This proposal, pursuant to 5 U.S.C. 553, proposes amendments to regulations issued to carry out a marketing order as defined in 7 CFR 900.2(j). This proposal is issued under Marketing Order No. 966, as amended (7 CFR part 966), regulating the handling of tomatoes grown in Florida. Part 966 (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 tomato producers and handlers operating within the area of production.

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 proposal has been reviewed under Executive Order 12988, Civil Justice Reform. This proposed rule is not intended to have retroactive effect. This proposed rule shall not be deemed to preclude, preempt, or supersede any State program covering tomatoes grown in Florida.

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 no later than 20 days after the date of entry of the ruling.

Section 1504 of the Food, Conservation, and Energy Act of 2008 (2008 Farm Bill) (Pub. L. 110-246) amended section 8c(17) of the Act, which in turn required the addition of supplemental rules of practice to 7 CFR part 900 (73 FR 49307; August 21, 2008). The amendment of section 8c(17) of the Act and additional supplemental rules of practice authorize the use of informal rulemaking (5 U.S.C. 553) to amend Federal fruit, vegetable, and nut marketing agreements and orders. USDA may use informal rulemaking to amend marketing orders based on the nature and complexity of the proposed amendment, the potential regulatory and economic impacts on affected entities, and any other relevant matters.

AMS has considered these factors and has determined that the amendments proposed are not unduly complex and the nature of the proposed amendments is appropriate for utilizing the informal rulemaking process to amend the Order.

The proposed amendments were unanimously recommended by the Committee following deliberations at two public meetings held on November 1, 2018, and February 27, 2019. The proposals would amend the Order by changing the Committee's size, the length of term of office, and quorum requirements.

A proposed rule soliciting comments on the proposed amendments was issued on September 23, 2019 and published in the Federal Register on October 1, 2019 (84 FR 52044). No comments were received. AMS will conduct a producer referendum to determine support for the proposed amendments. If appropriate, a final rule will then be issued to effectuate the amendments if they are favored by producers in the referendum.

The Committee's proposals would amend the Order by changing the Committee's size, the length of term of office, and quorum requirements.

Section 966.22 provides that the Committee consists of 12 members and, for each member of the Committee, there must be an alternate who has the same qualifications as the member. This proposal would amend § 966.22 by reducing the size of the Committee from 12 to 10 members. The requirement that each member have an alternate with the same qualifications as the member would remain unchanged.

Since promulgation of the Order in 1995, the Florida tomato industry has seen reductions of about 80% in the number of tomato producers and 33% of registered handlers. Industry consolidation and land development pressure have also contributed to this decline. Decreasing the Committee's size from 12 members to 10 members would make Committee membership more reflective of today's industry and enable it to fulfill quorum requirements.

Section 966.23 requires Committee members and their alternates to serve for one year.

This proposal would change § 966.23 by revising the term of office for producer members from one year to two years beginning on August 1 and ending as of July 31. Currently, the nominating process for the 12 members and alternate members is conducted annually. This proposed change would reduce the annual turnover on the Committee and provide time for new members and alternates to learn the details of Committee operations and business.

Currently, § 966.32 states that eight members of the Committee shall constitute a quorum, and the same number of concurring votes shall be required to pass any motion or approve any Committee action.

The proposed change would modify § 966.32 to allow six members to constitute a quorum. The requirement that the same number of concurring votes (six) shall be required to pass any motion or approve any Committee action would remain unchanged. The Committee is experiencing difficulties filling all seats and obtaining a quorum at meetings since several seats have been vacant. Adjusting the current requirements would enable the Committee to operate fully and increase the chance of reaching a quorum during scheduled meetings. These changes would help to streamline the Committee's operations and increase its effectiveness.

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

The purpose of the RFA is to fit regulatory actions to the scale of businesses subject to such actions so 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.

There are approximately 75 producers of Florida tomatoes in the production area and 37 handlers subject to regulation under the Order. Small agricultural producers are defined by the Small Business Administration (SBA) as those having annual receipts less than $1,000,000, and small agricultural service firms are defined as those whose annual receipts are less than $30,000,000 (13 CFR 121.201).

According to industry and Committee data, the average annual price for fresh Florida tomatoes during the 2017-18 season was approximately $12.56 per 25-pound container, and total fresh shipments were 25.9 million containers. Using the average price and shipment information, the number of handlers, and assuming a normal distribution, the majority of handlers have average annual receipts less than $30,000,000 ($12.56 times 25.9 million containers equals $325,304,000 divided by 37 handlers equals $8,792,000 per handler) and may be classified as small entities.

With an estimated producer price of $6.00 per 25-pound container, the number of Florida tomato producers, and assuming a normal distribution, the average annual producer revenue is above $1,000,000 ($6.00 times 25.9 million containers equals $155,400,000 divided by 75 producers equals $2,072,000 per producer). Thus, the majority of producers of Florida tomatoes may be classified as large entities.

The proposed amendments would change the Committee's size, the length of term of office, and quorum requirements.

The Committee unanimously recommended the proposed amendments at public meetings on November 1, 2018 and February 27, 2019. If these proposals are approved in a referendum, there would be no direct financial effects on producers or handlers. However, these proposed changes would decrease administrative costs to producers and Committee staff. This action would save time and work for producers and Committee staff, by avoiding the annual requirement to prepare multiple nomination notices and meetings, and the administrative and travel expenses that are required to carry out these annual duties.

Since 1995, the number of producers and handlers operating in the industry has decreased, which makes it difficult to find enough members to fill positions on the Committee. Decreasing the Committee's size would make it more reflective of today's industry. No economic impact is expected if the proposed amendments are approved because they would not establish any new regulatory requirements on handlers, nor would they have any assessment or funding implications. There would be no change in financial costs, reporting, or recordkeeping requirements if this proposal is approved.

Alternatives to this proposal, including making no changes at this time, were considered by the Committee. Due to changes in the industry, AMS believes the proposals are justified and necessary to ensure the Committee's ability to locally administer the program. Reducing the size of the Committee would enable it to satisfy membership and quorum requirements fully, thereby ensuring a more efficient and orderly flow of business.

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 (Vegetable and Specialty Crops). No changes in those requirements are necessary because of this action. Should any changes become necessary, they would be submitted to OMB for approval.

This proposed rule would impose no additional reporting or recordkeeping requirements on either small or large Florida tomato handlers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public-sector agencies.

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 action.

The Committee's meeting was widely publicized throughout the Florida tomato production area. All interested persons were invited to attend the meeting and encouraged to participate in Committee deliberations on all issues. Like all Committee meetings, the November 1, 2018, and February 27, 2019, meetings were public, and all entities, both large and small, were encouraged to express their views on the proposals.

A proposed rule concerning this action was published in the Federal Register on October 1, 2019 (84 FR 52044). Copies of the rule were mailed or sent via facsimile to all Committee members and Florida tomato handlers. Finally, the proposed rule was made available through the internet by USDA and the Office of the Federal Register. A 60-day comment period ending December 2, 2019, was provided to allow interested persons to respond to the proposal. No comments were received, so no changes will be made to the amendments as proposed.

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.

The findings and conclusions and general findings and determinations included in the proposed rule set forth in the October 1, 2019, issue of the Federal Register are hereby approved and adopted.

Annexed hereto and made a part hereof is the document entitled “Order Amending the Order Regulating the Handling of Tomatoes Grown in Florida.” This document has been decided upon as the detailed and appropriate means of effectuating the foregoing findings and conclusions. It is hereby ordered, that this entire proposed rule be published in the Federal Register .

It is hereby directed that a referendum be conducted in accordance with the procedure for the conduct of referenda (7 CFR part 900.400-407) to determine whether the annexed order amending the Order regulating the handling of tomatoes grown in Florida is approved by growers, as defined under the terms of the Order, who during the representative period were engaged in the production of tomatoes in the production area. The representative period for the conduct of such referendum is hereby determined to be October 1, 2018, through September 30, 2019.

The agents designated by the Secretary to conduct the referendum are Steven Kauffman and Christian D. Nissen, Southeast Marketing Field Office, Marketing Order and Agreement Division, Specialty Crops Program, AMS, USDA; Telephone: (863) 324-3375, Fax: (863) 325-8793, or Email: Steven.Kauffman@usda.gov or Christian.Nissen@usda.gov, respectively.

The findings hereinafter set forth are supplementary to the findings and determinations which were previously made in connection with the issuance of the Order; and all said previous findings and determinations are hereby ratified and affirmed, except insofar as such findings and determinations may be in conflict with the findings and determinations set forth herein.

1. The Order, as amended, and as hereby proposed to be further amended, and all the terms and conditions thereof, would tend to effectuate the declared policy of the Act;

2. The Order, as amended, and as hereby proposed to be further amended, regulates the handling of tomatoes grown in Florida in the same manner as, and is applicable only to, persons in the respective classes of commercial and industrial activity specified in the Order;

3. The Order, as amended, and as hereby proposed to be further amended, is limited in application to the smallest regional production area which is practicable, consistent with carrying out the declared policy of the Act, and the issuance of several orders applicable to subdivisions of the production area would not effectively carry out the declared policy of the Act;

4. The Order, as amended, and as hereby proposed to be further amended, prescribes, insofar as practicable, such different terms applicable to different parts of the production area as are necessary to give due recognition to the differences in the production and marketing of tomatoes produced in the production area; and

5. All handling of tomatoes produced or packed in the production area as defined in the Order is in the current of interstate or foreign commerce or directly burdens, obstructs, or affects such commerce.

It is therefore ordered, that on and after the effective date hereof, all handling of tomatoes grown in Florida shall be in conformity to, and in compliance with, the terms and conditions of the said Order as hereby proposed to be amended as follows:

The provisions of the proposed marketing order amending the Order contained in the proposed rule issued by the Administrator on September 23, 2019 and published in the Federal Register (84 FR 52044) on October 1, 2019, will be and are the terms and provisions of this order amending the Order and are set forth in full herein.

For the reasons set forth in the preamble, the Agricultural Marketing Service proposes to amend 7 CFR part 966 as follows:

The FAA invites 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-2019-1021; Project Identifier MCAI-2019-00120-E” at the beginning of your comments. The FAA specifically invites comments on the overall regulatory, economic, environmental, and energy aspects of this NPRM. The FAA will consider all comments received by the closing date and may amend this NPRM because of those comments.

Except for Confidential Business Information as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to https://www.regulations.gov, including any personal information you provide. The FAA will also post a report summarizing each substantive verbal contact received about this NPRM.

Confidential Business Information (CBI) is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this NPRM contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this NPRM, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this NPRM. Submissions containing CBI should be sent to Mehdi Lamnyi, Aerospace Engineer, ECO Branch, FAA, 1200 District Avenue, Burlington, MA 01803. Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking.

The FAA issued AD 2016-07-13, Amendment 39-18458 (81 FR 20222, April 7, 2016), (“AD 2016-07-13”), and AD 2018-03-22, Amendment 39-19195 (83 FR 6455, February 14, 2018), (“AD 2018-03-22”) for certain GE Aviation Czech s.r.o. M601D-11, M601E-11, M601E-11A, M601E-11AS, M601E-11S, and M601F turboprop engines. AD 2016-07-13 requires inspection of the engine PT disk and, if found damaged, its replacement with a part eligible for installation. AD 2016-07-13 resulted from the discovery of damage to certain engine PT disks during engine shop visits. AD 2018-03-22 requires the removal of certain engine PT disks installed on the affected engines. AD 2018-03-22 resulted from a design review by the manufacturer that determined engine PT rotors with certain engine PT disks have less overspeed margin than originally stated during product certification.

The FAA issued AD 2016-07-13 to prevent failure of the engine PT disk, which could result in release of high-energy debris, damage to the engine, and reduced control of the airplane. The FAA issued AD 2018-03-22 to prevent failure of the engine PT rotor, which could result in uncontained release of the engine PT disk, damage to the engine, and damage to the airplane.

Since the FAA issued AD 2016-07-13 and AD 2018-03-22, The European Union Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Community, has issued EASA AD 2019-0143, dated June 13, 2019 (referred to after this as “the MCAI”), to address the unsafe condition on these products. The MCAI states:

You may obtain further information by examining the MCAI in the AD docket on the internet at https://www.regulations.gov by searching for and locating Docket No. FAA-2019-1021.

The FAA reviewed GE Aviation Czech s.r.o Alert Service Bulletin (ASB) ASB-M601E-72-50-00-0069[02], ASB-M601D-72-50-00-0052[02], ASB-M601T-72-50-00-0028[02], ASB-M601F-72-50-00-0035[02] and ASB-M601Z-72-50-00-0038[02] (single document), dated June 11, 2019. The ASB provides procedures for replacing the engine PT disk. 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 EASA, and is approved for operation in the United States. Pursuant to our bilateral agreement with the European Community, EASA has notified us of the unsafe condition described in the MCAI and service information referenced above. The FAA is proposing this AD because it evaluated all the relevant information provided by EASA and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.

This proposed AD would retain certain requirements of AD 2016-07-13 and AD 2018-03-22. This proposed AD would require an inspection of the engine PT disk and, if found damaged, its replacement with a part eligible for installation. This proposed AD would also require the removal of certain engine PT disks identified by P/N installed on the affected engines. In addition, this proposed AD expands the applicability to additional engine PT disk P/Ns and S/Ns affected by the damage or non-conformity.

EASA AD 2019-0143, dated June 13, 2019, identifies the applicability as GE Aviation Czech s.r.o. M601D, M601D-1, M601D-2, M601D-11, M601D-11NZ, M601E, M601E-11, M601E-11A, M601E-11AS, M601E-11S, M601E-21, M601F, M601FS, M601F-11, M601F-22, M601F-32, M601T, and M601Z turboprop engines. This proposed AD is applicable to only GE Aviation Czech s.r.o. M601D-11, M601E-11, M601E-11A, M601E-11AS, M601E-11S, and M601F turboprop engines. The GE Aviation Czech s.r.o. turboprop engines not listed in this proposed AD have not been type validated for operation in the United States.

The FAA estimates that this proposed AD affects 24 GE Aviation Czech s.r.o. M601 turboprop engines installed on airplanes of U.S. registry. The FAA estimates that 12 affected turboprop engines are “Group 1” engines and 12 are “Group 2” engines.

The FAA estimates the following costs to comply with this proposed AD:

The FAA estimates the following costs to do any necessary replacements that would be required based on the results of the proposed inspection. The FAA has no way of determining the number of engines that might need this replacement:

According to the manufacturer, some of the costs of this proposed AD may be covered under warranty, thereby reducing the cost impact on affected individuals. The FAA does not control warranty coverage for affected individuals. As a result, the FAA has included all costs in its cost estimate.

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.

The FAA is 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 engines, propellers, and associated appliances to the Manager, Engine and Propeller Standards Branch, Policy and Innovation Division.

The FAA 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) Will not affect intrastate aviation in Alaska, and

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

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

Authority for This Rulemaking

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would amend the Class E airspace extending upward from 700 feet above the surface at Burnett County Airport, Siren, WI, to support IFR operations at this airport.

Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments, as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal. Communications should identify both docket numbers and be submitted in triplicate to the address listed above. Commenters wishing the FAA to acknowledge receipt of their comments on this notice must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. FAA-2019-1042/Airspace Docket No. 19-AGL-28.” The postcard will be date/time stamped and returned to the commenter.

All communications received before the specified closing date for comments will be considered before taking action on the proposed rule. The proposal contained in this notice may be changed in light of the comments received. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket.

An electronic copy of this document may be downloaded through the internet at https://www.regulations.gov. Recently published rulemaking documents can also be accessed through the FAA's web page at https://www.faa.gov/air_traffic/publications/airspace_amendments/.

You may review the public docket containing the proposal, any comments received, and any final disposition in person in the Dockets Office (see the ADDRESSES section for the address and phone number) between 9:00 a.m. and 5:00 p.m., Monday through Friday, except federal holidays. An informal docket may also be examined during normal business hours at the Federal Aviation Administration, Air Traffic Organization, Central Service Center, Operations Support Group, 10101 Hillwood Parkway, Fort Worth, TX 76177.

This document proposes to amend FAA Order 7400.11D, Airspace Designations and Reporting Points, dated August 8, 2019, and effective September 15, 2019. FAA Order 7400.11D is publicly available as listed in the ADDRESSES section of this document. FAA Order 7400.11D lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

The FAA is proposing an amendment to Title 14 Code of Federal Regulations (14 CFR) part 71 by amending the Class E airspace extending upward from 700 feet above the surface to within a 6.5-mile radius (increased from a 6.4-mile radius) of the Burnett County Airport, Siren, WI; removing the city associated with the airport to comply with a change to FAA Order 7400.2M, Procedures for Handling Airspace Matters; updating the geographic coordinates of the airport to coincide with the FAA's aeronautical database; removing the exclusionary language from the airspace legal description as it is no longer required; adding an extension 2 miles each side of the 045° bearing from the airport extending from the 6.5-mile radius to 9.5 miles northeast of the airport; adding an extension 2 miles each side of the 137° bearing from the airport extending from the 6.5-mile radius to 9.9 miles southeast of the airport; adding an extension 2 miles each side of the 225° bearing from the airport extending from the 6.5-mile radius to 9.5 miles southwest of the airport; and adding an extension 2 miles each side of the 317° bearing extending from the 6.5-mile radius to 9.5 miles northwest of the airport.

These actions are the result of an airspace review caused by the decommissioning of the Siren VOR, which provided navigation information for the instrument procedures at these airports, as part of the VOR MON Program.

Class E airspace designations are published in paragraph 6005 of FAA Order 7400.11D, dated August 8, 2019, and effective September 15, 2019, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation listed in this document will be published subsequently in the Order.

FAA Order 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.

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

This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.

Accordingly, pursuant to the authority delegated to me, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:

I. Background

In December 1972, the Commission published for public comment proposed Guides Concerning the Use of Endorsements and Testimonials in Advertising, 37 FR 25548 (1972). Interested parties submitted extensive comments. On May 21, 1975, the Commission promulgated, under the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. 41-58, three sections of the 1972 proposal as final guidelines (16 CFR 255.0, 255.3 and 255.4) and republished three others, in modified form, for additional public comment. 40 FR 22127 (1975). The Commission received public comment on the three re-proposed guidelines, as well as on one of the final guidelines. On January 18, 1980, the Commission promulgated three new sections as final guidelines (16 CFR 255.1, 255.2 and 255.5) and modified one example to one of the final guidelines adopted in May 1975 (16 CFR 255.0 Example 4). 45 FR 3870 (1980).

As part of its periodic regulatory review, the Commission sought public comment on the Endorsement Guides in January 2007. 72 FR 2214 (2007). In November 2008, the Commission discussed the comments it received in 2007, proposed certain revisions to the Guides, and requested comment on those proposed revisions. 73 FR 72374 (2008). In October 2009, the Commission substantively amended the Guides. 74 FR 53124 (2009).

The Guides are designed to assist businesses and others in conforming their endorsement and testimonial advertising practices to the requirements of Section 5 of the FTC Act. The Guides interpret laws the Commission administers, and thus are advisory in nature. The Commission, however, can take action under the FTC Act if an endorsement or testimonial is inconsistent with the Guides. In any such enforcement action, the Commission must prove that the challenged act or practice is unfair or deceptive in violation of Section 5 of the FTC Act. The Guides define both endorsements and testimonials broadly to mean any advertising message that consumers are likely to believe reflects the opinions, beliefs, findings, or experience of a party other than the sponsoring advertiser. 16 CFR 255.0(a) and (b).

The Guides state that endorsements must reflect the honest opinions, findings, beliefs, or experience of the endorser. 16 CFR 255.1(a). Furthermore, endorsements may not contain any representations that would be deceptive, or could not be substantiated, if made directly by the advertiser. Id.

The Guides advise that an advertisement employing a consumer endorsement on a central or key attribute of a product will be interpreted as representing that the endorser's experience is representative of what consumers will generally achieve. 16 CFR 255.2(a). If an advertiser does not have adequate substantiation that the endorser's experience is representative, the advertisement should contain a clear and conspicuous disclosure. Id.

The Guides define an expert endorser as someone who, as a result of experience, study or training, possesses knowledge of a particular subject that is superior to that generally acquired by ordinary individuals. 16 CFR 255.0(d). An expert endorser's qualifications must, in fact, give him or her the expertise that he or she is represented as possessing with respect to the endorsement. 16 CFR 255.3(a). Moreover, an expert endorsement must be supported by an actual exercise of expertise, and the expert's evaluation of the product must have been at least as extensive as someone with the same degree of expertise would normally need to conduct in order to support the conclusions presented. 16 CFR 255.3(b).

Among other things, the Guides also state that: (1) Advertisements presenting endorsements by what are represented to be actual consumers should utilize actual consumers, or clearly and conspicuously disclose that the persons are not actual consumers, 16 CFR 255.2(c); (2) an organization's endorsement must be reached by a process sufficient to ensure that the endorsement fairly reflects the collective judgment of the organization, 16 CFR 255.4; and (3) when there is a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement ( i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed, 16 CFR 255.5.

The Commission periodically reviews all Commission rules and guides. These reviews seek information about the costs and benefits of the Commission's rules and guides and their economic impact. The information obtained assists the Commission in identifying rules and guides that warrant modification or rescission. Therefore, the Commission solicits comment on, among other things, the economic impact of and the continuing need for its Endorsement Guides; possible conflict between the Guides and state, local, federal, or international laws; and the effect of any technological, economic, environmental, or other industry changes on the Guides.

The Commission is particularly interested in comments and supporting data on the following questions. These questions are designed to assist the public and should not be construed as a limitation on the issues on which public comment may be submitted. In their replies to each of these questions, commenters should provide any available evidence and data, such as empirical data, consumer perception studies, or consumer complaints, that support the commenter's asserted position.

(1) Is there a continuing need for the Endorsement Guides as currently promulgated?

(2) Are any specific provisions of the Guides no longer necessary, and, if so, which provisions and why are they no longer necessary?

(3) Are the deceptive or unfair practices addressed by the Guides prevalent in the marketplace? Are the Guides effective in addressing those practices? Are there deceptive or unfair practices involving endorsements that are not covered by the Guides? Are there alternatives, such as individual enforcement actions under the FTC Act, which would be more effective or equally effective in addressing those practices? Do the Endorsement Guides describe any practices that are not deceptive or unfair, and if so, which practices and why are they not deceptive or unfair?

(4) What is the degree of compliance with the Endorsement Guides? What effect, if any, does this have on the continuing need for the Guides? Do covered businesses and others following the Guides' suggestions self-regulate or have voluntary standards or guidance, such as through trade associations, that overlap with the Guides? If so, to what extent, if any, do the Guides support industry self-regulation or voluntary standards?

(5) What benefits, if any, have the Endorsement Guides provided to consumers? Do the Guides impose any significant costs on consumers?

(6) What impact, if any, have the Guides had on the flow of truthful or deceptive information to consumers?

(7) What changes, if any, should be made to the Endorsement Guides to increase their benefits to consumers? How would these changes affect consumer benefits or business costs?

(8) What burdens or costs, including costs of compliance, have the Guides imposed on businesses? What burdens or costs have the Guides imposed on small businesses in particular? What burdens or costs have the Guides imposed on endorsers? What benefits have the Guides provided to businesses? What benefits have the Guides provided to endorsers?

(9) What changes, if any, should be made to the Guides to reduce the burdens or costs imposed on businesses or endorsers? How would these changes affect the benefits provided by the Guides to consumers, businesses, and endorsers?

(10) Do the Guides overlap or conflict with federal, state, or local laws or regulations? Do the Guides overlap or conflict with any international laws or regulations?

(11) Have consumer perceptions regarding endorsements changed since the Guides were last revised and, if so, do these changes warrant revising the Guides?

(12) What modifications to the Guides, if any, should be made to address technological, economic, or environmental changes that have occurred since the Guides were last revised?

(13) FTC staff periodically updates a business guidance document, “The FTC's Endorsement Guides: What People Are Asking.” Is there guidance in the current version of that document that should be incorporated into the Guides? If so, what and why? Is there guidance in the current version of that document that should not be incorporated into the Guides? If so, what and why?

(14) How well are advertisers and endorsers disclosing unexpected material connections on social media platforms? Does this depend on the type of material connection? What disclosures of material connections are sufficiently clear ( i.e., understandable) to consumers when used in social media? What disclosures of material connection currently being used in social media are likely not understood by consumers? Does the sufficiency or insufficiency vary by platform, type of material connection ( e.g., a paid post versus a free product), or other factors, and, if so, how? To the extent that these connections are not being adequately disclosed, do the problems tend to be in the substance of the disclosures or in their conspicuousness ( e.g., placement, visibility, or audibility)? Should the Guides provide more detail on what disclosures of material connections are sufficiently clear or unclear in different social media formats? Does the fact that Commission Guides are generally reviewed every ten years affect your answer as to whether providing more detail would be helpful?

(15) The FTC has received complaints that young children may not adequately understand disclosures of material connections. To what extent would knowledge of a material connection affect the weight or credibility that young children give to an endorsement? At what age are children capable of making a connection between credibility and a material connection? Does this age differ from the age at which children are capable of identifying advertising? Why or why not and, if so, how? To what extent do young children understand disclosures of material connections? What should advertisers and endorsers appealing to young children know about their intended audience's understanding of a particular endorsement, advertising format, or disclosure? How can disclosures of material connections in media consumed by young children be made clearer or more effective? How, if at all, are your answers to the above questions impacted by parental involvement in the media consumption of young children? What disclosures of material connections should advertisers and endorsers appealing to young children provide to parents?

(16) Some marketers give incentives ( e.g., free or discounted products) to consumers in exchange for posting reviews of their products or services without specifically requiring that the reviews be favorable. Do such incentives skew or bias the resulting reviews? Why or why not? If so, how and to what extent do incentives skew or bias the resulting reviews, and what factors may make such impacts more or less likely? Should such incentives be disclosed? Why or why not and if so, how? Does the nature or value of the incentive matter? If so, how? Do such incentives skew composite ratings? Why or why not and if so, how? Do such incentives impact the order in which products or services are presented to consumers on retail or other review platforms? Why or why not and if so, how?

(17) Some consumer reviewers who receive incentives in exchange for their reviews disclose their material connections in their reviews. Are such disclosures adequate when incentivized reviews are included in composite ratings? Why or why not? Are composite ratings that are based in whole or in part on such incentivized reviews misleading? If such composite ratings are misleading: (1) Are there disclosures that could adequately address this concern and if so, what disclosures; and (2) how should the Guides address composite ratings if disclosures are not sufficient or there is not an opportunity for the marketer to make adequate disclosures ( e.g., when the reviews and composite ratings appear on a third party's website)?

(18) Some marketers actively solicit customer feedback and send satisfied customers down one path to relevant review sites and send customers with negative sentiment down another path, sometimes into some sort of customer service resolution process. What are the costs and benefits of this practice? Should it be addressed in the Guides and, if so, how?

(19) Some advertisers contend that consumers who use social media understand that influencers who promote products are generally doing so only because they are paid or given something by the marketer, regardless of what or whether disclosures appear in social media posts. What evidence is there to support or contradict this assertion and does the answer differ depending on the nature of the material connection? In particular cases, what factors might be considered to determine whether a material connection is unexpected? Do consumer expectations vary by the age of the audience, the product category, the nature of the influencer, the format or substance of the endorsement, or otherwise, and if so, how?

(20) Some endorsers (including the authors of some product reviews) include affiliate links that can be used to purchase the products they are endorsing. Should the Guides address such links, and if so, how? To what extent do consumers expect that these endorsers are compensated for purchases through those links? If so, what compensation arrangements do consumers ordinarily expect? To what extent would knowing of such compensation affect the weight or credibility given to those endorsements? Is there a distinction in terms of either consumer expectations or the weight ascribed to an endorsement between affiliate links to a product's marketer and affiliate links to one or more retailers? If so, how, why, and how should that be addressed?

(21) What disclosures, if any, do advertisers or the operators of review websites or review platforms need to make about the creation, collection, processing, or publication of reviews or ratings in order to prevent those reviews or ratings from being deceptive or unfair?

(22) What other fact patterns or scenarios should be addressed by the Guides and why?

You can file a comment online or on paper. For the Commission to consider your comment, we must receive it on or before April 21, 2020. Write “Endorsement Guides, P204500” on your comment. Your comment—including your name and your state—will be placed on the public record of this proceeding, including, to the extent practicable, on the https://www.regulations.gov website.

Postal mail addressed to the Commission is subject to delay due to heightened security screening. As a result, we encourage you to submit your comments online. To make sure that the Commission considers your online comment, you must file it through https://www.regulations.gov, by following the instruction on the web-based form.

If you file your comment on paper, write “Endorsement Guides, P204500” on your comment and on the envelope, and mail or deliver it to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex B), Washington, DC 20580, or deliver your comment to the following address: Federal Trade Commission, Office of the Secretary, Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex B), Washington, DC 20024. If possible, please submit your paper comment to the Commission by courier or overnight service.

Because your comment will be placed on the publicly accessible website https://www.regulations.gov, you are solely responsible for making sure that your comment does not include any sensitive personal information, such as your or anyone's Social Security number; date of birth; driver's license number or other state identification number or foreign country equivalent; passport number; financial account number; or credit or debit card number. You are also solely responsible for ensuring your comment does not include any sensitive health information, such as medical records or other individually identifiable health information. In addition, your comment should not include any “[t]rade secret or any commercial or financial information which . . . is privileged or confidential”—as provided in Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2)—including in particular competitively sensitive information such as costs, sales statistics, inventories, formulas, patterns, devices, manufacturing processes, or customer names.

Comments containing material for which confidential treatment is requested must be filed in paper form, must be clearly labeled “Confidential,” and must comply with FTC Rule 4.9(c). In particular, the written request for confidential treatment that accompanies the comment must include the factual and legal basis for the request, and must identify the specific portions of the comment to be withheld from the public record. See FTC Rule 4.9(c). Your comment will be kept confidential only if the General Counsel grants your request in accordance with the law and the public interest. Once your comment has been posted publicly at www.regulations.gov —as legally required by FTC Rule 4.9(b)—we cannot redact or remove your comment, unless you submit a confidentiality request that meets the requirements for such treatment under FTC Rule 4.9(c), and the General Counsel grants that request.

Visit the FTC website to read this request for comment and the news release describing it. The FTC Act and other laws that the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. The Commission will consider all timely and responsive public comments that it receives on or before April 21, 2020. For information on the Commission's privacy policy, including routine uses permitted by the Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

In the Federal Register of May 20, 2005 (70 FR 29214), FDA and USDA jointly issued a proposed rule entitled “Food Standards; General Principles and Food Standards Modernization,” as a first step in instituting a process to modernize FDA definitions and standards of identity (and standards of quality and fill of container) consistent with section 401 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 341), and USDA's definitions and standards of identity or composition under the Federal Meat Inspection Act and the Poultry Products Inspection Act (21 U.S.C. 607(c) and 457(b)) (and standards of fill of container). The proposed rule, if finalized, would establish general principles that FDA and USDA would consider when determining whether to establish, revise, or eliminate a food standard.

Although the general principles were mostly consistent between FDA and USDA, a few principles were not identical. Because FDA and USDA regulate different products under different statutory authorities, some principles were developed to reflect specific FDA or USDA regulatory needs and perspectives. FDA and USDA stated that adherence to principles identified in the proposed rule would result in standards that would (1) better promote honesty and fair dealing in the interest of consumers and protect the public; (2) allow for technological advances in food production; (3) be consistent with international food standards to the extent feasible; and (4) be clear, simple, and easy to use for both manufacturers and the agencies that enforce compliance with the standards.

The Preliminary Regulatory Impact Analysis (PRIA) of the proposed rule anticipated that the associated social costs of finalizing both FDA and USDA principles would be small, however would likely yield substantial benefits. The PRIA noted that:

The PRIA stated that applying the principles set forth in the proposed rule could help address these issues and that the benefits of establishing the proposed principles outweighed the costs.

Interested persons were originally given until August 18, 2005, to comment on these proposed general principles and to provide additional information as described in the Request for Comments section of the proposed rule. While comments received were generally supportive, FDA and USDA did not finalize the proposed rule due to resource constraints and competing priorities.

In the proposed rule, FDA proposed a set of 13 general principles we would consider when establishing, revising, or eliminating a food standard (see 70 FR 29214 at 29234 to 29235 (proposed 21 CFR 130.5(b)). The first four general principles stated the purpose or function of a food standard and were the most fundamental principles addressing consumer economic protection. Therefore, if a food standard is inconsistent with any one of these four principles, we would consider eliminating it. The proposed rule also would revise or establish a new food standard if it was consistent with the full set of 13 principles:

1. Promotes honesty and fair dealing in the interest of consumers.

2. Describes the basic nature of the food to ensure that consumers are not misled by the name of the food and to meet consumers' expectations of product characteristics and uniformity.

3. Reflects the essential characteristics of the food—or those that define or distinguish a food or describe the distinctive properties of a food and that may contribute to achieving the food's basic nature or may reflect relevant consumer expectations of a food product.

4. Ensures food does not appear to be better or of a greater value than it is. May be used as a vehicle to improve the overall nutritional quality of the food supply.

5. Contains clear and easily understood requirements to facilitate compliance by food manufacturers.

6. Permits maximum flexibility in the technology used to prepare the food provided the technology does not alter the basic nature or essential characteristics, or adversely affect the nutritional quality or safety, of the food. Provides for any suitable, alternative manufacturing process that accomplishes the desired effect, and describes ingredients as broadly and generically as feasible.

7. Harmonizes with international food standards to the extent feasible.

8. Is simple, easy to use, and consistent among all food standards. Includes only those elements that are necessary to define the basic nature and essential characteristics of a particular food, without unnecessary details.

9. Allows for variations in the physical attributes of the food. Where necessary to provide for specific variations in the physical attributes of a food within the standard, variations are consolidated into a single food standard.

10. Incorporates general requirements that pertain to multiple food standards of a commodity group into general regulatory provisions that address the commodity group whenever possible.

11. Considers other relevant regulations. Any specific requirements for foods intended for further manufacturing are incorporated within the reference standard rather than provided as a separate standard.

12. Provides terms that can be used to name a food and allows terms to be used in any order that is not misleading to consumers.

13. Names of ingredients and functional use categories in a food standard should be consistent with other food standards and relevant regulations in this chapter, and, when appropriate, incorporate current scientific nomenclature.

Since publication of the proposed rule, FDA announced our Nutrition Innovation Strategy (NIS) with the goal of helping to reduce preventable death and disease related to poor nutrition. The NIS focuses on, among other things, providing incentives for food manufacturers to produce products that have more healthful attributes. Under the NIS, FDA is seeking to modernize food standards in a manner that will achieve three primary goals: (1) Protect consumers against economic adulteration; (2) maintain the basic nature, essential characteristics, and nutritional integrity of food; and (3) promote industry innovation and provide flexibility to encourage manufacturers to produce more healthful foods.

In July 2018, FDA held a public meeting on the NIS. 1 At the meeting, we led a breakout session to discuss our food standards modernization goals and, among other things, to learn from stakeholders what FDA should be aware of when reviewing our food standard regulations and exploring how to modernize. At this public meeting, and in comments submitted to the public meeting docket, stakeholders expressed general support for FDA continuing its work with USDA to finalize the proposed rule. However, stakeholders also shared that, given the time that has passed since its publication, we should reopen the comment period to allow the public the opportunity to provide data and information on changes that have occurred in manufacturing, food technology, market trends, and nutrition science that FDA should consider when determining next steps for the proposed rule.

While FDA intends to work with USDA if we pursue finalization of the proposed rule, for purposes of this notice we are only interested in comments, data, and information on FDA-specific aspects of the proposed rule, including the 13 general principles listed above.

In response to stakeholder comments and to inform our decision regarding whether to proceed with finalizing the proposed rule, we seek new information and public comment on how we could create general principles for establishing new food standards and for revising or eliminating existing food standards. While FDA and USDA jointly issued the proposed rule, we are only seeking comments on the FDA-specific aspects of the proposal. We encourage comments to be as specific as possible and, when possible, to provide data and information for FDA to consider.

While the public may comment on any FDA aspects of the proposed rule, we are particularly interested in comments on the following questions:

1. Should FDA finalize the proposed rule? Why or why not?

2. Are there general FDA principles that should be added, eliminated, revised, or retained?

a. What is the specific principle?

b. Why should the principle be added, eliminated, revised, or retained?

c. Are there specific product examples that illustrate why a principle should be added, eliminated, revised, or retained?

3. What specific revisions should FDA make to the proposed rule's principles or framework to better reflect our modernization goals of:

a. Protecting consumers against economic adulteration?

b. Ensuring standardized foods continue to meet consumer expectations?

c. Maintaining the basic nature, essential characteristics, and nutritional integrity of food?

d. Promoting industry innovation?

e. Providing flexibility to produce more healthful foods?

f. Facilitating additional flexibility across all or broad categories of standardized foods?

4. How should FDA weigh the general principles?

a. The proposed rule stated that the first four principles were the most fundamental to addressing consumer economic protection and therefore, FDA would consider eliminating a food standard if it is inconsistent with any of these four principles.

i. Please explain whether you agree with this framework.

ii. If you do not agree, what principles should FDA consider when deciding whether to eliminate a food standard?

b. The proposed rule explained that FDA would consider revising or establishing a new food standard only if it was consistent with all 13 principles.

i. Please explain whether you agree with this framework.

ii. If you do not agree, what principles should FDA consider when deciding whether to revise or establish a new food standard?

5. What explanation is needed to provide more clarity, certainty, or context regarding:

a. The rationale for the principles?

b. How FDA will consider the principles when evaluating whether to eliminate, revise, or establish a new food standard?

c. How stakeholders should use the principles to inform the preparation of petitions requesting that FDA eliminate, revise, or establish a new food standard?

6. What additional information should FDA consider when evaluating the costs, benefits, and estimates of the annual reporting burden of the proposed rule?

I. Background—Regulatory Authorities

The Federal Food, Drug, and Cosmetic Act (FD&C Act), as amended by the Medical Device Amendments of 1976 (the 1976 amendments) (Pub. L. 94-295), the Safe Medical Devices Act of 1990 (Pub. L. 101-629), Food and Drug Administration Modernization Act of 1997 (Pub. L. 105-115), the Medical Device User Fee and Modernization Act of 2002 (Pub. L. 107-250), the Medical Devices Technical Corrections Act (Pub. L. 108-214), the Food and Drug Administration Amendments Act of 2007 (Pub. L. 110-85), and the Food and Drug Administration Safety and Innovation Act (Pub. L. 112-144), among other amendments, establishes a comprehensive system for the regulation of medical devices intended for human use. Section 513 of the FD&C Act (21 U.S.C. 360c) established three categories (classes) of devices, reflecting the regulatory controls needed to provide reasonable assurance of their safety and effectiveness. The three categories of devices are class I (general controls), class II (general controls and special controls), and class III (general controls and premarket approval).

Section 513(a)(1) of the FD&C Act defines the three classes of devices. Class I devices are those devices for which the general controls of the FD&C Act (controls authorized by or under sections 501, 502, 510, 516, 518, 519, or 520 (21 U.S.C. 351, 352, 360, 360f, 360h, 360i, or 360j) or any combination of such sections) are sufficient to provide reasonable assurance of safety and effectiveness; or those devices for which insufficient information exists to determine that general controls are sufficient to provide reasonable assurance of safety and effectiveness or to establish special controls to provide such assurance, but because the devices are not purported or represented to be for a use in supporting or sustaining human life or for a use which is of substantial importance in preventing impairment of human health, and do not present a potential unreasonable risk of illness or injury, are to be regulated by general controls (section 513(a)(1)(A) of the FD&C Act). Class II devices are those devices for which general controls by themselves are insufficient to provide reasonable assurance of safety and effectiveness, and for which there is sufficient information to establish special controls to provide such assurance, including the promulgation of performance standards, postmarket surveillance, patient registries, development and dissemination of guidelines, recommendations, and other appropriate actions the Agency deems necessary to provide such assurance (section 513(a)(1)(B) of the FD&C Act). Class III devices are those devices for which insufficient information exists to determine that general controls and special controls would provide a reasonable assurance of safety and effectiveness, and are purported or represented to be for a use in supporting or sustaining human life or for a use which is of substantial importance in preventing impairment of human health, or present a potential unreasonable risk of illness or injury (section 513(a)(1)(C) of the FD&C Act).

Devices that were not in commercial distribution prior to May 28, 1976 (generally referred to as postamendments devices) are automatically classified by section 513(f)(1) of the FD&C Act into class III without any FDA rulemaking process. Those devices remain in class III and require premarket approval, unless, and until, (1) FDA reclassifies the device into class I or class II, or (2) FDA issues an order finding the device to be substantially equivalent, in accordance with section 513(i) of the FD&C Act, to a predicate device that does not require premarket approval. FDA determines whether new devices are substantially equivalent to predicate devices by means of premarket notification procedures in section 510(k) of the FD&C Act and part 807 (21 CFR part 807), subpart E, of the regulations.

A postamendments device that has been initially classified in class III under section 513(f)(1) of the FD&C Act may be reclassified into class I or II under section 513(f)(3) of the FD&C Act. Section 513(f)(3) of the FD&C Act provides that FDA, acting by administrative order, can reclassify the device into class I or class II on its own initiative, or in response to a petition from the manufacturer or importer of the device. To change the classification of the device, the proposed new class must have sufficient regulatory controls to provide a reasonable assurance of the safety and effectiveness of the device for its intended use.

FDA relies upon “valid scientific evidence,” as defined in section 513(a)(3) and 21 CFR 860.7(c)(2), in the classification process to determine the level of regulation for devices. To be considered in the reclassification process, the “valid scientific evidence” upon which the Agency relies must be publicly available (see section 520(c) of the FD&C Act). Publicly available information excludes trade secret and/or confidential commercial information, e.g., the contents of a pending PMA (see section 520(c) of the FD&C Act).

In accordance with section 513(f)(3) of the FD&C Act, the Agency is issuing this proposed order to reclassify HIV serological diagnostic and supplemental tests and HIV NAT diagnostic and supplemental tests, postamendments class III devices, into class II (special controls), subject to premarket notification because the Agency believes the standard in section 513(a)(1)(B) of the FD&C Act is met because there is sufficient information to establish special controls, in addition to general controls, to provide reasonable assurance of the safety and effectiveness of the device. 1

Section 510(m) of the FD&C Act provides that a class II device may be exempted from the premarket notification requirements under section 510(k) of the FD&C Act if the Agency determines that premarket notification is not necessary to provide reasonable assurance of the safety and effectiveness of the device. FDA has determined that premarket notification is necessary to reasonably assure the safety and effectiveness of HIV serological diagnostic and supplemental tests and HIV NAT diagnostic and supplemental tests. Therefore, the Agency does not intend to exempt this proposed class II device from premarket notification (510(k)) submission under section 510(m) of the FD&C Act.

This proposed order covers HIV serological diagnostic and supplemental tests and HIV NAT diagnostic and supplemental tests. These are prescription tests that are assigned product code MZF. These postamendments devices are currently regulated as class III devices under section 513(f)(1) of the FD&C Act. Based on our review experience and consistent with the FD&C Act and FDA's regulations in 21 CFR 860.134, FDA believes that these devices should be reclassified from class III into class II with special controls because there is sufficient information for these devices to establish special controls that can provide a reasonable assurance of the device's safety and effectiveness.

FDA has regulated the devices subject to this proposed order for many years. The first serological test intended for use as an aid in the diagnosis of infection with HIV was approved in 1987. The first supplemental test intended for use as an aid in confirming diagnosis of infection with HIV was approved in 1992. Currently there are 11 diagnostic serological tests and 6 supplemental serological tests on the market in the United States. In 2006, FDA approved one NAT test that is intended for use as an aid in the diagnosis of infection with HIV. This device is also approved as a supplemental NAT test.

A review of the medical device reporting databases indicates that there is a low number of reported events for HIV serological diagnostic and supplemental tests and HIV NAT diagnostic tests. Over 100 million HIV tests subject to this proposed reclassification have been sold since 2000, with less than 1,000 reported events as of September 2019. Of these, fewer than 40 are reported to involve injuries due to false results; the remainder are malfunctions, user errors, or incorrect results that had no reported effect on the individual being tested. There have been less than 10 recalls specific to these tests, and no class I recalls, indicating a good safety record for this device class.

This proposed order applies to certain HIV serological diagnostic and supplemental tests that are prescription devices for the qualitative detection of HIV antigens and/or antibodies against HIV in human body fluids or tissues. As such, the prescription device must satisfy prescription labeling requirements for in vitro diagnostic products (see 21 CFR 809.10(a)(4) and (b)(5)(ii)). The tests are intended for use as an aid in the diagnosis of infection with HIV. These devices are not intended for monitoring patient status or for screening donors of blood, plasma, or human cells, tissues, or cellular or tissue-based products (HCT/Ps). HIV serological tests detect the presence of HIV by using anti-HIV antibodies and/or HIV antigens to detect the presence of HIV antigens and/or anti-HIV antibodies in human fluids. The analytes are detected by chemical, fluorescent, luminescent, or other methods to produce a qualitative output that determines the presence or absence of HIV in the sample. Supplemental serological tests are intended to be used as an additional test to confirm the presence of HIV antibodies or antigens in specimens found to be repeatedly reactive by a diagnostic screening device. These tests are intended for professional use only.

This proposed order also applies to certain HIV NAT diagnostic and supplemental tests that are prescription devices for the detection of HIV nucleic acid in human body fluids or tissues. The tests are intended for use as an aid in the diagnosis of infection with HIV. These devices are not intended for monitoring patient status, or for screening donors of blood, plasma, or HCT/Ps. HIV NAT tests detect the presence of HIV by detecting HIV nucleic acid in human body fluids or from solutions after isolation of nucleic acid from cells or tissues. The nucleic acids are amplified and detected by labeled probes that produce a qualitative signal that indicates the presence or absence of HIV nucleic acid in the sample. Supplemental NAT tests are intended to be used as an additional test to confirm the presence of HIV nucleic acid in specimens found to be repeatedly reactive by a diagnostic screening device. These tests are intended for professional use only.

FDA is proposing to reclassify HIV serological diagnostic and supplemental tests and HIV NAT diagnostic and supplemental tests. FDA held a public meeting on July 19, 2018, of the Blood Products Advisory Committee, convened as a medical device Panel (“the Panel”), which unanimously agreed that special controls, in addition to general controls, are sufficient to mitigate the risks to health from HIV serological diagnostic and supplemental tests and HIV NAT diagnostic and supplemental tests. The Panel believed that class II with special controls would provide reasonable assurance of the safety and effectiveness of the device. The Panel discussed the proposed special controls (see section VII), especially the performance criteria and number of samples that would be required for testing. The Panel also recommended that FDA consider reclassification from class III to class II of HIV viral load tests indicated for use for monitoring patient status.

The Agency believes that, at this time, sufficient data and information exist such that the risks to health identified in section V can be mitigated by establishing special controls that, together with general controls, can provide a reasonable assurance of the safety and effectiveness of these devices. Therefore, FDA proposes these devices be reclassified from class III to class II.

In accordance with section 513(f)(3) of the FD&C Act and 21 CFR part 860, subpart C, FDA is proposing to reclassify postamendments HIV serological diagnostic and supplemental tests and NAT diagnostic and supplemental tests from class III into class II. FDA believes that there are sufficient data and information available through FDA's accumulated experience with these devices from review submissions, recommendations provided by the Panel, and from published literature to demonstrate that the proposed special controls, along with general controls, would effectively mitigate the risks to health identified in section V and provide a reasonable assurance of safety and effectiveness of these devices. Absent the special controls identified in this proposed order, general controls applicable to the device are insufficient to provide reasonable assurance of the safety and effectiveness of the device. FDA expects that the reclassification of these devices would enable more manufacturers to develop HIV serological diagnostic and supplemental and NAT diagnostic and supplemental tests such that patients would benefit from increased access to safe and effective tests.

FDA is proposing to create separate classification regulations for HIV serological diagnostic and supplemental tests and HIV NAT diagnostic and supplemental tests that will be reclassified from class III to class II. Under this proposed order, if finalized, HIV serological diagnostic and supplemental tests and HIV NAT diagnostic and supplemental tests will be identified as prescription devices. In this proposed order the Agency has proposed the special controls under section 513(a)(1)(B) of the FD&C Act that, together with general controls, would provide a reasonable assurance of the safety and effectiveness of HIV serological and NAT diagnostic and supplemental tests.

Section 510(m) of the FD&C Act provides that FDA may exempt a class II device from the premarket notification requirements under section 510(k) of the FD&C Act if FDA determines that premarket notification is not necessary to provide reasonable assurance of the safety and effectiveness of the device. For these HIV serological diagnostic and supplemental tests and HIV NAT diagnostic and supplemental tests, FDA has determined that premarket notification is necessary to provide a reasonable assurance of the safety and effectiveness of the devices. Therefore, FDA does not intend to exempt these proposed class II devices from the 510(k) requirements. If this proposed order is finalized, persons who intend to market this type of device must submit to FDA a 510(k) and receive clearance prior to marketing the device.

This proposal, if finalized, will decrease regulatory burden on industry, as manufacturers will no longer have to submit a PMA for these types of devices but can instead submit a 510(k) to the Agency for review prior to marketing their device. A 510(k) is a less burdensome pathway to market a device, which typically results in a shorter premarket review timeline compared to a PMA. This ultimately provides more timely access of these types of devices to patients.

HIV can be transmitted to others by blood transfusion, sex, sharing of contaminated needles by intravenous drug users, and from mother to child during pregnancy, childbirth, and breast feeding (Ref. 1). Left untreated, a significant proportion of those infected with HIV will develop acquired immunodeficiency syndrome (AIDS), which causes significant morbidity and mortality. However, with consistent anti-retroviral treatment, HIV infection is a treatable, chronic condition with significantly improved survival and quality of life for people living with HIV and significantly decreased risk of transmission to others (Ref. 2). The Centers for Disease Control and Prevention (CDC) recommends that all persons ages 13 through 64 and pregnant women be tested at least once, with more frequent testing for individuals at high risk of infection. Nevertheless, at the present time, only about 85 percent of people infected with HIV in the United States know that they are infected, and those who do not know their status are many times more likely to transmit the virus to others (Ref. 3). Therefore, improving access to HIV diagnostic devices is an urgent public health priority. After considering the recommendations of the panel, FDA's accumulated experience with these devices from review submissions, and the published literature, FDA has identified the following probable risks to health associated with HIV serological diagnostic and supplemental tests:

(1) A false negative/false non-reactive test result may influence patient management decisions, such as the withholding or discontinuation of antiretroviral therapy, which can lead to serious injury including death. A false negative/false non-reactive test result also may contribute to public health risk by leading to inadvertent transmission of virus by an infected person. Factors that may cause decreased test sensitivity and/or increased rate of false negative/false non-reactive test reporting include, but are not limited to, strain variability, acquisition of de novo mutations in genomic regions of HIV targeted by the device, the presence of interfering substances in the sample, acute infection at a stage that is too early for a device to detect the infection, and analyte concentrations that are too low to be detected by the device due to suppression of analyte expression by drugs used to treat or prevent HIV infection. False negative/false non-reactive results also can be caused by improper sample collection or sample handling, loss of sensitivity of the device, failure of detection reagents, and failure of instruments. They also can be caused by misinterpretation of invalid results as negative.

(2) A false positive/false reactive test result may contribute to unnecessary initiation of treatment. It can also lead to unnecessary interventions such as an unnecessary Caesarian section for women during childbirth, unnecessary treatment of infants with anti-retroviral medications, withholding of breastfeeding, and significant emotional stress. Factors that may lead to false positive/false reactive results include cross-reactivity with other substances in the sample, contamination of the sample, patient participation in vaccine trials, and improper sample handling and instrument use.

FDA believes that HIV serological diagnostic and supplemental tests and HIV NAT diagnostic and supplemental tests should be reclassified from class III (PMA) into class II (special controls) because special controls, in addition to general controls, can be established to mitigate the risks to health identified in section V and provide reasonable assurance of the safety and effectiveness of these device types. The proposed special controls are identified by FDA in section VII. FDA's reasons for reclassification are as follows:

(1) There is substantial scientific and medical information available regarding the nature, complexity, and risks associated with HIV serological diagnostic and supplemental tests and NAT diagnostic and supplemental tests. The safety and effectiveness of this device type has been well-established by the performance of the more than 20 devices currently available (Ref. 4).

(2) Risks associated with the failure of the device to perform as indicated ( e.g., false negative/false non-reactive or false positive/false reactive test results) can be mitigated through a combination of special controls, including performance criteria and requirements for submission of certain aspects of labeling, submission of certain manufacturing information, and submission of a complaint log. Performance criteria will consist primarily of analytical and clinical study design specifications and performance criteria that are based on public information regarding the performance and validation of previously approved devices. Examples of labeling mitigations include appropriate limitations, including that results should be confirmed according to current guidelines as promulgated by the CDC and other public health authorities, which are necessary to ensure that the devices are used and the results are interpreted appropriately, given the diversity of environments in which they are intended to be used. Manufacturing information submitted will include summaries of strategies to detect new types, subtypes, genotypes and mutations to ensure the tests continue to detect clinically relevant forms of HIV, a summary of the design matrix that determines the severity of events to ensure appropriate adverse event reporting, protocols for assessing stability, evaluation of test performance at the extremes of specifications to ensure the tests have been validated to function correctly under diverse conditions. The complaint log that will be submitted annually for 5 years following clearance of a traditional 510(k) is the log required to be maintained by device manufacturers under 21 CFR 820.198(a). We are proposing as a special control to require submission of all complaints, whether or not the complaint was reported under part 803 (21 CFR part 803). We are not requiring submission of an annual report as described in 21 CFR 814.84. Review of the complaint log will allow FDA to closely monitor issues with manufacturing and implementation of new devices that may not rise to the level of adverse event reporting required under 21 CFR 820.198(a) but that may have an effect on the performance of the devices.

Taking into account the probable health benefits of the use of the device and the nature and known incidence of the risk of the device, FDA, on its own initiative, is proposing to reclassify these postamendments devices from class III into class II. FDA believes that, when used as indicated, HIV serological and NAT diagnostic and supplemental tests can provide significant benefits to clinicians and patients.

FDA believes that these devices can be classified into class II with the establishment of special controls. FDA believes that these special controls, in addition to general controls, will provide a reasonable assurance of the safety and efficacy of these devices. Tables 1 and 2 demonstrate how these proposed special controls will mitigate each of the identified risks to health in section V.

If this proposed order is finalized, HIV serological diagnostic and supplemental tests and HIV NAT diagnostic and supplemental tests will be reclassified into class II (special controls). As discussed below, the reclassification will be codified in 21 CFR 866.3956 (serological) and 21 CFR 866.3957 (NAT) tests. Firms submitting a 510(k) for an HIV serological diagnostic and/or supplemental or HIV NAT diagnostic and/or supplemental test will be required to comply with the particular mitigation measures set forth in the special controls. Adherence to the special controls, in addition to the general controls, is necessary to provide a reasonable assurance of the safety and effectiveness of the devices.

The Agency has determined under 21 CFR 25.34(b) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

FDA tentatively concludes that this proposed rule contains no new collection of information. Therefore, clearance by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3521) is not required. This proposed order refers to previously approved FDA collections of information. These collections of information are subject to review by the OMB under the PRA. The collections of information in part 807, subpart E, regarding premarket notification submissions have been approved under OMB control number 0910-0120; the collections of information in 21 CFR part 820 have been approved under OMB control number 0910-0073; and the collections of information in 21 CFR parts 801 and 809 have been approved under OMB control number 0910-0485.

Under section 513(f)(3) of the FD&C Act, FDA may issue final orders to reclassify devices. FDA will continue to codify classifications and reclassifications in the Code of Federal Regulations (CFR). Changes resulting from final orders will appear in the CFR as newly codified orders. Therefore, under section 513(f)(3), in the proposed order, we are proposing to codify HIV serological diagnostic and/or supplemental tests in the new 21 CFR 866.3956, under which HIV serological diagnostic and/or supplemental tests would be reclassified from class III to class II, and HIV NAT diagnostic and/or supplemental tests in the new 21 CFR 866.3957, under which HIV NAT diagnostic and/or supplemental tests would be reclassified from class III to class II.

FDA proposes that any final order based on this proposed order become effective 30 days after its date of publication in the Federal Register .

The following references have been placed on display in the Dockets Management Staff (see ADDRESSES ) and may be seen by interested persons between 9 a.m. and 4 p.m., Monday through Friday; they are also available electronically at https://www.regulations.gov. FDA has verified the website addresses, as of the date this document publishes in the Federal Register , but websites are subject to change over time.

Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, it is proposed that 21 CFR part 866 be amended as follows:

Public Law 115-55, the Veterans Appeals Improvement and Modernization Act of 2017 (AMA), changes the processes by which veterans seek review of VA benefits decisions. VA has implemented the AMA in a rulemaking that is generally applicable to benefits administered throughout VA, to include benefits administered by the Veterans Health Administration (VHA). VA Claims and Appeals Modernization, 84 FR 138, 172 (Jan. 18, 2019). That rulemaking specifically provides, “unless otherwise specified in this final rule, VA amends its regulations applicable to all claims processed under the new review system, which generally applies where an initial VA decision on a claim is provided on or after the effective date or where a claimant has elected to opt into the new review system under established procedures.” 84 FR 138.

However, the VA Claims and Appeals Modernization regulatory amendments did not explicitly revise or remove VHA specific regulations which are inconsistent with AMA. In this rulemaking, VA proposes to sunset multiple VHA regulations that are inconsistent with the AMA and the VA Claim and Appeals Modernization regulatory amendments. Because the AMA and VA's January 2019 regulations apply to VHA, these proposed conforming changes to part 17 will not change the procedures VHA currently follows under the AMA.

First, the authority to reconsider a VHA decision, which is established under VHA's regulations at 38 CFR 17.133, 17.276, 17.904, and 17.1006 and 38 CFR 70.40, is inconsistent with the specific differentiated lanes for seeking review of a VA decision that are established by AMA and implemented in the VA Claims and Appeals Modernization regulatory amendments, particularly the closed record requirement for higher level review. To conform VHA's regulations to the procedures applicable under AMA and implementing regulations, VA proposes to amend §§ 17.133, 17.276, 17.904, 17.1006, and 70.40 to make clear that VHA reconsideration is available only in legacy claims, as defined in Part 3 and 20 of this title.

Similarly, VHA proposes to revise 38 CFR 17.132 regarding appeals of VHA decisions on certain requests for payment or reimbursement for care rendered in the community. Section 17.132 affords only one avenue for disputing a VA decision regarding payment or reimbursement, appeal to the Board of Veterans' Appeals. For payment requests covered by AMA and implementing regulations, this is inconsistent with the three distinct lanes established by that law. Thus, VHA proposes to revise § 17.132 to clarify that it will apply only to payment decisions made for legacy claims as described above.

This final rule contains no provisions constituting a collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521).

The Secretary hereby certifies that this proposed rule would not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act (5 U.S.C. 601-612). This proposed rule only affects procedures regarding the appeals process; it does not affect the cost of filing an appeal nor any amount duly owed to a small entity. Therefore, pursuant to 5 U.S.C. 605(b), the initial and final regulatory flexibility analysis requirements of 5 U.S.C. 603 and 604 do not apply.

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, and other advantages; distributive impacts; and equity). Executive Order 13563 (Improving Regulation and Regulatory Review) emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. The Office of Information and Regulatory Affairs has determined that this rule is a significant regulatory action under Executive Order 12866.

VA's impact analysis can be found as a supporting document at http://www.regulations.gov, usually within 48 hours after the rulemaking document is published. Additionally, a copy of the rulemaking and its impact analysis are available on VA's website at http://www.va.gov/orpm by following the link for VA Regulations Published from FY 2004 through FYTD.

This rule is not expected to be subject to the requirements of Executive Order 13771 because this rulemaking is expected to result in no more than de minimis costs.

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

The Catalog of Federal Domestic Assistance numbers and titles for the programs affected by this document are 64.009—Veterans Medical Care Benefits; 64.039—CHAMPVA.

The Secretary of Veterans Affairs, or designee, approved this document and authorized the undersigned to sign and submit the document to the Office of the Federal Register for publication electronically as an official document of the Department of Veterans Affairs. Pamela Powers, Chief of Staff, Department of Veterans Affairs, approved this document on January 10, 2020, for publication.

For the reasons set out in the preamble, VA proposes to amend 38 CFR parts 17 and 70 as set forth below:

The Commission's rules permit the Postal Service, when adjusting market dominant rates as part of a market dominant rate adjustment proceeding, to include discounted prices for rate incentives that the Postal Service plans to offer in the percentage change in rates calculation, as long as the rate incentive meets certain criteria. 39 CFR 3010.23(e). These criteria are: (1) That the rate incentive is in the form of a discount or can be easily translated into a discount; (2) that sufficient billing determinants are available for the rate incentive to be included in the percentage change in rates calculation; and (3) that the rate incentive is a rate of general applicability. 39 CFR 3010.23(e)(2). The Commission's rules also require the Postal Service to provide “sufficient information to demonstrate that the rate incentive is a rate of general applicability.” 39 CFR 3010.12(b)(9)(i).

When the Commission promulgated rules with regard to the treatment of market dominant rate incentives, it included a specific definition of “rate of general applicability” in the context of market dominant rate adjustments which provided, inter alia, that “[a] rate is not a rate of general applicability if eligibility for the rate is dependent on factors other than the characteristics of the mail to which the rate applies.” 39 CFR 3010.1(g). The Commission explained that mail volume sent by a mailer in a previous year is not a characteristic of the mail to which rates under an incentive program apply. 1

In the most recent market dominant rate adjustment proceeding, the Postal Service sought to include a rate incentive in the percentage change in rates calculation that featured the following terms. First, a 2-cent “base” credit per qualifying mailpiece was offered to mailers who sent out Business Reply Mail, Courtesy Reply Mail, and/or Share Mail enclosures which were subsequently returned or forwarded by the recipients. 2 For new participants, there was no required volume threshold in order to be eligible to participate in the incentive program. Id. For repeat participants, they had to meet or exceed 93 percent of their returns from the prior year in order to remain eligible. Id. In addition, repeat participants whose returns exceeded 100 percent of their returns from the prior year were eligible for an additional 2-cent “bonus” credit (for a total of 4 cents per qualifying mailpiece). Id. A question arose as to whether the “base” tier of the incentive program, the “bonus” tier, both, or neither constituted “rates of general applicability” appropriate for inclusion in the percentage change in rates calculation at discounted prices. Id. at 17, 19-24.

The Commission found that the Postal Service had failed to provide sufficient information to demonstrate that the rate incentive in question was a rate of general applicability, as required by § 3010.12(b)(9)(i). Id. at 22. Nevertheless, upon considering the matter, the Commission determined that a potential ambiguity existed in the Commission's rules concerning whether a rate incentive featuring a mailer-specific volume threshold based on historical volume data could constitute a “rate of general applicability.” Id. at 23-24. The Commission permitted both tiers of the promotion to be included in the percentage change in rates calculation in Docket No. R2020-1, but indicated that it would initiate a rulemaking to clarify this issue. Id.

The Commission proposes to clarify its rules by making three revisions. First, the Commission proposes to amend § 3010.1(g) to clarify that in order to qualify as a rate of general applicability, a rate cannot be based on mailer-specific data, such as historical mailer volume. Second, the Commission proposes to amend § 3010.23(e)(2) to add an additional criterion for a rate incentive to be eligible for inclusion in a percentage change in rates calculation at discounted prices—the rate incentive must be made available to all mailers equally on the same terms and conditions.

The Commission's basis for proposing these revisions is twofold. The Commission is concerned that interpreting “rate of general applicability” to permit volume thresholds based on historical volume data would contravene the policy reasons underlying the general applicability requirement, because, as the Commission has found before, “volume sent by a mailer in a previous year is not a characteristic of the mail to which rates under [an] incentive program apply[,]” due to the fact that past behavior by mailers bears no relationship to mail being sent in the present. See Order No. 2086 at 15. The Commission is equally concerned about the fairness of permitting mailer-specific thresholds for determining eligibility for market dominant rate incentives. Where a rate incentive is not made available to all mailers on the same terms and conditions, the potential exists for non-qualifying mailers to be forced to subsidize the rate incentives received by qualifying mailers.

The third revision the Commission is proposing is to amend § 3010.12(b)(9) to add additional requirements intended to ensure that the Postal Service provides sufficient information at the outset of a market dominant rate adjustment proceeding to permit the Commission and stakeholders to verify that all rate incentives included in a percentage change in rates calculation comply with the definition of “rates of general applicability” and are made available to all mailers equally on the same terms and conditions.

Proposed § 3010.1(g). Proposed § 3010.1(g) is revised to state clearly that the definition of “rate of general applicability” within the context of a market dominant rate adjustment proceeding means a rate incentive that is not based on mailer-specific data, such as historical volume data.

Proposed § 3010.12(b)(9). Proposed § 3010.12(b)(9) is revised to state clearly what information the Postal Service must file to support its claim that a rate incentive meets the necessary criteria to be included in a percentage change in rates calculation.

Proposed § 3010.23(e)(2)(iv). Proposed § 3010.23(e)(2)(iv) is added to make it a criterion for a market dominant rate incentive to be included in a percentage change in rates calculation that the incentive be available to all mailers equally on the same terms and conditions.

For the reasons stated in the preamble, the Commission proposes to amend chapter III of title 39 of the Code of the Federal Regulations as follows:

Entities potentially affected directly by this action include states, United States (U.S.) territories, local authorities and eligible tribes that are currently administering, or may in the future administer, EPA-approved implementation plans (collectively “states”). 1 Entities potentially affected indirectly by this action are sources categorized as fossil fuel-fired steam generators, fluid bed catalytic cracking unit catalyst regenerators at petroleum refineries, sulfuric acid plants, or nitric acid plants. For convenience, the EPA's reference to “affected sources” in this rulemaking generally refers to sources affected by SIP requirements, i.e., those sources to which a SIP's Appendix P-specified monitoring requirements actually apply. While all sources among the Appendix P source categories (when not already excepted in Appendix P itself) are potentially affected by such requirements, it is within the state's discretion to grant an exemption in its SIP from applicability of the Appendix P-specified monitoring requirements for certain sources. If you have questions regarding the applicability of this action to a particular entity, consult the person listed in the FOR FURTHER INFORMATION CONTACT section of this document.

When submitting comments, remember to:

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

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

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

• Describe any assumptions and provide any technical information and/or data that you used to support your comment.

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

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

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

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

Submitting CBI. Do not submit information containing CBI to the EPA through https://www.regulations.gov or email. Clearly mark the part or all of the information that you claim to be CBI. For CBI information on any digital storage media that you mail to the EPA, mark the outside of the digital storage media as CBI and then identify electronically within the digital storage media the specific information that is claimed as CBI. In addition to one complete version of the comments that includes information claimed as CBI, you must submit a copy of the comments that does not contain the information claimed as CBI for inclusion in the public docket. If you submit any digital storage media that does not contain CBI, mark the outside of the digital storage media clearly that it does not contain CBI. Information not marked as CBI will be included in the public docket and the EPA's electronic public docket without prior notice. Information marked as CBI will not be disclosed except in accordance with procedures set forth in 40 Code of Federal Regulations (CFR) part 2. Send or deliver information identified as CBI only to the following address: OAQPS Document Control Officer (C404-02), OAQPS, U.S. Environmental Protection Agency, Research Triangle Park, North Carolina 27711, Attention Docket ID No. EPA-HQ-OAR-2018-0633.

To request a public hearing or information pertaining to a public hearing regarding this document, please contact Ms. Pam Long, U.S. EPA, Office of Air Quality Planning and Standards, Air Quality Policy Division (C504-01), Research Triangle Park, NC 27711, telephone number (919) 541-0641, email address: long.pam@epa.gov on or before March 9, 2020. Additional information about the hearing, if one is requested, will be published in a subsequent Federal Register document.

In addition to being available in the docket, an electronic copy of this Federal Register document will be posted at https://www.epa.gov/air-quality-implementation-plans/develop-air-quality-sip#guidance.

The information presented in this preamble is organized as follows:

The EPA is proposing amendments to update the data reporting requirements specified for SIPs under Appendix P to 40 CFR part 51. Appendix P, which the EPA promulgated in 1975, sets forth certain minimum requirements for continuous emission monitoring that each SIP must include in order to be approved under the provisions of 40 CFR 51.214. See 40 FR 46240 (October 6, 1975).

The EPA proposes to revise the current specification that sources among the four Appendix P source categories must report excess emissions at a frequency of no less than every calendar quarter, by changing the minimum frequency to semiannually. For example, the reference to “each calendar quarter” in paragraph 4.1 of Appendix P would be removed and replaced with a reference to “twice per year at 6-month intervals.” As a result, states would be allowed to establish, in their SIPs, a reporting frequency for affected sources under Appendix P that aligns with the reporting frequency that the EPA has generally established under more recently updated programs applicable to sources among the four Appendix P source categories, such as NSPS. As described in Section III.B of this document, the EPA has generally moved to a semiannual reporting frequency specification for sources regulated under its regulations pursuant to the Clean Air Act (CAA), e.g., in NSPS (40 CFR part 60) and National Emission Standards for Hazardous Air Pollutants (NESHAP) (40 CFR parts 61 and 63). 2 A semiannual minimum reporting frequency under Appendix P would also align with the semiannual reporting frequency required of sources through the EPA's regulations for title V operating permits (40 CFR parts 70 and 71). 3 Notwithstanding these proposed revisions to Appendix P, a source that is subject to other excess emission reporting requirements ( e.g., under 40 CFR parts 60, 61, or 63) would be required to comply with the applicable provisions of those rules.

The EPA emphasizes that the proposed amendments to Appendix P, if finalized as proposed, would not require states to adopt these particular changes (by revising their SIPs). When proposing in 1974 to add Appendix P to 40 CFR part 51, the EPA stressed that Appendix P set forth only minimum requirements and recognized that in keeping with the basic framework of SIPs, states were allowed, even encouraged, to develop procedures even more comprehensive than those in Appendix P. 4 Likewise, upon promulgating Appendix P in 1975, the EPA stated that while minimum requirements were being established, states “may, as they deem appropriate, expand these requirements.”  5 Thus, although the relaxation in minimum reporting frequency specified for SIPs under Appendix P being proposed would allow a state in turn to require semiannual reporting of sources among the Appendix P source categories, it would not obligate a state to adopt requirements for semiannual reporting in its SIP if the state chooses to retain requirements beyond the minimum ( e.g., quarterly reporting requirements for Appendix P source categories).

An additional amendment proposed in this action would revise one cross-reference under Appendix P so that it refers to the appropriate section of 40 CFR part 51. In accordance with the EPA's regulations for SIPs concerning continuous emission monitoring, each SIP must meet certain minimum requirements, including those specified in Appendix P. The continuous emission monitoring regulations of 40 CFR part 51 were moved from § 51.19(e) to § 51.214 as part of a 1986 rule through which the EPA significantly restructured and consolidated its regulations for the development of SIPs. 6 In the notice of final rulemaking for that 1986 rule, several cross-references under Appendix P were revised. The EPA acknowledges that the cross-reference in Appendix P under section 1.0 (which concerns contininuous emission monitoring requirements) was changed from § 51.19(e) to § 51.165(b) in error, when the intent was to change it to § 51.214. The EPA now proposes to revise section 1.0 of Appendix P so that it correctly refers to the continuous emission monitoring regulations at § 51.214.

This document is being developed under the authority of sections 110(a)(2)(F) and 301(a) of the CAA.

The SIP is a state's plan identifying how the state will meet its CAA requirements, such as to attain and maintain the National Ambient Air Quality Standards (NAAQS). Pursuant to section 110 of the CAA, each state is required to submit a SIP for EPA approval, and the EPA is required to evaluate and either approve or disapprove the state's submission. The SIP (including revisions over time) contains control measures and strategies developed through a public process and formally adopted by the state. The elements of a SIP are prescribed in particular under section 110 and Part D of the CAA. Of particular relevance to this proposed rulemaking, CAA section 110(a)(2)(F) governs requirements associated with stationary source monitoring and reporting in the context of SIPs.

Pursuant to CAA section 110, the EPA established procedural requirements applicable to all states concerning the preparation, adoption, and submission of SIPs and SIP revisions. These regulations, initially promulgated in 1971, comprise 40 CFR part 51, “Requirements for Preparation, Adoption, and Submittal of Implementation Plans.” Like the SIPs themselves, these regulations are periodically revised.

The EPA in 1974 proposed to amend its SIP preparation regulations under 40 CFR part 51 to require that SIPs contain legally enforceable procedures mandating owners or operators of stationary sources to install equipment to monitor pollutant emissions on a continuous basis and to report the data obtained. 7 As was explained in the 1974 notice of proposed rulemaking, the regulations already required states to have the legal authority to require such monitoring and recording. 8 However, at the time that the EPA's SIP preparation regulations were originally published, “[t]he Agency believed that the state-of-the-art was such that it was not prudent to require existing sources to install [continuous monitoring] devices.”  9 The agency explained that, for certain sources, “general specifications for accuracy, reliability and durability can be established for continuous emission monitors . . . .”  10 Accordingly, the agency proposed to amend 40 CFR part 51 by adding a new requirement that would “require States to revise their implementation plans to require sources to install monitoring instruments and to report the resulting data to the appropriate State Agency.”  11

In choosing the types of sources and pollutants listed in Appendix P and, thus, subject to the proposed minimum requirements for continuous emission monitoring specified for SIPs, the EPA selected four source categories that would be covered by continuous emission monitoring requirements and performance testing methods simultaneously proposed under NSPS regulations pursuant to section 111 of the CAA ( i.e., under Part 60). 12 The EPA even noted in the Appendix P proposal that the SIP rulemaking was very closely connected with the NSPS rulemaking. The EPA urged states and other affected parties to consider the companion NSPS proposal as part of the Appendix P proposal and to direct comments to the relevant portions of both proposals. 13

In 1975, the EPA promulgated Appendix P on the same day it promulgated the NSPS monitoring and performance requirements under 40 CFR part 60. 14 In the final amendments to 40 CFR part 51, the EPA expanded 40 CFR 51.19 (now 40 CFR 51.214) to require states to revise their SIPs to include legally enforceable procedures requiring certain specified categories of existing stationary sources to monitor emissions on a continuous basis. The agency explained that requiring “a sound program of continuous emission monitoring and reporting” would more fully implement CAA sections 110(a)(2)(F)(ii) and (iii). 15

Section 51.19(e)(4) (now § 51.214(e)) in 40 CFR specifies such procedures to require the source owner or operator to submit information relating to emissions and operation of the emission monitors to the state to the extent described in Appendix P as frequently as or more frequently than described therein. 16 With respect to reporting requirements, Appendix P specifies under paragraph 4.1 that the SIP “shall require owners or operators of facilities required to install continuous monitoring systems to submit a written report of excess emissions for each calendar quarter and the nature and cause of the excess emissions, if known.”  17 At the time of promulgation in 1975, this specification in Appendix P of quarterly reporting as the minimum frequency was by design aligned with the quarterly reporting frequency generally specified for new sources under Part 60. This “report of excess emissions,” like the corollary “excess emissions and monitoring systems performance report” specified under 40 CFR part 60 ( see § 60.7(c)), should be submitted by the owner or operator whether or not excess emissions occurred within the reporting period ( see Appendix P, paragraph 4.5).

Each state is required to include all of the Appendix P-specified requirements in its SIP, including the monitoring requirements listed in Appendix P under section 1.1, “Applicability,” for sources specified under Appendix P at a minimum. 18 However, section 1.2, “Exemptions,” provides that a state may exempt certain sources from applicability of those monitoring requirements. When proposing in 1974 to amend the 40 CFR part 51 regulations to include minimum requirements for continuous emission monitoring, the EPA noted that the 40 CFR part 51 amendments were not intended to necessarily apply to new sources, since the 40 CFR part 60 (NSPS) requirements would apply to those new sources. 19 Therefore, in accordance with Appendix P, paragraph 1.2.1, a state may choose to include in its SIP a provision to grant an exemption from the Appendix P-specified monitoring requirements for a source that is subject to an NSPS promulgated in 40 CFR part 60. Similarly, in accordance with paragraph 1.2.2, a state may choose to include in its SIP a provision to grant an exemption for a source that is not subject to an applicable emission standard of the approved SIP. As the EPA clarified in the 40 CFR part 51 amendments, Appendix P-specified continuous emission monitors “are not required for sources unless such sources are subject to an applicable emission limitation of an approved SIP.”  20 In addition, in accordance with paragraph 1.2.3, a state was allowed to include in its SIP a provision granting an exemption for certain affected sources that were scheduled for retirement within 5 years after inclusion of the Appendix P monitoring requirements in its SIP.

As of 1975, when the continuous emission monitoring specifications for SIPs under 40 CFR part 51 and for NSPS under 40 CFR part 60 were promulgated, sources affected under either set of regulations were required to submit continuous emission monitor reports of their excess emissions and other information on a quarterly basis. Over the next many years, the EPA expanded the types of sources to be regulated pursuant to CAA sections 111 (for NSPS) and 112 (for NESHAP), and those later regulations ( e.g., NSPS under 40 CFR part 60 and NESHAP under 40 CFR parts 61 and 63) increasingly allowed sources to submit such reports on a less frequent basis, semiannually or in some cases even annually. In the agency's experience, semiannual reporting provides sufficiently timely information to ensure compliance and enable adequate enforcement of applicable requirements, while imposing less burden on the affected industry than would quarterly reporting. Thus, in 1999, the EPA promulgated a Burden Reduction Rule, 21 which, among other revisions, revised the NSPS reporting frequency, with a few exceptions, 22 to semiannually for nearly all source categories. As a result, the reporting frequency requirements under NSPS regulations, including for the four Appendix P source categories, no longer aligned with the reporting requirements specified in Appendix P.

As rationale for the Burden Reduction Rule, the EPA noted at proposal that its most recent NSPS and NESHAP had moved almost exclusively to semiannual reporting as a standard approach. 23 Thus, also in the General Provisions for 40 CFR parts 60, 61, and 63, the Burden Reduction Rule changed the reporting frequency requirements, to conform them to recently promulgated NSPS and NESHAP regulations. The EPA estimated a 20-percent reduction in reporting burden on sources under a typical rule. 24

As noted by the EPA in the Burden Reduction Rule, 25 and as recognized in Section II.A of this document, the EPA's regulations for title V operating permits also specify semiannual reporting by sources. 26

With this proposed rulemaking, the EPA is seeking to reasonably resolve a longstanding inconsistency in its reporting requirements for certain categories of sources between (i) those specified as the minimum for Appendix P source categories in the SIP context (under 40 CFR part 51) and (ii) those prescribed for similar sources through NSPS (under part 60) or NESHAP (under 40 CFR parts 61 and 63). The EPA acknowledges that two states in particular, South Carolina and Tennessee, have been urging the EPA to amend the Appendix P specification for reporting frequency. South Carolina and Tennessee each have sources among the Appendix P source categories that cannot be exempted from the Appendix P-specified monitoring requirements under any of the exemptions available under Appendix P section 1.2 (Exemptions). While such sources are subject to SIP emission limitations, they are not subject to any NSPS because they commenced operation before the applicability dates of those standards. States have argued that the rationale on which the EPA has relied to decrease the minimum reporting frequency over time for sources regulated under NSPS, for example, is the same rationale on which the EPA should rely to decrease the minimum reporting frequency that Appendix P specifies for 40 CFR part 51 sources. Materials submitted by South Carolina and Tennessee, including their general arguments in support of—and in advance of—such action, are available in the docket for this rulemaking. The EPA is including those materials in the docket because they serve to illustrate how the proposed amendments to Appendix P might manifest in a SIP.

A change in the specified minimum frequency with which affected sources must submit continuous monitoring system data reports, as a result of the proposed revisions to Appendix P, is not expected to result in any change in the pollutant emissions from any of the affected sources. Therefore, the EPA believes that this action will not have potential disproportionately high and adverse human health or environmental effects on minority, low-income, or indigenous populations.

This action is not a significant regulatory action and was, therefore, not submitted to the Office of Management and Budget (OMB) for review.

This action is not expected to be an Executive Order 13771 regulatory action because this action is not significant under Executive Order 12866.

The information collection activities in this proposed rule have been submitted for approval to the OMB under the PRA. The ICR document that the EPA prepared has been assigned EPA ICR number 2590.01. You can find a copy of the ICR in the docket for this proposed rule, and it is briefly summarized here.

The EPA is proposing to update a regulation, Appendix P to 40 CFR part 51, that specifies what SIPs must require of sources among four categories with respect to continuous emission monitoring, recording, and reporting. In particular, the proposed amendments to Appendix P would generally relax a “minimum reporting frequency” specification for SIPs from quarterly to semiannually. The subject rule would revise only the minimum requirement, and so the rule does not require that any state change the actual reporting frequency requirement in its SIP that applies to Appendix P sources. Therefore, to comply with the subject rule's requirements, each state may choose to prepare and submit a SIP revision but is not required to do so, and so the information collection activities in this proposed rule are voluntary for the states as respondents. The EPA has determined that the requested information collection (SIP submissions) would not include any confidential information. In accordance with 40 CFR 51.116, “Data availability,” each state must retain and make available for public inspection all detailed data and calculations used in the preparation of its SIP and SIP revisions. The EPA has the responsibility and statutory authority under CAA section 110(a) to assure that the states, through their SIPs, meet the requirements of the CAA. The regulatory burden under the information collection is attributed to states' preparation and submission of SIP revisions, a type of reporting burden. For purposes of estimating the paperwork burden, the EPA assumes that each of 56 entities, including states, the District of Columbia, and U.S. territories, would make a single SIP submission that includes an Appendix P-related provision within 3 years after the effective date of the rule, corresponding to the requested 3-year collection period. There are no capital costs or operation and maintenance costs attributed to the proposed rule.

Respondents/affected entities: All states.

Respondent's obligation to respond: Voluntary.

Estimated number of respondents: 56.

Frequency of response: One-time.

Total estimated burden: 3,080 hours per year (or 55 hours per respondent per year). Burden is defined at 5 CFR 1320.3(b).

Total estimated cost: $191,200 per year (or $3,414 per respondent per year), with no capital cost and no operation and maintenance cost.

The derivation of these estimates is described in greater detail in the Supporting Statement for the initial, rule-related ICR for “Revisions to Appendix P to 40 CFR part 51” that is included in the docket for this rulemaking.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for the EPA's regulations in 40 CFR are listed in 40 CFR part 9.

Submit your comments on the agency's need for this information, the accuracy of the provided burden estimates and any suggested methods for minimizing respondent burden to the EPA using the docket identified at the beginning of this rule. You may also send your ICR-related comments to OMB's Office of Information and Regulatory Affairs via email to OIRA_submission@omb.eop.gov, Attention: Desk Officer for the EPA. Since OMB is required to make a decision concerning the ICR between 30 and 60 days after receipt, OMB must receive comments no later than March 23, 2020. The EPA will respond to any ICR-related comments in the final rule.

I certify that this action will not have a significant economic impact on a substantial number of small entities under the RFA. In making this determination, the impact of concern is any significant adverse economic impact on small entities. Any agency may certify that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, has no net burden or otherwise has a positive economic effect on the small entities subject to this rule. This action will not impose any requirements on small entities. Instead, this action leaves to each state the choice as to whether to reflect in its SIP a reduction in minimum reporting frequency specified for certain categories of stationary sources regulated under the CAA.

This action does not contain any unfunded mandate as described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect small governments. The action imposes no enforceable duty on any state, local or tribal governments or the private sector.

This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government.

This action does not have tribal implications as specified in Executive Order 13175. It would not have a substantial direct effect on one or more Indian tribes, since no tribe has to develop a TIP under these regulatory revisions. Furthermore, these regulation revisions do not affect the relationship or distribution of power and responsibilities between the federal government and Indian tribes. The CAA and the Tribal Air Rule establish the relationship of the federal government and tribes in developing plans to attain the NAAQS, and these revisions to the regulations do nothing to modify that relationship. Thus, Executive Order 13175 does not apply to this action.

The EPA interprets Executive Order 13045 as applying only to those regulatory actions that concern environmental health or safety risks that the EPA has reason to believe may disproportionately affect children, per the definition of “covered regulatory action” in section 2-202 of the Executive Order. This action is not subject to Executive Order 13045 because the reduction in minimum reporting frequency specified for certain categories of sources regulated under the CAA will have no effect on any obligation to comply with emission limitations in SIPs, and so it does not concern an environmental health risk or safety risk.

This action is not a “significant energy action” because it is not likely to have a significant adverse effect on the supply, distribution or use of energy. This action merely allows states the option to reflect in their SIPs a reduction in minimum reporting frequency specified for certain categories of stationary sources regulated under the CAA.

This rulemaking does not involve technical standards.

The EPA believes that this action does not have disproportionately high and adverse human health or environmental effects on minority populations, low-income populations and/or indigenous populations as specified in Executive Order 12898 (59 FR 7629, February 16, 1994).

This action merely allows states the option to reflect in their SIPs a reduction in minimum reporting frequency specified for certain categories of stationary sources regulated under the CAA, which will have no effect on any obligation to comply with emission limitations in SIPs.

The statutory authority for this action is provided by CAA section 101 et seq. (42 U.S.C. 7401 et seq. ).

For the reasons stated in the preamble, 40 CFR part 51 is proposed to be amended as follows:

In the Final Rules section of this Federal Register , EPA is approving the State's SIP submittal as a direct final rule without prior proposal because the Agency views this as a noncontroversial submittal and anticipates no adverse comments. A detailed rationale for the approval is set forth in the direct final rule. If no relevant adverse comments are received in response to this rule, no further activity is contemplated. If EPA receives such comments, the direct final rule will be withdrawn and all public comments received will be addressed in a subsequent final rule based on this proposed rule. EPA will not institute a second comment period. Any parties interested in commenting on this action should do so at this time. Please note that if EPA receives adverse comment on an amendment, paragraph, or section of this rule and if that provision may be severed from the remainder of the rule, EPA may adopt as final those provisions of the rule that are not the subject of an adverse comment. For additional information, see the direct final rule which is located in the Rules section of this Federal Register .

How can I get copies of this document and other related information?

This Federal Register proposed rule and supporting documentation are available in a docket EPA has established for this action under Docket ID No. EPA-HQ-OLEM-2019-0086. All documents in the docket are listed in the http://www.regulations.gov index. Although listed in the index, some information is not publicly available, e.g., Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, will be publicly available only in hard copy. Publicly available docket materials are available either electronically at http://www.regulations.gov or in hard copy at EPA/DC, WJC West, Room 3334, 1301 Constitution Ave. NW, Washington, DC 20460. This Docket Facility is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The Docket Facility telephone number is (202) 566-0276. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is (202) 566-1744.

Section 108(b) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) directs EPA to develop regulations that require classes of facilities to establish and maintain evidence of financial responsibility consistent with the degree and duration of risk associated with the production, transportation, treatment, storage, or disposal of hazardous substances. The statute further requires that the level of financial responsibility be established to protect against the level of risk that the President, in his discretion, believes is appropriate, based on factors including the payment experience of the Hazardous Substance Superfund (Fund). The President's authority under this section for non-transportation-related facilities has been delegated to the EPA Administrator.

This proposal is based on EPA's interpretation of the statute and analysis of its record developed for this rulemaking. 1 EPA has analyzed the need for financial responsibility based on risk of taxpayer funded cleanups at facilities in the Chemical Manufacturing Industry operating under modern management practices and modern environmental regulations, i.e., the type of facilities to which financial responsibility regulations would apply.

That risk is identified by examining the management of hazardous substances at such facilities, as well as by examining Federal and state regulatory controls on that management and Federal and state financial responsibility requirements.

Based on that examination, EPA is proposing that, in the context of CERCLA section 108(b), the degree and duration of risk associated with the modern production, transportation, treatment, storage or disposal of hazardous substances by the Chemical Manufacturing Industry does not present a level of risk of taxpayer funded response actions that warrant imposition of financial responsibility requirements for this sector.

In August 2014, the Idaho Conservation League, Earthworks, Sierra Club, Amigos Bravos, Great Basin Resource Watch, and Communities for a Better Environment filed a lawsuit in the U.S. Court of Appeals for the District of Columbia Circuit, seeking a writ of mandamus requiring issuance of CERCLA Section 108(b) financial responsibility rules for the hardrock mining industry, and for the three additional industries identified by EPA in the 2010 Advance Notice of Proposed Rulemaking (ANPRM), 2 that is, Chemical Manufacturing; Petroleum and Coal Products Manufacturing; and Electric Power Generation, Transmission, and Distribution. Following oral arguments, EPA and the petitioners submitted a Joint Motion for an order on Consent, filed on August 31, 2015, which included a schedule for further administrative proceedings under CERCLA Section 108(b). The court order granting the motion was issued on January 29, 2016. A copy of the order can be found in the docket for this rulemaking.

In addition to requiring EPA to publish a proposed rule on hardrock mining financial requirements by December 1, 2016, the January 2016 order required EPA to sign for publication in the Federal Register a determination whether EPA will issue a notice of proposed rulemaking on financial assurance requirements under Section 108(b) in the (a) chemical manufacturing industry; (b) petroleum and coal products manufacturing industry; and (c) electric power generation, transmission, and distribution industry by December 1, 2016. EPA signed the required determination on December 1, 2016; the notice was published on January 11, 2017  3 and announced EPA's intent to proceed with rulemakings for all three of the classes.

The purpose of this action is to propose that financial responsibility requirements under CERCLA Section 108(b) at facilities in the Chemical Manufacturing industry are not necessary and to solicit comments on this proposal. EPA has reached this conclusion based on the analyses described in Parts VI and VII of this proposal. The evidence provided in these analyses contributed to EPA's proposed finding that the degree and duration of risk posed by the Chemical Manufacturing industry does not warrant financial responsibility requirements under CERCLA Section 108(b).

The analysis and proposed finding in this proposal are not applicable to and do not affect, limit, or restrict EPA's authority (1) to take a response action or enforcement action under CERCLA with respect to any facility in the Chemical Manufacturing industry, including any currently operating facilities or those described in this proposal and in the background documents for this proposal, and (2) to include requirements for financial responsibility as part of such response action. The set of facts in the rulemaking record related to the individual facilities discussed in this proposed rulemaking support the Agency's proposal not to issue financial responsibility requirements under Section 108(b) for this class. At the same time, a different set of facts could demonstrate a need for a CERCLA response action at an individual site. This proposed rulemaking also does not affect the Agency's authority under other authorities that may apply to individual facilities, such as the Clean Air Act (CAA), the Clean Water Act (CWA), the Resource Conservation and Recovery Act (RCRA), and the Toxic Substances Control Act (TSCA).

EPA is proposing to not require evidence of financial responsibility under CERCLA Section 108(b) at facilities in the Chemical Manufacturing industry. Thus, there are no proposed regulatory provisions associated with this action.

EPA is proposing to not require evidence of financial responsibility under CERCLA Section 108(b) at facilities in the Chemical Manufacturing industry. EPA, therefore, has not conducted a Regulatory Impact Analysis for this action.

This proposed rule is issued under the authority of Sections 101, 104, 108 and 115 of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C 9601, 9604, 9608 and 9615, and Executive Order 12580 (52 FR 2923, January 29, 1987).

CERCLA, as amended by the Superfund Amendments and Reauthorization Act of 1986 (SARA), establishes a comprehensive environmental response and cleanup program. Generally, CERCLA authorizes EPA  4 to undertake removal or remedial actions in response to any release or threatened release into the environment of “hazardous substances” or, in some circumstances, any other “pollutant or contaminant.” As defined in CERCLA Section 101, removal actions include actions to “prevent, minimize, or mitigate damage to the public health or welfare or to the environment,” and remedial actions are “actions consistent with [a] permanent remedy[.]” Remedial and removal actions are jointly referred to as “response actions.” CERCLA Section 111 authorizes the use of the Hazardous Substance Superfund established under title 26, United States Code, to finance response actions undertaken by EPA. In addition, CERCLA Section 106 gives EPA  5 authority to compel action by liable parties in response to a release or threatened release of a hazardous substance that may pose an “imminent and substantial endangerment” to public health or welfare or the environment.

CERCLA Section 107 imposes liability for response costs on a variety of parties, including certain past owners and operators, current owners and operators, and certain generators, arrangers, and transporters of hazardous substances. Such parties are liable for certain costs and damages, including all costs of removal or remedial action incurred by the Federal Government, so long as the costs incurred are “not inconsistent with the national contingency plan” (the National Oil and Hazardous Substances Pollution Contingency Plan or NCP). 6 Section 107 also imposes liability for natural resource damages and health assessment costs. 7

Section 108(b) establishes authority to require owners and operators of classes of facilities to establish and maintain evidence of financial responsibility. Section 108(b)(1) directs EPA to develop regulations requiring owners and operators of facilities to establish evidence of financial responsibility “consistent with the degree and duration of risk associated with the production, transportation, treatment, storage, or disposal of hazardous substances.” In turn, Section 108(b)(2) directs that the level of financial responsibility shall be initially established, and, when necessary, adjusted to protect against the level of risk that EPA in its discretion believes is appropriate based on the payment experience of the Fund, commercial insurers, court settlements and judgments, and voluntary claims satisfaction. Section 108(b)(2) does not, however, preclude EPA from considering other factors in addition to those specifically listed. The statute prohibited promulgation of such regulations before December 1985.

In addition, Section 108(b)(1) provides for publication within three years of the date of enactment of CERCLA of a “priority notice” identifying the classes of facilities for which EPA would first develop financial responsibility requirements. It also directs that priority in the development of requirements shall be accorded to those classes of facilities, owners, and operators that present the highest level of risk of injury.

On March 11, 2008, Sierra Club, Great Basin Resource Watch, Amigos Bravos, and Idaho Conservation League filed suit in the U.S. District Court for the Northern District of California against then EPA Administrator Stephen Johnson and then Secretary of the U.S. Department of Transportation Mary E. Peters. Sierra Club, et al. v. Johnson, No. 08-01409 (N. D. Cal.). On February 25, 2009, that court ordered EPA to publish the Priority Notice required by CERCLA Section 108(b)(1) later that year. The 2009 Priority Notice and supporting documentation presented the Agency's conclusion that hardrock mining facilities would be the first class of facilities for which EPA would issue CERCLA Section 108(b) requirements. 8 Additionally, the 2009 Priority Notice stated EPA's view that classes of facilities outside of the hardrock mining industry may warrant the development of financial responsibility requirements. 9 The Agency committed to gather and analyze data on additional classes of facilities and to consider them for possible regulation. The court later dismissed the remaining claims.

On January 6, 2010, EPA published an Advance Notice of Proposed Rulemaking (ANPRM), 10 in which the Agency identified three additional industrial sectors for the development, as necessary, of proposed Section 108(b) regulation. To develop the list of additional classes for the 2010 ANPRM, EPA used information from the CERCLA National Priorities List (NPL) and analyzed data from the RCRA Biennial Report (BR) and the Toxics Release Inventory (TRI).

EPA specifically requested public comment in the 2010 ANPRM on whether to propose a regulation under CERCLA Section 108(b) for each of the three industries, or any class or classes within those industries, including information demonstrating why such financial responsibility requirements would or would not be appropriate for those particular classes. In addition, the Agency requested information related to the industry categories discussed in the ANPRM, including data on facility operations, information on past and expected future environmental response actions, use of financial responsibility mechanisms by the industry categories, existing financial responsibility requirements, and other information the Agency might consider in setting financial responsibility levels. Finally, EPA requested information from the insurance and financial sectors related to instrument availability and implementation, and to potential instrument conditions. 11 Comments received on the ANPRM are summarized in the Additional Classes 2017 Notice of Intent to Proceed with Rulemakings, section III.B.4 below.

In August 2014, the Idaho Conservation League, Earthworks, Sierra Club, Amigos Bravos, Great Basin Resource Watch, and Communities for a Better Environment filed a new lawsuit in the U.S. Court of Appeals for the District of Columbia Circuit, seeking a writ of mandamus requiring issuance of CERCLA Section 108(b) financial assurance rules for the hardrock mining industry and for three other industries: Chemical manufacturing; petroleum and coal products manufacturing; and electric power generation, transmission, and distribution. Thirteen companies and organizations representing business interests in the hardrock mining and other sectors sought to intervene in the case.

Following oral argument, the court issued an order in May 2015 requiring the parties to submit, among other things, supplemental submissions addressing a schedule for further administrative proceedings under CERCLA Section 108(b). Petitioners and EPA requested an order from the court with a schedule calling for the Agency to sign a proposed rule for the hardrock mining industry by December 1, 2016, and a final rule by December 1, 2017. The joint motion also included a requested schedule for the additional industry classes, which called for EPA to sign by December 1, 2016, a determination on whether EPA would issue a notice of proposed rulemaking for classes of facilities in any or all of the other industries, and a schedule for proposed and final rules for the additional industry classes as follows:

While the joint motion identified the three additional industries as the Chemical Manufacturing industry, the Petroleum and Coal Products Manufacturing industry, and the Electric Power Generation, Transmission and Distribution industry, and set a rulemaking schedule, the motion did not indicate which industry would be the first, second or third. The Joint Motion specified that it did not alter the Agency's discretion as provided by CERCLA and administrative law. 13

On January 29, 2016, the court granted the joint motion and issued an order that mirrored the submitted schedule in substance. The order did not mandate any specific outcome of the rulemakings. 14 The court order can be found in the docket for this rulemaking. The signing of this proposed rule by December 1, 2022, will satisfy one component of the court order.

Consistent with the January 2016 court order, EPA signed on December 1, 2016, a determination regarding rulemakings for the additional classes—a Notice of Intent to Proceed with Rulemakings for all three of the classes. The notice was published in the Federal Register on January 11, 2017. 15

The notice formally announced EPA's intention to move forward with the regulatory process and to publish a notice of proposed rulemaking for classes of facilities within the three industries identified in the 2010 ANPRM. The announcement in the notice was not a determination that requirements were necessary for any or all of the classes of facilities within the three industries, or that EPA would propose such requirements. In addition, the notice gave an overview of some of the comments received on the 2010 ANPRM and initial responses to those comments. The comments on the ANPRM which specifically addressed the need for CERCLA Section 108(b) regulation for the three additional classes fell into four categories: (1) Other laws with which the industry complies that obviate the need for CERCLA Section 108(b) regulation; (2) the sources of data that EPA used to select the industries; (3) past versus current practices within each industry; and (4) the overall need for financial responsibility for each industry. In discussing the ANPRM comments in the 2017 notice, the Agency stated its intent to use other, more industry-specific and more current sources of data to identify risk; to consider site factors that reduce risks, including those that result from compliance with other regulatory requirements; and to develop a regulatory proposal for each rulemaking.

At the time of the 2017 notice, EPA had not identified sufficient evidence to determine that the rulemaking process was not warranted, nor had EPA identified sufficient evidence to establish CERCLA Section 108(b) requirements. The notice described a process to gather and analyze additional information to support the Agency's ultimate decision, including further evaluation of the classes of facilities within the three industry sectors. The notice stated that EPA would decide whether proposing requirements was necessary and, accordingly, that EPA would propose appropriate requirements or would propose not to impose requirements.

On July 29, 2019, EPA published a notice of proposed rulemaking on the first of the three additional industries. In that notice, the Agency proposed to not impose financial responsibility requirements for the Electric Power Generation, Transmission, and Distribution industry and described the analyses and results that were used to reach that decision. The court's January 2016 order requires that a final action on the first additional industry be signed by December 2, 2020. 16

CERCLA Section 108(b) provides general instructions on how to determine what financial responsibility requirements to impose for a particular class of facility. Section 108(b)(1) directs EPA to develop regulations requiring owners and operators of facilities to establish evidence of financial responsibility “consistent with the degree and duration of risk associated with the production, transportation, treatment, storage, or disposal of hazardous substances.” Section 108(b)(2) directs that the “level of financial responsibility shall be initially established and, when necessary, adjusted to protect against the level of risk” that EPA “believes is appropriate based on the payment experience of the Fund, commercial insurers, courts settlements and judgments, and voluntary claims satisfaction.” EPA interprets the risk to be addressed by financial assurance under Section 108(b) to be the risk of the need for taxpayer financed response actions. Read together, the statutory language on determining the degree and duration of risk and on setting the level of financial responsibility confers a significant amount of discretion on EPA.

Section 108(b)(1) directs EPA to evaluate risk from a selected class of facilities, but it does not suggest that a precise calculation of risk is either necessary or feasible. Although the cost of response associated with a particular site can be ascertained only once a response action is required, any financial responsibility requirements imposed under Section 108(b) would be imposed before any such response action was identified. The statute thus necessarily confers on EPA wide latitude to determine, in a Section 108(b) rulemaking proceeding, what degree and duration of risk are presented by the identified class.

Section 108(b)(2) in turn directs that EPA establish the level of financial responsibility that EPA in its discretion believes is appropriate to protect against the risk. This statutory direction does not specify a methodology for the evaluation. Rather, this decision is committed to the discretion of the EPA Administrator. While the statute provides a list of information sources on which EPA is to base its decision—the payment experience of the Superfund, commercial insurers, courts settlements and judgments, and voluntary claims satisfaction—the statute does not indicate that this list of factors is exclusive, nor does it specify how the information from these sources is to be used, such as by indicating how these categories are to be weighted relative to one another.

EPA believes that sections 108(b)(1) and (b)(2) are sufficiently interrelated that it is appropriate to evaluate the degree and duration of risk under subsection (b)(1) by considering the factors enumerated in subsection (b)(2). EPA therefore concludes that Congress intended the risk associated with a particular class of facilities to mean the risk of future Fund-financed cleanup actions in that industry. This reading is supported by the structure of the statute, as Section 108(b) appears between two provisions related to cost recovery. Section 108(a), concerning financial assurance requirements for certain vessels, refers specifically to cleanup costs. And Section 108(c), concerning recovery of costs from guarantors who provide the financial responsibility instruments, refers specifically to liability for cleanup costs. EPA thus reads “risk” in Section 108(b) consistent with its meaning in sections 108(a) and (c); that is, the risk of Fund-financed cleanup. EPA adopted this interpretation in assessing the need for financial responsibility requirements under CERCLA Section 108(b) for facilities in the first class of facilities it evaluated: The Hardrock Mining industry. 17 In its opinion deciding the challenge to the Final Action for the Hardrock Mining industry, the U.S. Court of Appeals for the District of Columbia Circuit held that EPA's interpretation that the provisions of Section 108(b) “relate only to ensuring against financial risks associated with cleanup costs,” is reasonable and entitled to deference. 18

For the Chemical Manufacturing industry, EPA has investigated the payment history of the Fund, and enforcement settlements and judgments, to evaluate, in the context of this CERCLA Section 108(b) rulemaking, the risk of a Fund-financed response action at facilities that would be subject to CERCLA financial responsibility requirements. The statute also authorizes EPA to consider the existence of Federal and state regulatory requirements, including any financial responsibility requirements. Section 108(b)(1) directs EPA to promulgate financial responsibility requirements “in addition to those under subtitle C of the Solid Waste Disposal Act and other Federal law.” According to the 1980 Senate Report on legislation that was later enacted as CERCLA, Congress considered it appropriate for EPA to examine those additional requirements when evaluating the degree and duration of risk under what was later enacted as CERCLA Section 108(b):

While the Senate Report mentions RCRA Section 3004(6) specifically, it is consistent with congressional intent for EPA to consider other potentially duplicative Federal financial responsibility requirements when examining the “degree and duration of risk” in the context of CERCLA Section 108(b) to determine whether and what financial responsibility requirements are appropriate. It is also consistent with congressional intent for EPA to consider state laws before imposing additional Federal financial responsibility requirements.

Consideration of state laws before developing financial responsibility regulations is consistent with CERCLA Section 114(d), which prevents states from imposing financial responsibility requirements for liability for releases of the same hazardous substances after a facility is regulated under Section 108 of CERCLA. Just as Congress intended to prevent states from imposing duplicative financial assurance requirements after EPA had acted to impose such requirements under Section 108, it is reasonable to also conclude that Congress did not mean for EPA to disrupt existing state programs that are successfully regulating industrial operations to minimize risk, including the risk of taxpayer liability for response actions under CERCLA, and that specifically include appropriate financial assurance requirements under state law. Reviews of both state programs and other Federal programs help to identify whether and at what level there is current risk that is appropriate to address under CERCLA Section 108.

EPA also believes that, when evaluating whether and at what level it is appropriate to require evidence of financial responsibility, EPA should examine information on Chemical Manufacturing facilities operating under modern conditions. In other words, EPA should assess the types of facilities to which any new financial responsibility regulations would apply. Financial responsibility requirements under Section 108(b) would not apply to legacy operations that are no longer operating. Rather, any requirements would apply to facilities that follow current industry practices and are subject to the modern regulatory framework ( i.e., the regulations currently in place that apply to this industry). These modern conditions include state and Federal regulatory requirements and financial responsibility requirements that currently apply to operating facilities. This reading of Section 108(b) is consistent with statements in the legislative history of the statute. The1980 Senate Report states that the legislative language that became Section 108(b) “requires those engaged in businesses involving hazardous substances to maintain evidence of financial responsibility commensurate with the risk which they present.”  20 This approach is also consistent with the analysis that EPA undertook, in developing its Final Action on Financial Responsibility Requirements Under CERCLA Section 108(b) for Classes of Facilities in the Hardrock Mining Industry. 21 EPA's approach was recently upheld by the U.S. Court of Appeals for the District of Columbia Circuit. 22

This statutory interpretation is reflected in today's proposal. Any financial responsibility requirements imposed under Section 108(b) would apply to currently operating facilities. EPA thus sought to examine the extent to which hazardous substance management at currently operating Chemical Manufacturing facilities as a class continues to present risk. Moreover, the statutory direction to identify requirements consistent with identified risks guides EPA's interpretation that imposition of financial responsibility requirements under Section 108(b) would not be necessary for currently operating facilities that present minimal current risk of a Fund-financed response action. The interpretation in this proposal does not extend to any site-specific determinations of risk made in the context of individual CERCLA site responses. Those decisions will continue to be made in accordance with preexisting procedures.

EPA thus examined records of releases of hazardous substances from facilities operating under a current regulatory framework and data on the actions taken and expenditures incurred in response to such releases. The data collected do not reflect historical practices, many of which would be illegal under current environmental laws and regulations. Instead, EPA has considered current Federal and state regulation of hazardous substance production, transportation, treatment, storage, or disposal applicable to facilities in the Chemical Manufacturing industry.

Based on the statutory interpretation described above, EPA developed an analytical approach to determine whether the current risk under the modern regulatory framework within the Chemical Manufacturing industry rises to the level that warrants imposition of financial responsibility requirements under CERCLA Section 108(b). Specifically, EPA designed the analytical approach to determine the need for financial responsibility for this industry based on the degree and duration of risk of a Fund-financed response action associated with the industry's production, transportation, treatment, storage, or disposal of hazardous substances.

The approach, described in detail below, looks at risks by examining records of releases of hazardous substances from facilities in the industry in combination with the payment history of the Fund and enforcement settlements and judgments. To enable EPA to base its decision on risk posed by facilities operating under modern conditions, i.e., the types of facilities to which financial responsibility requirements would apply, EPA developed an approach to identify and consider relevant state and Federal regulatory requirements and financial responsibility requirements that currently apply to operating facilities, as well as voluntary protective practices.

EPA sought to determine the level of risk of a Fund-financed response action at current Chemical Manufacturing operations. Relevant to this decision are requirements of existing regulatory programs and voluntary practices, including existing financial responsibility requirements, which can reduce costs to the taxpayer; EPA's experience with cleanups in the Chemical Manufacturing industry; and enforcement actions, which may reduce the need for Federally-financed response action at facilities in the Chemical Manufacturing industry.

As part of scoping the Chemical Manufacturing industry for this proposal, EPA sought to understand general characteristics of the industry that may be relevant to financial responsibility under Section 108(b). To do this, EPA compiled industry features, including the types of activities undertaken and wastes handled or produced. Additionally, EPA looked at the financial condition of the industry to assess the ability of facilities in this class to pay for any environmental obligations they may incur. Discussion of these aspects of the industry is included in section VI of this proposal.

Section VII.A describes EPA's evaluation of cleanup cases at facilities in the Chemical Manufacturing industry. So-called “cleanup cases” are sites in the Chemical Manufacturing industry where releases and cleanup actions occurred. To perform this evaluation EPA developed an analytic approach that considered cleanup cases to identify risk at currently operating facilities and where taxpayer funds were expended for response action. EPA first examined each site to determine the nature and timing of release. EPA used this information to determine if releases occurred under current regulations. As an initial screen, releases that occurred prior to 1980 were deemed to be legacy releases that occurred before the advent of the modern environmental regulatory framework and were therefore screened out of our analysis. Once EPA identified those sites with more recent releases occurring under a modern regulatory framework, EPA then focused on those response actions that were paid for by the taxpayer by looking at those sites with Fund-financed cleanup activity.

As described in section VII.B, to understand the modern regulatory framework applicable to currently operating facilities within the Chemical Manufacturing industry, EPA compiled applicable Federal and state regulations. Specifically, EPA looked to regulations that address the types of releases identified in the cleanup cases. This review also considered industry voluntary programs that could reduce risk of releases. EPA also identified financial responsibility regulations that apply to facilities in the Chemical Manufacturing industry in section VII.C, and compliance and enforcement history for the relevant regulations in section VII.D.

EPA considered payments from commercial insurers as well but determined that it was not necessary to conduct a detailed analysis of this potential information source in light of the analyses of cleanup cases and enforcement data. The cleanup cases and enforcement data, in addition to addressing the payment experience of the Fund, court settlements and judgments, and voluntary claims satisfaction, also encompasses amounts from commercial insurance payments. For example, at three of the Chemicals Manufacturing NPL sites identified and reviewed, EPA recovered funds from a commercial insurer that had issued a policy to a potentially responsible party (PRP) that was a liable party at all three sites. Furthermore, payments from commercial insurers may have helped finance the work conducted by PRPs in the cleanup cases identified or may have been included in settlements, judgments, or enforcement cases identified by EPA. However, in the event there were significant payments from commercial insurers associated with facilities in the Chemical Manufacturing industry that were not already indirectly captured, this information would neither indicate greater risk to the Fund nor suggest a need for financial responsibility requirements under CERCLA Section 108(b).

In considering how to structure its analysis and what data sources to examine, EPA reviewed prior analysis done for selection of industry classes in the 2010 ANPRM and public comments responding to EPA's approach. In the public comment period for the ANPRM, EPA received a total of 67 comments from 30 commenters on the Chemical Manufacturing industry, Petroleum and Coal Products Manufacturing industry, and the Electric Power Generation, Transmission, and Distribution industry. In addition, EPA received five comments to the Hardrock Mining Proposed Rule that were related to the additional classes of facilities.

EPA received comments from the American Chemistry Council and the Society of Chemical Manufacturers and Affiliates, among others. Commenters indicated that EPA should concentrate on current practices and not legacy contamination. Commenters also said that EPA should not impose financial responsibility requirements on facilities that are already subject to other Federal laws. Lastly, many commenters believe that EPA placed too much emphasis on TRI data and RCRA BR data and expressed their opinions that these data sources are not designed or intended to provide risk-based information.

In its 2017 Notice of Intent to Proceed with Rulemakings  23 EPA acknowledged limitations on information that can be gained from TRI and BR data and announced its intention to use industry-specific and current sources of data to identify risk for the purposes of the rulemakings. EPA also analyzed those limitations in the final action for the Hardrock Mining rule. 24 Accordingly, in the analysis conducted to assess risk in the Chemical Manufacturing industry for this action, EPA chose not to rely on TRI and BR data. While, at the time of the 2010 ANPRM, the Agency found those data sources appropriate for identifying classes of facilities to examine further, the Agency does not find the data sources valuable for assessing current risk of a Fund-financed response action in the industry.

For this proposal and the associated analyses, EPA reviewed facilities classified under the North American Industry Classification System (NAICS) code 325. The most recent available census data lists the size of the industry at 13,480 establishments nationally. 25 Chemical Manufacturing facilities transform raw materials ( e.g., oil, natural gas, water, minerals, metals) into tens of thousands of different products, including pigments, synthetic fibers, bulk chemicals, plastics, pharmaceuticals, and consumer goods, as well as produce inputs to agriculture, manufacturing, and construction industries.

As discussed in the approach section, to provide a backdrop for its analyses, EPA reviewed, and characterizes here, the operation of the chemical manufacturing industry from a broad perspective. Operational and decommissioning practices in industrial sectors and their associated firms can ultimately affect the ability of individual firms to responsibly minimize their impact on human health and the environment. Commodity chemical manufacturers create products in large quantities under continuous processing conditions, generally in large volumes in response to homogenous specifications. Specialty-batch chemical manufacturers develop products for focused markets, making complex products in small quantities that are then processed into higher value-added products. These manufacturers change their process lines several times a year, providing more opportunities for environmental improvements but also making environmental compliance more complicated. To consider the potential for releases as part of its decision making, EPA prepared a high-level review of industry practices and the environmental profile of the Chemical Manufacturing industry, which includes a summary of relevant operational and decommissioning materials and wastes in a background document, which is available in the docket for this rulemaking. 26

Potentially hazardous materials are frequently used in this industry. These materials can include a large variety of chemicals and compounds. The many different processes used in the Chemical Manufacturing industry result in many different wastes. Typical wastes from Chemical Manufacturing facilities can include, for example, spent solvents, distillation bottoms and side-cuts, off-specification and unused chemicals, wastewater, wastewater treatment sludge, emission control sludges, filter cake, spent catalysts, byproducts, reactor cleanout wastes, and container residues. Chemical Manufacturing facilities typically handle large volumes of chemicals using above and below ground bulk storage tanks, transfer equipment, process piping, and raw material/final product storage areas. Due to the nature of this industry, it is not surprising that it generates high volumes of hazardous waste. 27

Some wastes may be found on site in surface impoundments, bulk storage tanks, waste piles, and disposal pits. All these areas may contribute to soil and groundwater contamination. Decommissioning wastes can include all the chemicals and substances listed above, as well as contaminated soil and building materials, sludges, neutralization liquids, and cleaning solvents. If such wastes are hazardous, then they must be managed in accordance with RCRA regulations.

Industry practices in certain subsectors of the Chemical Manufacturing industry, including All Other Basic Organic Chemical Manufacturing (325199), Other Basic Inorganic Chemical Manufacturing (325180), Cyclic Crude, Intermediate, and Gum and Wood Chemical Manufacturing (325194), and Synthetic Dye and Pigment Manufacturing (325130), use more hazardous substances and generate larger volumes of hazardous waste. Several sectors use fewer hazardous substances and generate lower amounts of hazardous waste, including Custom Compounding of Purchased Resins (325991), Printing Ink Manufacturing (325910), Polish and other Sanitation Good Manufacturing (325612), Phosphatic Fertilizer Manufacturing (325312), and Ethyl Alcohol Manufacturing (325193). Further information on industry practices is provided in the background document for this section, which is available in the docket for this rulemaking. 28

Sites contaminated by the industry contain a wide variety of contaminants, including but not limited to toxic organics, such as benzene, polychlorinated biphenyls (PCBs), phenol, and volatile organic hydrocarbons (VOCs); chemical substances, such as benzo(b)fluoranthene, carbon tetrachloride, methyl methacrylate, methylene chloride, nitroglycerin, phosphoric acid, and sodium hypochlorite; and metals, such as arsenic, barium, cadmium, chromium, iron, lead, manganese, mercury, thorium, and zinc.

Facilities in the Chemical Manufacturing industry are subject to a wide range of environmental regulation and enforcement oversight as discussed in Sections VII.B and VII.D below, and have adopted voluntary practices that can be effective at reducing pollution, as discussed in Section VII C.

Economic trends and financial health in industrial sectors and their associated firms can ultimately affect the ability of individual firms to responsibly address their environmental liabilities. Circumstances in which firms face financial stress can potentially contribute to the abandonment of facilities and the creation of orphan waste sites requiring cleanup. To consider the potential for firms to default on their financial obligations, EPA prepared a high-level economic profile of the Chemical Manufacturing industry, which includes a summary of relevant financial metrics, industry default statistics and trends, and a broad discussion outlining environmental liabilities under Chapter 11 of the Bankruptcy Code. This analysis, summarized in this section, looked at the industry as a whole and additionally focused on four subsectors individually, providing an industry profile, evaluation of the potential universe of regulated entities, and discussion of the subsectors' financial health and relative volatility. The full analysis is found in the background document for this section, and is available in the docket for this rulemaking. 29

Generally, this analysis found the sector to be financially stable and able to pay off short-term obligations, though some subsectors experienced declining profitability and increased risk in recent years. Overall, financial ratios indicate healthy financial performance, despite an overall decrease in the total value of shipments and receipts for services in the sector. The report also notes that firms generally remain liable for environmental compliance obligations under Chapter 11 debt restructuring. Sections 101(5) and 1141(d) of the Bankruptcy Code only provide for a discharge of monetary rights to payment and not for compliance obligations where the Federal government has not sought the payment of money.

As described in the Approach to Developing the Proposed Rule, Section V above, to evaluate the need for financial responsibility regulations in the Chemical Manufacturing industry, EPA sought examples of pollution that occurred under a modern regulatory framework, and that required a taxpayer-funded CERCLA cleanup. In its evaluation, EPA focused first on identifying response actions at Superfund National Priorities List (NPL) sites and sites using the Superfund Alternative Approach (SAA), 30 as those are generally larger cleanups both in terms of amounts of contaminants removed and in terms of costs to carry out these cleanups. EPA also looked at Superfund removals at non-NPL sites.

To identify the relevant cleanup cases in the Chemical Manufacturing industry, EPA included the NPL sites already identified in the 2010 ANPRM, 31 and supplemented the dataset with additional NPL sites that had been identified since the ANPRM, sites using the SAA, and non-NPL sites identified in EPA's Superfund Enterprise Management System (SEMS) database. EPA collected information on the timing and nature of releases or threatened releases at these sites. Specifically, EPA sought to identify, as applicable, facility operation end dates, release dates, sources of contamination, NPL proposal dates, contaminated media, type of contaminant, cleanup lead, and information on Superfund expenditures at the site, as well as other information. For this collection, EPA relied on information previously collected as part of the ANPRM, information available in Superfund site documents ( e.g., NPL listing narratives, Records of Decision, Action Memos, Five-Year Reviews), and information in EPA's SEMS as of March 2018. The cleanup case identification and site information collection processes are described in greater detail in the relevant background documents, which are available in the docket for this rulemaking. 32

After compiling information about the risks and history of each site, EPA sought to identify instances in which releases occurred under the modern regulatory framework that resulted in Fund-financed response actions. To do so, EPA's methodology applied sequenced screens to the identified sites. EPA first screened out any NPL sites or sites using the SAA where the contaminant release or cleanup activity occurred before 1980. EPA chose 1980 as the cutoff point to initially screen out legacy contamination because it was the year when CERCLA was enacted, as well as the date of the initial regulations under RCRA Subtitle C governing the generation, treatment, storage, and disposal of hazardous waste. EPA chose to give these significant RCRA and CERCLA milestones greatest consideration due to the large number of issues of waste management, land disposal, and soil contamination identified in the review of the NPL and SAA cases. EPA believes the 1980 cutoff date is a conservative screen ( i.e., retains more sites in the analysis) in that only the initial RCRA regulations were in place in 1980 and they were refined, expanded and enhanced several times over the next decades. Moreover, the Agency's enforcement authorities expanded in the 1980s as the RCRA program matured. Notably, the passage of the Hazardous and Solid Waste Amendments (HSWA) in 1984 resulted in many regulatory changes and enhanced enforcement mechanisms. More specifically, HSWA created the Land Disposal Restrictions (LDR) program, codified in 40 CFR part 268, which prohibits the land disposal of untreated hazardous wastes. HSWA also substantially expanded corrective action authorities for both permitted RCRA treatment, storage and disposal (TSD) facilities and facilities operating under interim status, 33 requiring facilities to address the release of hazardous wastes and demonstrate financial responsibility for completing the required corrective actions, further reducing the risks that sites would have to be addressed under CERCLA. For further detail on these requirements, see section VII. B below.

Next, EPA sought to remove from the analysis sites where significant Fund expenditures had not occurred, because response actions that were paid for by private parties do not support the need for CERCLA Section 108(b) financial responsibility regulations. Using the “Action Lead” field in SEMS associated with each site, EPA screened out the potentially responsible party (PRP) lead sites. This left only the Mixed Lead Construction or Government Performed Construction sites in the analysis, under the assumption that PRP Performed Construction  34 sites did not present significant expenses to the Fund.

EPA then reviewed the remaining sites ( i.e., those with both pollution dates of 1980 or later and Mixed Lead Construction or Government Performed Construction designation in SEMS) individually in greater detail. Specifically, EPA considered the site history and each of the contamination sources at the site in the context of the regulations that would be applicable to that facility today. More information on the regulations EPA considered is available in Section VII.B.

Findings from EPA's analysis of the cleanup cases are discussed below, with more detailed information available in background documents available in the docket for this rulemaking. 35 These background documents provide the list of sites identified and remaining at each stage of the analysis, as well as the information considered in the screening and review process.

Using the data sources described above for the Chemical Manufacturing industry, EPA identified 199 NPL sites and eight sites using the SAA, as well as 290 non-NPL CERCLA removal action sites, 36 to evaluate according to the methodology described above. As explained further below, the majority of the contamination at NPL sites and sites using the SAA were ultimately considered to involve releases that occurred before the modern regulatory framework or they were cases where no taxpayer funds were used. Similarly, for the removal sites, the majority of cases, albeit to a lesser extent as compared to NPLs, showed no releases of hazardous substances under the modern regulatory framework or required minimal or no taxpayer-funded cleanups, as described below.

The 199 NPL sites and eight sites using the SAA that were evaluated include different industry groups within the Chemical Manufacturing sector. While multiple manufacturing activities can occur at a site, facilities that were engaged in manufacturing pesticides, fertilizers, and agricultural chemicals show up more prevalently on the Chemical Manufacturing NPL list (about 42%), closely followed by facilities engaged in basic Chemical Manufacturing (about 39%). Other manufacturing activities observed to a lesser extent include resin, synthetic rubber, and artificial synthetic fibers and filaments manufacturing, paint, coating, and adhesive manufacturing, and “other” types of Chemical Manufacturing activities.

A review of the history of environmental contamination at these NPL and NPL-like sites revealed that the most common types of environmental damage were contamination of soil and ground water (approximately 90%), while impacts to surface water bodies were also relatively common (nearly 60%). To a lesser extent, impact to air and sediments were also observed. The primary source of the contamination was contaminated soils (approximately 62% of sites) that resulted from inappropriate waste and material handling, leaks and spills, fires and explosions, lack of stormwater management, and poor housekeeping practices. Other significant sources include disposal into unlined ponds and wastewater lagoons (approximately 40%)  37 and the abandonment of hazardous waste and materials in drums and other containers (approximately 32%). 38 Detailed discussions of the impacted media and sources of contamination identified at these NPL and NPL-like sites are presented in supporting technical background documents, which are available in the docket for this rulemaking. 39

After characterizing the industrial activities and contamination history at these sites, EPA applied the screens described above to remove PRP-Performed Construction sites and sites where the environmental releases occurred pre-1980 to the 199 NPL sites and the eight sites using the SAA approach. Based on these criteria, EPA screened out 127 sites. Additionally, EPA also excluded 46 sites from the analysis where, upon further review, the industrial activities were found to fall outside of the relevant class of facilities under consideration in this rulemaking. Thirty-four NPL sites remained after those screens that were either Government Performed Construction or Mixed Lead Construction ( i.e., a combination of Government and PRP) sites and had releases that arose in 1980 or later. None of the sites using SAA remained after those screens.

To assess the remaining 34 sites, EPA first conducted a detailed review to compare the environmental issues ( e.g. contamination) at the sites against the regulations applicable today. Based on the detailed review, EPA concluded that notwithstanding the screens applied at earlier stages of the analysis, the releases at 30 of the 34 NPL sites resulted largely from legacy practices and contamination. An example of such a case is Baird & McGuire Inc., a 20-acre facility in Holbrook, Massachusetts, that operated as a chemicals manufacturing and batching company from 1912 to 1983. EPA did not initially screen out the site because case files on this site showed documented discharges of black oily substances into a nearby wetland between 1981 and 1982. Despite these releases, EPA concluded that the most significant contamination at the site occurred largely from legacy waste disposal practices (included direct discharge into the soil, lagoons, and wetlands) and improper storage of chemicals during the 70 years of operation that began in 1912. Because of these practices, on-site soil, ground water, surface water, and municipal water supplies were contaminated, which prompted EPA to list the site on the NPL in 1983. When these disposal practices were assessed against today's modern regulatory framework, the releases were all found to have occurred before the promulgation of RCRA Subtitle C regulations. Moreover, enforcement records further corroborate the presence of significant compliance issues at this site before 1980, as the owner and operator had been fined at least 35 times between 1954 and 1977 by various state and Federal agencies for numerous violations. 40 For discharges of oily substances into wetlands identified post-1980s, EPA's case file also showed Baird & McGuire had voluntarily taken actions, including removing the discharge pipes and applying absorbent pads to the wetland to soak up the oil. Appendix 4 of the background document provides more detailed discussions on this site and the 29 other NPL sites that EPA deemed as legacy issues after the detailed reviews. 41