination to add these eighteen persons under nineteen entries to the Entity List. Under that paragraph, persons for whom there is reasonable cause to believe, based on specific and articulable facts, that the persons have been involved, are involved, or pose a significant risk of being or becoming involved in, activities that are contrary to the national security or foreign policy interests of the United States and those acting on behalf of such persons may be added to the Entity List. Paragraphs (b)(1)-(b)(5) of § 744.11 include an illustrative list of activities that could be contrary to the national security or foreign policy interests of the United States.

The eighteen persons under nineteen entries being added to the Entity List under this rule have been determined by the ERC to be involved in activities that are contrary to the national security or foreign policy interests of the United States. One of the persons being added to the Entity List under this rule, Ukrspetexport, is located in Ukraine. Ukrspetexport, Ukraine's state-owned arms trader, exported military equipment to a country on the State Department's State Sponsors of Terrorism List. Therefore, pursuant to § 744.11(b) of the EAR, the ERC determined that Ukrspetexport knowingly and willfully engaged in activities contrary to US national security and foreign policy interests.

The ERC has reasonable cause to believe that the one person being listed under Germany, Manufacturers Equipment Organization (MEO), a company headquartered in Germany, assisted other persons already listed on the Entity List, specifically Christof Schneider and Schneider GMBH, in transactions involving items subject to the EAR. Mr. Schneider and his company were listed on the Entity List in a Federal Register Notice published July 21, 2009 (74 FR 35797) as a result of a February 5, 2009 indictment stemming from unlawful attempted shipments to Iran of petrochemical equipment. The consignee on the recent transaction, in which MEO assisted Schneider, also had links to the Iranian petrochemical industry. Based on Schneider's notorious activities, MEO's participation with Schneider in the export of items subject to the EAR to Iranian interests has led the ERC to determine that MEO engaged in activities contrary to U.S. national security and foreign policy interests and poses a high risk of involvement in violations of the EAR.

The ERC also has reasonable cause to believe that eight of the persons being added under this rule, all listed under the U.A.E., Afsari General Trading LLC, Ghasem Afsari, Mohamad Javad, Moh Khoman, aBensa FZ LLC, Alex Ardalan, Next Gulf Trading LLC and Dr. Artush Parsi, actively engaged with Iran in the trade of items subject to the EAR and actively misled U.S. exporters and the U.S. Government in an attempt to disguise their illicit activities. Specifically, the above-referenced persons took the following actions: they portrayed themselves as the ultimate consignees for items subject to the EAR that, during subsequent end-use checks (EUCs) conducted by BIS Special Agents, could not be located, claimed to have purchased the items on behalf of customers who in fact did not exist, and claimed to have purchased the items on behalf of customers who denied any relationship with any of the eight persons. Based on their actions and their known connections to Iran, the ERC has determined that these persons are engaged in activities contrary to U.S. national security and foreign policy interests and pose a high risk of involvement in violations of the EAR.

The ERC further has reasonable cause to believe that three of the persons being listed under this rule, also located in the U.A.E., Liberty House Trading LLC, Hamid Rashed, and David Khayam, attempted to procure items subject to the EAR on behalf of entities in Iran that support the Iranian government's nuclear and missile programs. Additionally, these three persons actively misled U.S. exporters and the U.S. Government as to the true destination of those items. After refusing to allow BIS to conduct a post-shipment verification check (PSV), Liberty House Trading LLC began doing business under the name Baet Alhoreya Electronics Trading (Baet Alhoreya). BIS was eventually able to conduct a PSV at the offices of Baet Alhoreya, which was negative. Based on their actions, the ERC has determined that Liberty House, Baet Alhoreya and certain individuals employed by the company ( i.e., Hamid Rashed and David Khayam) are engaged in activities contrary to U.S. national security and foreign policy interests and pose a high risk of involvement in violations of the EAR.

Additionally, the ERC has reasonable cause to believe that the five persons being listed in six entries under China and Hong Kong, Giant Base Asia Limited, Jadeshine, Jadeshine Engineering HK Co, Jadeshine Engineering (HK) Co., and Jason Shuai, obtained a U.S.-origin laser system and provided it to the Chinese Academy of Launch Vehicle Technology (CALT), which is involved in the design, development or production of rocket systems for China. Pursuant to § 744.3(a)(3) of the EAR, a license is required for the shipment of any item subject to the EAR that will be used in the design, development or production of rocket systems by a Country Group D:4 country (including China). Therefore, based on their actions, the ERC has determined that these five persons are engaged in activities contrary to U.S. national security and foreign policy interests and pose a high risk of involvement in violations of the EAR.

Pursuant to § 744.11(b)(3) and (b)(5) of the EAR, the ERC determined that the above conduct raises sufficient concern that prior review of exports, reexports, or transfers (in-country) of items subject to the EAR involving these eighteen persons under nineteen entries being listed on the Entity List, and the possible imposition of license conditions or license denials, will enhance BIS's ability to prevent violations of the EAR. For the eighteen persons under nineteen entries being added to the Entity List, the ERC specified a license requirement for all items subject to the EAR and established a license application review policy of a presumption of denial. The license requirement applies to any transaction in which items are to be exported, reexported, or transferred (in-country) to such persons or in which such persons acts as purchaser, intermediate consignee, ultimate consignee, or end-user. In addition, no license exceptions are available for exports, reexports, or transfers (in-country) to the eighteen persons under nineteen entries being added to the Entity List.

This final rule adds the following eighteen persons under nineteen entries to the Entity List:

(1) Jadeshine,

(2) Jadeshine Engineering HK Co.,

(1) Manufacturers Equipment Organization (MEO), a.k.a. the following one alias:

(1) Giant Base Asia Limited,

(2) Jadeshine Engineering (HK) Co.,

(3) Jadeshine Engineering HK Co.,

(4) Jason Shuai, a.k.a. the following one alias:

(1) Ukrspetexport,

(1) aBensa FZ LLC, a.k.a. the following one alias:

(2) Afsari General Trading LLC,

(3) Alex Ardalan,

(4) David Khayam,

(5) Dr. Artush Parsi,

(6) Ghasem Afsari,

(7) Hamid Rashed,

(8) Liberty House Trading LLC, a.k.a. the following two aliases:

(9) Moh Khoman,

(10) Mohamad Javad,

(11) Next Gulf Trading LLC,

On the basis of a decision made by the ERC, in addition to the eighteen persons under nineteen entries described above, this rule amends one entry currently on the Entity List under Germany. The amendment provides two alternate addresses for this listed person, as follows:

(1) Christof Schneider,

This rule implements an ERC decision to remove one person, Atlas Electronic Systems, located in Canada, from the Entity List as a result of the person's successful request for removal. Based upon the review of the information provided in the removal request in accordance with § 744.16 (Procedure for requesting removal or modification of an Entity List entity), and after review by the ERC's member agencies, the ERC determined that Atlas Electronic Systems should be removed from the Entity List.

The ERC's decision to remove Atlas Electronic Systems took into account its cooperation with the U.S. Government, as well as its assurances of future compliance with the EAR. In accordance with § 744.16(c), the Deputy Assistant Secretary for Export Administration has sent written notification to Atlas Electronic Systems, informing it of the ERC's decision to remove them from the Entity List. This final rule implements the decision to remove the following person from the Entity List:

(1) Atlas Electronic Systems (AES),

The removal of the above-referenced entity on the basis of a § 744.16 removal request that was approved by the ERC, eliminates the existing license requirements in Supplement No. 4 to part 744 for exports, reexports, and transfers (in-country) to this entity. However, the removal of this entity from the Entity List does not relieve persons of other obligations under part 744 of the EAR or under other parts of the EAR. Neither the removal of an entity from the Entity List nor the removal of Entity List-based license requirements relieves persons of their obligations under General Prohibition 5 in § 736.2(b)(5) of the EAR which provides that, “you may not, without a license, knowingly export or reexport any item subject to the EAR to an end-user or end-use that is prohibited by part 744 of the EAR.” Additionally, this removal does not relieve persons of their obligation to apply for export, reexport, or in-country transfer licenses required by other provisions of the EAR. BIS strongly urges the use of Supplement No. 3 to part 732 of the EAR, “BIS's `Know Your Customer' Guidance and Red Flags,” when persons are involved in transactions that are subject to the EAR.

This rule also provides notice that the ERC has concluded annual reviews of the Entity List for entities located in five countries, in accordance with the procedures outlined in Supplement No. 5 to part 744 (Procedures for End-User Review Committee Entity List Decisions). The ERC has concluded its annual review for entities located in Afghanistan, Greece, India, Russia, and Ukraine. No changes are made to the Entity List as a result of these reviews. The changes from the annual review of the Entity List that are approved by the ERC are implemented in stages as the ERC completes its review of entities listed under different destinations on the Entity List.

Shipments of items removed from eligibility for a License Exception or export or reexport without a license (NLR) as a result of this regulatory action that were en route aboard a carrier to a port of export or reexport, on March 28, 2013, pursuant to actual orders for export or reexport to a foreign destination, may proceed to that destination under the previous eligibility for a License Exception or export or reexport without a license (NLR).

Although the Export Administration Act expired on August 20, 2001, the President, through Executive Order 13222 of August 17, 2001, 3 CFR, 2001 Comp., p. 783 (2002), as amended by Executive Order 13637 of March 8, 2013, 78 FR 16129 (March 13, 2013), and as extended by the Notice of August 15, 2012, 77 FR 49699 (August 16, 2012), has continued the Export Administration Regulations in effect under the International Emergency Economic Powers Act. BIS continues to carry out the provisions of the Export Administration Act, as appropriate and to the extent permitted by law, pursuant to Executive Order 13222.

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

2. Notwithstanding any other provision of law, no person is required to respond to nor be subject to a penalty for failure to comply with a collection of information, subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ) (PRA), unless that collection of information displays a currently valid Office of Management and Budget (OMB) Control Number. This regulation involves collections previously approved by the OMB under control numbers 0694-0088, “Multi-Purpose Application,” which carries a burden hour estimate of 43.8 minutes for a manual or electronic submission. This rule does not alter any information collection requirements; therefore, total burden hours associated with the PRA and OMB control number 0694-0088 are not expected to increase as a result of this rule. You may send comments regarding the collection of information associated with this rule, including suggestions for reducing the burden, to Jasmeet K. Seehra, Office of Management and Budget (OMB), by email to Jasmeet_K._Seehra@omb.eop.gov, or by fax to (202) 395-7285.

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

4. The provisions of the Administrative Procedure Act (5 U.S.C. 553) requiring notice of proposed rulemaking, the opportunity for public comment, and a 30-day delay in effective date are inapplicable because this regulation involves a military or foreign affairs function of the United States. (See 5 U.S.C. 553(a)(1)). BIS implements this rule to protect U.S. national security or foreign policy interests by preventing items from being exported, reexported, or transferred (in country) to the persons being added to the Entity List. If this rule were delayed to allow for notice and comment and a delay in effective date, then entities being added to the Entity List by this action would continue to be able to receive items without a license and to conduct activities contrary to the national security or foreign policy interests of the United States. In addition, because these parties may receive notice of the U.S. Government's intention to place these entities on the Entity List once a final rule was published it would create an incentive for these persons to either accelerate receiving items subject to the EAR to conduct activities that are contrary to the national security or foreign policy interests of the United States and/or to take steps to set up additional aliases, change addresses, and take other steps to try to limit the impact of the listing on the Entity List once a final rule was published. Further, no other law requires that a notice of proposed rulemaking and an opportunity for public comment be given for this rule. Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule by 5 U.S.C. 553, or by any other law, the analytical requirements of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., are not applicable.

Accordingly, part 744 of the Export Administration Regulations (15 CFR parts 730-774) is amended as follows:

Background

BIS established the ECCN 0Y521 series to identify items that warrant control on the CCL but are not yet identified in an existing ECCN. Items are added to the ECCN 0Y521 series by the Department of Commerce, with the concurrence of the Departments of Defense and State, upon a determination that an item should be controlled because it provides at least a significant military or intelligence advantage to the United States or because foreign policy reasons justify such control. The ECCN 0Y521 series is a temporary holding classification equivalent to United States Munitions List (USML) Category XXI (Miscellaneous Articles) in part 121 of the International Traffic in Arms Regulations, but with a limitation that while an item is temporarily classified under ECCN 0Y521, the U.S. Government works to adopt a control through the relevant multilateral regime(s), to determine an appropriate longer-term control over the item, or that the item does not warrant control on the CCL.

Items classified under ECCN 0Y521, including the items identified in this interim final rule as 0A521, 0D521 and 0E521 items, remain so-classified for one year from the date a final rule identifying the item is published in the Federal Register amending the EAR, unless the item is re-classified under a different ECCN, under an EAR99 designation, or the 0Y521 classification is extended. During this time, the U.S. Government determines whether it is appropriate to submit a proposed control to the applicable export control regime (e.g., the Australia Group) for potential multilateral control, with the understanding that multilateral controls are preferable when practical. An item's ECCN 0Y521 classification may be extended for two one-year periods to provide time for the U.S. Government and multilateral regime(s) to reach agreement on controls for the item, and provided that the U.S. Government has submitted a proposal to obtain multilateral controls over the item. Further extension beyond three years may occur only if the Under Secretary for Industry and Security makes a determination that such extension is in the national security or foreign policy interests of the United States. An extension or re-extension, including a determination by the Under Secretary for Industry and Security, will be published in the Federal Register .

The license requirements and policies for the ECCNs 0Y521 series appear in § 742.6(a)(7) of the EAR. ECCN 0Y521 items are subject to a nearly worldwide license requirement (i.e., for every country except Canada) with a case-by-case license review policy, through regional stability (RS Column 1) controls. The description and status of ECCN 0Y521 items appear in Supplement No. 5 to part 774 of the EAR, along with any item-specific license exceptions, where applicable. Unless otherwise indicated, License Exception GOV is applicable to all ECCN 0Y521 series items, including those items identified in this notice, if the item is within the scope of § 740.11(b)(2)(ii) (Items for official use by personnel and agencies of the U.S. Government), as provided in § 740.2(a)(14). License Exception GOV is the only license exception that can be used for the items identified in this interim final rule.

In this rule, BIS amends the EAR to make specified biosensor systems, and related “software,” and “technology” subject to the EAR and impose license requirements on these items. These items are being added to the 0Y521 series pursuant to a determination by the Department of Commerce, with the concurrence of the Departments of State and Defense, that these items should be controlled because they provide a significant military or intelligence advantage to the United States or because foreign policy reasons justify such controls. The specified biosensor systems, “software,” and “technology” are classified under ECCNs 0A521, 0D521 and 0E521, respectively. A brief description of each of these items and ECCNs follows.

ECCN 0A521 covers biosensor systems and dedicated detecting components capable of detecting certain aerosolized bioagents and having the following characteristics: capable of showing results in three minutes or less; containing an integrated bioaerosol collector and identifier; containing antibodies to the bioagents listed in the entry; and utilizing bioluminescence as a process. This entry also includes a Related Controls paragraph that differentiates ECCNs 1A004.c detection systems and 2B351 toxic gas monitoring systems and their dedicated detecting components controls on the CCL from 0A521 Biosensor Systems. That paragraph also refers exporters to USML Category XIV(f)(2) for equipment for the detection, identification, warning or monitoring of biological agents that is subject to the licensing jurisdiction of the Department of State, Directorate of Defense Trade Controls. Finally, two Technical Notes are provided for this entry defining the term `dedicated' and clarifying that the entry does not control biosensor systems that detect foodborne pathogens.

0D521 is “Software” for the function of biosensor systems controlled by ECCN 0A521.

0E521 is “Technology” for the “development” or “production” of biosensor systems controlled by ECCN 0A521.

The technical descriptions and the status of the specified items appear in the table found in Supplement No. 5 to part 774 of the EAR.

License applications for these items may be submitted through SNAP-R in accordance with § 748.6 of the EAR. Exporters are directed to include detailed descriptions and technical specifications with the license application, and identify the hardware as ECCN 0A521, the “software” as ECCN 0D521, and the “technology” as ECCN 0E521.

This rule is being issued in interim final form because while the Government believes that it is in the national security interests of the United States to immediately implement these controls, it also wants to provide the interested public with an opportunity to comment to the Government on the ultimate nature of export controls on these items.

Although the Export Administration Act expired on August 20, 2001, the President, through Executive Order 13222 of August 17, 2001, 3 CFR, 2001 Comp., p. 783 (2002), as extended by the Notice of August 15, 2012, 77 FR 49699 (August 16, 2012), has continued the Export Administration Regulations in effect under the International Emergency Economic Powers Act. BIS continues to carry out the provisions of the Export Administration Act, as appropriate and to the extent permitted by law, pursuant to Executive Order 13222.

1. Executive Orders 13563 and 12866 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distribute impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule has been determined to be not significant for purposes of Executive Order 12866.

2. Notwithstanding any other provision of law, no person is required to respond to, nor is subject to a penalty for failure to comply with, a collection of information, subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ) (PRA), unless that collection of information displays a currently valid OMB control number. This rule affects two approved collections: (1) The Simplified Network Application Processing + System (control number 0694-0088), which carries a burden hour estimate of 43.8 minutes, including the time necessary to submit license applications, among other things, as well as miscellaneous and other recordkeeping activities that account for 12 minutes per submission; and (2) License Exceptions and Exclusions (0694-0137). With these initial 0Y521 series items, BIS does not believe that this rule will materially increase the number of submissions under these collections.

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

4. The provisions of the Administrative Procedure Act (5 U.S.C. 553) requiring prior notice, the opportunity for public comment and a delay in effective date are inapplicable because this regulation involves a military or foreign affairs function of the United States ( See 5 U.S.C. 553(a)(1)). BIS, with the concurrence of the U.S. Departments of Defense and State, is implementing this rule because the items identified for the ECCN 0Y521 series in this rule provide a significant military or intelligence advantage to the United States. Immediate imposition of a license requirement is necessary to effect the national security and foreign policy goals of this rule. Immediate implementation will allow BIS to prevent exports of these items to users and for uses that pose a national security threat to the United States or its allies. If BIS delayed this rule to allow for prior notice and opportunity for public comment, the resulting delay in implementation would afford an opportunity for the export of these items to users and uses that pose such a national security threat, thereby undermining the purpose of the rule. In addition, if parties receive notice of the U.S. Government's intention to control these items under 0Y521 once a final rule was published, they might have an incentive to either accelerate orders of these items or attempt to have the items exported prior to the imposition of the control.

Further, BIS finds good cause to waive the 30-day delay in effectiveness under 5 USC 553(d)(3). Immediate implementation will allow BIS to prevent exports of these items to users and for uses that pose a national security threat to the United States or its allies. If BIS delayed this rule to allow for a 30-day delay in effectiveness, the resulting delay in implementation would afford an opportunity for the export of these items to users and uses that pose such a national security threat, thereby undermining the purpose of the rule.

Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule by 5 U.S.C. 553, or by any other law, the analytical requirements of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., are not applicable. Although notice and opportunity for comment are not required, BIS is issuing this rule as an interim final rule with a request for comments. All comments must be in writing and submitted via one or more of the methods listed under the ADDRESSES caption to this notice. All comments (including any personal identifiable information) will be available for public inspection and copying. Those wishing to comment anonymously may do so by submitting their comment via regulations.gov and leaving the fields for identifying information blank.

Accordingly, part 774 of the Export Administration Regulations (15 CFR parts 730-774) is amended as follows:

1. Pursuant to section 215 of the Federal Power Act (FPA), 1 the Commission approves Reliability Standard FAC-003-2 (Transmission Vegetation Management), submitted by the North American Electric Reliability Corporation (NERC), the Commission-certified Electric Reliability Organization (ERO). Reliability Standard FAC-003-2 modifies the currently-effective standard, FAC-003-1 (the “Version 1” standard). The proposed modifications, in part, respond to certain Commission directives in Order No. 693, in which the Commission approved FAC-003-1. 2

2. Reliability Standard FAC-003-2 has a number of features that make it an improvement over the Version 1 standard. For example, like Version 1, FAC-003-2 applies to all overhead transmission lines operated at or above 200 kV, but unlike Version 1, it explicitly applies to any lower voltage overhead transmission line that is either an element of an Interconnection Reliability Operating Limit (IROL) or an element of a Major WECC Transfer Path. 3 The Reliability Standard also makes explicit a transmission owner's obligation to prevent an encroachment into the minimum vegetation clearance distance (MVCD) for a line subject to the standard, regardless of whether that encroachment results in a sustained outage or fault. 4 Also, for the first time, FAC-003-2 requires transmission owners to annually inspect all transmission lines subject to the standard and to complete 100 percent of their annual vegetation work plan. The Reliability Standard also incorporates the MVCDs into the text of the standard, and does not rely on clearance distances from an outside reference, as is the case with the Version 1 standard. We believe these beneficial provisions, and others discussed below, support our approval of FAC-003-2.

3. A recurring cause in many blackouts has been vegetation-related outages. In fact, one of the initiating causes of the 2003 Northeast blackout was inadequate vegetation management practices that led to tree contact. 5 Further, NERC has identified a focus on preventing non-random equipment outages such as those caused by vegetation as a top priority that will most likely have a positive impact on Bulk-Power System reliability. 6 We also note that industry has made important strides in reducing the instances of vegetation contact. 7 We believe that industry compliance with FAC-003-2, together with a continued focus by industry on best practices for vegetation management, will serve to enhance the reliability of the Bulk-Power System. While we approve NERC's use of the Gallet equation to determine the minimum vegetation clearance distances, we believe it is important that NERC develop empirical evidence that either confirms assumptions used in calculating the MVCD values based on the Gallet equation, or gives reason to revisit the Reliability Standard. Accordingly, consistent with the Notice of Proposed Rulemaking (NOPR) proposal, the Commission directs that NERC conduct or contract testing to obtain empirical data and submit a report to the Commission providing the results of the testing. 8

4. We also approve the three new or revised definitions associated with the proposed Reliability Standard for inclusion in the NERC Glossary. Specifically, we approve the changes in the definition of “Right-of-Way” and “Vegetation Inspection,” as well as the addition of the term “Minimum Vegetation Clearance Distance (MVCD)” as defined in NERC's petition. We also approve NERC's implementation plan for FAC-003-2.

5. NERC has not adequately supported the proposed assignment of a “medium” Violation Risk Factor to Requirement R2, which pertains to preventing vegetation encroachments into the MVCD of transmission lines operated at 200 kV and above, but which are not part of an IROL or a Major WECC Transfer Path. As discussed later, system events have originated from non-IROL facilities. Accordingly, we adopt the NOPR proposal and direct NERC to submit a modification, within 60 days of the effective date of the Final Rule, assigning a “high” Violation Risk Factor for Requirement R2.

6. As discussed below, we also direct NERC to develop a means to assure that IROLs are communicated to transmission owners.

7. Section 215 of the FPA requires the Commission-certified ERO to develop mandatory and enforceable Reliability Standards, subject to Commission review and approval. Once approved, the Reliability Standards may be enforced by the ERO subject to Commission oversight, or by the Commission independently. 9 Pursuant to the requirements of FPA section 215, the Commission established a process to select and certify an ERO  10 and, subsequently, certified NERC as the ERO. 11

8. Reliability Standard FAC-003-2 includes seven requirements. 13

9. Requirements R1 and R2: Pursuant to Requirements R1 and R2, subsection 1, transmission owners must “manage vegetation to prevent encroachments into the MVCD of its applicable line(s),” and any encroachment is considered a violation of these requirements regardless of whether it results in a sustained outage. 14 In its petition, NERC characterized this as a “zero tolerance” approach to vegetation management. 15 According to NERC, these requirements represent an improvement over the Version 1 standard because FAC-003-2 makes the requirement to prevent encroachments explicit, and because it incorporates specific clearance distances into the standard itself based on “an established method for calculating the flashover distance for various voltages, altitudes, and atmospheric conditions.”  16

10. In addition, FAC-003-2 includes a footnote describing certain conditions or scenarios, outside the transmission owner's control, where an encroachment would be exempt from Requirements R1 and R2, including natural disasters and certain human or animal activity. 17 In its petition, NERC explained that the footnote “does not exempt the Transmission Owner from responsibility for encroachments caused by activities performed by their own employees or contractors, but it does exempt them from responsibility when other human activities, animal activities, or other environmental conditions outside their control lead to an encroachment that otherwise would not have occurred. ”  18

11. Requirement R3: Requirement R3 requires a transmission owner to have “documented maintenance strategies or procedures or processes or specifications it uses to prevent the encroachment of vegetation into the MVCD of its applicable lines.” Requirement R3 requires that these strategies take into account movement of conductors (sag and sway), and the inter-relationship between vegetation growth rates, vegetation control methods, and inspection frequency. While NERC acknowledged that this requirement does not include the Version 1 standard's requirement to establish a Clearance 1, NERC noted that Clearance 1 levels are left largely to the discretion of the transmission owner and that the only numerical criterion for Clearance 1 is that it “must be some undefined amount larger than the minimum flashover distance [Clearance 2].”  19 According to NERC, the FAC-003-2 requirement to avoid encroachments after taking into account conductor movement, vegetation growth rates, etc., “still retains the same obligations defined by `Clearance 1.' ”  20

12. Requirement R4: Requirement R4 requires a transmission owner that has observed a vegetation condition likely to produce a fault at any moment to notify, “without any intentional time delay,” the appropriate control center with switching authority for that transmission line.

13. Requirement R5: Requirement R5 requires a transmission owner constrained from performing vegetation management work needed to prevent a vegetation encroachment into the MVCD prior to implementation of the next annual work plan to take corrective action to prevent such encroachments. NERC stated in its petition that Requirement 5 improves upon the Version 1 standard provision, Requirement R1.4, which merely requires a transmission owner to develop mitigation measures to address such circumstances, but does not affirmatively require the transmission owner to take corrective action. The proposed measures for determining compliance associated with proposed Requirement R5 provide examples of the kinds of corrective actions expected, including increased monitoring, line de-ratings, and revised work orders. 21

14. Requirement R6: Pursuant to Requirement R6, each transmission owner must inspect 100 percent of its applicable transmission lines at least once per year and with no more than 18 months between inspections on the same right-of-way. According to NERC, Requirement R6 is “an improvement to the standard that reduces risks.”  22 NERC noted that the Version 1 standard allows a transmission owner to develop its own schedule for inspections (with no standard minimum time) and contains no explicit requirement that the transmission owner meet its established schedule.

15. Requirement R7: Pursuant to Requirement R7, the transmission owner must complete 100 percent of its annual vegetation work plan, allowing for documented changes to the work plan as long as those modifications do not allow encroachment into the MVCD. NERC explained in its petition that Requirement R7 represents an improvement because Requirement R2 of the Version 1 standard “does not mandate that entities plan to prevent encroachments into the MVCD, but simply that they implement whatever is included in the plan.”  23

16. NERC explained in its petition that the Standard Drafting Team applied the “Gallet equation” to derive the MVCDs set forth in FAC-003-2. NERC described the Gallet equation as a “well- known method of computing the required strike distance for proper insulation coordination.”  24 The Commission's Office of Electric Reliability retained the Pacific Northwest National Laboratory (PNNL) to undertake an “analysis of the mathematics and documentation of the technical justification behind the application of the Gallet equation and the assumptions used in the technical reference paper [Exh. A of NERC's petition].”  25

17. PNNL's final Report on the Applicability of the “Gallet Equation” to the Vegetation Clearances of NERC Reliability Standard FAC-003-2 (PNNL Report) was posted as part of the record in this docket on April 23, 2012, along with a notice inviting comment on the PNNL Report within 30 days. Nine entities submitted comments in response to the PNNL Report. 26

18. On May 4, 2012, Commission staff issued data requests to NERC. NERC submitted a timely response to the data requests on May 25, 2012, addressing matters such as the correct understanding and enforceability of certain provisions of the proposed Reliability Standard. Relevant elements of NERC's response to the data requests are discussed further below.

19. On October 18, 2012, the Commission issued a NOPR proposing to approve Reliability Standard FAC-003-2. In addition to seeking comment on various aspects of NERC's petition, the Commission proposed to direct that NERC: (1) Conduct or commission testing to obtain empirical data that either confirms the MVCD values or gives reason to revisit the Reliability Standard and submit a report to the Commission providing the results of the testing; and (2) submit a modification that assigns a “high” Violation Risk Factor for Requirement R2.

20. Comments were due on December 24, 2012. Twenty sets of comments were received. The Appendix to the Final Rule identifies the name of commenters. The comments were informative and assisted the Commission in developing this Final Rule. On February 5, 2013, NERC submitted reply comments.

21. Pursuant to section 215(d) of the FPA, we approve Reliability Standard FAC-003-2, including the associated definitions and implementation plan, as just, reasonable, not unduly discriminatory or preferential, and in the public interest. As discussed in Section A below, we believe the proposed Reliability Standard will enhance reliability and satisfies a number of the directives from Order No. 693. We also discuss the following matters below: (A) Approval of FAC-003-2; (B) applicability of the standard to sub-200 kV transmission lines; (C) clearance distances; (D) appropriate Violation Risk Factor for Requirement R2; (E) enforcement issues; (F) inclusion of reporting obligations as a compliance measure; and (G) proposed definitions.

22. In the NOPR, the Commission proposed to approve FAC-003-2, explaining that it improves upon the Version 1 standard by supporting vegetation management practices that can effectively protect against vegetation-related transmission outages, and by satisfying a number of the outstanding directives from Order No. 693. 27 The Commission highlighted several improvements, including the expanded applicability of the Reliability Standard so that it now applies not only to all transmission lines above 200 kV, but also to transmission lines operated below 200 kV if they are an element of an IROL or an element of a Major WECC Transfer Path. The Commission also highlighted that FAC-003-2 incorporates (1) minimum clearance distances into the text of the Reliability Standard and (2) a minimum inspection cycle requirement.

23. NERC supports the Commission's proposal to approve the proposed Reliability Standard, stating that FAC-003-2 represents a significant step in transmission vegetation management. According to NERC, FAC-003-2 maintains reliability by using a defense-in-depth strategy to manage vegetation located on transmission rights-of-way and by minimizing vegetation encroachments within the transmission owner's control, thus “preventing the risk of those vegetation-related outages that could lead to a Sustained Outage.”  28 Further, NERC requests that the Commission give “due weight” to NERC's technical expertise and approve FAC-003-2 as filed.

24. Trade Associations support approval of FAC-003-2, stating that the revised Reliability Standard responds to the Commission directives in Order No. 693 and provides a strong defense-in-depth approach to vegetation management, including a requirement for at least annual inspections. 29 Trade Associations agree with the Commission's statement in the NOPR that FAC-003-2 explicitly states minimum clearance distances and that the modified “applicability” provision includes additional facilities. Trade Associations state that FAC-003-2 strikes the appropriate balance between establishing minimum criteria and permitting utility-specific variations that will enhance reliability and prevent outages caused by vegetation intrusion. Likewise, AEP, BPA, Idaho Power, ITC Companies, KCPL, Manitoba Hydro, PacifiCorp, PA PUC, PG&E and Southern Companies support approval of FAC-003-2 as an improvement over the currently-effective Reliability Standard, and as addressing the Commission's directives in Order No. 693.

25. NESCOE generally supports FAC-003-2 as representing appropriate enhancements to the Version 1 standard in a number of critical areas. While noting that the Reliability Standard is not designed to address severe weather events and natural disasters such as the October 2011 Northeast snowstorm, NESCOE states that more clearly defined clearance requirements and stricter vegetation management practices should have the attendant benefit of reducing the risk to Bulk-Power System reliability during such events. However, NESCOE believes that NERC should be required to demonstrate that the proposal is supported by a cost analysis, i.e., that the incremental reliability gains outweigh the added costs. Therefore, NESCOE recommends that the Commission grant “interim approval” to FAC-003-2, with final approval conditioned on NERC supporting the proposal with a cost-benefit analysis.

26. APS comments that the Version 1 standard, FAC-003-1, has proven effective and the Commission should consider “maintaining” that standard. APS notes that the number of outages caused by vegetation grow-in has steadily declined since implementation of the Version 1 standard, and APS attributes this decline largely to the “Clearance 1” requirement that transmission owners develop and document their plan to manage the vegetation on rights-of-way at the time of work. APS expresses concern that a different approach may be less effective. Alternatively, if FAC-003-2 is approved, APS suggests integrating a Clearance 1 requirement in that standard.

27. We adopt our NOPR proposal and approve Reliability Standard FAC-003-2, including the associated definitions and implementation plan, as just, reasonable, not unduly discriminatory or preferential, and in the public interest. 30 We find that FAC-003-2 is an improvement over the currently-effective Version 1 standard, will support vegetation management practices that can effectively protect against vegetation-related transmission outages, and satisfies a number of the outstanding directives from Order No. 693. As discussed earlier, NERC has explained how many of the Requirements improve upon the currently-effective Version 1 standard. In accordance with our directives in Order No. 693, and as discussed further in Section II.B below, NERC has expanded the applicability of the Reliability Standard so that it now applies not only to all transmission lines operated above 200 kV, but also to transmission lines operated below 200 kV if they are an element of an IROL or an element of a Major WECC Transfer Path.

28. In addition, NERC has incorporated minimum clearance distances into the text of the Reliability Standard, and no longer includes a required clearance distance based on a reference to distances set by Institute of Electric and Electronics Engineers (IEEE) Standard 516 that, as indicated in Order No. 693, served a different purpose than vegetation management. Proposed FAC-003-2 requires a transmission owner to prevent an encroachment into the MVCD, even if the encroachment does not result in a flashover or fault. As NERC explains, “FAC-003-2 presents a `zero-tolerance' approach to vegetation management, explicitly treating any encroachment into the MVCD* * * as a violation* * *.”  31 Encroachments must be prevented under all rated operating conditions, and strategies to prevent encroachments must take into account sag and sway of the line, as well as vegetative growth rates and frequency of inspection and maintenance. 32

29. Further, in Order No. 693 the Commission expressed concern that the Version 1 standard leaves to the discretion of each transmission owner to determine inspection cycles. 33 In response, NERC has addressed this concern by incorporating a minimum inspection cycle requirement in the proposed Reliability Standard (at least once per calendar year and no more than 18 months between inspections). 34

30. The Commission disagrees with APS and will not maintain the Version 1 standard. While we agree with APS that the Version 1 standard has proven effective in minimizing the number of outages caused by vegetation grow-in, as described above, we conclude that FAC-003-2 includes improvements upon the Version 1 standard. We expect these new features to enhance vegetation management practices and continue the decline in reported vegetation-related outages. Moreover, with regard to APS's concerns on the elimination of the “Clearance 1” requirement, we do not believe that this concern supports maintaining the Version 1 standard. As we discuss in more detail later on, under FAC-003-2, transmission owners will manage vegetation to distances beyond the MVCD to ensure no encroachment into the MVCD. 35 Therefore, we are not persuaded that APS's concerns warrant a remand of FAC-003-2.

31. We also disagree with NESCOE that the Commission should grant “interim approval” to FAC-003-2, with final approval conditioned on NERC supporting the proposal with a cost-benefit analysis. As NESCOE acknowledges, the Reliability Standard includes enhancements to the Version 1 standard in a number of critical areas. Section 215(d) of the FPA authorizes the Commission to approve or remand a Reliability Standard proposed by the ERO. There is no mention of authority to approve a standard on an “interim” basis, or what that approval would entail. In addition, as the Commission has stated, while the cost of implementation is appropriate for consideration among other factors in the development of a Reliability Standard, the Commission has not required the preparation of a cost-benefit analysis for approval of a standard. 36

32. Accordingly, we approve FAC-003-2 on a final basis, and transmission owners must comply with the Reliability Standard as set forth in NERC's implementation plan.

33. The Reliability Standard applies to transmission owners. Further, FAC-003-2 applies to (1) overhead transmission lines operated at 200 kV or higher and (2) overhead lines operated below 200 kV if (a) “identified as an element of an IROL under NERC Standard FAC-014 by the Planning Coordinator” or (b) “identified as an element of a Major WECC Transfer Path* * *” In the NOPR, the Commission asked how IROL status of a facility will be communicated to transmission owners, and how transmission owners can effectively implement this provision since IROL status can change with system conditions. 37 Further, the Commission asked for comment on how FAC-003-2 complies with the Order No. 693 directive that the standard cover “lines that have an impact on reliability.”  38

34. NERC comments that FAC-003-2 relies on the identification of IROLs by the planning coordinator, which “would include identifying any changes in the status of a line if a line's IROL status changes given changing system conditions.”  39 NERC further states that Requirement R5 of FAC-014 provides the means for a transmission owner to obtain IROL information. According to NERC, this provision requires the planning authority (a term synonymous with planning coordinator) to “provide its SOLs and IROLs to entities with a reliability-related need, such as a Transmission Owner, who request such information.”  40 NERC further offers that “[i]f the Commission does not agree that Transmission Owners can obtain information directly from Planning Coordinators under Requirement R5 of FAC-014,” transmission owners have other means such as Requirement R8 of Reliability Standard TPL-001-2 as well as existing agreements between transmission owners and transmission operators. 41 Regarding changes in IROL status, NERC comments that the burden is on the transmission owner to procure this information as part of its responsibility to manage vegetation to prevent encroachment and as the entity responsible for implementing FAC-003-2.

35. Likewise, Duke states that, pursuant to FAC-014, a transmission owner can request IROL designations from the planning coordinator, including future changes to IROL status. Duke and AEP comment that FAC-003-2 includes an effective date twelve months after the date a transmission line operated below 200 kV is newly designated as an element of an IROL. They state that this twelve-month period allows time for the transmission owner to modify its vegetation management work plan to include new IROL elements.

36. According to Trade Associations, AEP and FirstEnergy, FAC-014 does not require planning coordinators to notify transmission owners of the designation of IROL facilities. Further, Trade Associations maintain that a vegetation management program is based on the near term planning horizon of one to five years and, thus, applicable entities cannot document compliance with day-to-day operating changes to IROLs. Trade Associations comment that, while this issue should not delay approval of FAC-003-2, it is important to establish a clearly defined communication structure and agreed upon start date for compliance documentation prior to transmission owners' inclusion of IROL elements in their vegetation management programs.

37. FirstEnergy and AEP advocate that the Commission direct NERC to modify FAC-014 to include a requirement that planning coordinators promptly communicate IROL status updates to transmission owners. According to Idaho Power, FAC-003-2 should require that the planning coordinator communicate IROL status to transmission owners. Moreover, Idaho Power suggests that it is reasonable to hold a transmission owner responsible for vegetation management on lines that can become IROLs during “studied credible contingencies” but not for unstudied or unanticipated system conditions.

38. BPA suggests that NERC develop an automated electronic notification system to inform affected transmission owners regarding changes in IROL status.

39. Consistent with the NOPR, we remain concerned regarding how IROL status of a facility will be communicated to transmission owners. We are not persuaded that Reliability Standard FAC-014 requires the communication of IROL status information to transmission owners. Requirement R5 of FAC-014-2 provides:

40. While Requirement R5 indicates that SOLs and IROLs should be provided to entities that have a “reliability-related need” for that information, this broad language is limited “as follows” to the entities specified in sub-Requirement R5.1. Transmission owners are not specified. Further, Requirement R5 of FAC-003 does not include “for example” or “including but not limited to” language that would suggest the entities specified in sub-Requirement R5.1 are not exclusive. Thus, we conclude that FAC-014-2 does not obligate reliability coordinators, planning authorities and transmission planners to provide IROL information to transmission owners. 42

41. Rather, we agree with Trade Associations and other commenters that NERC should establish a clearly defined communication structure to assure that IROLs and changes to IROL status are timely communicated to transmission owners. This structure will better support compliance with the extended applicability of FAC-003-2 to sub-200 kV transmission lines that are an element of an IROL. One way to achieve this objective, as advocated by AEP and others, is to modify FAC-014 to require the provision of IROLs to transmission owners. However, we leave it to NERC to determine the most appropriate means for communicating IROL status to transmission owners.

42. We do not believe, however, that establishing a communication structure should delay the implementation of FAC-003-2. As NERC indicates, the ultimate responsibility for compliance with FAC-003-2 is upon transmission owners. Moreover, it appears that there are multiple avenues for transmission owners to obtain information about IROL elements on their facilities. For example, NERC represents that, in many instances, the entity responsible for identifying IROL elements on a system is also registered as a transmission owner. 43 Likewise, transmission owners may obtain the necessary information through voluntary communications or pursuant to coordination required in bilateral agreements. As Duke and AEP note, FAC-003-2 includes an effective date that is twelve months after the date a line operated below 200 kV is initially designated as an element of an IROL, which allows time for the transmission owner to modify its vegetation management work plan to include new IROL elements. We encourage NERC to inform us when it has developed means for communication of IROLs to transmission owners to help ensure they receive notice of each of their applicable lines before the standard becomes effective as to those lines.

43. With regard to the concern in the NOPR on the changing status of IROLs, we accept the explanation of Trade Associations that a vegetation management program should be based on the near term planning horizon of one to five years, in which case applicable transmission owners will not be responsible to document compliance with day-to-day operating changes to IROLs. Likewise, we agree with Idaho Power that transmission owners should be responsible for vegetation management on lines that can become IROLs during “studied credible contingencies.” Based on the methodology set forth in FAC-014, sub-200 kV transmission lines that are identified as elements of an IROL or Major WECC Transfer Path are subject to FAC-003-2. For example, some entities identify seasonal IROLs and we expect sub-200 kV elements of seasonal IROLs to be subject to FAC-003-2. 44 In contrast, as suggested by Idaho Power, if, for example, a multiple contingency results in the operation of the system in an unknown state for a limited period of time, a transmission owner is not responsible for compliance with FAC-003-2 with respect to IROLs that may result from temporary operation in that unknown state. We believe that this approach provides consistency and predictability in identifying the sub-200 kV transmission lines that are subject to compliance with FAC-003-2.

44. Finally, with regard to BPA's suggestion, we will not direct that NERC develop an automated electronic notification system to inform affected transmission owners of changes in IROL status. BPA may propose this directly to NERC, and NERC can determine whether this is an appropriate activity.

45. NERC maintains that, consistent with Order No. 693, it has properly modified the applicability of FAC-003-2 to include transmission lines that have an impact on reliability while balancing the extension of the applicability of the standard against unreasonably increasing the burden on transmission owners. 45 According to NERC, rather than employing a bright-line threshold of 100 kV, the standard drafting team chose to limit sub-200 kV applicability to “specific cases where lines are critical to reliability by virtue of their inclusion as elements in the determination of an IROL or a part of a Major WECC Transfer Path.”  46 NERC states that, by relying on IROL and Major WECC Transfer Path identification as a “proxy” for reliability importance, FAC-003-2 uses an “impact-based approach” for determining applicability. Similarly, Duke asserts that FAC-003-2 appropriately covers lines that have an impact on reliability by including sub-200 kV lines that are either an element of an IROL or a major WECC Transfer Path.

46. PacifiCorp and NESCOE comment that FAC-003-2 appropriately balances the inclusion of certain sub 200-kV lines based on IROLs with the risk of over-capturing elements that do not present a risk of cascading outages. NESCOE states that this balance “takes into account the burden placed on transmission owners and, implicitly costs ultimately borne by consumers.”  47

47. In response to the NOPR question regarding how NERC will assure that IROLs are properly designated in light of the 2011 Southwest Outage, NERC states that it will continue to enforce FAC-014 and FAC-010 to ensure that planning coordinators identify IROLs using their developed methodology. NERC also states that efforts are underway to implement recommendations of the Outage Report addressing the failure to properly designate IROLs.

48. The Commission accepts NERC's explanation that it has properly modified the applicability of FAC-003-2 to include transmission lines that have an impact on reliability. We agree with NERC that, by making the applicability of sub-200 kV transmission lines dependent on operating impacts, i.e., elements of IROLs and Major WECC Transfer Paths, the Reliability Standard reasonably balances enhanced applicability of the standard with unreasonably increasing the burden on transmission owners without commensurate reliability gains.

49. With regard to the Commission's question in the NOPR regarding how NERC will assure that IROLs are properly designated in light of the 2011 Southwest Outage, 48 we are satisfied with NERC's explanation that (a) NERC will continue to enforce FAC-014 and FAC-010 to ensure that planning coordinators identify IROLs using their developed methodology and (b) efforts are underway to implement recommendations of the Outage Report addressing the failure to properly designate IROLs.

50. In the NOPR, the Commission stated that “[b]ased on the record in this proceeding, the application of the Gallet equation appears to be one reasonable method to calculate MVCD values.”  49 The Commission further stated that NERC “has supported the inputs and assumptions it used to develop those minimum clearance distances, at least until such time that empirical data is developed and is available for use in setting MVCDs.”  50 The Commission, however, explained that it remained concerned over the lack of empirical data with regard to actual flashover distances observed through testing or analysis of flashover events. 51

51. NERC, in its petition, indicated that Electric Power Research Institute (EPRI) is planning to undertake field tests of energized high voltage conductor flash-over to vegetation, and the NOPR asked for information on the status of the testing. In the NOPR, the Commission proposed to direct that NERC conduct or commission testing to obtain empirical data and submit a report to the Commission providing the results of the testing.

52. EPRI, in its comments, provides an update on the status of its testing. EPRI states that, beginning in June 2009, it planted vegetation on a test right-of-way at EPRI's facilities, intended for high voltage air gap spark-over research. EPRI explains that it can raise and lower the test line, and adjust the test line voltage, to create the desired spark-over scenario. According to EPRI, with appropriate funding and designation of scope, testing can begin in the summer of 2013. EPRI recommends that a study designed to improve understanding of gap flash over to trees should focus primarily on validation of the Gallet equation, and specifically the flashover characteristics of a conductor to a grounded rod. EPRI states that it is committed to working with the Commission and other entities to develop an appropriate project scope, to estimate the required funding and solicit that funding.

53. NERC asks that, due to uncertainty in timing, funding, design, scope and execution of a study to develop empirical data, the Commission refrain from issuing a directive that NERC conduct or commission testing. NERC suggests that, as an alternative, the Commission “accept NERC's commitment” to work with the Commission and other entities to determine “whether and how a study could be conducted to obtain the empirical data the Commission seeks * * *”  52 According to NERC, this alternative approach would allow NERC flexibility to discuss study scope and funding with the Commission, allow for the development of partnerships in conducting the study, and allow collaboration on the study and any necessary changes to the Reliability Standard. NERC asks that, if directed to conduct empirical research, the Final Rule address (1) the need for the empirical data and scope of the study, (2) time frame for the study—and allow NERC to submit a proposed schedule for completion, and (3) funding of the study.

54. Trade Associations support EPRI conducting research “to the extent needed,” and submitting a preliminary report with initial observations by first quarter 2014. Trade Associations state that EPRI has the skills and equipment necessary to conduct testing, but add that funding “may be a challenge” since EPRI does not have a dedicated funding source. Trade Associations comment that there needs to be a clearer understanding of the scope and timeline for the research, and urge limiting the scope and subsequent report to validating the “gap factors” used to represent the “air gap” between a conductor and vegetation. Trade Associations, as well as Duke, advocate that the study not focus on validating the appropriateness of the Gallet equation for use in determining MVCDs, as that testing and validation has already taken place. Trade Associations add that, as an alternative to a Commission directive, the Commission could consider informal discussions with NERC and stakeholders to inform decisions on the scope and timing of the research, and how to most effectively ensure strong project management and funding.

55. AEP, BPA, Duke, Idaho Power and PacifiCorp also support the proposal to direct testing of the MVCDs calculated by the Gallet equations, and support EPRI conducting such field testing or research. Idaho Power recommends directing that NERC submit a report within one year of a final rule approving FAC-003-2. AEP, however, believes that it would be premature to impose a schedule for the testing until funding is procured.

56. On a related matter, regarding compliance with MVCD values in Requirements R1 and R2, PacifiCorp and APS comment that the only way to prove that the MVCD has not been violated under all rated conditions and all sag/sway scenarios is to employ Light Detection and Ranging (LiDAR) on a continuous basis. PacifiCorp recommends that, because this approach is cost prohibitive, FAC-003-2 should be revised in a subsequent version to return to the language of the Version 1 standard that allows transmission owners to remedy Clearance 2 encroachments prior to an outage without a violation. APS requests clarification regarding the need to demonstrate compliance at all rated conditions so that transmission owners can design their vegetation management plans appropriately and reduce the risk of violation.

57. APS comments that, while the Gallet equation appears to be a reasonable method to calculate MVCD values, it shares the Commission's concern regarding the lack of empirical data on actual flashover distances and supports the proposed directive for field tests of energized high voltage conductor flashover to vegetation. APS suggests that the United States Department of Energy (DOE) conduct the study, with a completion date of first quarter 2014.

58. Moreover, APS expresses concern that FAC-003-2 does not carry over the Clearance 1 requirement set forth in the current Version 1 standard. According to APS, the requirement to maintain Clearance 1 is a primary cause of the success of the Version 1 standard in reducing vegetation-related outages. APS also states that Clearance 1 clarifies that federal, state, and other agencies do not have the authority or responsibility to determine clearances on rights-of-way. According to APS, Clearance 1 “gives legitimacy” to transmission owners in discussions with federal agencies for clearance distances that are greater than the minimum required, i.e., Clearance 2 distances. APS, therefore, advocates that the Commission either maintain the Version 1 standard or “integrate” a Clearance 1 requirement into FAC-003-2.

59. We adopt the NOPR proposal and direct NERC to conduct or contract testing to develop empirical data regarding the flashover distances between conductors and vegetation. The data obtained from such studies should be informative of the appropriateness and accuracy of the MVCD values for various voltage ratings as set forth in FAC-003-2. While NERC can develop the specific parameters for such testing, generally, repeated application of high voltage injections into a test line under set conditions would provide evidence of sparkover events. A statistical analysis would then evaluate the test results and provide empirical evidence to support an appropriate gap factor to be applied in calculating minimum clearance distances using the Gallet equation. 53

60. In response to Trade Associations, we are not directing NERC to reconsider use of the Gallet equation in determining MVCD values as set forth in the Reliability Standard. As we stated in the NOPR, and adopt in the Final Rule, the application of the Gallet equation appears to be one reasonable method to calculate MVCD values. 54 However, MVCD calculations based on the Gallet equation depend on certain assumptions, such as the appropriate “gap factor.” NERC previously indicated that it relied on a “widely known and regarded source for determining the appropriate gap factor.”  55 It nonetheless is clear that the gap factor NERC applied in the Gallet equation to calculate MVCD values was not based on empirical data. If such inputs into the calculation prove to be inaccurate, in a worst case scenario, flashovers from vegetation to a conductor could occur at the MVCD values identified in the Reliability Standard. While NERC's use of the Gallet equation and the resulting MVCD values are reasonable based on the information available in this docket, minimum clearance values are too important to reliability to ultimately rely on assumed inputs, and empirical testing is appropriate to confirm the values used in the equation.

61. NERC asks that we accept its commitment to move forward with the study. However, our determination that such a study is needed warrants imposing a directive for its completion. Thus, we direct NERC, within 45 days of the effective date of this Final Rule, to submit an informational filing that includes, inter alia: (1) A schedule for testing, (2) scope of work, (3) funding solutions, and (4) deadline for submitting a final report to the Commission on the test results (and interim reports if a multi-year study is conducted). This approach should give NERC the flexibility to consult with the Commission or its staff as well as industry members to determine the technical specifications for the required study, funding sources and timing. However, given the importance of the testing set forth in our determination, the filing and schedule must include a reasonable date for the submission of a final report on the results of the empirical study.

62. With regard to the comments of PacifiCorp and APS on compliance with the MVCD values under all rated conditions, we disagree that FAC-003-2 should be revised to allow transmission owners to remedy MVCD encroachments prior to an outage without a violation. NERC indicates that, under FAC-003-2, transmission operators will manage vegetation to distances beyond the MVCD to ensure no encroachment into the MVCD. 56 Thus, in response to PacifiCorp and APS, a vegetation management strategy required by Requirement R3 of FAC-003-2 must provide enough clearance to ensure that the MVCD will not be encroached under any conditions.

63. We are not persuaded by APS's concern that the Commission should carry over the Clearance 1 requirement to FAC-003-2. In the NOPR, the Commission provided a detailed explanation, based on the NERC petition, regarding how transmission owners are expected to comply with the clearance requirements set forth in Requirements R1 and R2 of FAC-03-2. The MVCD clearances represent only one aspect of FAC-003-2. The MVCD establishes a “ minimum [] required to prevent Flash-over.”  57 Reliability Standard FAC-003-2 requires transmission owners to manage vegetation to ensure that vegetation does not encroach into the MVCD, which in turn requires transmission owners to manage vegetation to a distance further than the MVCD. For example, transmission owners are required to have documented compliance strategies, procedures, processes, or specifications under Requirement R3 to prevent encroachments into the MVCDs after taking into account sag and sway of the lines, as well as vegetative growth rates, planned control methods and frequency of inspections. 58 Similarly, under Requirement R7, a transmission owner is required to “complete 100% of its annual vegetation work plan of applicable lines to ensure no vegetation encroachments occur within the MVCD.”  59 As NERC has explained, the “Transmission Owner is obligated to show detailed documentation that clearly explains their system with regard to the geography and how the Transmission Owner will execute the plan to prevent encroachment.”  60 Further, according to the NERC petition, a transmission owner's documentation approach will generally contain certain specific elements including “the maintenance strategy used (such as minimum vegetation-to-conductor distance or maximum vegetation height) to ensure that MVCD clearances are never violated.”  61 Likewise, NERC indicated that “prudent vegetation maintenance practices dictate that substantially greater distances [than the applicable MVCD] will be achieved at time of vegetation maintenance.”  62

64. NERC also explained that a conductor's position in space at any point in time continuously changes in reaction to a variety of factors, such as the amount of thermal and physical loading, air temperature, wind velocity and direction, and precipitation. The following diagram is a cross-section view of a single conductor at a given point along the span that illustrates six possible conductor positions due to movement resulting from thermal and mechanical loading:  63

NERC indicated that conductor movements must be taken into account under FAC-003-2, and that the transmission owner is required to show that its approach to vegetation management under Requirement R3 will prevent encroachments under all expected line positions. 64 Thus, a transmission owner must manage vegetation to ensure it does not encroach into the MVCD under multiple conditions.

65. Finally, as NERC explained in its Technical Reference Document, transmission owners will have to clear vegetation to levels “well away from” the minimum spark-over zone:

66. Thus, while clearances required at the time of maintenance may vary from one region or area to another, our proposed approval of FAC-003-2 is based on our understanding, which is drawn directly from NERC's statements in its petition, that transmission operators will manage vegetation to distances beyond the MVCD to ensure no encroachment into the MVCD.

67. NERC's approach to setting MVCDs and maintaining vegetation is reasonable and designed to provide flexibility while assuring that transmission owners will proactively avoid encroachments into the MVCD. Accordingly, we will not require the reinstatement of a Clearance 1 requirement in FAC-003-2 as requested by APS.

68. The NOPR explained that NERC proposes to assign a “high” Violation Risk Factor to Requirement R1, which requires transmission owners to “manage vegetation to prevent encroachments into the MVCD of its applicable line(s) which are either an element of an IROL, or an element of a Major WECC Transfer Path.” Requirement R2, which is assigned a “medium” Violation Risk Factor, provides that “[e]ach Transmission Owner shall manage vegetation to prevent encroachments into the MVCD of its applicable line(s) which are not either an element of an IROL, or an element of a Major WECC Transfer Path.”  66 The Commission observed that the substantive obligations set forth in Requirements R1 and R2 are identical, but the Violation Risk Factors differ based on whether a transmission line is an element of an IROL or Major WECC Transfer Path.

69. The Commission, in the NOPR, questioned whether this proposed “bifurcation” comported with the definition of “medium” Violation Risk Factor and the Commission's guidelines for reviewing Violation Risk Factor designations. The Commission also noted that transmission lines not designated as elements of IROLs played a role in past cascading outages. For these reasons, the Commission proposed to modify the Violation Risk Factor for Requirement R2 from “medium” to “high,” and invited NERC to “provide additional explanation * * * to demonstrate the lines identified in Requirement R2 are properly assigned a medium Violation Risk Factor.”  67

70. NERC comments that it “does not have additional information beyond the information supplied in its petition” on this issue. 68 NERC maintains that the “medium” designation is appropriate, aligns with the definitions for Violation Risk Factors and complies with the Commission's guidelines for such designations. According to NERC, the separate designations for Requirements R1 and R2 recognize that an element of an IROL or WECC Major Transfer Path is a “greater risk” to the transmission system, while applicable lines that are not an element of an IROL or Major WECC Transfer Path “do require effective vegetation management, but these lines are comparatively less operationally significant.”  69

71. Trade Associations “do not disagree” with the NOPR statement that lines not designated as IROL or Major WECC Transfer Path may be associated with higher-risk consequences including cascading outages. Trade Associations, however, maintain that the test for a medium Violation Risk Factor “is not whether a violation could lead to system instability, but whether it is likely (or unlikely) to occur.”  70 Thus, Trade Associations argue that the “medium” designation for Requirement R2 is appropriate because lines that are not an element of an IROL or Major WECC Transfer Path present a “comparatively reduced risk” for cascading outages or system instability. Trade Associations note that the Violation Risk Factor distinction between Requirements R1 and R2 received broad industry support and that the Commission's proposal would reverse NERC and industry's consensus approach to the development of FAC-003-2.

72. Duke and Manitoba Hydro also oppose the designation of a “high” Violation Risk Factor for Requirement R2. Duke notes that the definition of IROL is “a System Operating Limit that, if violated, could lead to instability, uncontrolled separation, or Cascading Outages * * *” and, thus, argues that a non-IROL line does not present as great a risk for cascading outages or instability and should have a lesser Violation Risk Factor.

73. We adopt our NOPR proposal and direct NERC to modify the Violation Risk Factor for Requirement R2 from “medium” to “high,” within 45 days of the effective date of the Final Rule.

74. The Commission-approved definition of a “medium” risk requirement is:

The definition of a high Violation Risk Factor is:

75. We are not persuaded by the response of NERC and others that a medium Violation Risk Factor designation for Requirement R2 is supported because there is a relatively greater risk of cascading outages associated with a transmission line that is an element of an IROL or Major WECC Transfer Path than with a line that is not. The definition of “medium” Violation Risk Factor provides in part that “violation of a medium risk requirement is unlikely to lead to bulk electric system instability, separation, or cascading failures.” In the NOPR, the Commission questioned NERC's rationale, stating that “NERC does not explain why outages on these relatively high voltage lines (200 kV or higher) would not likely lead to cascading, separation, or instability * * *”  73 Further, the Commission pointed out that transmission lines not designated as an IROL element (or the equivalent) have been instrumental in causing major blackouts, including the August 2003 Northeast blackout and an August 10, 1996 blackout in the Western Interconnection. 74 Rather than responding to the Commission's request for an explanation of why outages on high voltage, non-IROL lines are unlikely to lead to instability, separation or cascading, NERC and others simply reiterate their previous rationale. Thus, we conclude that NERC and other commenters have not adequately supported a “medium” Violation Risk Factor designation for Requirement R2.

76. As noted above, a high Violation Risk Factor is defined, in part, as a “requirement that, if violated, could directly cause or contribute to bulk electric system instability, separation, or a cascading sequence of failures, or could place the bulk electric system at an unacceptable risk of instability, separation, or cascading failures * * *” As we explained in the NOPR, transmission lines that are not an element of an IROL or Major WECC Transfer Path have contributed to major cascading outages. 75 This fact supports a “high” Violation Risk Factor designation for Requirement R2. Moreover, our Violation Risk Factor guidelines, which require, among other things, consistency within a Reliability Standard (guideline 2) and consistency between requirements that have similar reliability objectives (guideline 3), also support modifying the Violation Risk Factor assigned to Requirement R2 from medium to high. 76

77. Accordingly, we direct NERC to modify the Violation Risk Factor for Requirement R2 from “medium” to “high,” within 45 days of the effective date of the Final Rule.

78. Reliability Standard FAC-003-2 includes a footnote describing certain conditions or scenarios, outside the transmission owner's control, in which an encroachment would be exempt from Requirements R1 and R2, including natural disasters and certain human or animal activity. 77 In its Petition, NERC explained, the footnote “does not exempt the Transmission Owner from responsibility for encroachments caused by activities performed by their own employees or contractors, but it does exempt them from responsibility when other human activities, animal activities, or other environmental conditions outside their control lead to an encroachment that otherwise would not have occurred.”  78

79. Southern Companies and PG&E disagree with the explanation of footnote 2 in NERC's petition. According to Southern Companies, NERC's “interpretation” is contrary to the plain language of the footnote, which unambiguously states that Requirement R1 “does not apply to circumstances that are beyond the control of the Transmission Owner” including “human activity” such as installation, removal, or digging of vegetation. Southern Companies asserts that the standard drafting team intended footnote 2, in part, to maintain the exemption from responsibility for contractor-caused violations provided under the Version 1 standard. Southern Companies argue that NERC's understanding could discourage transmission owners from having contractors remove danger trees from outside of the right-of-way that could make contact with a conductor since the transmission owner would be responsible for inadvertent contact during such removal. PG&E makes similar arguments and adds that, while recognizing that it has a responsibility to ensure that its employees and contractors are properly trained and follow appropriate safety practices, a utility cannot craft a vegetation management program that will prevent unintended and unpredictable encroachment associated with possible human activity or error. Thus, Southern Companies and PG&E urge the Commission to reject NERC's explanation of footnote 2.

80. BPA comments that it “understand and accepts” that transmission owners will be held liable for the actions of its employees and contractors, but believes there should be exceptions to this liability in some circumstances. According to BPA, if for example employees or contractors are negligent while felling a tree, the utility should be held accountable. However, BPA maintains that “an exemption should be granted” if a transmission owner can demonstrate that it utilized appropriate best management vegetation strategies and practices, but an unpredictable event occurs, such as an equipment failure, rope breakage or a hidden tree defect, and results in an encroachment that violates Requirement R1 or R2. BPA notes that placing liability on the transmission owner will have potentially significant cost impacts. For example, BPA asserts that vegetation contractors will have to increase the amounts on their liability insurance and performance bonds, and pass those costs on to transmission owners.

81. In reply to Southern Companies and PG&E, NERC states that it consulted with the standard drafting team in preparing the petition and confirmed that the intent of footnote 2 was not to exclude the activity of the employee or contractor. According to NERC, interpreting the footnote as suggested by Southern Companies and PG&E would insulate all errors in executing vegetation management plans and “effectively encourage mismanagement.” Rather, according to NERC, specific instances of error by employees or contractors in executing a vegetation management plan may be addressed on a case-by-case analysis, including the scenarios described by BPA.

82. The language in footnote 2 of FAC-003-2 provides:

83. The stated intent of the footnote is to not hold transmission owners responsible for vegetation encroachments into the MVCD resulting from circumstances beyond the control of the transmission owner. The footnote then provides numerous examples of circumstances beyond a transmission owner's control, including “human or animal activity such as logging * * * or installation, removal, or digging of vegetation.” As stated above, NERC explained that footnote 2 “does not exempt the Transmission Owner from responsibility for encroachments caused by activities performed by their own employees or contractors, but it does exempt them from responsibility when other human activities, animal activities, or other environmental conditions outside their control lead to an encroachment that otherwise would not have occurred.”  79

84. We do not read NERC's statement as inconsistent with the language of the footnote, as suggested by Southern Companies. Footnote 2 does not remove from the responsibility of the transmission owner all activity of its employees or contractors under all circumstances. We do not read NERC's statement as ascribing transmission owner responsibility under Requirements R1 and R2 to all activity of its employees or contractors. Rather, should an encroachment occur as a result of activity by a transmission owner's employee or contractor, a case-by-case analysis is necessary to determine responsibility. This understanding is consistent with BPA's comments, which recognize that transmission owners may be held liable for the actions of an employee or contractor, while also acknowledging that unpredictable events may occur that are reasonably outside the control of the transmission owner. We believe that this is an appropriate approach that is consistent with the text of footnote 2 of FAC-003-2 as well as NERC's explanation of this provision.

85. Requirement R1.3 of the Version 1 standard provides that “[a]ll personnel directly involved in the design and implementation of the TVMP shall hold appropriate qualifications and training, as defined by the Transmission Owner, to perform their duties * * *” Reliability Standard FAC-003-2 does not include a training requirement. According to NERC, the provision of the Version 1 standard is “effectively meaningless,” since “appropriate” qualifications and training are undefined and left entirely to the discretion of the transmission owner. 80

86. PA PUC disagrees with the elimination of the training provision and recommends that the Commission require NERC to develop a standard that specifies the minimum necessary qualifications and training for personnel involved in the design and implementation of vegetation management programs. Washington DNR also urges the Commission to not approve the elimination of Requirement R1.3 and, rather, define appropriate qualifications for personnel performing vegetation management.

87. We are not persuaded by the commenters to direct NERC to include a training or qualifications provision in FAC-003-2. NERC explained in its petition that the qualifications provision of the Version 1 standard, Requirement R1.3, is “effectively meaningless,” since “appropriate” qualifications and training are undefined and left entirely to the discretion of the transmission owner. 81 The use of the term “appropriate” in current Requirement R1.3 does not render this requirement unenforceable. However, if interested entities wish to pursue development of a future training requirement further with NERC, they can develop a Standards Authorization Request (SAR) and submit it to NERC for consideration.

88. The Commission, in the NOPR, noted that NERC provided information from several sources that are useful to an overall understanding of the intent of FAC-003-2 and how it will be enforced, including information from NERC's petition, NERC's Guideline and Technical Basis document, and NERC's May 25, 2012 response to Commission staff data requests. The NOPR requested comment on whether NERC should consolidate the reference material so that entities that must comply can find these materials in one place. 82

89. NERC comments that it does not object to consolidating the reference material and posting it on the NERC Web site along with FAC-003-2 prior to implementation. BPA and ITC Companies agree that the reference material should be consolidated in one place. Trade Associations comment that the guidance material can have value to inform a company in developing management plans and activities, but cautions that such guidance must not alter the requirements of a Reliability Standard or be used as a compliance measurement.

90. NERC and other commenters support the NOPR proposal to consolidate reference material pertaining to FAC-003-2 to support implementation of the Reliability Standard. We agree with NERC and other commenters and adopt our NOPR proposal. Accordingly, within 45 days of the effective date of the Final Rule, NERC must consolidate the reference material and post it on the NERC Web site along with Reliability Standard FAC-003-2.

91. Requirement R4 of FAC-003-2 requires transmission owners to notify “without intentional time delay” the control center with switching authority for the applicable line when the transmission owner has confirmed the existence of a vegetation condition that is likely to cause an imminent fault. In the NOPR, the Commission asked for comment on how NERC “would or should treat a delay in communication caused by the negligence of the transmission owner or one of its employees, where the delay may be significant and `unintentional.' ”  83

92. NERC responds that the specific facts and circumstances underlying a delay in communication must be determined on a case-by-case basis. However, according to NERC, the expectation in Requirement R4 is that once the transmission owner has confirmed the existence of a vegetation condition that is likely to cause an imminent fault, the transmission owner must immediately notify the control center. NERC explains that the standard drafting team did not include a “quantitative” time element for notification in Requirement R4 due to the difficulty in determining one time period that applies to all situations.

93. Trade Associations, Duke and Southern Companies comment that the inquiry into whether a transmission owner's notification occurred “without any intentional time delay” is a fact specific determination. Southern Companies adds that the drafting team considered a specific time window for notifying the control center but adopted the current language because it (i) avoids an arbitrarily narrow time-frame and (ii) provides a clear metric. PacifiCorp comments that, because the severity of an event will “vary across facts and circumstances,” it recommends the “development of a load factor above which the failure to promptly report a vegetation condition * * * would warrant a high severity level and below which would warrant a lesser severity level.”  84 Idaho Power comments that the cause of the delay must be assessed and degrees of failure could be addressed in Violation Severity Levels or, if delays result from administrative process issues, addressed in the “find, fix and track” process.

94. We agree with the explanation of NERC and Trade Associations that the specific facts and circumstances underlying a delay in communication must be determined on a case-by-case basis. We also agree with, and adopt, NERC's explanation that, pursuant to Requirement R4, once the transmission owner has confirmed the existence of a vegetation condition that is likely to cause an imminent fault, the transmission owner must immediately notify the control center.

95. We reject PacifiCorp's suggestion that severity levels for non-compliance with Requirement R4 be tied to a load factor. This appears to be an overly-complex approach to address a failure to promptly communicate a vegetation condition that is likely to cause an imminent fault.

96. The Version 1 Standard, FAC-003-1, Requirements R3 and R4, require quarterly reporting to the Regional Entities of sustained transmission outages caused by vegetation. In the NOPR, the Commission explained that, while FAC-003-2 moves the reporting requirements to the “Additional Compliance Information” section as a Periodic Data Submittal, NERC maintains that the reporting requirements remain enforceable under NERC's Rules of Procedure. In its Petition, NERC stated that it and Regional Entities can require entities to provide “such information as is necessary to monitor compliance with the reliability standards” under Section 401.3 of NERC's Rules of Procedure. 85 NERC asserted that “it has certain courses of action it may undertake as necessary to ensure the entity complies with the Rule, pursuant to NERC Rule of Procedure Section 100, including notifying the Commission of the entity's failure to comply. 86 While agreeing that, pursuant to Section 401.3, NERC and the Regional Entities can require transmission owners to submit quarterly reports of sustained transmission outages, the Commission asked for comment regarding the “courses of action” that are available to NERC to ensure compliance.

97. NERC responds that, as an example of a course of action, the NERC Rules of Procedure provide possible consequences for an entity's failure to timely provide requested data—including application of a “severe” Violation Severity Level for a Reliability Standard Violation. 87 Idaho Power suggests that other courses of action could include Regional Entity audits, spot checks and investigations of vegetation-caused outages.

98. Santa Clara asserts that non-compliance with the quarterly reporting requirement is analogous to non-compliance with a NERC request for data that is necessary to meet NERC's section 215 obligations, pursuant to Section 1600 of NERC's Rules of Procedure. Santa Clara thus maintains that NERC's only recourse, pursuant to Section 1603 of NERC's Rules, is to refer such non-compliance to the Commission for enforcement. According to Santa Clara, the Rules provisions cited in NERC's Petition and the NOPR are not applicable because they pertain specifically to NERC's compliance/enforcement program.

99. In a reply comment, NERC reiterates its authority under Section 400 of the NERC Rules of Procedure, claiming that the quarterly reporting obligation is “squarely” part of NERC's compliance, monitoring and enforcement functions.

100. We accept NERC's explanation that it has “tools” to address non-compliance with the reporting requirements set forth in the “Additional Compliance Information” section of Reliability Standard FAC-003-2. As NERC indicates, in connection with a substantive violation of Requirements R1 or R2 of FAC-003-2 due to an encroachment that causes a sustained outage, NERC or a Regional Entity can attach a higher Violation Severity Level to that violation based on the failure to identify the encroachment in a required periodic report. Likewise, pursuant to the NERC Rules, the Regional Entity can devote more compliance resources to oversight of an entity that fails to comply with a reporting requirement. 88

101. We are not persuaded by Santa Clara's claims that NERC's “tools” do not apply because they pertain specifically to NERC's compliance/enforcement program. Rather, it is reasonable to view a transmission owner's failure to provide quarterly data as set forth in the Additional Compliance Information provision of FAC-003-2 as fitting within NERC's compliance, monitoring and enforcement function. The reporting of sustained outages caused by vegetation encroachment pertains to substantive compliance with the requirements of FAC-003-2 and will provide information that is necessary to monitor compliance with FAC-003-2 to the extent that transmission owners do not otherwise self-report possible violations. Thus, we find that the reporting of quarterly data set forth in the Additional Compliance Information provision falls within Section 401.3 of NERC's Rules of Procedure. Moreover, NERC's “tool” of assigning a higher violation severity level for a related violation of FAC-003-2 will occur in a compliance posture. The other “tool” identified by NERC, more stringent oversight of an entity that fails to comply with a reporting requirement, is simply a matter of Regional Entity discretion regarding how it chooses to apply compliance resources.

102. Ultimately, if these tools prove ineffective in gaining the cooperation of a transmission owner in timely reporting of sustained outages as set forth in FAC-003-2, NERC's Rules of Procedure provide for NERC seeking enforcement action by the Commission for a violation of NERC's Rules of Procedure. Such a violation would also violate section 39.2 of the Commission's regulations. 89

103. NERC modified the definition of “Right-of-Way” as follows:

104. While the Commission in the NOPR proposed to approve the right-of-way definition, it also sought comment on certain aspects of the definition. Below, we discuss the following matters related to the right-of-way definition: (1) Guidance for defining an appropriate right-of-way; (2) NERC's approach to fall-ins by “danger trees”; and (3) vegetation management strategies.

105. In the NOPR, the Commission observed that, because fall-ins, blow-ins and grow-ins that cause a sustained outage violate FAC-003-2 only if they occur from inside the right-of-way, transmission owners have an incentive to define right-of-way as narrowly as possible to limit penalty exposure. 90 Related, the Commission noted that the right-of-way definition includes guidance as to how the transmission owner may define its right-of-way, requiring that it be based on construction documents, pre-2007 vegetation maintenance records, or as-built blowout standards. The Commission asked for comment on how the guidance in the definition will be used by (1) transmission owners to establish criteria to determine an appropriate right-of-way and (2) auditors to establish criteria to determine compliance with the Reliability Standard. 91

106. NERC points out that “an encroachment due to vegetation growth into the MVCD that caused a vegetation-related Sustained Outage” would violate Requirements R1 and R2, “regardless of the defined right-of-way.”  92 NERC also comments that, given the significant cost and public scrutiny of a sustained outage, transmission owners have an incentive to set right-of-way widths properly to ensure that the land needed to operate a transmission line is included.

107. Further, NERC clarifies that the right-of-way definition requires that the width of a corridor “be established by engineering or construction standards as documented in either construction documents, pre-2007 vegetation maintenance records, or by the blowout standard in effect when the line was built.”  93 NERC thus explains that the three types of information identified in the right-of-way definition are the criteria for a transmission owner to set the width of the right-of-way using sound engineering or construction standards. NERC states that “in all cases” the width of the right-of-way must meet engineering or construction standards and cannot be arbitrarily set by the transmission owner. According to NERC, auditors will be able to request supporting information used to set the width of the right-of-way, including any of the available information listed in the right-of-way definition.

108. Duke comments that the Commission's concern is unfounded because transmission owners are not free to arbitrarily define a particular right-of-way but, rather, are bounded by the specific parameters stated in NERC's definition.

109. Trade Associations state that, in many instances, transmission owners may not have construction documents, pre-2007 vegetation maintenance records, or as-built blowout standards since many transmission lines were constructed decades ago and the guidance material is no longer available. Trade Associations ask the Commission to clarify that, when guidance materials are unavailable, a transmission owner may work with NERC and its Regional Entity on a case-by-case basis to develop right-of-way widths applying, for example, recognized industry procedures. AEP comments that it supports the right-of-way definition with the understanding that, for some lines, the right-of-way may be constrained by the original design or existing legal rights. ITC also supports clarification where the materials stated in the right-of-way definition are not available, and proposes specific language to insert within the definition that would require the transmission owner to develop a written procedure to determine and document the corridor width based on current industry accepted methods.

110. In its reply comments, NERC opposes ITC's proposal for specific changes to the right-of-way definition, contending that the definition includes the necessary latitude for a transmission owner to determine a right-of-way based on the options provided in the definition.

111. We agree with NERC that an encroachment due to vegetation growth into the MVCD that results in a sustained outage would violate Requirements R1 and R2 regardless of the defined right-of-way. This responsibility is stated explicitly and without qualification regarding tree location: “[e]ach Transmission Owner shall manage vegetation to prevent encroachments into the MVCD of its applicable line(s) * * * of the types shown below * * * (4) An encroachment due to vegetation growth into the MVCD that caused a vegetation-related Sustained Outage.”  94 Further, we agree with NERC and others that the criteria set forth in the right-of-way definition provide a reasonable, objective means of determining an appropriate right-of-way width.

112. With regard to the concern of Trade Associations and others where none of the records mentioned in the right-of-way definition are available for a specific applicable transmission line, an alternative approach to setting right-of-way width is necessary. We agree with NERC that “in all cases” the width of the right-of-way must meet engineering or construction standards and cannot be arbitrarily set by the transmission owner. As suggested by Trade Associations, one reasonable way to achieve this is for the transmission owner to work with NERC and the relevant Regional Entity on a case-by-case basis to develop right-of-way widths applying recognized industry procedures. Further, NERC may determine—after some experience with setting right-of-way widths—that this is an appropriate topic for an industry advisory or operating committee guideline. We will not, however, require that NERC revise the Reliability Standard to address this issue, as suggested by ITC.

113. In the NOPR, the Commission agreed with NERC that fall-ins of green or healthy trees outside the corridor-based right-of-way, but within the right-of-way controlled by the transmission owner, would not violate FAC-003-2. The Commission, however, questioned NERC's approach to a fall-in by “danger timber” in that same range. NERC explained that, “if the TO is regularly identifying its danger trees and has a program for managing the risk of fall-in there would be no violation.”  95 The Commission expressed concern that this statement “could be read to mean that, as long as the transmission owner identifies danger trees and has a program to manage the risk of those trees, an encroachment into the MVCD from a location within the transmission owner's control would not be a violation.”)  96 The Commission disagreed with such an approach because the mere existence of a program to identify danger trees and a program to manage risk should not shield a transmission owner from enforcement.

114. In response to the Commission's concerns, NERC clarifies that its earlier statement that “if the TO is regularly identifying its danger trees and has a program for managing the risk of fall-in there would be no violation” is accurate so long as the transmission owner implements a well-managed and executed vegetation management program as documented under Requirement R3 and as carried out through the risk-based Requirements R6 and R7. According to NERC, the reference to “no violation” pertained to Requirements R6 and R7, but was not intended to convey that mere existence of a program to identify danger trees and a program to manage risk would create a shield from a finding of a violation under Requirements R1 or R2 if an encroachment occurs.

115. APS, BPA, PA PUC and VELCO support NERC's approach. They agree that the “mere existence” of a danger tree program is insufficient, and transmission owners should have a “demonstrably active and robust” danger tree management program. BPA adds that a transmission owner that has reasonably implemented a program to manage fall-in risks should be exempt from violation since “accidents do occur” even when due care is exercised. PA PUC comments that, while NERC's data request response is helpful, it should be incorporated into the BES definition or the Reliability Standard to prevent confusion in the future.

116. Trade Associations articulate their understanding that, in the event of encroachment into the MVCD by a danger tree located outside the right-of-way but within the control of the transmission owner, the transmission owner would not be found in violation of Requirement R6 when it implemented a program that regularly identifies danger trees and manages the risk of fall-in encompassing areas within the transmission owner's control. Further, Trade Associations comment that, while it is common practice to include identification and mitigation of danger trees in transmission owner vegetation management plans, in many cases the identification of diseased or dying trees is not a matter involving simple observation. 97 Thus, Trade Associations as well as Duke caution against basing enforcement decisions on “post hoc” analyses of whether a transmission owner correctly identified a dead or diseased tree. They assert that, if the Commission places transmission owners at risk of violation based on such after-the-fact assessment, transmission owners may likely engage in more clear-cutting to avoid the risk. VELCO also indicates that a strict stance on off-corridor danger tree management could lead to more clear-cutting and adds that a better outcome motivates transmission owners to actively identify and, exercising professional judgment, remove danger trees on a case-by-case basis.

117. PacifiCorp maintains that the Commission's concern appears to be unfounded based on the explicit language of Requirements R1 and R2 that require transmission owners to manage vegetation to prevent all encroachments into the MVCD of an applicable line, and then identifies specific circumstances. According to PacifiCorp, the NERC drafting team was concerned that many transmission owners have rights-of-way far wider than necessary to responsibly maintain the integrity of their applicable transmission lines. PacifiCorp asserts that it would be unreasonable to hold utilities to the same level of compliance for all activities within the legal right-of-way for areas beyond those currently necessary.

118. Fall-ins of danger trees into the MVCD from outside the right-of-way but within the control of the transmission owner are not addressed by Requirements R1 and R2. However, such fall-ins do have compliance implications with regard to Requirements R6 and R7 of FAC-003-2. Requirement R6 requires each transmission owner to perform a “Vegetation Inspection of 100% of its applicable transmission lines * * * at least once per calendar year * * * ” NERC defines the term “Vegetation Inspection” as “[t]he systematic examination of vegetation conditions on a Right-of-Way and those vegetation conditions under the Transmission Owner's control that are likely to pose a hazard to the line(s) prior to the next planned maintenance or inspection * * * ”  98 The definition explicitly provides that the Vegetation Inspection include the examination of vegetation conditions not only in the defined right-of-way but of “vegetation conditions under the Transmission Owner's control that are likely to pose a hazard to the line(s) * * * ” Likewise, Requirement R7 provides that “[e]ach transmission owner shall complete 100% of its annual vegetation work plan of applicable lines to ensure no vegetation encroachments occur within the MVCD,” without mention of or limitation to the defined right-of-way. 99

119. Thus, the fall-in of danger tree from outside the defined right-of-way but within a transmission owner's control would likely merit examination to determine whether the transmission owner is properly conducting the annual Vegetation Inspection as required by Requirement R6 and performing the annual work plan as required by Requirement R7. In this context, we find the explanation of NERC and other commenters informative that it is not sufficient for a transmission owner simply to demonstrate that it identifies danger trees and has a program for managing the risk of fall-in. Rather, a transmission owner must have a well-managed, danger tree management program as carried out through Requirements R6 and R7. 100

120. As indicated by NERC, the “documented maintenance strategies” required by Requirement R3 should demonstrate whether a transmission owner adequately inspects vegetation and completes its annual work plan. Likewise, the Measures set forth in FAC-003-2 provide the basis for determining a transmission owner's compliance with the corresponding Requirements R6 and R7. We agree with Trade Associations and Duke that a potential violation of Requirements R6 and R7 should not be based on “post hoc” analyses of whether a transmission owner correctly identified a dead or diseased tree. A fall-in from outside of the defined right-of-way may give reason to review a transmission owner's compliance with the annual inspection and work plan requirements. In the context of fall-ins from outside the defined right-of-way, enforcement decisions should be based on a review of the quality of the transmission owner's program and its execution of that program.

121. In the NOPR, the Commission noted that FAC-003-2 does not require clear-cutting along the right-of-way but, instead, gives the transmission owner flexibility to adopt an appropriate vegetation management strategy to comply with the Reliability Standard. The NOPR also noted that NERC's Technical Reference Document provides that different vegetation management strategies may be appropriate for different areas, and FAC-003-2 gives transmission owners the option to adopt strategies to comply with FAC-003-2 that encourage active vegetation management and Integrated Vegetation Management rather than clear-cutting. 101 Further, NERC's Technical Reference Document describes American National Institute of Standards (ANSI) A-300—Best Management Practices for Tree Care Operations and identifies Integrated Vegetation Management as a best management practice, including incorporation of wire-border zone management techniques and the establishment and maintenance of compatible vegetation.

122. Trade Associations state that, since approval of FAC-003-1, transmission owners have “aggressively pursued compliance under a `zero defects' mandate for transmission tree-related outages” and, as a result, only a small number of violations have affected reliable operation of the Bulk-Power System. 102 According to Trade Associations, transmission owners' vegetation management practices are designed to prevent vegetation-related outages by creating and sustaining a stable and compatible “vegetated community” within a transmission corridor using “integrated vegetation management” techniques. They further explain that vegetation that has the “genetic disposition” to grow to heights that may interfere with transmission should be removed. Trade Associations contend that continuous trimming will not guarantee that an encroachment will not occur, and it is a “gamble” not to use best management practices and remove the vegetation that will interfere with transmission. They add that transmission owners do have successful vegetation management programs that also help property owners maintain and even enhance the environmental benefits of the right-of-way while ensuring sufficient clearance between the vegetation and energized conductors. Trade Associations and ITC add that transmission owners have outreach programs and maintain information on company Web sites on vegetation management practice, and encourage the Commission to further this public education process. PacifiCorp suggests that the Commission appears to apply a “double standard” by supporting a zero tolerance approach to compliance with FAC-003 while also opposing tree removal.

123. PG&E and APS support the Commission's recognition of the importance of using best utility vegetation management practices, the use of Integrated Vegetation Management and the “wire-border zone” technique contained in ANSI A-300. PG&E states that an approach using these concepts will accomplish the objective of developing and maintaining a sustainable, low-growing compatible plant community in the right-of-way, while reducing the risk of vegetation-related outages. APS states that ANSI A-300 recognizes the need to remove vegetation that can cause power outages within the right-of-way and to convert the right-of-way to more compatible plant species.

124. APS comments that ANSI A-300 recognizes the need to communicate with all stakeholders involved in the vegetation maintenance process. APS acknowledges that the Commission “is in a difficult position” on ensuring reliability and considering public expectations for vegetation management. 103 APS recognizes that, in the past, transmission owners have used the Commission's regulations as an “excuse” for clearing trees. According to APS, while properly implementing best management practices may require clearing that could displease property owners, vegetation management programs should engage and work cooperatively with land owners.

125. Trade Associations also raise concerns regarding right-of-way access issues, particularly involving federal lands. According to Trade Associations, for some transmission owners, access to federal lands is a “significant variable” in setting facilities ratings, configuring transmission for reliability and vegetation management. Trade Associations assert that, particularly in Western states, transmission owners have experienced significant difficulties with federal agency field personnel for obtaining timely permission to access land and scheduling facilities inspections and maintenance activities, including vegetation management. Trade Associations thus urge the Commission to take a leadership role in initiating and coordinating discussions with other federal agencies, and with stakeholder groups, to find practical remedies to right-of-way access issues.

126. As indicated by NERC, Requirement R3 documented maintenance strategies can take many forms. 104 While accommodating flexibility, these documented strategies must have sufficient specification to provide a means to follow the transmission owner's strategy through a paper trail or guidelines. Documented strategies cannot be so vague as to fail to provide any clear guidance for auditors and others to understand the basis for the transmission owner's vegetation management program.

127. With regard to comments on the implementation of vegetation management strategies, we agree that ANSI-A 300 is a commonly recognized source for best vegetation management practices. We disagree with PacifiCorp, however, that we are seeking to apply a “double standard” by supporting a zero tolerance approach to compliance with FAC-003 while also opposing tree removal. We understand that, as explained by Trade Associations and other commenters, best practices call for the removal of tall-growing vegetation from the right-of-way and replacement with a sustainable plant community. In many circumstances, this is a reasonable approach. However, we also believe that a transmission owner should not monolithically equate vegetation management with tree removal. Circumstances may provide greater latitude, for example, when addressing the concerns of an individual landowner and where the species of vegetation are not genetically disposed to encroach into the MVCD. Certainly, as recognized by APS, a transmission owner decision's to remove vegetation in such circumstances should not be ascribed to the Commission.

128. Ultimately, transmission owners should work with private land owners to determine an appropriate approach that assures reliability and respects private land owner concerns. As noted by commenters, this approach requires clear communications between transmission owners and private landowners; and meaningful outreach should indicate how a transmission owner plans to execute vegetation management along the right-of-way.

129. Trade Associations raise concerns regarding transmission owners' right-of-way access issues on public lands. We note that in Order No. 693, the Commission directed NERC “to collect outage data for transmission outages of lines that cross both federal and non-federal lands, analyze it, and use the results of this analysis and information to develop a Reliability Standard that would apply to transmission lines crossing both federal and non-federal land.”  105 NERC has not provided this analysis, nor does the development record provided with NERC's petition indicate that the standard drafting team utilized such analysis or data in developing FAC-003-2. In these circumstances, given the lack of objective data, it is difficult for the Commission to gauge the nature or seriousness of this issue.

130. NERC should gather and analyze the necessary data regarding vegetation management issues on public lands. If NERC's analysis indicates that there are issues that should be addressed, NERC should propose a means to address the concern, for example by issuing an alert, or propose other appropriate action.

131. The Office of Management and Budget (OMB) regulations require that OMB approve certain reporting and recordkeeping (collections of information) imposed by an agency. 106 Upon approval of a collection(s) of information, OMB will assign an OMB control number and expiration date. Respondents subject to the filing requirements of this rule will not be penalized for failing to respond to these collections of information unless the collections of information display a valid OMB control number.

132. The Commission is submitting these reporting and recordkeeping requirements to OMB for its review and approval under section 3507(d) of the Paperwork Reduction Act of 1995. The Commission solicited comments on the need for and the purpose of the information contained in Reliability Standard FAC-003-2 and the corresponding burden to implement the Reliability Standard. The Commission received one comment on the reporting burden estimates. Idaho Power states that it does not anticipate adding new transmission lines to its vegetation management plan and, therefore, Idaho Power does not project a significant increase in outage reporting.

133. The Final Rule approves Reliability Standard FAC-003-2, which includes certain requirements to create and maintain records related to a transmission owner's vegetation management strategies, vegetation management work plan and its performance of inspections. Because transmission owners have vegetation management plans they follow per the existing transmission vegetation management standard (FAC-003-1), and must compile and maintain similar records and provide similar reports under the existing standard, the revisions are expected to have a minor impact on the burden of record-keeping and reporting. In addition, by allowing greater flexibility compared to the currently-effective Version 1 standard with regard to the materials that must be maintained for a vegetation management plan or strategy, FAC-003-2 may reduce the reporting burden for some entities.

134. Public Reporting Burden: Our estimate below regarding the number of respondents is based on the NERC compliance registry as of July 24, 2012. According to the compliance registry, NERC has registered 330 transmission owners within the United States. Transmission owners must report and retain certain data pursuant to the currently effective Version 1 standard. Thus, the burden estimate below is based on the potential change in the reporting burden imposed by FAC-003-2. Requirement R3 of FAC-003-2 provides more flexibility than FAC-003-1 for transmission owners in preparing and maintaining a vegetation management program, and the incremental change in the burden may be negligible or even decrease for some portion of transmission owners. The individual burden estimates are based on each transmission owner having to perform a one-time review of the revised Reliability Standard's information collection requirements and to make any required modifications to its existing vegetation management plans and documentation procedures. In addition, the burden estimate takes into account an on-going, albeit very minor increase in the quarterly reporting burden, based on the increased burden to confirm whether or not reportable outages have occurred on lines not previously subject to FAC-003-1's requirements. Idaho Power's comment affirms that the increase in quarterly reporting burden should be insignificant. Further, the burden estimate takes into account the increased recordkeeping burden associated with the Reliability Standard's annual vegetation inspection requirements, which is estimated to increase the inspection cycles (and the associated documentation to demonstrate compliance) for about one third of transmission owners (110 transmission owners).

Total Annual Hours for Collection: (Compliance/Documentation) = 5,730 hours.

Quarterly Reporting Cost for Transmission Owners: = 230 hours @ $70/hour  108 = $16,100.

Annual Vegetation Inspections Documentation: = 220 hours @ $28/hour  109 = $6,160.

Total Annual Cost (Reporting + Record Retention): = $16,100 + $6,160 = $22,260.

One-Time Review and Modification of Plans and Documentation: 5,280 hours @ $52/hour  110 = $274,560.

Title: Mandatory Reliability Standards for the Bulk-Power System.

Action: Revisions to collection FERC-725A.

OMB Control No.: 1902-0244.

Respondents: Businesses or other for-profit institutions; not-for-profit institutions.

Frequency of Responses: Annual, quarterly, and one-time.

Necessity of the Information: Reliability Standard FAC-003-2 Transmission Vegetation Management is part of the implementation of the Congressional mandate of the Energy Policy Act of 2005 to develop mandatory and enforceable Reliability Standards to better ensure the reliability of the nation's Bulk Power System. Specifically, the revised standard would ensure that transmission owners are protecting transmission lines from encroachment of vegetation.

Internal Review: The Commission has reviewed the revisions to the currently-effective Reliability Standard and made a determination that its action is necessary to implement section 215 of the FPA. The Commission has assured itself, by means of its internal review, that there is specific, objective support for the burden estimate associated with the information requirements.

135. Interested persons may obtain information on the reporting requirements by contacting the following: Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426 [Attention: Ellen Brown, Office of the Executive Director, email: DataClearance@ferc.gov, phone: (202) 502-8663, fax: (202) 273-0873].

For submitting comments concerning the collection(s) of information and the associated burden estimate(s), please send your comments to the Commission and to the Office of Management and Budget, Office of Information and Regulatory Affairs, Washington, DC 20503 [Attention: Desk Officer for the Federal Energy Regulatory Commission, phone: (202) 395-4638, fax: (202) 395-7285]. For security reasons, comments to OMB should be submitted by email to: oira_submission@omb.eop.gov. Comments submitted to OMB should include OMB Control Number 1902-0244 and Docket Number RM12-4-000.

136. The Commission is required to prepare an Environmental Assessment (EA) or an Environmental Impact Statement (EIS) for any action that may have a significant adverse effect on the human environment. 111 The Commission has categorically excluded certain actions from this requirement as not having a significant effect on the human environment. In the NOPR, the Commission stated the proposed action, i.e., approval of the revised Reliability Standard, falls within the categorical exclusion for rules that are clarifying, corrective, or procedural, or that do not substantially change the effect of the regulations being amended. 112

137. Washington DNR urges the Commission to perform an EIS on Reliability Standard FAC-003-2. According to Washington DNR, vegetation management can conflict with protection of fragile vegetation species that are identified in federal and state programs and, thus, changes to the Reliability Standard may result in adverse environmental impacts. Washington DNR comments that it cannot fully assess the impacts of the proposed Reliability Standard since it is unaware of the locations of all transmission lines operated below 200 kV that would be subject to FAC-003-2 and may affect state lands. Washington DNR contends that the proposed Commission rulemaking constitutes a major federal action with the potential for significant impacts on the environment and must not be promulgated without an EIS. Washington DNR disagrees with the Commission's reliance on the categorical exclusion for rules that are clarifying, corrective, or procedural, or do not substantially change the effect of regulations being amended. Rather, according to Washington DNR, the proposal substantively changes the existing regulations by “applying expanded clearance standards and an entirely new and legally indefensible definition of `right-of-way', and does so across unpublished miles of under-200 kV line not currently subject to this regulation.”  113

138. Washington DNR also contends that the timeframe to comply with the Version 2 standard does not include sufficient time for transmission owners to give meaningful notice to landowners, obtain relevant information about the environmental characteristics or management of adjacent lands, obtain permits, and work with landowners to create mutually agreed upon management plans.

139. APS and PacifiCorp recommend that the Commission initiate an EIS in conjunction with other federal agencies such as the U.S. Department of Agriculture, U.S. Department of Interior and DOE. According to APS, because the Version 1 standard “compelled transmission owners to determine what should be appropriate for vegetation management, the industry automatically referenced ANSI A-300 Best Management Practices for Tree Care Operations.”  114 APS claims that the elimination of a direct reference to ANSI A-300 will “lead to weak links” and possibly result in some transmission owners regressing in their vegetation management programs by reverting to tree pruning. Thus, APS recommends that an EIS address implementation of ANSI A-300 and applicable best management practices on federal lands to “provide transmission owners authority and allow them to define their program of work within the scope of their TVMP and eliminate personal opinion when working at the local level of each federal agency.” 115

140. The Commission is required to prepare an EA or an EIS for any action that may have a significant adverse effect on the human environment. 116 We disagree with the assertion that we should require an EIS or EA for Reliability Standard FAC-003-2.

141. Reliability Standard FAC-003-2 modifies the currently effective Version 1 standard. For example, it includes minimum vegetation clearance distances in the text of the standard, instead of referencing another document as in the Version 1 standard. However, the revised standard makes little change in minimum clearance distance values from the current rule and, therefore, will not have a significant impact on how transmission owners currently perform vegetation management so as to warrant an EA or EIS. The differences in minimum clearance distances between FAC-003-2 and the Version 1 standard are measured in inches, and thus do not give rise to concerns that the modified standard may have a significant adverse effect on the human environment. 117

142. Further, we are not persuaded by Washington DNR that NERC's revised definition of the term “Right-of-Way” justifies undertaking an EA or EIS. Version 1 defines right-of-way based on a transmission owner's legal rights. 118 In Order No. 693, the Commission directed NERC to consider whether to change the definition of right-of-way to more precisely define the area that needed to be subject to vegetation management, i.e., to encompass the required clearance area, and not the entire legal right-of-way, particularly where the legal right-of-way may greatly exceed the area needed for effective vegetation management. 119 The revised right-of-way definition submitted with FAC-003-2 recognizes that a transmission owner may not always need to maintain vegetation to the full extent of its legal right-of-way. For example, PacifiCorp explains that a transmission owner may have acquired rights in anticipation of adding facilities at a later date, but maintenance of the additional corridor may not be necessary to assure that vegetation will not encroach into existing transmission lines. 120 The new FAC-003-2 would allow transmission owners flexibility to manage vegetation in an area less than their legal right-of-way but still in an area appropriate to assure no encroachment into a transmission line. Other than pointing to the fact that NERC revised the right-of-way definition, Washington DNR provides no explanation how bringing more precision to the area that needs to be managed in the new right-of-way definition may have a significant adverse effect on the human environment.

143. The application of the standard to certain sub-200 kV facilities under the revised standard also does not warrant the preparation of an EA or EIS. While the expanded applicability subjects the owners of certain sub-200 kV transmission facilities to compliance with FAC-003-2, we do not expect the expanded applicability of FAC-003-2 to significantly change vegetation management practices at these facilities or otherwise have a significant adverse effect on the human environment. The transmission lines that are implicated by FAC-003-2, even under the expanded applicability, by necessity, are currently subject to vegetation management practices, as transmission owners must maintain their existing rights-of-way to prevent flashovers and outages. 121 In many instances, utilities manage vegetation to comply with either good utility practice or conduct vegetation management in accordance with best industry practices. 122

144. Moreover, while the revised Reliability Standard requires a specific result, i.e., that vegetation does not encroach into the MVCD, the standard does not require any specific means of obtaining that result. Transmission owners will have flexibility regarding how they perform vegetation management to comply with the new standard, and the circumstances (topography, weather, tree growth, etc.) will differ for each transmission owner. 123 Thus, while we believe that the impacts will not be significant because transmission owners have generally conducted vegetation management on the sub-230 kV facilities that will now be subject to compliance with FAC-003-2 (or else there would have been many more flashovers and outages), identifying those incremental impacts of the revised Reliability Standard on either a programmatic or site-specific basis would be difficult and likely not produce meaningful results. In such circumstances, where the potential impacts are not subject to meaningful quantification, courts have found that it is not necessary to conduct an EIS or EA. 124

145. Further, we are not persuaded by the claims of APS and PacifiCorp. According to APS, because the Version 1 standard “compelled transmission owners to determine what should be appropriate for vegetation management, the industry automatically referenced ANSI A-300 Best Management Practices for Tree Care Operations.”  125 While the Version 1 standard references ANSI A-300, it does not require compliance with the document. 126 Moreover, FAC-003-2 references the same document, again as a source for best industry practices in vegetation management. 127 Thus, we are not persuaded by APS's claim that the change in references to ANSI A-300 will “lead to weak links” and possible “regression” in vegetation management practices, or that the revisions to the standard may result in a significant adverse effect on the human environment, let alone a substantial change to the regulation.

146. APS recommends that an EIS address implementation of ANSI A-300 and best management practices on federal lands to “provide transmission owners authority and allow them to define their program of work * * * and eliminate personal opinion when working at the local level of each federal agency.”  128 However, implementation of ANSI A-300 best practices is not a requirement of the Version 1 standard or FAC-003-2. Thus, we are not persuaded by APS that an EIS is required to study the implementation of ANSI A-300 best practices on federal lands.

147. For the reasons discussed above, we conclude that the Commission correctly asserted that approval of the revised Reliability Standard falls within the categorical exclusion set forth in section 380.4(a)(2)(ii) of the Commission's rules and regulations for promulgation of rules that are “clarifying, corrective or procedural, or that do not substantively change the effect of * * * regulations being amended.” Accordingly, we will not require an EIS or EA on Reliability Standard FAC-003-2.

148. The Regulatory Flexibility Act of 1980 (RFA)  129 generally requires a description and analysis of final rules that will have significant economic impact on a substantial number of small entities. The RFA mandates consideration of regulatory alternatives that accomplish the stated objectives of a proposed rule and that minimize any significant economic impact on a substantial number of small entities. The Small Business Administration's (SBA) Office of Size Standards develops the numerical definition of a small business. 130 The SBA has established a size standard for electric utilities, stating that a firm is small if, including its affiliates, it is primarily engaged in the transmission, generation and/or distribution of electric energy for sale and its total electric output for the preceding twelve months did not exceed four million megawatt hours. 131

149. Reliability Standard FAC-003-2 applies to overhead transmission lines operated at 200 kV or higher, and, for the first time, to transmission lines operated at less than 200 kV if they are elements of an IROL or elements of a Major WECC Transfer Path. In addition, FAC-003-2 requires annual vegetation inspections for all applicable lines, which could result in an increase in annual inspections performed for a subset of transmission owners.

150. Comparison of the NERC Compliance Registry with data submitted to the Energy Information Administration on Form EIA-861 indicates that, of the 330 transmission owners in the United States registered by NERC, 127 of these entities qualify as small businesses. The Commission estimates that the 127 transmission owners that qualify as small businesses will incur increased costs associated solely with a one-time review of the standard and modification to existing plans and procedures. As described in the information collection section of this Final Rule, the estimated cost for the increased data collection and retention is approximately $1,000 per entity.

151. Further, some transmission owners that qualify as small entities will incur costs associated with an increase in frequency of inspections. As indicated above, the Version 1 standard requires periodic vegetation management inspections of transmission line rights-of-way at an interval determined by each transmission owner. Requirement R6 of FAC-003-2 requires each transmission owners to inspect 100 percent of the transmission lines at least once per year. Based on a review of available information, including data provided in response to a 2004 vegetation management study performed by Commission staff, 132 we estimate that approximately one third, i.e., 42, of the transmission owners that qualify as small entities would incur costs associated with more frequent inspection cycles. Assuming that (1) such small entities own approximately 50-200 miles of transmission lines, (2) approximately 15-20 miles of transmission line can be inspected per day and (3) cost of labor is approximately $47 per hour, 133 the estimated increase in inspection cost for these 42 small entities is in the range of approximately $5,000 to $10,000 per entity. As discussed above, FAC-003-2 modifies the applicability of the Reliability Standard to include overhead transmission lines that are operated below 200 kV if they are either an element of an IROL or an element of a Major WECC Transfer Path. Based on a review of the Major WECC Transfer Paths and a sample of sub-200 kV IROLs in the Eastern Interconnect, the Commission believes that most, if not all, of the transmission lines subject to the expanded applicability of FAC-003-2 are owned by large entities. Thus, the increased cost of the new rule to small entities appears to be negligible with respect to the expanded applicability of the Reliability Standard.

152. Based on the above analysis, the Commission does not consider the cost of the modified Reliability Standard to be a significant economic impact for small entities because it should not represent a significant percentage of an affected small entity's operating budget.

153. Based on this understanding, the Commission certifies that the Reliability Standard will not have a significant economic impact on a substantial number of small entities. Accordingly, no regulatory flexibility analysis is required.

154. In addition to publishing the full text of this document in the Federal Register , the Commission provides all interested persons an opportunity to view and/or print the contents of this document via the Internet through FERC's Home Page ( http://www.ferc.gov ) and in FERC's Public Reference Room during normal business hours (8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street, NE., Room 2A, Washington DC 20426.

155. From FERC's Home Page on the Internet, this information is available on eLibrary. The full text of this document is available on eLibrary in PDF and Microsoft Word format for viewing, printing, and/or downloading. To access this document in eLibrary, type the docket number excluding the last three digits of this document in the docket number field.

156. User assistance is available for eLibrary and the FERC's Web site during normal business hours from FERC Online Support at 202-502-6652 (toll free at 1-866-208-3676) or email at ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502-8371, TTY (202) 502-8659. Email the Public Reference Room at public.referenceroom@ferc.gov.

157. These regulations are effective May 28, 2013. The Commission has determined, with the concurrence of the Administrator of the Office of Information and Regulatory Affairs of OMB, that this rule is not a “major rule” as defined in section 351 of the Small Business Regulatory Enforcement Fairness Act of 1996.

Background

We are making final the rules for evaluating visual disorders we proposed in a notice of proposed rulemaking (NPRM) published in the Federal Register on February 13, 2012 (77 FR 7549). The preamble to the NPRM provides a full explanation of the background of these revisions. You can view the preamble by visiting www.regulations.gov and searching for document “SSA-2010-0078-0001.” We are making a number of changes because of public comments to the NPRM. We explain those changes in our summary of the public comments and our responses later in this preamble. We are also making a number of minor editorial changes throughout these final rules.

We are revising the listings for evaluating visual disorders to update the medical criteria, clarify how we evaluate visual disorders, and address adjudicator questions.

We will begin to use these final rules on their effective date. We will continue to use the current rules until the date these final rules become effective. We will apply the final rules to new applications filed on or after the effective date of these final rules and to claims that are pending on or after the effective date. 1 These final rules will remain in effect for 5 years after the date they become effective, unless we extend them, or revise and issue them again.

In the NPRM, we provided the public with a 60-day comment period, which ended on April 13, 2012. We received 12 public comment letters. The comments came from members of the public, national medical organizations, disability examiners, and a national association representing disability examiners in the State agencies that make disability determinations for us. We have summarized the comments below because some of them were long. We summarized only those comments with concerns or suggestions and responded to the significant issues that were relevant to this rulemaking. Some commenters supported the proposed changes and noted the provisions with which they agreed. While we appreciate those comments, we have not summarized or responded to them below because they do not require a response.

Comment: One commenter suggested that we replace the reference to “physician or optometrist” with “optometrist or ophthalmologist” in 2.00A4 and 102.00A4 where we explain what evidence we need to evaluate visual disorders, including those that result in statutory blindness under title II.

Response: We did not adopt this comment because we removed the reference to “physician or optometrist” from those sections. When we were considering this comment, we determined we did not need to include the reference because our rules that explain the sources who can provide evidence to establish an impairment are in 20 CFR 404.1513 and 416.913, and, therefore, we do not need to restate those sources in the introductory text.

Comment: One commenter suggested that we maintain the specific references to the Humphrey Field Analyzer (HFA) and Octopus perimeters that were provided in the introductory text. The commenter believed that the specific references were essential for making accurate determinations and decisions.

Response: We did not adopt this comment because we believe that providing the requirements for acceptable perimeters and perimetry is sufficient for accurate decisionmaking. We provide the requirements for acceptable perimeters in 2.00A9 and 102.00A9. We also provide the requirements for acceptable perimetry in 2.00A6 and 102.00A6 and include examples of acceptable automated static threshold tests (HFA 30-2, HFA 24-2, and Octopus 32) that can be used to evaluate visual field loss.

Comment: One commenter suggested that we develop a formula for determining the intensity of the stimulus based on the maximum stimulus luminance of the instrument rather than include two examples in 2.00A6b(iii) and 102.00A6b(iii).

Response: We did not adopt the commenter's suggestion that we develop a formula to determine the intensity of the stimulus, but we did make a change in the final rules to address the commenter's concern. We added a third example (2.00Ab(iii) C and 102.00Ab(iii) C ), so the listings now include the most common maximum stimulus luminances on automated static threshold perimeters.

Comment: One commenter said that the mean deviation in 2.03B and 102.03B varies by age and suggested that we reconsider using mean deviation as a listing criterion.

Response: We did not adopt this comment. As we said when we published the final rule in 2006 (71 FR 67013), the National Research Council recommended that a mean deviation of 22 or worse on an automated static threshold test measuring the central 30 degrees of the visual field would serve as a reasonable criterion for disability determination. We continue to agree with that recommendation. 2

Comment: One commenter requested that we provide guidance on how to interpret and assess medical findings included in the case file that are outside of the specified testing requirements.

Response: We did not adopt this comment. We cannot provide guidance on how to use all vision tests. We believe that it is sufficient to provide specific guidance on the testing that is required to meet the listings. All other testing found in the medical evidence can be evaluated with the totality of the evidence when making a determination or decision at other steps in the sequential evaluation.

Commenter: One commenter said that our use of the term “cycloplegic refraction” in proposed listing sections 2.00A5d and 102.00A5d is incorrect and suggested that we revise the definition for clarity and accuracy. The commenter also noted that cycloplegic refraction is a part of a comprehensive eye examination and may be used to provide a more precise measurement of refractive error.

Response: We partially adopted this comment. We revised the definition of “cycloplegic refraction” in 2.00A5d and 102.00A5d, but we did not adopt the commenter's suggestion to note that cycloplegic refraction is a part of a comprehensive eye examination. Rather, we deleted the statement in the proposed rules that said cycloplegic refraction testing is not part of a routine examination.

Comment: One commenter suggested that we modify the behavioral criteria in 102.02B for evaluating visual acuity in pre-verbal children by stating that the inability to fixate and pursue a one-inch toy at one foot with the better eye qualifies as legal blindness in children over one year of age. Another commenter suggested that we provide additional guidance in 102.00A for evaluating vision loss in young children.

Response: We did not adopt these comments. We believe that the guidance we provide in 102.00A5a(iv) sufficiently addresses the fact that very young children test differently from older children. We believe the requirements of 102.02B adequately address the possible issues that may arise when testing very young children. There is no need to modify the behavioral criteria. We did, however, clarify in final 102.00A5a(iv) that the inability to participate in testing using Snellen methodology or other comparable testing must be “due to your young age.”

Comment: One commenter suggested that we expand our guidance on scotomas in 2.00A6h by including information about how scotomas affect visual fields. The commenter also suggested that we provide guidance on the test instruments that would be best for measuring and evaluating the limitations caused by the scotoma.

Response: We did not adopt this comment. We clarify the definition of scotoma by including “field defect” in addition to a “non-seeing area.” We believe that the guidance we provide in 2.00A6h (and 102.00A6h) for how we consider scotomas when evaluating vision loss, in addition to the guidance in 2.00A6a, 2.00A6b, and 2.00A6e (and 102.00A6a, 102.00A6b, and 102.00A6e) on acceptable perimeters, explains sufficiently how scotomas affect visual fields, how we consider scotomas, and which instruments are best for measuring visual field loss.

Comment: Several commenters recommended that we amend the language used in the Act regarding blindness.

Response: We did not adopt these comments. We use the language in the Act in our regulations because we do not have the authority to revise the language Congress used in the Act without Congressional legislation.

Comment: One commenter noted that the sum of the eight principal meridians we identify in the right eye in Figure 1 in 2.00A7 is incorrect. The commenter noted that the correct sum of the principal meridians should be 530 instead of 500.

Response: We partially adopted this comment. We revised Figure 1 in 2.00A7 and 102.00A7 to show the points on the principal meridians clearly. However, because we are using the figure to explain a visual efficiency percentage of 100 percent, the sum of the meridians remains 500.

Comment: One commenter believed that we should clarify our guidance on visual efficiency values and percentages to make it easier to differentiate between the two. The commenter said that the term “efficiency value” is inappropriate because it indicates impairment rather than severity, and the commenter suggested that we use the term “impairment value.” The commenter also believed that Table 1 in 2.00A7 is confusing because it contains both values and percentages.

Response: We adopted these comments. We have revised 2.00A7 and 102.00A7, and added 2.00A8 and 102.00A8 to include language that clarifies the differences between visual acuity efficiency values and visual acuity efficiency percentages. We also revised the listing criteria for 2.04 and 102.04 to reflect the clarification.

Comment: One commenter suggested that we remove the phrase “because they significantly reduce the visual field” from our guidance on telescopic lenses in 2.00A5c because reduced field is only one of many reasons why telescopic lenses should not be used to test visual acuity.

Response: We adopted this comment. We agree that there are several reasons that the telescopic lens should not be used to test visual acuity. It is unnecessary to provide an explanation for why each reason is unacceptable for our purposes. We believe that it is sufficient to simply state that visual acuity measurements obtained with telescopic lenses are unacceptable.

Comment: One commenter stated that our use of “perimetric lenses” in proposed 2.00A6g and 102.00A6g is outdated because these types of lenses are rarely used in modern medical practice. The commenter believed that it would be more logical to measure visual fields using the person's usual mode of corrective lenses.

Response: We partially adopted this comment. One of the goals of updating our regulations is to address advances in medical technology and terminology. We have removed the term “perimetric lenses” from 2.00A6g. We did not adopt the comment about using the person's usual mode of corrective lenses for testing. We continue to provide our guidance that eyeglasses should not be worn during visual field testing. Visual field testing accommodates the need for eyeglasses or other corrective lenses, allowing for accurate measurement of visual fields.

The Act authorizes us to make rules and regulations and to establish necessary and appropriate procedures to implement them. Sections 205(a), 702(a)(5), and 1631(d)(1).

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

We certify that these final rules will not have a significant economic impact on a substantial number of small entities because they affect individuals only. Therefore, the Regulatory Flexibility Act, as amended, does not require us to prepare a regulatory flexibility analysis.

These rules do not create any new or affect any existing collections and, therefore, do not require Office of Management and Budget approval under the Paperwork Reduction Act.

For the reasons set out in the preamble, we are amending 20 CFR chapter III, part 404, subpart P as set forth below:

Pursuant to the authority granted in 33 U.S.C. 1605, the DoN amends 32 CFR Part 706.

This amendment provides notice that the DAJAG (Admiralty and Maritime Law), under authority delegated by the Secretary of the Navy, has certified that USS MINNESOTA (SSN 783) is a vessel of the Navy which, due to its special construction and purpose, cannot fully comply with the following specific provisions of 72 COLREGS without interfering with its special function as a naval ship: Annex I, paragraph 2(a)(i), pertaining to the vertical placement of the masthead light; Annex I, Section 2(f) (i), pertaining to Virginia class submarine masthead light location below the submarine identification lights; Annex I, paragraph 2(k), pertaining to the vertical separation of the anchor lights and vertical placement of the forward anchor light above the hull; Rule 30 (a) and Rule 21 (e), pertaining to arc of visibility of the forward and after anchor lights; Annex I, paragraph 3(b), pertaining to the location of the sidelights; and Rule 21(c), pertaining to the location and arc of visibility of the sternlight. The DAJAG (Admiralty and Maritime Law) has also certified that the lights involved are located in closest possible compliance with the applicable 72 COLREGS requirements.

Moreover, it has been determined, in accordance with 32 CFR Parts 296 and 701, that publication of this amendment for public comment prior to adoption is impracticable, unnecessary, and contrary to public interest since it is based on technical findings that the placement of lights on this vessel in a manner differently from that prescribed herein will adversely affect the vessel's ability to perform its military functions.

For the reasons set forth in the preamble, the DoN amends part 706 of title 32 of the Code of Federal Regulations as follows:

The Wilmington Family YMCA, on behalf of NCDOT who owns and operates both the Isabel S. Holmes and the S.R. 74 bridges, has requested a temporary deviation from the current operating regulations set out in 33 CFR 117.829 (a) and 33 CFR 117.821(a)(4), respectively.

Due to changes in the event times, the following drawbridges will now be closed to navigation to accommodate the 6th annual PPD Beach2Battleship iron and half iron distance triathlons on Saturday, October 26, 2013: the Isabel S. Holmes Bridge from 10:30 a.m. to 6 p.m.; and the S.R.74 Bridge from 7 a.m. to 11:30 a.m.

There are no alternate routes for vessels transiting these sections of the Northeast Cape Fear River and the AIWW. The drawbridges will be able to open in the event of an emergency.

The majority of the vessels that transit through these bridges during this time of year are primarily recreational boats. The Coast Guard will inform all users of the waterways through our Local and Broadcast Notice to Mariners of the closure periods for the drawbridges so that vessels can arrange their transits to minimize any impacts caused by the temporary deviation.

In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the designated time period. This deviation from the operating regulations is authorized under 33 CFR 117.35.

The Route 107 temporary bridge, across the Saugus River, mile 2.5, between Saugus and Lynn, Massachusetts, has a vertical clearance in the closed position of 6 feet above mean high water and 15 feet above mean low water. The bridge is required to open on signal at all times in accordance with 33 CFR 117.5.

The waterway is transited by recreational and commercial fishing boats.

The lift span at the new bridge will be installed between April 1, 2013, and April 6, 2013. During that time period the span will be in the closed position. Once the construction of the lift span is completed the draw will be placed in the full open position until all the operating machinery is installed.

The upstream facilities and the fishermen were advised regarding the six day closure. No objections were received.

Under this temporary deviation the Route 107 temporary bridge may remain in the closed position from April 1, 2013 through April 6, 2013.

In accordance with 33 CFR 117.35(e), the bridge must return to its regular operating schedule immediately at the end of the designated time period. This deviation from the operating regulations is authorized under 33 CFR 117.35.

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

EPA is taking final action to withdraw our previous approvals of revisions to the state implementation plan (SIP) submitted by the State of California to demonstrate compliance with the vehicle miles traveled (VMT) emissions offset requirement under Clean Air Act (CAA) section 182(d)(1)(A) with respect to the 1-hour and 8-hour ozone standard in the South Coast nonattainment area. EPA is taking this action in response to a decision by the Ninth Circuit in Association of Irritated Residents v. EPA. Under section 110(k) of the CAA, we are also taking final action to disapprove these same plan elements because they reflect an approach to showing compliance with section 182(d)(1)(A) that was rejected by the Ninth Circuit.

Subject to our regulations at 40 CFR 52.31, our disapproval of the SIP revisions will trigger the new source review (NSR) offset sanction in CAA section 179(b)(2) and the highway funding sanction under CAA section 179(b)(1) in the South Coast ozone nonattainment area 18 months, and 24 months, respectively, after the effective date of this action unless we take final action approving SIP revisions meeting the relevant requirements of the CAA prior to the time the sanctions would take effect. 1 In addition to the sanctions, CAA section 110(c) provides that EPA must promulgate a federal implementation plan (FIP) addressing the deficiency that is the basis for this disapproval two years after the effective date of the disapproval unless we have approved a revised SIP before that date.

On September 19, 2012 (77 FR 58067), we proposed the same actions that we are finalizing today. In our proposed rule, we reviewed the regulatory and SIP submittal history of the South Coast Air Basin 1-hour and 8-hour nonattainment areas with respect to the VMT emissions offset requirement under CAA section 182(d)(1)(A), the related EPA actions, and the ensuing litigation and court decision. We provide a summary of that discussion herein. For a more detailed discussion, please see our September 19, 2012 proposed rule at pages 58068-58070.

The CAA requires EPA to promulgate national ambient air quality standards (NAAQS or “standards”) for certain pervasive air pollutants to protect public health and welfare with an adequate margin of safety. In 1979, EPA promulgated an ozone NAAQS of 0.12 parts per million (ppm), averaged over a 1-hour period. Under the CAA, EPA must also designate areas as attainment, nonattainment, or unclassifiable for the NAAQS, and States with designated nonattainment areas must submit revisions to their SIPs that provide for, among other things, attainment of the standards within certain prescribed periods.

The control requirements and date by which attainment of the one-hour ozone standard was to be achieved varied with an area's classification. Under the Clean Air Act Amendments of 1990, EPA designated the Los Angeles-South Coast Air Basin Area (“South Coast”)  2 as “extreme” nonattainment for the 1-hour ozone standard, with an attainment date no later than November 15, 2010. See 56 FR 56694 (November 6, 1991). Extreme areas were subject to the most stringent planning requirements and were provided the most time to attain the standard. The various ozone planning requirements to which Extreme ozone nonattainment areas were subject are set forth in section 172(c) and section 182(a)-(e) of the CAA. Of particular importance for the purposes of this action, section 182(d)(1)(A) requires the following:

As we discussed in our proposed rule, EPA believes that it is appropriate to treat the three required elements of section 182(d)(1)(A) ( i.e., offsetting emissions growth, attainment of the reasonable further progress (RFP) reduction, and attainment of the ozone NAAQS) as separable. As to the first element of CAA section 182(d)(1)(A) ( i.e., offsetting emissions growth), EPA has historically interpreted this CAA provision to allow areas to meet the requirement by demonstrating that emissions from motor vehicles decline each year through the attainment year. See 57 FR 13498, at 13521-15323 (April 16, 1992). The proposed rule and this final rule relate only to the first element of section 182(d)(1)(A) ( i.e., offsetting emissions growth). Herein, we refer to this element as the VMT emissions offset requirement.

In 1997, EPA replaced the 1-hour ozone standard with an 8-hour ozone standard of 0.08 ppm. See 62 FR 38856 (July 18, 1997). 3 EPA's anti-backsliding rules governing the transition from the 1-hour ozone standard to the 8-hour ozone standard revoked the 1-hour ozone standard effective June 2005 but also carried forward most of the SIP requirements, which had applied to an area by virtue of its 1-hour ozone classification, to areas designated as nonattainment for the 8-hour ozone standard. See 69 FR 23951 (April 30, 2004); 40 CFR 51.905(a)(1); and 40 CFR 51.900(f). The VMT emission offset requirement is one of the requirements carried forward; thus, the South Coast, which is designated nonattainment for the 1997 8-hour ozone standard, remains subject to the VMT emissions offset requirement for the 1-hour ozone standard notwithstanding the revocation of that standard in 2005. Moreover, the South Coast is subject to the VMT emissions offset requirement for the 1997 8-hour ozone standard itself by virtue of its classification, first as “Severe-17,” and now as “Extreme,” for the 1997 ozone standard. See 69 FR 23858 (April 30, 2004); 70 FR 71612 (November 29, 2005); 75 FR 24409 (May 5, 2010); and 40 CFR 51.902(a).

In 2008, to comply with the VMT emissions offset requirement for the 1-hour ozone standard, the South Coast Air Quality Management District (SCAQMD) submitted a demonstration showing decreases in aggregate year-over-year motor vehicle emissions in the South Coast from a base year through the applicable attainment year (2010). 4 The following year, EPA approved the South Coast 1-hour ozone VMT emissions offset demonstration as meeting the VMT emissions offset requirement. See 74 FR 10176 (March 10, 2009). The State of California also submitted a VMT emissions offset demonstration for the South Coast for the 8-hour ozone standard, and it too demonstrated compliance through a showing of aggregate year-over-year motor vehicle emissions decreases from a base year (2002) through the applicable attainment year (2024). 5

Meanwhile, as explained in more detail in our September 19, 2012 proposed rule, EPA's approval of the SCAQMD's VMT emissions offset demonstration for the 1-hour ozone standard was challenged in the Ninth Circuit Court of Appeals, and in 2011, the court ruled against EPA, determining that EPA incorrectly interpreted the statutory phrase “growth in emissions” in section 182(d)(1)(A) as meaning a growth in “aggregate motor vehicle emissions.” In other words, the court ruled that additional transportation control strategies and measures are required whenever vehicle emissions are projected to be higher than they would have been had vehicle miles traveled not increased, even when aggregate vehicle emissions are actually decreasing. Association of Irritated Residents v. EPA, 632 F.3d 584, at 596-597 (9th Cir. 2011), reprinted as amended on January 27, 2012, 686 F.3d 668, further amended February 13, 2012 (“ Association of Irritated Residents v. EPA” ).

Based on this reasoning, the court remanded the approval of the South Coast VMT emissions offset demonstration for the 1-hour ozone standard back to EPA for further proceedings consistent with the opinion. In May 2011, EPA filed a petition for panel rehearing requesting the court to reconsider its decision as to the VMT emissions offset requirement. In January 2012, the court denied the request and issued the mandate, but prior to the court's mandate, EPA took final action to approve the South Coast VMT emissions offset demonstration for the 1997 8-hour ozone standard as part of a larger plan approval action. See 77 FR 12674 (March 1, 2012). Shortly thereafter, several environmental and community groups filed a lawsuit in the Ninth Circuit challenging EPA's approval of that larger plan (i.e., the South Coast 1997 8-hour ozone plan). Communities for a Better Environment, et al. v. EPA, No. 12-71340.

In light of the remand in the Association of Irritated Residents v. EPA case and the current court challenge to EPA's approval of the same SIP element for the 8-hour ozone standard, EPA proposed to withdraw the Agency's previous approvals of the VMT emissions offset demonstrations submitted by the State of California to comply with the VMT emissions offset requirement under CAA section 182(d)(1)(A) for the 1-hour and the 1997 8-hour ozone standards in the South Coast. EPA also proposed to disapprove those same submittals.

EPA proposed the withdrawals of previous approvals and the disapprovals because the Ninth Circuit rejected EPA's long-standing interpretation of the first element of section 182(d)(1)(A) that states could demonstrate compliance with the VMT emissions offset requirement through submittal of aggregate motor vehicle emissions estimates showing year-over-year declines in such emissions and because the submitted demonstrations and related EPA approvals were predicated on the long-standing interpretation that was rejected by the court. Specifically, as explained in our September 19, 2012 proposed rule, we found that the submitted VMT emissions offset demonstrations are not consistent with the court's ruling on the requirements of section 182(d)(1)(A) because they fail to identify, compared to a baseline assuming no VMT growth, the level of increased emissions resulting solely from VMT growth and to show how such increased emissions have been offset through adoption and implementation of transportation control strategies and transportation control measures. See the proposed rule at page 58070.

Publication of our September 19, 2012 proposed rule in the Federal Register started a 30-day public comment period which ended on October 19, 2012. We received two comment letters, one from the California Air Resources Board (CARB), and one from the SCAQMD. Neither comment letter objects to our proposed withdrawal or disapproval actions. Rather, both comment letters address aspects of a non-binding and non-final guidance memorandum  6 issued by EPA in response to the court's decision on the section 182(d)(1)(A) VMT emissions offset requirement.

EPA appreciates the comments from CARB and the SCAQMD on the guidance. However, the comments are beyond the scope of this rulemaking, and EPA is not here taking any final action to respond to these comments or with respect to the non-final and non-binding guidance that they address. This final action simply withdraws EPA's previous approvals of the VMT emissions offset demonstrations for the South Coast with respect to the 1-hour and 8-hour ozone NAAQS and disapproves the same because they are based on a rationale for compliance with section 182(d)(1)(A) that was rejected by the Ninth Circuit in Association of Irritated Residents v. EPA. EPA is not relying on the non-final and non-binding section 182(d)(1)(A) guidance memorandum for today's final action. If a future SIP submission implements the guidance, EPA will take separate regulatory final action to address that SIP and its satisfaction of section 182(d)(1)(A). Lastly, EPA appreciates CARB's and SCAQMD's willingness to respond promptly to the court decision and this final action, and to submit revisions to the South Coast portion of the California SIP to address the section 182(d)(1)(A) VMT emissions offset requirement for the 1-hour and 8-hour ozone standards.

For the reasons provided in the proposed rule and summarized herein, EPA is taking final action to withdraw our previous approvals of SIP revisions submitted by the State of California to demonstrate compliance with the VMT emissions offset requirement under CAA section 182(d)(1)(A) with respect to the 1-hour and 8-hour ozone standards in the South Coast nonattainment area. EPA is taking this action in response to a decision of the Ninth Circuit in Association of Irritated Residents v. EPA. Under section 110(k), EPA is also taking final action to disapprove those same submittals because they reflect an approach to showing compliance with section 182(d)(1)(A) that was rejected by the court as inconsistent with the CAA section 182(d)(1)(A) VMT emissions offset requirement.

Pursuant to CAA section 179(a), our disapproval of the SIP revisions will trigger the NSR offset sanction in CAA section 179(b)(2) and the highway funding sanction under CAA section 179(b)(1) in the South Coast ozone nonattainment area 18 months, and 24 months, respectively, after the effective date of this action unless we take final action approving SIP revisions meeting the relevant requirements of the CAA prior to the time the sanctions would take effect. If we propose approval of a SIP revision meeting the relevant requirements of the CAA and determine at that time that it is more likely than not the deficiency has been corrected, sanctions will be deferred. See 40 CFR 52.31 which sets forth when sanctions apply and when they may be stopped or deferred.

In addition to the sanctions, CAA section 110(c) provides that EPA must promulgate a FIP addressing the deficiency that is the basis for this disapproval action two years after the effective date of the disapproval unless we have approved a revised SIP before that date.

The Office of Management and Budget (OMB) has exempted this regulatory action from Executive Order 12866, entitled “Regulatory Planning and Review.”

This action does not impose an information collection burden under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. Burden is defined at 5 CFR 1320.3(b).

The Regulatory Flexibility Act (RFA) generally requires an agency to conduct a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small not-for-profit enterprises, and small governmental jurisdictions.

This rule will not have a significant impact on a substantial number of small entities because SIP approvals or SIP disapprovals under section 110 of the Clean Air Act do not create any new requirements but simply approve or disapprove requirements that the State is already imposing. Therefore, because the withdrawal of previous approvals of certain SIP revisions, and disapproval of the same, do not create any new requirements, I certify that this action will not have a significant economic impact on a substantial number of small entities. Moreover, due to the nature of the Federal-State relationship under the Clean Air Act, preparation of a flexibility analysis would constitute Federal inquiry into the economic reasonableness of State action. The Clean Air Act forbids EPA to base its actions concerning SIPs on such grounds. Union Electric Co., v. U.S. EPA, 427 U.S. 246, 255-66 (1976); 42 U.S.C. 7410(a)(2).

Under section 202 of the Unfunded Mandates Reform Act of 1995 (“Unfunded Mandates Act”), signed into law on March 22, 1995, EPA must prepare a budgetary impact statement to accompany any proposed or final rule that includes a Federal mandate that may result in estimated costs to State, local, or tribal governments in the aggregate, or to the private sector, of $100 million or more. Under section 205, EPA must select the most cost-effective and least burdensome alternative that achieves the objectives of the rule and is consistent with statutory requirements. Section 203 requires EPA to establish a plan for informing and advising any small governments that may be significantly or uniquely impacted by the rule.

EPA has determined that this action does not include a Federal mandate that may result in estimated costs of $100 million or more to either State, local, or tribal governments in the aggregate, or to the private sector. This Federal action withdraws previous approvals of certain pre-existing SIP elements and disapproves the same, and imposes no new requirements. Accordingly, no additional costs to State, local, or tribal governments, or to the private sector, result from this action.

Federalism (64 FR 43255, August 10, 1999) revokes and replaces Executive Orders 12612 (Federalism) and 12875 (Enhancing the Intergovernmental Partnership). Executive Order 13132 requires EPA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in the Executive Order to include regulations that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.” Under Executive Order 13132, EPA may not issue a regulation that has federalism implications, that imposes substantial direct compliance costs, and that is not required by statute, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by State and local governments, or EPA consults with State and local officials early in the process of developing the proposed regulation. EPA also may not issue a regulation that has federalism implications and that preempts State law unless the Agency consults with State and local officials early in the process of developing the proposed regulation.

This rule will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132, because it merely withdraws previous approvals of certain SIP revisions implementing a Federal standard and disapproves the same, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. Thus, the requirements of section 6 of the Executive Order do not apply to this rule.

Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000), requires EPA to develop an accountable process to ensure “meaningful and timely input by tribal officials in the development of regulatory policies that have tribal implications.” This rule does not have tribal implications, as specified in Executive Order 13175. It will not have substantial direct effects on tribal governments, on the relationship between the Federal government and Indian tribes, or on the distribution of power and responsibilities between the Federal government and Indian tribes. Thus, Executive Order 13175 does not apply to this rule.

EPA interprets Executive Order 13045 (62 FR 19885, April 23, 1997) as applying only to those regulatory actions that concern health or safety risks, such that the analysis required under section 5-501 of the Executive Order has the potential to influence the regulation. This rule is not subject to Executive Order 13045, because it withdraws previous approvals of certain SIP revisions implementing a Federal standard and disapproves the same.

This rule is not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001) because it is not a significant regulatory action under Executive Order 12866.

Section 12 of the National Technology Transfer and Advancement Act (NTTAA) of 1995 requires Federal agencies to evaluate existing technical standards when developing a new regulation. To comply with NTTAA, EPA must consider and use “voluntary consensus standards” (VCS) if available and applicable when developing programs and policies unless doing so would be inconsistent with applicable law or otherwise impractical.

EPA believes that VCS are inapplicable to this action. Today's action does not require the public to perform activities conducive to the use of VCS.

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

EPA lacks the discretionary authority to address environmental justice in this rulemaking. In reviewing SIP submissions, EPA's role is to approve or disapprove state choices, based on the criteria of the Clean Air Act. Accordingly, this action merely withdraws previous approvals of certain SIP revisions implementing a Federal standard and disapproves the same under section 110 of the Clean Air Act and will not in-and-of itself create any new requirements. Accordingly, it does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898.

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

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by May 28, 2013. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements (see section 307(b)(2)).

Part 52, chapter I, title 40 of the Code of Federal Regulations is amended as follows:

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

Table 1 lists the rule we are approving with the dates that it was adopted by the local air agency and submitted by the California Air Resources Board.

On March 13, 2012, EPA determined that the submittal for SCAQMD Rule 463 met the completeness criteria in 40 CFR Part 51 Appendix V, which must be met before formal EPA review.

We approved an earlier version of Rule 463 into the SIP on January 4, 2007. The SCAQMD adopted revisions to the SIP-approved version on November 4, 2011 and CARB submitted them to us on February 23, 2012. While we can act on only the most recently submitted version, we have reviewed materials provided with previous submittals.

Volatile organic compounds (VOCs) help produce ground-level ozone and smog, which harm human health and the environment. Section 110(a) of the CAA requires States to submit regulations that control VOC emissions. SCAQMD Rule 463 controls VOC emissions from above-ground storage tanks used for storage of organic liquids. EPA's technical support document (TSD) has more information about the rule.

Generally, SIP rules must be enforceable (see section 110(a) of the Act), must require Reasonably Available Control Technology (RACT) for each category of sources covered by a Control Techniques Guidelines (CTG) document as well as each major source in nonattainment areas (see sections 182(a)(2) and (b)(2)), and must not relax existing requirements (see sections 110(l) and 193). The SCAQMD regulates an ozone nonattainment area (see 40 CFR part 81), so Rule 463 must fulfill RACT.

Guidance and policy documents that we use to evaluate enforceability and RACT requirements consistently include the following:

1. “Issues Relating to VOC Regulation Cutpoints, Deficiencies, and Deviations,” EPA, May 25, 1988 (the Bluebook).

2. “Guidance Document for Correcting Common VOC & Other Rule Deficiencies,” EPA Region 9, August 21, 2001 (the Little Bluebook).

3. “Control of Volatile Organic Emissions from Petroleum Liquid Storage in External Floating Roof Tanks,” EPA-450/2-78-047.

4. “Control of Volatile Organic Emissions from Storage of Petroleum Liquid in Fixed-Roof Tanks,” EPA-450/2-77-036.

We believe this rule is consistent with the relevant policy and guidance regarding enforceability, RACT, and SIP relaxations. The TSD has more information on our evaluation.

There are no recommendations for the next time the local agency modifies the rule.

As authorized in section 110(k)(3) of the Act, EPA is fully approving the submitted rule because we believe it fulfills all relevant requirements. We do not think anyone will object to this approval, so we are finalizing it without proposing it in advance. However, in the Proposed Rules section of this Federal Register , we are simultaneously proposing approval of the same submitted rule. If we receive adverse comments by April 29, 2013, we will publish a timely withdrawal in the Federal Register to notify the public that the direct final approval will not take effect and we will address the comments in a subsequent final action based on the proposal. If we do not receive timely adverse comments, the direct final approval will be effective without further notice on May 28, 2013. This will incorporate the rule into the federally enforceable SIP.

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

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

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

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

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

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

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

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

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

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

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

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by May 28, 2013. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. Parties with objections to this direct final rule are encouraged to file a comment in response to the parallel notice of proposed rulemaking for this action published in the Proposed Rules section of today's Federal Register , rather than file an immediate petition for judicial review of this direct final rule, so that EPA can withdraw this direct final rule and address the comment in the proposed rulemaking. This action may not be challenged later in proceedings to enforce its requirements (see section 307(b)(2)).

Part 52, Chapter I, Title 40 of the Code of Federal Regulations is amended as follows:

This notice is organized as follows:

The WTC Health Program does not currently offer monitoring or treatment services to individuals who responded to the September 11, 2001, terrorist attacks at the Pentagon or in Shanksville. The statute clearly defines eligibility criteria for New York responders, whereas the Administrator is required to develop criteria for the enrollment of Pentagon and Shanksville responders. This rule establishes those eligibility criteria. Upon the effective date of this rule, individuals who believe they may be eligible for enrollment in the WTC Health Program may submit an application and supporting documentation.

This interim final rule will establish eligibility criteria for the enrollment of responders to the September 11, 2001, terrorist attacks at the Pentagon and in Shanksville, Pennsylvania. The PHS Act does not allow for enrollment of survivors from either of the two sites. Therefore, survivors of the terrorist attacks at those sites who did not engage in rescue, recovery, cleanup or other related activities will not be eligible for enrollment.

The eligibility criteria in § 88.4(b) and (c) apply to those individuals who were a member of a fire or police department (whether fire or emergency personnel, active or retired), worked for a recovery or cleanup contractor, or were volunteers; and performed rescue, recovery, demolition, debris cleanup, or other related services at either site.

This interim final rule adds the definition of “police department” to the list of definitions in 42 CFR 88.1. It also adds definitions for “Pentagon site” and “Shanksville, Pennsylvania site.”

In order to establish that the individual is eligible for membership in the WTC Health Program, he or she must have participated in activities at either site for a minimum amount of time. Pentagon responders must have participated at the site for at least 1 day beginning September 11, 2001, and ending on November 19, 2001. Shanksville, Pennsylvania responders must have participated at that site for at least 1 day beginning September 11, 2001, and ending on October 3, 2001.

The total cost, transfers, and benefits resulting from this regulatory action are due to the expansion of the population of responders eligible to enroll in the WTC Health Program. For the purpose of this analysis, HHS assumes that between 540 and 1,467 Pentagon and Shanksville responders will enroll in the Program in 2013. We estimate the total cost of initial medical examinations, annual monitoring, and treatment for Pentagon and Shanksville responders to be at least $988,300 and no more than $3,203,400 annually through 2016.

Interested persons or organizations are invited to participate in this rulemaking by submitting written views, opinions, recommendations, and/or data. Comments are invited on any topic related to this interim final rule. In addition, HHS invites comments specifically on the following questions related to this rulemaking:

1. The terms “Pentagon site” and “Shanksville, Pennsylvania site” are not defined in the PHS Act. The Administrator believes it is necessary to define the geographic boundaries of the respective sites, in order to better identify eligible responders and has defined the terms in this interim final rule. The Administrator seeks input on whether the definitions are clearly understood and contain the locations that are relevant to the response activities. After reviewing published reports and anecdotal accounts of the events at both sites, the Administrator is unable to ascertain whether there may have been perimeter boundaries broader than our proposed definitions, and whether the proposed definitions may unintentionally exclude some response personnel who worked at the sites. We have identified a number of specific locations around the Pentagon where response activities occurred: the heliport, triage areas established on the lawn near S. Washington Road and Jefferson Davis Highway and in the Pentagon Center Court, and in the North Parking lot debris sifting area. We have also identified Fort Belvoir in Virginia and Dover Air Force Base in Delaware as locations where responders may have worked closely with victims' remains. Similarly, for the Shanksville site, we are aware that responders transported remains to the Pennsylvania National Guard armory in Friedens. We welcome input from responder organizations who participated in Pentagon and Shanksville response activities regarding these definitions.

2. The Administrator is establishing dates for the end of clean-up activities at each site. Based on the best available evidence, the rule establishes end-dates of November 19, 2001, for the Pentagon site and October 3, 2001, for the Shanksville, Pennsylvania site. The Administrator welcomes additional public input on these dates.

Comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not include any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure. HHS will consider the comments submitted and may revise the final rule as appropriate.

After the terrorist attacks of September 11, 2001, HHS, CDC, and NIOSH facilitated medical monitoring for those firefighters and related personnel, law enforcement officers, and rescue, recovery, and cleanup workers who responded to the terrorist attacks in New York City. A health screening program for responders that began in 2002 was expanded through a series of congressional appropriations, and in 2006 the program was re-named the WTC Medical Monitoring and Treatment Program (MMTP) to reflect expanded services available for responders. A separate NIOSH health program for residents, students, and others in the community who were affected by the September 11, 2001, terrorist attacks in New York City (survivors) was funded in 2008.

Responders, including members of fire and police departments and others who conducted rescue, recovery, and cleanup at the September 11, 2001, terrorist attack sites in Shanksville, Pennsylvania and at the Pentagon were not provided services under the MMTP because congressional appropriations language did not specify inclusion of those groups.

The WTC Health Program was established by law on January 2, 2011, and went into effect July 1, 2011. Regulations established in 42 CFR Part 88 describe the process by which individuals who were firefighters and related personnel, law enforcement officers, rescue, recovery, and cleanup workers who responded to the September 11, 2001, terrorist attacks in New York City or survivors associated with the New York City attacks may be enrolled in the WTC Health Program. Part 88 also sets out the processes by which the Administrator makes enrollment determinations, certifies WTC-related health conditions for monitoring and treatment, reimburses providers for medically necessary treatment, and adds conditions to the List of WTC-Related Health Conditions.

The WTC Health Program does not currently offer monitoring or treatment services to individuals who responded to the September 11, 2001, terrorist attacks at the Pentagon or in Shanksville. The statute clearly defines eligibility criteria for New York responders, whereas the Administrator is required to develop criteria for the enrollment of Pentagon and Shanksville responders. This rule establishes those eligibility criteria. Upon the effective date of this rule, individuals who believe they may be eligible for enrollment in the WTC Health Program may submit an application and supporting documentation. Information about applying to the WTC Health Program is available at http://www.cdc.gov/wtc.

Title I of the James Zadroga 9/11 Health and Compensation Act of 2010 (Pub. L. 111-347) amended the PHS Act to add Title XXXIII, 1 establishing the WTC Health Program within HHS. Under Title XXXIII of the PHS Act, the Administrator is responsible for the WTC Health Program. All references to the Administrator in this notice mean the NIOSH Director or his or her designee.

Section 3311(a)(2)(C) of the PHS Act identifies a responder to the September 11, 2001, terrorist attacks at the Pentagon and Shanksville, Pennsylvania as an individual who “was a member of a fire or police department (whether fire or emergency personnel, active or retired), worked for a recovery or cleanup contractor, or was a volunteer; and performed rescue, recovery, demolition, debris cleanup, or other related services.” The Act requires that the Administrator establish the dates on which cleanup was concluded at the Pentagon and Shanksville sites, respectively. The Administrator is also required under § 3311(a)(2)(C)(ii) to develop eligibility criteria for determining whether an individual applicant is at an increased risk of developing a WTC-related health condition as a result of exposure to airborne toxins, other hazards, or adverse conditions resulting from the September 11, 2001, terrorist attacks, at each site. The Administrator is required to consult with the WTC Health Program Scientific/Technical Advisory Committee (STAC) on the development of eligibility criteria related to such exposures. The PHS Act does not allow for enrollment of survivors from either of the two sites.

The Administrator reviewed relevant data to determine whether further eligibility criteria, beyond those criteria described in the Act for Pentagon and Shanksville responders (see Section III.B., above), was warranted. A report to the Administrator produced by NIOSH at the Administrator's request reviewed published literature and other authoritative sources and consultations with participating responders from both sites, and served as the basis for the Administrator's consideration. 2 The Administrator assessed the reported results of environmental sampling at the respective sites as well as the estimated length of time that each of the various responder groups participated in rescue, recovery, demolition, debris cleanup, and other related response activities. The Administrator's review of the evidence identified important response and cleanup events after the terrorist attacks and provided information on the exposures potentially experienced by the responders. The review also identified the sequence of events related to clean-up at the sites and identified the likely dates of termination of clean-up activities.

Based on the evidence summarized below and after consultation with the STAC, the Administrator is revising the eligibility criterion to require that a Pentagon or Shanksville responder worked on-site for at least 1 day (the length of a standard work shift, or at least 4 hours but less than 24 hours) during the prescribed periods of time at either site. The Administrator is establishing dates for the end of clean-up activities at each site based on the best available evidence; they are November 19, 2001, for the Pentagon site and October 3, 2001, for the Shanksville, Pennsylvania site and seeks input on whether these dates are accurate.

According to the report to the Administrator, an estimated 60 Federal, State, and local agencies, including military personnel, responded to the Pentagon within the first 8 hours of the terrorist-related plane crash. Response activities included rescue efforts, site security, traffic control, and evidence collection. American Red Cross and Salvation Army personnel provided food and water, and civilian and military groups collaborated to address mental health issues. Emotional well-being support was provided by mental health professionals, clergy, physiotherapists, chiropractors, and therapy dogs and their handlers. Response activities occurred in many areas of the Pentagon Reservation, including but not limited to: the heliport; triage areas established on the Pentagon lawn near S. Washington Road and Jefferson Davis Highway and in the Pentagon Center Court; and the North Parking lot debris sifting area. Human remains were removed from the area of the crash site and driven to Fort Belvoir in Fairfax County, Virginia, where they were retrieved by Army helicopters and flown to Dover Air Force Base in Delaware. 3

The Administrator found that the firefighter groups were on-site from September 11 to September 21, 2001, at which time control of the site was turned over to the Federal Bureau of Investigation (FBI). One fire company, a technical rescue team, paramedics, and some police departments were on-site until the Department of Defense assumed control from the FBI, which occurred no later than September 28, 2001. Demolition and cleanup began on October 18 and concluded on November 19, 2001. It is unclear what period of time fire and police department personnel were on-site during the period from the end of September until the end of cleanup activities on November 19, 2001, based on the available information. Recovery or cleanup contractors were on-site until November 19, 2001, which is when the demolition activities concluded. 4 Finally, available evidence suggests that volunteers were likely on-site through September 28, 2001. 5

Environmental sampling at the Pentagon site was conducted by U.S. Army, Navy, and Air Force personnel, as well as personnel from the former Walter Reed Army Medical Center, Department of Defense, the Uniformed Services University of the Health Sciences, and a civilian contractor. The Administrator's review of the available literature found that contamination from the jet fuel, jet fuel combustion products, combustion products from aircraft and building materials, building debris, and human remains was concentrated at the incident site and most of the environmental samples collected were below occupational health and environmental exposure standards. 6

After reviewing the length of time the various responder groups spent working at the Pentagon site, the Administrator has determined that, for the purposes of establishing eligibility criteria for Pentagon responders in 42 CFR 88.4(b), all rescue, recovery, demolition, debris cleanup, and other related response activities at the site concluded on November 19, 2001, which is when the demolition activities concluded.

The report to the Administrator determined that fire and police departments responded immediately to the plane crash at the Shanksville, Pennsylvania site and extinguished localized hot spots and brush fires. Because of the nature of the incident, there was only a limited fire response phase and no rescue response phase; responders proceeded to a recovery and investigatory response phase. Pennsylvania State Troopers provided security in and around the site, and the FBI assumed control over the site shortly after arriving on September 11. Personnel from the Somerset County (Pennsylvania) Coroner's office, the Pennsylvania Region 13 Counter-Terrorism Task Force, the State Funeral Directors Association, and other volunteers also joined the search for airplane parts and human remains. During the response, the American Red Cross and Salvation Army provided food and mental health services to responders. Response activities occurred on the property in Stonycreek Township, Somerset County, Pennsylvania, which is bounded by Route 30 (Lincoln Highway), State Route 1019 (Buckstown Road), and State Route 1007 (Lambertsville Road). Human remains were removed from the area of the crash site and taken to the Pennsylvania National Guard Armory in Friedens, Pennsylvania for identification. 7

FBI controlled the crash site in Shanksville beginning on September 11 and ending on September 24, 2001. At that time, control was relinquished to the Somerset County Coroner. The effort to search the area for remaining aircraft parts and human remains was conducted on September 29-30, 2001.

After the response to the crash, Environmental Resources Management, Inc. (ERM) was contracted by United Airlines to document soil and water quality at the site. ERM compared the sampling results obtained to standards established by the Pennsylvania Department of Environmental Protection (PADEP) and the Pennsylvania Land Recycling and Environmental Remediation Standards Act. Although ERM concluded that no surface or subsurface soil samples exceeded any Pennsylvania standards and the site did not require any remediation, the Administrator has concluded that it is likely that responders to the Shanksville site were exposed to contamination from the jet fuel, jet fuel combustion products, combustion products from aircraft materials, and human remains. 8 ERM's reclamation activities took place between October 1 and October 3, 2001. It is not clear from available literature whether fire personnel or volunteers were on-site during these reclamation activities. Law enforcement personnel provided security on-site for a number of years following the events of September 11, 2001.

After reviewing the length of time the various responder groups spent working at the Shanksville, Pennsylvania site, the Administrator has determined that, for the purposes of establishing eligibility criteria for Shanksville responders in 42 CFR 88.4(c), all rescue, recovery, demolition, debris cleanup, and other related response activities at the site concluded on October 3, 2001.

The report to the Administrator and the Administrator's findings, including the response end-dates, were presented to the STAC during a public meeting held February 15-16, 2012. The STAC considered the proposed eligibility criteria and agreed that they are reasonable. 9

In most circumstances, the APA requires a public notice and comment period and consideration of the submitted comments prior to promulgation of a final rule having the effect of law. However, the APA provides for exceptions to its notice and comment procedures when an agency finds that there is good cause for dispensing with such procedures on the basis that they are impracticable, unnecessary, or contrary to the public interest. In the case of this interim final rule (IFR), HHS has determined that under 5 U.S.C. 553(b)(B), good cause exists for waiving the notice and comment procedures, and that the use of such procedures would be contrary to the public interest. This IFR amends 42 CFR 88.4 to establish eligibility criteria for the enrollment of responders who responded to the September 11, 2001, terrorist attacks at the Pentagon and in Shanksville, Pennsylvania. HHS has determined that it is contrary to the public interest to delay any longer than necessary those individuals' eligibility for treatment for WTC-related health conditions that are found to be related to the time they spent conducting rescue, recovery, demolition, debris cleanup, or other related services at either the Pentagon or Shanksville sites. Postponement in the implementation of eligibility criteria for Pentagon and Shanksville responders could result in real harm to those individuals who are currently coping with one or more health conditions found on the List of WTC-Related Health Conditions in 42 CFR 88.1, or who are at risk for developing such a condition. Thus, HHS is waiving the prior notice and comment procedures in the interest of protecting the health of the Pentagon and Shanksville, Pennsylvania responders and allowing them to apply for enrollment in the WTC Health Program as soon as possible.

Members of the affected communities have been given opportunities to meet with WTC Health Program staff to learn about the WTC Health Program and share thoughts and concerns. To date, WTC Health Program staff have traveled to both Arlington, Virginia and Shanksville, Pennsylvania to meet with responder representatives, including the Arlington, Virginia and Shanksville, Pennsylvania fire chiefs, and have also met with FBI responders. WTC Health Program staff have interviewed responders at both sites to collect exposure data and timelines of events. In addition, interested parties were given the opportunity to provide comment to the STAC on the proposed eligibility criteria for the Pentagon and Shanksville responders during the February 15-16, 2012, meeting of the STAC (no comments were received).

The effective date of this interim final rule will be 31 days after publication in order to allow for any substantive feedback on the rule text. While amendments to § 88.4 will be effective 31 days after the date of publication of this IFR, they are interim and will be finalized following the receipt of any substantive public comments. ( See Section II. Public Participation, above.)

This interim final rule will establish eligibility criteria for the enrollment of responders to the September 11, 2001, terrorist attacks at the Pentagon and in Shanksville, Pennsylvania.

The eligibility criteria in § 88.4(b) and (c) apply to those individuals who were a member of a fire or police department (whether fire or emergency personnel, active or retired), worked for a recovery or cleanup contractor, or were volunteers; and performed rescue, recovery, demolition, debris cleanup, or other related services at either site.

This interim final rule adds the definition of “police department” to the list of definitions in 42 CFR 88.1. Section 3311(a)(2)(C) of the PHS Act identifies eligible individuals who were a “member of a * * * police department.” The definition of “police department” promulgated in this interim final rule includes members of Federal, State, and local police departments and law enforcement agencies who were present on-site at the Pentagon or in Shanksville, Pennsylvania.

This rule also adds definitions of “Pentagon site” and “Shanksville, Pennsylvania site” to § 88.1. Based on the review of available evidence discussed above in section III.C., the definition “Pentagon site” includes the statutory definition of Pentagon Reservation found in 10 U.S.C. 2674(f)(1): any area of the land (consisting of approximately 280 acres) and improvements thereon, located in Arlington, Virginia, on which the Pentagon Office Building, Federal Building Number 2, the Pentagon heating and sewage treatment plants, and other related facilities are located, including various areas designated for the parking of vehicles, affected by the terrorist-related aircraft crash on September 11, 2001. The Administrator believes that the specific locations where response activities occurred near the Pentagon were contained within the Pentagon Reservation, although the Administrator is seeking comment on boundaries of the Pentagon Reservation and the specific locations where response activities occurred. The Administrator has determined that the definition should also include those areas at Fort Belvoir in Virginia and at the Dover Port Mortuary at Dover Air Force Base in Delaware involved in the recovery, identification, and transportation of human remains from the terrorist attacks. The mortuary at Dover and areas of Fort Belvoir are included in the definition of “Pentagon site” in order to parallel the provision in the eligibility criteria for New York responders identifying responders (including morgue workers) who were involved in the examination and handling of human remains from the World Trade Center.

After review of the evidence of events at the Shanksville, Pennsylvania site, the Administrator has defined “Shanksville, Pennsylvania site” as the property in Stonycreek Township, Somerset County, Pennsylvania, which is bounded by Route 30 (Lincoln Highway), State Route 1019 (Buckstown Road), and State Route 1007 (Lambertsville Road); the site also includes the Pennsylvania National Guard Armory in Friedens, Pennsylvania. Similar to the Pentagon site definition described above, the armory in Friedens is identified in order to establish parity with the eligibility criteria for the New York responders involved in the examination and handling of human remains.

In order to establish that the individual is eligible for membership in the WTC Health Program, he or she must have participated in activities at either site for a minimum amount of time. Pentagon responders must have participated at the site for at least 1 day beginning September 11, 2001, and ending on November 19, 2001. Shanksville, Pennsylvania responders must have participated at that site for at least 1 day beginning September 11, 2001, and ending on October 3, 2001. “One day” is defined in 42 CFR 88.1 as “the length of a standard work shift, or at least 4 hours but less than 24 hours.” The Administrator determined that presence at either site for at least 4 hours is in keeping with the corresponding minimum amount of time required to establish eligibility for responders in the New York City area. ( See, New York City responders eligibility criteria, 42 CFR 88.4(a).) The report to the Administrator (discussed in Section III.C., above) found that while area sampling was conducted at both sites in the aftermath of the terrorist attacks, personal exposure data is not available. The Administrator recognizes the potential for responders at the two sites to have been exposed to chemical, biological, and physical hazards, similar to some of the exposures experienced as a result of the September 11, 2001, terrorist attacks on the former World Trade Center site in New York City.

Upon promulgation of this interim final rule, individuals who were a member of a fire or police department (whether fire or emergency personnel, active or retired), worked for a recovery or cleanup contractor, or who were volunteers; and performed rescue, recovery, demolition, debris cleanup, or other related services at either the Pentagon or Shanksville sites may apply to obtain coverage under the WTC Health Program. The application process for responders can be found in 42 CFR 88.5.

Beginning with the effective date of this rulemaking, an individual who believes that he or she meets the eligibility criteria established in this interim final rule and qualifies as a ‘WTC responder (a ‘WTC responder’ is defined in § 88.1 as an individual who meets the specified eligibility criteria), 10 must fill out and submit an application form to the WTC Health Program indicating that he or she meets certain eligibility criteria described in § 88.4. 11 An individual who can demonstrate that he or she meets the eligibility criteria may be enrolled in the WTC Health Program. Supporting documentation is required to be submitted along with the application and if no documentation is included ( e.g., a pay stub or personnel roster), the individual must explain how he or she attempted to find documentation and why the attempt was unsuccessful. The application must be signed by the applicant or a designated representative. An applicant who knowingly provides false information may be subject to a fine and/or imprisonment of not more than 5 years.

Once enrolled in the WTC Health Program, a WTC responder may receive treatment for specific physical and mental health conditions that have been certified by the WTC Health Program and are included on the List of WTC-Related Health Conditions. 12 The List of WTC-Related Health Conditions was established by Congress and may be expanded by the Administrator through rulemaking; the List is included in § 88.1, the definitions section of this rule. In order for an individual enrolled as a WTC responder to obtain coverage for treatment of any health condition on the List of WTC-Related Health Conditions, a two-step process must be satisfied. First, a physician at a Clinical Center of Excellence or in the nationwide provider network must make a determination that the particular health condition for which the responder seeks treatment coverage is both on the List of WTC-Related Health Conditions and that exposure to airborne toxins, other hazards, or adverse conditions resulting from the September 11, 2001, terrorist attacks is substantially likely to be a significant factor in aggravating, contributing to, or causing the health condition for which the responder seeks treatment coverage. 13 Pursuant to 42 CFR 88.12(a), the physician's determination must be based on the following: (1) an assessment of the individual's exposure to airborne toxins, any other hazard, or any other adverse condition resulting from the September 11, 2001, attacks; and (2) the type of symptoms reported and the temporal sequence of those symptoms. As a second statutory requirement, all physician determinations are reviewed by the Administrator. The Administrator will certify the determination unless he or she determines that the responder's condition is not on the List of WTC-Related Health Conditions or that exposure to airborne toxins, other hazards, or adverse conditions resulting from the September 11, 2001, terrorist attacks, is not substantially likely to be a significant factor in aggravating, contributing to, or causing the condition.

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility.

This interim final rule has been determined to be a “significant” action, as defined in section 3(f)(1) of E.O. 12866. Providing medical monitoring and treatment for Pentagon and Shanksville, Pennsylvania responders through the WTC Health Program will have an annual effect on the economy of less than $100 million.

The total cost, transfers, and benefits resulting from this regulatory action result from the expansion of the population of responders eligible to enroll in the WTC Health Program. In July, 2011, HHS published an interim final rule establishing the WTC Health Program regulations at 42 CFR Part 88 (76 FR 38914, 38921, July 1, 2011). HHS estimated the costs and benefits associated with the development of the WTC Health Program and the subsequent enrollment, treatment, and monitoring of responders and survivors of the September 11, 2001, terrorist attacks on New York City. For the purpose of this analysis and as discussed below, HHS assumes that a percentage of enrolled responders will not have health insurance. Program costs associated with these uninsured responders are characterized as new “societal costs” since these responders would not otherwise receive the health care available from the WTC Health Program. HHS further assumes that all of these previously uninsured responders will have access to health insurance after implementation of relevant provisions of the Patient Protection and Affordable Care Act (Affordable Care Act) (Pub. L. 111-148) in 2014. Accordingly, for the years 2014-2016, all program costs, including program costs for these previously uninsured responders, are characterized as “transfers,” since all responders will have access to some type of health insurance under the Affordable Care Act beginning in 2014 and the impact of this regulation is only to “transfer” the cost from other such payers to the WTC Health Program. The costs and transfers identified in the July 2011 interim final rule include administrative expenses for enrollment and claims processing, the costs of medical monitoring, and medical treatment costs. To estimate the costs associated with enrollment and medical care of the Pentagon and Shanksville responders, HHS assumes that the program and administrative costs will be analogous to those costs for the New York City responders. HHS estimates the annual cost of medical monitoring and treatment to be provided and administrative expenses of this regulatory action in millions of dollars as presented in Table 1, below. The WTC Health Program has recently conducted rulemaking to add certain types of cancer to the List of WTC-Related Health Conditions in 42 CFR 88.1 (77 FR 56138, September 12, 2012). The cost of treating and monitoring cancers that may be certified for Pentagon and Shanksville responders is included in the analysis conducted in that rulemaking.

According to published studies, up to 8,000 individuals responded to the terrorist attack at the Pentagon and approximately 1,000 responded in Shanksville, Pennsylvania. 14 For the purposes of this economic analysis, HHS estimates the total population of potential new enrollees in the WTC Health Program from the Pentagon and Shanksville sites to be 9,000 responders. In order to estimate the number and rate of Pentagon and Shanksville responders who may apply for enrollment in the WTC Health Program, HHS assumed two enrollment scenarios based on the share of uninsured responders. First, HHS assumed that of the 9,000 eligible responders, 1,467 (16.3 percent, the current National average rate of uninsured persons)  15 will be uninsured and therefore will likely apply for enrollment as soon as eligibility criteria are promulgated. Alternatively, HHS assumed that of the 9,000 responders, 540 (6 percent) will be uninsured. The 6 percent uninsured rate is derived from a study by the Urban Institute, which indicates that 97 percent of workers in public administration are insured. 16 For the purposes of this analysis, HHS further assumed that most public agencies (Federal, state, and local) involved in these responses similarly offer health insurance to employees, that retention rates for public sector employment tend to be high, and that disability insurance and health insurance among retired public employees are also likely to be high. To account for uncertainty regarding the impact on insurance rates of retention, disability, and retirements among public employee responders involved in these responses, as well as uncertainty regarding the quotient of volunteer responders who were not public employees, we doubled the uninsured rate of 3 percent documented in the Urban Institute study to 6 percent. HHS further assumed that 1.3 percent of the remaining unenrolled population will enroll on an annual basis thereafter. This percentage is based on the current rate at which individuals who responded to or survived the terrorist attacks in New York City are enrolling in the WTC Health Program.

Using data from the Program's operational experience to date (since July 1, 2011), HHS has estimated costs for administrative activities and medical monitoring and treatment, and has estimated related rates of enrollment and certification of individuals who responded at the Pentagon or in Shanksville. The analyses of WTC Health Program costs use a low estimate reflecting actual costs associated with maintaining the existing program plus additional administrative activities, and a higher estimate level that assumes increases in both administrative costs and other health care costs.

As discussed above, the WTC Health Program expects to initially enroll a minimum of 540 and a maximum of 1,467 Pentagon and Shanksville, Pennsylvania responders in 2013 and between 97 and 110 additional new enrollees over the course of the first year. HHS assumes that there will be between 97 and 109 new enrollees in 2014, between 95 and 107 in 2015, and between 94 and 106 in 2016.

HHS estimates administrative costs ranging between $326,519 and $900,565 annually, covering program management, enrollment of Pentagon and Shanksville responders, certification of WTC-related health conditions, authorization of medical care, payment services, administration of appeals processes, and education and outreach. The range of the costs estimated reflects uncertainty associated with levels of activity for enrollment, appeals, and competitively established costs for contractual administrative services. All administrative costs are counted as societal costs.

New enrollees are eligible for an initial medical examination. The costs per patient are estimated between $650 and $1,032 per individual. The low estimate is based on the average costs for patients currently enrolled in the WTC Health Program serviced by the nationwide provider network. 17 The high estimate is based on the services if all tests were conducted and billed at the Federal Employees Compensation Act (FECA) rates for Washington, DC. 18

These projections assume 35 percent of enrolled responders will obtain annual monitoring examinations, which is the average participation rate for WTC responders in the current Program. The monitoring exams are provided only in the years following the initial medical exam. All monitoring costs incurred in 2013 are counted as societal costs because the population basis assumed that the initial influx of new enrollees will be uninsured, and that an additional 97 to 110 new responders will be added over the course of the year. All medical costs incurred in 2014 through 2016 are counted as transfers.

The estimated costs for medical treatment are based on an average cost in the WTC Health Program. HHS estimates the cost of treatment to be $3,500 per patient. The estimate is based on the average costs for patients currently enrolled in the WTC Health Program serviced by the nationwide provider network. HHS has no quantitative basis to estimate a different rate of medical treatment utilization for this population as compared to the New York City WTC responders. Therefore, as was done in the July 2011 economic analysis, HHS assumes that 29 percent of future enrolled WTC responders will receive treatment annually. The range of average per patient costs is based on the average costs for patients having received treatment through the WTC Health Program. HHS assumes that in 2013 the initial influx of Pentagon and Shanksville enrollees who receive medical treatment in the WTC Health Program will not have medical insurance provided by employer, private sources, Medicare, or Medicaid; thereafter, HHS assumes that an additional 97 to 110 responders would enroll throughout the year. HHS assumes that all of the enrollees who receive medical treatment will have access to medical insurance in 2014 and beyond when the provisions of the Affordable Care Act are implemented. Therefore, all treatment costs occurring in 2014 and beyond are counted as transfers.

A summary of annual WTC Health Program costs associated with this rulemaking is presented in Table 2 below.

I. Background

DoD published a proposed rule in the Federal Register at 76 FR 75512 on December 2, 2011, to incorporate the requirement for a proposal adequacy checklist into DFARS 215.408, and an associated solicitation provision at 252.215-7009, to ensure offerors take responsibility for submitting thorough, accurate, and complete proposals. Fifteen respondents submitted public comments in response to the proposed rule.

DoD reviewed the public comments in the development of the final rule. A discussion of the comments and the changes made to the rule as a result of those comments is provided, as follows:

A. Summary of significant changes from the proposed rule.

• The sentence “Completion of this checklist in no way reduces the responsibility to fully comply with all of the requirements of 41 U.S.C. chapter 35, Truthful Cost or Pricing Data, and any other special requirements of the solicitation.” is removed from the checklist instructions at DFARS 252.215-7009.

• The sentence “In preparation of the offeror's checklist, offerors may elect to have their prospective subcontractors use the same or similar checklist as appropriate.” was added to the end of the checklist instructions at DFARS 252.215-7009. The following checklist items are referred to by their proposed rule numbering scheme:

• Checklist item 2 is modified to change the word “lending” to “accountable”.

• Checklist item 3 is modified to read “Does the proposal identify and explain notifications of noncompliance with CASB or CAS; any proposal inconsistencies with your disclosed practices or applicable CAS; and inconsistencies with your established estimating and accounting principles and procedures?”

• Checklist item 4 is modified to read “Does the proposal disclose any other known activity that could materially impact the costs?” and now includes the list of eight sample factors that appear in the definition of “cost or pricing data” at FAR 2.101. The reference column is updated to add FAR 2.101, “Cost or pricing data”.

• Checklist item 9 is revised in response to public comments to provide a different reference.

• Checklist item 10 has added the phrase “including breakdown by year” after “consistent with your cost accounting system”.

• Checklist items 11 and 13 are removed in response to public comments and are covered by final rule item 10, as revised.

• Checklist item 14 is removed in response to public comments and final rule checklist item 4 was modified to include that non-recurring costs should be noted in the proposal along with other known activity that could materially impact costs.

• Checklist item 16 (final rule item 13) is modified to read “Is there a Government forward pricing rate agreement (FPRA)? If so, the offeror shall identify the official submittal of such rate and factor data.” Checklist item 33 from the proposed rule, has been revised and combined with final rule item 13, to address the proposal requirements if there is no FPRA.

• Checklist item 17 is removed in response to public comments.

• Checklist item 18 (final rule item 14) is modified to note that a consolidated summary of individual material and services is “frequently referred to as a Consolidated Bill of Materials (CBOM)”.

• Checklist item 19 (final rule item 15) is modified to read “Has the offeror identified in the proposal those subcontractor proposals, for which the contracting officer has initiated or may need to request field pricing analysis?” and to add the reference “DFARS 215.404-3.”

• Checklist item 20 (final rule item 16) is modified to remove “proposal(s)” and add “certified cost or pricing data”.

• Checklist item 21 (final rule item 17) is combined with checklist item 22 and modified to read “Is there a Price/Cost Analysis establishing the reasonableness of each of the proposed subcontracts included with the proposal? If the offeror's price/cost analyses are not provided with the proposal, does the proposal include a matrix identifying dates for receipt of subcontractor proposal, completion of fact finding for purposes of price/cost analysis, and submission of the price/cost analysis?”

• The sections of the checklist titled “COMMERCIAL ITEM DETERMINATION” and “ADEQUATE PRICE COMPETITION” are now titled “EXCEPTIONS TO CERTIFIED COST OR PRICING DATA.”

• Checklist item 23 (final rule item 18) is modified to read “Has the Offeror submitted any exceptions to the submission of certified cost or pricing data for commercial items proposed either at the prime or subcontractor level, in accordance with provision 52.215-20?” and now contains a list of the questions from items 24 through 26. The reference column is updated to read “FAR 52.215-20” And “FAR 2.101, commercial item.”

• Checklist item 27 (final rule item 19) is modified to read “Does the proposal include a price analysis for all commercial items offered that are not available to the general public?”

• Checklist item 32 (final rule item 24) is modified to read “For labor Basis of Estimates, does the proposal include labor categories, labor hours, and task descriptions, (e.g.; Statement of Work reference, applicable CLIN, Work Breakdown Structure, rationale for estimate, applicable history, and time-phasing)?”

• Checklist item 33 is removed and relocated within final rule item 13 in response to public comments.

• Checklist item 35 (final rule item 26) is modified to add “and how they are applied.”

• Checklist item 43 is removed in response to public comments.

• Checklist item 44 (final rule 34) is revised in response to public comments to provide a different reference in the reference column and to address all types of economic price adjustments, not just those based on indices.

• Checklist item 45 (final rule item 35) is modified to read “If the offeror is proposing Performance-Based Payments did the offeror comply with FAR clause 52.232-28?” and the reference is updated to read “FAR 52.232-28.”

• Checklist item 47 is removed in response to public comments.

Comment: Two respondents stated that this new rule would result in increased costs that will ultimately be passed on to the Government and may be financially prohibitive to seeking other business.

Response: This provision results from a long history of incomplete proposals resulting in rework and lost time, and it aims to achieve cost savings by improving initial proposal submissions from contractors.

Comment: One respondent noted that the checklist will improve efficiency on both sides of the contract and that DOD will save time because they will have all the answers they need to determine which contractor is best for the Government.

Response: This comment accurately expresses the goals of this rule.

Comment: Several respondents believed that this checklist imposes additional reporting requirements on the contractor and note that many of the checklist items are not currently required for submission of certified cost or pricing data. One respondent noted that while this checklist adds the new requirements it appears to add no value to the contracting process.

Response: This rule does not impose additional requirements over what is already required under the conditions where certified cost or pricing data are required and these requirements are already covered by OMB Control Number 9000-0013. This provision is applicable to solicitations with an estimated value greater than the TINA threshold and that require certified cost or pricing data. This provision intends to increase uniformity across DoD, minimize local variations, and thereby decrease proposal preparation costs.

Comment: Several respondents suggested that the checklist is unnecessary and duplicative. One respondent noted that it is the offeror's responsibility to comply with the requirements of the solicitation and an offeror that is unable to submit a compliant proposal is likely to be noncompliant after award. The same respondent noted that this checklist is somewhat duplicative of the DCAA forward pricing adequacy checklist. Another noted that most of the checklist items already appear in FAR 15.408 at table 15-2 and suggested that the rule should require contractors confirm that their proposal complies with all applicable requirements of 15-2. Another respondent noted that this rule is: (1) Not compliant with Executive Order 12866 as there is no defined problem that this rule aims to solve; (2) the rule is inconsistent, incompatible and duplicative of what is already in Table 15-2; and (3) that this checklist only adds a layer of regulatory requirements.

Response: This provision is a single, uniform tool that is applicable across DoD to address the inconsistent interpretations of Table 15-2. The intent of this provision is to increase uniformity across DoD, minimize local variations, and thereby decrease proposal preparation costs. The checklist created by this rule is a DFARS provision; any checklist that DCAA currently uses is outside the scope of this rule.

Comment: Several of the respondents suggested that this checklist should be incorporated into the DFARS PGI as it seems that it is intended to be a tool for assisting contracting officers in determining the adequacy of proposal and not a regulatory requirement.

Response: This provision impacts contractors; therefore it must be in the DFARS. Language added to the DFARS PGI cannot have any effect on the public and exists to assist contracting officers.

Comment: Several respondents stated that the proposed rule does not support the BBP Initiative and noted that the rule does not align with any of the 23 principal actions. The respondents believed that the proposed rule is contrary to the BBP Initiative to reduce nonproductive processes and bureaucracy.

Response: While this initiative predates BBP, it is consistent with the BBP's cost reduction initiatives.

Comment: Several comments were received regarding the possibility of contractors self validating their proposal through the use of the checklist. The respondents noted that: (1) The contractor has always been responsible for meeting the requirements of the solicitation; (2) use of the checklist will not relieve the contracting officers of the responsibility of determining the proposal adequate; and (3) it is likely that time and resources will be wasted reviewing the checklist instead of reviewing the proposal.

Response: This provision should result in cost savings by improving initial proposal submissions from offerors and reduce the amount of rework and resubmissions. Because the offeror will specify where to find required information in its proposal, this provision aims to achieve time savings for contracting officers.

Comment: One respondent suggested that this rule creates additional potential for protests as acceptance of the checklist or the non-rejection of the checklist would allow contractors to claim they have met all solicitation requirements and were unfairly denied award.

Response: This checklist is intended to facilitate the contractor submitting an adequate proposal. The checklist is not intended to be a standalone decision document; it will be used by contracting officials in reviewing proposals when certified cost or pricing data are required.

Comment: One respondent suggested changing the clause prescription at 215.408(3) to read that the contracting officer “shall” use the checklist instead of “should” as is used in the proposed rule. This respondent believed that nonstandard mandatory use of the checklist will cause confusion across the DoD and industry.

Response: Because of the wide variance in requirements, the contracting officer will have discretion to determine applicability to the requirements.

Comment: Two respondents suggested that there should be penalties associated with non-submission of the checklist.

Response: The checklist is intended to be a tool to assist contractors to provide adequate, compliant proposals; it is not meant to be punitive. Non-receipt of the checklist may result in extending the proposal evaluation and delaying contract award.

Comment: One respondent suggested that the contracting officer should specify which items on the checklist will be required and where data other than certified cost or pricing data are required.

Response: This provision is to be included only in solicitations requiring certified cost or pricing data.

Comment: One respondent suggested that the contracting officer should be able to tailor the checklist as necessary to each acquisition.

Response: The solicitation provision will be utilized in its entirety. This is a tool for offerors to improve the initial proposal submission, ensuring adequacy and completeness.

Comment: Several comments were received regarding the applicability of the checklist to subcontractors as the proposed rule has no guidance on this. One of the respondents noted that flowdown to require subcontractor to use the checklist would add a significant amount of time to proposal preparation.

Response: The checklist is not required to flow down to subcontractors, but prime contractors may elect to use it for their prospective subcontractors' proposals.

Comment: One respondent made several suggestions toward the overall solicitation process including: (1) Not allowing proposal costs to be billed directly if the proposal is inadequate; (2) requiring contractors to justify their proposed fee with a risk analysis; (3) requiring, for all proposal modifications, a total proposal resubmission; (4) requiring more detail in contractor's analysis of subcontractor proposals; and (5) creating a requirement that postaward subcontractor cost savings should be passed on to the Government.

Response: These comments are beyond the scope of this rule.

Comment: One respondent stated that many of the checklist items are already called out in section L of the solicitation and suggested that section L could be modified to reflect the pertinent items in the checklist.

Response: The solicitation provision created by this rule will go in section L of the solicitation, and it is meant to supplement the other instructions for circumstances where certified cost or pricing data will be required.

Comment: One respondent suggested removing the “compliance” statement directly preceding the checklist at clause 252.215-7009.

Response: The provision is modified to remove “Completion of this checklist in no way reduces the responsibility to fully comply with all of the requirements of 41 U.S.C. chapter 35, Truthful Cost or Pricing Data, and any other special requirements of the solicitation.”

Comment: One respondent stated that the checklist is not appropriate for IDIQ solicitations and awards. The respondent stated that this is because IDIQs often provide a placeholder value or a predetermined bill of material that the offeror must use, but the checklist implies that the offeror is responsible for all of the TINA requirements for a value in the proposal that has been directed by the Government.

Response: This checklist is applicable to solicitations that require certified price and costing data. When a predetermined bill of materials is provided by the Government, certified cost or price data is not required for that cost element.

Comment: One respondent stated that the Government's requirement for a CBOM is not always consistently interpreted or applied which, at times, has resulted in unnecessary costs to the Government in the name of compliance. The checklist should encourage contractors to discuss BOM requirements with the contracting officer prior to preparing the proposal where a single CBOM (in an electronic format) is not consistent with the contractor's current (and approved) practices. Further, the contracting officer should be allowed the reasonable discretion to decide what information or format is truly necessary for determining a price fair and reasonable.

Response: The rule does not restrict communication among the parties. Specific submission requirements can be included in section L of the solicitation at the contracting officer's discretion.

Comment: One respondent stated that the terms “Offeror” and “contractor” should be used consistently and not interchangeably to minimize confusion.

Response: All “contractor” references have been changed to “offeror” in the DFARS text and provision.

Comment: One respondent suggested that proposals include both the CAGE and DUNS numbers of the offeror in order to more effectively monitor offeror compliance with forward pricing rate recommendations and forward pricing rate agreements.

Response: This is outside the scope of this rule; it is already required by the solicitation.

Comment: One respondent requested adding a question in the “General Instructions” to assess whether the offeror addressed the specific requirements of the contracting officer within the proposal.

Response: This checklist addresses proposals that will require certified cost or pricing data. Specific submission requirements can be included in section L of the solicitation at the contracting officer's discretion.

Comment: One respondent suggested adding under “General Instructions” the following three items:

a. Does the proposal comply with the RFP in regard to data rights?

b. Does the proposal comply with the RFP regarding the applicable requirements relative to submission of subcontracting plan, Cost and Software Data Reporting (DFARS 252.234-7003, 252.234-7004), EVM, Unique Item Identification (UID) and specialty metals?”

Response: This checklist applies only to the cost proposal and not the proposal in its entirety.

Comment: One respondent requested changing the format of the checklist to include a “Y/N/N/A” column.

Response: The checklist is designed to be open-ended. An explanation should be provided when “not applicable.” A column with “Y/N/N/A” is not necessary. If the offeror fills in the checklist with a page number(s) in the “Proposal Page No.” column this would denote that “yes” the item has been provided. If the contractor enters something in the “If not provided EXPLAIN” column, this would denote that the item has not been provided and there should be an explanation as to why the item has not been provided. The item not being applicable for the particular proposal can be included with the explanation as to why it has not been provided.

Comment: Two respondents recommended modifying the reference block for item 1 to accurately reflect the two items being referred to in FAR table 15-2.

Response: The reference is changed to “Paragraph A.”

Comment: One respondent recommended the terminology in the checklist item for Government-furnished material/tooling/test equipment be made consistent with the FAR reference for Government property. Another respondent suggested requiring a cost impact study if Government-furnished property/material/tooling/test equipment is denied. One respondent requested replacing the term “lending” with “accountable” in order to be consistent with the FAR.

Response: The DFARS text is changed to replace the term “lending” with “accountable”. A cost impact study is outside the scope of this rule.

Comment: One respondent suggested changing the checklist item to ask whether the offeror has been notified of any CAS noncompliance or other estimating deficiencies that may impact the proposed price. Another respondent recommended requiring the offeror to evaluate the magnitude of the impact of the CAS noncompliance or deficiency on estimated costs, describe the offeror's efforts to correct the noncompliance, and propose a method of dealing with the noncompliance in the negotiated agreement. One respondent stated that no FAR references or any other FAR or DFARS clauses currently require an offeror to disclose estimating deficiencies in a proposal and this checklist item would create a new requirement for an offeror.

Response: This item is revised to read “Does the proposal identify and explain notifications of noncompliance with CASD or CAS; any proposal inconsistencies with your disclosed practices or applicable CAS; and inconsistencies with our established estimating and accounting principles and procedures?” to more closely align with table 15-2.

Comment: One respondent stated some of the terms in the checklist were newly created for the checklist and were not directly from the requirements already in the Federal Acquisition Regulation (FAR). The respondent suggested the inclusion of new terms would cause inconsistency that may lead to confusion. The FAR reference was also questioned.

Response: This checklist item is modified to read “Does the proposal disclose any other known activity that could materially impact the costs?” and now includes the list of eight sample factors that appear in the definition of “cost or pricing data” at FAR 2.101. The reference column is updated to add FAR 2.101, “cost or pricing data.”

Comment: Two respondents stated it would be wastefully time consuming and burdensome for offerors to disclose which pages of the proposal contain a judgmental factor applied and the mathematical or other methods used in the estimate. The respondents suggested a large percentage of the pages comprising the proposal would contain such information.

Response: Having contractors identify this information prevents miscommunication and misunderstanding, and it will save time in the proposal evaluation process.

Comments: One respondent stated the FAR reference was not applicable because it pertains to CLINS instead of cost estimating relationships. One respondent suggested the checklist item should include an additional requirement that the offeror explain how the cost estimating relationship (CER) is applied.

Response: This reference for the item has been change to cite Section II, Paragraphs A and B of Table 15-2. These references require the basis of estimate. CER is a basis of estimate that could be used when cost is not proposed on a discrete basis.

Comment: One respondent stated the FAR reference was not applicable because it pertains to CLINS instead of cost elements.

Response: Paragraph D is referenced because it specifically requests offeror to provide cost element breakdown for each proposed line item. The checklist does not directly restate every item of table 15-2 as it is meant to be used as a tool to ensure all necessary elements have been included with the proposal.

Comments: One respondent noted the FAR reference to paragraph D was not applicable. Another respondent commented the item would introduce a new requirement because paragraph D does not require a yearly breakdown by either total price or cost element.

Response: This element is removed from the checklist as it is covered by final rule item 10; breakdowns for cost elements must be consistent with the cost accounting system.

Comments: One respondent noted the FAR reference to paragraph E was not applicable. Another respondent commented the item would introduce a new requirement because paragraph D does not require a yearly breakdown by either total price or cost element.

Response: This element is removed from the checklist as it is covered by final rule item 10; breakdowns for cost elements must be consistent with the cost accounting system.

Comments: One respondent noted the FAR reference to paragraph E was not applicable. Another respondent commented the item would introduce a new requirement because the offeror currently does not have to segregate recurring and non-recurring costs at the CLIN/Sub-CLIN and total cost levels.

Response: This checklist item is removed as non-recurring costs are cited in the definition of “cost or pricing data” at FAR 2.101 and should be noted in response to checklist item 4.

Comments: Several respondents stated the checklist item for a description of supplies and services addresses non-cost information and should be eliminated. The respondents commented that the checklist item would create a new reporting requirement for offerors because this is not currently a FAR or DFARS requirement.

Response: Since item 17 requests non-cost information, it is removed from the final rule. The basis on which supplies or services meet the need of the Government should be developed within the proposal.

Comments: One respondent requested the language of the checklist item be expanded to inquire whether the offeror's estimating technique is appropriate and whether inter-organizational transfers are included in the Consolidated Bill of Materials. Several respondents suggested a requirement that an offeror provide an electronic version of the CBOM that can be sorted by supplier, category, quantity, unit price, extended price of parts number, and identification of commercial items. Another respondent imparted the rationale that was utilized to reach the final version of the Air Force Proposal Adequacy Checklist and cautioned expanding the scope for this checklist item.

Response: The suggested items, as well as requiring an electronic submission that can be sorted, would be new reporting requirements beyond the intent of this rule. Specific submission requirements can be included in section L of the solicitation at the contracting officer's discretion. The checklist is not intended to dictate all specific requirements for every solicitation in which it is used.

Comments: Several respondents suggested additional language to inform offerors that they must still perform price and cost analysis when an assist audit has been requested on a subcontractor. One respondent suggested the checklist item be modified or eliminated because contracting officers and DCAA, not prime contractors have the authority to request assist audits of subcontractors. Another respondent requested amending the checklist item to direct the offeror to inform the contracting officer as soon as possible of the need for an assist audit resulting from proprietary data rights assertions.

Response: A reference for item 19 is added to reflect “DFARS 215.404-3” and the checklist item is modified to read “Has the offeror identified in the proposal those subcontractor proposals, for which the contracting officer has initiated or may need to request field pricing analysis?”

Comments: One respondent proposed the FAR reference be revised to match that of item 18. Two respondents suggested modifying the language. One suggested: “Per the thresholds of FAR 15.404-3(c), Subcontract Pricing Considerations, does the proposal include either a copy of the applicable subcontractor's proposals or the date by which these proposals will be submitted directly from the subcontractor? If proposals are to be submitted, annotate the projected date provided of submission in ‘explanation’ column of this checklist.” The other respondent suggested modifying the language to read: “* * * does the proposal include a copy of the applicable subcontractor's certified cost or pricing data?”

Response: The item reference is revised to add “FAR 52.244-2”. The submission item text will be modified to incorporate the second respondent's suggestion of “* * * does the proposal include a copy of the applicable subcontractor's certified cost or pricing data?” If the answer is “no,” the explanation should state how and when the data will be provided.

Comments: One respondent noted the language in checklist items 21 and 22 should be consistent when addressing an offeror's price/cost analysis of subcontracts. One respondent suggested the checklist item question be modified to ask whether a prime contractor's price/cost analysis of each proposed subcontract greater than $700,000 is included in the proposal.

Response: Item 21 is modified to read “Is there a price/cost analysis establishing the reasonableness of each of the proposed subcontracts included with the proposal?” A price or cost analysis must be accomplished on all subcontractor proposals; there is no dollar threshold for this.

Comments: One respondent stated the checklist item would create a new reporting requirement for offerors because this is not currently a FAR or DFARS clause that requires an offeror to provide a matrix of anticipated dates for the receipt of proposals from subcontractors. Other respondents recommended identifying the offeror as a prime contractor and using the language consistently when addressing an offeror's price/cost analysis of subcontracts.

Response: This is only necessary if a proposal is incomplete because the information in the preceding checklist item has not been submitted. The checklist is not generating a new reporting requirement; it is only requesting remaining proposal components submission date for adequacy. This item has been combined with the previous checklist item (item 21 which is item 16 in the final rule) to clarify that it is a follow-up that is only necessary when an analysis has not yet been submitted for each subcontract.

Comments: One respondent commented the item would introduce a new requirement because it is not currently mandatory for the offeror to indicate whether commercial items would be exempt for certified cost or pricing data requirements. The respondent noted a contracting officer may require data other than certified cost or pricing data when a commercial item is being acquired. Another respondent suggested the offeror provide the rationale for commercial items listed as exempt from certified cost or pricing data requirements.

Response: This is not a new reporting requirement as this item allows the offeror to acknowledge an allowable exemption to the requirement for certified cost or pricing data at the prime or subcontractor level. The item is modified to read “Has the Offeror submitted any exceptions to the submission of certified cost or pricing data for commercial items proposed either at the prime or subcontractor level, in accordance with provision 52.215-20?” and now contains a bulleted list of the questions from items 24 through 26. The reference column is updated to read “FAR 52.215-20” and “FAR 2.101, commercial item.”

Comments: One respondent noted the FAR reference only points to the definition of a commercial item and does not reference a FAR instruction for an offeror to provide a technical description of the differences between the proposed item and the comparison item.

Response: This item is removed because the requirements at 52.215-20 are consolidated in checklist item 23 (final rule item 17) making this item redundant.

Comments: One respondent commented the checklist item would create a new reporting requirement for offerors because the FAR currently states a contracting officer may require data other than certified cost or pricing data but does not require an offeror to provide such information for every proposal. Another respondent suggested including language that a minor modification must meet the definition in FAR 2.101 in order to clarify the requirements of a commercial item exemption. One respondent requested the checklist item ask the offeror to justify, in addition to classifying, the modification. Several respondents requested the replacement of the phrase “see note below” with language that informs the offeror modifications that do not qualify as minor under FAR 2.101 or modifications that qualify as minor where the total price of all such modifications exceed the greater of the thresholds for certified cost or pricing data or 5% of the total price of the contract are not exempt from the submission of certified cost or pricing data.

Response: This item is removed because the requirements at 52.215-20 are consolidated in checklist item 23 (final rule item 18) making this item redundant.

Comments: One respondent stated the checklist item only references the definition of a commercial item and would create a new reporting requirement for offerors because this is not currently a FAR or DFARS requirement for an offeror to provide a technical description of the differences between the proposed item and the comparison item.

Response: This item is removed because the requirements at 52.215-20 are consolidated in checklist item 23 (final rule item 18) making this item redundant.

Comments: Several respondents suggested additional requirements for the offeror to provide data other than certified cost or pricing data to support a determination of price reasonableness for commercial items such as data related competition, market prices, costs, etc. One respondent stated that the reference was incorrect because cost or pricing data are not required for commercial items and if such information were required, it creates a new reporting requirement for offerors because this is not currently a FAR or DFARS requirement for an offeror.

Response: The contracting officer would have to decide during discussions if other than certified cost or pricing data will be necessary. This is not a new requirement; it is a reminder that a price analysis is still required when certified cost or pricing data are not required. The FAR reference is revised to reflect “FAR 15.408, Table 15-2, Section II Paragraph A” and rephrased to address “a price analysis for all commercial items offered that are not available to the general public.”

Comments: One respondent suggested amending the FAR reference for the requirement to provide analysis for inter-organizational transfers.

Response: The table 15-2 reference is added to the references column in the final rule (Paragraph A(1) Section II Table 15-2).

Comments: One respondent noted the importance of well referenced information regarding the types, time phasing, and WBS for direct labor so that the cost element summary can be reconciled with the basis of estimates.

Response: The checklist is intended to assist contractors in providing well referenced proposal information.

Comments: One respondent noted the checklist item would impose a new requirement on offerors since the FAR reference requires a time-phased breakdown of labor hours, rates, and cost by appropriate category but does not require task descriptions, statement-of-work reference, applicable CLIN, work breakdown structure (WBS), rationale for estimate and other detailed breakdowns. Another responded reiterated the importance of well referenced information regarding the types, time phasing, and WBS for direct labor so that the cost element summary can be with reconciled with the basis of estimates.

Response: The checklist item is modified to include the list of examples “Statement of Work reference, applicable CLIN, work breakdown structure, rationale for estimate, applicable history, and time-phasing” in parentheses. Also, “e.g.” has been added at the beginning of this list to further denote that the items are merely examples.

Comments: One respondent recommended relocating the content of checklist item 33 into the “General Instructions.” Another respondent suggested a requirement that an offeror provide historical direct labor rates for proposed labor categories if a FPRA/FPRP is not available. Ifhistorical direct labor rates are also not available the respondent requests an offeror provide marketplace analysis for the proposed labor categories.

Response: This item is relocated to the “General Instructions” section of the checklist and consolidated with item 16 (final rule item 13).

Comments: Several respondents request including additional guidance in the checklist item so offerors more clearly explain how indirect rates are developed and applied throughout the proposal.

Response: The rule text is modified to include “and how they are applied?”

Comments: One respondent stated the language of the checklist item should be amended to distinguish when travel is proposed as a direct cost because it may not always be proposed as such and the question requirement would not be applicable. Another respondent stated the checklist item creates a new reporting requirement for offerors because this is no current FAR or DFARS requirement.

Response: The travel details listed in item 36 are not spelled out in table 15-2; however they are the necessary details to provide an adequate basis for pricing of direct travel.

Comments: One respondent stated the checklist item duplicates the requirement listed in checklist item 39 which addresses cost element breakdowns of all types of proposals.

Response: The tables are represented in separate checklist items to accentuate that they are each used in different circumstances.

Comments: One respondent stated the checklist item duplicates the requirement listed in checklist item 39 which addresses cost element breakdowns of all types of proposals.

Response: The tables are represented in separate checklist items to accentuate that they are each used in different circumstances.

Comments: One respondent commented that the item would introduce a new requirement because the checklist item requires the offeror to state that the fee is in accordance with statutory requirements whereas the FAR reference identifies a requirement on the contracting officer to verify the fee does not exceed statutory requirements.

Response: This item is removed because the contracting officer determines if the fee is appropriate in accordance with the regulations, not the offeror.

Comments: One respondent recommended the removal of item 44 in the checklist regarding the rationale and application of economic price adjustment in a proposal. The respondent noted the inclusion of the item on the checklist may encourage an offeror to propose the use of economic price adjustments, which would not be desirable to the Government because of the of the administrative burden. The respondent also stated the checklist item assumes an economic price adjustment with indices when indices are only one of the methods available. The FAR reference was also questioned.

Response: This item is revised to address all type of economic incentive arrangements and a new reference has been provided to FAR 16.203-4 and FAR 15.408 Table 15-2, Section II, Paragraphs A, B, C, and D.

Comments: One respondent suggested that the checklist item should clarify that an offeror can propose a separate price for performance based payments which are negotiated after award. Another respondent stated that the checklist item creates a new reporting requirement for offerors because there is no current FAR or DFARS requirement for an offeror to provide an expenditure profile.

Response: The reference is modified to reflect FAR 52.232-28 and the item is modified to read as follows: “If the offeror is proposing Performance-Based Payments, did the offeror comply with FAR 52.232-28?” The provision at FAR 52.232-28 is included in solicitations when offerors are invited to propose performance based payments and the provision includes all of the necessary information for submission.

Comments: One respondent suggested expanding checklist item 46 to require identification and explanation of any higher tier subcontractors rather than limiting the requirement to only subcontractors supplying the prime contractor. Another respondent recommended the FAR reference be amended to include FAR 52.215-22.

Response: References to FAR clauses 52.215-22 and 52.215-23 are added. This checklist is addressed to the offeror and not to the subcontractors. When the prime is subcontracting more than 70% of the effort, the contractor is required to disclose this in the proposal.

Comments: One respondent commented the item would introduce a new requirement because the checklist item does not make reference to a current requirement within the FAR.

Response: This item is removed as point of contact data is already required by table 15-2 Section I (A)(3), which is covered by checklist item 1.

Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

A final regulatory flexibility analysis has been prepared consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., and is summarized as follows:

This final rule amends the Defense Federal Acquisition Regulation Supplement (DFARS) to add a checklist for Department of Defense (DoD) contractors to complete under solicitations that require the submission of certified cost or pricing data and when the Contracting Officer chooses to use the provision. This rule supports DoD's Better Buying Power initiatives.

The objective of the rule is to ensure that offerors submit thorough, accurate, and complete proposals. Through filling out the checklist the contractor will be able to self validate their proposals.

No significant issues were raised by the public in response to the initial regulatory flexibility analysis.

No comments were filed by the Chief Counsel for Advocacy of the Small Business Administration in response to the rule.

The rule will apply to solicitations, for which certified cost or pricing data are required. Based on data collected in the Federal Procurement Data System for FY2008—FY2010, there are on average 905 actions per year that met the criteria where the proposal adequacy checklist could be utilized; on average 421 of those actions were with small business concerns.

No alternatives were determined; the proposal adequacy checklist was created directly from requirements already in the FAR.

The rule contains information collection requirements that require the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C chapter 35). However, these changes to the DFARS do not impose additional information collection requirements to the paperwork burden previously approved under OMB Control Number 9000-0013, entitled Cost or Pricing Data Exemption Information.

Therefore, DoD amends 48 CFR parts 215 and 252 as follows:

I. Background

DoD published an interim rule in the Federal Register at 77 FR 30356 on May 22, 2012, to implement the United States-Korea Free Trade Agreement (see the United States-Korea Free Trade Agreement Implementation Act (Pub. L. 112-41) (19 U.S.C. 3805 note)). There were no public comments submitted in response to the interim rule.

Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is a significant regulatory action and, therefore, was subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

DoD certifies that this rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. Korea is already a designated country under the World Trade Organization (WTO) Agreement on Government Procurement (GPA). Although the rule now opens up Government procurement to the goods and services of Korea at or above the threshold of $100,000, DoD does not anticipate any significant economic impact on U.S. small businesses. DoD only applies the trade agreements to the non-defense items listed at DFARS 225.401-70, and acquisitions that are set aside or provide other forms of preference for small businesses are exempt. FAR 19.502-2 states that acquisitions that do not exceed $150,000 (except as described in paragraph (1) of the definition of “simplified acquisition threshold” at FAR 2.101) are automatically reserved exclusively for small business concerns, unless the contracting officer determines that there is not a reasonable expectation of obtaining offers from two or more responsible small business concerns.

This rule affects the certification and information collection requirements in the provision at DFARS 252.225-7035, currently approved under OMB Control Number 0704-0229, titled Defense Federal Acquisition Regulation Supplement part 225, Foreign Acquisition, and related clauses, in accordance with the Paperwork Reduction Act (44 U.S.C. chapter 35). OMB Control Number 0704-0229 assessed the total burden related to part 225 at approximately 57,230 hours. The impact of this rule, however, is negligible, because it is just a question of under which category offered goods from the Republic of Korea would be listed. The rule also affects DFARS 252.225-7018, which is a variant of the Buy American-trade agreements certifications already approved, which was issued as an interim rule under DFARS Case 2011-D046 (76 FR 78858, December 20, 2011).

Accordingly, the interim rule amending 48 CFR parts 225 and 252, which was published at 77 FR 30356 on May 22, 2012, is adopted as a final rule without change.

I. Background

DoD published an interim rule in the Federal Register at 77 FR 31536 on May 29, 2012, to implement the United States-Colombia Trade Promotion Agreement Implementation Act (Pub. L. 112-42) (19 U.S.C. 3805 note).

No public comments were received. Therefore, DoD is adopting the interim rule as final, without change.

Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

DoD certifies that this final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. Although the rule now opens up Government procurement to the goods and services of Colombia at or above the threshold of $77,494.00, DoD does not anticipate any significant economic impact on U.S. small businesses. DoD only applies the trade agreements to the non-defense items listed at DFARS 225.401-70, and acquisitions that are set aside or provide other forms of preference for small businesses are exempt. FAR 19.502-2 states that acquisitions that do not exceed $150,000 (with some exceptions) are automatically reserved exclusively for small business concerns.

This rule affects the certification and information collection requirements in the provision 252.225-7035, currently approved under OMB Control Number 0704-0229, titled Defense Federal Acquisition Regulation Supplement Part 225, Foreign Acquisition, and related clauses, in accordance with the Paperwork Reduction Act (44 U.S.C. chapter 35). OMB Control Number 0704-0229 assessed the total burden related to part 225 at approximately 57,230 hours. The impact, however, is negligible, because it is just a question of under which category offered goods from Colombia would be listed.

Accordingly, the interim rule amending 48 CFR part 252, which was published at 77 FR 31536 on May 29, 2012, is adopted as a final rule without change.

I. Background

DoD published a proposed rule in the Federal Register at 77 FR 43474 on July 24, 2012. DoD proposed to amend the definition of “produce” to eliminate the phrase “quenching and tempering” of armor steel plate, and to expand the application of the other listed technologies, currently restricted just to titanium and titanium alloys, to any specialty metal that could be formed by such technologies.

DoD received comments on the proposed rule from 13 respondents.

DoD reviewed the public comments in the development of the final rule. A discussion of the comments and the changes made to the rule as a result of those comments is provided, as follows:

The phrase “gas atomization” in the definition of “produce” has been revised to read “atomization,” in order to allow for other types of atomization (e.g., gas, water, centrifugal, plasma).

Comment: All respondents strongly supported the proposed definition of “produce.” Some of the benefits of the revised definition noted by the respondents are as follows:

Provides domestic control of material vital to protection of our troops is critical to national security interests, promotes self-sufficiency of U.S. defense industry.

Helps maintain a strong domestic armor steel plate industry and strengthens our defense industrial base, as well as the overall economic strength of the United States. Incentivizes investment in the manufacturing capacity, process technology, research and development necessary to meet the needs of the U.S. military, thereby reducing the possibility of supply shortages. Adds new U.S. steelmaking jobs, as well as jobs throughout the steelmaking supply chain.

Is consistent with statutory language and legislative history.

Response: Noted.

Comment: Some respondents commented on the statement by DoD in the Federal Register preamble to the proposed rule, that there is now sufficient capacity to meet DoD requirements, if DoD were to remove “quenching and tempering of steel plate” from the definition of “produce.” One respondent expressed concern that by linking the regulatory definition of “produce” to changes in capacity, DoD is creating uncertainty and discourages potential investors from building or maintaining domestic production.

Several respondents also commented that there are already existing statutory authorities (i.e., the nonavailability and national security exceptions), which should provide sufficient flexibility and make it unnecessary to revisit the issue of the definition of “produce.”

Response: Since these respondents are all strongly in support of the proposed rule, no change is necessary in the final rule.

Comment: One respondent expressed support for DoD's decision to amend the definition of “produce” to create a uniform definition for all specialty metals. Several respondents noted that the definition now only includes those technologies that make a significant contribution equivalent to melting, and allows for flexibility and future technology advances that could replace the melt stage for certain specialty metals.

Response: Noted.

Comment: One respondent stated that atomization of metal is not always achieved by using a stream of gas. Atomization may also be achieved by rotating molten metal at high speeds. Therefore, the respondent recommended deletion of the word “gas” from the proposed definition of “produce.”

Response: DoD has removed the word “gas” from the final rule.

Comment: The same respondent stated that the final consolidation of metal powders produced through atomization would not be sufficient to confer domestic origin on the resulting article, because the atomization process uses molten metal. Therefore, the metal powder produced through atomization is a melt-derived powder, rather than a non-melt derived powder. The respondent did not request a change to the rule with regard to this issue, but requested clarification in the preamble to the final rule that articles produced from melt-derived metal powders, including metal powders produced through atomization, would have to be consolidated from domestically melted metal powders in order to be considered products of the United States.

Response: DoD has created a vertical list to improve the clarity with regard to the three processes that constitute production, and must therefore be performed in the United States: (i) Atomization; (ii); sputtering; or (iii) final consolidation of non-melt derived powders.

It is very clear that final consolidation only constitutes production with regard to metal powders that are derived by non-melt processes (such as mechanical or chemical processes). It is acceptable for non-melt processes to occur outside the United States, as long as final consolidation occurs in the United States, but any processes involving melting must occur in the United States.

Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

A final regulatory flexibility analysis has been prepared consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., and is summarized as follows:

DoD has issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to revise the definition of “produce” as it applies to specialty metals. The National Defense Authorization Act for Fiscal Year 2011 directed DoD to review the definition of “produce” to ensure its compliance with 10 U.S.C. 2533b and to determine if a revision to the current rule was necessary and appropriate.

The objective of the proposed rule is to revise the definition of “produce” as it applies to production of specialty metals, in response to comments received and consideration of current technologies for production of specialty metals other than titanium. The legal basis for the rule is 10 U.S.C. 2533b. No significant issues were raised by the public comments in response to the initial regulatory flexibility analysis. There were no comments filed by the Chief Counsel for Advocacy of the Small Business Administration.

The final rule affects primarily producers of specialty metal steel armor plate, and manufacturers that supply steel armor plate that will be incorporated into end items to be acquired by DoD. Producers of specialty metals are generally large businesses. There is a high capitalization requirement to establish a business that can melt or produce specialty metals. The small business size standard for primary metal manufacturing ranges from 500 to 1,000 employees. All the specialty metals producers reviewed had more than 500 employees. There are numerous manufacturers of products containing specialty metals, either as prime contractors or subcontractors. DoD does not have the data to determine the total number of these manufacturers, or the number that are small businesses, because the Federal Procurement Data System only collects data on prime contractors and end items, not subcontractors and components of end items.

There are no projected reporting, recordkeeping, or other compliance requirements.

DoD did not identify any significant alternatives to the rule which would minimize any impact of the rule on small entities and still meet the requirements of the statute 10 U.S.C. 2533b.

The rule does not contain any information collection requirements that require the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35).

Therefore, DoD amends 48 CFR part 252 as follows:

This final rule revises several provisions of the Pacific coast trawl rationalization program and supersedes regulatory delays and/or revisions NMFS established through temporary emergency action in a final rule published on August 1, 2012 (77 FR 45508), and extended on January 17, 2013 (78 FR 3848). Specifically, this action will:

(1) Allow transfer of QS or IBQ (except for widow rockfish QS) between QS permit holders in the shorebased IFQ fishery beginning January 1, 2014;

(2) Require QS permit holders in the shorebased IFQ fishery holding QS or IBQ in excess of the accumulation limits to divest themselves of excess QS (except for widow rockfish QS) or IBQ by November 30, 2015;

(3) Allow limited entry trawl permit holders in the mothership fishery to request a change (or transfer) of mothership/catcher vessel (MS/CV) endorsement and its CHA beginning September 1, 2014;

(4) Require MS/CV endorsed limited entry trawl permit owners to divest themselves of ownership in permits in excess of the accumulation limits by August 31, 2016; and

(5) Extend the divestiture period delay and moratorium on transfer of widow rockfish QS in the shorebased IFQ fishery indefinitely.

Each of these elements, along with additional background information, were described in detail in the proposed rule (78 FR 72, January 2, 2013), and are not repeated here.

NMFS has determined that the Council's recommendation to maintain the existing initial whiting allocations (No Action Alternative) is consistent with the MSA, the Groundfish FMP, the court's order in Pacific Dawn v. Bryson, No. C10-4829 TEH (N.D. Cal.) ( Pacific Dawn ), and other applicable law. This determination is based on NMFS' review of the entire record, including the Council's record and NMFS' consideration of comments received on the proposed rule. After considering the required statutory factors and the goals and objectives of the trawl rationalization program and the Groundfish FMP, NMFS has determined that the existing initial whiting allocations provide for a fair and equitable allocation to the shorebased IFQ program and the mothership coop program. These initial allocations of whiting take the form of QS for both harvesters and processors in the shorebased IFQ program, and CHA for harvesters in the mothership fishery. For the purposes of this action, “quota” is used to describe allocations of both CHA and QS to harvesters in the shorebased IFQ and mothership fisheries, as well as to describe allocation of QS to shoreside processors.

In the context of the relatively narrow remand ordered by the court in Pacific Dawn, NMFS has determined that many MSA factors show minimal differences, or none at all, between the alternatives under consideration. Additionally, where there are differences, they are tempered by the relatively modest shifts in quota among the various alternatives and other relatively minor variations that result. For example, comparing the No Action Alternative to the alternative most favoring recent history (Alternative 4) reveals overall modest shifts in quota from status quo holders to others (17% for shorebased harvesters, 3% for shoreside processors, and 18% for mothership harvesters) and generally modest shifts among most individual permit holders and processors. This is principally the result of the fact that a majority of participants in the whiting fishery have generally continuous participation in the fishery. Given this, and in balancing the various factors in this decision (including control date, investment and dependence, disruption, efficiency, employment, current and historic participation, communities), NMFS has concluded there are fundamental and compelling reasons to maintain the existing initial allocations of whiting. Of most importance, maintaining existing allocations takes into account the intent of the 2003 control date and principal policy goals of the trawl rationalization program (including reducing overcapitalization and ending the race for fish). Maintaining status quo also reduces concentration of quota among participants and achieves a wider geographic distribution of initial program benefits. NMFS believes these key factors, among other considerations, outweigh the reasons supporting alternatives that favor more recent history (e.g., recognizing recent fishery participants' dependence and investments, reducing future quota leasing or acquisition costs, reducing quota to recent non-participants, and reflecting more recent market and fishery conditions). More detailed discussion on the specific statutory factors under MSA section 1853a(c)(5)(A) and related provisions is set forth in the preamble to the proposed rule and not repeated here.

Maintaining the initial whiting allocations, including the use of qualifying years of 1994-2003 for whiting harvesters and 1998-2004 for whiting processors, supports the Council's and NMFS' efforts to reduce overcapitalization and end the race for fish by not rewarding increases in harvesting or processing that occurred after the end of the qualifying periods (i.e., after the 2003 control date). The existing whiting allocations also support the importance of the control date for this and future rationalization programs, minimize the concentration of harvester quota, and provide for a wider initial geographic distribution of the program benefits along the coast and the corresponding fishing communities.

Two fundamental purposes of Amendment 20 were to reduce overcapitalization in the groundfish fishery and to end the race for fish. The Council adopted and announced the 2003 control date to further these purposes, seeking to discourage speculative capitalization and discourage effort by putting participants on notice that any fishing history earned beyond 2003 may not count towards a future allocation system. Since the original notice of the 2003 control date in the Federal Register on January 9, 2004 (69 FR 1563), there has been continuous and systematic work to develop the trawl rationalization program. Throughout the reconsideration, many participants testified or provided written comment with respect to how the announcement of the control date affected their business decisions. NMFS acknowledges that a control date is not a guarantee that any specific period will count toward initial allocations. NMFS believes, however, that recognition of the business and investment decisions made by participants who interpreted the control date as signaling the likely end of the qualifying period is consistent with the fundamental purposes of Amendment 20. While no mechanism exists to separate speculative from non-speculative effort after the control date, maintaining the control date for harvesters does not reward any speculative behavior after the control date and does not penalize those who honored the control date. Additionally, an important signal is sent for future programs (nationally as well as on the Pacific Coast)—the use of control dates is still a valid tool to deter increases in effort or capitalization that would undermine conservation and management goals pending development of a limited access privilege program.

Moreover, for processors, the record establishes valid reasons to end the qualifying period for processors one year after the 2003 control date, including accounting for processor investments that took place prior to the announcement of the control date but that did not begin to earn processing history until 2003 and 2004. In addition, the purpose of applying control dates to onshore processors, while important, is not necessarily as significant as for harvesters, who have a greater ability to move into and out of various fisheries to gain potential fishing history. These factors, in addition to the fact that it was not clear until 2005 that the 2003 control date potentially applied to processors, support the decision that a one year shift, to 2004, was a reasonable cutoff date for processors.

While maintaining the end of the qualifying periods necessarily excludes providing credit for more recent participation, publication of the control date and the continuous and active deliberation of the Council provided notice to all participants that this was a possibility. Thus, those participants who did increase their investments or effort in the fishery were on notice that any history established in later years might not count towards initial allocations. Additionally, participants had the opportunity to purchase permits from others to bolster their catch history totals to potentially reflect their increased investments and effort (as the record reflects did occur). The fairness of maintaining the initial cut-off dates also is reflected in the public comments of participants that supported No Action Alternative despite the fact that they would receive higher levels of quota if an alternative favoring more recent history were adopted.

Although the length of time between the original control date and the agency approval in 2010, implementation of the program in 2011, and this decision in 2013 is longer than the time span in most programs that announce control dates, this is explained by the complexity of the program, which resulted in significant time needed to involve the public and fishery participants, develop alternatives, develop appropriate analytical documents, reach a final decision, implement that decision, and then engage in this reconsideration process. Additionally, the Council and NMFS have fully considered all applicable fishing and processing history for this decision, leaving no gap in the available information considered.

The record reflects that basing initial whiting allocations on alternatives that include more recent history would generally have the effect of concentrating quota for harvesters in fewer hands, creating fewer winners and more losers compared to maintaining the existing allocations (see EA, Section 4.5.3.2 and FRFA). Moreover, when viewed in the context of the trawl rationalization program as a whole, moving the end date of the qualifying period to a more recent year could have the effect of creating “double-dip” gains and losses for certain participants due to having different allocation periods for whiting compared to some non-whiting species. For example, there were seven permits that, after 2003, reduced their share of harvest in the non-whiting fishery while increasing their share in the whiting fishery (see EA, Section 2.2.3.2). Using an allocation period other than the No Action Alternative would benefit those participants with more whiting history in recent years because they would receive an amount of non-whiting quota allocated under a 2003 cut-off while simultaneously receiving increased whiting quota (i.e., double-dipping) if a later end year was used for whiting allocations, creating inequities in the allocation of target species.

The record reflects that maintaining the existing allocations would provide a more even distribution of initial whiting allocations along the coast and to the corresponding fishing communities. Shifting to alternatives favoring more recent history could contribute to a northward shift in initial quota distribution, and accordingly a similar shift in any benefits stemming from that initial allocation (see EA, Section 4.3.3). The northward shift is expected to be relatively small (less than 8 percent of the total quota—2 percent for processors and 6 percent for harvesters between the No Action Alternative and Alternative 4), and the analysis shows whiting landings have been shifting northward in recent years (due to fish availability and investments in ports). Although the 8 percent difference is relatively modest, NMFS believes that maintaining the initial whiting allocations supports historic fishing communities in more southern locations and creates a wider geographic distribution of the initial benefits associated with allocations. Maintaining initial whiting allocations would further support one of the guiding principles in the development of Amendment 20 (see Am 20 EIS, Section 1.2.3)—to minimize negative impacts resulting from localized concentrations of fishing [and processing] effort. For processors, in addition to the distribution of wealth associated with initial allocations, the wider distribution of initial allocation of whiting QS may provide some additional influence over where deliveries are made along the coast than if the initial allocation were based on more recent qualifying years that would shift allocations and potentially landings northward.

In the proposed rule, NMFS solicited public comments on the regulatory revisions and on NMFS' preliminary determination that the Council's recommendation to maintain the initial allocations of whiting for the shorebased IFQ fishery and the at-sea mothership fishery is consistent with the MSA, the Groundfish FMP, and other applicable law. The comment period ended February 1, 2013. NMFS received 19 written comments on the proposed rule reflecting comments from individuals, organizations and other agencies. NMFS also received oral comments regarding the existing initial whiting allocations at a meeting during the comment period. The U.S. Department of the Interior submitted a letter indicating that it had no comment. One written comment also addressed the proposed regulatory revisions. The comments received and NMFS' responses are below.

Comment 1: NMFS has the responsibility of reviewing the record as a whole and ensuring that the action is consistent with the Groundfish FMP and the MSA. NMFS must not simply defer to the Council.

Response: NMFS agrees that it must make the final decision and cannot simply defer to the Council with respect to whether the recommendation to maintain the existing initial whiting allocations and make associated regulatory revisions is consistent with the Groundfish FMP, the MSA, including the national standards, and other applicable law. NMFS has taken its own hard look at the entire record, including public comment on the proposed rule, and determined that this action satisfies those requirements.

Comment 2: The public reconsideration process was thorough, lengthy, open, and transparent. To make appropriate decisions, Council members need stakeholder involvement and the Council reviewed and heard numerous public comments and advisory body statements from various perspectives. In addition, the majority of Council members that participated in the reconsideration were not members of the Council when it took its original action in 2008, which allowed for thorough review of the fairness and equity of that decision.

Response: NMFS agrees that stakeholder involvement is the foundation of an open public Council process and is an important component of decision making, especially with respect to allocations. The Council, including NMFS representatives, reviewed and considered many comments from various perspectives at Council meetings and NMFS has further considered stakeholder input through the comments received on the proposed rule.

Comment 3: It is unclear what role the NOAA Catch Share Policy played in the reconsideration of initial whiting allocations. Further, based on the section of the NOAA Catch Share Policy entitled “evaluating catch share applicability,” three of the characteristics for use in determining whether a fishery is a suitable candidate for a catch share program—overcapitalization, overfished stocks, and bycatch—do not appear to be present in the whiting fishery in 2010 and therefore it is unclear whether the whiting fishery was a good candidate for a catch share program.

Response: NMFS considered the NOAA Catch Share Policy (the Policy) as part of the reconsideration. Generally, the Policy recommends that allocations be revisited on a regular basis and that an allocation decision should include consideration of conservation, economic, and social criteria in furtherance of the goals of the underlying FMP. The reconsideration of initial whiting allocations reflected consideration of the factors identified in the Policy. The decision to include whiting in the trawl rationalization program was approved in Amendment 20 and implemented in 2011. NMFS also considered provisions of the Policy at that time. Amendment 20 was developed to address among other things, overcapitalization, overfishing, and bycatch, including bycatch of overfished species, in the groundfish trawl fishery (75 FR 78344). The decision to include the whiting fisheries as part of the trawl rationalization program is not part of the reconsideration of initial whiting allocations or this rule.

Comment 4: Consideration of a factor means that it must be weighed and taken into account, not noted and ignored. NMFS must provide a reasoned analysis that connects the factor with the decision it makes with respect to initial whiting allocations.

Response: NMFS agrees that consideration of a factor entails more than noting its existence. However, when making an allocation decision, the factors that must be considered do not require any particular outcome. For example, the requirement to consider current harvests when establishing a fair and equitable initial allocation does not mandate that the qualifying periods for initial whiting allocations be expanded to include years beyond the existing cut-offs. As the record demonstrates, there is a rational basis for excluding more recent years from the qualifying periods. The existing initial allocations further the goals and objectives of Amendment 20 and avoid rewarding increases in harvesting or processing at a time when the fishery was overcapitalized, and a time after participants were aware that history beyond 2003 may not qualify for use in an allocation formula.

Comment 5: More recent years should be used in the qualifying period for allocating whiting to processors to reflect changes in the marketplace. The whiting market has changed since the end of the existing qualifying periods, specifically with the growth of the market for the whiting headed and gutted product. The changes made the fishery more efficient and economically stable after 2004, so more recent years should be more heavily weighted to establish a fair and equitable allocation.

Response: NMFS agrees that there have been changes in the markets for whiting. These changes have led to changes in the amounts and types of product made out of whiting. Since the early 1990s, shorebased processors have converted whiting into headed and gutted (H&G), surimi, fillets, and fish meal products. In the early 1990s, there was a much greater emphasis on surimi. New plants came on line in response to the demand for surimi caused by the phase out of Japanese and Korean fleets off the U.S. and Russian waters. In recent years there has been a much greater emphasis on H&G products, sparked by the increased world demand for H&G products. In the early 1990s, the market for H&G products was a limited domestic market and now the H&G market is international.

The surimi market has declined, based on changes in the Japanese and Korean demand and from foreign competition. As a result, surimi plants have either shut down or reduced production. Prior to 2004, up to five plants were producing surimi. Currently, there is only one shorebased plant that is producing whiting surimi and that plant is also producing H&G products.

In response to changing world markets, company restructuring, and other factors, there has always been entry and exit within the whiting processing sector. There have also been changes in relative prices of products that in turn determine the mix of various products. Underlying both the development of the surimi processing capacity, and now H&G processing capacity, have been declining trends in world groundfish production.

Overall, the major companies of the processing industry that existed prior to 2004 still exist in 2012. For companies that no longer exist, the quota that would have been allocated to those entities has been distributed to existing companies in proportion to the size of their quota allocations under the existing initial allocations. NMFS recognizes the influence of H&G prices and the new world markets, but does not believe these changes should result in selecting an alternative that includes more recent years in the whiting allocation formula, as all companies are partaking in the expanded market for H&G whiting and can continue to do so irrespective of the amount of the whiting QS received by that entity. Furthermore, recent entrants into the processing sector entered at a time when they could benefit from the expanded market for H&G whiting, which could allow them to be competitive despite receiving no, or a lesser amount, of an initial whiting allocation. They also entered at a time after the control date had been announced and while the Council was actively pursuing development of the trawl rationalization program. NMFS believes that it is fair and equitable to use qualifying years that more heavily reflect the investments and processing history that occurred prior to 2004, consistent with the intent of discouraging speculative increases in capacity and minimizing disruption to processors that invested under the old management regime prior to the Council beginning its efforts to rationalize the fishery.

Comment 6: Using more recent years in the qualifying period promotes conservation because larger fish tend to occur in northern waters, and northern processors have a better opportunity to process larger and higher quality fish. Under alternatives that would shift more quota to the north, fewer larger fish can be harvested, leaving more fish in the water to spawn and sustain the fishery. Using more recent years would also promote conservation because H&G product has higher recovery rates than surimi product which dominated the whiting fishery in earlier years.

Response: NMFS agrees that northern processors may have a greater opportunity to process larger and higher quality fish. However, NMFS disagrees that using more recent years promotes conservation to any meaningful extent. Any conservation benefit associated with the alternatives is extremely small and highly speculative, and does not justify selecting an alternative that uses more recent years when considered in light of all the factors.

The EA analyzes the potential biological impacts associated with the alternatives that were considered. Generally, for whiting, harvesting a larger proportion of older fish in any given year is likely to have an upward influence on stock productivity relative to harvesting the same amounts of whiting with a smaller proportion of older fish. In an extreme hypothetical where all harvests were delayed until September of each year—when whiting are typically larger and located further to the north—a 10 percent increase in stock productivity was projected when compared to having all harvest occurring in April.

In contrast, the amount of quota that could initially be shifted geographically and potentially result in changes in the location of harvest is much smaller than in the all-harvest hypothetical above. To begin, the allocation alternatives are unlikely to affect the location of harvest in the mothership fishery or the catcher/processor fishery because these fisheries are not tied to a need for shorebased processing. Together, the mothership and catcher/processor fisheries are allocated 58 percent of the non-tribal commercial allocation (24 percent for the mothership sector and 34 percent for the catcher-processors). Of the remaining 42 percent of the non-tribal commercial allocation given to the shorebased IFQ fishery, the allocation most likely to have any short term effects on geographic area of harvest is the QS issued to processors, which is a maximum of 20 percent of the 42 percent allocated to the shoreside fishery, or 8.4 percent of the non-tribal commercial whiting allocation. The EA also indicates that the effects of initial allocations on the distribution of fishing among communities are difficult to predict because over the long term quota will likely move toward those ports where profit margins tend to be the highest, regardless of the initial allocations (see EA Section 4.3.3). Using the 10 percent hypothetical result as a maximum, and applying that result to the 8.4 percent of the non-tribal commercial whiting allocation to processors, results in an upper bound on the impact on stock productivity of less than 1 percent. Even this is likely an overstatement, however, given that only a relatively small amount of the quota actually shifts to more northern based processors when comparing the No Action Alternative to Alternative 4 (which most favors recent history).

NMFS also notes that when adding Canadian and Tribal fisheries to the analysis, the potential for conservation benefits becomes smaller. For 2011, the total U.S. and Canadian Total Allowable Catch (TAC) limit was 393,751 mt. The U.S. portion of the TAC was 290,903 mt, which includes the U.S. shorebased allocation of 92,818 mt. The 20 percent of shorebased whiting QS allocated to processors is approximately 5% of the U.S. and Canadian coastwide TAC. NMFS further notes that depending on the strength of the year classes, it may be difficult, even in the northern portion of the fishery, to avoid small fish (see Status of the Pacific hake (Whiting) stock in U.S. and Canadian Waters in 2012, International Joint Technical Committee for Pacific Hake, Final Document 2/29/2012, pages 27-28, http://www.nwr.noaa.gov/fisheries/management/whiting/pacific_whiting.html ).

The EA concludes that given the relatively small amount of quota that may be reallocated among geographic regions, the fact that QS trading will likely change geographic distribution regardless of the initial allocations, and considering fleet mobility, the effect of the initial allocations on area of harvest and resulting biological impacts are negligible. Additionally, even assuming recovery rates for H&G products are greater than those for surimi, NMFS does not anticipate that initial allocations to processors will have a significant influence on the type of whiting products produced by processors, especially in the long term. As a result, there does not appear to be a difference in conservation among the alternatives in terms of product recovery. Also see response to comment 5 addressing the transition from surimi to H&G for the whiting fishery.

In sum, selecting an alternative that uses more recent years in the qualifying period is not justified based on differences in biological impacts and NMFS believes that other considerations justify maintaining the existing initial allocations.

Comment 7: The purpose of considering current and historical harvests for processors is that it allows a council and the Secretary to consider the relative value of investments made in processing capacity early in the development of a fishery compared to the value of investments in processing made late in a fishery that is already heavily overcapitalized. This is one of the considerations that should go into the decision of which years of processing participation are best used for fair and equitable allocations to processors.

Response: NMFS agrees and has concluded that investments in processing capacity made earlier in the fishery should be more heavily taken into account when determining the initial allocation qualifying periods. This is in part because the allocation of quota to processors was intended to minimize disruption to processors that had invested under an expectation of operating under the pre-Amendment 20 fishing regime, and also because any investments made after the announcements of the control date were made at a time when it was evident that the Council was actively pursuing an effort to rationalize the trawl fishery.

Comment 8: A significant portion of quota was allocated to permits that had no history of landings in the fishery after 2003. The EA indicated that allocations went to 21 permits that had no participation in the shorebased whiting fishery during the seven years between 2004 and 2010, representing 10.2% of the shorebased whiting quota. Furthermore, the EA also identified that whiting allocations went to 14 permits (representing 9.6% of the quota allocated to the mothership sector) that had no participation in the mothership sector during the same seven years between 2004 and 2010. Considering the number of permits that received quota but have not participated in the fishery since 2003, it is evident that the existing qualifying periods were based at least partially on some industry members' desire to sell their quota and retire. The initial allocations should instead be based on what is best for those currently participating. When considering investment as a measure of dependence, NMFS should focus only on whiting and not on other fisheries.

Response: NMFS acknowledges that quota was allocated to some permits that did not directly participate by harvesting or landing whiting in the whiting fishery in the years between 2004 and 2010. However, NMFS does not believe that this fact warrants including more recent years in the qualifying period because many of the permit owners owned other permits that were active in the whiting fishery during those years, participated in other fisheries including other sectors of the whiting fishery, or held those inactive permits as an investment.

Groundfish fisheries on the West Coast are frequently prosecuted based on a “portfolio” approach where fishermen participate in various sectors or corollary fisheries throughout a given year and between years to maximize benefits. To the extent permits received quota but did not actively participate in West Coast fisheries during the years referenced, the quota was still allocated to the permit owner at the time of initial allocation and reflects the investment of the participant in the permit. As discussed in the EA, a limited entry trawl permit is a highly fishery-dependent investment that must be renewed annually. Public comment, both at the Council meetings and through comments on the proposed rule, also indicated that some fishermen actively chose to invest in permits in the hope that they would receive initial allocation quota amounts that would accommodate their intended fishing strategies. As noted in public comment on the proposed rule in support of the existing allocations of whiting, the initial harvester allocation to current permit owners recognizes recent participation and investments in the fishery. After the 2003 control date, 18 permits were sold to new permit owners and the permit's catch history went to those new permit owners. Another commenter made a similar comment that business decisions were made to retire vessels after the control date rather than investing in vessel upgrades and maintenance, with the understanding that the intent of the program was to promote consolidation within an overcapitalized fishery. Furthermore, as discussed below, when considering permits that were truly inactive in either the shorebased or mothership sectors of the whiting fishery after 2003, only approximately 1.5 percent of the history based quota was allocated to those permits. Finally, the topic raised by the commenter regarding the business decisions made by those who acquire QS through initial allocation (e.g., whether to sell or lease that quota to another participant or eventually sell the QS/CHA once it becomes transferable) are present irrespective of the qualifying period chosen.

With respect to inactive permits being owned by an entity that also actively participated in the whiting fisheries through the use of other permits, for shorebased whiting permit QS allocation recipients, 4 of the 21 permits referenced by the commenter were owned by entities that also controlled other shorebased whiting permits. Those four permits received No Action QS allocations totaling 2.35% (i.e., 2.9% of the total shorebased whiting allocation to permits). Similarly, 4 of the 13 permits referenced by the commenter (the EA demonstrates there were 13 rather than 14 as stated in the comment, Section 4.5.2.1) that received CHA were owned by entities that also control other MS whiting permits. Those four permits received No Action CHA allocations totaling 3.8% (i.e., 3.8% of the total MS whiting CHA allocation to permits). In addition, for permits that received either shorebased whiting QS or mothership CHA allocations, there were a total of 15 permits that had no shorebased whiting or Mothership whiting history after 2003. Those 15 permits received No Action Shorebased whiting QS allocations totaling 3.8% (i.e., 4.75% of the total shorebased whiting allocation to permits), and No Action Mothership CHA allocations totaling 1.46% (i.e., 1.46% of the total MS whiting CHA allocation to permits). Six of those 15 permits were owned by entities that also controlled other shorebased whiting permits. Those six permits received No Action shorebased whiting QS allocations totaling 2.46% (i.e., 3.1% of the total shorebased whiting allocation to permits). None of the 15 permits were owned by entities that also controlled other MS/CV whiting permits. When looking at the whiting fishery as a whole, only 1.46% of the CHAs and only 1.65% of the shorebased QS was allocated to permits that were truly latent in both the mothership and shorebased sectors. NMFS defines “truly latent” permits as those that received either mothership CHA or shorebased quota share allocations where the permit itself was not fished in either the mothership fishery or the shoreside whiting fishery, and the owner of the permits also did not fish other owned permits in the mothership or shoreside whiting fishery after 2003.

Additionally, after accounting for participation in other fisheries, including those off Alaska, there were a total of only nine permits (shorebased or mothership) where the owner apparently had no fishing activity off the West Coast or Alaska after 2003. These nine permits translate into only 1.3 percent of the shorebased QS and 1.0 percent of the mothership catch history assignment used for the 2011 and 2012 fisheries.

Accordingly, the existing allocations allocate only a very small portion of quota to permits that are held by owners that did not participate in whiting, West Coast, or Alaskan fisheries or own other permits that did participate after 2003.

Comment 9: NMFS seemed to have difficulty defining dependence although the meaning of dependence in the MSA is clear and means to rely upon the fishery for financial support and income. Also, it is not fair and equitable to give quota to permits which, based upon the available objective information, did not participate in the fishery for some time and arguably no longer demonstrate any financial dependence on the fishery.

Response: NMFS did not have difficulty defining dependence in the proposed rule. In the proposed rule, NMFS noted that the MSA does not provide a definition of dependence, provided an explanation of the meaning of dependence, and noted that factors related to dependence may be measured in numerous ways. As stated, in general terms, dependence upon the fishery relates to the degree to which participants rely on the whiting fishery as a source of wealth, income, or employment to financially support their business. Current harvests, historical harvests, levels of investment over time, and levels of participation over time are all aspects of dependence, as they can all be connected to the processes that fishers and processors use to generate income. For purposes of this decision, NMFS believes that including all potential sources of income in assessing the level of dependence is appropriate.

NMFS also considered the Council's approach as discussed in Section 5.4.2 of the EA. The EA cites the NOAA technical memorandum “The Design and Use of Limited Access Privilege Programs,” (Anderson and Holliday 2007), which notes that “various measures of dependence on the fishery [exist] including percent of revenue or opportunities to participate in other fisheries, and inter-relations with other fishery related business especially with respect to employment.” The existing initial allocations do not provide history based quota to harvesters after 2003 or processors after 2004. As described above, that does not mean that investment and dependence during that period were ignored. Rather, the issue of investment and dependence for more recent years has been thoroughly explored, and there are valid policy reasons for excluding those years as discussed elsewhere. One important fact to recognize is that most current harvesters and processors in the fishery were also historical participants during the qualifying periods for initial allocation, and the shifts in quota among the initial allocation alternatives considered were relatively modest overall and for a majority of the participants. Permit owners receiving initial allocation received quota reflecting their historic participation and current permit ownership (reflective of dependence and investment) as well as a share of the buyback quota that was equally distributed.

Comment 10: Catch history years should be 1994-2010 or 2000-2010 to be fair and equitable and permits with no active involvement after 2004 should not be allocated whiting quota. Another commenter stated that NMFS should adopt 2000-2010 for the catch history years and adopt a present participation requirement that would require permits to have landed at least 500 mt of whiting in the period 2003-2010 to recognize the factors required for consideration in allocation decisions.

Response: As discussed in the preamble and in response to other comments, NMFS has concluded that excluding years beyond 2003 for harvesters and beyond 2004 for processors results in a fair and equitable allocation. Selecting an alternative that would include years beyond the existing cut-offs would be contrary to the policies underlying Amendment 20. Requiring permits to have landed at least 500 mt of whiting in the period 2003-2010 is not necessary to recognize the factors required in consideration of an allocation decision. Furthermore, adopting a present participation requirement for the period of 2003-2010 that would exclude any inactive permits would be inconsistent with the Groundfish FMP history since the Council rejected “Use It or Lose It” rules in 1994 relating to the development of Amendment 6 to the FMP (adopting the limited entry program). Similarly, requiring a participation requirement spanning the years after the announcement of the control date creates an incentive and a reward for increasing participation at a time the Council was attempting to address overcapitalization. Finally, the requirement suggested by the comment could undermine decisions made relative to investments in permits.

Comment 11: It is instructive that other fishery management councils are considering the problem of allocation of quota to license holders with minimal history or participation. The North Pacific Council, in a February 2013 problem statement stated that “distributing shares with minimal history may be argued to be inconsistent with the requirement to allocate shares based on fishery dependence.” Further, in a footnote, the council paper noted that acquisition of a permit “is clearly an investment in the fishery,” but “reflects only an investment in a fishery privilege, and not an investment in a fishery operation.” (Citing Item C-3(b) for the upcoming North Pacific Council meeting).

Response: First, NMFS notes that the Pacific Council and NMFS considered investments in and dependence upon the fishery in making this decision on whiting allocation. Second, NMFS notes that when fishery management councils develop catch share or other programs, councils may choose to weigh the factors differently based on the specific facts before them, including the factor of dependence and investment. NMFS notes that for purposes of the Pacific groundfish fishery and the decision on reallocation of initial whiting quota, a permit is viewed as a highly fishery dependent investment. Permits have no alternative use outside of accessing the trawl fishery; therefore permit owners are entirely dependent on the trawl groundfish fishery for recovery of their investment in permits. Other fishing assets, such as vessels, have some value in alternative uses.

Comment 12: Several commenters addressed the issue of employment. Some commenters expressed concern that companies that have scaled down their employment more recently would qualify for more quota based on their historical participation, while companies with larger recent harvesting and processing history will lose employment if they cannot afford to lease or buy quota. Another commenter stated employment on catcher vessels that benefitted from improved market conditions during 2000-2010 will be strongly disadvantaged given a 1994-2003 qualifying period because their quota shares will be less than their participation in recent years. Another commenter said 1994-2003 (status quo) maintained, on average, their fleet's historic and current access to whiting, their number of vessels, and their number of crewmember jobs in both the shorebased and mothership fisheries. Another commenter noted the analysis shows that overall the stability or level of employment does not vary much between all alternatives, including status quo; however, there are anticipated effects on individual fishing businesses based on any change from status quo.

Response: The final EA addresses impacts to employment (see section 5.4.3.5). While there may be some initial local shifts or variations in employment among the alternatives, the analysis did not anticipate notable variations in the stability or level of employment overall. As discussed elsewhere in the responses to comments, the relatively modest differences in the alternatives overall and for a majority of individuals also likely means even initial changes in employment will be limited. Overall, NMFS believes it has adequately considered impacts to employment in the harvesting and processing sectors in arriving at its decision.

Comment 13: Quota allocation to processors can provide a significant competitive advantage. Processors are unique from harvesters in that their investments are rooted to the community and the local fisheries that support that community, making dependence different for a processor than for a harvester. Initial allocations should use processing history from 2000-2010 because that period of time captures current and historical harvests and reflects a period of time when the fishery had recovered from being overfished and reached record revenues for fishery participants. Some processor companies made significant investments over the last decade to upgrade their facilities that supports using more recent years.

Response: NMFS is aware that initial quota allocation may provide advantages to one processor over another. However, given that the overall amount of quota that may shift between processors is only 3%, the degree of competitive advantage or even its existence depends on the business decisions of the quota recipient and numerous other considerations such as processor location, presence of local competition, access to markets, fleet dynamics, and status of the whiting stock, among other factors.

One main purpose of allocating 20 percent of the shorebased whiting quota to processors was recognition of the significant processing investments that had been made in reliance upon the fishery prior to the announcements of the control date and the development of Amendment 20. The allocation to processors was, in part, an attempt to minimize the disruption during the transition to the new system and provide some consideration and measure of stability. (See EA section 10.1, statement of Mr. Anderson; Amendment 20 EIS, Section 2.6.6).

NMFS and the Council acknowledge that testimony indicated that investments were made by some processors after 2004, including investments in infrastructure to process other stocks, such as sardines. However, it is reasonable to provide initial allocations more heavily weighted to reflect the investments and dependence on the fishery that occurred prior to the time it was evident that the Council was pursuing a change to the management system. Development of the trawl rationalization program could be most disruptive to processors that invested prior to 2004 because the program was likely to result in changes to the timing of landings, and potentially result in fewer vessels participating in the fishery—part of the effort to reduce overcapitalization. Given the establishment of the 2003 control date and subsequent clarification after the 2004 season that the 2003 control date could apply to processors, businesses that entered the processing sector or made investments after 2003 did so with a degree of risk regarding receiving any initial allocations or larger allocations.

NMFS recognizes that how quota is initially allocated to processors has some influence on the competitive advantage of processors between themselves and with respect to new entrants, including the potential for increased bargaining power with harvesters. However, other processors may have locational advantages whether it is to infrastructure (e.g., cold storage facilities, highways, water supply and waste removal) or closer access to the resource itself (some processing of whiting has occurred in inland locations). Northern processors, in addition to being located closer to where much of the harvest has recently occurred, also have a locational advantage in the sense that they have more immediate access to tribal whiting resources as tribal fisheries are located in northern Washington. Since 2003, one processor in particular has processed over 99% of the tribal shorebased whiting harvests.

Any competitive advantages processors gain under the alternatives are relatively modest given that the entire allocation is only 20 percent of the shorebased fishery. Overall, only 3 percent of the processor quota shifts from status quo holders to others, and the levels of shift among most individual processors are similarly modest, especially when compared to overall volumes of fish processed and revenues generated.

Additionally, although the effect is relatively modest, based on the analysis in the EA regarding the potential for northward shift in quota, and public comment relative to the competitive advantages for processors from being allocated quota, maintaining the existing initial allocations rather than selecting an alternative that uses more recent years could also help mitigate negative impacts resulting from localized concentrations of fishing and processing effort while providing the initial allocations necessary for the trawl rationalization program to function.

Comment 14: One commenter stated that five new processors entered the fishery after 2004 and that NMFS failed to explain why it is rational to exclude these new entrants. For example one processor that went out of business in 2000 received quota under the existing allocations but a processor that began processing whiting in 2006 and has risen to become a significant player in the whiting market received no quota.

Response: NMFS did not allocate quota to processors that went out of business. For processors that would have been allocated quota but did not exist at the time of initial allocation, that quota was distributed to the other qualifying processors proportional to their initial QS amounts. Any new entrant after 2005 is in the same situation as a new entrant in 2012, as neither would have initially allocated quota and would need to purchase or lease quota if doing so was a desired part of their business strategy. After the 2005 clarification that the 2003 control date applied to processors, new entrants were on notice that their history might not count towards initial allocations. NMFS notes that depending on how processor is defined (e.g., company, buying/processing site, etc.) the number of new processor entrants after 2004 will vary. The EA notes that eight processors entered the shorebased whiting processing market for the first time after 2004 and did not receive an initial allocation, and of these eight processors only two consistently processed whiting since entering the fishery.

Comment 15: The cost of leasing quota was not appropriately analyzed or considered. The added costs of purchasing or leasing quota from inactive permit holders is contrary to National Standard 7, which states that “Conservation and management measures shall, where practicable, minimize costs and avoid unnecessary duplication.” In addition, the costs associated with increasing observer costs, the Pacific Coast Groundfish Fishery buyback program and the soon to be implemented cost recovery program are new costs that NMFS failed to consider when making a decision as to whether the initial allocation of quota should be changed or not. The costs associated with leasing quota will be particularly constraining on smaller businesses. Local small community companies need whiting quota to keep their businesses going. Larger processing companies can afford to lease or buy IFQ no matter what the price. Smaller, family-owned vessels will be lost over time to corporations owning multiple vessels or other assets. One of the commenters also made an attempt to estimate the fair market values and leasing costs of whiting quota. The projections were approximately as follows : value of shorebased whiting allocated to the 21 permits that were reportedly inactive during 2004-2010 is $8,500,000 and that the annual cost of leasing this IFQ is conservatively $680,000. For the mothership sector, the fair market value of the whiting quota allocated to the 14 permits reportedly inactive during 2004-2010 is $4,320,000 and that the annual cost of leasing this quota is near $350,000.

Response: Leasing is an expected activity in many fisheries. Before the trawl rationalization program, limited entry permits were being leased by fishermen in order to gain access to trawl fisheries. Consistent with the MSA requirement to establish a policy and criteria for transferability, through sale or lease, of limited access privileges such as whiting IFQ, 16 USC 1853a(c)(7), the ability to lease quota was an element of the trawl rationalization program analyzed and adopted through Amendment 20. Some level of leasing is expected under the program. Leasing is expected in the Shorebased IFQ Program in particular given that 20% of the whiting catch history-based quota of shorebased harvesters was allocated to processors—as a result many shorebased whiting fishermen, especially those not strongly affiliated with a processor, may have to lease quota to return to pre-trawl rationalization catch levels.

The environmental impact statement for Amendment 20 (Amendment 20 EIS) considered the economic condition of the fishery, which was one of the motivations for considering alternate management approaches for the trawl fishery. The Amendment 20 EIS also considered efficient utilization of the resource in the design elements of the program, especially compared to the previous trip limit management fishery. It also weighed the costs and benefits of such a program, including initial allocations and leasing costs, on different user groups such as harvesters, processors, and potential new entrants for the IFQ and MS fisheries (see Amendment 20 EIS sections 4.4, 4.6.2.5, 4.6.3.4, 4.6.3.7, 4.7.2.3, 4.9.2.2, and 4.9.3.7). The issue of leasing costs was also addressed in the final rule implementing the trawl rationalization program. (75 FR 60868, 74 October 1, 2010, Comment 27).

In addition to the Amendment 20 EIS, the EA for the reconsideration of whiting allocation weighed the costs and benefits of allocation on different user groups, including harvesters, processors, potential new entrants, and communities for the IFQ and MS fisheries (see EA sections 4.3, 4.5.3, 5.4, and 5.8). The EA also discussed costs of leasing in other fisheries and potential effects on Pacific groundfish fisheries (EA section 3.3.2.6 and 4.5.3.1), and the value of limited entry permits as an investment whether actively fished in recent years or not (EA section 3.3.2.5 and 4.3). Regarding leasing costs, the EA for this action recognized that leasing costs will occur, that the benefits of the program (which requires an initial allocation) outweigh the costs, and that, ultimately, quota will tend towards the most efficient users, especially once trading is allowed.

NMFS recognizes that those receiving initial allocations may be placed at a competitive advantage over new entrants or existing participants who must purchase more quota if they desire to maintain their recent harvest levels. (EA section 5.4). However, any new costs associated with leasing also come with new benefits—the opportunity to acquire a desired amount of quota that can then be harvested without competing in a race for fish, along with the other benefits anticipated under the trawl rationalization program. The EA demonstrates that quota was transferred to many shorebased whiting fishermen in 2011, allowing successful harvest well in excess of some participants' initial allocations. (EA section 3.3.2.7). NMFS also considered the costs associated with the buyback program that was implemented in 2005 (70 FR 40225, July 13, 2005). The loan associated with the buyback program financed most of the cost of a fishing capacity reduction program in the Pacific Coast groundfish fishery and corollary fisheries. To repay the loan, participants in the Shorebased IFQ Program and the MS Coop Program currently pay five percent of the full delivery value of fish harvested and delivered to processors. In addition, the MSA requires that cost recovery be a component of a LAPP such as the trawl rationalization program. Under the proposed cost recovery program (78 FR 7371, February 1, 2013), participants in the Shorebased IFQ Program and the MS Coop Program would be required to pay a fee, not to exceed three percent of the ex-vessel value of fish delivered to processors, to cover part of the costs of management, data collection, and enforcement of the trawl rationalization program. Costs associated with the trawl rationalization program, including the costs of observer coverage, were also considered in the Amendment 20 EIS, section 2.6.3, A-2.3.3. NMFS notes that the agency currently covers the majority of the costs for observers off the West Coast (but not the North Pacific). NMFS also notes that there is a national effort underway to explore the use of electronic monitoring as one potential tool to address the costs associated with observers. See http://www.nmfs.noaa.gov/sfa/reg_svcs/Councils/ccc_2013/K_NMFS_EM_WhitePapers.pdf.

Although some alternatives could more closely align initial allocation amounts with recent levels of harvest associated with a given permit, and potentially minimize leasing costs to those participants in the short term, when balanced with the other considerations, NMFS has determined that the Council's recommendation is consistent with National Standard 7 and minimizes costs to the extent practicable. The costs associated with the buyback program (which benefitted the industry by helping to reduce the level of overcapacity and substantially expanded fishing opportunity for all vessels, as reflected by higher trip limits), the observer program, and the statutorily required cost recovery program, do not alter NMFS' conclusion. NMFS notes that some commenters felt that NMFS did properly analyze and consider the impact of the initial allocation on costs and benefits, as required by National Standard 7, and that status quo balances costs and benefits by allocating to a large amount of recipients with a geographic spread among those that received initial allocations.

The commenter that provided estimates of fair market values of quota and leasing costs used a multiplier of 3.75 applied to the ex-vessel value of whiting to determine fair market value of whiting QS. NMFS does not have sufficient information to evaluate the use of a multiplier of 3.75 to project the value of quota, particularly as quota has yet to be traded. However, the EA considered that the ratio of QS to ex-vessel value ranged from 4:1 to 9:1 in a Canadian groundfish trawl fisher might be representative. Based on information developed from quota pounds sold or leased via the Jefferson State Trading Company Web site ( http://jeffersonstatetradingco.com/cgi-bin/auction/auction.pl ), which tracks the trading of quota pounds for this program, the leasing ratio of 30% of the ex-vessel value may be high but representative. Even assuming that the projections provided by the commenter are accurate, it does not alter NMFS conclusions for the reasons described above and throughout this final rule.

In response to the comment about the impacts of costs on smaller businesses, and smaller, family-owned vessels, in general, impacts of the allocation decision on both small and large businesses were considered, and regulations are in place that attempt to minimize any undue burden placed upon small businesses (e.g., accumulation limits). As discussed below in the summary of the final regulatory flexibility analysis (FRFA), over the years 1998 to 2010, there were 17 processors that participated in the fishery and that meet the recent participation criteria of the various alternatives. After taking into account ownership and affiliation relationships, there are 12 processing entities based on Small Business Administration (SBA) definitions. Of these 12 processing entities, there are 9 small processing entities and three large processing entities that are affected by this rule. The FRFA also notes that regardless of the allocation alternative chosen some small businesses will be affected.

As discussed in response to comment 14, although NMFS agrees that in some circumstances the initial allocations of quota could result in some degree of competitive advantage, the degree of that advantage is dependent on numerous factors. Furthermore, owning whiting QS is not required to process whiting. New entrants or processors with lower initial allocations may choose to lease or purchase quota as part of their business plans, but may also use other methods to incentivize delivery of whiting to their facilities. Furthermore, any advantages processors may gain under the alternative considered are relatively modest given the entire allocation is only 20 percent of the shorebased whiting QS, overall only 3 percent of the processor quota shifts from status quo holders to others, and the levels of shift among most individual processors are similarly modest, especially when compared to overall volumes of fish processed and revenues generated.

Comment 16: An article critical of the effects of leasing in the Canadian halibut fishery, “The elephant in the room: The hidden costs of leasing individual transferable fishing quotas,” Evelyn Pinkerton, Danielle N. Edwards, Marine Policy 33 (2009) 707-713, was not sufficiently considered in the context of whether the existing allocations are consistent with National Standard 5, which states that “Conservation and management measures shall, where practicable, consider efficiency in the utilization of fishery resources; except that no such measures have economic allocation as its sole purpose.” The failure to give the most quota to the most active participants through 2010 creates new leasing costs and is not justified in terms of economic objectives.

Response. NMFS considered the article referenced by the commenters, and its position that certain conditions that allow for the efficiency benefits of individual transferable quotas (ITQs) to accrue are not present in the Canadian halibut fishery; therefore, the authors argue in part that vessels operating with initially granted quota are more financially viable than new entrants and can afford to pay higher quota lease fees, eventually having the effect of bidding up the lease price.

NMFS notes that there was also a published comment in response to this article questioning the article's data and assertions. (A rejoinder to E. Pinkerton et al. The elephant in the room: The hidden costs of leasing individual transferable fishing quotas, Bruce R. Turris, Marine Policy 34 (2010) 431-436). One of the main conclusions of the published response was that it would be incorrect to suggest that quota will not be transferred to the most economically efficient operators. The commenter noted that even with transaction costs and other limitations, tradable quota should move to more efficient operators, and further noted that those who initially start out with quota may be more profitable than new entrants or those that need to lease more quota, but that issue is one of income distribution and not an efficiency issue. The initial authors published a short response to the comment, asserting that the commenter did not directly address the major points of their article and that their data analysis was appropriate. (Ignoring market failure in quota leasing? Evelyn Pinkerton, Danielle N. Edwards. Marine Policy 34 (2010) 1110-1114.)

The debate appears to be one of whether the halibut program in Canada is achieving efficiency at all or whether the halibut program is more efficient than the former derby style of fishery it replaced. This debate is also about the distribution of rent—who shares in the profits or income generated in the fishery. The debate is not whether there have been efficiency gains, but whether additional gains can be achieved. Pinkerton claims they have not achieved full efficiency because of market inefficiencies and the lack of access to capital for some participants. However, it is not clear why participants who were granted quota would not try to be as efficient as possible and why they would not get out and lease their quota if they were less efficient. High lease prices may suggest that efficiency is high as owner operators are making high profits and are unwilling to lease quota to other fishermen unless the lease price is at the level where it is more profitable to lease than fish. In terms of the reconsideration of initial whiting allocations, these articles discuss the effects of leasing, which was a component of Amendment 20 and will exist regardless of the years chosen for determining the allocation of quota. See response to comment 15.

With respect to the net economic benefit to the nation, the effects of the alternatives are similar. The initial allocation of whiting is a one-time distribution of wealth in the form of QS and CHA to members of the fishing industry, which allows for implementation of the program. In addition to assisting existing participants' transition to the new management system, the initial allocation will likely affect harvester and processor competitiveness. To the degree that initial allocations match up with the harvesters that will use the quota, transition costs will be lessened. However, whatever initial allocation alternative is selected does not affect the long-term efficiency and operation of the fishery. In the short run, there may be transition costs and disruption to participants' operations depending on how closely the initial allocations are distributed to the most efficient participants. To the degree that initial allocations match up with the harvesters and processors that will use the quota, transition costs and disruption will be lessened as the fishery moves to its long-term, more efficient state. Regardless of the allocation alternative chosen, it is unlikely that the initial allocation will be that allocation that represents the most efficient users. NMFS does not currently know which users are the most efficient and which users in the future will be the most efficient. Note that the biggest users of the resource may not be the most efficient users. Over the long term, it is expected that operations will move, or quota will be traded, to the ports in which the highest profits can be earned, taking into account all forms of costs such as average distance to fishing grounds and catch and bycatch rates.

With the choice of maintaining the existing initial allocations over alternatives that reflect more recent history, NMFS and the Council are providing to those who have historically participated in the fishery (the majority of which are also recent participants) and are anticipated to have a better chance to benefit from the market processes described above. NMFS considered how the short and long term impacts of leasing may vary between the alternative whiting allocations and has concluded that the benefits of more heavily favoring history prior to the end of the existing qualifying periods furthers the purposes of Amendment 20, rewards investments and dependence consistent with the policies underlying announcing a control date, and minimizes disruption to those participants that made business decisions based on the assumption that quota formulas were unlikely to include more recent years.

With regard to the comment on National Standard 5, the trawl rationalization program was designed, in part, to reduce fleet capacity and to economically rationalize the groundfish trawl fishery. Reducing excess capacity is expected to improve the efficiency in the utilization of fishery resources as well as reduce the levels of incidental catch. NMFS' decision to maintain the initial whiting allocations would not change any of those program design features that would allow more efficient utilization of the resource, such as reductions in fleet capacity, reduced regulatory discards, and once the moratorium is lifted, quota trading. After considering the relevant factors, including costs associated with leasing, NMFS has determined that the existing initial allocations consider efficiency in the utilization of fishery resources, where practicable, and are consistent with National Standard 5.

Comment 17: The North Pacific Council has recognized the problem of absentee ownership of crab harvest shares by persons or corporations with little or no involvement in the prosecution of the fisheries, which limits the amount of quota available for active participants in the Bearing Sea/Aleutian Islands (BSAI) Crab Rationalization Program. The same problem exists in the Pacific whiting fishery under the status quo allocations.

Response: NMFS agrees that the North Pacific Council is considering the issue of absentee ownership of crab harvest shares, and notes that in its report of the February 2013 North Pacific Council meeting, the Council:

Relative to the reconsideration of the initial allocation of whiting, NMFS acknowledges that in the future there may be similar issues that need to be considered and potentially addressed during the five year review. However, the crab rationalization program and the Pacific groundfish trawl rationalization program are significantly different and it is not possible to predict that the issues and potential solutions will be the same.

Comment 18. NMFS should determine how many of the inactive, or latent, permits from 2004-2010 actively harvested their whiting allocations during the post-rationalized fishery, 2011-2012.

Response: NMFS considered the information in the final EA, which shows the number of permits that did not land fish in 2011. Information for 2012 was not available for use during the reconsideration.

Comment 19: Control dates are merely advisory and do not obligate the Council or NMFS to use them. The MSA does not contain any overarching considerations such as a control date that trump the National Standards and other statutory criteria. The control date should not be used as a basis for maintaining the existing initial allocations.

Response: NMFS acknowledges that a control date is not a guarantee that any specific period will count toward initial allocations. NMFS believes, however, that recognition of the business and investment decisions made by participants who interpreted the control date as signaling the likely end of the qualifying period is consistent with the fundamental purposes of Amendment 20, including reducing overcapacity. Commenters supporting existing allocations noted that it is important to adhere to control dates to prevent speculative increases in harvesting or processing, and that doing so supports a fundamental objective of the program to address longstanding overcapacity issues in both the harvesting and processing sectors of the whiting fishery. The overarching considerations described in the propose rule reflect consideration of the factors identified in National Standard 4 and the MSA provisions at 16 U.S.C. 1853a(c)(5)(A) in light of all relevant factors, including the other National Standards and the control date. After considering those factors, and taking into account public comment on the proposed rule, NMFS has considered all of the factors related to the initial allocations and has concluded that use of the 2003 control date as the cut-off period for harvesters, and use of 2004 for processors is rational. As described in the preamble and in response to other comments, the control date and the underlying policy goals of Amendment 20, while important, are not the sole basis for NMFS' decision.

Comment 20: While it was a lengthy process between announcing the control date and implementation, the process was lengthy because of the complexity of the trawl rationalization program, including the allocation decisions The control date could not be considered “stale” because there was no period of inactivity between the control date and implementation, there was no major change in the broad policy fishery managers were pursuing or in the fundamental design of the program.

Response: NMFS agrees that the control date is not “stale.” The EA documents the extensive process required for developing the trawl rationalization program and the numerous stages for stakeholder input. (EA table 1-1, 1-2). Considering the amount of time necessary to develop the program, the length of time between the control date and program implementation, as well as this reconsideration, is reasonable. Furthermore, NMFS has not ignored the years beyond the control date, but rather has considered all the required information, including harvests after 2003, in deciding to maintain the existing initial allocations.

Comment 21: Not adhering to control dates as announced when allocating initial quota sets a dangerous precedent, and could potentially result in increased harvesting or processing capacity in an attempt to increase the initial allocation of quota in the development of future limited entry or limited access privilege programs (LAPPs). Relying on the control date is consistent with National Standard 4 and the groundfish FMP management goals that list conservation as the first goal, as well as the Amendment 20 EIS that states that failure to use a control date may exacerbate conservation concerns. Several other commenters also noted that they would benefit by receiving increased harvester allocations if more recent years were included, but they believe that reliance on the control dates is fair because everyone in the fishery knew the consequences of fishing after the control date and therefore support the existing allocations.

Response: NMFS agrees that, in general terms, control dates serve a useful purpose of deterring speculative increased capacity or effort during the development of LAPPs. NMFS further agrees that not using the announced date of 2003 for harvesters could have a negative effect in the future when the Pacific Council or other councils begin to consider limited entry or LAPP programs, and further notes that there is a rational basis for modifying the control date by one year for processors. Further, NMFS believes that the reliance on the control date expressed by many commenters benefited the underlying purposes of Amendment 20 pending its implementation. The fact that several participants commented that they would benefit financially from selecting an alternative that uses more recent years, but nevertheless support the existing allocations, is indicative of the fairness and equity of the Council's recommendation and NMFS' decision.

Comment 22: Harvests after the control date should be rewarded because fishing and processing was happening in the Pacific coast whiting fishery where and when there were market opportunities.

Response: As noted in the proposed rule, no mechanism exists to separate speculative from non-speculative effort after the control date and by maintaining the control date for harvesters, any speculative behavior after the control date is not rewarded and those who acted consistent with the control date and goals of Amendment 20 are not penalized. As explained in this final rule, and after consideration of the statutory factors, NMFS has determined that the control date of 2003 as the cut-off for the harvester qualifying period is rational, as is the use of 2004 as the cut-off for the processor qualifying period, and the end result is a fair and equitable initial allocation.

Comment 23: The policies supporting a control date for harvesters do not apply to processors, and are at best a theoretical and indirect concern. Processor interests in acquiring quota are to ensure that fish continue to support the processing plants. Processors do not speculatively increase capacity to acquire quota as an asset to later be bought, sold, leased, or traded. Testimony at the June 2012 Council meeting indicated concern about undercapitalization in the processing sector, not overcapitalization.

Response: The control date was intended to put the industry on notice and deter speculative increases in effort and capitalization, regardless of sector. Section 3.3.2.4 of the EA discusses the key indicators that were used to identify overcapacity issues within the fishery. Fishing season length is a key indicator of overcapacity in a fishery because in the absence of excess capacity, a fishing season could potentially run through December 31, assuming other constraining factors are taken into account. Although allowable harvests increased in the years from 2004-2010, season length in the shorebased whiting fishery decreased during this period. The weekly harvest pattern for the shorebased fishery during this period demonstrates substantial excess capacity. Fleet weekly harvest was used as a proxy for effort and capacity in the shorebased sector (both harvesters and processors). Even if the fleets were capable of sustained fishing at only one half their lowest annual maximum weekly rate, the amount of time required to take the maximum allocation available in recent years would be far less than the potential number of season days available. Despite a situation of excess capacity, after 2004 the number of vessels participating was generally on an upward trend in both the shorebased and mothership sectors. While one commenter noted that with respect to processors, speculation and overcapacity was a theoretical or indirect concern, another commenter noted that in industrial fisheries like Pacific whiting, all harvests are landed and processed. Therefore the harvest and subsequent processing of that harvest provides a proxy for investments and dependence in the fishery by harvesters and processors. The purpose of applying control dates to onshore processors, while important, is not necessarily as significant as for harvesters, who have a greater ability to move into and out of various fisheries to gain potential fishing history. In addition, comments on the proposed rule and public testimony at Council meetings noted that including 2004 in the qualifying period for processors takes into account more recent investments that were made in 2003 but that did not come online and start acquiring history until 2004. These factors, in addition to the fact that it was not clear until 2005 that the 2003 control date potentially applied to processors, support the decision that a one year shift, to 2004, was a reasonable cutoff date for processors.

Although one commenter testified at the June 2012 Council meeting that the shorebased processing sector was undercapitalized, other public testimony indicated that the fishery was heavily overcapitalized and there was no shortage of processing capacity available, and that the control date was meant as to deter the entire industry from injecting more capital into an already overcapitalized fishery, or at the very least put them on notice that doing so was not guaranteed to be rewarded by being credited for initial allocations. NMFS also notes that a commenter asserted that those who made investments in harvesting and processing capacity later in the development of a fishery, after it was already overcapitalized, have made investments that are at a net loss to society and therefore should not necessarily be rewarded for their investments with allocations of quota.

Control dates are largely preemptive tools meant to signal that speculation will not be rewarded. NMFS is unable to determine whether speculation would have been worse had no control date been issued. However, in the absence of a control date, that incentive would have been present. For all these reasons, NMFS believes it is appropriate to continue to apply the 2004 cut-off date to processors.

Comment 24: The Federal Register notices regarding the control date were unclear on how the control date applied to processors, even after the clarification in 2005.

Response: NMFS agrees that the original announcement of the 2003 control date, 69 FR 1563, did not explicitly state that it applied to processors. However, the notice published in 2005, 70 FR at 29714, reiterated the 2003 control date and clarified that it did not preclude processors from participating in the trawl rationalization program and being eligible for quota. The original announcement that was clarified stated that the control date “will apply to any person potentially eligible for IQ shares,” but the list of eligible persons did not include processors. In clarifying that processors could be eligible for initial allocation, the 2005 notice included processors as an entity eligible for IQ shares to which the 2003 control date would apply. However, NMFS recognizes that processors were not expressly included until after the end of the 2004 season and thus potentially not on notice, which is one reason why NMFS determines that it is reasonable to extend the cut-off for processors to 2004.

Comment 25: The Council and NMFS considered current and historical participation of fishing communities, partially through the allocation of quota to processors. The existing allocations spread the processor allocation along the coast among seven processors in five communities from Westport, WA to Eureka, CA. All of the alternatives other than the No Action Alternative would shift quota north devaluing the FMP objective to protect communities.

Response: NMFS agrees that the record reflects that maintaining the existing allocations would provide a more even distribution of initial whiting allocations along the coast and to the corresponding fishing communities. Shifting to alternatives favoring more recent history could contribute to a northward shift in initial quota distribution, and accordingly any benefits stemming from that initial allocation (see EA, Section 4.3.3). The northward shift is expected to be relatively small (less than 8 percent of the total quota—2 percent for processors and 6 percent for harvesters between the No Action Alternative and Alternative 4) and the analysis shows whiting landings have been shifting northward in recent years (due to fish availability and investments in ports). Some commenters noted that this northward shift would benefit two processors at the cost to all of the remaining processors. Similarly, a few harvesters would benefit at the cost of many. Although the shift in quota would be relatively modest, NMFS believes that maintaining the initial whiting allocations supports historic fishing communities in more southern locations and creates a wider geographic distribution of the initial wealth associated with allocations. Maintaining initial whiting allocations would further support one of the guiding principles in the development of Amendment 20 (see Am 20 EIS, Section 1.2.3)—to minimize negative impacts resulting from localized concentrations of fishing [and processing] effort. For processors, in addition to the distribution of wealth associated with initial allocations, the wider distribution of initial allocation of whiting QS may provide some additional influence over where deliveries are made along the coast than if the initial allocations are based on more recent qualifying years that would shift allocations and potentially landings northward. However, as discussed in response to other comments, it is difficult to determine the degree of competitive advantage or the impacts of the geographic location of QS allocated to processors on location of future harvest. Ultimately, the QS issued to processors should assist in mitigating for the changes expected in the timing and location of harvest expected over the long-term under the trawl rationalization program.

Comment 26: One commenter said that the law is clear; NMFS cannot make the decision about the proper allocation method based on political considerations or popularity, only on the facts of the case and the applicable law. In addition, no referendum was held so it is impossible to determine exactly the degree of support for the initial allocation system.

Response: NMFS agrees that the agency cannot make the decision based on political considerations or popularity. As described in detail in this final rule, the agency has independent reasons that support its decision to maintain the existing initial allocations. NMFS further agrees that the agency cannot determine exactly the “degree of support” for the agency's adoption of the No Action Alternative because a referendum was not held; however the record is clear that the majority of participants that commented during the Council process and on the proposed rule support the Council/agency proposal. The extensive and transparent public process followed for this reconsideration, and the fact that a majority of commenters support the Council's recommendation, including some of those that would receive higher allocations under other alternatives, is one factor that the agency considered. Irrespective of the degree of industry support, NMFS believes the agency's decision results in a fair and equitable allocation.

Comment 27: Several commenters stated that they supported the existing initial allocations and noted that the Council and NMFS did a thorough and transparent reconsideration process, in which a major portion of the affected stakeholders participated.

Response: NMFS agrees.

Comment 28: Some commenters noted that industry continues to support the No Action Alternative as a fair and equitable decision that balances the necessary conditions, avoids disruption to the fishery, and upholds the validity of control dates and the integrity of the Council process. Industry support for the No Action Alternative is highlighted by several members of industry who would benefit under alternatives that included years after the control dates, yet they continue to support the No Action Alternative for the same reasons.

Response: NMFS agrees that the no action alternative is a fair and equitable allocation. A review of the record indicates that there were members of the industry that testified or commented in support of the No Action Alternative, although they would stand to benefit through a revised initial allocation. Any allocation scheme will create winners and losers. NMFS acknowledges the fact that some members of industry who might gain quota under other alternatives still support maintaining the existing initial allocations.

Comment 29: The trawl rationalization program (including the status quo initial allocation) has generated conservation benefits for groundfish stocks and economic benefits for the fishing industry and communities. Discards of overfished species have dropped dramatically, and per vessel revenues have increased, despite the fact that the fishery was previously overcapitalized, had been subject to overfishing, and had been declared an economic disaster in 2000. Several comments supported maintaining the existing whiting allocations and emphasized: the importance of honoring the control date and the underlying policy goals of Amendment 20, the fact that those who increased effort or capitalization post the control date did so with notice any history earned may not count towards an initial allocation, and the protection of historic fishing communities and a wider distribution of the initial allocations among those communities.

Response: NMFS agrees and has concluded that the reasons supporting maintaining the existing allocations for the shorebased IFQ and mothership whiting fisheries (e.g., taking in to account the intent of the 2003 control date and the policy goals of Amendment 20, not rewarding speculative behavior, minimizing concentration of quota, and achieving wider geographic distribution of initial program benefits) outweigh the reasons supporting alternatives that favor more recent history (e.g., providing greater amounts of quota to the recent fishery participants to recognize their recent fishery dependence/investments, potentially reducing future leasing or acquisition costs, reducing quota to latent permits, and reflecting the more recent market and fishery conditions). The initial allocation is a fair and equitable allocation and is consistent with the requirements of the MSA, the Groundfish FMP, other applicable law, and the court's order in Pacific Dawn.

Comment 30: One commenter noted that while the draft regulatory language extends the prohibition on transferability of widow rockfish QS, it does not provide for the limited exception that would address outcomes of court actions such as might occur in probate or bankruptcy. The commenter requested that the regulations be clarified to state that any prohibition on the transferability of widow rockfish QS would also be subject to the current limited exception that allows transferability under a U.S. court order or authorization as approved by NMFS.

Response: NMFS agrees with the commenter that the regulations should be clarified to state that the current exception applies to transfer of widow rockfish QS and has modified the regulatory language, as described below. The existing prohibition on QS transferability allows for transferability under the limited exception raised by the commenter. The extension of the prohibition on transferability of widow rockfish QS should have more explicitly included the extension of the limited exception.

This rule extends the moratorium on transfer of widow rockfish QS in the IFQ fishery indefinitely, pending reconsideration of the allocation of QS for widow rockfish. In response to a public comment, a change has been made for the final rule to clarify that transfer of widow rockfish QS may be allowed under U.S. court order or authorization, and as approved by NMFS. This is consistent with the current transfer exception for QS or IBQ between QS accounts at § 660.140(d)(3)(ii)(B)( 2 ). NMFS will make this change at § 660.140(d)(3)(ii)(B)( 2 ). Additionally, two minor changes were made for clarity in § 660.140(d)(4)(v) and in § 660.150(g)(3)(i)(D).

Pursuant to section 304(b)(1)(A) of the MSA, the NMFS has determined that this final rule is consistent with the Groundfish FMP, the MSA, and other applicable law. To the extent that the regulations in this rule differ from what was deemed by the Council, NMFS invokes its independent authority under 16 U.S.C. 1855(d).

NMFS finds good cause to waive the 30-day delay in effectiveness pursuant to 5 U.S.C. 553(d)(3), so that this final rule is effective on April 1, 2013. As described in the preamble to the proposed rule (78 FR 72, January 2, 2013), the initial allocations of whiting to the shorebased IFQ and mothership sectors were challenged in Pacific Dawn. On February 21, 2012, the court in that case issued an order remanding the regulations establishing the initial allocations of whiting for the shorebased IFQ fishery and the at-sea mothership fishery “for further consideration.” The order requires NMFS to implement revised regulations before the 2013 Pacific whiting fishing season begins on April 1, 2013. Waiving the 30-day delay in effectiveness is necessary to comply with the court-ordered deadline. Reconsideration of the initial allocations was a significant undertaking that required development and consideration of different alternatives, review of new information, development of new analyses, and preparation of draft and final environmental assessments and proposed regulations through the Pacific Fishery Management Council, which held three Council meetings and took public comment at all of them. NMFS and the Council devoted substantial effort and resources to accomplish this reconsideration by April 1, including providing a 30-day comment period on the proposed rule to allow time for public comment. Except for the portion of § 660.140(d)(3)(ii)(B)(2) that addresses widow rockfish, the regulatory revisions contained within this rule reinstate certain provisions that were suspended by temporary action (77 FR 45508, August 1, 2012; 78 FR 3848, January 17, 2013) pending reconsideration of the initial allocations and, as specified in the regulatory text, do not actually affect regulated entities until January 1, 2014, at the earliest. Thus, there is more than sufficient time for the public to become aware of and to come into compliance with or take other actions regarding these provisions. Some provisions of this rule (e.g. allowing participants in the program to transfer quota and requiring divestiture of quota in excess of accumulation limits) were components of the original program implemented under Amendment 20 to the FMP ( see 75 FR 78344; Dec. 15, 2010) that NMFS delayed until it could respond to the court order. The public is well aware of these measures and does not need to come into compliance with them within the next 30 days. NMFS previously provided for a 30-day delay in effectiveness of these measures when it issued the rule implementing Amendment 20. In addition, for the portion of § 660.140(d)(3)(ii)(B)(2) that continues the current restriction on transfer of widow rockfish quota shares, the public is aware that this prohibition is in place under the temporary actions cited above and as such, do not require any additional time to prepare to comply with the restriction. For the above reasons, there is good cause under 5 U.S.C. 553(d)(3) to establish an effective date less than 30 days after date of publication.

NMFS prepared an Environmental Assessment (EA) for the reconsideration of initial whiting allocation and concluded that there will be no significant impact on the human environment as a result of this rule. NMFS prepared a finding of no significant impact (FONSI) which can be found in Section 6.2 of the EA. A copy of the EA is available on NMFS' Web site at http://www.nwr.noaa.gov/Groundfish-Halibut/Groundfish-Fishery-Management/Trawl-Program/index.cfm. Aspects related to this action were previously discussed in the final environmental impact statement (EIS) for Amendment 20 to the Pacific Coast Groundfish FMP which discussed the structure and features of the original trawl rationalization program.

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

A Regulatory Impact Review (RIR) was prepared on the action in its entirety and is included as part of the final regulatory flexibility analysis (FRFA) on the regulatory changes. The FRFA and RIR describe the impact this rule will have on small entities. The FRFA incorporates the IRFA, a summary of the significant issues raised by the public comments in response to the IRFA, and NMFS responses to those comments, and a summary of the analyses completed to support the action. A copy of the FRFA is available from NMFS ( see ADDRESSES ) and a summary of the FRFA, per the requirements of 5 U.S.C. 604(a), follows:

No significant issues were raised by the public comments that were directed to the IRFA itself. However, economic issues were raised in the comments to the Proposed Rule. These mainly concerned the application of the MSA criteria for determining allocations. These issues are addressed in the comments above. Although not directed to the IRFA, there was one comment that touched on the effects on leasing for small companies. This is addressed above in Comment 15.

The Council considered four alternatives for allocating whiting. The following analysis compares the No Action Alternative to Alternative 4 as they show greatest differences between the pre-control date fishery and post-control date fishery. The No Action Alternative allocates whiting using the years 1994 to 2003 for harvesters (shoreside and mothership) and 1998-2004 for processors. Alternative 4 allocates whiting using the years 2000-2010 for both harvesters (shoreside and mothership) and processors.

Over the years 1994-2010, there were 65 fishing permit holders that participated in the shoreside fishery and 37 permit holders that participated in the mothership fishery. Over the years 1998 to 2010, there were 17 processors that participated in the fishery and that meet the recent participation criteria of the various alternatives. For quota share purposes there are 17 potential processing plants based on fish ticket information. After taking into account ownership and affiliation relationships, there are 12 processing entities based on SBA definitions. Of these 12 processing entities, there are nine small processing entities and three large processing entities that are affected by this rule. Comparing the No Action Alternative to Alternative 4 in terms of 2011 ex-vessel revenues, information on the gainers and losers in each of these affected groups can be developed from information in the Environmental Assessment (EA). The allocation of 98,000 mt to the 2011 shorebased whiting fishery was worth approximately $21 million (ex-vessel value). Based on the No Action Alternative allocations, eighty percent of these quota pounds were allocated to fishing permits ($17 million) and 20 percent to the shorebased processors ($4 million). The allocation of 57,000 mt whiting to the whiting mothership catcher vessels was worth $12 million in ex-vessel value. It is important to note that 2011 was a peak year for the shorebased fishery and a near-peak year for the mothership fishery (see Figure 3-5 of the EA). (Note: although ex-processor or “first wholesale” revenues are higher than ex-vessel values and would be a better indicator of processing activity levels, data on ex-processor sales were not readily available for use by the Council. A better indicator of the gains and losses by groups would be changes in profits (revenues less operating costs)).

The Northwest Fisheries Science Center (NWFSC) has developed an estimate of economic net revenue that is an indicator of profits. Economic net revenue seeks to measure economic profit, which includes the opportunity costs of operating a commercial fishing vessel. The NWFSC collected and assessed 2008 cost-earning data on vessels participating in the shoreside groundfish fisheries including whiting. Vessels that participate in the shoreside whiting fishery are typically classified as either “whiting” vessels or “Alaska” vessels depending on whether or not they operated in Alaska. Whiting vessels are defined as those with at least $100,000 revenue, of which at least 33% comes from whiting. Alaska vessels are defined as those vessels that earned at least $100,000 in revenue of which at least 50% comes from Alaska fisheries. Based on the responses received, whiting vessels earned 37% of their revenue from West Coast-caught whiting in 2008, Alaska vessels 46%. The average economic net revenue of a whiting vessel in 2008 was $167,457, which represents 19.2% of revenue from all fisheries. Limited entry trawl vessels classified as Alaska vessels had an average economic net revenue of $493,915, 28.3% of the $1,744,793 revenue earned from all sources by these vessels. These estimates are based on revenue and cost information directly related to the operation of a commercial fishing vessel such as those associated with office space. Revenues are from West Coast landings, Alaska landings, at-sea deliveries, sale and leasing of permits, chartering for research purposes and other activities related to the operation of the vessel. Compared to other years, these estimates may be high as whiting revenues and overall groundfish revenues were at their highest annual level during the 2001-2010 period during 2008. However, crab revenues during 2008 on the West Coast were at their lowest level since 2003.

Compared with the No Action Alternative, under Alternative 4 approximately 17% ($3.7 million) of the allocation to shorebased catcher vessels would be transferred away from the No Action Alternative/status quo holders; twenty eight permit holders would gain quota share including six permits that did not qualify under the No Action Alternative (Table 4-4 of the EA). The largest gain by a single permit holder is 3.3% ($700,000). Alternative 4 would lead to 37 permits losing quota share including 12 permits that would not receive any quota share. The largest loss by a single permit holder would be 2.0% of quota share ($340,000). A total of 41 out of 65 permits will see a change of less than $100,000 (increase or decrease) in revenues in comparing Alternative 4 to the No Action Alternative.

In comparing Alternative 4 to the No Action Alternative for shorebased processors, approximately 2.7% ($567,000) of the shoreside allocation of $21 million would be transferred away from the No Action/status quo holders; ten processing plants would gain, including seven processing plants that did not qualify under the No Action Alternative (Table 4-29 of the EA). The largest gain by a single plant is 1.0% of quota share ($214,000). Alternative 4 would lead to seven processing plants losing quota share including three plants that would not receive any quota share. The largest loss by a single plant is 0.9% of quota share ($189,000). Twelve out of 17 processing plants would see a change of less than $100,000. (Note—The Draft EA used processor counts that included one processor that operated four processing plants. Each of these four plants established a QS account and received separate processors' QS allocations under No Action—status quo. For this analysis, especially in regards to estimating impacts on communities, it was decided each of these four processing plants should be treated separately. This treatment changes the number of processors that were active in the fishery at some point during 1994-2010 from 16 to 19 (see, for example, Figure 4-13 in the EA). However, two of those processing plants are no longer in existence and so did not receive processors' QS allocations under No Action—status quo. Consequently in the Final EA's displays that include counts of processors receiving QS allocations under the alternatives, the processor count is reduced from 19 to 17 (see, for example, Table 4-30 in the EA).)

In comparing Alternative 4 to the No Action Alternative for whiting mothership catcher vessels, approximately 18% ($2 million) of the total catch history assignment would be transferred away from the status quo holders; 16 mothership catcher vessel endorsed permits would gain (Table 4-16 of the EA). No new permits would qualify. The largest gain by a single permit holder would be 4.5% of catch history assignment ($545,000). Alternative 4 would lead to 21 permits with reduced catch history assignments, including 10 permits that would not receive any catch history assignment. The largest loss by a single catch history assignment holder would be 2.7% ($333,000). Eighteen out of 36 permits would see a change of less than $100,000.

In terms of net economic benefit to the nation, the effects of the alternatives are similar. According to the Pacific States Marine Fisheries Council (PSMFC's) Scientific and Statistical Committee:

The initial allocation of whiting is a one-time distribution of wealth in the form of quota shares and catch history assignments to members of the fishing industry. The initial allocation is essentially the granting of a capital asset that will affect harvester and processor competitiveness and assist existing participants in the transition to the new management system. To the degree that the initial allocation matches up with the harvesters that will use the quota, transition costs and disruption will be lessened as the fishery moves to its long-term, more efficient state.

Similarly, those processors who receive an initial allocation may experience a boost in their competitive advantage due to the infusion of new wealth (the value of the QS received). The initial allocation does not affect the long-term efficiency and operation of the fishery. However, liquidity constraints, and perhaps other unknown constraints, may mean that there are some short-term inefficiencies. For example, this one time distribution of wealth may affect expenditures in the communities depending on location and spending patterns of recipients of these quota shares and catch history assignments. The EA provides the following regarding impacts on communities:

While the discussion above concerns the long term efficiency and operation of the fishery, short term distributional effects matter to NMFS and the Council. The initial allocation of quota shares affects each participant's business operation, investments, and community. With the choice of the No Action Alternative over alternatives that reflect more recent history, NMFS and the Council are providing to those who have historically participated in the fishery (the majority of which are also recent participants) a potentially better chance to benefit from the market processes described above.

This action also would revise several regulations that were delayed on an emergency basis in response to the Court order. RAW 1 delayed the ability to transfer QS and IBQ between QS accounts in the shorebased IFQ fishery, and to the ability to sever mothership/catcher vessel endorsement and its associated catch history assignment (CHA) from limited entry trawl permits in the mothership fishery, pending the outcome of the reconsideration.

NMFS postponed the ability to trade quota shares as well as the ability of mothership catcher vessels to trade their endorsements and catch history assignments separately from their limited entry permits. NMFS also postponed all trading of QS species/species groups because for many affected parties, their QS allocations (especially for bycatch species) are a composite of whiting-trip calculations and non-whiting trip calculations. Postponing these activities, while NMFS and the Council reconsidered the whiting allocation, minimized confusion and disruption in the fishery from trading quota shares that have not yet been firmly established by regulation. For example, if QS trading was not delayed, QS permit owners would be transferring QS amounts that potentially could change (increase or decrease) after the reconsideration.

For similar reasons, NMFS also delayed the ability to transfer a mothership catcher vessel (MS/CV) endorsement and associated catch history assignment from one limited entry trawl permit to another in the mothership sector. The ability to sell or trade a limited entry permit with the endorsement and catch history remains. The use of the catch history assignment to be assigned to a co-op to be fished continues. These delays were expected to be temporary in nature and to benefit both small and large entities as they help smooth the transition to any changes in how Pacific whiting is allocated, and reduce the uncertainty to existing and potential new holders of these allocations.

With these revised regulations, those who find themselves with excess QS (except for widow QS) and IBQ, have until November 30, 2015, to divest. MS/CV-endorsed limited entry trawl permit owners will have to divest themselves of ownership in permits in excess of the accumulation limits by August 31, 2016. This rule allows limited entry trawl permit holders in the mothership sector to request a change (or transfer) of MS/CV endorsement and its associated CHA beginning September 1, 2014. Finally, this rule allows transfer of QS or IBQ, except widow rockfish QS, between QS permit holders beginning January 1, 2014.

The Small Business Administration has established size criteria for all major industry sectors in the U.S., including fish harvesting and fish processing businesses. A business involved in fish harvesting is a small business if it is independently owned and operated and not dominant in its field of operation (including its affiliates) and if it has combined annual receipts not in excess of $4.0 million for all its affiliated operations worldwide. A seafood processor is a small business if it is independently owned and operated, not dominant in its field of operation, and employs 500 or fewer persons on a full time, part time, temporary, or other basis, at all its affiliated operations worldwide. A business involved in both the harvesting and processing of seafood products is a small business if it meets the $4.0 million criterion for fish harvesting operations. A wholesale business servicing the fishing industry is a small business if it employs 100 or fewer persons on a full time, part time, temporary, or other basis, at all its affiliated operations worldwide. For marinas and charter/party boats, a small business is one with annual receipts not in excess of $7.0 million.

NMFS now collects small business information as part of its permit renewal processes. For quota share purposes there are 17 potential processing plants based on fish ticket information. After taking into account ownership and affiliation relationships, there are 12 processing entities based on SBA definitions. Of these 12 processing entities, there are nine small processing entities and three large processing entities that are affected by this rule. Sixteen of the limited entry trawl permits that participated in the shorebased whiting fishery are associated with large companies and 49 of these permits are associated with small companies. In the mothership fishery, 14 catcher vessel permits are associated with large companies and 23 with small companies. When permits associated with the shoreside fishery and the mothership fisheries are combined, there are 66 limited entry permits of which 21 are associated with large companies. Given the review of the various alternatives, the amount of ex-vessel revenues that may change hands, and how each alternative differs slightly in the mixture of large and small entities that qualify for whiting quota share, maintaining the No Action/status quo allocations should not have a significant economic impact on a substantial number of small entities.

No Federal rules have been identified that duplicate, overlap, or conflict with the action.

Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996 states that, for each rule or group of related rules for which an agency is required to prepare a FRFA, the agency shall publish one or more guides to assist small entities in complying with the rule, and shall designate such publications as “small entity compliance guides.” The agency shall explain the actions a small entity is required to take to comply with a rule or group of rules. As part of this rulemaking process, a public notice that also serves as small entity compliance guide was prepared. Copies of this final rule and public notice are available from NMFS Northwest Regional Office, and are posted on its Web site ( http://www.nwr.noaa.gov/fisheries/management/about_groundfish/index.html ), and will be emailed to members of our groundfish fishery email listserve.

NMFS issued Biological Opinions under the Endangered Species Act (ESA) on August 10, 1990, November 26, 1991, August 28, 1992, September 27, 1993, May 14, 1996, and December 15, 1999, pertaining to the effects of the Pacific Coast groundfish fisheries on Chinook salmon (Puget Sound, Snake River spring/summer, Snake River fall, upper Columbia River spring, lower Columbia River, upper Willamette River, Sacramento River winter, Central Valley spring, California coastal), coho salmon (Central California coastal, southern Oregon/northern California coastal), chum salmon (Hood Canal summer, Columbia River), sockeye salmon (Snake River, Ozette Lake), and steelhead (upper, middle and lower Columbia River, Snake River Basin, upper Willamette River, central California coast, California Central Valley, south/central California, northern California, southern California). These biological opinions have concluded that implementation of the Pacific Coast groundfish fishery is not expected to jeopardize the continued existence of any endangered or threatened species under the jurisdiction of NMFS, or result in the destruction or adverse modification of critical habitat.

NMFS issued a Supplemental Biological Opinion on March 11, 2006, concluding that neither the higher observed bycatch of Chinook in the 2005 whiting fishery nor new data regarding salmon bycatch in the groundfish bottom trawl fishery required a reconsideration of its prior “no jeopardy” conclusion. NMFS also reaffirmed its prior determination that implementation of the Groundfish FMP is not likely to jeopardize the continued existence of any of the affected ESUs. Lower Columbia River coho (70 FR 37160, June 28, 2005) and Oregon Coastal coho (73 FR 7816, February 11, 2008) were relisted as threatened under the ESA. The 1999 biological opinion concluded that the bycatch of salmonids in the Pacific whiting fishery were almost entirely Chinook salmon, with little or no bycatch of coho, chum, sockeye, and steelhead.

On December 7, 2012, NMFS completed a biological opinion concluding that the groundfish fishery is not likely to jeopardize non-salmonid marine species including listed eulachon, green sturgeon, humpback whales, Steller sea lions, and leatherback sea turtles. The opinion also concludes that the fishery is not likely to adversely modify critical habitat for green sturgeon and leatherback sea turtles. An analysis included in the same document as the opinion concludes that the fishery is not likely to adversely affect green sea turtles, olive ridley sea turtles, loggerhead sea turtles, sei whales, North Pacific right whales, blue whales, fin whales, sperm whales, Southern Resident killer whales, Guadalupe fur seals, or the critical habitat for Steller sea lions.

As Steller sea lions and humpback whales are also protected under the Marine Mammal Protection Act, incidental take of these species from the groundfish fishery must be addressed under MMPA section 101(a)(5)(E). On February 27, 2012, NMFS published notice that the incidental taking of Steller sea lions in the West Coast groundfish fisheries was addressed in NMFS' December 29, 2010, Negligible Impact Determination (NID) and this fishery has been added to the list of fisheries authorized to take Steller sea lions (77 FR 11493, Feb. 27, 2012). NMFS is currently developing MMPA authorization for the incidental take of humpback whales in the fishery.

On November 21, 2012, the U.S. Fish and Wildlife Service (FWS) issued a biological opinion concluding that the groundfish fishery will not jeopardize the continued existence of the short-tailed albatross. The (FWS) also concurred that the fishery is not likely to adversely affect the marbled murrelet, California least tern, southern sea otter, bull trout, nor bull trout critical habitat.

Pursuant to Executive Order 13175, this rule was developed after meaningful consultation and collaboration, through the Council process, with the tribal representative on the Council. The revised regulations have no direct effect on the tribes.

For the reasons stated in the preamble, 50 CFR part 660 is amended as follows:

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

In accordance with § 679.22(a)(7)(i)(C), the Administrator, Alaska Region, NMFS (Regional Administrator), has determined that 113 metric tons of Pacific cod have been caught by catcher vessels less than 60 feet (18.3 m) LOA using jig or hook-and-line gear in the Bogoslof exemption area described at § 679.22(a)(7)(i)(C)( 1 ). Consequently, the Regional Administrator is prohibiting directed fishing for Pacific cod by catcher vessels less than 60 feet (18.3 m) LOA using jig or hook-and-line gear in the Bogoslof Pacific cod exemption area.

After the effective date of this closure the maximum retainable amounts at § 679.20(e) and (f) apply at any time during a trip.

This action responds to the best available information recently obtained from the fishery. The Assistant Administrator for Fisheries, NOAA (AA), finds good cause to waive the requirement to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B) and § 679.25(c)(1)(ii) as such requirement is impracticable and contrary to the public interest. This requirement is impracticable and contrary to the public interest as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would delay the closure of Pacific cod by catcher vessels less than 60 feet (18.3 m) LOA using jig or hook-and-line gear in the Bogoslof Pacific cod exemption area. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of March 22, 2013.

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

This action is required by § 679.22 and is exempt from review under Executive Order 12866.