This action, pursuant to 5 U.S.C. 553, proposes an amendment to regulations issued to carry out a marketing order as defined in 7 CFR 900.2(j). This proposed rule is issued under Marketing Order No. 945 (7 CFR part 945), as amended, regulating the handling of Irish potatoes grown in certain designated counties in Idaho, and Malheur County, Oregon. Part 945 (referred to as the “Order”) is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.” The Committee locally administers the Order and is comprised of potato producers and handlers operating within the production area.

Section 8e of the Act provides that whenever certain specified commodities, including potatoes, are regulated under a Federal marketing order, imports of these commodities into the United States are prohibited unless they meet the same or comparable grade, size, quality, or maturity requirements as those in effect for the domestically produced commodities.

The Department of Agriculture (USDA) is issuing this proposed rule in conformance with Executive Orders 13563 and 13175. This action falls within a category of regulatory actions that the Office of Management and Budget (OMB) exempted from Executive Order 12866 review. Additionally, because this proposed rule does not meet the definition of a significant regulatory action it does not trigger the requirements contained in Executive Order 13771. See OMB's Memorandum titled “Interim Guidance Implementing Section 2 of the Executive Order of January 30, 2017, titled `Reducing Regulation and Controlling Regulatory Costs' ” (February 2, 2017).

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

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

There are no administrative procedures which must be exhausted prior to any judicial challenge to the provisions of import regulations issued under section 8e of the Act.

Under the terms of the Order, fresh market shipments of Idaho-Eastern Oregon potatoes are required to be inspected and are subject to minimum grade, size, quality, maturity, pack, and container requirements. This proposed rule would revise the varietal classifications that determine the size requirements for potatoes handled under the Order. As required under section 8e of the Act, the proposed revisions to the Order's varietal classifications would also be applied to imported long type potatoes.

At its meeting on November 8, 2017, the Committee unanimously recommended revising the varietal classifications that determine the size requirements for U.S. No. 2 grade potatoes. Sections 945.51 and 945.52 provide authority for the establishment and modification of grade, size, quality, and maturity regulations applicable to the handling of potatoes.

Section 945.341 establishes minimum grade, size, quality, maturity, pack, and container requirements for potatoes handled subject to the Order. The Order's handling regulations currently have two different size requirements for U.S. No. 2 grade potatoes. The requirements are applied based upon the varietal classification of the subject potato. Currently, the varietal classifications that determine which of the different size requirements are applicable are designated as “round varieties” in § 945.341(a)(2)(i), and “all other varieties” in § 945.341(a)(2)(ii).

This proposed rule would remove the designation “round varieties” in § 945.341(a)(2)(i) to make the size requirements in that paragraph applicable to all U.S. No. 2 grade potatoes, unless otherwise specified. In addition, this proposed rule would change the designation for “all other varieties” in § 945.341(a)(2)(ii) to “Russet types,” maintaining the larger size requirements for “Russet types” only.

Committee members reported that the Idaho-Eastern Oregon potato industry has been producing and shipping an increasing number of non-traditional potato varieties, such as oblong, fingerling, and banana potatoes. The current size requirements contained in the handling regulations do not adequately differentiate between the various types of potatoes to effectively regulate the unique varieties that are now being marketed from the production area. Without a clear distinction, there exists the potential to inhibit orderly marketing of such potatoes by requiring them to adhere to size requirements that were never intended to be applied to that type or variety. Designating potatoes as “round varieties” and “all other varieties” was appropriate when the regulations were initially established but potatoes from the production area are now segmented into two different market sectors, Russet type potatoes and all other non-Russet varieties. The characteristics of each of these market sectors continues to need different minimum size requirements. However, with the current size requirement classifications in the handling regulations, some varieties of potatoes are being required to meet size requirements that do not match their natural characteristics or their intended market outlet.

For example, Russet varieties are primarily utilized as baked potatoes or are peeled and further prepared by the consumer as products such as french fries, potato salad, or mashed potatoes. The Committee intends for the size requirements for these potatoes to be greater than for other varieties of potatoes and those size requirements match the likely utilization of such potatoes. Non-Russet type potatoes are typically marketed fresh and are prepared and consumed whole. These types, while predominantly round varieties, include unique varieties that could not be described as “round” but are also not comparable to Russet types. Requiring non-Russet type potatoes to meet size requirements intended for potatoes used for baking or french fries puts those potatoes at a marketing disadvantage.

The Committee believes that potato size is a significant consideration of potato buyers. Providing potato buyers with the sizes desired by their customers for the type of potato that is being marketed is important to promoting potato sales. The size requirements intended to facilitate orderly marketing should not unintentionally inhibit a market segment, even if that segment is a minor one. Modifying the size requirement classifications to meet the intent of the Committee would help facilitate the growth of the emerging market for unique potato varieties. This proposed change is expected to improve the marketing of Idaho-Eastern Oregon potatoes and enhance overall returns to handlers and producers.

This proposed rule would relax the current handling regulations for non-round potatoes that are also not Russet type. Such potatoes would be subject to the smaller size requirements that are currently applied to round varieties. The Committee believes that, while these potatoes represent a small market segment relative to the total output from the production area, the market is expected to grow and the Order's handling regulations should be responsive to it.

Section 8e mandates the regulation of certain imported commodities whenever those same commodities are regulated by a domestic marketing order. Irish potatoes are one of the commodities specifically covered by section 8e in the Act. In addition, section 8e stipulates that, whenever two or more such marketing orders regulating the same agricultural commodity produced in different areas are concurrently in effect, imports must comply with the provisions of the order which regulates the commodity produced in the area with which the imported commodity is in the “most direct competition.” 7 CFR 980.1(a)(2)(iii) contains the determination that imports of long type potatoes during each month of the year are in most direct competition with potatoes of the same type produced in the area covered by the Order.

Minimum grade, size, quality, and maturity requirements for potatoes imported into the United States are currently in effect under § 980.1. Section 980.1(b)(3) stipulates that, through the entire year, the grade, size, quality, and maturity requirements of the Order applicable to potatoes of all long types shall be the respective grade, size, quality, and maturity requirements for imported potatoes of all long types. Therefore, this proposed action would relax the minimum size requirements for imports of non-round U.S. No. 2 grade long type potatoes, other than Russet types, accordingly.

This rule would also allow potato importers to respond to the changing demands of domestic consumers. The domestic market's increasing preference for unique potato varieties applies to imported potatoes as well as to domestically produced potatoes. In addition, the higher prices that the unique potatoes are expected to command would also apply to imported product. Thus, importers are expected to benefit along with domestic producers and handlers by increased sales of U.S. No. 2 grade potatoes and increased total revenue.

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

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

There are approximately 32 handlers of Idaho-Eastern Oregon potatoes who are subject to regulation under the Order and about 450 potato producers in the regulated area. In addition, there are approximately 255 importers of all types of potatoes, many of which import long types, who are subject to regulation under the Act. Small agricultural service firms, which include potato handlers and importers, are defined by the Small Business Administration (SBA) as those having annual receipts of less than $7,500,000, and small agricultural producers are defined as those whose annual receipts are less than $750,000 (13 CFR 121.201).

During the 2016-2017 fiscal period, the most recent full year of statistics available, 37,449,300 hundredweight of Idaho-Eastern Oregon potatoes were inspected under the Order and sold into the fresh market. Based on information provided by the National Agricultural Statistics Service (NASS), the average producer price for the 2016 Idaho potato crop was $6.75 per hundredweight. Multiplying $6.75 by the shipment quantity of 37,449,300 hundredweight yields an annual crop revenue estimate of $252,782,775. The average annual fresh potato revenue for each of the 450 producers is therefore calculated to be $561,740 ($252,782,775 divided by 450), which is less than the SBA threshold of $750,000. Consequently, on average, most of the Idaho-Eastern Oregon potato producers may be classified as small entities.

In addition, based on information reported by USDA's Market News Service (Market News), the average f.o.b. shipping point price for the 2016-2017 Idaho potato crop was $11.79 per hundredweight. Multiplying $11.79 by the shipment quantity of 37,449,300 hundredweight yields an annual crop revenue estimate of $441,527,247. The average annual fresh potato revenue for each of the 32 handlers is therefore calculated to be $13,797,726 ($441,527,247 divided by 32), which is above the SBA threshold of $7,500,000 for agricultural service firms. Therefore, most of the Idaho-Eastern Oregon potato handlers would be classified as large entities.

Further, based on information from USDA's Foreign Agricultural Service (FAS), potato importers imported 11,157,190 hundredweight of potatoes into the U.S. in 2016 (the most recent full year that statistics are available). FAS also reported the total value of potato imports for 2016 to be $212,331,000. The average annual revenue of the estimated 255 potato importers is therefore calculated to be $832,670 ($212,331,000 divided by 255), which is significantly less than the SBA threshold of $7,500,000. Consequently, on average, most of the entities importing potatoes into the U.S. may be classified as small entities.

This proposed rule would revise the varietal classifications that determine the size requirements for U.S. No. 2 grade potatoes handled under the Order. Specifically, this action would remove the designation “round varieties” in § 945.341(a)(2)(i) to make the size requirements in that paragraph applicable to all U.S. No. 2 grade potatoes, unless otherwise specified. In addition, this proposed rule would change the designation for “all other varieties” in § 945.341(a)(2)(ii) to “Russet types,” maintaining the larger size requirements that were previously applied to all non-round varieties, but would only apply them to “Russet types.”

Pursuant to section 8(e) of the Act, this proposed revision to the Order's varietal classifications that determine the size requirements for U.S. No. 2 grade potatoes would also be applied to imported long type Irish potatoes.

This proposed action was recommended by the Committee to ensure that the size profile of non-round, non-Russet type U.S. No. 2 grade potatoes would consistently be a size preferred by consumers. This proposed change is expected to improve the marketability of Idaho-Eastern Oregon potatoes and increase returns to handlers and producers. Authority for this proposed rule is provided in §§ 945.51 and 945.52 of the Order.

At the November 8, 2017, meeting, the Committee discussed the impact of this change on handlers and producers. The proposed change to the varietal classifications that determine the size requirements is a relaxation in regulation. The proposed regulatory change is expected to have a positive, or neutral, impact on industry participants.

The Committee relied on the opinions of producers and handlers familiar with the industry to draw its conclusions regarding the recommended handling regulation change. The Committee received anecdotal evidence from industry members at the November 8, 2017, meeting that there is some confusion in the industry with regards to which size requirements apply to which varieties of potatoes and that some varieties are being inspected and sized to requirements that were not intended by the Committee. The proposed change to the size requirements would clarify which size requirements are applicable to which potatoes.

If implemented, this proposed change is expected to lead to increased revenue for handlers and producers. Currently, non-round potato varieties that are not Russet type are required to conform to the larger size requirements, even though the Committee does not believe that this meets its intent with regards to the handling regulation. Defining the distinct classifications would allow more of the non-round, non-Russet type potatoes to enter the market, thereby allowing the sale of potatoes that would have otherwise been restricted. The benefits derived from this proposed action are not expected to be disproportionately more or less for small handlers or producers than for larger entities.

The Committee discussed alternatives to this proposed change. One consideration was making no change at all to the current regulation. Another alternative was to further differentiate between various varieties and types of potatoes in the handling regulations. There was some discussion of adding another classification. After consideration of all the alternatives, the Committee decided that the proposed changes would provide the greatest amount of benefit to the industry with the least amount of burden to producers and handlers.

Further, the Committee's meeting was widely publicized throughout the potato industry, and all interested persons were invited to attend the meeting and participate in Committee deliberations. Like all Committee meetings, the November 8, 2017, meeting was a public meeting and all entities, both large and small, were able to express their views on this issue. Finally, interested persons are invited to submit comments on this proposed rule, including the regulatory and informational impacts of this action on small businesses.

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

This proposed rule would not impose any additional reporting or recordkeeping requirements on small or large potato handlers and importers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies.

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

USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this proposed rule.

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

In accordance with section 8e of the Act, the United States Trade Representative has concurred with the issuance of this proposed rule.

A 60-day comment period is provided to allow interested persons to respond to this proposal. All written comments timely received will be considered before a final determination is made on this matter.

For the reasons set forth above, 7 CFR part 945 is proposed to be amended as follows:

Comments Invited

We invite you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2018-0391; Product Identifier 2017-NM-165-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this NPRM. We will consider all comments received by the closing date and may amend this NPRM based on those comments.

We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this NPRM.

The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA Airworthiness Directive 2017-0221R1, dated December 15, 2017 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for all ATR-GIE Avions de Transport Régional Model ATR42-200, -300, and -320 airplanes. The MCAI states:

You may examine the MCAI in the AD docket on the internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2018-0391.

This NPRM would not supersede AD 2008-04-19 R1 or AD 2015-26-09. Rather, we have determined that a stand-alone AD would be more appropriate to address the changes in the MCAI. This NPRM would require revising the maintenance or inspection program, as applicable, to incorporate new or more restrictive maintenance requirements and airworthiness limitations. Accomplishment of the proposed actions would then terminate all requirements of AD 2008-04-19 R1 and AD 2015-26-09 for ATR-GIE Avions de Transport Régional Model ATR42-200, -300, and -320 airplanes only. Accomplishment of the proposed actions would also terminate all requirements of AD 2000-17-09, Amendment 39-11883 (65 FR 53897, September 6, 2000) (“AD 2000-17-09”) for ATR-GIE Avions de Transport Régional Model ATR42-200, -300, and -320 airplanes only.

ATR-GIE Avions de Transport Régional has issued ATR 42-200/-300/-320, Time Limits Document (TL), Revision 8, dated October 17, 2016. This service information describes life limits and maintenance requirements for the affected airplanes. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with the State of Design Authority, we have been notified of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all pertinent information and determined an unsafe condition exists and is likely to exist or develop on other products of the same type design.

This proposed AD would require revisions to certain operator maintenance documents to include new actions ( e.g., inspections). Compliance with these actions is required by 14 CFR 91.403(c). For airplanes that have been previously modified, altered, or repaired in the areas addressed by this proposed AD, the operator may not be able to accomplish the actions described in the revisions. In this situation, to comply with 14 CFR 91.403(c), the operator must request approval for an alternative method of compliance according to paragraph (k)(1) of this proposed AD. The request should include a description of changes to the required actions that will ensure the continued operational safety of the airplane.

The FAA recently became aware of an issue related to the applicability of ADs that require incorporation of revised airworthiness limitations (ALS) into an operator's maintenance or inspection program.

Typically, when these types of ADs are issued by civil aviation authorities of other countries, they apply to all airplanes covered under an identified type certificate (TC). The corresponding FAA AD typically retains applicability to all of those airplanes.

In addition, U.S. operators must operate their airplanes in an airworthy condition, in accordance with 14 CFR 91.7(a). Included in this obligation is the requirement to perform any maintenance or inspections specified in the ALS, and in accordance with the ALS as specified in 14 CFR 43.16 and 91.403(c), unless an alternative has been approved by the FAA.

When a type certificate is issued for a type design, the specific ALS, including revisions, is a part of that type design, as specified in 14 CFR 21.31(c).

The sum effect of these operational and maintenance requirements is an obligation to comply with the ALS defined in the type design referenced in the manufacturer's conformity statement. This obligation may introduce a conflict with an AD that requires a specific ALS revision if new airplanes are delivered with a later revision as part of their type design.

To address this conflict, the FAA has approved alternative methods of compliance (AMOCs) that allow operators to incorporate the most recent ALS revision into their maintenance/inspection programs, in lieu of the ALS revision required by the AD. This eliminates the conflict and enables the operator to comply with both the AD and the type design.

However, compliance with AMOCs is normally optional, and we recently became aware that some operators choose to retain the AD-mandated ALS revision in their fleet-wide maintenance/inspection programs, including those for new airplanes delivered with later ALS revisions, to help standardize the maintenance of the fleet. To ensure that operators comply with the applicable ALS revision for newly delivered airplanes containing a later revision than that specified in an AD, we plan to limit the applicability of ADs that mandate ALS revisions to those airplanes that are subject to an earlier revision of the ALS, either as part of the type design or as mandated by an earlier AD.

This proposed AD therefore would apply to ATR-GIE Avions de Transport Régional Model ATR42-200, -300, and -320 airplanes with an original certificate of airworthiness or original export certificate of airworthiness that was issued on or before the date of approval of the ALS revision identified in this proposed AD. Operators of airplanes with an original certificate of airworthiness or original export certificate of airworthiness issued after that date must comply with the airworthiness limitations specified as part of the approved type design and referenced on the type certificate data sheet.

We estimate that this proposed AD affects 33 airplanes of U.S. registry.

We estimate the following costs to comply with this proposed AD.

We have determined that revising the maintenance or inspection program takes an average of 90 work-hours per operator, although we recognize that this number may vary from operator to operator. In the past, we have estimated that this action takes 1 work-hour per airplane. Since operators incorporate maintenance or inspection program changes for their affected fleet(s), we have determined that a per-operator estimate is more accurate than a per-airplane estimate. Therefore, we estimate the total cost per operator to be $7,650 (90 work-hours × $85 per work-hour).

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

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

This proposed AD is issued in accordance with authority delegated by the Executive Director, Aircraft Certification Service, as authorized by FAA Order 8000.51C. In accordance with that order, issuance of ADs is normally a function of the Compliance and Airworthiness Division, but during this transition period, the Executive Director has delegated the authority to issue ADs applicable to transport category airplanes to the Director of the System Oversight Division.

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

For the reasons discussed above, I certify this proposed regulation:

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

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

3. Will not affect intrastate aviation in Alaska; and

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

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

We invite you to participate in this rulemaking by submitting written comments, data, or views. We also invite comments relating to the economic, environmental, energy, or federalism impacts that might result from adopting the proposals in this document. The most helpful comments reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data. To ensure the docket does not contain duplicate comments, commenters should send only one copy of written comments, or if comments are filed electronically, commenters should submit only one time.

We will file in the docket all comments that we receive, as well as a report summarizing each substantive public contact with FAA personnel concerning this proposed rulemaking. Before acting on this proposal, we will consider all comments we receive on or before the closing date for comments. We will consider comments filed after the comment period has closed if it is possible to do so without incurring expense or delay. We may change this proposal in light of the comments we receive.

EASA, which is the Technical Agent for the Member States of the European Union, has issued EASA AD No. 2017-0165, dated September 5, 2017 (EASA AD 2017-0165), to correct an unsafe condition for Airbus Helicopters Model SA 365 N1, AS 365 N2, AS 365 N3, SA 366 G1, EC 155 B and EC 155 B1 helicopters. EASA advises of several reports of aft fuselage (baggage compartment area) outer skin disbonding found during a 600-hour inspection. EASA advises that most of the reports of disbonding occurred on Model EC 155 helicopters and may occur in the same area on Model AS 365, SA 365, and SA 366 helicopters due to design similarity. According to EASA, the cause of the disbonding has not yet been determined and the investigation is continuing. Airbus Helicopters states possible causes that are being considered include exhaust gas heat from the exhaust pipes and environmental conditions. EASA states that this condition, if not detected and corrected, could reduce the structural integrity of the aft fuselage, possibly affecting safe flight and landing.

To address this unsafe condition, EASA AD 2017-0165 requires a repetitive tap inspection of the aft fuselage outer skin for disbonding, a repetitive visual inspection of the aft fuselage outer skin for distortion, wrinkling, and corrosion, and contacting Airbus Helicopters if there is any disbonding.

These helicopters have been approved by the aviation authority of France and are approved for operation in the United States. Pursuant to our bilateral agreement with France, EASA, its technical representative, has notified us of the unsafe condition described in its AD. We are proposing this AD because we evaluated all known relevant information and determined that an unsafe condition is likely to exist or develop on other products of the same type design.

We reviewed Airbus Helicopters Alert Service Bulletin (ASB) No. AS365-05.00.77 for Model AS365 N, N1, N2, and N3 and non-FAA-certificated Model AS365 F, Fs, Fi, K, and K2 helicopters; ASB No. SA366-05.48 for Model SA366 G1 and non-FAA-certificated Model SA366 GA helicopters; and ASB No. EC155-05A033 for Model EC155 B and B1 helicopters, all Revision 0 and all dated July 21, 2017. This service information specifies repetitive tap and visual inspections between aft fuselage outer skin frames X4630 and X6630 and defines the allowable limit of disbonding for this area. If there is distortion, wrinkling, or corrosion, this service information specifies performing a tap inspection. If there is disbonding within the allowable limit, this service information specifies reporting the inspection results to Airbus Helicopters and performing the recurring tap inspection at a shorter compliance time interval. If there is disbonding that exceeds the allowable limit, this service information specifies contacting Airbus Helicopters for repair before further flight.

This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

This proposed AD would require, within 110 hours time-in-service (TIS), a tap inspection of the aft fuselage outer skin for disbonding. If there is no disbonding, repeating the tap inspection at intervals not to exceed 660 hours TIS would be required. If there is disbonding, either repeating the tap inspections at intervals not to exceed 110 hours TIS or repairing or replacing the panel before further flight and then tap inspecting the panel at intervals not to exceed 660 hours TIS would be required. This proposed AD would also require, within 220 hours TIS and thereafter at intervals not to exceed 110 hours TIS, cleaning the aft fuselage outer skin and visually inspecting for distortion, wrinkling, and corrosion. If there is any distortion, wrinkling, or corrosion, tap inspecting the area for disbonding would be required before further flight.

If there is disbonding within the allowable limit, the EASA AD specifies reporting the inspection results to Airbus Helicopters, whereas this proposed AD would not. If there is disbonding that exceeds the allowable limit, the EASA AD specifies contacting Airbus Helicopters for approved skin panel repair or replacement instructions, whereas this proposed AD would require repairing or replacing the panel instead.

We consider this proposed AD to be an interim action. If final action is later identified, we might consider further rulemaking then.

We estimate that this proposed AD would affect 46 helicopters of U.S. Registry. We estimate that operators may incur the following costs in order to comply with this AD. Labor costs are estimated at $85 per work-hour.

Tap inspecting the aft fuselage outer skin would take about 3 work-hours for an estimated cost of $255 per helicopter and $11,730 for the U.S. fleet per inspection cycle. Visually inspecting the aft fuselage outer skin would take about 0.3 work-hour for an estimated cost of $26 per helicopter and $1,196 for the U.S. fleet per inspection cycle. Repairing a panel would take about 5 work-hours and parts would cost about $500 for an estimated cost of $925. Replacing a panel would take about 10 work-hours and parts would cost about $20,000 for an estimated cost of $20,850.

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

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

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

For the reasons discussed, I certify this proposed regulation:

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

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

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

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

We prepared an economic evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket.

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

Comments Invited

We invite you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2018-0395; Product Identifier 2017-NM-136-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this NPRM. We will consider all comments received by the closing date and may amend this NPRM based on those comments.

We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this NPRM.

The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2017-0185, dated September 22, 2017 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for all Airbus Model A330-200 Freighter series airplanes, Model A330-200 series airplanes, Model A330-300 series airplanes, Model A340-200 series airplanes, Model A340-300 series airplanes, Model A340-500 series airplanes, and Model A340-600 series airplanes. The MCAI states:

You may examine the MCAI in the AD docket on the internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2018-0395.

Airbus has issued the following service information. These documents are distinct since they apply to different airplane models.

• Service Bulletin A330-32-3281, Revision 02, dated June 16, 2017, including Appendixes 01 through 06; and Service Bulletin A340-32-4310, Revision 02, dated June 16, 2017, including Appendixes 01 through 06. This service information includes procedures for inspections to identify the part numbers and serial numbers of the main fittings, bogie beams, and sliding pistons of the MLG; and procedures for determining the airplane's weight variant. This service information also describes the reduced life limits for affected parts. These documents are distinct since they apply to different airplane models.

• Service Bulletin A340-32-5119, Revision 01, dated January 31, 2017, including Appendixes 01 through 07. This service information includes procedures for inspections to identify the part numbers and serial numbers of the main fittings and bogie beams of the MLG, NLG, and CLG; and procedures for determining the airplane's weight variant. This service information also describes the reduced life limits for affected parts.

In addition, Airbus has issued the following service information, which describes life limits for affected parts. These documents are distinct since they apply to different airplane models and to different life limited parts.

• A330 Airworthiness Limitations Section (ALS) Part 1, “Safe Life Airworthiness Limitation Items (SL-ALI),” Revision 09, dated September 18, 2017.

• A330 ALS Part 1, “Safe Life Airworthiness Limitation Items (SL-ALI),” Variation 9.2, dated November 28, 2017.

• A340 Airworthiness Limitations Section (ALS) Part 1, “Safe Life Airworthiness Limitation Items (SL-ALI),” Revision 09, dated September 18, 2017.

• A340 ALS Part 1, “Safe Life Airworthiness Limitation Items (SL-ALI),” Variation 9.2, dated November 28, 2017.

This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with the State of Design Authority, we have been notified of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all pertinent information and determined an unsafe condition exists and is likely to exist or develop on other products of these same type designs.

We estimate that this proposed AD affects 103 airplanes of U.S. registry.

We estimate the following costs to comply with this proposed AD:

We have received no definitive data that would enable us to provide cost estimates for the on-condition part replacements specified in this proposed AD.

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

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

This proposed AD is issued in accordance with authority delegated by the Executive Director, Aircraft Certification Service, as authorized by FAA Order 8000.51C. In accordance with that order, issuance of ADs is normally a function of the Compliance and Airworthiness Division, but during this transition period, the Executive Director has delegated the authority to issue ADs applicable to transport category airplanes to the Director of the System Oversight Division.

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

For the reasons discussed above, I certify this proposed regulation:

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

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

3. Will not affect intrastate aviation in Alaska; and

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

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

Comments Invited

We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2018-0326; Product Identifier 2018-CE-006-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD because of those comments.

We will post all comments we receive, without change, to http://regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD.

We issued AD 98-16-03, Amendment 39-10677 (63 FR 40359; July 29, 1998). That AD required actions intended to address an unsafe condition on SOCATA Models TB 9 and TB 10 airplanes and was based on mandatory continuing airworthiness information (MCAI) originated by an aviation authority of another country.

Since we issued AD 98-16-03, SOCATA developed improved repair procedures and increased the applicability to include Model TB 200 airplanes.

The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Community, has issued EASA AD No. 2018-0030, dated January 31, 2018 (referred to after this as “the MCAI”), to correct an unsafe condition for the specified products. The MCAI states:

You may examine the MCAI on the internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2018-0326.

SOCATA has issued Daher Service Bulletin SB 10-081, Revision 3, dated December 2017. The service bulletin describes procedures for inspecting the front attachments and installing modification kits. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section of this NPRM.

This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with this State of Design Authority, they have notified us of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all information and determined the unsafe condition exists and is likely to exist or develop on other products of the same type design.

We estimate that this proposed AD will affect 126 products of U.S. registry. We also estimate that it would take about 3 work-hours per product to comply with the inspection requirements of this proposed AD. We also estimate that it would take about 25 work-hours per product to comply with the replacement/modification (wing and fuselage sides) requirements of this proposed AD. The average labor rate is $85 per work-hour. Required parts would cost about $3,000 per product.

Based on these figures, we estimate the cost of the proposed AD on U.S. operators to be $677,880, or $5,380 per product.

In addition, we estimate that any necessary follow-on actions to replace the wing attachment on the wing side, resulting from the repetitive inspections, would take about 9 work-hours and require parts costing $3,000, for a cost of $3,765 per product. We have no way of determining the number of products that may need these actions.

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

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

This AD is issued in accordance with authority delegated by the Executive Director, Aircraft Certification Service, as authorized by FAA Order 8000.51C. In accordance with that order, issuance of ADs is normally a function of the Compliance and Airworthiness Division, but during this transition period, the Executive Director has delegated the authority to issue ADs applicable to small airplanes, gliders, balloons, airships, domestic business jet transport airplanes, and associated appliances to the Director of the Policy and Innovation Division.

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

For the reasons discussed above, I certify this proposed regulation:

(1) Is not a “significant regulatory action” under Executive Order 12866,

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

(3) Will not affect intrastate aviation in Alaska, and

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

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

The Commission is publishing for comment a proposed interpretation of the standard of conduct for investment advisers under the Advisers Act [15 U.S.C. 80b]. 1

An investment adviser is a fiduciary, and as such is held to the highest standard of conduct and must act in the best interest of its client. 2 Its fiduciary obligation, which includes an affirmative duty of utmost good faith and full and fair disclosure of all material facts, is established under federal law and is important to the Commission's investor protection efforts. 3 The Commission also regulates broker-dealers, including the obligations that broker-dealers owe to their customers. Investment advisers and broker-dealers provide advice and services to retail investors and are important to our capital markets and our economy more broadly. Broker-dealers and investment advisers have different types of relationships with their customers and clients and have different models for providing advice, which provide investors with choice about the levels and types of advice they receive and how they pay for the services that they receive.

Today, the Commission is proposing a rule that would require all broker-dealers and natural persons who are associated persons of broker-dealers to act in the best interest of retail customers  4 when making a recommendation of any securities transaction or investment strategy involving securities to retail customers (“Regulation Best Interest”). 5 We are also proposing to require registered investment advisers and registered broker-dealers to deliver to retail investors a relationship summary, which would provide these investors with information about the relationships and services the firm offers, the standard of conduct and the fees and costs associated with those services, specified conflicts of interest, and whether the firm and its financial professionals currently have reportable legal or disciplinary events. 6 In light of the comprehensive nature of our proposed set of rulemakings, we believe it would be appropriate and beneficial to address in one release  7 and reaffirm—and in some cases clarify—certain aspects of the fiduciary duty that an investment adviser owes to its clients under section 206 of the Advisers Act. 8

An investment adviser's fiduciary duty is similar to, but not the same as, the proposed obligations of broker- dealers under Regulation Best Interest. 9 While we are not proposing a uniform standard of conduct for broker-dealers and investment advisers in light of their different relationship types and models for providing advice, we continue to consider whether we can improve protection of investors through potential enhancements to the legal obligations of investment advisers. Below, in addition to our interpretation of advisers' existing fiduciary obligations, we request comment on three potential enhancements to their legal obligations by considering areas where the current broker-dealer framework provides investor protections that may not have counterparts in the investment adviser context.

The Advisers Act establishes a federal fiduciary standard for investment advisers. 10 This fiduciary standard is based on equitable common law principles and is fundamental to advisers' relationships with their clients under the Advisers Act. 11 The fiduciary duty to which advisers are subject is not specifically defined in the Advisers Act or in Commission rules, but reflects a Congressional recognition “of the delicate fiduciary nature of an investment advisory relationship” as well as a Congressional intent to “eliminate, or at least to expose, all conflicts of interest which might incline an investment adviser—consciously or unconsciously—to render advice which was not disinterested.”  12 An adviser's fiduciary duty is imposed under the Advisers Act in recognition of the nature of the relationship between an investment adviser and a client and the desire “so far as is presently practicable to eliminate the abuses” that led to the enactment of the Advisers Act. 13 It is made enforceable by the antifraud provisions of the Advisers Act. 14

An investment adviser's fiduciary duty under the Advisers Act comprises a duty of care and a duty of loyalty. Several commenters responding to Chairman Clayton's June 2017 request for public input  15 on the standards of conduct for investment advisers and broker-dealers acknowledged these duties. 16 This fiduciary duty requires an adviser “to adopt the principal's goals, objectives, or ends.”  17 This means the adviser must, at all times, serve the best interest of its clients and not subordinate its clients' interest to its own. 18 The federal fiduciary duty is imposed through the antifraud provisions of the Advisers Act. 19 The duty follows the contours of the relationship between the adviser and its client, and the adviser and its client may shape that relationship through contract when the client receives full and fair disclosure and provides informed consent. 20 Although the ability to tailor the terms means that the application of the fiduciary duty will vary with the terms of the relationship, the relationship in all cases remains that of a fiduciary to a client. In other words, the investment adviser cannot disclose or negotiate away, and the investor cannot waive, the federal fiduciary duty. 21 We discuss our views  22 on an investment adviser's fiduciary duty in more detail below. 23

As fiduciaries, investment advisers owe their clients a duty of care. 24 The Commission has discussed the duty of care and its components in a number of contexts. 25 The duty of care includes, among other things: (i) The duty to act and to provide advice that is in the best interest of the client, (ii) the duty to seek best execution of a client's transactions where the adviser has the responsibility to select broker-dealers to execute client trades, and (iii) the duty to provide advice and monitoring over the course of the relationship.

We have addressed an adviser's duty of care in the context of the provision of personalized investment advice. In this context, the duty of care includes a duty to make a reasonable inquiry into a client's financial situation, level of financial sophistication, investment experience, and investment objectives (which we refer to collectively as the client's “investment profile”) and a duty to provide personalized advice that is suitable for and in the best interest of the client based on the client's investment profile. 26

An adviser must, before providing any personalized investment advice and as appropriate thereafter, make a reasonable inquiry into the client's investment profile. The nature and extent of the inquiry turn on what is reasonable under the circumstances, including the nature and extent of the agreed-upon advisory services, the nature and complexity of the anticipated investment advice, and the investment profile of the client. For example, to formulate a comprehensive financial plan for a client, an adviser might obtain a range of personal and financial information about the client, including current income, investments, assets and debts, marital status, insurance policies, and financial goals. 27

An adviser must update a client's investment profile in order to adjust its advice to reflect any changed circumstances. 28 The frequency with which the adviser must update the information in order to consider changes to any advice the adviser provides would turn on many factors, including whether the adviser is aware of events that have occurred that could render inaccurate or incomplete the investment profile on which it currently bases its advice. For example, a change in the relevant tax law or knowledge that the client has retired or experienced a change in marital status might trigger an obligation to make a new inquiry.

An investment adviser must also have a reasonable belief that the personalized advice is suitable for and in the best interest of the client based on the client's investment profile. A reasonable belief would involve considering, for example, whether investments are recommended only to those clients who can and are willing to tolerate the risks of those investments and for whom the potential benefits may justify the risks. 29 Whether the advice is in a client's best interest must be evaluated in the context of the portfolio that the adviser manages for the client and the client's investment profile. For example, when an adviser is advising a client with a conservative investment objective, investing in certain derivatives may be in the client's best interest when they are used to hedge interest rate risk in the client's portfolio, whereas investing in certain directionally speculative derivatives on their own may not. For that same client, investing in a particular security on margin may not be in the client's best interest, even if investing in that same security may be in the client's best interest. When advising a financially sophisticated investor with a high risk tolerance, however, it may be consistent with the adviser's duties to recommend investing in such directionally speculative derivatives or investing in securities on margin.

The cost (including fees and compensation) associated with investment advice would generally be one of many important factors—such as the investment product's or strategy's investment objectives, characteristics (including any special or unusual features), liquidity, risks and potential benefits, volatility and likely performance in a variety of market and economic conditions—to consider when determining whether a security or investment strategy involving a security or securities is in the best interest of the client. Accordingly, the fiduciary duty does not necessarily require an adviser to recommend the lowest cost investment product or strategy. We believe that an adviser could not reasonably believe that a recommended security is in the best interest of a client if it is higher cost than a security that is otherwise identical, including any special or unusual features, liquidity, risks and potential benefits, volatility and likely performance. For example, if an adviser advises its clients to invest in a mutual fund share class that is more expensive than other available options when the adviser is receiving compensation that creates a potential conflict and that may reduce the client's return, the adviser may violate its fiduciary duty and the antifraud provisions of the Advisers Act if it does not, at a minimum, provide full and fair disclosure of the conflict and its impact on the client and obtain informed client consent to the conflict. 30 Furthermore, an adviser would not satisfy its fiduciary duty to provide advice that is in the client's best interest by simply advising its client to invest in the least expensive or least remunerative investment product or strategy without any further analysis of other factors in the context of the portfolio that the adviser manages for the client and the client's investment profile. For example, it might be consistent with an adviser's fiduciary duty to advise a client with a high risk tolerance and significant investment experience to invest in a private equity fund with relatively high fees if other factors about the fund, such as its diversification and potential performance benefits, cause it to be in the client's best interest. We believe that a reasonable belief that investment advice is in the best interest of a client also requires that an adviser conduct a reasonable investigation into the investment sufficient to not base its advice on materially inaccurate or incomplete information. 31 We have brought enforcement actions where an investment adviser did not independently or reasonably investigate securities before recommending them to clients. 32 This obligation to provide advice that is suitable and in the best interest applies not just to potential investments, but to all advice the investment adviser provides to clients, including advice about an investment strategy or engaging a sub-adviser and advice about whether to rollover a retirement account so that the investment adviser manages that account.

We have addressed an investment adviser's duty of care in the context of trade execution where the adviser has the responsibility to select broker-dealers to execute client trades (typically in the case of discretionary accounts). We have said that, in this context, an adviser has the duty to seek best execution of a client's transactions. 33 In meeting this obligation, an adviser must seek to obtain the execution of transactions for each of its clients such that the client's total cost or proceeds in each transaction are the most favorable under the circumstances. An adviser fulfills this duty by executing securities transactions on behalf of a client with the goal of maximizing value for the client under the particular circumstances occurring at the time of the transaction. As noted below, maximizing value can encompass more than just minimizing cost. When seeking best execution, an adviser should consider “the full range and quality of a broker's services in placing brokerage including, among other things, the value of research provided as well as execution capability, commission rate, financial responsibility, and responsiveness” to the adviser. 34 In other words, the determinative factor is not the lowest possible commission cost but whether the transaction represents the best qualitative execution. Further, an investment adviser should “periodically and systematically” evaluate the execution it is receiving for clients. 35

An investment adviser's duty of care also encompasses the duty to provide advice and monitoring over the course of a relationship with a client. 36 An adviser is required to provide advice and services to a client over the course of the relationship at a frequency that is both in the best interest of the client and consistent with the scope of advisory services agreed upon between the investment adviser and the client. The duty to provide advice and monitoring is particularly important for an adviser that has an ongoing relationship with a client (for example, a relationship where the adviser is compensated with a periodic asset-based fee or an adviser with discretionary authority over client assets). Conversely, the steps needed to fulfill this duty may be relatively circumscribed for the adviser and client that have agreed to a relationship of limited duration via contract (for example, a financial planning relationship where the adviser is compensated with a fixed, one-time fee commensurate with the discrete, limited-duration nature of the advice provided). 37 An adviser's duty to monitor extends to all personalized advice it provides the client, including an evaluation of whether a client's account or program type (for example, a wrap account) continues to be in the client's best interest.

The duty of loyalty requires an investment adviser to put its client's interests first. An investment adviser must not favor its own interests over those of a client or unfairly favor one client over another. 38 In seeking to meet its duty of loyalty, an adviser must make full and fair disclosure to its clients of all material facts relating to the advisory relationship. 39 In addition, an adviser must seek to avoid conflicts of interest with its clients, and, at a minimum, make full and fair disclosure of all material conflicts of interest that could affect the advisory relationship. The disclosure should be sufficiently specific so that a client is able to decide whether to provide informed consent to the conflict of interest. 40 We discuss each of these aspects of the duty of loyalty below.

Because an adviser must serve the best interests of its clients, it has an obligation not to subordinate its clients' interests to its own. For example, an adviser cannot favor its own interests over those of a client, whether by favoring its own accounts or by favoring certain client accounts that pay higher fee rates to the adviser over other client accounts. 41 Accordingly, the duty of loyalty includes a duty not to treat some clients favorably at the expense of other clients. Thus, we believe that in allocating investment opportunities among eligible clients, an adviser must treat all clients fairly. 42 This does not mean that an adviser must have a pro rata allocation policy, that the adviser's allocation policies cannot reflect the differences in clients' objectives or investment profiles, or that the adviser cannot exercise judgment in allocating investment opportunities among eligible clients. Rather, it means that an adviser's allocation policies must be fair and, if they present a conflict, the adviser must fully and fairly disclose the conflict such that a client can provide informed consent.

An adviser must seek to avoid conflicts of interest with its clients, and, at a minimum, make full and fair disclosure to its clients of all material conflicts of interest that could affect the advisory relationship. 43 Disclosure of a conflict alone is not always sufficient to satisfy the adviser's duty of loyalty and section 206 of the Advisers Act. 44 Any disclosure must be clear and detailed enough for a client to make a reasonably informed decision to consent to such conflicts and practices or reject them. 45 An adviser must provide the client with sufficiently specific facts so that the client is able to understand the adviser's conflicts of interest and business practices well enough to make an informed decision. 46 For example, an adviser disclosing that it “may” have a conflict is not adequate disclosure when the conflict actually exists. 47 A client's informed consent can be either explicit or, depending on the facts and circumstances, implicit. We believe, however, that it would not be consistent with an adviser's fiduciary duty to infer or accept client consent to a conflict where either (i) the facts and circumstances indicate that the client did not understand the nature and import of the conflict, or (ii) the material facts concerning the conflict could not be fully and fairly disclosed. 48 For example, in some cases, conflicts may be of a nature and extent that it would be difficult to provide disclosure that adequately conveys the material facts or the nature, magnitude and potential effect of the conflict necessary to obtain informed consent and satisfy an adviser's fiduciary duty. In other cases, disclosure may not be specific enough for clients to understand whether and how the conflict will affect the advice they receive. With some complex or extensive conflicts, it may be difficult to provide disclosure that is sufficiently specific, but also understandable, to the adviser's clients. In all of these cases where full and fair disclosure and informed consent is insufficient, we expect an adviser to eliminate the conflict or adequately mitigate the conflict so that it can be more readily disclosed.

Full and fair disclosure of all material facts that could affect an advisory relationship, including all material conflicts of interest between the adviser and the client, can help clients and prospective clients in evaluating and selecting investment advisers. Accordingly, we require advisers to deliver to their clients a “brochure,” under Part 2A of Form ADV, which sets out minimum disclosure requirements, including disclosure of certain conflicts. 49 Investment advisers are required to deliver the brochure to a prospective client at or before entering into a contract so that the prospective client can use the information contained in the brochure to decide whether or not to enter into the advisory relationship. 50 In a concurrent release, we are proposing to require all investment advisers to deliver to retail investors before or at the time the adviser enters into an investment advisory agreement a relationship summary which would include a summary of certain conflicts of interest. 51

The Commission requests comment on our proposed interpretation regarding certain aspects of the fiduciary duty under section 206 of the Advisers Act.

• Does the Commission's proposed interpretation offer sufficient guidance with respect to the fiduciary duty under section 206 of the Advisers Act?

• Are there any significant issues related to an adviser's fiduciary duty that the proposed interpretation has not addressed?

• Would it be beneficial for investors, advisers or broker-dealers for the Commission to codify any portion of our proposed interpretation of the fiduciary duty under section 206 of the Advisers Act?

The Commission is sensitive to the potential economic effects of the proposed interpretation provided above. 52 In this section we discuss how the proposed Commission interpretation may benefit investors and reduce agency problems by reaffirming and clarifying the fiduciary duty an investment adviser owes to its clients. We also discuss some potential broader economic effects on the market for investment advice.

The Commission's interpretation of the standard of conduct for investment advisers under the Advisers Act set forth in this Release would affect investment advisers and their associated persons as well as the clients of those investment advisers, and the market for financial advice more broadly. 53 There are 12,659 investment advisers registered with the Commission with over $72 trillion in assets under management as well as 17,635 investment advisers registered with states and 3,587 investment advisers who submit Form ADV as exempt reporting advisers. 54 As of December 2017, there are approximately 36 million client accounts advised by SEC-registered investment advisers.

These investment advisers currently incur ongoing costs related to their compliance with their legal and regulatory obligations, including costs related to their understanding of the standard of conduct. We believe, based on the Commission's experience, that the interpretations we are setting forth in this Release are generally consistent with investment advisers' current understanding of the practices necessary to comply with their fiduciary duty under the Advisers Act; however, we recognize that there may be certain current investment advisers who have interpreted their fiduciary duty to require something less, or something more, than the Commission's interpretation. We lack data to identify which investment advisers currently understand the practices necessary to comply with their fiduciary duty to be different from the standard of conduct in the Commission's interpretation. Based on our experience, however, we generally believe that it is not a significant portion of the market.

Based on our experience as the long-standing regulator of the investment adviser industry, the Commission's interpretation of the fiduciary duty under section 206 of the Advisers Act described in this Release generally reaffirms the current practices of investment advisers. Therefore, we expect there to be no significant economic impacts from the interpretation. We do acknowledge, however, to the extent certain investment advisers currently understand the practices necessary to comply with their fiduciary duty to be different from those discussed in this interpretation, there could be some potential economic effects, which we discuss below.

The typical relationship between an investment adviser and a client is a principal-agent relationship, where the principal (the client) hires an agent (the investment adviser) to perform some service (investment advisory services) on the client's behalf. 55 Because investors and investment advisers are likely to have different preferences and goals, the investment adviser relationship is subject to agency problems: That is, investment advisers may take actions that increase their well-being at the expense of investors, thereby imposing agency costs on investors. 56 A fiduciary duty, such as the duty investment advisers owe their clients, can mitigate these agency problems and reduce agency costs by deterring agents from taking actions that expose them to legal liability. 57

To the extent the Commission's interpretation of investment adviser fiduciary duty would cause a change in behavior of those investment advisers, if any, who currently interpret their fiduciary duty to require something different from the Commission's interpretation, we expect a potential reduction in agency problems and, consequently, a reduction of agency costs to the client. The extent to which agency costs would be reduced is difficult to assess given that we are unable to ascertain whether any investment advisers currently interpret their fiduciary duty to be something different from the Commission's interpretation, and consequently we are not able to estimate the agency costs these advisers, if any, currently impose on investors. However, we believe that there may be potential benefits for clients of those investment advisers, if any, to the extent the Commission's interpretation is effective at strengthening investment advisers' understanding of their obligations to their clients. For example, to the extent that the Commission's interpretation enhances the understanding of any investment advisers of their duty of care, it may potentially raise the quality of investment advice given and that advice's fit with a client's individual profile and preferences or lead to increased compliance with the duty to provide advice and monitoring over the course of the relationship.

Additionally, to the extent the Commission's interpretation enhances the understanding of any investment advisers of their duty of loyalty it may potentially benefit the clients of those investment advisers. Specifically, to the extent this leads to a higher quality of disclosures about conflicts for clients of some investment advisers, the nature and extent of such conflict disclosures would help investors better assess the quality of the investment advice they receive, therefore providing an important benefit to investors.

Further, to the extent that the interpretation causes some investment advisers to properly identify circumstances in which disclosure alone cannot cure a conflict of interest, the proposed interpretation may lead those investment advisers to take additional steps to mitigate or eliminate the conflict. The interpretation may also cause some investment advisers to conclude in some circumstances that even if disclosure would be enough to meet their fiduciary duty, such disclosure would have to be so expansive or complex that they instead voluntarily mitigate or eliminate the conflicts of interest. Thus, to the extent the Commission's interpretation would cause investment advisers to better understand their obligations as part of their fiduciary duty and therefore to make changes to their business practices in ways that reduce the likelihood of conflicted advice or the magnitude of the conflicts, it may ameliorate the agency conflict between investment advisers and their clients and, in turn, may improve the quality of advice that the clients receive. This less-conflicted advice may therefore produce higher overall returns for clients and increase the efficiency of portfolio allocation. However, as discussed above, we would generally expect these effects to be minimal. Finally, this interpretation would also benefit clients of investment advisers to the extent it assists the Commission in its oversight of investment advisers' compliance with their regulatory obligations.

In general, we expect the Commission's interpretation of an investment adviser's fiduciary duty would affirm investment advisers' understanding of the obligations they owe their clients, reduce uncertainty for advisers, and facilitate their compliance. Furthermore, by addressing in one release certain aspects of the fiduciary duty that an investment adviser owes to its clients, the Commission's interpretation could reduce the costs associated with comprehensively assessing their compliance obligations. We acknowledge that, as with other circumstances in which the Commission speaks to the legal obligations of regulated entities, affected firms, including those whose practices are consistent with the Commission's interpretation, incur costs to evaluate the Commission's interpretation and assess its applicability to them. Moreover, as discussed above, there may be certain investment advisers who currently understand the practices necessary to comply with their fiduciary duty to be different from the standard of conduct in the Commission's interpretation. Those investment advisers if any, would experience an increase in their compliance costs as they change their systems, processes and behavior, and train their supervised persons, to align with the Commission's interpretation.

Moreover, to the extent any investment advisers that understood their fiduciary obligation to be different from the Commission's interpretation change their behavior to align with this interpretation, there could potentially also be some economic effects on the market for investment advice. For example, any improved compliance may not only reduce agency costs in current investment advisory relationships and increase the value of those relationships to current clients, it may also increase trust in the market for investment advice among all investors, which may result in more investors seeking advice from investment advisers. This may, in turn, benefit investors by improving the efficiency of their portfolio allocation. To the extent it is costly or difficult, at least in the short term, to expand the supply of investment advisory services to meet an increase in demand, any such new demand for investment adviser services could potentially put some upward price pressure on fees. At the same time, however, if any such new demand increases the overall profitability of investment advisory services, then we expect it would encourage entry by new investment advisers—or hiring of new representatives, by current investment advisers—such that competition would increase over time. Indeed, we recognize that the recent growth in the investment adviser segment of the market, both in terms of firms and number of representatives, 58 may suggest that the costs of expanding the supply of investment advisory services are currently relatively low.

Additionally, we acknowledge that to the extent certain investment advisers recognize, due to the Commission's interpretation, that their obligations to clients are stricter than how they currently interpret their fiduciary duty, it could potentially affect competition. Specifically, the Commission's interpretation of certain aspects of the standard of conduct for investment advisers may result in additional compliance costs to meet their fiduciary obligation under the Commission's interpretation. This increase in compliance costs, in turn, may discourage competition for client segments that generate lower revenues, such as clients with relatively low levels of financial assets, which could reduce the supply of investment adviser services and raise fees for these client segments. However, the investment advisers who already are complying with the understanding of their fiduciary duty reflected in the Commission's interpretation, and may therefore currently have a comparative cost disadvantage, could potentially find it more profitable to compete for the customers of those investment advisers who would face higher compliance costs as a result of the proposed interpretation, which would mitigate negative effects on the supply of investment adviser services. Furthermore, as noted above, there has been a recent growth trend in the supply of investment advisory services, which is likely to mitigate any potential negative supply effects from the Commission's interpretation. 59

Finally, to the extent the proposed interpretation would cause some investment advisers to reassess their compliance with their disclosure obligations, it could lead to a reduction in the expected profitability of certain products associated with particularly conflicted advice for which compliance costs would increase following the reassessment. 60 As a result, the number of investment advisers willing to advise a client to make these investments may be reduced. A decline in the supply of investment adviser advice on these investments could potentially reduce the efficiency of portfolio allocation of those investors who might otherwise benefit from investment adviser advice on these investments.

In 2011, the Commission issued the staff's 913 Study, pursuant to section 913 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, in which the staff recognized several areas for potential harmonization of broker-dealer and investment adviser regulation. 61 We have identified a few discrete areas where the current broker-dealer framework provides investor protections that may not have counterparts in the investment adviser context, and request comment on those areas. The Commission intends to consider these comments in connection with any future proposed rules or other proposed regulatory actions with respect to these matters.

Associated persons of broker-dealers that effect securities transactions are required to be registered with the Financial Industry Regulatory Authority (“FINRA”), 62 and must meet qualification requirements, which include passing a securities qualification exam and fulfilling continuing education requirements. 63 The federal securities laws do not require investment adviser representatives to become licensed or to meet qualification requirements, but most states impose registration, licensing, or qualification requirements on investment adviser representatives who have a place of business in the state, regardless of whether the investment adviser is registered with the Commission or the state. 64 These qualification requirements typically mandate that investment adviser representatives register and pass certain securities exams or hold certain designations (such as Chartered Financial Analyst credential). 65 The staff recommended in the 913 Study that the Commission consider requiring investment adviser representatives to be subject to federal continuing education and licensing requirements. 66

We request comment on whether there should be federal licensing and continuing education requirements for personnel of SEC-registered investment advisers. Such requirements could be designed to address minimum and ongoing competency requirements for the personnel of SEC-registered advisers. 67

• Should investment adviser representatives be subject to federal continuing education and licensing requirements?

• Which advisory personnel should be included in these requirements? For example, should persons whose functions are solely clerical or ministerial be excluded, similar to the exclusion in the FINRA rules regarding broker-dealer registered representatives? Should a subset of registered investment adviser personnel (such as supervised persons, individuals for whom an adviser must deliver a Form ADV brochure supplement, “investment adviser representatives” as defined in the Advisers Act, or some other group) be required to comply with such requirements?

• How should the continuing education requirement be structured? How frequent should the certification be? How many hours of education should be required? Who should determine what qualifies as an authorized continuing education class?

• How could unnecessary duplication of any existing continuing education requirement be avoided?

• Should these individuals be required to register with the Commission? What information should these individuals be required to disclose on any registration form? Should the registration requirements mirror the requirements of existing Form U4 or require additional information? Should such registration requirements apply to individuals who provide advice on behalf of SEC-registered investment advisers but fall outside the definition of “investment adviser representative” in rule 203A-3 (because, for example, they have five or fewer clients who are natural persons, they provide impersonal investment advice, or ten percent or less of their clients are individuals other than qualified clients)? Should these individuals be required to pass examinations, such as the Series 65 exam required by most states, or to hold certain designations, as part of any registration requirements? Should other steps be required as well, such as a background check or fingerprinting? Would a competency or other examination be a meritorious basis upon which to determine competency and proficiency? Would a competency or other examination requirement provide a false sense of security to advisory clients of competency or proficiency?

• If continuing education requirements are a part of any licensing requirements, should specific topics or types of training be required? For example, these individuals could be required to complete a certain amount of training dedicated to ethics, regulatory requirements or the firm's compliance program.

• What would the expected benefits of continuing education and licensing be? Would it be an effective way to increase the quality of advice provided to investors? Would it provide better visibility into the qualifications and education of personnel of SEC-registered investment advisers?

• What would the expected costs of continuing education and licensing be? How expensive would it be to obtain the continuing education or procure the license? Do those costs scale, or would they fall more heavily on smaller advisers? Would these requirements result in a barrier to entry that could decrease the number of advisers and advisory personnel (and thus potentially increase the cost of advice)?

• What would the effects be of continuing education and licensing for investment adviser personnel in the market for investment advice ( i.e., as compared to broker-dealers)?

• What other types of qualification requirements should be considered, such as minimum experience requirements or standards regarding an individual's fitness for serving as an investment adviser representative?

Fees and costs are important to retail investors, 68 but many retail investors are uncertain about the fees they will pay. 69 The relationship summary that we are proposing in a concurrent release would discuss certain differences between advisory and brokerage fees to provide investors more clarity concerning the key categories of fees and expenses they should expect to pay, but would not require more complete, specific or personalized disclosures or disclosures about the amount of fees and expenses. 70 We believe that delivery of periodic account statements, if they specified the dollar amounts of fees and expenses, would allow clients to readily see and understand the fees and expenses they pay for an adviser's services. Clients would receive account statements close in time to the assessment of periodic account fees, which could be an effective way for clients to understand and evaluate the cost of the services they are receiving from their advisers.

Broker-dealers are required to provide confirmations of transactions with detailed information concerning commissions and certain other remuneration, as well as account statements containing a description of any securities positions, money balances or account activity during the period since the last statement was sent to the customer. 71 Broker-dealers generally must provide account statements no less than once every calendar quarter. Brokerage customers must receive periodic account statements even when not receiving immediate trade confirmations. 72 Although we understand that many advisers do provide clients with account statements, advisers are not directly required to provide account statements under the federal securities laws. Notably, however, the custody rule requires advisers with custody of a client's assets to have a reasonable basis for believing that the qualified custodian sends an account statement at least quarterly. 73 In addition, in any separately managed account program relying on rule 3a-4 under the Investment Company Act of 1940, the program sponsor or another person designated by the sponsor must provide clients statements at least quarterly containing specified information. 74

We request comment on whether we should propose rules to require registered investment advisers to provide account statements, either directly or via the client's custodian, regardless of whether the adviser is deemed to have custody of client assets under Advisers Act Rule 206(4)-2 or the adviser is a sponsor (or a designee of a sponsor) of a managed account program relying on the safe harbor in Investment Company Act rule 3a-4.

• To what extent do retail clients of registered investment advisers already receive account statements? To what extent do those account statements specify the dollar amounts charged for advisory fees and other fees ( e.g., brokerage fees) and expenses? Would retail clients benefit from a requirement that they receive account statements from registered investment advisers? If clients are uncertain about what fees and expenses they will pay, would they benefit from a requirement that, before receiving advice from a registered investment adviser, they enter into a written (including electronic) agreement specifying the fees and expenses to be paid?

• What information, in addition to fees and expenses, would be most useful for retail clients to receive in account statements? Should any requirement to provide account statements have prescriptive requirements as to presentation, content, and delivery? Should they resemble the account statements required to be provided by broker-dealers, under NASD Rule 2340 with the addition of fee disclosure?

• How often should clients receive account statements?

• How costly would it be to provide account statements? Does that cost depend on how those account statements could be delivered ( e.g., via U.S. mail, electronic delivery, notice and access)? Are there any other factors that would impact cost?

Broker-dealers are subject to a comprehensive financial responsibility program. Pursuant to Exchange Act rule 15c3-1 (the net capital rule), broker-dealers are required to maintain minimum levels of net capital designed to ensure that a broker-dealer under financial stress has sufficient liquid assets to satisfy all non-subordinated liabilities without the need for a formal liquidation proceeding. 75 Exchange Act rule 15c3-3 (the customer protection rule) requires broker-dealers to segregate customer assets and maintain them in a manner designed to ensure that should the broker-dealer fail, those assets are readily available to be returned to customers. 76 Broker-dealers are also subject to extensive recordkeeping and reporting requirements, including an annual audit requirement as well as a requirement to make their audited balance sheets available to customers. 77 Broker-dealers are required to be members of the Securities Investor Protection Corporation (“SIPC”), which is responsible for overseeing the liquidation of member broker-dealers that close due to bankruptcy or financial trouble and customer assets are missing. When a brokerage firm is closed and customer assets are missing, SIPC, within certain limits, works to return customers' cash, stock, and other securities held by the firm. If a firm closes, SIPC protects the securities and cash in a customer's brokerage account up to $500,000, including up to $250,000 protection for cash in the account. 78 Finally, FINRA rules require that broker-dealers obtain fidelity bond coverage from an insurance company. 79

Under Advisers Act rule 206(4)-2, investment advisers with custody must generally maintain client assets with a “qualified custodian,” which includes banks and registered broker-dealers, and must comply with certain other requirements. 80 In 2009 the Commission adopted amendments to the custody requirements for investment advisers that, among other enhancements, required all registered investment advisers with custody of client assets to undergo an annual surprise examination by an independent public accountant. SEC-registered investment advisers, however, are not subject to any net capital requirements comparable to those applicable to broker-dealers, although they must disclose any material financial condition that impairs their ability to provide services to their clients. 81 Many investment advisers have relatively small amounts of capital, particularly compared to the amount of assets that they have under management. 82 When we discover a serious fraud by an adviser, often the assets of the adviser are insufficient to compensate clients for their loss. In addition, investment advisers are not required to obtain fidelity bonds, unlike many other financial service providers that have access to client assets. 83

In light of these disparities, we request comment on whether SEC-registered investment advisers should be subject to financial responsibility requirements along the lines of those that apply to broker-dealers.

• What is the frequency and severity of client losses due to investment advisers' inability to satisfy a judgment or otherwise compensate a client for losses due to the investment adviser's wrongdoing?

• Should investment advisers be subject to net capital or other financial responsibility requirements in order to ensure they can meet their obligations, including compensation for clients if the adviser becomes insolvent or advisory personnel misappropriate clients' assets?  84 Do the custody rule and other rules  85 under the Advisers Act adequately address the potential for misappropriation of client assets and other financial responsibility concerns for advisers? Should investment advisers be subject to an annual audit requirement?

• Should advisers be required to obtain a fidelity bond from an insurance company? If so, should some advisers be excluded from this requirement?  86 Is there information or data that demonstrates fidelity bonding requirements provide defrauded clients with recovery, and if so what amount or level of recovery is evidenced?

• Alternatively, should advisers be required to maintain a certain amount of capital that could be the source of compensation for clients?  87 What amount of capital would be adequate?  88

• What would be the expected cost of either maintaining some form of reserve capital or purchasing a fidelity bond? Specifically, in addition to setting aside the initial sum or purchasing the initial bond, what would be the ongoing cost and the opportunity cost for investment advisers? Would one method or the other be more feasible for certain types of investment advisers (particularly, smaller advisers)?

• Would the North American Securities Administrators Association Minimum Financial Requirements For Investment Advisers Model Rule 202(d)-1  89 (which requires, among other things, an investment adviser who has custody of client funds or securities to maintain at all times a minimum net worth of $35,000 (with some exceptions), an adviser who has discretionary authority but not custody over client funds or securities to maintain at all times a minimum net worth of $10,000, and an adviser who accepts prepayment of more than $500 per client and six or more months in advance to maintain at all times a positive net worth), provide an appropriate model for a minimum capital requirement? Why or why not?

• Although investment advisers are required to report specific information about the assets that they manage on behalf of clients, they are not required to report specific information about their own assets. 90 Should advisers be required to obtain annual audits of their own financials and to provide such information on Form ADV? Would such a requirement raise privacy concerns for privately held advisers?

We view public participation as essential to effective rulemaking, and will consider all comments and material received during the comment period. Your comment can help shape the outcome of this rulemaking. If you submit a comment, please include the docket number for this rulemaking, indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation.

We encourage you to submit comments through the Federal eRulemaking Portal at http://www.regulations.gov. If your material cannot be submitted using http://www.regulations.gov, contact the person in the FOR FURTHER INFORMATION CONTACT section of this proposed rule for alternate instructions. Documents mentioned in this proposed rule as being available in the docket, and all public comments, will be available in our online docket at http://www.regulations.gov, and can be viewed by following that website's instructions. Additionally, if you go to the online docket and sign up for email alerts, you will be notified when comments are posted or if a final rule is published.

We accept anonymous comments. All comments received will be posted without change to http://www.regulations.gov and will include any personal information you have provided. For more about privacy and the docket, visit http://www.regulations.gov/privacyNotice.

The Non-Indigenous Aquatic Nuisance Prevention and Control Act of 1990 (NANPCA, Pub. L. 101-646), as amended by the National Invasive Species Act of 1996 (NISA), (Pub. L. 104-332), requires the Secretary of the Department of Homeland Security (DHS) to ensure, to the maximum extent practicable, that aquatic nuisance species are not discharged into U.S. waters from vessels (16 U.S.C. 4701 et seq. ). These statutes also direct the Secretary to issue regulations and collect records regarding vessel ballasting practices as a means for determining vessel compliance with the ballast water management (BWM) program (16 U.S.C. 4711(c) and (f)) and they authorize the Secretary to revise such regulations, as necessary, on the basis of best scientific information, and in accordance with criteria developed by the Aquatic Nuisance Species Task Force (16 U.S.C. 4711(e)). The Secretary has delegated the regulatory functions and authorities in 16 U.S.C. 4711 to the Commandant of the Coast Guard (Department of Homeland Security Delegation No. 0170.1 (II.)(57)).

Coast Guard regulations regarding BWM are located in 33 CFR 151, subparts C (§§ 151.1500 through 151.1518) and D (§§ 151.2000 through 151.2080). The regulations we propose to amend, §§ 151.2015 and 151.2060, were issued in 2015 and deal with BWM reporting and recordkeeping requirements. See “Ballast Water Management Reporting and Recordkeeping” final rule (80 FR 73105, Nov. 24, 2015).

You may find a full discussion of the statutory and regulatory history of the Coast Guard's broader actions to implement both NANPCA and NISA in the preamble of our 2012 final rule, “Standards for Living Organisms in Ships' Ballast Water Discharged in U.S. Waters,” published on March 23, 2012 (77 FR 17254, 17255).

We have determined that the annual reporting requirement in § 151.2060 for vessels operating in a single Captain of the Port (COTP) Zone is unnecessary to analyze and understand ballast water management practices and is an unnecessary burden that should be removed. Our proposal to amend §§ 151.2015 and 151.2060 is in accordance with 16 U.S.C. 4711(e) which authorizes the Secretary to revise such regulations, as necessary, on the basis of best scientific information, and in accordance with criteria developed by the Aquatic Nuisance Species Task Force.

The 2015 final rule established a 3-year requirement starting in 2016 for the master, owner, operator, agent, or person in charge of certain vessels with ballast tanks to submit an annual report of their BWM practices. The requirement applies to U.S. non-recreational vessels that operate on voyages exclusively between ports or places within a single COTP Zone. These reports contain information, specified in § 151.2060(f), about the vessel, the number of ballast tanks, total ballast water capacity, and a record of ballast water loading and discharges. These reports are submitted to the National Ballast Information Clearinghouse (NBIC).

The annual reports for calendar years 2016, 2017, and 2018, are due on March 31 of the following year. March 31, 2019 is the due date for the last report required by regulation. This proposed rule seeks to eliminate this annual reporting requirement in § 151.2060(e) before the 2018 report is due. It would also amend § 151.2015(c) to exempt vessels that operate on voyages exclusively between ports or places within a single COTP Zone from § 151.2060 reporting requirements.

The Coast Guard is proposing to remove this requirement because it views the existing reporting requirement as not meeting the necessary objective. We have reviewed the 2016 annual reports and have concluded that they do not contribute to the quality and breadth of BWM data as originally intended. A discussion of the objective of this requirement can be found in the preamble of the 2015 final rule. 1 Our objective was to gather a sufficient amount of data without imposing an undue burden on vessels that were otherwise not required to report. However, we have concluded that the current annual reporting data fields are too simplistic to capture vessel movements and ballasting operations in the necessary level of detail. Therefore, we propose to relieve the affected population of the requirement to submit an annual report for calendar year 2018.

We received recommendations supporting this proposed action in response to our June 8, 2017 (82 FR 26632) request to the public to identify rules that should be repealed, replaced, or modified to alleviate unnecessary regulatory burdens. To view these recommendations, see submissions 102, 143, and 147 under docket number USCG-2017-0480. One commenter correctly points out that a vessel operator cannot indicate in the Annual Ballast Water Summary Report whether the vessel uses water from a U.S. public water system as ballast.

In this section, we describe how we propose to remove the Annual Ballast Water Ballast Water Summary Report requirement through changes to §§ 151.2015 and 151.2060. Our proposed amendatory instructions and regulatory text appear at the end of this document.

Section 151.2015. Currently § 151.2015(c) exempts vessels that operate exclusively on voyages between ports or places within a single COTP Zone from the ballast water management requirements in § 151.2025 and from the recordkeeping requirements in § 151.2070. We propose to add the reporting requirements in § 151.2060 to this current list of exemptions in § 151.2015(c). Restoring this reporting exemption provision to § 151.2015(c) makes it clear to vessels that operate exclusively on voyages between ports or places within a single COTP Zone that they are not subject to the reporting requirements in § 151.2060.

We also propose to amend Table 1 to § 151.2015, which lists specific exemptions for types of vessels. We propose to amend the column “151.2060 (Reporting)” to reflect vessels that operate exclusively on voyages between ports or places within a single COTP Zone are exempt from the reporting requirements in § 151.2060. We would also add a footnote to the table for non-seagoing vessels. This footnote would replace the current lengthy qualifying language in the “151.2070 (Recordkeeping)” column of the table for those non-seagoing vessels that operate exclusively on voyages between ports or places within a single COTP zone. We would also apply the footnote to the table's “151.2060 (Reporting)” column in that row based on our proposed amendment to § 151.2015(c). Non-seagoing vessels are the only category of vessels in the table that may need this potential exemption reminder. The other categories of vessels are either exempt or operate in multiple COTP zones.

Section 151.2060. Paragraph (b) of § 151.2060 currently begins with language exempting vessels operating exclusively on voyages between ports or places within a single COTP Zone. We propose to delete this language because it would no longer be needed based on our proposed amendment to § 151.2015(c) that would exempt such vessels from the requirements in § 151.2060. Also, as previously discussed we propose to remove § 151.2060(e) and (f). Paragraph (e) contains the requirement to submit the Annual Ballast Water Summary Report to the NBIC and paragraph (f) describes the information to be included in that report.

The Coast Guard developed this proposed rule after considering numerous statutes and Executive orders related to rulemaking. A summary of our analyses based on these statutes or Executive orders follows.

Executive Orders 13563 (Improving Regulation and Regulatory Review) and 12866 (Regulatory Planning and Review) direct agencies to assess the 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). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. Executive Order 13771 (Reducing Regulation and Controlling Regulatory Costs) directs agencies to reduce regulation and control regulatory costs and provides that “for every one new regulation issued, at least two prior regulations be identified for elimination, and that the cost of planned regulations be prudently managed and controlled through a budgeting process.”

The Office of Management and Budget (OMB) has not designated this rule a “significant regulatory action,” under section 3(f) of Executive Order 12866. Accordingly, OMB has not reviewed it. OMB considers this rule to be an Executive Order 13771 deregulatory action. See OMB's Memorandum “Guidance Implementing Executive Order 13771, Titled `Reducing Regulation and Controlling Regulatory Costs'” (April 5, 2017). A regulatory analysis follows.

The Coast Guard considers all estimates and analysis in this regulatory analysis subject to change in consideration of public comments. Table 1 presents a summary of the economic impact of the proposed rule. A detailed description of the estimates follows in the next section.

Under this proposed rule, the Coast Guard would no longer require owners or operators of vessels with ballast tanks operating exclusively on voyages between ports or places within a single COTP Zone to submit an annual summary report of their ballast water management practices.

Since 2016, owners or operators of vessels affected by the 2015 final rule provision in § 151.2060(e) have submitted annual summary reports as required to the NBIC. These summary reports were used to estimate the number of vessels that operated and the amount of ballast water discharged within a single COTP Zone. Based on the data received and analyzed by the NBIC, the Coast Guard is able to determine the actual number of vessels affected by the 2015 final rule. The NBIC data confirms that 67 owners or operators of 166 U.S.-flagged vessels  3 have reported ballasting operations in accordance with § 151.2060(e). Table 2 presents the vessel types and number of these vessels.

We estimated in the 2015 final rule that the total annual amount of burden hours for owners or operators completing the reporting requirement at 40 minutes per vessel per year. We break down those 40 minutes as 25 minutes to account for time needed throughout the year to record ballast management operations and 15 minutes for time needed by owners or operators to aggregate and calculate the recorded ballast water discharge information and to complete the electronic form submitted to the NBIC.

This proposed rulemaking has been scheduled to enable the Coast Guard to issue a final rule by the end of fiscal year 2018, which is September 30, 2018, and to make the rule effective October 1, 2018. The current regulation only requires annual reports through the calendar year 2018. Therefore, any realized savings from this proposed rule would account for the last 3 months of calendar year 2018. We estimate that the total time saved by this proposed rule would be 21.25 minutes per vessel (15 minutes for submission of report + 6.25 total minutes from the last 3 months of 2018). Converting this time to an hourly equivalent, we arrive at 0.35 hours (21.25 minutes/60 minutes).

We anticipate that the person charged with collecting and reporting the information to NBIC would be a vessel Captain, Mate or Vessel Pilot. The mean hourly wage rate associated with these professions is reported by the Bureau of Labor Statistics (BLS) to be $39.19 per hour. 4 We calculated the load factor from data collected in the Employer Cost for Employee Compensation survey done by the BLS and applied it to the mean hourly wage rate to obtain a fully loaded wage rate, which more accurately represents the employers' cost per hour for an employee's work. 5 The load factor we used for this economic analysis is 1.52. 6 7 The loaded mean hourly wage rate used to assess the savings estimates for this proposed rule is calculated at $59.57 ($39.19 × 1.52).

We anticipate that by eliminating the reporting requirement from the last quarter of the year, this proposed rule would reduce industry's economic burden by 58.1 hours (166 vessels × 0.35 hours). We calculate that the dollar value saved would be $20.85 per vessel ($59.57 wage × 0.35 hours). The estimated one-time total savings for removing the reporting requirement for the 166 vessels operating exclusively between port or places within a single COTP Zone would be $3,461 ($20.85 per vessel savings × 166 vessels) (non-discounted). Table 3 presents the total savings to the affected population.

This proposed rulemaking would not have annual recurring savings. This proposed rule would not require additional Coast Guard resources to implement and would be budget neutral.

In addition, a one-time savings of $3,461 in 2018 is equivalent to approximately $197.76 in 2016 dollars using perpetual discounting at 7 percent.

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

As described in the “Regulatory Planning and Review” section, we expect that the savings per vessel would be $20.85 for the remainder of 2018. The Coast Guard is eliminating the reporting requirement under § 151.2060(e), which applies to owners or operators of vessels operating exclusively between ports or places within a single COTP Zone. Based on our economic assessment of the proposed rule, we conclude that this proposed rule would have no cost burden to industry.

Accordingly, the Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities. If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this proposed rule would have a significant economic impact on it, please submit a comment to the docket at the address under ADDRESSES . In your comment, explain why you think it qualifies and how and to what degree this proposed rule would economically affect it.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996, Public Law 104-121, we want to assist small entities in understanding this proposed rule so that they can better evaluate its effects on them and participate in the rulemaking. If the proposed rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person in the FOR FURTHER INFORMATION CONTACT section of this proposed rule. The Coast Guard will not retaliate against small entities that question or complain about this proposed rule or any policy or action of the Coast Guard.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247).

This proposed rule would call for a change to an existing collection of information under the Paperwork Reduction Act of 1995, 44 U.S.C. 3501-3520. As defined in 5 CFR 1320.3(c), “collection of information” comprises reporting, recordkeeping, monitoring, posting, labeling, and other similar actions. The title and description of the information collections, a description of those who must collect the information, and an estimate of the total annual burden follow.

Title: Ballast Water Management Reporting and Recordkeeping.

OMB Control Number: 1625-0069.

Summary of the Collection of Information: This proposed rule modifies the existing BWM reporting and recordkeeping requirement in § 151.2060(e) which would amend current reporting. In the current regulation, the Coast Guard requires vessels with ballast tanks that operate exclusively on voyages between ports or places within a single COTP Zone to submit an annual summary report on their ballast water practices. The current final rule published in 2015 requires vessels to report to the NBIC for a 3-year period, after which a sunset clause in the rule has this provision expiring at the end of the 2018 calendar year. This proposed rule would remove the last year of reporting requirements for the population affected by the 2015 final rule and prior to the provision's sunset; thereby, returning the overall Collection of Information (COI) burden estimates to the 2015 final rule's level.

Need for Information: The Coast Guard is removing the reporting requirement under § 151.2060(e), because the information being provided by the affected population did not meet the expectations of the Coast Guard.

Proposed Use of Information: The collection of this BWM data was intended to fill a limited gap in information about vessels operating exclusively within a single COTP Zone. The data was to measure ballast water practices within a COTP Zone, by vessels that operated exclusively within a single COTP Zone. Sections 151.2060(e) and (f) are being removed because the data collected did not help the Coast Guard to better understand these ballasting practices.

Description of the Respondents: The respondents are the owners or operators of vessels with ballast water tanks operating exclusively on voyages between ports or place within a single COTP Zone.

Number of Respondents: The current number of respondents is 9,663. However, when we published the final rule in 2015, we incorrectly estimated the additional number of respondents in the collection of information to be 1,280. The population of 1,280 was an overestimation by the Coast Guard because information about vessels operating exclusively within a single COTP Zone had not been documented prior to the 2015 final rule. For the purpose of maintaining continuity between the 2015 final rule and the overall COI OMB CONTROL NUMBER: 1625-0069, the Coast Guard estimates changes to the overall COI using the 2015 final rule COI values to obtain a net result of zero. 8 Therefore, in order to revert back to the 2015 baseline, we need to subtract the 1,280 respondents we incorrectly estimated in the final rule. 9 With this change, we are maintaining the 2015 baseline of 8,383 respondents because we would be subtracting the incorrect estimated population of 1,280 respondents. The incurred cost savings and burden-hour reduction we estimate in this proposed rule would only affect 166 respondents for the last three months of this calendar year. After this time, the approved OMB-approved number of respondents would remain at the 2015 baseline level of 8,383 respondents because of the sunset clause in the 2015 final rule. We show these calculations, for illustrative purposes, in the below table.

Frequency of Response: Reporting requirement under this COI is scheduled to occur annually. This proposed rule would result in current respondents under § 151.2060(e) to be no longer required to maintain and submit BWM information on an annual basis.

Burden of Response: The Coast Guard anticipates that the elimination of the rule would decrease burden by approximately 40 minutes per report for vessels with ballast water tanks operating exclusively on voyages between ports or places within a single COTP Zone.

Estimate of Total Annual Burden: The annual reduction in burden is estimated as follows:

(a) Annual reduction in burden resulting from removing reporting requirement for vessels operating within a single COTP Zone: This proposed rule would reduce the private sector burden hours for this COI by 58.1 hours (166 vessels × 0.35 hours [3 months of savings]). There are three items associated with this collection of information: Voyage reports, annual reports (which is applicable to this proposed rule), and compliance extension requests. The voyage reports and compliance extension requests are not included in this proposed rule. The burden estimates in this collection of information, stemming from these, would be unaffected. Voyage reports account for 60,727 hours, annual reports account for 858 hours, and compliance extension requests account for 234 hours for a total of 61,819 hours. Essentially, with this proposed rule, we are accounting for the 58.1 burden hours of reduction in the last three months of this calendar year only, when the sunset clause becomes effective. To capture this change and to correct for the incorrect hour burden estimate of 858 hours, the total hour burden in the last three months of this year would be about 61,019 hours (61,819 hours − 858 hours + 58 hours). After December 31, 2018, the burden hours will remain at the 2015 baseline level of 60,691 hours, or the current OMB inventory amount, with the subtraction of the 858 hours for the annual reports.

Moreover, due to the establishment of a sunset clause in the 2015 final rule, all recordkeeping and reporting burden associated with this regulation would be eliminated. This adjustment would only reduce current ICR burden levels prior to the 2015 final rule. We show the burden hour calculations in the table 5.

(b) Reduction of annual burden due to the elimination of the current rule: This proposed rule would result in a reduction of annual burden of 58.1 hours for the last three months of the year ending December 31, 2018. However, after correcting for the overestimated burden in the 2015 COI, the reduction in annual burden hours as reflected in the Supporting Statement for this COI is 858 hours (as explained above).

As required by 44 U.S.C. 3507 (d), we will submit a copy of this proposed rule to OMB for its review of the collection of information.

If you submit comments on the collection of information, submit them both to OMB and to the docket where indicated under ADDRESSES , by the date under DATES .

You need not respond to a collection of information unless it displays a currently valid control number from OMB. Before the Coast Guard could enforce the collection of information requirements in this proposed rule, OMB would need to approve the Coast Guard's request to collect this information.

A rule has implications for federalism under Executive Order 13132 (Federalism) if it has a substantial direct effect on States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this proposed rule under Executive Order 13132 and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132. Our analysis follows.

This proposed rule would revise the Coast Guard's BWM reporting and recordkeeping requirements promulgated under the authority of NANPCA, as amended by NISA. Specifically, we propose to remove the requirement that an Annual Ballast Water Summary Report for calendar year 2018 be submitted for vessels operating on voyages exclusively between ports or places within a single Captain of the Port Zone. NANPCA, as amended by NISA, contains a “savings provision” that saves to States their authority to “adopt or enforce control measures” for aquatic nuisance species (16 U.S.C. 4725). Nothing in the Act would diminish or affect the jurisdiction of any State over species of fish and wildlife. This type of BWM reporting and recordkeeping is a “control measure” saved to States under the savings provision and would not be preempted unless State law makes compliance with Coast Guard requirements impossible or frustrates the purpose of Congress. Additionally, the Coast Guard has long interpreted this savings provision to be a congressional mandate for a Federal-State cooperative regime in which federal preemption under NANPCA, as amended by NISA, would be unlikely. The Coast Guard does not intend for the removal of this Federal reporting requirement to be a determination, or have any implications, with regard to the necessity of existing or future state BWM reporting requirements. Therefore, this proposed rule is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.

The Coast Guard recognizes the key role that State and local governments may have in making regulatory determinations. Additionally, for rules with federalism implications and preemptive effect, Executive Order 13132 specifically directs agencies to consult with State and local governments during the rulemaking process. If you believe this rule has implications for federalism under Executive Order 13132, please contact the person listed in the FOR FURTHER INFORMATION section of this preamble.

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

This proposed rule would not cause a taking of private property or otherwise have taking implications under Executive Order 12630 (Governmental Actions and Interference with Constitutionally Protected Property Rights).

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

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

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

We have analyzed this proposed rule under Executive Order 13211 (Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use). We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy.

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

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

We have analyzed this proposed rule under Department of Homeland Security Management Directive 023-01 and Commandant Instruction M16475.1D which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have made a preliminary determination that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. A preliminary Record of Environmental Consideration (REC) supporting this determination is available in the docket where indicated under the “Public Participation and Request for Comments” section of this preamble. This proposed rule would be categorically excluded under paragraph L54 of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 01. Paragraph L54 pertains to regulations which are editorial or procedural.

This proposed rule involves the removal of the last year of a 3-year annual ballast water reporting requirement. We seek any comments or information that may lead to the discovery of a significant environmental impact from this proposed rule.

For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 151, subpart D, as follows:

Executive Summary

Purpose: This proposed rule would amend the rules for IPR, PGR, and CBM proceedings that implemented provisions of the Leahy-Smith America Invents Act (“AIA”) providing for trials before the Office, by replacing the current claim construction standard for interpreting unexpired patent claims and claims proposed in a motion to amend, with an approach that is the same as the standard used by Article III federal courts following Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc). This proposed rule also would amend the rules to add that the Office will consider any prior claim construction determination concerning a term of the involved claim in a civil action, or an ITC proceeding, that is timely made of record in an IPR, PGR, or CBM proceeding.

Summary of Major Provisions: The Office is using over five years of historical data and user experiences to further shape and improve PTAB trial proceedings, particularly IPR, PGR, and CBM proceedings. In this notice of proposed rulemaking, the Office seeks feedback and information in relation to the Office's proposed changes to the claim construction standard used for interpreting unexpired patent claims and claims proposed in a motion to amend. The Supreme Court of the United States has endorsed the Office's ability to choose an approach to claim construction for AIA trial proceedings. Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2144-46 (2016). Some parties have expressed a desire that the Office apply the same claim construction standard used in federal district courts, rather than the current standard of BRI. As part of the Office's continuing efforts to improve the trial proceedings, it is appropriate to revisit the claim construction standard applied in AIA trial proceedings involving unexpired patent claims and claims proposed in a motion to amend. The proposed changes would replace the BRI standard with an approach that would be consistent with the claim construction standard used in federal district courts. The proposed changes also would be consistent with the Office's current approach for interpreting claims in an expired patent. See Wasica Fin. GmbH v. Cont'l Auto. Sys., Inc., 853 F.3d 1272, 1279 (Fed. Cir. 2017) (noting that “[t]he Board construes claims of an expired patent in accordance with Phillips . . . and [u]nder that standard, words of a claim are generally given their ordinary and customary meaning”).

Costs and Benefits: This rulemaking is not economically significant, and is not significant, under Executive Order 12866 (Sept. 30, 1993), as amended by Executive Order 13258 (Feb. 26, 2002) and Executive Order 13422 (Jan. 18, 2007).

On September 16, 2011, the AIA was enacted into law (Pub. L. 112-29, 125 Stat. 284 (2011)), and within one year, the Office implemented rules to govern Office practice for AIA trials, including IPR, PGR, CBM, and derivation proceedings pursuant to 35 U.S.C. 135, 316 and 326 and AIA 18(d)(2). See Rules of Practice for Trials Before the Patent Trial and Appeal Board and Judicial Review of Patent Trial and Appeal Board Decisions, 77 FR 48612 (Aug. 14, 2012); Changes to Implement Inter Partes Review Proceedings, Post-Grant Review Proceedings, and Transitional Program for Covered Business Method Patents, 77 FR 48680 (Aug. 14, 2012); Transitional Program for Covered Business Method Patents—Definitions of Covered Business Method Patent and Technological Invention, 77 FR 48734 (Aug. 14, 2012). Additionally, the Office published a Patent Trial Practice Guide to advise the public on the general framework of the regulations, including the structure and times for taking action in each of the new proceedings. See Office Patent Trial Practice Guide, 77 FR 48756 (Aug. 14, 2012).

Previously, in an effort to gauge the effectiveness of the rules governing AIA trial proceedings, the Office led a nationwide listening tour in April and May of 2014. During the listening tour, the Office solicited feedback on how to make the AIA trial proceedings more transparent and effective by adjusting the rules and guidance to the public where necessary. To elicit even more input, in June of 2014, the Office published a Request for Comments in the Federal Register and, at public request, extended the period for receiving comments to October 16, 2014. See Request for Comments on Trial Proceedings Under the America Invents Act Before the Patent Trial and Appeal Board, 79 FR 36474 (June 27, 2014) (“Request for Comments”). The Request for Comments asked seventeen questions on ten broad topics, including a general catchall question, to gather public feedback on any changes to the AIA trial proceedings that might be beneficial. See Request for Comments, 79 FR at 36476-77.

Upon receiving comments from the public and carefully reviewing the comments, the Office published two final rules in response to the public feedback with respect to the AIA trial proceedings. In the first final rule, the Office changed the existing rules, among other things, to: (1) Increase the page limit for Patent Owner's motion to amend by ten pages and allow a claims appendix to be filed with the motion; and (2) increase the page limit for Petitioner's reply to Patent Owner's response by ten pages. Amendments to the Rules of Practice for Trials Before the Patent Trial and Appeal Board, 80 FR 28561 (May 19, 2015). In the second final rule, the Office changed the existing rules to: (1) Allow new testimonial evidence to be submitted with a patent owner's preliminary response; (2) allow a claim construction approach that emulates the approach used by a district court for claims of patents that will expire before entry of a final written decision; (3) replace page limits with word count limits for major briefing; and (4) add a Rule 11-type certification for papers filed in a proceeding. Amendments to Rules of Practice for Trials Before the Patent Trial and Appeal Board, 81 FR 18750 (April 1, 2016).

The Board currently construes unexpired patent claims and proposed claims in AIA trial proceedings using the BRI standard, as directed by 37 CFR 42.100(b), 42.200(b), and 42.300(b) (“A claim in an unexpired patent that will not expire before a final written decision is issued shall be given its broadest reasonable construction in light of the specification of the patent in which it appears.”). The BRI standard differs from the standard used in federal district courts and the ITC, which construe patent claims in accordance with the principles that the United States Court of Appeals for the Federal Circuit articulated in Phillips.

However, although the BRI standard is consistent with longstanding agency practice, the fact that the Office uses a claim construction standard that is different from that used by federal district courts and the ITC means that decisions construing the same or similar claims in those fora may be different from those in AIA trial proceedings and vice versa. Minimizing differences between claim construction standards used in the various fora could lead to greater uniformity and predictability of the patent grant. In addition, using the same standard in the various fora could help increase judicial efficiency overall. One study found that 86.8% of patents at issue in AIA trial proceedings also have been the subject of litigation in the federal courts. Saurabh Vishnubhakat, Arti K. Rai & Jay P. Kesan, Strategic Decision Making in Dual PTAB and District Court Proceedings, 31 Berkeley Tech. L.J. 45 (2016), https://ssrn.com/abstract=2731002. Thus, the high percentage of overlap between AIA trial proceedings and district court litigation favors using a claim construction standard in AIA trials that is consistent with the standard used by federal district courts and the ITC.

Having AIA trial proceedings use the same claim construction standard that is applied in federal district courts and ITC proceedings also addresses the concern that potential unfairness could result from using an arguably broader standard in AIA trial proceedings. According to some patent owners, the same claim construction standard should apply to both validity (or patentability) determination and infringement determination. Because the BRI standard potentially reads on a broader universe of prior art than does the Phillips standard, a patent claim could be found unpatentable in an AIA trial on account of claim scope that the patent owner would not be able to assert in an infringement proceeding. For example, even if a competitor's product would not be found to infringe a patent claim if it was sold after the patent's effective filing date, the same product nevertheless could constitute invalidating prior art if publicly sold before the patent's effective filing date.

The Office's goal is to implement a fair and balanced approach, providing greater predictability and certainty in the patent system. The Office has carefully considered “the effect of [the proposed] regulation on the economy, the integrity of the patent system, the efficient administration of the Office, and the ability of the Office to complete timely the proceedings in promulgating regulations.” 35 U.S.C. 316(b) and 326(b). Under 35 U.S.C. 316(a)(4) and 326(a)(4), the Office must prescribe regulations establishing and governing IPR, PGR, and CBM proceedings and the relationship of such review to other proceedings, including civil actions to invalidate a patent under 35 U.S.C. 282(b). Congress intended these administrative trial proceedings to provide “quick and cost effective alternatives” to litigation in the courts. H.R. Rep. No. 112-98, pt. 1, at 48 (2011), as reprinted in 2011 U.S.C.C.A.N. 67, 78; see also id. at 40 (AIA “is designed to establish a more efficient and streamline patent system that will improve patent quality and limit unnecessary and counterproductive litigation costs.”). The claim construction standard could be outcome determinative. PPC Broadband, Inc. v. Corning Optical Comm'ns RF, LLC, 815 F.3d 734, 740-42 (Fed. Cir. 2016) (noting that “[t]his case hinges on the claim construction standard applied—a scenario likely to arise with frequency”); see also Rembrandt Wireless Techs., LP v. Samsung Elecs. Co., 853 F.3d 1370, 1377 (Fed. Cir. 2017) (noting that “the Board in IPR proceedings operates under a broader claim construction standard than the federal courts”); Google LLC v. Network-1 Techs., Inc.. No. 2016-2509, 2018 WL 1468370, at *5 (Fed. Cir. Mar. 26, 2018) (nonprecedential) (holding that “[i]n order to be found reasonable, it is not unnecessary that a claim be given its correct construction under the framework laid out in Phillips.” ). Using the same claim construction standard as the standard applied in federal district courts would “seek out the correct construction—the construction that most accurately delineates the scope of the claim invention—under the framework laid out in Phillips.” PPC Broadband, 815 F.3d at 740-42.

In this notice of proposed rulemaking, the Office proposes to change the relevant rules to provide that a patent claim, or a claim proposed in a motion to amend, shall be construed using the same claim construction standard that would be used to construe such claim in a civil action to invalidate a patent under 35 U.S.C. 282(b), including construing the claim in accordance with the ordinary and customary meaning of such claim as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent. This proposed change would replace the BRI standard for construing unexpired patent claims and proposed claims in IPR, PGR, and CBM proceedings with an approach that follows the framework set forth in Phillips.

Under the proposed approach, the Office would construe patent claims and proposed claims based on the record of the IPR, PGR, or CBM proceeding, taking into account the claim language itself, specification, and prosecution history pertaining to the patent. The Office would apply the principles that the Federal Circuit articulated in Phillips and its progeny. For example, claim construction begins with the language of the claims. Phillips, 415 F.3d at 1312-14. The “words of a claim are generally given their ordinary and customary meaning,” which is “the meaning that the term would have to a person of ordinary skill in the art in question at the time of the invention, i.e., as of the effective filing date of the patent application.” Id. at 1212-1313. The specification is “the single best guide to the meaning of a disputed term and . . . acts as a dictionary when it expressly defines terms used in the claims or when it defines terms by implication.” Id. at 1321. Although the prosecution history “often lacks the clarity of the specification and thus is less useful for claim construction purposes,” it is another source of intrinsic evidence that can “inform the meaning of the claim language by demonstrating how the inventor understood the invention and whether the inventor limited the invention in the course of prosecution, making the claim scope narrower than it would otherwise be.” Id. at 1317. Extrinsic evidence, such as expert testimony and dictionaries, may be useful in educating the court regarding the field of the invention or helping determine what a person of ordinary skill in the art would understand claim terms to mean. Id. at 1318-19. However, extrinsic evidence in general is viewed as less reliable than intrinsic evidence. Id.

Additionally, consistent with Phillips and its progeny, the doctrine of construing claims to preserve their validity would apply to AIA trials. Phillips, 415 F.3d at 1327-28. As the Federal Circuit recognized in Phillips, however, this doctrine is “of limited utility.” Id.

The Court has not applied that doctrine broadly, and has “certainly not endorsed a regime in which validity analysis is a regular component of claim construction.” Id. at 1327. The doctrine of construing claims to preserve their validity has been limited to cases in which “the court concludes, after applying all the available tools of claim construction, that the claim is still ambiguous.” Id. (quoting Liebel-Flarsheim Co. v. Medrad, Inc., 358 F.3d 898, 911 (Fed. Cir. 2004)). Moreover, the Federal Circuit “repeatedly and consistently has recognized that courts may not redraft claims, whether to make them operable or to sustain their validity.” Rembrandt Data Techs., LP v. AOL, LLC, 641 F.3d 1331, 1339 (Fed. Cir. 2011); see also MBO Labs., Inc. v. Becton, Dickinson & Co., 474 F.3d 1323, 1332 (Fed. Cir. 2007) (noting that “validity construction should be used as a last resort, not first principle”).

The prosecution history taken into account would be the prosecution history that occurred previously at the USPTO, including before an examiner during examination, reissue, reexamination, IPR, PGR, and CBM proceedings. This would also include prosecution before an examiner in a related application where relevant ( Trading Technologies Intern., Inc. v. Open E Cry, LLC, 728 F.3d 1309 (Fed. Cir. 2013)) and any argument made on appeal of a rejection before the grant of the patent for which review is sought, as those arguments are before the examiner when the decision to allow an application is made ( See TMC Fuel Injection System, LLC v. Ford Motor Company, 682 Fed. Appx. 895 (Fed. Cir. 2017)).

During an AIA trial proceeding, the patent owner may file a motion to amend an unexpired patent claim to propose a reasonable number of substitute claims, but the proposed claims “may not enlarge the scope of the claims of the patent or introduce new matter.” 35 U.S.C. 316(d) and 326(d); 37 CFR 42.121(a)(2) and 42.221(a)(2); see also Aqua Prods., Inc. v. Matal, 872 F.3d 1290, 1306 (noting that “[t]he patent owner proposes an amendment that it believes is sufficiently narrower than the challenged claim to overcome the grounds of unpatentability upon which the IPR was instituted”). Among other things, having the same claim construction standard for both the original patent claims and proposed claims would reduce the potential for inconsistency in the interpretation of the same or similar claim terms.

In addition, the Office intends that any proposed rule changes adopted in a final rule would be applied to all pending IPR, PGR, and CBM proceedings before PTAB.

In light of the foregoing considerations, the Office requests input from the public on the proposed rule changes in this notice of proposed rulemaking and on how the Office should implement the changes if adopted.

Title 37 of the Code of Federal Regulations, part 42, is proposed to be amended as follows:

Sections 42.100, 42.200, and 42.300: Each of §§ 42.100(b), 42.200(b), and 42.300(b) is proposed to be amended to replace the first sentence with the following: a claim of a patent, or a claim proposed in a motion to amend, “shall be construed using the same claim construction standard that would be used to construe such claim in a civil action to invalidate a patent under 35 U.S.C. 282(b), including construing the claim in accordance with the ordinary and customary meaning of such claim as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent.” This proposed revision would replace the BRI standard for construing unexpired patent claims and proposed claims during an IPR, PGR, or CBM proceeding with a standard that is the same as the standard applied in federal district courts and ITC proceedings. As discussed above, the Office would apply the principles that the Federal Circuit articulated in Phillips and its progeny. The Office would construe patent claims and proposed claims based on the record of the IPR, PGR, or CBM proceeding, taking into account the claim language itself, specification, and prosecution history pertaining to the patent, as well as relevant extrinsic evidence, all as in prevailing jurisprudence of Article III courts. The prosecution history taken into account would be the prosecution history that occurred previously in proceedings at the USPTO prior to the IPR, PGR, or CBM proceeding at issue, including in another IPR, PGR, or CBM proceeding, or before an examiner during examination, reissue, and reexamination.

The Office has considered using different claim construction standards for IPR, PGR, and CBM proceedings, but, for consistency, the Office proposes the same claim construction to be applied in all IPR, PGR, and CBM proceedings.

Each of §§ 42.100(b), 42.200(b), and 42.300(b) also is proposed to be amended to add the sentence “Any prior claim construction determination concerning a term of the claim in a civil action, or a proceeding before the International Trade Commission, that is timely made of record in the . . . proceeding will be considered.” Under this proposed provision, the Office would consider any prior claim construction determination in a civil action or ITC proceeding if a federal court or the ITC has construed a term of the involved claim previously using the same standard, and the claim construction determination has been timely made of record in the IPR, PGR, or CBM proceeding.

Each of §§ 42.100(b), 42.200(b), and 42.300(b) further is proposed to be amended to delete the second and third sentences, eliminating the procedure for requesting a district court-type claim construction approach for a patent expiring during an IPR, PGR, or CBM proceeding. Such a procedure would not be needed should the Office adopt the same claim construction standard, as proposed, for construing claims of unexpired patents as well as for construing claims of expired patents in an IPR, PGR, or CBM proceeding.

A. Administrative Procedure Act (APA): This proposed rule would revise the rules relating to Office trial practice for IPR, PGR, and CBM proceedings. The changes being proposed in this notice of proposed rulemaking would not change the substantive criteria of patentability. These proposed changes involve rules of agency procedure and interpretation. See Perez v. Mortg. Bankers Ass'n, 135 S. Ct. 1199, 1204 (2015) (Interpretive rules “advise the public of the agency's construction of the statutes and rules which it administers.” (citation and internal quotation marks omitted)); Bachow Commc'ns, Inc. v. F.C.C., 237 F.3d 683, 690 (D.C. Cir. 2001) (rules governing an application process are procedural under the Administrative Procedure Act); Inova Alexandria Hosp. v. Shalala, 244 F.3d 342, 350 (4th Cir. 2001) (rules for handling appeals were procedural where they did not change the substantive requirements for reviewing claims); Nat'l Org. of Veterans' Advocates, Inc. v. Sec'y of Veterans Affairs, 260 F.3d 1365, 1375 (Fed. Cir. 2001) (rule that clarifies interpretation of a statute is interpretive); JEM Broad. Co. v. F.C.C., 22 F.3d 320, 328 (D.C. Cir. 1994) (rules are not legislative because they do not “foreclose effective opportunity to make one's case on the merits”).

Accordingly, prior notice and opportunity for public comment are not required pursuant to 5 U.S.C. 553(b) or (c) (or any other law). See Perez, 135 S. Ct. at 1206 (Notice-and-comment procedures are required neither when an agency “issue[s] an initial interpretive rule” nor “when it amends or repeals that interpretive rule.”); Cooper Techs. Co. v. Dudas, 536 F.3d 1330, 1336-37 (Fed. Cir. 2008) (stating that 5 U.S.C. 553, and thus 35 U.S.C. 2(b)(2)(B), do not require notice and comment rulemaking for “interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice”) (quoting 5 U.S.C. 553(b)(3)(A)).

The Office, nevertheless, is publishing this proposed rule for comment to seek the benefit of the public's views on the Office's proposed changes to the claim construction standard for reviewing patent claims and proposed claims in AIA trial proceedings before the Board.

B. Regulatory Flexibility Act: For the reasons set forth herein, the Deputy General Counsel for General Law of the United States Patent and Trademark Office has certified to the Chief Counsel for Advocacy of the Small Business Administration that changes proposed in this notice of proposed rulemaking would not have a significant economic impact on a substantial number of small entities. See 5 U.S.C. 605(b).

The changes proposed in this notice of proposed rulemaking are to revise certain trial practice procedures before the Board. Any requirements resulting from these proposed changes are of minimal or no additional burden to those practicing before the Board.

For the foregoing reasons, the proposed changes in this notice of proposed rulemaking would not have a significant economic impact on a substantial number of small entities.

C. Executive Order 12866 (Regulatory Planning and Review): This rulemaking has been determined to be not significant for purposes of Executive Order 12866 (Sept. 30, 1993).

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

E. Executive Order 13771 (Reducing Regulation and Controlling Regulatory Costs): This proposed rule is not expected to be an Executive Order 13771 regulatory action because this proposed rule is not significant under Executive Order 12866.

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

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

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

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

J. Executive Order 12630 (Taking of Private Property): This rulemaking will not affect a taking of private property or otherwise have taking implications under Executive Order 12630 (Mar. 15, 1988).

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

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

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

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

O. Paperwork Reduction Act: The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3549) requires that the Office consider the impact of paperwork and other information collection burdens imposed on the public. This proposed rule involves information collection requirements which are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3549). This rulemaking does not add any additional information requirements or fees for parties before the Board. Therefore, the Office is not resubmitting information collection packages to OMB for its review and approval because the revisions in this rulemaking do not materially change the information collections approved under OMB control number 0651-0069.

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

For the reasons set forth in the preamble, the Office proposes to amend part 42 of title 37 of the Code of Federal Regulations as follows:

I. Background

On December 14, 2012, the EPA revised the primary annual PM 2.5 NAAQS to 12.0 micrograms per cubic meter (μg/m 3 ). See 78 FR 3086 (January 15, 2013). An area meets the standard if the three-year average of its annual average PM 2.5 concentration (at each monitoring site in the area) is less than or equal to 12.0 μg/m 3 . The CAA requires states to submit, within three years after promulgation of a new or revised standard, SIPs meeting the applicable “infrastructure” elements of sections 110(a)(1) and (2). One of these applicable infrastructure elements, CAA section 110(a)(2)(D)(i), requires SIPs to contain “good neighbor” provisions to prohibit certain adverse air quality effects on neighboring states due to interstate transport of pollution.

Section 110(a)(2)(D)(i) includes four distinct components, commonly referred to as “prongs,” that must be addressed in infrastructure SIP submissions. The first two prongs, which are codified in section 110(a)(2)(D)(i)(I), are provisions that prohibit any source or other type of emissions activity in one state from contributing significantly to nonattainment of the NAAQS in another state (prong 1) and from interfering with maintenance of the NAAQS in another state (prong 2). The third and fourth prongs, which are codified in section 110(a)(2)(D)(i)(II), are provisions that prohibit emissions activity in one state from interfering with measures required to prevent significant deterioration of air quality in another state (prong 3) or from interfering with measures to protect visibility in another state (prong 4).

In this action, the EPA is proposing to approve the prong 1 and prong 2 portions of infrastructure SIP submissions submitted by: Colorado on December 1, 2015; Montana on December 17, 2015; North Dakota on August 23, 2015; South Dakota on January 25, 2016; and Wyoming on June 24, 2016, as containing adequate provisions to ensure that air emissions in these states will not significantly contribute to nonattainment or interfere with maintenance of the 2012 annual PM 2.5 NAAQS in any other state. All other applicable infrastructure SIP requirements for these SIP submissions have been addressed in separate rulemakings. 1

We review each state's submission to see how it evaluates the transport of air pollution to other states for a given air pollutant, the types of information the state used in its analysis, how that analysis compares with prior EPA rulemakings, modeling, and guidance, and the conclusions drawn by the state.

The EPA has developed a consistent framework for addressing interstate transport with respect to the PM 2.5 NAAQS. This framework includes the following four steps: (1) Identify downwind areas that are expected to have problems attaining or maintaining the NAAQS; (2) Identify which upwind states contribute to these air quality problems in amounts sufficient to warrant further review and analysis; (3) Identify any emissions reductions necessary to prevent an identified upwind state from significantly contributing to downwind nonattainment or interfering with downwind maintenance of the NAAQS; and (4) Adopt permanent and enforceable measures needed to achieve those emissions reductions.

To help states identify the receptors expected to have problems attaining or maintaining the 2012 annual PM 2.5 NAAQS, the EPA released a memorandum titled, “Information on the Interstate Transport `Good Neighbor' Provision for the 2012 Fine Particulate Matter National Ambient Air Quality Standards under Clean Air Act Section 110(a)(2)(D)(i)(I)” on March 17, 2016 (hereon “2016 Memo”). 2 The 2016 Memo provides projected future year annual PM 2.5 design values for monitors throughout the country based on quality assured and certified ambient monitoring data and recent air quality modeling and explains the methodology used to develop these projected design values. The 2016 Memo also describes how the projected values can be used to help determine which monitors should be further evaluated as potential receptors under step 1 of the interstate transport framework described above, and how to determine whether emissions from other states significantly contribute to nonattainment or interfere with maintenance of the 2012 annual PM 2.5 NAAQS at these monitoring sites.

To develop the projected values presented in the 2016 Memo, the EPA used the results of nationwide photochemical air quality modeling that it recently performed to support several ozone NAAQS-related rulemakings. Base year modeling was performed for 2011. Future year modeling was performed for 2017 to support the Cross-State Air Pollution Rule (CSAPR) Update for the 2008 Ozone NAAQS. See 81 FR 74504 (October 26, 2016). Future year modeling was performed for 2025 to support the Regulatory Impact Assessment of the final 2015 Ozone NAAQS. 3 In addition, and relevant to this proposed action on interstate transport SIPs for the 2012 annual PM 2.5 NAAQS, the outputs from these model runs included hourly concentrations of PM 2.5 that were used in conjunction with measured data to project annual average PM 2.5 design values for 2017 and 2025.

Areas that were designated as moderate PM 2.5 nonattainment areas for the 2012 annual PM 2.5 NAAQS in 2014 must attain the NAAQS by December 31, 2021, or as expeditiously as practicable. Since modeling results are only available for 2017 and 2025, the 2016 Memo explains that one way to assess potential receptors for 2021 4 is to assume that receptors projected to have average and/or maximum design values above the NAAQS in both 2017 and 2025 are also likely to be either nonattainment or maintenance receptors in 2021. Similarly, the EPA stated that it may be reasonable to assume that receptors that are projected to attain the NAAQS in both 2017 and 2025 are also likely to be attainment receptors in 2021. Where a potential receptor is projected to be nonattainment or maintenance in 2017, but projected to be attainment in 2025, further analysis of the emissions and modeling may be needed to make a further judgement regarding the receptor status in 2021.

Based on this approach, the EPA identified 19 potential nonattainment and/or maintenance receptors. All of the 17 potential nonattainment receptors are located in California. One of the potential maintenance-only receptors is located in Shoshone County, Idaho, and the other potential maintenance-only receptor is located in Allegheny County, Pennsylvania.

In the 2016 Memo, the EPA noted that because of data quality problems, nonattainment and maintenance projections were not done for all or portions of Florida, Illinois, Idaho, Tennessee and Kentucky. Data quality problems were since resolved for Tennessee, Kentucky and Florida, identifying no additional potential receptors, with those areas having design values below the 2012 annual PM 2.5 NAAQS and expected to maintain the NAAQS due to downward emission trends for NO X and SO 2 ( www.epa.gov/air-trends/air-quality-design-values and www.epa.gov/air-emissions-inventories/air-pollutant-emissions-trends-data ). Recent ambient data from 2015 and 2016 for Idaho and Illinois indicated that violations of the 2012 annual PM 2.5 NAAQS in the areas with previous data quality issues are unlikely. Considering this information, the very low background concentrations recorded at IMPROVE monitoring site locations in Idaho, and the continuing downward trend of annual PM 2.5 levels at monitors across Illinois, we propose that the Idaho and Illinois areas should not be considered receptors for purposes of the 2012 annual PM 2.5 NAAQS. 5

After identifying potential receptors, the next step is to identify whether upwind states contribute to air pollution at each of the identified receptors in other states. In the 2016 Memo, the EPA did not calculate the portion of any downwind state's predicted PM 2.5 concentrations that would result from emissions from individual states. Accordingly, the EPA will evaluate prong 1 and 2 submissions for states using a weight of evidence analysis. This analysis is based on a review of the state's submission and other available information, including air quality trends; topographical, geographical, and meteorological information; local emissions in downwind states and emissions from the upwind state; contribution modeling from prior interstate transport analyses; and existing and planned emission control measures in the state of interest. While none of these factors is by itself dispositive, together they may be used in weight of evidence analyses to determine whether the emissions from each of the five states that are the subject of this notice will significantly contribute to nonattainment or interfere with maintenance of the 2012 annual PM 2.5 NAAQS at the identified receptors in the 2016 Memo.

In this section, we provide an overview of each state's 2012 annual PM 2.5 transport analysis, as well as a summary of the EPA's evaluation of prongs 1 and 2 for each state. A detailed discussion of our evaluations can be found in the Technical Support Documents (TSDs) for this action, with separate TSDs for each of the five states. The TSDs can be accessed through www.regulations.gov (e-docket EPA-R08-OAR-2018-0055).

Colorado: Colorado concluded that it does not contribute significantly to nonattainment or interfere with maintenance of the 2012 annual PM 2.5 NAAQS in any other state for the following reasons: (1) Colorado has never violated the 2012 PM 2.5 NAAQS; (2) The nearest downwind nonattainment area is about 900 miles from Colorado's eastern border, 6 and the nearest upwind nonattainment area is about 600 miles from Colorado's western border; and (3) Colorado has an EPA-approved Regional Haze State Implementation Plan that will result in substantial future reductions of PM 2.5 and its precursors.

The EPA notes that, because Colorado's analysis focused on designated nonattainment areas, it does not independently address whether the SIP contains adequate provisions prohibiting emissions that will interfere with maintenance of the 2012 PM 2.5 NAAQS in any other state. In remanding the Clean Air Interstate Rule (CAIR) to the EPA in North Carolina v. EPA, the D.C. Circuit explained that the regulating authority must give the “interfere with maintenance” clause of section 110(a)(2)(D)(i)(I) “independent significance” by evaluating the impact of upwind state emissions on downwind areas that, while currently in attainment, are at risk of future nonattainment, considering historic variability. 7 While Colorado's submittal pre-dates the 2016 Memo, which provided the states with information about potential maintenance-only receptors, Colorado was still required to evaluate the potential impact of its emissions on areas that are currently measuring clean data, but that may have issues maintaining that air quality, and Colorado did not do so.

The EPA reviewed the information in Colorado's submittal, as well as the 2016 Memo and additional supplemental information for our evaluation, and we propose to come to the same conclusion as the state. This includes Colorado's conclusion that the state will not interfere with maintenance in downwind states, because we supplemented the state's analysis by identifying and assessing impacts on potential maintenance receptors. In our evaluation, we identified potential downwind nonattainment and maintenance receptors using the 2016 Memo. We then evaluated these receptors to determine whether Colorado emissions could significantly contribute to nonattainment or interfere with maintenance at them. Below, we provide an overview of our analysis. A more detailed evaluation of how the SIP revisions meet the requirements of CAA section 110(a)(2)(D)(i)(I) may be found in the Colorado TSD.

With regard to the 17 California receptors, our analysis showed that elevated PM 2.5 levels in California are driven primarily by local emissions. 8 Additionally, Colorado's western border is more than 570 miles to the east and generally downwind of the California receptors, with several intervening mountain ranges which tend to impede interstate pollution transport. Finally, monitoring data demonstrate that the air in remote areas between Colorado and California is well below the level of the 2012 PM 2.5 NAAQS. All of these factors indicate that emissions from Colorado will not significantly contribute to nonattainment or interfere with maintenance of the 2012 PM 2.5 NAAQS at any California projected receptors.

With regard to the Shoshone County, Idaho receptor, our analysis showed that elevated PM 2.5 levels in the area are driven primarily by local emissions from wood burning in the wintertime. 9 Additionally, Colorado is more than 550 miles to the southeast and downwind of this receptor. Finally, monitoring data indicate that the air in remote areas between Colorado and the Idaho receptor is well below the level of the 2012 PM 2.5 NAAQS. All of these factors indicate that emissions from Colorado will not significantly contribute to nonattainment or interfere with maintenance of the 2012 PM 2.5 NAAQS at the projected Shoshone County receptor.

With regard to the Allegheny County, Pennsylvania receptor, our analysis included review of previous modeling data conducted for the EPA's 2011 CSAPR, which addressed the 1997 and 2006 PM 2.5 NAAQS. 10 For the 2011 CSAPR, the EPA modeled contribution from states in the Eastern U.S. to air quality monitors (referred to as “receptors”) also located in the Eastern U.S. 11 Therefore, the 2011 CSAPR modeling did not project downwind contribution of emissions from Colorado, but projected contributions from states immediately east of Colorado, including Kansas. This modeling indicated that Kansas, a state located much closer to the Allegheny County receptor and with higher PM 2.5 precursor emissions than Colorado, 12 was modeled to be below 1% (the contribution level at which eastern states were considered “linked” to downwind receptors in the CSAPR and CSAPR Update rulemakings) of the 2012 annual PM 2.5 NAAQS at all receptors in the eastern U.S., including the Allegheny County receptor. Additionally, the modeling information contained in EPA's 2016 Memo shows that the Allegheny County receptor is projected to both attain and maintain the NAAQS by 2025. These factors, in addition to the very large distance (1,165 miles) from the Allegheny County receptor to the Colorado border, indicate that emissions from Colorado will not significantly contribute to nonattainment or interfere with maintenance of the 2012 PM 2.5 NAAQS at the projected Allegheny County receptor.

Based on these analyses, the EPA is proposing to approve the SIP submittal as meeting the CAA section 110(a)(2)(D)(i)(I) requirement that Colorado emissions will not contribute significantly to nonattainment or interfere with maintenance of the 2012 PM 2.5 NAAQS in any other state.

Montana: Montana concluded that it does not contribute significantly to nonattainment or interfere with maintenance of the 2012 annual PM 2.5 NAAQS in any other state for the following reasons: (1) The one PM 2.5 nonattainment area within the state, the Libby 1997 PM 2.5 nonattainment area, monitors PM 2.5 values which attain the 2012 PM 2.5 NAAQS; (2) Elevated levels of PM 2.5 in the state which can occur during the wintertime are highly dependent on low wind speed and meteorological “inversions” that lead to limited vertical mixing, resulting in neighborhood-scale impacts that are unlikely to contribute to elevated PM 2.5 levels in other states; and (3) The evidence indicates that Montana does not contribute to elevated emissions at the only area designated nonattainment for the 2012 PM 2.5 NAAQS with close proximity to the state, the West Silver Valley in Shoshone County, Idaho. Montana cited the EPA's technical support document on the West Silver Valley, Idaho nonattainment area designation, 13 which indicated that residential wood combustion within the West Silver Valley during wintertime periods of low wind speeds and low mixing height was the primary cause of the PM 2.5 issues in that area. Montana also noted winds into the West Silver Valley tend to be westerly, and that the Bitterroot and Coeur D'Alene mountain ranges run along the western border of Montana between the state and the West Silver Valley nonattainment area. Montana asserted that all of these considerations combined made it unlikely that emissions from Montana sources will contribute significantly to nonattainment or interfere with maintenance in the West Silver Valley, Idaho area.

The EPA notes that, because Montana's analysis focused on designated nonattainment areas, it does not independently address whether the SIP contains adequate provisions prohibiting emissions that will interfere with maintenance of the 2012 PM 2.5 NAAQS in any other state. While Montana's submittal pre-dates the 2016 Memo, which provided the states with information about potential maintenance-only receptors, Montana was still required to evaluate the potential impact of its emissions on areas that are currently measuring clean data, but that may have issues maintaining that air quality, and Montana did not do so.

The EPA reviewed the information in Montana's submittal, as well as the 2016 Memo and additional supplemental information for our evaluation, and we propose to come to the same conclusion as the state. This includes Montana's conclusion that the state will not interfere with maintenance in downwind states, because we supplemented the state's analysis by identifying and assessing impacts on potential maintenance receptors. In our evaluation, we identified potential downwind nonattainment and maintenance receptors using the 2016 Memo. We then evaluated these receptors to determine whether Montana emissions could significantly contribute to nonattainment or interfere with maintenance at them. Below, we provide an overview of our analysis. A more detailed evaluation of how the SIP revisions meet the requirements of CAA section 110(a)(2)(D)(i) may be found in the TSD.

With regard to the Shoshone County, Idaho receptor, our analysis indicated that elevated PM 2.5 levels in the area are driven primarily by local emissions from wood burning in the wintertime during inversion conditions, and therefore are not driven by transported emissions. 14 Monitoring data also indicate that the air in remote areas in western Montana and throughout the region is well below the level of the 2012 PM 2.5 NAAQS, especially during the winter months when PM 2.5 levels at the Shoshone County receptor are highest. 15 Additionally, the predominant wind direction in Shoshone County is from the west, while Montana is located to the east, making transport of emissions from Montana to this receptor unlikely. Finally, the intervening topography of the Bitterroot and Coeur D'Alene mountain ranges would impede interstate pollution transport. These factors, which are also discussed in Montana's analysis and further examined by the EPA in a TSD for this action, 16 indicate that emissions from Montana will not significantly contribute to nonattainment or interfere with maintenance of the 2012 PM 2.5 NAAQS at the projected Shoshone County receptor.

With regard to the 17 California receptors, our analysis showed that elevated PM 2.5 levels in California are driven primarily by local emissions. 17 Additionally, Montana is more than 630 miles to the northeast and generally downwind of the California receptors, with several intervening mountain ranges which tend to impede interstate pollution transport. Finally, monitoring data demonstrate that the air in remote areas between Montana and California is well below the level of the 2012 PM 2.5 NAAQS. All of these factors indicate that emissions from Montana will not significantly contribute to nonattainment or interfere with maintenance of the 2012 PM 2.5 NAAQS at any California projected receptors.

With regard to the Allegheny County, Pennsylvania receptor, our analysis included review of previous modeling data conducted for the EPA's 2011 CSAPR. 18 The 2011 CSAPR modeling did not project downwind contribution of emissions from Montana, but projected contributions from states immediately east of Montana, including North Dakota. This modeling indicated that North Dakota, a state located much closer to the Allegheny County receptor and with higher PM 2.5 precursor emissions than Montana, 19 was modeled to be below 1% of the 2012 annual PM 2.5 NAAQS at all receptors in the eastern U.S., including the Allegheny County receptor. Additionally, the modeling information contained in the EPA's 2016 Memo shows that the Allegheny County receptor is projected to both attain and maintain the NAAQS by 2025. These factors, in addition to the very large distance (1,267 miles) from the Allegheny County receptor to Montana's eastern border, indicate that emissions from Montana will not significantly contribute to nonattainment or interfere with maintenance of the 2012 PM 2.5 NAAQS at the projected Allegheny County receptor.

Based on our analyses, the EPA is proposing to approve the SIP submittal as meeting the CAA section 110(a)(2)(D)(i)(I) requirement that Montana emissions will not contribute significantly to nonattainment or interfere with maintenance of the 2012 PM 2.5 NAAQS in any other state.

North Dakota: North Dakota concluded that it does not contribute significantly to nonattainment or interfere with maintenance of the 2012 annual PM 2.5 NAAQS in any other state for the following reasons: (1) There are no PM 2.5 nonattainment areas within North Dakota; (2) The nearest 2012 PM 2.5 nonattainment area, in Shoshone County, Idaho, is roughly 660 miles west of the western border of North Dakota. Given that the three PM 2.5 monitors in western North Dakota indicate very low annual PM 2.5 levels, and the wind in the western U.S. is generally westerly, any PM 2.5 contribution from North Dakota to the nearest nonattainment area would be insignificant; (3) The modeling conducted for the EPA's CSAPR (August 8, 2011, 76 FR 48208) indicated that North Dakota sources have a maximum annual average contribution to any nonattainment area of .06 μg/m 3 , and a maximum contribution of .04 μg/m 3 to any maintenance receptor in the Eastern U.S.; (4) Annual PM 2.5 monitor values throughout North Dakota are all well below the 2012 PM 2.5 NAAQS; and (5) Direct and precursor emissions of PM 2.5 have been steadily declining in North Dakota for years. Between 2004-2014, NOx emissions in the state decreased by 36%, SO 2 emissions decreased by 64%, and primary particulate emissions from major point sources decreased by 19%, with further anticipated reductions due to North Dakota's Regional Haze requirements.

The EPA reviewed the information in North Dakota's submittal, as well as the 2016 Memo and additional supplemental information for our evaluation, and we propose to come to the same conclusion as the state. In our evaluation, we identified potential downwind nonattainment and maintenance receptors using the 2016 Memo. We then evaluated these receptors to determine whether North Dakota emissions could significantly contribute to nonattainment or interfere with maintenance at them. Below, we provide an overview of our analysis. A more detailed evaluation of how the SIP revisions meet the requirements of CAA section 110(a)(2)(D)(i) may be found in the North Dakota TSD.

With regard to the 17 California receptors, our analysis showed that elevated PM 2.5 levels in California are driven primarily by local emissions. 20 Additionally, North Dakota is more than 1,030 miles to the east and generally downwind of the California receptors, with several intervening mountain ranges which tend to impede interstate pollution transport. Finally, monitoring data demonstrate that the air in remote areas between North Dakota and California is well below the level of the 2012 PM 2.5 NAAQS. All of these factors indicate that emissions from North Dakota will not significantly contribute to nonattainment or interfere with maintenance of the 2012 PM 2.5 NAAQS at any California projected receptors.

With regard to the Shoshone County, Idaho receptor, our analysis showed that elevated PM 2.5 levels in the area are driven primarily by local emissions from wood burning in the wintertime. 21 Additionally, North Dakota is more than 500 miles to the east and downwind of this receptor. Finally, monitoring data indicate that the air in remote areas between North Dakota and the Shoshone County receptor is well below the level of the 2012 PM 2.5 NAAQS. All of these factors indicate that emissions from North Dakota will not significantly contribute to nonattainment or interfere with maintenance of the 2012 PM 2.5 NAAQS at the projected Shoshone County receptor.

With regard to the Allegheny County, Pennsylvania receptor, our analysis included review of previous modeling data conducted for the EPA's 2011 CSAPR. 22 As noted, this modeling projected North Dakota's impact at all receptors in the eastern U.S., including the Allegheny County receptor, and that impact was modeled to be well below 1% of the 2012 annual PM 2.5 NAAQS at all receptor locations. 23 Additionally, the modeling information contained in EPA's 2016 Memo shows that the Allegheny County receptor is projected to both attain and maintain the NAAQS by 2025. These factors, in addition to the very large distance (925 miles) from the Allegheny County receptor to North Dakota's eastern border, indicate that emissions from North Dakota will not significantly contribute to nonattainment or interfere with maintenance of the 2012 PM 2.5 NAAQS at the projected Allegheny County receptor.

Based on these analyses, the EPA is proposing to approve the SIP submittal as meeting the CAA section 110(a)(2)(D)(i)(I) requirement that North Dakota emissions will not contribute significantly to nonattainment or interfere with maintenance of the 2012 PM 2.5 NAAQS in any other state.

South Dakota: South Dakota concluded that it does not contribute significantly to nonattainment or interfere with maintenance of the 2012 annual PM 2.5 NAAQS in any other state for the following reasons: (1) There are no 2012 PM 2.5 nonattainment or maintenance areas within South Dakota or neighboring states; (2) Source-oriented PM 2.5 emissions are low throughout South Dakota; (3) Existing programs in the South Dakota SIP will prevent new or modified sources from causing nonattainment in South Dakota or contributing significantly to nonattainment or maintenance with this NAAQS in neighboring states; and (4) South Dakota has a small population.

The EPA notes that, because South Dakota's analysis focused on designated nonattainment areas, it does not independently address whether the SIP contains adequate provisions prohibiting emissions that will interfere with maintenance of the 2012 PM 2.5 NAAQS in any other state. While South Dakota's submittal pre-dates the 2016 Memo, which provided the states with information about potential maintenance-only receptors, South Dakota was still required to evaluate the potential impact of its emissions on areas that are currently measuring clean data, but that may have issues maintaining that air quality, and South Dakota did not do so.

The EPA reviewed the information in South Dakota's submittal, as well as the 2016 Memo and additional supplemental information for our evaluation, and we propose to come to the same conclusion as the state. This includes South Dakota's conclusion that the state will not interfere with maintenance in downwind states, because we supplemented the state's analysis by identifying and assessing impacts on potential maintenance receptors. In our evaluation, we identified potential downwind nonattainment and maintenance receptors using the 2016 Memo. We then evaluated these receptors to determine whether South Dakota emissions could significantly contribute to nonattainment or interfere with maintenance at them. Below, we provide an overview of our analysis. A more detailed evaluation of how the SIP revisions meet the requirements of CAA section 110(a)(2)(D)(i) may be found in the South Dakota TSD.

With regard to the 17 California receptors, our analysis showed that elevated PM 2.5 levels in California are driven primarily by local emissions. 24 Additionally, South Dakota is more than 937 miles to the northeast and generally downwind of the California receptors. Finally, monitoring data demonstrate that the air in remote areas between South Dakota and California is well below the level of the 2012 PM 2.5 NAAQS. All of these factors indicate that emissions from South Dakota will not significantly contribute to nonattainment or interfere with maintenance of the 2012 PM 2.5 NAAQS at any California projected receptors.

With regard to the Shoshone County, Idaho receptor, our analysis showed that elevated PM 2.5 levels in the area are driven primarily by local emissions from wood burning in the wintertime. 25 Additionally, South Dakota is more than 600 miles to the east and downwind of this receptor. Finally, monitoring data indicate that the air in remote areas between South Dakota and the Idaho receptor is well below the level of the 2012 PM 2.5 NAAQS. All of these factors indicate that emissions from South Dakota will not significantly contribute to nonattainment or interfere with maintenance of the 2012 PM 2.5 NAAQS at the projected Shoshone County receptor.

With regard to the Allegheny County, Pennsylvania receptor, our analysis included review of previous modeling data conducted for the EPA's 2011 CSAPR. 26 This modeling projected South Dakota's impact at all receptors in the eastern U.S., including the Allegheny County receptor, and that impact was modeled to be well below 1% of the 2012 annual PM 2.5 NAAQS at all receptor locations. 27 Additionally, the modeling information contained in the EPA's 2016 Memo shows that the Allegheny County receptor is projected to both attain and maintain the NAAQS by 2025. These factors, in addition to the very large distance (880 miles) from the Allegheny County receptor to South Dakota's eastern border, indicate that emissions from South Dakota will not significantly contribute to nonattainment or interfere with maintenance of the 2012 PM 2.5 NAAQS at the projected Allegheny County receptor.

Based on these analyses, the EPA is proposing to approve the SIP submittal as meeting the CAA section 110(a)(2)(D)(i)(I) requirement that South Dakota emissions will not contribute significantly to nonattainment or interfere with maintenance of the 2012 PM 2.5 NAAQS in any other state.

Wyoming: Wyoming concluded that it does not contribute significantly to nonattainment or interfere with maintenance of the 2012 annual PM 2.5 NAAQS in any other state for the following reasons: (1) There are no PM 2.5 nonattainment areas within Wyoming, and all PM 2.5 monitors in the state indicate levels well below the NAAQS in spite of certain maximum values being influenced by wildfires; (2) There are no 2012 PM 2.5 nonattainment areas in states bordering Wyoming apart from Idaho; and (3) The evidence indicates that Wyoming does not contribute to elevated emissions at the only area designated nonattainment for the 2012 PM 2.5 NAAQS with close proximity to the state, the West Silver Valley in Shoshone County, Idaho. This nonattainment area is over 300 miles from the nearest border of Wyoming, and wind roses within Wyoming show that winds primarily blow west-to-east, and do not favor southeast-to-northwest transport needed for Wyoming emissions to impact this nonattainment area. The monitored PM 2.5 values in the Wyoming counties nearest the West Silver Valley, Idaho nonattainment area are well below the NAAQS. Wyoming also cited the EPA's technical support document on the West Silver Valley, Idaho, nonattainment area designation, 28 which indicated that residential wood combustion and prescribed burning within the West Silver Valley were the primary causes of PM 2.5 issues in that area. Wyoming also stated that the Beaverhead, Lemhi, Teton and Gallatin mountain ranges also inhibited westward transport between Wyoming and the West Silver Valley, Idaho nonattainment area. Wyoming asserted that all of these considerations combined made it reasonable to conclude that emissions from Wyoming sources are not significantly contributing to nonattainment in the West Silver Valley, Idaho area.

The EPA notes that, because Wyoming's analysis focused on designated nonattainment areas, it does not independently address whether the SIP contains adequate provisions prohibiting emissions that will interfere with maintenance of the 2012 PM 2.5 NAAQS in any other state. Each state is required to evaluate the potential impact of its emissions on areas that are currently measuring clean data, but that may have issues maintaining that air quality, and Wyoming did not do so.

The EPA reviewed the information in Wyoming's submittal, as well as the 2016 Memo and additional supplemental information for our evaluation, and we propose to come to the same conclusion as the state. This includes Wyoming's conclusion that the state will not interfere with maintenance in downwind states, because we supplemented the state's analysis by identifying and assessing impacts on potential maintenance receptors. In our evaluation, we identified potential downwind nonattainment and maintenance receptors using the 2016 Memo. We then evaluated these receptors to determine whether Wyoming emissions could significantly contribute to nonattainment or interfere with maintenance at them. Below, we provide an overview of our analysis. A more detailed evaluation of how the SIP revisions meet the requirements of CAA section 110(a)(2)(D)(i) may be found in the Wyoming TSD.

With regard to the Shoshone County, Idaho receptor, our analysis showed that elevated PM 2.5 levels in the area are driven primarily by local emissions from wood burning in the wintertime during inversion conditions, and therefore are not driven by transported emissions. 29 Additionally, monitoring data indicate that the air in remote areas between Wyoming and the Idaho receptor is well below the level of the 2012 PM 2.5 NAAQS. These factors indicate that emissions from Wyoming will not significantly contribute to nonattainment or interfere with maintenance of the 2012 PM 2.5 NAAQS at the projected Shoshone County receptor.

With regard to the 17 California receptors, our analysis showed that elevated PM 2.5 levels in California are driven primarily by local emissions. 30 Additionally, Wyoming is more than 548 miles to the east and generally downwind of the California receptors, with several intervening mountain ranges which tend to impede interstate pollution transport. Finally, monitoring data demonstrate that the air in remote areas between Wyoming and California is well below the level of the 2012 PM 2.5 NAAQS. All of these factors indicate that emissions from Wyoming will not significantly contribute to nonattainment or interfere with maintenance of the 2012 PM 2.5 NAAQS at any California projected receptors.

With regard to the Allegheny County, Pennsylvania receptor, our analysis included review of previous modeling data conducted for the EPA's 2011 CSAPR. 31 The 2011 CSAPR modeling did not project contribution of emissions from Wyoming, but projected contributions from states immediately east of Wyoming, including Nebraska. This modeling indicated that Nebraska, a state located much closer to the Allegheny County receptor and with higher PM 2.5 precursor emissions than Wyoming, 32 was modeled to be below 1% of the 2012 annual PM 2.5 NAAQS at all receptors in the eastern U.S., including the Allegheny County receptor. Additionally, the modeling information contained in the EPA's 2016 Memo shows that the Allegheny County receptor is projected to both attain and maintain the NAAQS by 2025. These factors, in addition to the very large distance (1,260 miles) from the Allegheny County receptor to Wyoming's eastern border, indicate that emissions from Wyoming will not significantly contribute to nonattainment or interfere with maintenance of the 2012 PM 2.5 NAAQS at the projected Allegheny County receptor.

Based on these analyses, the EPA is proposing to approve the SIP submittal as meeting the CAA section 110(a)(2)(D)(i)(I) requirement that Wyoming emissions will not contribute significantly to nonattainment or interfere with maintenance of the 2012 PM 2.5 NAAQS in any other state.

The EPA is proposing to approve the following submittals as meeting the interstate transport requirements of CAA section 110(a)(2)(D)(i)(I) for the 2012 PM 2.5 NAAQS: Colorado's December 1, 2015 submittal; Montana's December 17, 2015 submittal; North Dakota's August 23, 2015 submittal; South Dakota's January 25, 2016 submittal; and Wyoming's June 24, 2016 submittal. The EPA is proposing this approval based on our review of the information and analysis provided by each state, as well as additional relevant information, which indicates that in-state air emissions will not contribute significantly to nonattainment or interfere with maintenance of the 2012 PM 2.5 NAAQS in any other state. This action is being taken under section 110 of the CAA.

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, the EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, these proposed actions merely approve state law as meeting federal requirements and do not impose additional requirements beyond those imposed by state law. For that reason, these proposed actions:

• Are not significant regulatory actions subject to review by the Office of Management and Budget under Executive Order 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);

• Are not Executive Order 13771 (82 FR 9339, February 2, 2017) regulatory actions because SIP approvals are exempted under Executive Order 12866;

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

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

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

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

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

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

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

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

In addition, these SIPs are not approved to apply on any Indian reservation land or in any other area where the EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

On June 16, 2015, Virginia, through the Department of Environmental Quality (VADEQ), submitted a SIP revision to address the elements of CAA section 110(a)(2) with the exception of section 110(a)(2)(D)(i). EPA approved that SIP revision on June 16, 2016. See 81 FR 39210. EPA's previous approval on that June 16, 2015 submittal is not at issue in this rulemaking action and EPA will not be taking comment on the previous approval. On May 16, 2017, Virginia, through VADEQ, submitted a SIP revision addressing the infrastructure requirements under section 110(a)(2)(D)(i) of the CAA for the 2012 PM 2.5 NAAQS.

Particle pollution is a complex mixture of extremely small particles and liquid droplets in the air. When inhaled, these particles can reach the deepest regions of the lungs. Exposure to particle pollution is linked to a variety of significant health problems. Particle pollution also is the main cause of visibility impairment in the nation's cities and national parks. PM 2.5 can be emitted directly into the atmosphere, or it can form from chemical reactions of precursor gases including sulfur dioxide (SO 2 ), nitrogen dioxide (NO 2 ), certain volatile organic compounds (VOC), and ammonia. On January 15, 2013, EPA revised the level of the health based (primary) annual PM 2.5 standard to 12 micrograms per meter cubed (µg/m 3 ). See 78 FR 3086.

Pursuant to section 110(a)(1) of the CAA, states are required to submit a SIP revision to address the applicable requirements of section 110(a)(2) within three years after promulgation of a new or revised NAAQS or within such shorter period as EPA may prescribe. Section 110(a)(2) requires states to address basic SIP elements to assure attainment and maintenance of the NAAQS—such as requirements for monitoring, basic program requirements, and legal authority. Section 110(a) imposes the obligation upon states to make a SIP submission to EPA for a new or revised NAAQS, but the contents of that submission may vary depending upon the facts and circumstances of each NAAQS and what is in each state's existing SIP. In particular, the data and analytical tools available at the time the state develops and submits the SIP revision for a new or revised NAAQS affect the content of the submission. The content of such SIP submission may also vary depending upon what provisions the state's existing SIP already contains.

Specifically, section 110(a)(1) provides the procedural and timing requirements for SIP submissions. Section 110(a)(2) lists specific elements that states must meet for infrastructure SIP requirements related to a newly established or revised NAAQS such as requirements for monitoring, basic program requirements, and legal authority that are designed to assure attainment and maintenance of the NAAQS.

Section 110(a)(2)(D)(i)(I) of the CAA requires a state's SIP to address any emissions activity in one state that contributes significantly to nonattainment, or interferes with maintenance, of the NAAQS in any downwind state. The EPA sometimes refers to these requirements as prong 1 (significant contribution to nonattainment) and prong 2 (interference with maintenance), or jointly as the “good neighbor” provision of the CAA. On March 17, 2016, EPA issued a memorandum providing information on the development and review of SIPs that address CAA section 110(a)(2)(D)(i) for the 2012 PM 2.5 NAAQS (2016 PM 2.5 Memorandum). 1 Further information can be found in the Technical Support Document (TSD) for this rulemaking action, which is available online at www.regulations.gov, Docket number EPA-R03-OAR-2017-0337.

Virginia's May 16, 2017 SIP submittal includes a summary of annual emissions of oxides of nitrogen (NO X ) and SO 2 , both of which are precursors of PM 2.5 . The emissions summary shows that emissions from Virginia sources have been steadily decreasing for sources that could potentially contribute with respect to the 2012 PM 2.5 NAAQS to nonattainment in, or interfere with maintenance of, any other state. The submittal also included currently available air quality monitoring data for PM 2.5 , and its precursors SO 2 and NO 2 , which Virginia alleged show that PM 2.5 levels continue to be below the 2012 PM 2.5 NAAQS in Virginia.

Virginia also discussed EPA's 2016 PM 2.5 Memorandum and the fact that EPA's analysis showed that only one monitor in the eastern United States had projected PM 2.5 data above the 12.0 µg/m 3 NAAQS value (Allegheny County, PA). Virginia also discussed the direction of prevailing winds throughout Virginia and how, apart from short-term weather variations, Virginia's emissions would have a negligible influence on Allegheny County's attainment status. Virginia also points to EPA's response to comments on the 2012 PM 2.5 Designations, in which EPA discusses the factors contributing to the Allegheny County area's nonattainment designation. 2

Additionally, Virginia described in its submittal several existing SIP-approved measures and other federally enforceable source-specific measures, pursuant to permitting requirements under the CAA, that apply to sources of PM 2.5 and its precursors within Virginia. Virginia alleges with these measures, emissions reductions, ambient monitored PM 2.5 data, and meteorological data, the Commonwealth does not significantly contribute to, nor interfere with the maintenance of, another state for the 2012 PM 2.5 NAAQS. A detailed summary of Virginia's submittal and EPA's review and rationale for approval of this SIP revision as meeting CAA section 110(a)(2)(D)(i)(I) for the 2012 PM 2.5 NAAQS may be found in the TSD for this rulemaking action, which is available online at www.regulations.gov, Docket number EPA-R03-OAR-2017-0337.

EPA used the information in the 2016 PM 2.5 Memorandum and additional information for the evaluation and came to the same conclusion as Virginia. As discussed in greater detail in the TSD, EPA identified the potential downwind nonattainment and maintenance receptors identified in the 2016 PM 2.5 Memorandum, and then evaluated them to determine if Virginia's emissions could potentially contribute to nonattainment and maintenance problems in 2021, the attainment year for moderate PM 2.5 nonattainment areas. Specifically, the analysis identified the following areas as potential nonattainment and maintenance receptors: (i) 17 potential receptors in California; (ii) one potential receptor in Shoshone County, Idaho; (iii) one potential receptor in Allegheny County, Pennsylvania; (iv) data gaps exist for the monitors in four counties in Florida; and (v) data gaps exist for all monitors in Illinois. For the 17 receptors in California and one potential receptor in Idaho, based on EPA's evaluation of distance and wind direction, EPA proposes to conclude that Virginia's emissions do not significantly impact those receptors. For the potential receptor in Allegheny County, EPA expects the air quality affecting that monitor to improve to the point where the monitor will not be a nonattainment or maintenance receptor by 2021 and is therefore unlikely to be a receptor for purposes of interstate transport. For the four counties in Florida and the monitors in Illinois with data gaps, EPA initially treats those receptors as potential nonattainment or maintenance receptors. For the Florida receptors, it is unlikely that they will be nonattainment or maintenance receptors in 2021 and in any event, modeling from the Cross-State Air Pollution Rule (CSAPR) indicates that Virginia's emissions do not contribute to them. For the monitors in Illinois, the most recent air quality data (from 2015 and 2016) indicates that all monitors are likely attaining the PM 2.5 NAAQs and are therefore unlikely to be nonattainment or maintenance concerns in 2021. Therefore, EPA proposes to conclude that Virginia emissions will not contribute to those monitors. For these reasons, EPA is proposing to find that Virginia's existing SIP provisions as identified in the May 16, 2017 SIP submittal are adequate to prevent its emission sources from significantly contributing to nonattainment or interfering with maintenance in another state with respect to the 2012 PM 2.5 NAAQS.

EPA is proposing to approve the May 16, 2017 Virginia SIP revision addressing the interstate transport requirements for the 2012 PM 2.5 NAAQS because the submittal adequately addresses section 110(a)(2)(D)(i)(I) of the CAA. EPA is soliciting public comments on the issues discussed in this document. These comments will be considered before taking final action.

In 1995, Virginia adopted legislation that provides, subject to certain conditions, for an environmental assessment (audit) “privilege” for voluntary compliance evaluations performed by a regulated entity. The legislation further addresses the relative burden of proof for parties either asserting the privilege or seeking disclosure of documents for which the privilege is claimed. Virginia's legislation also provides, subject to certain conditions, for a penalty waiver for violations of environmental laws when a regulated entity discovers such violations pursuant to a voluntary compliance evaluation and voluntarily discloses such violations to the Commonwealth and takes prompt and appropriate measures to remedy the violations. Virginia's Voluntary Environmental Assessment Privilege Law, Va. Code Sec. 10.1-1198, provides a privilege that protects from disclosure documents and information about the content of those documents that are the product of a voluntary environmental assessment. The Privilege Law does not extend to documents or information that: (1) Are generated or developed before the commencement of a voluntary environmental assessment; (2) are prepared independently of the assessment process; (3) demonstrate a clear, imminent, and substantial danger to the public health or environment; or (4) are required by law.

On January 12, 1998, the Commonwealth of Virginia Office of the Attorney General provided a legal opinion that states that the Privilege law, Va. Code Sec. 10.1-1198, precludes granting a privilege to documents and information “required by law,” including documents and information “required by federal law to maintain program delegation, authorization or approval,” since Virginia must “enforce federally authorized environmental programs in a manner that is no less stringent than their federal counterparts. . . .” The opinion concludes that “[r]egarding § 10.1-1198, therefore, documents or other information needed for civil or criminal enforcement under one of these programs could not be privileged because such documents and information are essential to pursuing enforcement in a manner required by federal law to maintain program delegation, authorization or approval.”

Virginia's Immunity law, Va. Code Sec. 10.1-1199, provides that “[t]o the extent consistent with requirements imposed by federal law,” any person making a voluntary disclosure of information to a state agency regarding a violation of an environmental statute, regulation, permit, or administrative order is granted immunity from administrative or civil penalty. The Attorney General's January 12, 1998 opinion states that the quoted language renders this statute inapplicable to enforcement of any federally authorized programs, since “no immunity could be afforded from administrative, civil, or criminal penalties because granting such immunity would not be consistent with federal law, which is one of the criteria for immunity.”

Therefore, EPA has determined that Virginia's Privilege and Immunity statutes will not preclude the Commonwealth from enforcing its program consistent with the federal requirements. In any event, because EPA has also determined that a state audit privilege and immunity law can affect only state enforcement and cannot have any impact on federal enforcement authorities, EPA may at any time invoke its authority under the CAA, including, for example, sections 113, 167, 205, 211 or 213, to enforce the requirements or prohibitions of the state plan, independently of any state enforcement effort. In addition, citizen enforcement under section 304 of the CAA is likewise unaffected by this, or any, state audit privilege or immunity law.

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

• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);

• is not an Executive Order 13771 (82 FR 9339, February 2, 2017) regulatory action because SIP approvals are exempted under Executive Order 12866.

• 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 CAA; and

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

This action, proposing approval of Virginia's interstate transport submittal for the 2012 PM 2.5 standard, is not approved to apply on any Indian reservation land as defined in 18 U.S.C. 1151 or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

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

On September 13, 2017, YSAQMD adopted its Reasonably Available Control Technology State Implementation Plan Analysis for the 2008 ozone National Ambient Air Quality Standards (NAAQS). Included in the District's RACT SIP analysis were several negative declarations where the District stated that it did not have sources subject to the Control Techniques Guidelines (CTG) documents listed below in Table 1. The District's RACT SIP further stated that the negative declarations were for the 1997 and 2008 ozone NAAQS. On November 13, 2017, the California Air Resources Board (CARB) submitted YSAQMD's RACT SIP, including the following negative declarations, to the EPA as a SIP revision.

On April 11, 2018, the EPA determined that the negative declarations submitted as part of YSAQMD's RACT SIP met the completeness criteria in 40 CFR part 51 Appendix V, which must be met before formal EPA review.

On April 6, 2018 (83 FR 14754), we approved YSAQMD's RACT SIP certification, including several negative declarations for the 1997 8-hour ozone NAAQS.

Volatile Organic Compounds (VOCs) and nitrogen oxides (NO X ) together produce ground-level ozone, smog and particulate matter, which harm human health and the environment. Section 110(a) of the CAA requires states to submit regulations that control VOC and NO X emissions. Sections 182(b)(2) and (f) require that SIPs for ozone nonattainment areas classified as Moderate or above implement RACT for any source covered by a CTG document and for any major source of VOCs or NO X . The YSAQMD is subject to this requirement because it regulates part of the Sacramento Metropolitan ozone nonattainment area that is classified as a Severe-15 ozone nonattainment area for the 2008 8-hour ozone NAAQS. 2 Therefore, the YSAQMD must, at a minimum, adopt RACT-level controls for all sources covered by a CTG document and for all major non-CTG sources of VOCs or NO X within the nonattainment area that it regulates.

The EPA's rule to implement the 2008 8-hour ozone NAAQS (80 FR 12264 at 12278, March 6, 2015) states in part “. . . RACT SIPs must contain adopted RACT regulations, certifications where appropriate that existing provisions are RACT . . . and/or negative declarations that there are no sources in the nonattainment area covered by a specific CTG source category.” YSAQMD's RACT SIP submittal includes the negative declarations listed in Table 1 to certify that it has no stationary sources within its jurisdiction that are covered by the listed CTGs.

SIP rules must require RACT for each category of sources covered by a CTG document as well as each major source of VOC or NO X in ozone nonattainment areas classified as Moderate or above (see CAA section 182(b)(2)). States should submit for SIP approval negative declarations for those source categories for which they are not adopting VOC CTG-based regulations (because they have no sources covered by the CTG) regardless of whether such negative declarations were made for an earlier RACT SIP.

The EPA reviewed YSAQMD's list of negative declarations and compared the District's list against a list of stationary sources of VOCs derived from CARB's emissions inventory database for the years 2006 and 2015. The EPA selected these years based on when the RACT SIPs were due for the 1997 and 2008 8-hour ozone standards. Since the CTGs only cover VOC sources and do not cover NO X sources, we took CARB's emissions inventory list of VOC stationary sources in the YSAQMD and identified those with a sufficient quantity of VOC emissions that they could potentially be covered by a CTG. We then performed an internet search on these sources to determine if they performed operations subject to any of the CTGs for which YSAQMD was claiming a negative declaration. Our evaluation also included a review of whether identified stationary sources' Standard Industrial Code classification numbers corresponded to negative declarations claimed by the District. Finally, we queried YSAQMD staff regarding what VOC producing operations occurred at specific stationary source facilities to determine if any of those operations might be subject to a negative declaration. Based on this, the EPA agrees with YSAQMD's conclusion that it has no stationary sources of VOCs that are subject to the CTGs for which they have adopted negative declarations for the 1997 and 2008 8-hour ozone NAAQS. We believe these negative declarations are consistent with the relevant policy and guidance regarding RACT and SIP relaxations.

As authorized in section 110(k)(3) of the Act, the EPA proposes to fully approve the submitted negative declarations for the 1997 and 2008 8-hour ozone NAAQS because they fulfill all relevant requirements. We will accept comments from the public on this proposal until June 8, 2018. If we take final action to approve the submitted negative declarations, our final action will incorporate them 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, the EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this proposed action merely proposes to approve state law as meeting federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this proposed action:

• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);

• Is not an Executive Order 13771 (82 FR 9339, February 2, 2017) regulatory action because SIP approvals are exempted under Executive Order 12866;

• 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 the 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, the SIP is not approved to apply on any Indian reservation land or in any other area where the EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

Throughout this document, the terms “we,” “us,” and “our” mean the EPA.

Under Clean Air Act (CAA or “the Act”) section 107(d)(3)(D), the EPA is proposing to approve California's request to redesignate the Chico nonattainment area to attainment for the 2006 24-hour fine particulate matter (PM 2.5 ) national ambient air quality standards (NAAQS or “standards”). We are doing so based on our conclusion that the area has met the five criteria for redesignation under CAA section 107(d)(3)(E). Specifically, we have concluded that: (1) The area has attained the 24-hour PM 2.5 NAAQS in the 2014-2016 time period and continues to attain the PM 2.5 standard since that time; (2) the relevant portions of the California SIP are fully approved; (3) the improvement in air quality is due to permanent and enforceable reductions in emissions; (4) California has met all requirements applicable to the Chico PM 2.5 nonattainment area with respect to section 110 and part D of the CAA; and (5) the Chico, CA/Butte County PM 2.5 Nonattainment Area Redesignation Request and Maintenance Plan (“Chico PM 2.5 Plan” or “Plan”) meets the requirements of section 175A of the CAA.

In addition, the EPA is proposing to approve the Chico PM 2.5 Plan as a revision to the SIP under section 110(k)(3) of the CAA because we find that the maintenance demonstration shows how the area will continue to attain the 24-hour PM 2.5 NAAQS for at least 10 years beyond redesignation (through 2030) and that the contingency provisions describing the action the Butte County Air Quality Management District (BCAQMD or “District”) will take in the event of a future monitored violation meet all applicable requirements for maintenance plans and section 175A of the CAA.

The EPA is proposing these actions because the SIP revision meets the requirements of the CAA and EPA guidance for such plans.

Particulate matter includes particles with diameters that are generally 2.5 microns or smaller (PM 2.5 ) and particles with diameters that are generally 10 microns or smaller (PM 10 ). It contributes to effects that are harmful to human health and the environment, including premature mortality, aggravation of respiratory and cardiovascular disease, decreased lung function, visibility impairment, and damage to vegetation and ecosystems. Individuals particularly sensitive to PM 2.5 exposure include older adults, people with heart and lung disease, and children (78 FR 3086 at 3088, January 15, 2013). PM 2.5 can be emitted directly into the atmosphere as a solid or liquid particle (“primary PM 2.5 ” or “direct PM 2.5 ”) or can be formed in the atmosphere (“secondary PM 2.5 ”) as a result of various chemical reactions among precursor pollutants such as nitrogen oxides (NO X ), sulfur oxides (SO x ), volatile organic compounds (VOC), and ammonia (NH 3 ). 1

Under section 109 of the CAA, the EPA has established national ambient air quality standards for certain pervasive air pollutants (referred to as “criteria pollutants”) and conducts periodic reviews of the NAAQS to determine whether they should be revised or whether new NAAQS should be established. The EPA sets the NAAQS for criteria pollutants at levels required to protect public health and welfare. 2 PM 2.5 is one of the ambient pollutants for which the EPA has established health-based standards. Section 110(a) of the CAA requires states to submit regulations that control PM 2.5 emissions.

On July 18, 1997, the EPA revised the NAAQS for particulate matter to add new standards for PM 2.5 . The EPA established primary and secondary annual and 24-hour standards for PM 2.5 (62 FR 38652). The annual standard was set at 15.0 micrograms per meter cubed (µg/m 3 ) based on a 3-year average of annual mean PM 2.5 concentrations, and the 24-hour (daily) standard was set at 65 µg/m 3 based on the 3-year average of the annual 98th percentile values of 24-hour PM 2.5 concentrations at each population-oriented monitor within an area. 3

On October 17, 2006, the EPA retained the annual average NAAQS at 15 µg/m 3 but revised the level of the 24-hour PM 2.5 NAAQS to 35 µg/m 3 based on a 3-year average of the annual 98th percentile values of 24-hour concentrations (71 FR 61144). 4

On December 14, 2012, the EPA promulgated the 2012 PM 2.5 NAAQS, including a revision of the annual standard to 12.0 µg/m 3 based on a 3-year average of annual mean PM 2.5 concentrations, and maintaining the current 24-hour standard of 35 µg/m 3 based on a 3-year average of the 98th percentile of 24-hour concentrations (78 FR 3086, January 15, 2013).

Following promulgation of a new or revised NAAQS, the EPA is required by CAA section 107(d) to designate areas throughout the nation as attaining or not attaining the NAAQS. On April 25, 2007, the EPA promulgated its Clean Air Fine Particle Implementation Rule, codified at 40 CFR part 51, subpart Z, in which the Agency provided guidance for state and tribal plans to implement the PM 2.5 NAAQS (72 FR 20586). Effective December 14, 2009, the EPA established initial air quality designations under subpart 1 of the Act for most areas in the United States for the 2006 24-hour PM 2.5 NAAQS, including the Chico area (74 FR 58688, November 13, 2009). 5

The United States Court of Appeals District of Columbia Circuit (D.C. Circuit) remanded the Clean Air Fine Particle Implementation Rule and the final rule entitled “Implementation of the New Source Review (NSR) Program for Particulate Matter Less than 2.5 Micrometers (PM 2.5 )” (73 FR 28321, May 16, 2008) (collectively, “1997 PM 2.5 Implementation Rules”) to the EPA on January 4, 2013, in Natural Resources Defense Council v. EPA, 706 F.3d 428 (D.C. Cir. 2013). The Court found that the EPA erred in implementing the 1997 PM 2.5 NAAQS pursuant to the general implementation provisions of subpart 1 rather than the particulate matter-specific provisions of Part D of title I (subpart 4). The EPA responded to the D.C. Circuit's decision by identifying all PM 2.5 nonattainment areas for the 1997 and 2006 nonattainment areas for the 1997 and 2006 NAAQS as “moderate” nonattainment areas under subpart 4 and by establishing a new SIP submission date of December 31, 2014, for moderate area attainment plans and for any additional attainment-related or nonattainment new source review plans necessary for areas to comply with the requirements applicable under subpart 4 (79 FR 31566, June 2, 2014).

On July 29, 2016, EPA issued a rule entitled, “Fine Particulate Matter National Ambient Air Quality Standards: State Implementation Plan Requirements” (“PM 2.5 SIP Requirements Rule”) that clarifies how states should meet the statutory SIP requirements that apply to areas designated nonattainment for any PM 2.5 NAAQS under subparts 1 and 4 (81 FR 58010, August 24, 2016). It does so by establishing regulatory requirements and by providing guidance that is applicable to areas that are currently designated nonattainment for existing PM 2.5 NAAQS and areas that are designated nonattainment for any PM 2.5 NAAQS in the future. In addition, the rule responds to the D.C. Circuit's remand of the 1997 PM 2.5 Implementation Rules. As a result, the requirements of the rule also govern future actions associated with states' ongoing implementation efforts for the 1997 and 2006 PM 2.5 NAAQS.

The Chico PM 2.5 nonattainment area is located within Butte County, California, in the northern Sacramento Valley, which is defined by the southern Cascade Mountains and northern Sierra Nevada mountains to the east and the Coastal Mountains to the north and west. As noted in the Chico PM 2.5 Plan, the surrounding mountains provide “a substantial physical barrier to both locally created pollution and the pollution that has been transported northward on prevailing winds from the metropolitan areas to the south.” (Plan, p. 4.) Most of the population lives and works at elevations below 1,000 feet, where wintertime inversions can result in poor air quality.

The local air district with primary responsibility for air quality planning in this area is the BCAQMD. Authority for regulating sources under State jurisdiction in the Chico nonattainment area is split between the District, which has responsibility for regulating stationary and most area sources, and the California Air Resources Board (CARB), which has responsibility for regulating most mobile sources. The District worked cooperatively with CARB in preparing the Chico PM 2.5 redesignation request and maintenance plan.

Within three years of the effective date of designations, states with areas designated as nonattainment for the 2006 24-hour PM 2.5 NAAQS are required to submit SIP revisions that, among other elements, provide for implementation of reasonably available control measures (RACM), reasonable further progress (RFP), attainment of the standard as expeditiously as practicable but no later than five years from the nonattainment designation (in this instance, no later than December 14, 2014), as well as contingency measures. 6 Prior to the due date for these submissions, the State requested that the EPA make a determination that, based on quality assured and certified data from the 2008-2010 period, the Chico PM 2.5 nonattainment area had attained the 2006 24-hour PM 2.5 NAAQS. 7 In addition to requesting a finding of attainment, the State requested that the EPA suspend the attainment-related planning requirements.

Effective October 10, 2013, the EPA determined that the Chico nonattainment area had attained the 2006 24-hour PM 2.5 standard based on the 2010-2012 monitoring period (78 FR 55225, September 10, 2013). Based on that determination and pursuant to 40 CFR 51.1004(c), the requirements for this area to submit an attainment demonstration, together with RACM, an RFP plan, and contingency measures for failure to meet RFP and attainment deadlines were suspended for so long as the area continued to attain the 2006 24-hour PM 2.5 NAAQS or until the area is redesignated to attainment. 8 The EPA subsequently issued a determination that the Chico area had attained the 2006 24-hour PM 2.5 NAAQS by the applicable attainment date of December 31, 2015, based on 2013-2015 data (82 FR 21711, May 10, 2017). On December 18, 2017, CARB submitted the Chico PM 2.5 Plan and requested that the EPA redesignate the Chico PM 2.5 nonattainment area to attainment for the 2006 24-hour PM 2.5 NAAQS.

Section 110(l) of the Act requires states to provide reasonable notice and public hearing prior to adoption of SIP revisions. CARB's December 18, 2017 submittal of the Chico PM 2.5 Plan documents the public review process followed by BCAQMD and CARB in adopting the Chico PM 2.5 Plan prior to submittal to the EPA as a revision to the California SIP. The submittal provides evidence that reasonable notice of a public hearing was provided to the public and that a public hearing was conducted prior to adoption. Specifically, a notice of public hearing was published on September 26, 2017, in the Chico Enterprise-Record, a newspaper of general circulation in the City of Chico and Butte County. The notice announced the availability of the Chico PM 2.5 Plan at the District office and on its website, and it opened the comment period 30 days prior to the public hearing. The public hearing was held on October 26, 2017. No comments on the Plan were made during the public hearing and no written comments were received during the public comment period. Following adoption by BCAQMD's Air Quality Governing Board, the District provided the maintenance plan to CARB and requested that it submit the redesignation request and maintenance plan to the EPA. 9

On November 16, 2017, CARB adopted the Chico PM 2.5 Plan, as certified in Resolution 17-41. No public comments were received during the CARB hearing. CARB submitted the Plan to the EPA on December 18, 2017. On February 15, 2018, CARB provided additional information regarding its development of the 2012 winter emission inventory and other emissions inventories for the Chico PM 2.5 Plan. 10 Based on the documentation provided, we find that submittal of the Chico PM 2.5 Plan as a revision to the California SIP satisfies the procedural requirements of section 110(l) of the Act.

Section 110(k)(1)(B) of the CAA requires the EPA to determine whether a SIP submittal is complete within 60 days of receipt. This section also provides that any plan that we have not affirmatively determined to be complete or incomplete will become complete by operation of law six months after the day of submittal. A completeness review allows us to determine if the submittal includes all the necessary items and information we need to act on it.

We make completeness determinations using criteria we have established in 40 CFR part 51, Appendix V. These criteria fall into two categories: administrative information and technical support information. The administrative information provides documentation that the state has followed basic administrative procedures during the SIP adoption process. The technical support information provides the information we need to determine the impact of the proposed revisions on attainment and maintenance of the air quality standard.

We notify a state of our completeness determination by letter unless the submittal becomes complete by operation of law. A finding of completeness does not approve a submittal as part of the SIP nor does it indicate that the SIP is approvable. It does start a 12-month clock for the EPA to act on the SIP submittal. On April 5, 2018, we notified CARB that we had determined the submittal of the Chico PM 2.5 Plan to be complete. 11

The CAA establishes the requirements for redesignation of a nonattainment area to attainment. Specifically, section 107(d)(3)(E) allows for redesignation provided that the following criteria are met: (1) The EPA determines that the area has attained the applicable NAAQS; (2) the EPA has fully approved the applicable implementation plan for the area under 110(k); (3) the EPA determines that the improvement in air quality is due to permanent and enforceable reductions; (4) the EPA has fully approved a maintenance plan for the area as meeting the requirements of CAA 175A; and (5) the state containing such area has met all requirements applicable to the area under section 110 and part D of the CAA. Section 110 identifies a comprehensive list of elements that SIPs must include, and part D establishes the SIP requirements for nonattainment areas. Part D is divided into six subparts. The generally-applicable nonattainment SIP requirements are found in part D, subpart 1, and the particulate matter-specific SIP requirements are found in part D, subpart 4.

The EPA provided guidance on redesignations in a document entitled “State Implementation Plans; General Preamble for the Implementation of Title I of the Clean Air Act Amendments of 1990,” published in the Federal Register on April 16, 1992 (57 FR 13498), and supplemented on April 28, 1992 (57 FR 18070) (referred to herein as the “General Preamble”). Additional guidance was issued on September 4, 1992, in a memorandum from John Calcagni, Director, Air Quality Management Division, EPA Office of Air Quality Planning and Standards, entitled “Procedures for Processing Requests to Redesignate Areas to Attainment” (referred to herein as the “Calcagni memo”). Maintenance plan submittals are SIP revisions, and as such, the EPA is obligated under CAA section 110(k) to approve them or disapprove them depending upon whether they meet the applicable CAA requirements for such plans.

For reasons set forth in section V. of this document, we propose to approve CARB's request for redesignation of the Chico nonattainment area to attainment for the 2006 24-hour PM 2.5 NAAQS based on our conclusion that all the criteria under CAA section 107(d)(3)(E) have been satisfied.

Section 107(d)(3)(E)(i) of the CAA requires that for an area to be redesignated to attainment the EPA must determine that the area has attained the relevant NAAQS. In this case, the relevant NAAQS is the 2006 24-hour PM 2.5 NAAQS. In 2013, the EPA determined that the Chico nonattainment area had attained the 2006 24-hour PM 2.5 NAAQS based on the 2010-2012 monitoring period. In 2017, the EPA determined that the Chico nonattainment area attained the 2006 24-hour PM 2.5 NAAQS by the area's applicable attainment date of December 31, 2015, based on data for the years 2013-2015. 12 Today's action updates these determinations based on the most recent available PM 2.5 monitoring data.

Generally, the EPA determines whether an area's air quality is meeting the 2006 24-hour PM 2.5 NAAQS based upon complete, quality-assured, and certified data measured at established state and local air monitoring stations (SLAMS) in the nonattainment area and entered into the EPA Air Quality System (AQS) database. The EPA will consider air quality data from air monitoring sites other than SLAMS in the nonattainment area provided those stations meet the federal monitoring requirements for SLAMS, including the quality assurance and quality control criteria in 40 CFR part 58, appendix A. 13

Data from air monitoring sites operated by state, local, or tribal agencies in compliance with EPA monitoring requirements must be submitted to AQS. These monitoring agencies certify annually that these data are accurate to the best of their knowledge. Accordingly, the EPA relies primarily on data in AQS when determining the attainment status of an area. 14 All valid data are reviewed to determine the area's air quality status in accordance with 40 CFR part 50, appendix N.

As described previously, the 2006 24-hour PM 2.5 NAAQS is met when the design value is less than or equal to 35 µg/m 3 . The PM 2.5 24-hour average is considered valid when 75 percent of the hourly averages for the 24-hour period are available. Data completeness requirements for a given year are met when at least 75 percent of the scheduled sampling days for each quarter have valid data.

The California Air Resources Board is responsible for monitoring ambient air quality within Butte County and operates the PM 2.5 monitoring network in Butte County. CARB submits annual monitoring network plans to the EPA. These network plans describe the monitoring network operated by CARB within Butte County and discuss the status of the air monitoring network, as required under 40 CFR 58.10. The EPA regularly reviews these annual plans for compliance with the applicable reporting requirements in 40 CFR part 58. With respect to PM 2.5 , the EPA has found that the area's network plans meet the applicable reporting requirements under 40 CFR part 58. 15 The EPA also concluded from its 2015 Technical Systems Audit that CARB's monitoring network currently meets or exceeds the requirements for the minimum number of SLAMS for PM 2.5 in the Chico, CA Metropolitan Statistical Area (MSA), which comprises the Chico PM 2.5 nonattainment area. 16 CARB annually certifies that the data it submits to AQS are complete and quality-assured. 17

During the 2014-2016 period, CARB operated one PM 2.5 SLAMS monitoring site, Chico-East Avenue (AQS ID: 06-007-0008), within the Chico PM 2.5 nonattainment area. SLAMS produce data comparable to the NAAQS, and therefore, the monitor must be an approved Federal Reference Method (FRM), Federal Equivalent Method, or Approved Regional Method. The Chico-East Avenue monitor measures PM 2.5 concentrations on a daily, year-round basis using a method that has been designated an FRM by the EPA. Butte County also had two additional monitoring sites operated by CARB during this period, Gridley (AQS ID: 06-007-4001) and Paradise-Theater (06-007-2002), whose data are not comparable to the NAAQS and cannot be used for attainment demonstration purposes. CARB continues to meet EPA requirements for the minimum number of PM 2.5 monitoring sites in Butte County within the Chico MSA.

Consistent with the requirements contained in 40 CFR part 50, the EPA has reviewed the quality-assured and certified PM 2.5 ambient air monitoring data collected at the Chico-East Avenue monitoring site, as recorded in AQS, for the applicable monitoring period. We have determined that the data are of sufficient completeness for the purposes of making comparisons with the 2006 24-hour PM 2.5 NAAQS. The EPA's evaluation of whether the Chico PM 2.5 nonattainment area has attained the 2006 24-hour PM 2.5 NAAQS is based on our review of the monitoring data and takes into account the adequacy of the PM 2.5 monitoring network in the nonattainment area and the reliability of the data collected by the network as discussed earlier in this section of this document.

Table 1 below shows the 24-hour PM 2.5 design value monitored at the Chico-East Avenue monitoring site over the most recent three-year period (2014-2016). The data show that the 24-hour design value for the 2014-2016 period was equal to or less than 35 µg/m 3 at the Chico-East Avenue monitor. Therefore, we find that, based on complete, quality-assured, and certified data for 2014-2016, the Chico PM 2.5 nonattainment area has attained the 2006 24-hour PM 2.5 NAAQS. Preliminary data available in AQS for 2017 indicate that the area continues to attain the 2006 24-hour PM 2.5 NAAQS.

Sections 107(d)(3)(E)(ii) and (v) require the EPA to determine that the area has a fully approved applicable SIP under section 110(k) that meets all applicable requirements under section 110 and part D for the purposes of redesignation.

The general SIP elements and requirements set forth in section 110(a)(2) include, but are not limited to, the following: Submittal of a SIP that has been adopted by the state after reasonable public notice and hearing; provisions for establishment and operation of appropriate procedures needed to monitor ambient air quality; implementation of a source permitting program; provision for the implementation of part C requirements for prevention of significant deterioration; provisions for the implementation of part D requirements for nonattainment new source review permit programs; provisions for air pollution modeling; and provisions for public and local agency participation in planning and emission control rule development.

We note that SIPs must be fully approved only with respect to applicable requirements for purposes of redesignation in accordance with section 107(d)(3)(E)(ii). The section 110(a)(2) (and part D) requirements that are linked to a particular nonattainment area's designation and classification are the relevant measures to evaluate in reviewing a redesignation request. Requirements that apply regardless of the designation of any particular area of a state are not applicable requirements for the purposes of redesignation, and the State will remain subject to these requirements after the Chico PM 2.5 nonattainment area is redesignated to attainment.

For example, CAA section 110(a)(2)(D) requires that SIPs contain certain measures to prevent sources in a state from significantly contributing to air quality problems in another state: These SIPs are often referred to as “transport SIPs.” Because the section 110(a)(2)(D) requirements for transport SIPs are not linked to a particular nonattainment area's designation and classification, but rather apply regardless of the area's attainment status, these are not applicable requirements for the purposes of redesignation under section 107(d)(3)(E).

Similarly, the EPA believes that other section 110(a)(2) (and part D) requirements that are not linked to nonattainment plan submissions or to an area's attainment status are not applicable requirements for purposes of redesignation. The EPA believes that the section 110 (and part D) requirements that relate to a particular nonattainment area's designation and classification are the relevant measures to evaluate in reviewing a redesignation request. This view is consistent with the EPA's existing policy on applicability of the conformity SIP requirement for redesignations. 18

On numerous occasions, CARB and BCAQMD have submitted and we have approved provisions addressing the basic CAA section 110 provisions. The Butte County portion of the California SIP  19 contains enforceable emission limitations; requires monitoring, compiling and analyzing of ambient air quality data; requires preconstruction review of new or modified stationary sources; provides for adequate funding, staff, and associated resources necessary to implement its requirements; and provides the necessary assurances that the State maintains responsibility for ensuring that the CAA requirements are satisfied in the event that Butte County is unable to meet its CAA obligations. There are no outstanding or disapproved applicable SIP submittals with respect to the Butte County portion of the SIP that prevent redesignation of the Chico PM 2.5 nonattainment area for the 24-hour PM 2.5 standard. Therefore, we propose to conclude that CARB and BCAQMD have met all general SIP requirements for Chico that are applicable for purposes of redesignation under section 110 of the CAA.

Subparts 1 and 4 of part D, title 1 of the CAA contain air quality planning requirements for PM 2.5 nonattainment areas. Subpart 1 contains general requirements for all nonattainment areas of any pollutant, including PM 2.5 , governed by a NAAQS. The subpart 1 requirements include, among other things, provisions for RACM, RFP, emissions inventories, contingency measures, and conformity. Subpart 4 contains specific planning and scheduling requirements for PM 2.5 nonattainment areas. Section 189(a), (c), and (e) requirements apply specifically to moderate PM 2.5 nonattainment areas and include: An approved permit program for construction of new and modified major stationary sources; provisions for RACM; an attainment demonstration; quantitative milestones demonstrating RFP toward attainment by the applicable attainment date; and provisions to ensure that the control requirements applicable to major stationary sources of PM 2.5 also apply to major stationary sources of PM 2.5 precursors, except where the Administrator has determined that such sources do not contribute significantly to PM 2.5 levels that exceed the NAAQS in the area.

As noted in Section II.C.of this document, the EPA determined in 2013 that the Chico PM 2.5 nonattainment area attained the 24-hour PM 2.5 NAAQS based on 2010-2012 data. In accordance with the EPA's Clean Data Policy, we determined that the following requirements do not apply to the Chico PM 2.5 nonattainment area for so long as the area continues to attain the PM 2.5 standard or until the area is redesignated to attainment: An attainment demonstration under section 189(a)(1)(B); RACM provisions under sections 172(c) and 189(a)(1)(C); reasonable further progress provisions under section 189(c)(1); and contingency measures under section 172(c)(9). 20

Throughout this document whenever “we,” “us,” or “our” is used, we mean EPA.

On February 12, 2018, the EPA published a proposed rulemaking in the Federal Register to update a portion of the OCS Air Regulations. See 83 FR 5971. As stated in the EPA's February 12, 2018 proposed rulemaking, requirements applying to OCS sources located within 25 miles of states' seaward boundaries must be updated periodically to remain consistent with the requirements of the COA, as mandated by section 328(a)(1) of the Clean Air Act. The portion of the OCS air regulations that is being updated in the proposed rulemaking pertains to the requirements for OCS sources for which Massachusetts is the designated COA. The intended effect of approving the OCS requirements for the Massachusetts Department of Environmental Protection (MassDEP) is to regulate emissions from OCS sources in accordance with the requirements for onshore sources. The Commonwealth of Massachusetts' requirements discussed in the EPA's proposed rulemaking will be incorporated by reference into the Code of Federal Regulations (CFR) and listed in the appendix to the OCS air regulations in 40 CFR part 55.

Among other things, the EPA's February 12, 2018 action proposed to incorporate into 40 CFR part 55 the applicable provisions of 310 Code of Massachusetts Regulations (CMR) 7.00: Air Pollution Control, as amended through January 16, 2018. On March 9, 2018, the MassDEP promulgated amendments to the regulations at 310 CMR 7.00. Pursuant to 40 CFR 55.12, consistency reviews will occur if the EPA finds that part 55 is inconsistent with the requirements in effect in the COA. Therefore, the EPA is including the Commonwealth's March 9, 2018 amended regulations for 310 CMR 7.00 in the EPA's proposed consistency update to 40 CFR part 55 in addition to the other regulations EPA proposed for inclusion in the February 12, 2018 proposed rulemaking. The EPA has added the amended regulations at 310 CMR 7.00 to the docket and is reopening the comment period to give all interested persons the opportunity to comment on the incorporation by reference of the amended regulations at 310 CMR 7.00. 1 This document reopens the public comment period established in the Federal Register document on February 12, 2018 (83 FR 5971) (FRL-9974-28—Region 1).

To submit comments, or access the docket, please follow the detailed instructions provided in the ADDRESSES section of this Federal Register . Please refer to the EPA's February 12, 2018 (83 FR 5971) proposed rulemaking for more detailed information regarding this rulemaking action.

In the February 12, 2018 action, the EPA proposed to include in a final EPA rule regulatory text that includes incorporation by reference. The EPA is including the updated regulatory text below to reflect the March 9, 2018 effective date of the Commonwealth's amended regulations discussed in this document. In accordance with the requirements of 1 CFR 51.5, the EPA is proposing to incorporate by reference the Code of Massachusetts Regulations rules set forth below. The EPA has made, and will continue to make, these materials available through www.regulations.gov and at the EPA New England Region 1 Office (please contact the person identified in the FOR FURTHER INFORMATION CONTACT section of this document for more information).

For the reasons set out in the preamble, title 40 of the Code of Federal Regulations, part 55, is proposed to be amended as follows: