Federal Crop Insurance Corporation
Food and Nutrition Service
Food Safety and Inspection Service
Risk Management Agency
Industry and Security Bureau
International Trade Administration
National Oceanic and Atmospheric Administration
National Assessment Governing Board
Federal Energy Regulatory Commission
Centers for Medicare & Medicaid Services
Food and Drug Administration
Health Resources and Services Administration
National Institutes of Health
Substance Abuse and Mental Health Services Administration
Coast Guard
Federal Emergency Management Agency
U.S. Customs and Border Protection
Fish and Wildlife Service
Geological Survey
Indian Affairs Bureau
Land Management Bureau
National Park Service
Surface Mining Reclamation and Enforcement Office
Employee Benefits Security Administration
Labor Statistics Bureau
Veterans Employment and Training Service
Federal Aviation Administration
Federal Motor Carrier Safety Administration
Federal Transit Administration
Pipeline and Hazardous Materials Safety Administration
Alcohol and Tobacco Tax and Trade Bureau
Foreign Assets Control Office
Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, and notice of recently enacted public laws.
To subscribe to the Federal Register Table of Contents electronic mailing list, go to https://public.govdelivery.com/accounts/USGPOOFR/subscriber/new, enter your e-mail address, then follow the instructions to join, leave, or manage your subscription.
Food Safety and Inspection Service (FSIS), Department of Agriculture (USDA).
Final rule.
FSIS is revising the regulations prescribing the statistical methods used in measuring the performance of chemistry laboratories in its voluntary Accredited Laboratory Program (ALP) and expanding the scope of accreditations offered by the program. Currently, participants in the ALP are accredited for the analysis of food chemistry (moisture, protein, fat, and salt), specific chemical residues, and classes of chemical residues. FSIS also is providing for the ALP to accredit non-Federal laboratories for microbiological indicator organisms and pathogen testing. FSIS is changing the statistical method the ALP uses to evaluate laboratory proficiency testing (PT). Additionally, FSIS is making various minor edits and changes to the regulation for the sake of clarity and to incorporate all sample types under the jurisdiction of FSIS.
This rule is effective October 24, 2022.
Rachel Edelstein, Assistant Administrator, Office of Policy and Program Development, Food Safety and Inspection Service, U.S. Department of Agriculture; Telephone: (202) 720–0399.
FSIS accredits non-Federal analytical laboratories under its Accredited Laboratory Program (ALP). Under this voluntary program, FSIS accredits laboratories to conduct analyses of official meat and poultry samples for food chemistry (moisture, protein, fat, and salt), specific chemical residues, and classes of chemical residues. In response to the meat and poultry industries' need for more rapid analytical results as food testing expanded, and because of limitations in FSIS laboratory capacity at the time of this need, these programs were established to accredit non-Federal laboratories for certain tests of both meat and poultry products.
The ALP monitors each non-Federal laboratory currently accredited under the program to ensure that these laboratories are operating at a level of quality that produces reliable results that can be used to support decisions in establishments' food safety systems. The Proficiency Testing (PT) program administered by the ALP supports this effort. Monitoring is achieved by evaluating PT results for acceptable analytical performance and assessing quality assurance through on-site reviews of each laboratory's management system and facility assets.
On December 14, 2020, FSIS proposed changes to its ALP regulations (85 FR 80668). Specifically, FSIS proposed to change the statistical method it uses to evaluate laboratory PT sample results to the
The comment period ended on February 12, 2021. After reviewing comments, FSIS is finalizing the rule as proposed.
FSIS received seven comments on the proposed rule. Commenters included representatives from laboratories, an association of laboratory scientists, a State Department of Agriculture, a nationwide laboratory network, and a trade association. Four of the seven commenters expressed overall support for the proposed rule. Some commenters raised questions and made suggestions, and two of the commenters expressed concern with making International Organization for Standardization (ISO) 17025 accreditation a prerequisite to participation in the program, a possibility upon which FSIS requested comment in the proposal. No commenter expressed broad opposition to the proposal, as a whole, for updating the statistical PT scoring and expanding the program to include accreditations for microbiological indicator organisms and pathogen testing.
The following is a discussion of the relevant issues raised in the comments.
• A laboratory will be placed on probation for having two
• A laboratory may be placed on probation for having a persistent bias of an analyte or class of analytes compared
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs
There were approximately 55 food chemistry laboratories participating in the ALP in 2012. Since then, participation has declined to 34 laboratories in 2021. Of those laboratories, 25 were accredited for food chemistry, 13 for chemical residue chlorinated pesticides analysis, and 4 for chemical residue PCBs analysis (some laboratories have multiple accreditations).
Although the final rule does not change the current accreditation fee structure,
Additionally, the changes to the accreditation process (9 CFR 439.10(d)(4)(ii)) are also expected to reduce industry costs. Current criteria state that if a laboratory's second set of qualification samples do not meet the criteria for obtaining accreditation, laboratories must submit a new application, all fees, and all documentation of corrective action required for accreditation. FSIS will no longer require food chemistry laboratories to reapply and pay the fees again before receiving the third qualification sample set. Instead, fees will be paid after the third set or if the initial accreditation process is not completed within eleven months (per 9 CFR 439.10(c)). This is expected to reduce an applicable laboratory's accreditation cost by between $2,100 and $5,000.
The FSIS Administrator (Administrator) has made a determination that this final rule will not have a significant economic impact on a substantial number of small entities in the United States, as defined by the Regulatory Flexibility Act (5 U.S.C. 601
FSIS has reviewed this rule under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3520) and has determined that there is no new information collection related to this final rule. FSIS collects information for the ALP under Office of Management and Budget (OMB) approval numbers 0583–0082 and 0583–0163.
FSIS and USDA are committed to achieving the purposes of the E-Government Act (44 U.S.C. 3601,
This rule has been reviewed in accordance with the requirements of Executive Order 13175, Consultation and Coordination with Indian Tribal Governments. The review reveals that this regulation will not have substantial and direct effects on Tribal governments and will not have significant Tribal implications.
Public awareness of all segments of rulemaking and policy development is important. Consequently, FSIS will announce this
FSIS will also announce and provide a link to this
In accordance with Federal civil rights law and U.S. Department of Agriculture (USDA) civil rights regulations and policies, the USDA, its Agencies, offices, and employees, and institutions participating in or administering USDA programs are prohibited from discriminating based on race, color, national origin, religion, sex, gender identity (including gender expression), sexual orientation, disability, age, marital status, family/parental status, income derived from a public assistance program, political beliefs, or reprisal or retaliation for prior civil rights activity, in any program or activity conducted or funded by USDA (not all bases apply to all programs). Remedies and complaint filing deadlines vary by program or incident.
Persons with disabilities who require alternative means of communication for program information (
To file a program discrimination complaint, complete the USDA Program Discrimination Complaint Form, AD–3027, found online at
Submit your completed form or letter to USDA by: (1) mail: U.S. Department of Agriculture, Office of the Assistant Secretary for Civil Rights, 1400 Independence Avenue SW, Washington, DC 20250–9410; (2) fax: (202) 690–7442; or (3) email:
USDA is an equal opportunity provider, employer, and lender.
Laboratories, Meat inspection, Poultry and poultry products.
For the reasons discussed in the preamble, FSIS revises 9 CFR part 439 to read as follows:
7 U.S.C. 138f, 450, 1901–1906, 1622(o); 21 U.S.C. 451–470, 601–695; 7 CFR 2.18, 2.53.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(a) Participation in the ALP is voluntary. Application for accreditation must be made on designated paper or electronic forms provided by FSIS, or otherwise in writing, by the owner or manager of a non-Federal analytical laboratory. Application forms may be obtained by contacting the ALP at
(b) At the time that an application for accreditation is filed with the ALP, the laboratory must submit fees payable to the U.S. Department of Agriculture by check, bank draft, money order, or other form of payment accepted by the U.S. Department of Agriculture, in the amount specified by FSIS as directed in 9 CFR 391.5, along with the completed application for the accreditation(s).
(c) An application for accreditation will not be processed or allowed to advance, without further procedure, if the accreditation fee(s) is delinquent.
(d) FSIS will issue a bill annually in the amount specified by FSIS in 9 CFR 391.5 for each accreditation held and are due by the date required. Bills are payable to the U.S. Department of Agriculture by check, bank draft, money order, or other form of payment accepted by the U.S. Department of Agriculture.
(a) Analytical laboratories may be accredited for the analyses of foodborne indicator and pathogen analytes, or a specified chemical residue or a class of chemical residues, in raw or processed meat, poultry, and egg products. Analytical laboratories also may be accredited for the analyses of food chemistry components in raw or processed meat and poultry products.
(b) Accreditation will be granted only if the applying laboratory successfully satisfies FSIS requirements that are stated in this part.
(c) To obtain FSIS accreditation, an analytical laboratory must:
(1) Be supervised by a person holding, at a minimum, a bachelor's degree in biology, chemistry, microbiology, food science, food technology, or a related field.
(i) For food chemistry accreditation, the supervisor must also have one year of experience in food chemistry analysis, or equivalent qualifications.
(ii) For chemical residue accreditation, either the supervisor or the analyst assigned to analyze the sample must also have three years of experience determining analytes at or below part per million levels, or equivalent qualifications.
(iii) For indicator organisms or pathogen accreditation, either the supervisor or the analyst assigned to analyze the sample must also have three years of experience in foodborne pathogen analyses or equivalent qualifications.
(2) Demonstrate the capability to achieve quality assurance levels that are within acceptable limits as determined by evaluation that is consistent with ISO 13528 for the analysis of initial accreditation proficiency testing samples, in the analyte category for which accreditation is sought. FSIS and some Association of Official Analytical Collaboration (AOAC) International analytical test procedures are acceptable for use in this program. FSIS procedures may be found on the U.S. Department of Agriculture (USDA) FSIS website at
(3) Complete a second set of proficiency testing samples if the results of the first set of proficiency testing samples are unsuccessful.
(i) The second set of proficiency testing samples will be provided within 30 days following the date of receipt by FSIS of a request from the applying laboratory. The second set of proficiency testing samples will be analyzed only for the analyte(s) or analyte classes for which unacceptable initial results had been obtained by the laboratory.
(ii) If the results of the second set of proficiency testing samples are unsuccessful, the laboratory may request a third set of proficiency testing samples after a 60-day waiting period, commencing from the date of notification by FSIS of unsuccessful results. The third set of proficiency testing samples will be analyzed only for the analyte(s) or analyte classes for which unacceptable initial results had been obtained by the laboratory.
(iii) If the laboratory is unsuccessful for the third set and still wishes to pursue accreditation, the ALP will require a new application and an application fee if the initial accreditation process is not completed within eleven months. Documentation of corrective action(s) related to the previous unsuccessful accreditation attempt must be submitted to and accepted by the ALP.
(4) Allow inspection of the laboratory facility and pertinent documents by FSIS officials prior to the determination of granting accredited status.
(5) Pay the accreditation fee by the date required.
(a)
(b)
(1) Maintain laboratory quality control records for the most recent three years that samples have been analyzed.
(2) Maintain complete records of the receipt, analysis, and disposition of samples for the most recent three years that samples have been analyzed.
(3) Maintain in a secure electronic format or in a standards book, all records, readings, and calculations for prepared standards. Entries are to be dated and the analyst identified at the time of the entry, and manual calculations verified and documented by the supervisor, or by the supervisor's designee, before use of the standard. The standards records are to be retained for three years after the last recorded entry. The certificates of analysis are to be kept on file for purchased standards for at least the period of time that the materials are in use.
(4) Maintain records of instrument maintenance and calibration. The records are to be retained for three years after the last recorded entry.
(5) As provided in paragraph (e) of this section, records are to be made available for review by any duly authorized representative of the Secretary of Agriculture, including ALP personnel or their designees.
(c)
(2) Results must be those of the accredited laboratory. Analyses of proficiency testing samples must not be contracted out by the accredited laboratory.
(d)
(e)
(f)
(g)
(h)
(i)
(1) The laboratory must successfully analyze a set of initial accreditation proficiency testing samples for the analyte(s) that triggered the probation and submit the analytical results to FSIS by the due date, which is typically within approximately three weeks of receipt of the samples.
(2) Similarly satisfy criteria for accreditation maintenance proficiency testing samples specified by the ALP in this part.
(3) Provide written corrective action documentation, related to the issue that triggered the probation, to the ALP by the date required.
(j)
(1) Laboratories that are suspended due to performance or response issues enter a waiting period of 60 days from the effective date of that action. After the 60-day period has passed, if the laboratory wishes to pursue reinstatement to the ALP, the laboratory must submit a written corrective action plan specifying what corrections were made and illustrate to FSIS that the corrections are effective or would reasonably be expected to be effective.
(i) After the corrective action plan has been accepted by the ALP, the laboratory must successfully analyze a set of initial accreditation proficiency testing samples for the analyte(s) that triggered the suspension and meet all other program requirements including payment of any annual fees that are due. The ALP may perform an on-site inspection at the laboratory's facility and/or require the laboratory to provide documentation to confirm that it meets the requirements of the program.
(ii) The suspended laboratory is allowed two attempts to successfully analyze the initial accreditation proficiency testing set(s) of samples.
(2) Laboratories that are suspended due to indictment or charges as described in § 439.52 may not seek removal of suspension status until being cleared of said indictment or charges.
Upon a determination by the FSIS Administrator (Administrator), a laboratory will be refused accreditation for the following reasons:
(a) A laboratory will be refused accreditation for failure to meet the requirements of the ALP as stated in this part.
(b) A laboratory will be refused accreditation if the laboratory or any individual or entity responsibly connected with the laboratory has been convicted of, or is under indictment for, or has charges on any information brought against them in a Federal or State court concerning any of the following violations of law:
(1) Any felony.
(2) Any misdemeanor based upon acquiring, handling, or distributing of unwholesome, misbranded, or deceptively packaged food or upon fraud in connection with transactions in food.
(3) Any misdemeanor based upon a false statement to any governmental agency.
(4) Any misdemeanor based upon the offering, giving or receiving of a bribe or unlawful gratuity.
(5) Altering any official sample or analytical finding; or substituting any analytical result from any other laboratory and representing the result as its own.
Upon a determination by the Administrator, a laboratory will be placed on probation for the following reasons:
(a) If the laboratory fails to complete more than one inter-laboratory accreditation maintenance proficiency testing sample analysis within 12 consecutive months, unless written permission is granted by the Administrator.
(b) If the laboratory does not respond to ALP inquiries related to its participation in the program or fails to meet any of the requirements or criteria set in this part.
(c) If the laboratory does not successfully demonstrate the maintenance of quality assurance capabilities including its results from inter-laboratory accreditation maintenance proficiency testing samples. ALP evaluation criteria are based on the ISO 13528 standard, to include performance evaluation by
A laboratory will be suspended from the program if probation status is not rectified according to program requirements stated in this part. The accreditation of a laboratory will be immediately suspended if the laboratory or any individual or entity responsibly connected with the laboratory is indicted or has charges on information brought against them in a Federal or State court for any of the following violations of law. A laboratory must notify the ALP within 30 calendar days if any of these situations occur.
(a) Any felony.
(b) Any misdemeanor based upon acquiring, handling, or distributing of unwholesome, misbranded, or deceptively packaged food or upon fraud in connection with transactions in food.
(c) Any misdemeanor based upon a false statement to any governmental agency.
(d) Any misdemeanor based upon the offering, giving or receiving of a bribe or unlawful gratuity.
(e) Altering any official sample or analytical finding; or substituting any analytical result from any other laboratory and representing the result as its own.
A laboratory will have its accreditation revoked from the program if suspension status is not rectified. The accreditation of a laboratory will also be revoked for the following reasons:
(a) An accredited laboratory will have its accreditation revoked if the Administrator determines that the laboratory or any responsibly connected individual or any agent or employee has:
(1) Altered any official sample or analytical finding; or
(2) Substituted any analytical result from any other laboratory and represented the result as its own.
(b) An accredited laboratory will have its accreditation revoked if the laboratory or any individual or entity responsibly connected with the laboratory is convicted in a Federal or State court of any of the following violations of law. A laboratory must notify the ALP within 30 calendar days if any of these situations occur.
(1) Any felony.
(2) Any misdemeanor based upon acquiring, handling, or distributing of unwholesome, misbranded, or deceptively packaged food or upon fraud in connection with transactions in food.
(3) Any misdemeanor based upon a false statement to any governmental agency.
(4) Any misdemeanor based upon the offering, giving or receiving of a bribe or unlawful gratuity.
Accreditation of any laboratory will be refused, suspended, or revoked under the conditions previously described in this part. The owner or operator of the laboratory will be sent written notice of the refusal, suspension, or revocation of accreditation by the Administrator. In such cases, the laboratory owner or operator will be provided an opportunity to present, within 30 days of the date of the notification, a statement challenging the merits or validity of such action and to request an oral hearing with respect to the denial, suspension, or revocation decision. An oral hearing will be granted if there is any dispute of material fact joined in such responsive statement. The proceeding will be conducted thereafter in accordance with the applicable rules of practice, which will be adopted for the proceeding. Any such refusal, suspension, or revocation will be effective upon the receipt by the laboratory of the notification and will continue in effect until final determination of the matter by the Administrator.
Federal Aviation Administration (FAA), Department of Transportation (DOT).
Final rule.
This action modifies the Class E airspace, designated as an extension to a Class D or Class E surface area, at Camarillo Airport, Camarillo, CA. This action also removes the Camarillo very high frequency omnidirectional range (VOR)/distance measuring equipment (DME) from the airspace's legal description. Additionally, this action establishes Class E airspace extending upward from 700 feet above the surface. Lastly, this action makes administrative changes to the Class D and Class E legal descriptions. These actions would ensure the safety and management of visual flight rules (VFR) and instrument flight rules (IFR) operations at the airport.
Effective 0901 UTC, November 3, 2022. The Director of the Federal Register approves this incorporation by reference under 1 CFR part 51, subject to the annual revision of FAA Order JO 7400.11, Airspace Designations and Reporting Points, and publication of conforming amendments.
FAA Order JO 7400.11F, and subsequent amendments can be viewed online at
Nathan A. Chaffman, Federal Aviation Administration, Western Service Center, Operations Support Group, 2200 S 216th Street, Des Moines, WA 98198; telephone (206) 231–3460.
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 modify the Class D and Class E airspace at Camarillo Airport, Camarillo, CA, to support VFR and IFR operations at the airport.
The FAA published a notice of proposed rulemaking (NPRM) in the
This document amends FAA Order JO 7400.11F, Airspace Designations and Reporting Points, dated August 10, 2021, and effective September 15, 2021. FAA Order JO 7400.11F is publicly available as listed in the
The FAA is amending 14 CFR part 71 by modifying the Class E airspace, designated as an extension to a Class D or Class E surface area. This airspace area is east of the airport and is reduced to properly contain IFR aircraft descending below 1,000 feet above the surface. This action also removes the Camarillo VOR/DME navigational aid (NAVAID) from the airspace's legal description. The NAVAID is not required to define the airspace and removal of the NAVAID simplifies the airspace's description.
Additionally, this action establishes Class E airspace extending upward from 700 feet above the surface. This airspace is designed to contain arriving IFR aircraft descending below 1,500 feet above the surface and departing IFR aircraft until they reach 1,200 feet above the surface. Lastly, this action also makes several administrative modifications to the Class D and Class E airspace's legal descriptions. To match the FAA database, the geographic coordinates in the third line of the Class E4 airspace's text header are modified to read lat. “34°12′50″ N, long. 119°05′40″ W.” Also, since Camarillo Airport's Class D airspace abuts the Class D areas for Point Mugu Naval Air Station and Oxnard Airports, the geographic coordinates at Camarillo Airport's Class
Class D, E4, and E5 airspace designations are published in paragraphs 5000, 6004, and 6005, respectively, of FAA Order JO 7400.11F, dated August 10, 2021, and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The Class D and Class E airspace designations listed in this document will be published subsequently in FAA Order JO 7400.11. FAA Order JO 7400.11 is published annually and becomes 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.
The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1F, Environmental Impacts: Policies and Procedures, paragraph 5–6.5a. This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exist that warrant the preparation of an environmental assessment.
Airspace, incorporation by reference, navigation (air).
In consideration of the foregoing, the FAA amends 14 CFR part 71 as follows:
49 U.S.C. 106(f), 106(g), 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959–1963 Comp., p. 389.
That airspace extending upward from the surface to and including 2,000 feet MSL within a 4.3-mile radius of the Camarillo Airport, excluding that portion south and west of a line beginning at lat. 34°09′18.02″ N, long. 119°02′40.92″ W; to lat. 34°10′34.70″ N, long. 119°04′1.71″ W; to lat. 34°10′22″ N, long. 119°09′27″ W; to lat. 34°15′38.75″ N, long. 119°09′34.88″ W. This Class D airspace area is effective during the specific dates and times established in advance by a Notice to Air Missions. The effective date and time will thereafter be continuously published in the Chart Supplement.
That airspace extending upward from the surface within 2.5 miles each side of the 079° bearing from the airport, extending from the 4.3-mile radius to 8.2 miles east of the airport. This Class E airspace area is effective during the specific dates and times established in advance by a Notice to Air Missions. The effective date and time will thereafter be continuously published in the Chart Supplement.
That airspace extending upward from 700 feet above the surface within a 4.8-mile radius of the airport and within 3.1 miles each side of the 079° bearing from the airport extending from the 4.3-mile radius to 10.8 miles east of the airport, and within 1 mile each side of the 268° bearing from the airport extending from the 4.8-mile radius to 5.3 miles west of the airport.
Federal Aviation Administration (FAA), Department of Transportation (DOT).
Final rule.
This action removes the Class E airspace, designated as an extension to a Class D or Class E surface area. Additionally, this action establishes Class E airspace extending upward from 700 feet above the surface. Lastly, this action makes administrative changes to the Class D airspace legal description. These actions will ensure the safety and management of visual flight rules (VFR) and instrument flight rules (IFR) at the airport.
Effective 0901 UTC, November 3, 2022. The Director of the
FAA Order JO 7400.11F, and subsequent amendments can be viewed online at
Nathan A. Chaffman, Federal Aviation
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 modify the Class D and Class E airspace at Oxnard Airport, Oxnard, CA, to support VFR and IFR operations at the airport.
The FAA published a notice of proposed rulemaking (NPRM) in the
Class D, Class E4, and Class E5 airspace designations are published in paragraphs 5000, 6004, and 6005, respectively, of FAA Order JO 7400.11F, dated August 10, 2021, and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The Class D and Class E airspace designations listed in this document will be published subsequently in FAA Order JO 7400.11.
This document amends FAA Order JO 7400.11F, Airspace Designations and Reporting Points, dated August 10, 2021, and effective September 15, 2021. FAA Order JO 7400.11F is publicly available as listed in the
The FAA is amending 14 CFR part 71 by removing the Class E airspace, designated as an extension to a Class D or Class E surface area. This airspace is west of the airport and is no longer required to contain IFR arrivals descending below 1,000 feet above the surface.
This action also establishes Class E airspace extending upward from 700 feet above the surface to contain arriving IFR aircraft descending below 1,500 feet above the surface, and departing IFR aircraft until they reach 1,200 feet above the surface.
Finally, the FAA is making several administrative modifications to the Class D legal description. The current description requires modification to replace the use of the phrases “Notice to Airmen” and “Airport/Facility Directive.” These phrases should read “Notice to Air Missions” and “Chart Supplement” respectively, in the Oxnard Class D airspace legal description. Additionally, the Oxnard Airport's Class D airspace abuts the Class D areas of Point Mugu Naval Air Station Airport and Camarillo Airport. The geographic coordinates in the Oxnard Airport Class D legal description are updated to more accurately define the common borders of the three Class D surface areas, which does not represent a change to the current boundaries.
Class D, E4, and E5 airspace designations are published in paragraphs 5000, 6004, and 6005, respectively, of FAA Order JO 7400.11F, dated August 10, 2021, and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The Class D and Class E airspace designations listed in this document will be published subsequently in FAA Order JO 7400.11.
FAA Order JO 7400.11 is published annually and becomes 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.
The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1F, Environmental Impacts: Policies and Procedures, paragraph 5–6.5a. This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exist that warrant the preparation of an environmental assessment.
Airspace, incorporation by reference, navigation (air).
In consideration of the foregoing, the FAA amends 14 CFR part 71 as follows:
49 U.S.C. 106(f), 106(g), 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959–1963 Comp., p. 389.
That airspace extending upward from the surface to and including 2,000 feet MSL within a 4.3-mile radius of the airport, excluding that portion east and southeast of a line beginning at lat. 34°15′38.75″ N, long. 119°09′34.88″ W, to lat. 34°10′22″ N, long. 119°09′27″ W, to lat. 34°07′44.53″ N, long. 119°12′18.39″ W. This Class D airspace area is effective during the specific dates and times established in advance by a Notice to Air Missions. The effective date and time will thereafter be continuously published in the Chart Supplement.
That airspace extending upward from 700 feet above the surface within a 4.8-mile radius of the airport, and within 2 miles each side of the 091° bearing from the airport, extending from the 4.8-mile radius to 12.4 miles east of the airport, and within 1.8 miles each side of the 265° bearing from the airport, extending from the 4.8-mile radius to 6.5 miles west of Oxnard Airport.
Federal Aviation Administration (FAA), DOT.
Final rule.
This action amends the Class D airspace at Fort Worth, TX, and the Class E airspace at Dallas-Fort Worth, TX. This action is the result of an airspace review due to the cancellation of the instrument procedures and implementation of new instrument procedures at Granbury Regional Airport, Granbury, TX, contained within the Dallas-Fort Worth, TX, Class E airspace legal description. The geographic coordinates of Fort Worth Spinks Airport, Fort Worth, TX, are also being updated to coincide with the FAA's aeronautical database.
Effective 0901 UTC, November 3, 2022. The Director of the Federal Register approves this incorporation by reference action under 1 CFR part 51, subject to the annual revision of FAA Order JO 7400.11 and publication of conforming amendments.
FAA Order JO 7400.11F, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at
Jeffrey Claypool, Federal Aviation Administration, Operations Support Group, Central Service Center, 10101 Hillwood Parkway, Fort Worth, TX 76177; telephone (817) 222–5711.
The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it amends the Class D airspace at Fort Worth Spinks Airport, Fort Worth, TX, and the Class E airspace extending upward from 700 feet above the surface at Granbury Regional Airport, Granbury, TX, contained within the Dallas-Fort Worth, TX, airspace legal description, to support instrument flight operations at these airports.
The FAA published a notice of proposed rulemaking in the
Class D and E airspace designations are published in paragraphs 5000 and 6005, respectively, of FAA Order JO 7400.11F, dated August 10, 2021, and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The Class D and E airspace designations listed in this document will be published subsequently in FAA Order JO 7400.11.
This document amends FAA Order JO 7400.11F, Airspace Designations and Reporting Points, dated August 10, 2021, and effective September 15, 2021. FAA Order JO 7400.11F is publicly available as listed in the
Subsequent to publication of the NPRM, the FAA updated the term “Notice to Airmen” to “Notice to Air Missions.” As this is an administrative change and does not impact the proposed airspace, this change has been incorporated into the Fort Worth Spinks Airport, Fort Worth, TX, airspace legal description.
This amendment to 14 CFR part 71:
Amends the Class D airspace at Fort Worth Spinks Airport, Fort Worth, TX, by updating the geographic coordinates of the airport to coincide with the FAA's aeronautical database; and updates the outdated term “Notice to Airmen” to “Notice to Air Missions;”
And amends the Class E airspace extending upward from 700 feet above the surface within an 8.8-mile (increased from a 6.3-mile) radius of Granbury Regional Airport, Granbury, TX, contained within the Dallas-Fort Worth, TX, airspace legal description; and updates the geographic coordinates of Fort Worth Spinks Airport, Fort Worth, TX, also contained within the Dallas-Fort Worth, TX airspace legal description, to coincide with the FAA's aeronautical database.
This action is necessary due to an airspace review due to the cancellation of the instrument procedures and implementation of new instrument procedures at Granbury Regional Airport.
FAA Order JO 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
The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures,” paragraph 5–6.5.a. This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exist that warrant preparation of an environmental assessment.
Airspace, Incorporation by reference, Navigation (air).
In consideration of the foregoing, the Federal Aviation Administration amends 14 CFR part 71 as follows:
49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959–1963 Comp., p. 389.
That airspace extending upward from the surface up to but not including 3,000 feet MSL within a 4.1-mile radius of Fort Worth Spinks Airport, and within 1 mile each side of the 173° bearing from the airport extending from the 4.1-mile radius to 4.8 miles south of the airport. This Class D airspace area is effective during the specific dates and times established in advance by a Notice to Air Missions. The effective dates and times will thereafter be continuously published in the Chart Supplement.
That airspace extending upward from 700 feet above the surface within a 30-mile radius of Dallas-Fort Worth International Airport, and within a 6.6-mile radius of McKinney National Airport, and within 1.8 miles each side of the 002° bearing from McKinney National Airport extending from the 6.6-mile radius to 9.2 miles north of the airport, and within a 6.3-mile radius of Ralph M. Hall/Rockwall Municipal Airport, and within 1.6 miles each side of the 010° bearing from Ralph M. Hall/Rockwall Municipal Airport extending from the 6.3-mile radius to 10.8 miles north of the airport, and within a 6.5-mile radius of Mesquite Metro Airport, and within 4 miles west and 7.9 miles east of the 001° bearing from the Mesquite Metro: RWY 18–LOC extending from the 6.5-mile radius of the Mesquite Metro Airport to 10 miles north of the Mesquite Metro: RWY 18–LOC, and within a 6.6-mile radius of Lancaster Regional Airport, and within 1.9 miles each side of the 140° bearing from Lancaster Regional Airport extending from the 6.6-mile radius to 9.2 miles southeast of the airport, and within 8 miles northeast and 4 miles southwest of the 144° bearing from the Point of Origin extending from the 30-mile radius of Dallas-Fort Worth International Airport to 35 miles southeast of the Point of Origin, and within a 6.5-mile radius of Fort Worth Spinks Airport, and within 8 miles east and 4 miles west of the 178° bearing from Fort Worth Spinks Airport extending from the 6.5-mile radius to 21 miles south of the airport, and within a 6.9-mile radius of Cleburne Regional Airport, and within 3.6 miles each side of the 292° bearing from the Cleburne Regional Airport extending from the 6.9-mile radius to 12.2 miles northwest of airport, and within a 6.5-mile radius of Bourland Field, and within a 8.8-mile radius of Granbury Regional Airport, and within a 6.3-mile radius of Parker County Airport, and within 8 miles east and 4 miles west of the 177° bearing from Parker County Airport extending from the 6.3-mile radius to 21.4 miles south of the airport, and within a 6.3-mile radius of Bridgeport Municipal Airport, and within 1.6 miles each side of the 040° bearing from Bridgeport Municipal Airport extending from the 6.3-mile radius to 10.6 miles northeast of the airport, and within 4 miles each side of the 001° bearing from Bridgeport Municipal Airport extending from the 6.3-mile radius to 10.7 miles north of the airport, and within a 6.3-mile radius of Decatur Municipal Airport, and within 1.5 miles each side of the 263° bearing from Decatur Municipal Airport extending from the 6.3-mile radius to 9.2 miles west of the airport.
Federal Aviation Administration (FAA), DOT.
Final rule.
This rule establishes, amends, suspends, or removes Standard Instrument Approach Procedures (SIAPS) and associated Takeoff Minimums and Obstacle Departure procedures (ODPs) for operations at certain airports. These regulatory actions are needed because of the adoption of new or revised criteria, or because of changes occurring in the National Airspace System, such as the commissioning of new navigational facilities, adding new obstacles, or changing air traffic requirements. These
This rule is effective August 24, 2022. The compliance date for each SIAP, associated Takeoff Minimums, and ODP is specified in the amendatory provisions.
The incorporation by reference of certain publications listed in the regulations is approved by the Director of the Federal Register as of August 24, 2022.
Availability of matters incorporated by reference in the amendment is as follows:
1. U.S. Department of Transportation, Docket Ops–M30. 1200 New Jersey Avenue SE, West Bldg., Ground Floor, Washington, DC 20590–0001.
2. The FAA Air Traffic Organization Service Area in which the affected airport is located;
3. The office of Aeronautical Information Services, 6500 South MacArthur Blvd., Oklahoma City, OK 73169 or,
4. The National Archives and Records Administration (NARA). For information on the availability of this material at NARA, email
All SIAPs and Takeoff Minimums and ODPs are available online free of charge. Visit the National Flight Data Center at
Thomas J. Nichols, Flight Procedures and Airspace Group, Flight Technologies and Procedures Division, Flight Standards Service, Federal Aviation Administration. Mailing Address: FAA Mike Monroney Aeronautical Center, Flight Procedures and Airspace Group, 6500 South MacArthur Blvd., Registry Bldg. 29, Room 104, Oklahoma City, OK 73169. Telephone (405) 954–4164.
This rule amends 14 CFR part 97 by establishing, amending, suspending, or removes SIAPS, Takeoff Minimums and/or ODPS. The complete regulatory description of each SIAP and its associated Takeoff Minimums or ODP for an identified airport is listed on FAA form documents which are incorporated by reference in this amendment under 5 U.S.C. 552(a), 1 CFR part 51, and 14 CFR part 97.20. The applicable FAA Forms 8260–3, 8260–4, 8260–5, 8260–15A, 8260–15B, when required by an entry on 8260–15A, and 8260–15C.
The large number of SIAPs, Takeoff Minimums and ODPs, their complex nature, and the need for a special format make publication in the
The material incorporated by reference is publicly available as listed in the
The material incorporated by reference describes SIAPS, Takeoff Minimums and/or ODPs as identified in the amendatory language for Part 97 of this final rule.
This amendment to 14 CFR part 97 is effective upon publication of each separate SIAP, Takeoff Minimums and ODP as amended in the transmittal. Some SIAP and Takeoff Minimums and textual ODP amendments may have been issued previously by the FAA in a Flight Data Center (FDC) Notice to Airmen (NOTAM) as an emergency action of immediate flights safety relating directly to published aeronautical charts.
The circumstances that created the need for some SIAP and Takeoff Minimums and ODP amendments may require making them effective in less than 30 days. For the remaining SIAPs and Takeoff Minimums and ODPs, an effective date at least 30 days after publication is provided.
Further, the SIAPs and Takeoff Minimums and ODPs contained in this amendment are based on the criteria contained in the U.S. Standard for Terminal Instrument Procedures (TERPS). In developing these SIAPs and Takeoff Minimums and ODPs, the TERPS criteria were applied to the conditions existing or anticipated at the affected airports. Because of the close and immediate relationship between these SIAPs, Takeoff Minimums and ODPs, and safety in air commerce, I find that notice and public procedure under 5 U.S.C. 553(b) are impracticable and contrary to the public interest and, where applicable, under 5 U.S.C. 553(d), good cause exists for making some SIAPs effective in less than 30 days.
The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore—(1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. For the same reason, the FAA certifies that this amendment will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air traffic control, Airports, Incorporation by reference, Navigation (air).
Accordingly, pursuant to the authority delegated to me, Title 14, Code of Federal Regulations, Part 97 (14 CFR part 97) is amended by establishing, amending, suspending, or removing Standard Instrument Approach Procedures and/or Takeoff Minimums and Obstacle Departure Procedures effective at 0901 UTC on the dates specified, as follows:
49 U.S.C. 106(f), 106(g), 40103, 40106, 40113, 40114, 40120, 44502, 44514, 44701, 44719, 44721–44722.
Federal Aviation Administration (FAA), DOT.
Final rule.
This rule amends, suspends, or removes Standard Instrument Approach Procedures (SIAPs) and associated Takeoff Minimums and Obstacle Departure Procedures for operations at certain airports. These regulatory actions are needed because of the adoption of new or revised criteria, or because of changes occurring in the National Airspace System, such as the commissioning of new navigational facilities, adding new obstacles, or changing air traffic requirements. These changes are designed to provide for the safe and efficient use of the navigable airspace and to promote safe flight operations under instrument flight rules at the affected airports.
This rule is effective August 24, 2022. The compliance date for each SIAP, associated Takeoff Minimums, and ODP is specified in the amendatory provisions.
The incorporation by reference of certain publications listed in the regulations is approved by the Director of the Federal Register as of August 24, 2022.
Availability of matter incorporated by reference in the amendment is as follows:
1. U.S. Department of Transportation, Docket Ops-M30, 1200 New Jersey Avenue SE, West Bldg., Ground Floor, Washington, DC 20590–0001;
2. The FAA Air Traffic Organization Service Area in which the affected airport is located;
3. The office of Aeronautical Information Services, 6500 South MacArthur Blvd., Oklahoma City, OK 73169 or,
4. The National Archives and Records Administration (NARA).
For information on the availability of this material at NARA, email
All SIAPs and Takeoff Minimums and ODPs are available online free of charge. Visit the National Flight Data Center online at
Thomas J. Nichols, Flight Procedures and Airspace Group, Flight Technologies and Procedures Division, Flight Standards Service, Federal Aviation Administration. Mailing Address: FAA Mike Monroney Aeronautical Center, Flight Procedures and Airspace Group, 6500 South MacArthur Blvd., Registry Bldg. 29, Room 104, Oklahoma City, OK 73169. Telephone: (405) 954–4164.
This rule amends 14 CFR part 97 by amending the referenced SIAPs. The complete regulatory description of each SIAP is listed on the appropriate FAA Form 8260, as modified by the National Flight Data Center (NFDC)/Permanent Notice to Airmen (P–NOTAM), and is incorporated by reference under 5 U.S.C. 552(a), 1 CFR part 51, and 14 CFR 97.20. The large number of SIAPs, their complex nature, and the need for a special format make their verbatim publication in the
The material incorporated by reference is publicly available as listed in the
The material incorporated by reference describes SIAPs, Takeoff Minimums and ODPs as identified in the amendatory language for Part 97 of this final rule.
This amendment to 14 CFR part 97 is effective upon publication of each separate SIAP and Takeoff Minimums and ODP as amended in the transmittal. For safety and timeliness of change considerations, this amendment incorporates only specific changes contained for each SIAP and Takeoff Minimums and ODP as modified by FDC permanent NOTAMs.
The SIAPs and Takeoff Minimums and ODPs, as modified by FDC permanent NOTAM, and contained in this amendment are based on criteria contained in the U.S. Standard for Terminal Instrument Procedures (TERPS). In developing these changes to SIAPs and Takeoff Minimums and ODPs, the TERPS criteria were applied only to specific conditions existing at the affected airports. All SIAP amendments in this rule have been previously issued by the FAA in a FDC NOTAM as an emergency action of immediate flight safety relating directly to published aeronautical charts.
The circumstances that created the need for these SIAP and Takeoff Minimums and ODP amendments require making them effective in less than 30 days.
Because of the close and immediate relationship between these SIAPs, Takeoff Minimums and ODPs, and safety in air commerce, I find that notice and public procedure under 5 U.S.C. 553(b) are impracticable and contrary to the public interest and, where applicable, under 5 U.S.C. 553(d), good cause exists for making these SIAPs effective in less than 30 days.
The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore—(1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. For the same reason, the FAA certifies that this amendment will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air Traffic Control, Airports, Incorporation by reference, Navigation (Air).
Accordingly, pursuant to the authority delegated to me, Title 14, CFR part 97, (is amended by amending Standard Instrument Approach Procedures and Takeoff Minimums and ODPs, effective at 0901 UTC on the dates specified, as follows:
49 U.S.C. 106(f), 106(g), 40103, 40106, 40113, 40114, 40120, 44502, 44514, 44701, 44719, 44721–44722.
By amending: § 97.23 VOR, VOR/DME, VOR or TACAN, and VOR/DME or TACAN; § 97.25 LOC, LOC/DME, LDA, LDA/DME, SDF, SDF/DME; § 97.27 NDB, NDB/DME; § 97.29 ILS, ILS/DME, MLS, MLS/DME, MLS/RNAV; § 97.31 RADAR SIAPs; § 97.33 RNAV SIAPs; and § 97.35 COPTER SIAPs, Identified as follows:
Bureau of Industry and Security, Department of Commerce.
Final rule.
The Department of Commerce is amending the Export Administration Regulations (EAR) by adding seven entities under seven entries to the Entity List. These entities have been determined by the U.S. Government to be acting contrary to the national security or foreign policy interests of the United States and will be listed on the Entity List under the destination of the People's Republic of China (China). This final rule also corrects typographical errors in two existing entries on the Entity List.
This rule is effective August 24, 2022.
Chair, End-User Review Committee, Office of the Assistant Secretary for Export Administration, Bureau of Industry and Security, Department of Commerce, Phone: (202) 482–5991, Email:
The Entity List (supplement No. 4 to part 744 of the EAR (15 CFR parts 730–774)) identifies entities for which there is reasonable cause to believe, based on specific and articulable facts, that the entities have been involved, are involved, or pose a significant risk of being or becoming involved in activities contrary to the national security or foreign policy interests of the United States, pursuant to § 744.11(b). The EAR imposes additional license requirements on, and limits the availability of, most license exceptions for exports, reexports, and transfers (in-country) to listed entities. The license review policy for each listed entity is identified in the “License Review Policy” column on the Entity List, and the impact on the availability of license exceptions is described in the relevant
The End-User Review Committee (ERC), composed of representatives of the Departments of Commerce (Chair), State, Defense, Energy and, where appropriate, the Treasury, makes all decisions regarding additions to, removals from, or other modifications to the Entity List. The ERC makes all decisions to add an entry to the Entity List by majority vote and makes all decisions to remove or modify an entry by unanimous vote. This rule implements the ERC's decisions to add seven entities to the Entity List on the basis of § 744.11(b). Paragraphs (b)(1) through (5) of § 744.11 include an illustrative list of activities that could be contrary to the national security or foreign policy interests of the United States.
The ERC determined to add China Aerospace Science and Technology Corporation (CASC) 9th Academy 771 Research Institute, China Aerospace Science and Technology Corporation (CASC) 9th Academy 772 Research Institute, China Academy of Space Technology 502 Research Institute, China Academy of Space Technology 513 Research Institute, China Electronics Technology Group Corporation 43 Research Institute, China Electronics Technology Group Corporation 58 Research Institute, and Zhuhai Orbita Control Systems to the Entity List for acquiring and attempting to acquire U.S.-origin items in support of China's military modernization efforts. This activity is contrary to national security and foreign policy interests under § 744.11(b) of the EAR. For these seven entities added to the Entity List, BIS imposes a license requirement for all items subject to the EAR. For these seven entities, BIS will review license applications under a presumption of denial.
For the reasons described above, this final rule adds the following seven entities under seven entries to the Entity List and includes, where appropriate, aliases:
• China Aerospace Science and Technology Corporation (CASC) 9th Academy 771 Research Institute,
• China Aerospace Science and Technology Corporation (CASC) 9th Academy 772 Research Institute,
• China Academy of Space Technology 502 Research Institute,
• China Academy of Space Technology 513 Research Institute,
• China Electronics Technology Group Corporation 43 Research Institute,
• China Electronics Technology Group Corporation 58 Research Institute,
• Zhuhai Orbita Control Systems
This final rule also makes typographical corrections to two existing entities on the Entity List. Beijing Tianhua and Tenfine Ltd. are revised by correcting “Haidain” to “Haidian” in their addresses.
For the changes being made in this final rule, shipments of items removed from eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR) as a result of this regulatory action that were en route aboard a carrier to a port of export, reexport, or transfer (in-country), on August 24, 2022, pursuant to actual orders for export, reexport, or transfer (in-country) to or within a foreign destination, may proceed to that destination under the previous eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR).
On August 13, 2018, the President signed into law the John S. McCain National Defense Authorization Act for Fiscal Year 2019, which included the Export Control Reform Act of 2018 (ECRA) (50 U.S.C. 4801–4852). ECRA provides the legal basis for BIS's principal authorities and serves as the authority under which BIS issues this rule.
1. This rule has been determined to be not significant for purposes of Executive Order 12866.
2. Notwithstanding any other provision of law, no person is required to respond to or be subject to a penalty for failure to comply with a collection of information, subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
3. This rule does not contain policies with federalism implications as that term is defined in Executive Order 13132.
4. Pursuant to section 1762 of the Export Control Reform Act of 2018, this action is exempt from the Administrative Procedure Act (5 U.S.C. 553) requirements for notice of proposed rulemaking, opportunity for public participation, and delay in effective date.
5. Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule by 5 U.S.C. 553, or by any other law, the analytical requirements of the Regulatory Flexibility Act, 5 U.S.C. 601,
Exports, Reporting and recordkeeping requirements, Terrorism.
Accordingly, part 744 of the Export Administration Regulations (15 CFR parts 730–774) is amended as follows:
50 U.S.C. 4801–4852; 50 U.S.C. 4601
The additions and revisions read as follows:
Alcohol and Tobacco Tax and Trade Bureau, Treasury.
Final rule; Treasury decision.
The Alcohol and Tobacco Tax and Trade Bureau (TTB) is amending its regulations pertaining to the production of wine to add to the list of materials and processes authorized for the treatment of wine and of the juice from which wine is made, and to expand the authorized uses of certain materials already authorized under the regulations. TTB is finalizing amendments to the regulations proposed in a notice of proposed rulemaking, Notice No. 164, with some changes in response to comments received. Adding these wine treating materials and processes to the TTB regulations will increase the acceptability in export markets of wine produced using these materials and processes.
This final rule is effective August 24, 2022.
Karen A. Thornton, Regulations and Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street NW, Box 12, Washington, DC 20005; telephone 202–453–1039, ext. 175.
TTB authorizes the use of certain wine treating materials and processes under the authority of chapter 51 of the Internal Revenue Code of 1986, as amended (IRC), 26 U.S.C. chapter 51. Specifically, certain provisions of the IRC apply to the production of “natural wine,” which is defined at 26 U.S.C. 5381 as the product of the juice or must of sound, ripe grapes or other sound, ripe fruit, made with such cellar treatment as authorized under the IRC at 26 U.S.C. 5382. Section 5382(a) of the IRC (26 U.S.C. 5382(a)) provides that proper cellar treatment of natural wine constitutes those practices and procedures in the United States, of using various methods and materials to correct or stabilize the wine, or the fruit juice from which it is made, so as to produce a finished product acceptable in good commercial practice as prescribed by regulation. Section 5382(c) authorizes the Secretary of the Treasury (Secretary) to prescribe, by regulation, limitations on the preparation and use of methods and materials for clarifying, stabilizing, preserving, fermenting, and correcting wine and juice. In addition, section 5387(a) of the IRC (26 U.S.C. 5387(a)), which authorizes the production of agricultural wine from agricultural products other than the juice of fruit, provides that such agricultural wine must be made in accordance with good commercial practice as prescribed by regulation and may be cellar treated in accordance with sections 5382(a) and (c) of the IRC.
TTB administers chapter 51 of the IRC and its implementing regulations pursuant to section 1111(d) of the Homeland Security Act of 2002, as codified at 6 U.S.C. 531(d). The Secretary has delegated certain administrative and enforcement authorities to TTB through Treasury Order 120–01.
The regulations promulgated under these authorities are set forth in part 24 of title 27 of the Code of Federal Regulations (27 CFR part 24). The TTB regulations at 27 CFR 24.246 list materials authorized for the treatment of wine and juice; 27 CFR 24.247 lists materials authorized for the treatment of distilling material used in the production of wine; and 27 CFR 24.248 lists processes authorized for the treatment of wine, juice, and distilling material. The materials and processes listed in these regulatory sections are approved as being consistent with good commercial practice in the production, cellar treatment, or finishing of wine, and where applicable in the treatment of juice and distilling material, within limitations provided.
Industry members wanting to use a treating material or process not specifically authorized in part 24 may request authorization to do so. TTB may administratively approve the use of treating materials and processes not listed in the regulations, either as an experiment under 27 CFR 24.249 or for continual use (acceptable in good commercial practice) under 27 CFR 24.250. Applicants for such approvals must submit to TTB a request describing the material or process and the purpose, manner, and extent to which the material or process is to be used; certain samples and test results; and any other relevant information, as described in the regulations. If the request is for the approval of a material, the applicant must also submit documentary evidence of the U.S. Food and Drug Administration (FDA) approval of the material for its intended purpose in the amounts, along with the recommended minimum and maximum amounts of the material, if any. Consistent with §§ 24.246, 24.247, and 24.248, TTB may approve the use of treating materials
When TTB approves the continued commercial use of a treating material or process under § 24.250, it provides public notice of such approval on its website at
For several reasons, TTB conducts rulemaking to consider adding to or amending the materials and processes authorized in the regulations for treating wine, juice, and distilling material listed in §§ 24.246 through 24.248. One reason is that when TTB administratively approves wine treatments or processes for continued commercial use under § 24.250, TTB is making an initial determination that the treatment is consistent with “good commercial practice.” The subsequent rulemaking process allows industry members and other members of the public an opportunity to publicly comment on, and specifically to confirm or refute, the initial determination that the use of a material or process is consistent with good commercial practice. TTB can then determine whether to add the material or process to its regulations.
Administrative approval of a wine treatment under § 24.250 does not guarantee acceptance in foreign markets of any wine so treated. Therefore, conducting rulemaking to add wine treating materials and processes to the regulations may also result in acceptance of the treated wines in certain foreign jurisdictions. For example, under Article 4.2 of the 2006 Agreement between the United States of America and the European Community on Trade in Wine (Wine Agreement), the United States and the European Union agreed not to restrict “on the basis of either wine-making practices or product specifications, the importation, marketing or sale of wine originating in the territory of the other Party that is produced using wine-making practices that are authorized under laws, regulations and requirements of the other Party . . . and published or communicated to it by that other Party.” Article 5.1 of the Wine Agreement also contains provisions to authorize new or modified wine-making practices if a party to the Wine Agreement provides public notice and specific notice to the other party, and provides a reasonable opportunity for comment and to have those comments considered. Through the rulemaking process, TTB provides such public notice and opportunity to comment on wine treating materials and processes that had been administratively approved. As a result, incorporation of the treating materials and processes in the regulations provides domestic winemakers with greater flexibility in producing wines for sale in foreign markets.
TTB also consults with the U.S. Food and Drug Administration (FDA) on whether alcohol beverages are adulterated under the Federal Food, Drug, and Cosmetic Act (FD&C Act), including whether a substance added to an alcohol beverage is an unapproved food additive. Alcohol beverages are considered “food” under the FD&C Act. A substance added to food is a food additive unless it is otherwise excluded from the definition of a food additive under the FD&C Act. For example, the use of a substance in food that is generally recognized as safe by qualified experts (GRAS) is excluded from the definition of a food additive under the FD&C Act. See 21 U.S.C. 321(s), 21 CFR 170.30. The use of a food additive in food must be authorized by FDA either through a food additive regulation in 21 CFR or an effective food contact notification (FCN).
On November 22, 2016, TTB published in the
On March 5, 2015, the Wine Institute, a wine industry trade association, petitioned TTB to amend §§ 24.246 and 24.247 to replace many of the numerical limits for wine treating materials and processes with a usage standard of “good manufacturing practice.” Wine Institute noted in its petition that the current provisions generally limit the authorized usage of a material to the particular use of the material by the industry member who originally petitioned for its use. It also submitted a comment to Notice No. 164 and reiterated its request for “a default limit of good manufacturing practice (GMP) for those [treating] materials unless otherwise dictated by health concerns.”
TTB agrees that the current process, as described above, results in TTB's authorizing materials at specific usage levels reflecting the parameters detailed in requests by winemakers, and therefore reflects winemakers' actual use, or expressed interest in use, and TTB's evaluation of wine or juice to which the materials and processes have been applied, rather than potential use. This reflects TTB's longstanding application of “good commercial practice” as that term is described above. TTB intends to publish separate rulemaking to obtain public comment on the broader approach proposed in the Wine Institute's petition. TTB is not addressing the entirety of the petition in this rulemaking as it would entail many more amendments to the relevant regulations than were proposed in Notice No. 164. In this final rule, TTB is addressing the proposals regarding materials and processes that already had been the subject of notice and comment under Notice No. 164.
TTB received 33 comments in response to Notice No. 164, of which 3 were requests for extension of the comment period (Wine Institute (2 requests), and David Douglas). The remainder were comments submitted by or on behalf of: Six members of the public (Alice Feiring, Dr. Robert Kreisher (2 comments), Heather Nenow, Coleman Reardon, and Samantha Hunter); 13 wine industry members (vineyards and/or wineries) (Adelsheim Vineyard, Bear Creek Winery; Clover Hill Winery, Deerfield Ranch, Domaine Serene, Don Sebastiani and Sons, E&J Gallo Winery, Firestone Vineyard, Halter Ranch Vineyard, South Coast Winery Resort and Spa, Toni Stockhausen, Wine by Joe, WX Brands); 2 trade organizations (Enzyme Technical Association and Wine Institute); 4 companies that produce wine treating materials or processes (Beverage Supply Group, Erbslöh Geisenheim (2 comments), ConeTech, and Laffort USA); 1 industry consultant (Richard Gahagan); and the European Union (2 comments).
Eleven of the commenters submitted essentially the same letter containing no substantive differences (Adelsheim Vineyard, Bear Creek Winery, Deerfield Ranch Winery, Domaine Serene, Don and Sons, Firestone Winery, Halter Ranch Vineyard, Laffort, South Coast Winery Resort and Spa, Wine by Joe, and WX Brands). These comments will be referred as the “11 form letter comments” for ease of reference.
The 11 form letter comments expressed support for amending the regulations to incorporate the proposed additional wine treating materials, stating that these additions would positively affect their ability to export their wine and allow them to continue to grow their business in export markets by offering wines with better stability and quality. They also provided specific support for certain of the materials, and their comments are included in the comment discussion for each of these materials below. They further noted that the materials they addressed in their comment are used in multiple countries, including all countries following the International Organization of Vine and Wine (OIV), in good commercial practice at dose rates like those suggested by TTB in Notice No. 164.
The Wine Institute also expressed general agreement that the administratively approved wine and juice treating materials and processes proposed for authorization in Notice No. 164 “have accumulated sufficient analytical data and should be added to §§ 24.246 and 24.248 as appropriate.”
One commenter, Alice Feiring, expressed discontent with the number of authorized wine and juice treating materials for wine, stating that they “interfere with the taste and liveliness of the wine.” The commenter asserted that “none of these additives—other than sulfite addition . . . —are evaluated for their health impact and allergen potential,” and that “tannins and enzymes are the primary materials that trigger allergic reactions.” The commenter pointed to the proposal in Notice No. 164 to add polyvinylpyrrolidone (PVP) to the list of authorized wine and juice treating materials in § 24.246 and raised concerns regarding the safety of its use, which TTB addresses in the discussion of PVP later in this document. The commenter further suggested that TTB consider requiring the labeling of ingredients in wine.
Concerning the labeling of ingredients in wine, TTB is separately considering rulemaking regarding ingredient labeling, as noted in Treasury's February 2022 report on “Competition in the Markets for Beer, Wine, and Spirits,”
Below is a summary of the actions TTB is taking in this final rule, including a discussion of, and response to, comments received regarding the wine treating materials that were the subject of TTB proposals in Notice No. 164.
TTB proposed to include in § 24.246(b) a general, clarifying statement that approved materials may be used in a blend or otherwise in combination with other approved materials, provided that each material is used for its specified use and in accordance with any limitation specified for that use.
The 11 commenters who submitted the form letter did not directly address the proposed language pertaining to blends; however, they did comment on the use of blends for yeast nutrients. These commenters stated in part that yeast nutrient blends mitigate the risk of sluggish or stuck fermentation.
In Notice No. 164, TTB proposed to add six “yeast nutrients” to the list of approved treating materials and expand the approved use of a seventh that already appears on the list. Specifically, TTB proposed to add biotin, folic acid, inositol, magnesium sulfate, niacin, and pyridoxine hydrochloride to the list of authorized wine and juice treating materials in § 24.246, and to expand the current permitted use of calcium pantothenate in that section. The inclusion of these yeast nutrients was in response to a petition and to industry member requests. The specific proposals, comments, and final action are described below.
As described in Notice No. 164, TTB and its predecessor agencies have recognized the need to supply yeast with appropriate nutrients to facilitate fermentation of juice to wine and to prevent “stuck fermentation” (fermentation that has halted before completion due to, among other things, high sugar levels or nutrient deficiencies). In both the current and proposed regulations, TTB has referred to these nutrients as “yeast nutrients.”
Mr. Gahagan also opposed the use of the term “yeast nutrients” and suggested that a more appropriate heading would be “fermentation aids” or “fermentation adjuncts.” Mr. Gahagan points out that “yeast cell walls/membranes”, which are authorized for use in § 24.246 and proposed under the heading “yeast nutrients” in Notice No. 164, “are not yeast nutrients.” Mr. Gahagan cited scientific literature in support of his argument.
In Notice No. 164, TTB proposed to add biotin (vitamin B7), folic acid, inositol (myo-inositol), magnesium sulfate, niacin (vitamin B3), and pyridoxine hydrochloride (vitamin B6) to the list of authorized materials in § 24.246 for use as yeast nutrients. TTB had previously administratively approved all six materials but had not yet included them in the list of authorized materials in § 24.246. The proposed use limitations for each material were as follows:
• Biotin: 25 parts per billion (ppb).
• Folic acid: 100 ppb.
• Inositol (myo-inositol): 2 parts per million (ppm).
• Magnesium sulfate: 15 ppm.
• Niacin (vitamin B3): 1 ppm.
• Pyridoxine hydrochloride (vitamin B6): 150 ppb.
Additionally, TTB proposed to expand the authorized use of calcium pantothenate (vitamin B5) from use solely as a yeast nutrient in apple wine to use as a yeast nutrient in all juice and wine. The use limitation of 0.1 pound of calcium pantothenate per 25,000 gallons (0.48 ppm) would remain unchanged.
Additionally, Richard Gahagan supported the addition of magnesium sulfate to the list of authorized wine and juice treating materials in § 24.246 but concludes that the “qualitative limits” proposed in Notice No. 164 “may not be adequate in all cases.” Mr. Gahagan referenced scientific articles for his assertion that the proposed use level for magnesium sulfate “is not adequate” and recommended a use rate not to exceed 200 ppm (200 mg/L).
Mr. Gahagan also expressed his concern that the use rates for the proposed yeast nutrients in Notice No. 164 consist “essentially of the Gusmer commercial product”, which in his opinion, “would limit the United States wine industry to the use of only the Gusmer product, or products that contain no more of any one of the materials contained in Gusmer's product.” He argued that “commercial fermentation aid products would be excluded, severely limiting the choices of available fermentation aides [sic] to domestic winemakers.” Mr. Gahagan referred to the proposed yeast nutrients with use rates (“quantitative limitations”) and the fact that the use rates were proposed by the petitioner. Mr. Gahagan asserted that the FDA advisory opinion of August 29, 2016, referenced in Notice No. 164, states that the proposed yeast nutrients can be used in accordance with “good manufacturing practice.” He further pointed to
With respect to Mr. Gahagan's comment about the proposed use rate limits, under the regulatory provisions of §§ 24.249 and 24.250, TTB reviews and approves or denies proposed wine treating materials based on the information provided by the industry member who submitted the request. TTB does not have reason or resources to test experimentally treated wine containing a new wine treating material
As noted in Notice No. 164, many of the yeast nutrients are vitamins and minerals that are authorized for use in food, and FDA has informed TTB that FDA regulations for certain vitamins (
TTB notes that among the 11 submitters of the form letter is Laffort U.S.A., a supplier of wine treating materials. Laffort U.S.A. wrote that they support the addition of yeast nutrients proposed by TTB “at the levels recommended by TTB.” This support indicates that Laffort U.S.A. is not concerned that the proposed use rates for yeast nutrients would exclude any of their products from the market. Another supplier of wine treating materials (including yeast nutrients), Beverage Supply Group, commented on Notice No. 164, and while they did not specifically express support for the proposed use rates of the proposed yeast nutrients, they did not expressly voice concern that the proposed use rates are insufficient and possibly exclude their products from the marketplace.
In Notice No. 164, TTB proposed to amend its regulations in § 24.246 to identify, for the purpose of clarifying and stabilizing wine, a maximum use rate of 8 pounds of acacia per 1,000 gallons (0.96 grams per liter (g/L)) of wine. Acacia (gum arabic) is listed in § 24.246 as authorized for such purposes, but currently subject to the limitation that its use not exceed 2 pounds per 1,000 gallons (0.24 g/L) of wine. TTB explained in Notice No. 164 that TTB had administratively approved several requests from industry members for use rates up to 16 pounds per 1,000 gallons of wine, but was proposing a use rate of 8 pounds per 1,000 gallons of wine as it believed that rate was consistent with the maximum rate authorized in FDA regulations at 21 CFR 184.1330. Based on that, TTB noted that any administrative approvals authorizing use rates greater than 8 pounds per 1,000 gallons of wine would be revoked.
With regard to the comment that refers to acacia's use for stabilization of “coloring matter,” TTB notes that the stabilization of anthocyanins for color is consistent with how TTB interprets “stabilization” under § 24.246.
TTB proposed to add bakers yeast mannoprotein, at a use rate of 50–400 milligram per liter (mg/L) of wine, to the list of approved wine and juice treating materials contained in § 24.246, for the purpose of stabilizing wine from the precipitation of potassium bitartrate crystals. TTB had already administratively approved the use of bakers yeast mannoprotein for this purpose and with that limit.
The Wine Institute suggested GMP as the appropriate limit for bakers yeast mannoprotein, without a numerical limit, but stated that, if numerical limits are to be required, the proposed limit is “too low.” The Wine Institute stated that “a quick review of recommended usage rates . . . by Suppliers of this material to the Industry suggest usage rates up to 1500 mg/L as a more appropriate limit.”
The European Union (EU), in its comment, informed TTB that the EU does not have a fixed limit for bakers yeast mannoproteins, “which means that their use is based on the best manufacturing practice criteria.” They further state that the proposed limit for bakers yeast mannoproteins “may be insufficient for tartaric stabilization thus creating a possible barrier to trade.”
TTB proposed in Notice No. 164 to add beta-glucanase derived from
Wine Institute recommended using GMP as a use rate for beta-glucanase. In the absence of GMP, Wine Institute recommended a use rate of 80 mg/L based on a review it performed of usage rates recommended by suppliers of this material to the industry. Wine Institute also noted TTB's comment in Notice No. 164 about the agency inadvertently stating that the amount of beta-glucanase derived from
The Enzyme Technical Association supported the addition of
In its second comment submitted in response to Notice No. 164, Erbslöh Geisenheim suggested that TTB add the microorganism species
With respect to the use of
In Notice No. 164, TTB proposed to authorize chitosan for the removal of spoilage organisms from wine at a usage rate not to exceed 10 grams per 100 liters (or 10g/hL) of wine.
In its comment, Wine Institute welcomed the proposed addition of chitosan to the list of allowable treating materials but suggested that GMP is a more appropriate usage limit.
In his comment, Richard Gahagan supported the inclusion of chitosan but stated that the limitation should be “GRAS, or if TTB decides on a quantitative limit, 100 g/hL would be consistent with the OIV limitation.” Mr. Gahagan's comment regarding the authorized use of chitosan with OIV limitations was consistent with that of the EU, which stated that the TTB proposed use rate of 10 g/hL for chitosan is “10 times lower than the EU limit,” and indicated that the use rate proposed by TTB for chitosan “could create a trade barrier.” (TTB notes that OIV's use rate for chitosan was raised in 2015, to a rate not to exceed 500 g/hL of wine.)
After considering comments from Wine Institute, the EU, and Mr. Gahagan supporting an increased level of chitosan, the use range specified in GRAS Notice No. 000397, and TTB's experience with recent administrative approvals, TTB is amending § 24.246 to include chitosan from
Tartaric acid is currently listed in § 24.246 as a material authorized for the treatment of wine and juice for the purpose of correcting natural acid deficiencies in grape juice or wine and to reduce the pH of grape juice or wine. In Notice No. 164, TTB proposed to amend the entry for “tartaric acid” in the table at the end of § 24.246 to indicate that tartaric acid may be manufactured by either the method specified in 21 CFR 184.1099 (which allows for L(+) tartaric acid obtained as a byproduct of wine production) or the method specified for L(+) tartaric acid in GRAS Notice No. GRN 000187 (which allows L(+) tartaric acid manufactured using an enzyme from immobilized
In her comment, Toni Stockhausen argued that “synthetically derived L(+) Tartaric Acid, or L(+) Tartaric Acid (alternate method) per FDA GRAS notice GRN 000187 . . . should not be considered Good Manufacturing Practice for use in winemaking in the USA.” In support of this, Ms. Stockhausen stated: (1) That FDA GRAS Notice No. GRN 000187 for L(+) tartaric acid “does not comment on the source of the maleic acid or on the safety of potentially unconverted maleic acid or other contaminants unique to the alternate production method;” (2) “Despite GRN 000187, issued in 2006, in 10 years the FDA has not updated the list of direct food substances affirmed as generally regarded as safe;” and, (3) “For the purposes of exportation, jurisdictions including the European Union have confirmed or amended their food safety regulations to specify the source of Tartaric Acid as wine or grape derived, including the most recent European Pharmacopeia (9th Edition, effective January 1, 2017).”
In its comment, Wine Institute stated that it understands that “synthetic (L(+)) tartaric acid, which was administratively approved by TTB,” is not currently being used for the production of wine within the United States.
In response to the comments submitted by the EU and Wine Institute, TTB notes that with regard to the use rates for tartaric acid, the current regulations refer to TTB regulations at 27 CFR 24.182 and 24.192 that provide additional detail about its use, and to FDA regulations in 21 CFR 184.1099. The uses prescribed in the TTB regulations do not authorize a use rate that would “modify the natural and essential characteristics of the wine.” TTB did not propose to change the limitations on the use of tartaric acid, and is not changing those limits at this time. However, TTB will consider including the more limited use rates in any subsequent rulemaking for additional comment.
In her comment, Ms. Stockhausen claimed that the EU only allows tartaric acid derived from wine or grapes. TTB notes that in its comments on the proposal in Notice No. 186, the EU only addressed its belief that GMP was not an appropriate use rate for L(+) tartaric
In response to Ms. Stockhausen's comments regarding GRAS Notice No. GRN 000187, the FDA has stated to TTB that GRAS Notice No. GRN 000187 does not specifically state the source of maleic acid, and that maleic acid may be an impurity in the starting material (
TTB proposed to add polyvinylpyrrolidone (PVP)/polyvinylimidazole (PVI) polymer (terpolymer of 1-vinylimidazole, 1-vinylpyrrolidone, and 1,2-divinylimidazolidinone; CAS 87865–40–5
The 11 commenters of the form letter also recommended that the approval of PVP/PVI be extended to use in juice and must. They argued that this will give wineries the ability to “remove excessive copper (from vineyard treatments) before starting fermentation or the early stages.” They also stated that adoption of this recommendation “would align the US regulation with other countries.”
One commenter, Alice Feiring, raised concerns regarding the safety of PVP. She described PVP as a material that should not be authorized for use in the production of wine, stating that it “is classified as `expected to be toxic or harmful,' by the Environment Canada Domestic Substance List.”
With regards to the comment regarding the Canadian classification of PVP, TTB notes that under the Canada Food and Drug Regulations (see C.R.C., c 807 B.02.100(b)(xii)(D)), PVP may be used in the production of wine “in an amount that does not exceed 2 parts per million in the finished product.”
In Notice No. 164, TTB proposed to add potato protein isolates, at a use rate of 500 ppm or 50 grams per 100 liters (50 g/hL) of wine, as a fining agent, to the list of approved treating materials contained in § 24.246.
In its comment, the Wine Institute indicated its support of the addition of potato protein isolates to the list of authorized treating materials contained in § 24.246. It also recommended the use rate of good manufacturing practice for the use of potato protein isolates as a “clarification” material.
Erbslöh Geisenheim indicated its support of the addition of potato protein isolates to the list of authorized treating materials contained in § 24.246, noting that proteins from plant origins, including potatoes, have been authorized by the International Oenological Codex as a wine and juice treating material. It further stated, “Vegetable based fining agents have become increasingly important for the production of beverages that are suitable for a vegetarian or vegan diet.”
TTB proposed to add sodium carboxymethyl cellulose (CMC) to the list of authorized wine and juice treating materials in § 24.246 at a level not to exceed 0.8 percent of the wine, to stabilize wine from tartrate precipitation.
Wine Institute supported the addition of CMC to the list of authorized wine and juice treating materials; however, they recommended a use rate of GMP. Wine Institute recommended that if TTB does not adopt GMP, it should decrease the authorized amount of CMC from proposed 0.8% (8,000 mg/L) to 0.1% (1,000 mg/L), which according to Wine Institute, is the standard in international markets. It is Wine Institute's belief that the use of CMC at the maximum proposed level of 8,000 mg/L “could create quality issues in wines.”
TTB proposed to amend the regulations in § 24.248, which set forth certain processes that TTB has approved as being consistent with good commercial practice for use by proprietors in the production, cellar treatment, or finishing of wine, juice, and distilling materials, within the limitations of that section. A discussion of the specific proposals, comments received, and TTB responses follows.
TTB proposed to expand the authorized use of nanofiltration and ultrafiltration in § 24.248 (Processes authorized for the treatment of wine, juice, and distilling material) to include dealcoholization (reduction of the alcohol content). Currently, nanofiltration is authorized to reduce the level of volatile acidity in wine when used with ion exchange. Ultrafiltration is authorized for use to remove proteinaceous material from wine; to reduce harsh tannic material from white wine produced from white skinned grapes; to remove color from blanc de noir wine; and to separate red wine into high color and low color wine fractions for blending purposes. Because both nanofiltration and ultrafiltration are capable of reducing alcohol content in wine, the proposed liberalization will provide industry members with more tools to reduce the alcohol content of wine.
In his comment, Dr. Robert Kreisher disagreed with TTB's proposal to expand the authorized uses of nanofiltration and ultrafiltration to include dealcoholization. Dr. Kreisher indicated that TTB considered nanofiltration for purposes of alcohol reduction in 2007 and found that such a process is not consistent with good commercial practice because “nanofiltration permeate contained too great a quantity of volatile esters and fixed acids.” Dr. Kreisher further stated that ultrafiltration has the same problems as nanofiltration, at a greater magnitude. If authorized, Dr. Kreisher advised TTB that it should be made clear that nanofiltration, ultrafiltration, and reverse osmosis may only be used in combination with distillation.
In 2007, TTB reviewed a petition for the use of nanofiltration and ultrafiltration for purposes of removing off-flavors in wine. It did not review the processes for the purpose of alcohol reduction. However, TTB reviewed nanofiltration and ultrafiltration for purposes of alcohol reduction in 2013 and found that on a preliminary basis nanofiltration and ultrafiltration were acceptable for alcohol reduction pending future rulemaking.
In Notice No. 164, TTB proposed amending § 24.248 to state that nanofiltration, ultrafiltration, and reverse osmosis must be conducted on distilled spirits plant premises when used to remove ethyl alcohol (dealcoholization). The proposed amendment also provided a specific exemption to this rule for reverse osmosis and nanofiltration if ethyl alcohol is only temporarily created within a closed system. In this rulemaking document, TTB is adopting these amendments as final.
TTB proposed to amend the table of authorized processes in § 24.248 by revising the listings for reverse osmosis and osmotic transport to state that each process can be used in combination with the other to reduce the ethyl alcohol content of wine. These processes, whether used separately or in combination, must take place on distilled spirits plant premises.
In Notice No. 164, TTB proposed amending § 24.248 to allow the use of ultrafiltration to separate red grape juice into high and low color fractions for blending purposes, and to separate white grape juice that had darkened due to oxidation during storage into high and low color fractions for blending purposes. TTB had previously administratively approved the use of ultrafiltration to separate red grape juice into low and high color fractions, and the proposed amendment would amend the table at § 24.248 accordingly. However, TTB had not administratively approved the use of ultrafiltration to separate high and low colored fractions of discolored white grape juice, so, in Notice No. 164, TTB did invite comments on whether this practice constitutes good commercial practice.
TTB proposed a new 27 CFR 24.185 to maintain in one location all regulatory provisions pertaining to the treatment of wine with wood. Section 24.185(a) clarifies TTB's current policy that natural wine may be treated by contact with any wood that is consistent with the food additive requirements under the FD&C Act and that wood may be toasted, but not charred. Toasted wood refers to wood that has been heated but has not undergone combustion (that is, has not been burned or blackened).
Proposed § 24.185(b) states TTB's position on the use of wood essences and extracts in the production of wine. In the proposal, wood preparations made with an alcohol solution stronger than 24 percent alcohol by volume would be considered “essences” and must be used in accordance with § 24.85. Wood essences and extracts must be consistent with the food additive requirements of the FD&C Act for that purpose and could only be used in “other wines” in accordance with § 24.218.
TTB also proposed to remove the last sentence from § 24.225 (“Wooden storage tanks used for the addition of spirits may be used for the baking of wine”) and include it in the new § 24.185. Additionally, the proposal would remove the reference to oak chips from § 24.246 and include it in the new § 24.185.
Wine Institute also noted that TTB did not propose language indicating how it will determine whether wood has been charred. Wine Institute noted that the proposed regulation would allow “toasting”, which does not include “undergoing combustion.” Wine Institute refuted this by arguing that “during the toasting process, minor blisters may occur on the wood, which can be significantly darker in color than the rest of the wood and thus suggests—inaccurately—that combustion has occurred.” For this reason Wine Institute believed that a color test would be “insufficient to determine if combustion, and thus charring, has occurred” and asked TTB to clarify how it would “identify improperly `charred' wood containers.”
TTB proposed to amend § 24.225, which sets forth rules under which proprietors of a bonded wine premises may withdraw and receive spirits without payment of tax from the bonded premises of a distilled spirits plant and add the spirits to natural wine on bonded wine premises. The proposals included amendments to:
• Incorporate the terms of section 5373(a) of the IRC related to standards for the production of wine spirits (that is, spirits distilled from fresh or dried fruit, or the wine or wine residue therefrom), to clarify that natural wine or special natural wine to which sugar has been added after fermentation may not be refermented to develop alcohol from the added sugar and then used to produce wine spirits;
• Specify that wine spirits derived from special natural wine (that is, a wine produced from a base of natural wine and to which natural flavorings are added) may be used only in the production of a special natural wine if those spirits retain any flavor characteristics of the special natural wine; and
• Specify that spirits derived from authorized alcohol reduction treatments may be used as wine spirits, if such spirits are distilled at a rate of 100 degrees proof or more (rather than the general IRC standard of 140 degrees proof or more), and if the spirits conform to the other terms of section 5373(a) of the IRC.
TTB also proposed the following non-substantive technical amendments:
• Moving the sentence allowing the use of wooden storage tanks used for the addition of spirits for the baking of wine to a new § 24.185 that is related solely to the use of wood to treat natural wine; and
• Reorganizing the entire § 24.225 to improve readability and clarity.
TTB proposed to add what would have been a new 27 CFR 24.251, to provide for the correction of standard wine when the wine becomes other than standard wine due to accidental water additions in excess of the authorized levels provided for in 27 CFR part 24, subparts F and L. The proposed text set forth the authority and standards to allow for removal of accidental additions of water of not more than 10 percent of the original volume of the wine without the need to first seek TTB approval. The proposal also stated that the appropriate TTB officer could approve other removals of accidentally added water upon application by a proprietor and sets forth the requirements for submitting an application to TTB. It also specified that, in evaluating any request under this section, TTB may consider as a factor whether the proprietor has demonstrated good commercial practices, taking into account the proprietor's prior history of accidental additions of water to wine and of compliance with other regulations in part 24.
Additionally, Wine Institute expressed its support for language in proposed § 24.186(a), which provides that wine shall remain “standard wine” if water is accidentally added to standard wine in an amount that does not exceed 1 percent of the total volume of the wine, and the proprietor need not take any action to correct the wine. Wine Institute also suggested amending § 24.186(b), which allows for the correction of accidental water additions, to allow “the addition of grape juice concentrate to correct an accidental dilution of grape wine.” Wine Institute argued that since grape juice and grape juice concentrate is authorized to be added to standard wine (see 27 CFR 24.186), TTB should authorize the addition of grape juice and grape juice concentrate to wine that has been accidentally diluted with water. Wine Institute expressed its belief that water accidentally added can be completely or partially accounted for by an appropriate amount of juice concentrate because water is necessary to reconstitute juice concentrate back to original Brix. It argued that this approach eliminates the need for processing (such as reverse osmosis) that, according to Wine Institute, is expensive and can potentially impact the quality of the wine. Wine Institute further suggested that the process proposed in § 24.251 be used on a portion of the wine if concentrate does not fully account for the accidental water addition.
Clover Hill Winery expressed concern that the authority of removing accidentally added water from wine under the standards as proposed could be abused by winemakers to fortify wines by distilling “slightly past the original concentration.” With no record of this distillation, Clover Hill Winery stated “there would be no red flags at the regulatory agencies and customers would be none the wiser.”
In its comment, the EU quoted the EU–US agreement
TTB proposed in new § 24.186 to permit the blending of other than standard wine with standard wine to reduce the amount of accidentally added water to 1 percent or less of the total volume of the blended wine. The intent was that the resulting wine would be considered to be standard wine.
In response to the comment received by the EU, TTB has reconsidered this proposal and is removing it from § 24.186 in this final rulemaking document. Accordingly, this final rule will not allow for the “salvage” of wine by blending the accidentally diluted wine (other than standard wine) with a standard wine. However, in response to the Wine Institute's suggestion of allowing the addition of juice concentrate to wine that has been diluted with water, TTB has added language to proposed § 24.251 (which is redesignated as § 24.252 in this document) that authorizes the salvage of wine that has been diluted with water by adding concentrate under certain conditions.
TTB is codifying these provisions in a new section, § 24.252. TTB originally proposed them in § 24.251. However,
In response to Clover Hill Winery's comment, TTB notes that in general, wine spirits are authorized to be added to standard wine (see 27 CFR part 24, subpart K). It is unclear to TTB what is meant by “distill slightly past the point of concentration.” Currently, there are no labeling requirements in 27 CFR part 24 that require an industry member to indicate on the label of their product that it contains wine spirits. In fact, such practices are generally prohibited for wines that are required to be covered by a Certificate of Label Approval (COLA) under TTB's regulations in 27 CFR part 4.
Labeling concerns aside, the issue at hand is that alcohol that was removed from the permeate stream resulting from reverse osmosis is distilled and returned to the wine. As provided in the proposed regulations, the wine must be returned to its original condition by removing an amount of water equal to the amount that was accidentally added to the wine. “Returned to its original condition” includes alcohol content. TTB is adding clarifying language to the provisions of § 24.252 to address this issue.
In addition to the changes discussed previously, TTB Notice No. 164 included the following proposed regulatory amendments.
TTB proposed numerous technical and clarifying changes to § 24.246. First, TTB proposed to amend the heading in paragraph (a) of § 24.246 to read “Wine and juice” rather than just “Wine.” TTB also proposed a number of technical changes to the table in § 24.246. A significant portion of these technical changes involve revising the measurement references specified for the limitation on use of the authorized wine treating materials by making the notation of units of measurement consistent throughout the chart, supplying closing parentheses where they were absent, and removing decimal points followed only by zeroes. In addition, where units were only in U.S. Common (English) units or SI (International Standard, or metric) units, TTB proposed adding the other unit of measure for reference purposes, where appropriate. Other technical changes in the proposed rule include: (1) Adding a footnote reference after each use of ppm and ppb in the chart to address parts per million and parts per billion, respectively; (2) including a definition of the word “stabilize” at the end of the chart; (3) adding a third column to the table in § 24.246 titled “FDA reference” to provide references to relevant FDA regulations in title 21 of the CFR, FDA GRAS Notices, and FDA advisory opinions; and (4) updating references to FDA opinions.
In the entry for activated carbon in § 24.246, TTB proposed to amend one of the entries in the “Materials and use” column for clarity by revising the phrase “remove color in wine and/or juice” to read “remove color from wine and/or juice.”
TTB proposed to revise the name of the material to “Ammonium phosphate/diammonium phosphate (
In her comment, Heather Nenow expressed her concern that the current authorized use rate of ammonium/diammonium phosphate at 8 pounds per 1000 gallons of wine is insufficient to finish fermentation with grapes grown in certain regions of the country. Ms. Nenow referred to uncited studies that indicate yeast-assimilable nitrogen of 250 to 350 ppm is required to finish fermentation. According to Ms. Nenow, 1 pound of diammonium phosphate added to juice provides 22 ppm of yeast-assimilable nitrogen. With a limit of 8 pounds per 1000 gallons for addition of diammonium phosphate, the maximum increase of yeast-assimilable nitrogen the winemaker can add is 176 ppm, which is well below the 250-to-350 ppm of yeast-assimilable nitrogen that Ms. Nenow indicated is necessary to complete fermentation. She recommended a use rate for diammonium phosphate of 15 pounds per 1000 gallons of wine.
In the “Specific limitation” column, TTB proposed to remove the references to FDA's GRAS opinions. The opinions were from 1960 and 1961, and copies were no longer available from either TTB or FDA.
TTB also proposed to make the following technical changes to the current entries in the table in § 24.246:
• Albumen. In the “Specific limitation” column, TTB proposed to revise the words “of solution” in the second sentence to read “of wine.”
• Calcium carbonate. In the “Materials and use” column, TTB proposed to add the abbreviation “CaCO
• Citric acid. In the “Materials and use” column, TTB proposed revising the phrase “deficiencies in wine” to read “deficiencies in juice and wine.”
• Copper sulfate. In the “Specific limitation” column, TTB proposed to revise the phrase “sulfate added (calculated as copper)” to read “sulfate (calculated as copper) added to wine.”
• Dimethyl dicarbonate. For purposes of clarity, in the “Materials and use” column, TTB proposed to add the abbreviation “(DMDC)” after the material name and also proposed to remove the phrases “dealcoholized wine” and “low alcohol wine” from the entry to reduce redundancy.
• Ferrocyanide. TTB proposed to remove “ferrocyanide” from the list of authorized wine treating materials because TTB believes that ferrocyanide compounds are no longer available on the United States market and no longer being used by the U.S. wine industry.
• Milk products. Because milk products are currently approved for use as fining agents in all wines, TTB proposed to remove the phrase “Fining agent for grape wine or sherry.” TTB believes this phrase may cause confusion because under the standards of identity in § 4.21(a), sherry is a grape wine.
• Oxygen and compressed air. In the “Materials and use” column, TTB replaced the words “May be used in juice and wine” with the words “Various uses in juice and wine.”
• Polyvinylpolypyrrolidone (PVPP). In the “Materials and use” column, TTB proposed removing the phrase “black wine” because this term for a very dark red wine is no longer commonly used by industry members; the material will still be allowed in red wines, which covers so-called “black wines.”
• Sorbic acid and potassium salt of sorbic acid. In the “Materials and use” column, TTB proposed adding the words “potassium sorbate” in parentheses immediately after the material name because “potassium salt of sorbic acid” is commonly referred to as “potassium sorbate.”
• Sulfur dioxide. TTB proposed to correct the entry for sulfur dioxide to include its use in juice.
• Thiamine hydrochloride. TTB proposed to move the material thiamine hydrochloride under a new heading, “Yeast nutrients.”
TTB proposed a technical amendment to clarify the requirements in § 24.250 for applications for use of new wine treating materials or processes. The amendment would require evidence that the proposed material is “consistent with the food additive requirements under the FD&C Act for its intended purpose in the amounts proposed for the particular treatment contemplated.” TTB believes the proposed language is
In Notice No. 164, TTB invited public comments on a number of additional potential changes to part 24. Most of these issues had been raised in petitions for rulemaking or arose in connection with wine treatment approval requests under § 24.249 or § 24.250. The issues in question, and the specific points on which TTB requested public comments, are outlined below.
In 2008, Oak Tannin Technologies submitted a petition to amend the TTB regulations to allow “alcoholic oak extracts for use in natural wines as a stabilizing, enriching and integrating agent.” The petitioner stated that use of such extracts in wine is approved by the South African Wine and Spirit Board. However, TTB and its predecessor agencies' longstanding policy has been to treat such materials as essences or extracts, which, under § 24.85, may be used only in the production of formula wines
In Notice No. 164, TTB sought comments regarding the use of an alcoholic oak extract in the production of natural wines, in particular, as a material for use as a wine stabilizer, but also for any other purpose that is consistent with good commercial practice. TTB also advised that a manufacturer of alcoholic oak extract must contact FDA and go through the FDA pre-market review process.
In 2007, Hyman, Philips, & McNamara, P.C. petitioned TTB to amend §§ 24.182 and 24.246 to allow use of lactic acid in juice, must, and wine prior to fermentation. Lactic acid is most commonly found in dairy products and is a common component in both plant and animal metabolic processes. Under § 24.246, lactic acid is currently authorized for use in grape wine to correct natural acid deficiencies. In the table in § 24.246, the entry in the “Reference or limitation” column for lactic acid simply provides a citation to 27 CFR 24.182 and 24.192. Section 24.192 refers back to the limitations on the use of acid, among other things, prescribed in § 24.182. The regulations in § 24.182 state that acids of the kinds occurring in grapes or other fruit (including berries) may be added within the limitations of § 24.246 to juice or wine in order to correct natural deficiencies. Section 24.182 also states that, after fermentation is completed, citric acid, fumaric acid, malic acid, lactic acid, or tartaric acid, or a combination of two or more of these acids, may be added to correct natural deficiencies. The petitioner noted that lactic acid is currently allowed by § 24.246 for treatment of wine after fermentation and provided evidence that certain other countries allow the addition of lactic acid before fermentation. Further, the petitioner noted that lactic acid is less expensive and more reliably available than tartaric acid.
In Notice No. 164, TTB did not propose any changes to the regulations concerning the use of lactic acid. However, TTB invited comments regarding whether or not the use of lactic acid prior to fermentation is good commercial practice in the production of natural wine.
Section 24.248 currently provides for the use of reverse osmosis to reduce the ethyl alcohol content of wine and to remove off flavors in wine. In 2014, Constellation Wines U.S. Inc. (Constellation) submitted a petition to TTB requesting an expansion of the authorized uses of reverse osmosis in § 24.248 to include: (1) improving the phenol and flavor character of wine; and (2) reducing the water content in standard wine. In Notice No. 164, TTB invited comments on whether the use of reverse osmosis to reduce the water content of wine, improve the phenol and flavor character of wine, or to improve the sensory quality of the wine would be acceptable in good commercial practice. TTB did not, however, propose any amendments to add these uses to the list of authorized uses for reverse osmosis.
TTB stated that if commenters believed that the use of reverse osmosis for these purposes is consistent with good commercial practice, their comments should explain their position in detail, as well as provide guidelines/standards concerning how much water (maximum percentage) may be removed. If commenters believed that the use of reverse osmosis for these purposes is not consistent with good commercial practice, their comments should explain their position in detail.
In his comment, Coleman Reardon also expressed support for the use of reverse osmosis as requested by Constellation. Mr. Reardon argued that the concentration of standard wine via reverse osmosis would result in wine producers using more grapes in the production of wine, which would benefit grape growers. He also stated that “[i]ncluding less water in the production of wine would also inherently increase the flavor of wine's other ingredients and characteristics.” Mr. Reardon further argued that the U.S. is at an international disadvantage by not allowing the proposed use of reverse osmosis because such practice is authorized in some other countries.
In his second comment to Notice No. 164, Dr. Robert Kreisher opposed the proposed use of reverse osmosis and disagreed with Constellation's assertion that wine resulting from reverse osmosis to improve the phenol flavor and character of wine and reduce the water content “is considered to be standard wine but with reduced levels of alcohol and water.” Dr. Kreisher stated that Constellation's assertion was incorrect because, under current regulation, the concentration of wine via reverse osmosis is not authorized and, therefore, such a practice does not result in a standard wine.
Dr. Kreisher also argued that Constellation's statement that concentration of wine via reverse osmosis will result in “reduced levels of alcohol and water” is inaccurate. Dr. Kreisher indicated that concentration of wine cannot result in both a reduction of alcohol and water. He stated that reverse osmosis passes water (through a membrane) preferentially to alcohol and thus reduces water content, while concentrating (increasing) alcohol in the wine. Therefore, the alcohol in the retentate,
Dr. Kreisher also refuted Constellation's assertion “that many foreign countries permit the use of reverse osmosis as an acceptable winemaking practice to concentrate phenols and flavors in wine and in grape must” and that “[t]he expanded use of reverse osmosis would provide winemakers with better ability to regulate the alcohol content of wines.” He argued that the alcohol content of wine would only be regulated upward when reverse osmosis is used and further indicated that the claim that foreign countries authorize such practices is incorrect.
Finally, Dr. Kreisher argued that the prohibition on the concentration of wine to improve phenolic flavor and character and to reduce the water content does not subject anyone to unfair competition because wine produced with the use of such practices “may not be sold in any major market, including the U.S.” Dr. Kreisher stated “[t]his isn't unfair, it's parity.”
In her comment, Alice Feiring opposed the proposed use of reverse osmosis, stating that such a practice would be used “to cover up sloppy and unclean winemaking.”
In Notice No. 164, TTB discussed an industry member's request to use ultrafiltration to separate white grape juice that had darkened due to oxidation during storage into high and low color fractions for blending purposes. The low color fraction would be blended with white wine, and the high color fraction would be blended with red wine. TTB sought comment on whether the use of ultrafiltration to separate discolored wine for blending would be acceptable in good commercial practice. In its request for comment, TTB stated that a comment should explain in detail the commenter's position as to why the use of ultrafiltration in this manner is or is not acceptable in good commercial practice.
In his second comment in response to Notice No. 164, Dr. Robert Kreisher expressed support for extending the authorized use of ultrafiltration to separate discolored white wine. He further argued that the use of ultrafiltration gives winemakers greater control over the wine they produce.
In 2007, TTB received a petition from Gusmer Enterprises Inc. (Gusmer) requesting approval of eight vitamins and minerals for use as yeast nutrients in the production of wine—cobalamin (vitamin B12), iodine (potassium iodide), iron, manganese sulfate, nickel, potassium chloride, riboflavin (Vitamin B2), and zinc sulfate. Prior to the publication of Notice No. 164, TTB had not administratively approved these vitamins and minerals under § 24.250. In Notice No. 164, TTB sought comments supporting or rejecting the argument that the use of these vitamins and minerals as yeast nutrients in the production of wine is consistent with good commercial practice.
In its comment, Beverage Supply Group stated support for Gusmer's petition, specifically the use of zinc sulfate and manganese sulfate as yeast nutrients. Beverage Supply Group expressed their belief that the use of zinc sulfate and manganese sulfate is consistent with good commercial practice and also provided scientific data that they believe supports allowing the use of these two materials as yeast nutrients.
In his comment, Richard Gahagan stated that he does not believe that malolactic fermentation should be limited to
TTB has not received requests to experiment with malolactic bacteria belonging to the genera
It has been determined that this rule is not a significant regulatory action for purposes of Executive Order 12866. Therefore, a regulatory assessment is not required.
Pursuant to the requirements of the Regulatory Flexibility Act (5 U.S.C. chapter 6), TTB certifies that these final regulations will not have an economic impact on a substantial number of small entities. This final rule provides for the voluntary use of additional wine and juice treating materials and processes in the production of wine. This authorization does not impose any required change to current winemaking practices, nor does it impose additional compliance burden on small businesses. TTB authorizes new wine treating materials and processes by evaluating proprietors' requests to experiment with such materials and processes, such requests being made via application to TTB. This rule allows for certain treatments, under limited circumstances, without the submission of an application to TTB. TTB estimates that the regulation will reduce the number of respondents by approximately 10 applicants per year, thus slightly reducing the overall burden of the information collection.
In addition, TTB currently requires wineries to maintain usual and customary business records. Included in these records are those records that evidence the details and results of experiments approved by TTB under § 24.249. This recordkeeping requirement remains unchanged by this rule as wineries subject to part 24 still will be required to maintain those usual and customary records.
Pursuant to section 7805(f) of the IRC (26 U.S.C. 7805(f)), the notice of proposed rulemaking preceding these regulations was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business, and no comments were received.
Regulations in this document contain current collections of information that have been previously reviewed and approved by the Office of Management and Budget (OMB) in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507) and assigned control numbers 1513–0057, titled “Letterhead Applications and Notices Related to Wine (TTB REC 5120/2),” and 1513–0115, titled, “Usual and Customary Business Records Relating to Wine (TTB REC 5120/1).” Any agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by OMB.
In conjunction with Notice No. 164, TTB submitted revisions to OMB control numbers 1513–0057 to OMB for review. That revision accounted for the anticipated reduction in the number of respondents as a result of the proposal to no longer require proprietors to submit an application to TTB prior to correcting accidentally diluted wine. The proposal was included in Notice No. 164 and is adopted as final in this document. The revision and its connection to the proposed regulatory amendments are described in detail in Notice No. 164, which also solicited comments regarding the information collection revision. TTB received no comments in response to the revision, which OMB has now approved.
TTB finds good cause under 5 U.S.C. 553(d)(3) to dispense with the effective date limitation in 5 U.S.C. 553(d)(3). A 30-day delayed effective date is unnecessary because the regulatory changes in this final rule that authorize the use of wine treating materials are optional, and making the changes effective immediately upon publication will give wineries the option of using these newly-approved materials and processes as soon as possible.
Administrative practice and procedure, Claims, Electronic fund transfers, Excise taxes, Exports, Food additives, Fruit juices, Labeling, Liquors, Packaging and containers, Reporting and recordkeeping requirements, Research, Scientific equipment, Spices and flavoring, Surety bonds, Vinegar, Warehouses, Wine.
For the reasons discussed above in the preamble, TTB amends 27 CFR part 24 as follows:
5 U.S.C. 552(a); 26 U.S.C. 5001, 5008, 5041, 5042, 5044, 5061, 5062, 5121, 5122–5124, 5173, 5206, 5214, 5215, 5351, 5353, 5354, 5356, 5357, 5361, 5362, 5364–5373, 5381–5388, 5391, 5392, 5511, 5551, 5552, 5661, 5662, 5684, 6065, 6091, 6109, 6301, 6302, 6311, 6651, 6676, 7302, 7342, 7502, 7503, 7606, 7805, 7851; 31 U.S.C. 9301, 9303, 9304, 9306.
The revision reads as follows:
(a)
(b)
(c)
(a)
(b)
(a)
(b)
(i) Fresh or dried fruit or their residues;
(ii) Natural wine or wine residues from fresh or dried fruit, including spirits byproducts of authorized wine treatments to reduce alcohol; or
(iii) Special natural wine. If wine spirits produced from special natural wine contain any flavor characteristics of the special natural wine, those wine spirits may be used only in the production of a special natural wine.
(2)
(i) Commercial brandy aged in wood for a period of not less than 2 years, and barreled at not less than 100 degrees of proof, shall be deemed wine spirits for purposes of this section; and
(ii) Spirits byproducts of alcohol reduction processing authorized under § 24.248 that are produced at a distilled spirits plant and distilled, if necessary, at not less than 90 degrees of proof shall be deemed wine spirits for purposes of this section.
(3)
(4)
(ii) In the case of natural still wine, wine spirits may be added in any State only to wine produced by fermentation on bonded wine premises located within the same State.
(iii) If wine has been ameliorated, wine spirits may be added (whether or not wine spirits were previously added) only if the wine contains not more than 14 percent of alcohol by volume derived from fermentation.
(c)
(a)
(1) If the U.S. Food and Drug Administration (FDA) informs TTB that a specified use or limitation of any material listed in this section is inconsistent with the food additive requirements under the Federal Food, Drug, and Cosmetic Act, the appropriate TTB officer may cancel or amend the approval for use of the material in the treatment of wine and juice in the production, cellar treatment, or finishing of wine; and
(2) Where water is added to facilitate the solution or dispersal of a material, the volume of water added, whether the material is used singly or in combination with other water-based treating materials, may not total more than 1 percent of the volume of the treated wine or juice, or of both the wine and the juice, from which the wine is produced.
(b)
(c)
The revisions read as follows:
The materials listed in this section as well as the materials listed in § 24.246 are approved as being acceptable in good commercial practice for use by proprietors in the treatment of distilling material within the limitations specified in this section. If, however, the U.S. Food and Drug Administration (FDA) informs TTB that a specified use or limitation of any material listed in this section is inconsistent with the food additive requirements under the Federal Food, Drug, and Cosmetic Act, the appropriate TTB officer may cancel or amend the approval for use of the material in the treatment of distilling material.
The additions and revisions read as follows:
The processes listed in this section are approved as being consistent with good commercial practice for use by proprietors in the production, cellar treatment, or finishing of wine, juice, and distilling material, within the general limitations of this section. If, however, the U.S. Food and Drug Administration (FDA) informs TTB that a specified use or limitation of any material listed in this section is inconsistent with the food additive requirements under the Federal Food, Drug, and Cosmetic Act, the appropriate TTB officer may cancel or amend the approval for use of the process in the production, cellar treatment, or finishing of wine, juice, and distilling material.
The revision reads as follows:
(b)
(a)
(1) The use of reverse osmosis and distillation without prior application to TTB provided that:
(i) The accidentally added water represents no more than 10 percent of the original volume of the wine;
(ii) The wine is returned to its original condition by removing an amount of water equal to the amount that was accidentally added to the wine;
(iii) The vinous character of the wine is not altered;
(iv) The proprietor transfers the wine in bond to a distilled spirits plant for treatment; and
(v) Records are maintained in accordance with paragraph (c) of this section; or
(2) By adding juice concentrate under the conditions outlined in § 24.180 without prior application to TTB provided that:
(i) The accidentally added water represents no more than 10 percent of the original volume of the wine;
(ii) The solids content of the finished wine do not exceed 21 percent by weight;
(iii) The proprietor complies with any State or local rules regarding the addition of juice concentrate; and
(iv) Records are maintained in accordance with paragraph (c) of this section.
(b)
(c)
Office of Surface Mining Reclamation and Enforcement, Interior.
Final rule.
We, the Office of Surface Mining Reclamation and Enforcement (OSMRE), and the Department of the Interior are adopting as final the interim final rule published on January 14, 2022, making amendments to the departmental regulations governing the Abandoned Mine Reclamation Fund (AML Fund) to be consistent with the Infrastructure Investment and Jobs Act (IIJA), which included the Abandoned Mine Land Reclamation Amendments of 2021 (the 2021 amendments). The final rule adopts the changes to the regulations reflecting the extension of our statutory authority to collect reclamation fees for an additional 13 years and the 20 percent reduction in fee rates. In addition, the final rule adopts the changes to the regulations reflecting the statutory extension of the dates when moneys derived from these fees will be available for distribution to eligible States and Tribes as grants. The final rule adopts the interim final rule with two revisions to correct grammatical errors. The final rule also corrects two additional grammatical errors in the regulations which were unaffected by the interim final rule.
Effective August 24, 2022.
Harry Payne, Office of Surface Mining Reclamation and Enforcement, 1849 C Street NW, Mail Stop 4558, Washington, DC 20240; Telephone (202) 208–5683. Email:
Title IV of the Surface Mining Control and Reclamation Act of 1977 (SMCRA) created the AML Fund, which is funded primarily by a reclamation fee (also known as the AML fee) assessed on each ton of coal produced in the United States and that, among other things, provides funding to eligible States and Tribes for the reclamation of coal mining sites abandoned or left in an inadequate reclamation status as of August 3, 1977. As originally enacted, section 402(a) of SMCRA set the reclamation fee at 35 cents per ton (or 10 percent of the value of the coal, whichever was less) for coal other than lignite produced by surface mining methods, 15 cents per ton (or 10 percent of the value of the coal, whichever was less) for coal other than lignite produced from underground mines, and 10 cents per ton (or 2 percent of the value of the coal, whichever was less) for lignite. Section 402(b) of SMCRA first authorized collection of reclamation fees for 15 years following the date of SMCRA's enactment (August 3, 1977). Subsequently, the Omnibus Budget Reconciliation Act of 1990 (Pub. L. 101–508, 104 Stat. 1388, section 6003(a)) extended our fee collection authority through September 30, 1995, followed by the Energy Policy Act of 1992 (Pub. L. 102–486, 106 Stat. 2776, 3056, section 19143(b)(1) of Title XIX), which extended our fee collection authority through September 30, 2004. A series of short interim extensions in appropriations and other acts further extended our fee collection authority through September 30, 2007.
The Surface Mining Control and Reclamation Act Amendments of 2006 (the 2006 amendments) were signed into law on December 20, 2006, as part of the Tax Relief and Health Care Act of 2006 (Pub. L. 109–432, 120 Stat. 2922). The 2006 amendments extended our fee collection authority under section 402(b) through September 30, 2021, and reduced the reclamation fee rates in section 402(a) by 10 percent for the period from October 1, 2007, through September 30, 2012, and an additional 10 percent from the original levels for the period from October 1, 2012, through September 30, 2021. Therefore, the fee rates from October 1, 2012, through September 30, 2021, required coal mine operators to pay 28 cents per ton (or 10 percent of the value of the coal, whichever was less) for coal other than lignite produced by surface mining methods, 12 cents per ton (or 10 percent of the value of the coal, whichever was less) for coal other than lignite produced from underground mines, and 8 cents per ton (or 2 percent of the value of the coal, whichever was less) for lignite. OSMRE notified operators in writing of the change in fee rates resulting from the 2006 amendments in January and September 2007. 73 FR 67576, 67578. On November 14, 2008, the Department promulgated final regulations at 30 CFR parts 870 and 872 to codify these changes and other revisions made by the 2006 amendments (73 FR 67576).
The 2021 amendments, signed into law on November 15, 2021, as part of the Infrastructure Investment and Jobs Act (Pub. L. 117–58, 135 Stat. 429), commonly known as the Bipartisan Infrastructure Law (BIL), extended our fee collection authority under section 402(b) through September 30, 2034, and reduced reclamation fee rates in section 402(a) by 20 percent from the prior rates. Therefore, for the calendar quarter beginning October 1, 2021, the current rates require operators to pay 22.4 cents per ton (or 10 percent of the value of the coal, whichever is less) for coal other than lignite produced by surface mining
In addition, the 2021 amendments extended the current annual AML grant distributions to both uncertified and certified States and Tribes. (A State or Tribe “certifies” under section 411(a) of SMCRA (30 U.S.C. 1240a) when it has completed all known coal AML priorities.) Specifically, the 2021 amendments revised section 401(f)(2) of SMCRA to extend the annual grant distributions from the AML Fund to eligible uncertified States and Tribes by 13 years. The extension of our fee collection authority in section 402(b) also effectively extended the AML grant distributions from general Treasury funds (
While we consider the 2021 amendments to be self-executing, some of our regulations were inconsistent with these provisions. To provide consistency between our regulations and the 2021 amendments and to clarify that fee collections continue without interruption at the reduced rates and that annual AML grant distributions to eligible States and Tribes based on fee collections continue using the formula described in sections 401(f) and 402(i)(2) of SMCRA, we published an interim final rule, effective upon publication, that revised 30 CFR parts 870 and 872 to reflect the reduction in reclamation fee rates and the extension of our fee collection authority and annual AML grant distributions (87 FR 2341 (January 14, 2022)). We are finalizing that rule in this document.
The interim final rule revised the Department's regulations to be consistent with the 2021 amendments, which extend our statutory authority to collect reclamation fees for an additional 13 years, reduce reclamation fee rates, and extend the dates when annual grant funding will be available to eligible States and Tribes. Similar to the proposed rule for the 2006 SMCRA amendments, the interim final rule retained certain expired fee rates at 30 CFR 870.13 for historical purposes and for use in future audits of production from the years in which those rates applied.
For the reasons discussed above and as provided in the interim final rule, OSMRE is adopting as final the interim final rule with two revisions to correct grammatical errors. Section 870.13(b) of the interim final rule incorrectly expressed the acronym for British Thermal Units as “Btu's” rather than “Btus.” This rule corrects those grammatical errors in the regulations by replacing “Btu's” with “Btus.” This rule also corrects two additional grammatical errors in 30 CFR 870.13(a) by replacing “Btu's” with “Btus.”
The Administrative Procedure Act (APA) generally requires that a final rule must be published in the
The APA's legislative history indicates that the purpose of the 30-day publication requirement is to “afford persons affected a reasonable time to prepare for the effective date of a rule or rules or to take any other action which the issuance of the rules may prompt.” S. Rep. No. 79–752, at 201 (1945). However, the final rule merely revises the regulations to be consistent with the requirements of the BIL, which President Biden signed into law on November 15, 2021; thus, coal mine operators have had more than six months to prepare for the extension of our fee collection authority and commensurate reduction in reclamation fee rates, well in excess of the traditional 30-day requirement. Furthermore, the BIL did not create any new requirements with which coal mine operators must comply; both the requirement that coal mine operators pay a reclamation fee and our authority
In addition, pursuant to 5 U.S.C. 553(b)(3)(B), an agency may waive the prior notice and public comment requirements if it finds, for good cause, that the requirements are impracticable, unnecessary, or contrary to the public interest. We are availing ourselves of the good cause exemption at 5 U.S.C. 553(b)(3)(B) to correct two grammatical errors in 30 CFR 870.13(a) that were the result of an earlier rulemaking and unaffected by the interim final rule. This is a ministerial action that will have no substantive impact on regulated entities or the public. For that reason, we do not anticipate receiving meaningful comments on a proposal to correct these grammatical errors and find good cause to forgo notice and an opportunity for public comment.
Pursuant to the Congressional Review Act, 5 U.S.C. 801
As noted above, this rulemaking implements the 2021 amendments to SMCRA, which extended our fee collection authority for an additional 13 years, reduced reclamation fee rates by 20 percent, and extended annual AML grant distributions. Although OSMRE typically collects more than $100 million in reclamation fees annually and distributes over $100 million in annual AML grants to eligible States and Tribes, the reduction in fee collections resulting from the 20 percent reduction in reclamation fee rates is anticipated to be less than $100 million a year when compared to the fees collected and grants distributed in the fiscal years since fiscal year 2013, when the fee rate last changed. And because the 2021 amendments are self-executing, any effects come not from requirements imposed by this rule but rather from the extension of our traditional AML grant program and fee collection authority, and concurrent reduction in reclamation fee rates by Congress. As a result, this rule is not considered a major rulemaking.
Executive Order 12866 provides that OIRA will review all significant rules before they are issued. Because this final rule merely reflects the 2021 amendments to SMCRA, which extended our fee collection authority for an additional 13 years, reduced reclamation fee rates by 20 percent, and extended annual AML grant distributions, OIRA has concluded that this rulemaking is not a significant regulatory action under Executive Order 12866. Pursuant to Executive Order 12866, an action is a “significant regulatory action” if it is likely to result in a rule that may: (1) have an annual effect on the economy of $100 million or more or have a material adverse effect on the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) create a serious inconsistency or interfere with planned or actual action taken by another agency; (3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raise novel legal or policy issues that are the result of legal mandates, the President's priorities, or the principles set forth in the Executive order.
Although the reclamation fees collected and AML grants distributed typically exceed $100 million annually, this final rule is implementing only the 2021 amendments' continuation of an existing program mandated by Congress for an additional 13 years and is therefore not a change with a significant monetary impact. In addition, because the administrative and procedural provisions of this rule would reflect an annual impact of less than $100 million, it is not significant under Executive Order 12866. Furthermore, as OSMRE has collected reclamation fees and distributed annual AML grants for more than four decades, the agency is not aware of any inconsistencies with other agency actions or novel legal or policy issues that could arise as a result of the reauthorization of the reclamation fee and the extension of AML grants.
Executive Order 13563 reaffirms the principles of Executive Order 12866 while calling for improvements in the Nation's regulatory system to promote predictability, to reduce uncertainty, and to use the best, most innovative, and least burdensome tools for achieving regulatory ends. Executive Order 13563 directs agencies to consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public where these approaches are relevant, feasible, and consistent with regulatory objectives. Executive Order 13563 emphasizes further that regulations must be based on the best available science and that the rulemaking process must allow for public participation and an open exchange of ideas. We have developed this rule in a manner consistent with these requirements, to the extent permitted by statute.
The Regulatory Flexibility Act (RFA), which requires an agency to prepare a regulatory flexibility analysis for all rules, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities, applies only where an agency is required to publish a general notice of proposed rulemaking for any proposed rule.
This rule is not a major rule under 5 U.S.C. 804(2), the Small Business Regulatory Enforcement Fairness Act. As explained in section III.A. above, this rule:
(a) will not have an annual effect on the economy of $100 million or more;
(b) will not cause a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions; and
(c) will not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of United States-based enterprises to compete with foreign-based enterprises.
The Unfunded Mandates Reform Act of 1995 (UMRA) requires that, before promulgating any general notice of proposed rulemaking that is likely to result in promulgation of any rule that may result in the expenditure by a State, Tribal, or local government, in the aggregate, or by the private sector of $100 million, adjusted annually for inflation, in any 1 year, an agency must prepare a written statement that assesses the effects on State, Tribal, and local governments and the private sector.
This rule does not effect a taking of private property or otherwise have takings implications under Executive Order 12630. A takings implication assessment is not required.
Under the criteria in section 1 of Executive Order 13132, this rule does not have sufficient federalism implications to warrant the preparation of a federalism summary impact statement. A federalism summary impact statement is not required.
This rule complies with the requirements of Executive Order 12988. Specifically, this rule:
(a) meets the criteria of section 3(a) requiring that all regulations be reviewed to eliminate errors and ambiguity and be written to minimize litigation; and
(b) meets the criteria of section 3(b)(2) requiring that all regulations be written in clear language and contain clear legal standards.
The Department of the Interior strives to strengthen its government-to-government relationship with Tribes through a commitment to consultation with Tribes and recognition of their right to self-governance and Tribal sovereignty. We have evaluated this rule under the Department's consultation policy; Departmental Manual Part 512, Chapters 4 and 5; and Executive Order 13175 and have determined that it has no substantial direct effects on federally-recognized Tribes or Alaska Native Claims Settlement Act (ANCSA) Corporations, and that consultation under the Department's Tribal consultation policy is not required. OSMRE has conducted informal listening sessions with eligible Tribes to provide an overview of the BIL as it relates to the AML program. OSMRE is committed to communication and coordination and will continue engagement strategies as needed to keep Tribes informed of the requirements of the program.
In accordance with the requirements of the Paperwork Reduction Act (PRA), OSMRE may not conduct or sponsor, and you are not required to respond to, a collection of information unless it displays a currently valid OMB control number. OSMRE has reviewed this final rule and determined that it does not introduce any new or revised collections of information under the PRA. Therefore, no submission to OMB is required.
This rule does not constitute a major Federal action significantly affecting the quality of the human environment. A detailed statement under the National Environmental Policy Act of 1969 (NEPA) is not required because this rule is covered by a categorical exclusion. This rule is excluded from the requirement to prepare a detailed statement because it is a regulation of both an administrative and financial nature.
This rule is not a significant energy action as defined in Executive Order 13211. A Statement of Energy Effects is not required.
We are required by Executive Orders 12866 (section 1(b)(12)), 12988 (section 3(b)(1)(B)), and 13563 (section 1(a)), and by the Presidential Memorandum of June 1, 1998, to write all rules in plain language. This means that each rule we publish must:
(a) be logically organized;
(b) use the active voice to address readers directly;
(c) use common, everyday words and clear language rather than jargon;
(d) be divided into short sections and sentences; and
(e) use lists and tables wherever possible.
If you believe that we have not met these requirements in issuing this final rule, please contact the individual listed in the
In developing this rule, we did not conduct or use a study, experiment, or survey requiring peer review under the Data Quality Act (Pub. L. 106–554).
Section 12(d) of the National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 3701 note
Executive Order 13045 requires that environmental and related rules separately evaluate the potential impact to children. However, Executive Order 13045 is inapplicable to this rulemaking because this is not a substantive rulemaking and a notice of proposed rulemaking was neither required nor prepared.
Abandoned Mine Reclamation Fund, Fee collection and coal production reporting, Reporting and recordkeeping requirements, Surface mining.
Indians—land, Moneys available to eligible States and Indian tribes.
The action taken herein is pursuant to an existing delegation of authority.
For the reasons given in the preamble, the Department of the Interior adopts the interim rule amending 30 CFR parts 870 and 872, which was published at 87 FR 2341 on January 14, 2022, as final with the following changes:
28 U.S.C. 1746, 30 U.S.C. 1201
(a) * * *
(b) * * *
Coast Guard, DHS.
Notification of enforcement of regulation.
The Coast Guard will enforce the special local regulation on the waters of San Diego Bay, CA, during the Swim for Special Operations Forces on September 17, 2022. This special local regulation is necessary to provide for the safety of the participants, crew, sponsor vessels of the event, and general users of the waterway. During the enforcement period, persons and vessels are prohibited from entering into, transiting through, or anchoring within this regulated area unless authorized by the Captain of the Port, or his designated representative.
The regulations in 33 CFR 100.1101 for the location described in Item 16 in table 1 to § 100.1101, will be enforced from 7:30 a.m. until 11:30 a.m. on September 17, 2022.
If you have questions about this notification of enforcement, call or email Lieutenant Junior Grade Shera Kim, Waterways Management, U.S. Coast Guard Sector San Diego, CA; telephone (619) 278–7656, email
The Coast Guard will enforce the special local regulations in 33 CFR 100.1101 for the location identified in Item No. 16 in table 1 to § 100.1101, from 7:30 a.m. until 11:30 a.m. on September 17, 2022, for the Swim for Special Operations Forces in San Diego Bay, CA. This action is being taken to provide for the safety of life on the navigable waterways during the event. Our regulation for recurring marine events in the San Diego Captain of the Port Zone, § 100.1101, Item No. 16 in table 1 to § 100.1101, specifies the location of the regulated area for the Swim for Special
In addition to this document in the
Coast Guard, Department of Homeland Security (DHS).
Temporary final rule.
The Coast Guard is establishing a temporary safety zone for navigable waters within a 1000-yard radius of Sunset Point on San Juan Island, WA. The safety zone is needed to protect personnel, vessels, and the marine environment from potential hazards associated with the emergency response efforts and the product recovery of a sunken vessel. Entry of vessels or persons into this zone is prohibited unless specifically authorized by the Captain of the Port Sector Puget Sound.
This rule is effective without actual notice from August 24, 2022, through August 29, 2022, at 10 p.m. For the purposes of enforcement, actual notice will be used from August 18, 2022, at 10 p.m., until August 24, 2022.
To view documents mentioned in this preamble as being available in the docket, go to
If you have questions on this rule, call or email Lieutenant Commander Samud I. Looney, Sector Puget Sound, Waterways Management Division, U.S. Coast Guard; telephone 206–217–6051, email
On August 16, 2022, the Coast Guard created a rulemaking that created a temporary safety zone. The safety zone was effective August 16, 2022, to August 18, 2022. A copy of the rulemaking that ended on August 18, 2022, is available in the docket USCG–2022–0600. However, additional time is needed to maintain safe navigation around response equipment and responders while additional damage assessments and salvage operations occurs, and, as a result, the Coast Guard is establishing through temporary regulations a safety zone that will be in effect through August 29, 2022. The Coast Guard is issuing this temporary rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because immediate action is needed to respond to the safety hazards associated with the emergency response measures in product recovery of a sunken vessel. It is impracticable to publish an NPRM and hold a reasonable comment period for this rulemaking due to the emergent nature of the ongoing response and product recovery operations.
Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the
The Coast Guard is issuing this rule under authority in 46 U.S.C. 70034 (previously 33 U.S.C. 1231). The Captain of the Port Sector Puget Sound (COTP) has determined that potential hazards associated with the emergency response and recovery operations will be a safety concern for anyone within a 1000-yard radius of Sunset Point, San Juan Island, WA. This rule is needed to protect personnel, vessels, and the marine environment in the navigable waters within the safety zone while the emergency response is ongoing and during the pollution mitigation measures and product recovery of the sunken vessel.
This rule establishes a temporary safety zone that will is subject to enforcement from August 18, 2022, at 10 p.m. through August 29, 2022, at 10 p.m. The safety zone will cover all navigable waters within 1000-yard radius of Sunset Point, San Juan Island, WA. The duration of the zone is intended to protect personnel, vessels, and the marine environment in these navigable waters while the emergency response of the sunken vessel are ongoing. No vessel or person will be permitted to enter the safety zone without obtaining permission from the COTP or a designated representative. The safety zone may be suspended early at the discretion of COTP Sector Puget Sound.
We developed this rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive orders, and we discuss First Amendment rights of protestors.
Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. This rule has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB).
This regulatory action determination is based on the size, location, duration,
The Regulatory Flexibility Act of 1980, 5 U.S.C. 601–612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.
While some owners or operators of vessels intending to transit the safety zone may be small entities, for the reasons stated in section V.A above, this rule will not have a significant economic impact on any vessel owner or operator.
Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104–121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please call or email the person listed in the
Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1–888–REG–FAIR (1–888–734–3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.
This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3520).
A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on 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. We have analyzed this rule under that order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.
Also, this rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531–1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.
We have analyzed this rule under Department of Homeland Security Directive 023–01, Rev. 1, associated implementing instructions, and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321–4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves a safety zone lasting no more than 11 days that will prohibit entry within 1000 yards of Sunset Point while vessels, equipment, and personnel are being used in the emergency response and removal of a sunken vessel. It is categorically excluded from further review under paragraph L60[c] of Appendix A, Table 1 of DHS Instruction Manual 023–01–001–01, Rev. 1.
The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to call or email the person listed in the
Harbors, Marine safety, Navigation (water), Reporting and recordkeeping requirements, Security measures, Waterways.
For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:
46 U.S.C. 70034, 70051; 33 CFR 1.05–1, 6.04–1, 6.04–6, and 160.5; Department of Homeland Security Delegation No. 00170.1, Revision No. 01.2.
(a)
(b)
(c)
(2) To seek permission to enter, contact the COTP or the COTP's representative by VHF Channel 16. Those in the safety zone must comply with all lawful orders or directions given to them by the COTP or the COTP's designated representative.
(d)
Coast Guard, DHS.
Notification of enforcement of regulation.
The Coast Guard will enforce the Delaware River, Philadelphia, PA; Safety Zone from 8:15 p.m. through 9 p.m. on September 3, 2022 to provide for the safety of life on navigable waterways during the Delaware River Waterfront Corporation fireworks display. Our regulation for fireworks displays in the Fifth Coast Guard District identifies the regulated area for this event in Philadelphia, PA. During the enforcement period, the operator of any vessel in the regulated area must comply with directions from the Patrol Commander or any Official Patrol displaying a Coast Guard ensign.
The regulation 33 CFR 165.506 will be enforced for the location identified in entry 10 of table 1 to paragraph (h)(1) from 8:15 p.m. through 9 p.m. on September 3, 2022.
If you have questions about this notification of enforcement, call or email Petty Officer Dylan Caikowski, U.S. Coast Guard, Sector Delaware Bay, Waterways Management Division, telephone: (215) 271–4814, Email:
The Coast Guard will enforce the safety zone in table 1 to paragraph (h)(1) to 33 CFR 165.506, entry 10 for the Delaware River Waterfront Corporation fireworks display from 8:15 p.m. through 9 p.m. on September 3, 2022. This action is necessary to ensure safety of life on the navigable waters of the United States immediately prior to, during, and immediately after the fireworks display. Our regulation for safety zones of fireworks displays in the Fifth Coast Guard District, table 1 to paragraph (h)(1) to 33 CFR 165.506, entry 10 specifies the location of the regulated area as all waters of Delaware River, adjacent to Penn's Landing, Philadelphia, PA, within a 500-yard radius of the fireworks barge position. The approximate position for the fireworks barge is latitude 39°56′52″ N, longitude 075°08′09″ W. During the enforcement period, as reflected in § 165.506(d), vessels may not enter, remain in, or transit through the safety zone unless authorized by the Captain of the Port or designated Coast Guard patrol personnel on-scene.
In addition to this notice of enforcement in the
Coast Guard, DHS.
Notification of enforcement of regulation.
The Coast Guard will enforce the Delaware River, Philadelphia, PA; Safety Zone from 8:45 p.m. through 9:45 p.m. on September 4, 2022 to provide for the safety of life on navigable waterways during the Rivers Casino Philadelphia fireworks display. Our regulation for fireworks displays in the Fifth Coast Guard District identifies the regulated area for this event in Philadelphia, PA. During the enforcement period, the operator of any vessel in the regulated area must comply with directions from the Patrol Commander or any Official Patrol displaying a Coast Guard ensign.
The regulation 33 CFR 165.506 will be enforced for the location identified in entry 10 of table 1 to paragraph (h)(1) from 8:45 p.m. through 9:45 p.m. on September 4, 2022.
If you have questions about this notification of enforcement, call or email Petty Officer Dylan Caikowski, U.S. Coast Guard, Sector Delaware Bay, Waterways Management Division, telephone: (215) 271–4814, Email:
The Coast Guard will enforce the safety zone in table 1 to paragraph (h)(1) to 33 CFR 165.506, entry 10 for the Rivers Casino Philadelphia fireworks display from 8:45 p.m. through 9:45 p.m. on September 4, 2022. This action is necessary to ensure safety of life on the navigable waters of the United States immediately prior to, during, and immediately after the fireworks display. Our regulation for safety zones of fireworks displays in the Fifth Coast Guard District, table 1 to paragraph (h)(1) to 33 CFR 165.506, entry 10 specifies the location of the regulated area as all waters of Delaware River, adjacent to Penn's Landing, Philadelphia, PA, within a 500-yard radius of the fireworks barge position. The approximate position for the fireworks barge is latitude 39°57′39″ N, longitude 075°07′45″ W. During the enforcement period, as reflected in § 165.506(d), vessels may not enter, remain in, or transit through the safety zone unless authorized by the Captain of the Port or designated Coast Guard patrol personnel on-scene.
In addition to this notice of enforcement in the
Environmental Protection Agency (EPA).
Final rule.
This regulation amends the existing exemption from the requirement of a tolerance for residues
This regulation is effective August 24, 2022. Objections and requests for hearings must be received on or before October 24, 2022 and must be filed in accordance with the instructions provided in 40 CFR part 178 (see also Unit I.C. of the
The docket for this action, identified by docket identification (ID) number EPA–HQ–OPP–2022–0273, is available at
Charles Smith, Biopesticides and Pollution Prevention Division (7511M), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460–0001; main telephone number: (202) 566–1400; email address:
You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include:
• Crop production (NAICS code 111).
• Animal production (NAICS code 112).
• Food manufacturing (NAICS code 311).
• Pesticide manufacturing (NAICS code 32532).
You may access a frequently updated electronic version of 40 CFR part 180 through the Office of the Federal Register's e-CFR site at
Under FFDCA section 408(g), 21 U.S.C. 346a(g), any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA–HQ–OPP–2022–0273 in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing and must be received by the Hearing Clerk on or before October 24, 2022. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b), although EPA strongly encourages those interested in submitting objections or a hearing request to submit objections and hearing requests electronically.
Although EPA's regulations require submission via U.S. Mail or hand delivery, EPA intends to treat submissions filed via electronic means as properly filed submissions during this time that the Agency continues to maximize telework due to the pandemic; therefore, EPA believes the preference for submission via electronic means will not be prejudicial. If it is impossible for a person to submit documents electronically or receive service electronically,
In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing (excluding any Confidential Business Information (CBI)) for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit the non-CBI copy of your objection or hearing request, identified by docket ID number EPA–HQ–OPP–2022–0273, by one of the following methods:
•
•
•
Additional instructions on commenting or visiting the docket, along with more information about dockets generally, is available at
In the
Section 408(c)(2)(A)(i) of FFDCA allows EPA to establish an exemption from the requirement of a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the exemption is “safe.” Section 408(c)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and in residential settings but does not include occupational exposure. Pursuant to FFDCA section 408(c)(2)(B), in establishing or maintaining in effect an exemption from the requirement of a tolerance, EPA must take into account the factors set forth in FFDCA section 408(b)(2)(C), which require EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance or tolerance exemption and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue. . . .” Additionally, FFDCA section 408(b)(2)(D) requires that EPA consider “available information concerning the cumulative effects of [a particular pesticide's] . . . residues and other substances that have a common mechanism of toxicity.”
EPA establishes exemptions from the requirement of a tolerance only in those cases where it can be clearly demonstrated that the risks from aggregate exposure to pesticide chemical residues under reasonably foreseeable circumstances will pose no harm to human health. If EPA is able to determine that a tolerance is not necessary to ensure that there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, an exemption from the requirement of a tolerance may be established. Consistent with FFDCA section 408(c)(2)(A), and the factors specified in FFDCA section 408(c)(2)(B), EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure for
1.
Exposure to
2.
3.
FFDCA Section 408(b)(2)(C) provides that EPA shall retain an additional tenfold (10X) margin of safety for infants and children in the case of threshold effects to account for prenatal and postnatal toxicity and the completeness of the database on toxicity and exposure unless EPA determines based on reliable data that a different margin of safety will be safe for infants and children. This additional margin of safety is commonly referred to as the FQPA safety factor (SF). In applying this provision, EPA either retains the default value of 10X, or uses a different additional safety factor when reliable data available to EPA support the choice of a different factor. Based on the low toxicity of
Based on the available data and information, the EPA has concluded that a qualitative aggregate risk assessment is appropriate to support the pesticidal use of
A full explanation of why the Agency is relying on prior 2011
Based on the Agency's assessment, EPA concludes that there is reasonable certainty that no harm will result to the U.S. population, including infants and children, from aggregate exposure to residues of
An analytical method is not required for
One comment was received in response to the notice of filing. The comment discusses potential risk to humans and nontarget organisms from the use of products containing this active ingredient. Consistent with FFDCA section 408(b)(2)(D), EPA reviews the available scientific data and other relevant information and considers their validity, completeness, and reliability, as well as the relationship of this information to human risk. EPA also considers available information concerning the variability of the sensitivities of major identifiable subgroups of consumers, including infants and children. EPA relied on a variety of data and information to conclude that there is a reasonable certainty that no harm will result to the U.S. population, including infants and children, from aggregate exposure to residues of
Therefore, the existing tolerance exemption for
This action establishes an exemption from the requirement of a tolerance under FFDCA section 408(d) in response to a petition submitted to EPA. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled “Regulatory Planning and Review” (58 FR 51735, October 4, 1993). Because this action has been exempted from review under Executive Order 12866, this action is not subject to Executive Order 13211, entitled “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001), or Executive Order 13045, entitled “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997). This action does not contain any information collections subject to OMB approval under the Paperwork Reduction Act, 44 U.S.C. 3501
Since tolerances and exemptions that are established on the basis of a petition under FFDCA section 408(d), such as the tolerance exemption in this action, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act (5 U.S.C. 601
This action directly regulates growers, food processors, food handlers, and food retailers, not States or Tribes. As a result, this action does not alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of FFDCA section 408(n)(4). As such, EPA has determined that this action will not have a substantial direct effect on States or Tribal Governments, on the relationship between the National Government and the States or Tribal Governments, or on the distribution of power and responsibilities among the various levels of government or between the Federal Government and Indian Tribes. Thus, EPA has determined that Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999), and Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000), do not apply to this action. In addition, this action does not impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act (2 U.S.C. 1501
This action does not involve any technical standards that would require EPA's consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act (15 U.S.C. 272 note).
Pursuant to the Congressional Review Act (5 U.S.C. 801
Environmental protection, Administrative practice and procedure, Agricultural commodities, Pesticides and pests, Reporting and recordkeeping requirements.
Therefore, for the reasons stated in the preamble, EPA is amending 40 CFR chapter I as follows:
21 U.S.C. 321(q), 346a and 371.
An exemption from the requirement of a tolerance is established for residues of
Office of Government-wide Policy (OGP), General Services Administration (GSA).
Final rule.
GSA is issuing a final rule amending the Federal Management Regulation (FMR) to clarify the responsibilities of agencies for maintaining physical security standards in and at federally owned and leased facilities and grounds under the jurisdiction, custody, or control of GSA, including those facilities and grounds that have been delegated by the Administrator of General Services, in light of current law, Executive orders, and facility security standards. The revision will also update nomenclature and reorganize the subparts for better readability and clarity.
For clarification of content, contact Mr. Chris Coneeney, Director, Real Property Policy Division, Office of Government-wide Policy, at 202–501–2956 or
The provisions in 6 U.S.C. 232 reaffirm that, except for the law enforcement and related security functions that were transferred to the U.S. Department of Homeland Security (DHS) under the Homeland Security Act of 2002 (available at
Six months after the bombing of the Alfred P. Murrah Federal Building, President William Clinton issued Executive Order (E.O.) 12977: Interagency Security Committee, creating the Interagency Security Committee (ISC) within the Executive Branch (60 FR 54411, Oct. 19, 1995). The ISC, which consists of 66 Federal departments and agencies, has a mandate to enhance the quality and effectiveness of physical security in, and the protection of, nonmilitary Federal facilities, and to provide a permanent body to address continuing governmentwide security issues for these facilities. Pursuant to E.O. 12977, the ISC prepares guidance for the Facility Security Committees (FSC), which are responsible for addressing and implementing facility-specific security issues at each multi-occupant nonmilitary Federal facility.
In response to the terrorist attacks on September 11, 2001, Congress enacted the Act to enhance the protection of the assets and critical infrastructure of the United States. The Act established DHS and transferred the Federal Protective Service (FPS) from GSA to DHS. FPS was established as a component of GSA in January 1971. Historically, FPS serves as the security organization responsible for conducting investigations to protect GSA-controlled facilities, enforce Federal laws to protect persons and property, and make arrests without a warrant for any offense committed on Federal property in the presence of the arresting officer or for any felony that the arresting officer has reasonable grounds to believe the person to be arrested has committed or is committing. Section 1706 of the Act, codified at 40 U.S.C. 1315, transferred FPS's specific security and law enforcement functions and authorities to the Secretary of Homeland Security.
Section 422 of the Act references 6 U.S.C. 232, which reaffirms the authority of the Administrator of General Services to operate, maintain, and protect GSA-controlled facilities.
Following enactment of the Act, President George Bush issued E.O. 13286: Amendment of Executive Orders, and Other Actions, in Connection With the Transfer of Certain Functions to the Secretary of Homeland Security, which, among other things, transferred responsibility for chairing the ISC from the Administrator of General Services to the Secretary of Homeland Security (68 FR 10619, March 5, 2003).
In August 2004, President George Bush issued Homeland Security Presidential Directive 12 (HSPD–12) (available at
On December 15, 2020, the Office of Personnel Management issued the memorandum, “Credentialing Standards Procedures for Issuing Personal Identity Verification Cards under HSPD–12 and New Requirement for Suspension or Revocation of Eligibility for Personal Identity Verification Credentials” (available at
HSPD–12 was followed by the REAL ID Act of 2005, Public Law 109–13, 119 Stat. 302 (the REAL ID Act), which establishes minimum security standards for license issuance and production and prohibits Federal agencies from accepting for certain purposes driver's licenses and identification cards from States not meeting the REAL ID Act's minimum standards. Accessing Federal facilities, entering nuclear power plants and boarding federally regulated commercial aircraft are within the purview of the Real ID Act.
In June 2006, GSA and DHS signed a Memorandum of Agreement (MOA) outlining the responsibilities of each agency with regard to facility security. According to the MOA, FPS is required to conduct facility security assessments
In February 2013, Presidential Policy Directive 21: Critical Infrastructure Security and Resilience (available at
In August 2013, the ISC issued the initial The Risk Management Process for Federal Facilities (the RMP Standard), a standard to define the criteria and processes to determine the facility security level (FSL) and provide a single source of physical security countermeasures for nonmilitary Federal facilities. The ISC updated the standard in November 2016 and again in March 2021. See, The Risk Management Process for Federal Facilities: An Interagency Security Committee Standard (2021 Edition)
The following terms used in this final rule have the same definition as ascribed to them in the RMP Standard:
• Baseline Level of Protection,
• Facility Security Assessment,
• Facility Security Committee,
• Facility Security Level,
• Risk,
• Risk Mitigation,
• Level of Protection,
• Level of Risk, and
• Vulnerability.
Some notable provisions of the RMP Standard are described below:
(a) According to the RMP Standard, buildings with two or more Federal tenants with funding authority will have an FSC. FSCs are responsible for addressing building-specific security issues and approving the implementation of recommended countermeasures and practices. FSCs include representatives of all Federal occupant agencies in the building, as well as FPS and GSA. However, FPS and GSA do not have voting rights unless they are occupants in the building. If the FSC approves a countermeasure, each Federal occupant agency in the building is responsible for funding its
(b) The RMP Standard requires FPS to conduct facility security assessments to identify vulnerabilities and recommend countermeasures. FSCs use a building's facility security assessment report to—
1. Evaluate security risk;
2. Implement countermeasures to mitigate risk; and
3. Allocate security resources effectively.
For example, a facility security assessment report might include a recommendation to install cameras and relocate a loading dock. Upon deliberation, the FSC might decide only to install the cameras. FPS, in consultation with the FSC, helps determine a facility's security level, which determines the baseline level of protection. FSLs range from Level 1 (lowest risk) to Level 5 (highest risk), and dictate the frequency of the facility security assessments for that building. The FSL is based on five factors: mission criticality, symbolism, facility population, facility size, and threat to occupant agencies. In addition, intangibles (such as short duration occupancy) can be used to adjust the security level.
Occupant agencies or FSCs use the facility security assessment reports prepared by FPS to inform their deliberations regarding recommended risk mitigation countermeasures and other security-related actions. GSA will facilitate the implementation of the countermeasures or other actions after occupant agency or FSC approval and commitment of each occupant agency to pay its
GSA is changing this section to describe more accurately the scope and coverage of the regulation. The regulation uses the phrase “under the jurisdiction, custody, or control of GSA,” which is consistent with the terminology that appears in 6 U.S.C. 232, to describe the buildings and grounds owned or occupied by the Federal Government that are covered by this part. This phrase replaces and clarifies the phrase “operating under, or subject to, the authorities of the Administrator of General Services,” which was used in the previous version. The definitions of “Federal facility” and “Federal grounds” are included to clarify any confusion in the scope.
GSA is changing this section to clarify that, under E.O. 12977, the ISC is responsible for setting policies and recommendations that govern physical security at nonmilitary Federal facilities and buildings. The ISC issues standards, such as the ISC Risk Management Process Standard (2021 Edition), which is the current RMP Standard. ISC policies do not supersede other laws, regulations, and Executive orders that are intended to protect unique assets.
GSA is adding this section to clarify the governing authorities that pertain to this regulation.
GSA is eliminating in its entirety the previous § 102–81.20 because the RMP Standard supersedes all previous guidance contained in the Department of Justice's report entitled “Vulnerability Assessment of Federal Facilities” (June 28, 1995). GSA is adding the replacement provision to clarify that Federal agencies are required to follow this regulation in nonmilitary Federal facilities and grounds under the jurisdiction, custody, or control of GSA, including those facilities and grounds that have been delegated by the Administrator of General Services. Federal agencies must cooperate and comply with ISC policies and recommendations for nonmilitary facilities, except where the Director of National Intelligence determines that compliance would jeopardize intelligence sources and methods or the Secretary of Energy determines that compliance would conflict with the authorities of the Secretary of Energy over Restricted Data and Special Nuclear Material under, among others, sections 141, 145, 146, 147, and 161 of the Atomic Energy Act of 1954, as amended, the Department of Energy Organization Act, or any other statute.
GSA is eliminating in its entirety the previous § 102–81.25 because the RMP Standard supersedes all previous guidance contained in the Department of Justice's report entitled “Vulnerability Assessment of Federal Facilities” (June 28, 1995). GSA is adding the replacement provision to clarify that Federal agencies are responsible for meeting physical security standards at nonmilitary facilities in accordance with ISC standards, policies, and recommendations. An occupant agency, if it is the only Federal occupant agency in the building, or the FSC, as applicable, uses the facility security assessment reports they receive from FPS to inform deliberations regarding recommended countermeasures and other security-related actions, such as the documentation of risk acceptance. GSA will facilitate the implementation of the countermeasures or other actions after occupant agency or FSC approval, as applicable, and commitment of each occupant agency to pay its
GSA is eliminating in its entirety the previous § 102–81.30 because the requirements are addressed in section 231 of Public Law 101–647, now codified at 34 U.S.C. 20351. GSA is adding the replacement provision to be consistent with the RMP Standard. This section now describes physical security considerations associated with existing nonmilitary facilities.
GSA is adding this section to be consistent with the RMP Standard. This section describes physical security considerations associated with nonmilitary leased facilities and new construction.
In the proposed rule published in the
E.O.s 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is a significant regulatory action and, therefore, was subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993.
This rule is not a major rule under 5 U.S.C. 804(2). Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (codified at 5 U.S.C. 801–808), also known as the Congressional Review Act or CRA, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States. GSA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States. A major rule under the CRA cannot take effect until 60 days after it is published in the
This final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601
Therefore, an Initial Regulatory Flexibility Analysis has not been performed. GSA invites comments from small business concerns and other interested parties on the expected impact of this rule on small entities.
GSA will also consider comments from small entities concerning the existing regulations in subparts affected by the rule in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C. 610 (FMR Case 2018–102–2) in correspondence.
The Paperwork Reduction Act does not apply because the changes to the FMR do not impose recordkeeping or information collection requirements, or the collection of information from offerors, contractors or members of the public, that require the approval of the Office of Management and Budget under 44 U.S.C. 3501
GSA determined there is no impact or cost associated with this final rule for either large or small businesses.
GSA determined a series of compliance activities for the establishment, training, and operations of future FSCs; initial determination of future FSLs; and future facility risk assessments.
Prior to determining the FSL of a facility, all prospective members of the facility's FSC must successfully complete a series of mandatory training outlined within the ISC's RMP Standard.
GSA identified five training courses required to be completed by FSC members prior to joining the committee. ISC staff estimated it will take an FSC member no more than two hours to complete and review each training. The trainings are the following:
• IS–1170: Introduction to the Interagency Security Committee and Risk Management Process Training
• IS–1171: Introduction to Interagency Security Committee Publications Training
• IS–1172: Interagency Security Committee Risk Management Process: Facility Security Level Determination Training
• IS–1173: Interagency Security Committee Risk Management Process: Levels of Protection and Application of the Design Basis Threat Report
• IS–1174: Interagency Security Committee Risk Management Process: Facility Security Committees.
GSA, in consultation with PBS SMEs, determined 263
GSA, in consultation with PBS and ISC SMEs, determined the average FSC is composed of four members. For the analysis, GSA assumed an average of two agencies per facility.
Based on the analysis resulting from GSA's consultations, GSA estimated the cost to the Government for the training of each FSC member per course on a yearly basis to be $1,993,750 (2 hours × 1,052 FSC members × $94.76 [GS–15 rate]).
GSA determined 130 FSL 1
GSA estimated the cost to the Government for the operations of an FSC chairperson for an FSL 1 facility on a yearly basis to be $49,275 (4 hours × 130 facilities × $94.76 [GS–15 rate]).
GSA estimated the cost to the Government for the operations of an FSC chairperson for an FSL 2 facility on a yearly basis to be $43,590 (4 hours × 115 facilities × $94.76 [GS–15 rate]).
GSA estimated the cost to the Government for the operations of an FSC chairperson for an FSL 3 facility on a yearly basis to be $5,307 (4 hours × 14 facilities × $94.76 [GS–15 rate]).
GSA estimated the cost to the Government for the operations of an FSC chairperson for an FSL 4 facility on a yearly basis to be $1,137 (4 hours × 3 facilities × $94.76 [GS–15 rate]).
GSA estimated the cost to the Government for the operations of an FSC chairperson for an FSL 5 facility on a yearly basis to be $379 (4 hours × 1 facilities × $94.76 [GS–15 rate]).
GSA estimated the cost to the Government for the operations of an FSC voting member for an FSL 1 facility on a yearly basis to be $49,275 (4 hours × 130 facilities × $94.76 [GS–15 rate]).
GSA estimated the cost to the Government for the operations of an FSC voting member for an FSL 2 facility on a yearly basis to be $43,590 (4 hours × 115 facilities × $94.76 [GS–15 rate]).
GSA estimated the cost to the Government for the operations of an FSC voting member for an FSL 3 facility on a yearly basis to be $5,307 (4 hours × 14 facilities × $94.76 [GS–15 rate]).
GSA estimated the cost to the Government for the operations of an FSC voting member for an FSL 4 facility on a yearly basis to be $1,137 (4 hours × 3 facilities × $94.76 [GS–15 rate]).
GSA estimated the cost to the Government for the operations of an FSC voting member for an FSL 5 facility on a yearly basis to be $379 (4 hours × 1 facility × $94.76 [GS–15 rate]).
GSA estimated the cost to the Government for the operations of the two FSC non-voting members
GSA estimated the cost to the Government for the operations of an FSC non-voting member for an FSL 2 facility on a yearly basis to be $87,179 (4 hours × 230 non-voting members × $94.76 [GS–15 rate]).
GSA estimated the cost to the Government for the operations of an FSC non-voting member for an FSL 3 facility on a yearly basis to be $10,163 (4 hours × 28 non-voting members × $94.76 [GS–15 rate]).
GSA estimated the cost to the Government for the operations of an FSC non-voting member for an FSL 4 facility on a yearly basis to be $2,274 (4 hours × 6 non-voting members × $94.76 [GS–15 rate]).
GSA estimated the cost to the Government for the operations of an FSC non-voting member for an FSL 5 facility on a yearly basis to be $758 (4 hours × 2 non-voting members × $94.76 [GS–15 rate]).
GSA consulted ISC staff to determine the duration per year for single tenant facilities to operate their facility and determined the duration to be
GSA estimated the cost to the Government for the operation of single tenant facilities on a yearly basis to be $34,114 (1 hour × 360 facilities × $94.76 [GS–15 rate]).
GSA consulted with ISC staff to determine the duration of an FSL determination based on the FSL of a facility and the average rate of the individuals performing the assessment.
GSA estimated the cost to the Government for the FSL determination for new FSL 1 facilities on a yearly basis to be $149,058 (20 hours × 130 facilities × $57.33 [GS–12 rate]).
GSA estimated the cost to the Government for the FSL determination for new FSL 2 facilities on a yearly basis to be $263,718 (40 hours × 115 facilities × $57.33 [GS–12 rate]).
GSA estimated the cost to the Government for the FSL determination for new FSL 3 facilities on a yearly basis to be $48,157 (60 hours × 14 facilities × $57.33 [GS–12 rate]).
GSA estimated the cost to the Government for the FSL determination for new FSL 4 facilities on a yearly basis to be $13,759 (80 hours × 3 facilities × $57.33 [GS–12 rate]).
GSA estimated the cost to the Government for the FSL determination for new FSL 5 facilities on a yearly basis to be $5,733 (100 hours × 1 facility × $57.33 [GS–12 rate]).
GSA consulted with ISC staff to determine the duration of an FSL determination based on the FSL of a single agency facility and the average grade of the individuals performing the assessment.
GSA estimated the cost to the Government for the FSL determination for new single agency FSL 1 facilities on a yearly basis to be $16,052 (5 hours × 56 facilities × $57.33 [GS–12 rate]).
GSA estimated the cost to the Government for the FSL determination for new single agency FSL 2 facilities on a yearly basis to be $151,925 (10 hours × 265 facilities × $57.33 [GS–12 rate]).
GSA estimated the cost to the Government for the FSL determination for new single agency FSL 3 facilities on a yearly basis to be $27,518 (15 hours × 32 facilities × $57.33 [GS–12 rate]).
GSA estimated the cost to the Government for the FSL determination for new single agency FSL 4 facilities on a yearly basis to be $8,026 (20 hours × 7 facilities × $57.33 [GS–12 rate]).
GSA estimated the cost to the Government for the FSL determination for new single agency FSL 5 facilities on a yearly basis to be $1,433 (25 hours × 1 facility × $57.33 [GS–12 rate]).
GSA consulted with ISC staff to determine the duration of a risk assessment based on the FSL of a facility and the average grade of the individuals performing the assessment.
GSA estimated the cost to the Government for the risk assessment of new FSL 1 facilities on a yearly basis to be $298,116 (40 hours × 130 facilities × $57.33 [GS–12 rate]).
GSA estimated the cost to the Government for the risk assessment of new FSL 2 facilities on a yearly basis to be $527,436 (80 hours × 115 facilities × $57.33 [GS–12 rate]).
GSA estimated the cost to the Government for the risk assessment of new FSL 3 facilities on a yearly basis to be $96,314 (120 hours × 14 facilities × $57.33 [GS–12 rate]).
GSA estimated the cost to the Government for the risk assessment of new FSL 4 facilities on a yearly basis to be $27,518 (160 hours × 3 facilities × $57.33 [GS–12 rate]).
GSA estimated the cost to the Government for the risk assessment of new FSL 5 facilities on a yearly basis to be $11,466 (200 hours × 1 facility × $57.33 [GS–12 rate]).
GSA consulted with ISC staff to determine the duration of a risk assessment based on the FSL of a new single agency facility and the average grade of the individuals performing the assessment.
GSA estimated the cost to the Government for the risk assessment of new single agency FSL 1 facilities on a yearly basis to be $32,105 (10 hours × 56 facilities × $57.33 [GS–12 rate]).
GSA estimated the cost to the Government for the risk assessment of new single agency FSL 2 facilities on a yearly basis to be $303,849 (20 hours × 265 facilities × $57.33 [GS–12 rate]).
GSA estimated the cost to the Government for the risk assessment of new single agency FSL 3 facilities on a yearly basis to be $55,037 (30 hours × 32 facilities × [$57.33 GS–12 rate]).
GSA estimated the cost to the Government for the risk assessment of new single agency FSL 4 facilities on a yearly basis to be $16,052 (40 hours × 7 facilities × $57.33 [GS–12 rate]).
GSA estimated the cost to the Government for the risk assessment of new single agency FSL 5 facilities on a yearly basis to be $2,867 (50 hours × 1 facility × $57.33 [GS–12 rate]).
The overall total additional undiscounted cost of this final rule is estimated to be $46,703,404 over a 10-year period. GSA did not identify any cost savings based on the impact of the rule.
The preferred alternative is the process laid out in the analysis above. However, GSA has analyzed an alternative to the preferred process below.
Federal buildings and facilities, Government property management and physical security measures.
40 U.S.C. 121(c) and 581; 6 U.S.C. 232; Pub. L. 109–13, 119 Stat. 302; and Homeland Security Presidential Directive 12.
This part covers physical security in and at nonmilitary federally owned and leased facilities and grounds under the jurisdiction, custody, or control of the U.S. General Services Administration (GSA), including those facilities and grounds that have been delegated by the
The Interagency Security Committee (ISC) is responsible for developing and evaluating physical security standards for nonmilitary Federal facilities. In accordance with E.O. 12977, the ISC sets policies and recommendations that govern physical security at Federal facilities and on Federal grounds occupied by Federal employees for nonmilitary activities. This includes the ISC Risk Management Process Standard (the RMP Standard) that Federal agencies use in the protection of the real property they occupy, including the protection of persons on the property. The goal of the RMP Standard is a level of protection commensurate with the level of risk. ISC policies do not supersede other laws, regulations, and Executive orders that are intended to protect unique assets.
The governing authorities are as follows:
(a) 40 U.S.C. 121(c) and 581.
(b) E.O. 12977.
(c) E.O. 13286, sec. 23.
(d) 6 U.S.C. 232.
(e) Homeland Security Presidential Directive 12.
(f) REAL ID Act of 2005 (Pub. L. 109–13).
Each agency occupying a Federal facility or Federal grounds under the jurisdiction, custody, or control of GSA, including those facilities and grounds that have been delegated by the Administrator of General Services, for nonmilitary activities must comply with this part, except where the Director of National Intelligence determines that compliance would jeopardize intelligence sources and methods or the Secretary of Energy determines that compliance would conflict with the authorities of the Secretary of Energy over Restricted Data and Special Nuclear Material under, among others, sections 141, 145, 146, 147, and 161 of the Atomic Energy Act of 1954, as amended, the Department of Energy Organization Act, or any other statute. In situations where a Federal facility is occupied by multiple Federal agencies for both military and nonmilitary activities, and each such occupancy is substantial, those occupants will coordinate on the physical security of the facility.
Each agency occupying a Federal facility or Federal grounds under the jurisdiction, custody, or control of GSA, including those facilities and grounds that have been delegated by the Administrator of General Services, for nonmilitary activities is responsible for implementing, maintaining, and upgrading the physical security standards, except where the Director of National Intelligence determines that compliance would jeopardize intelligence sources and methods or the Secretary of Energy determines that compliance would conflict with the authorities of the Secretary of Energy over Restricted Data and Special Nuclear Material under, among others, sections 141, 145, 146, 147, and 161 of the Atomic Energy Act of 1954, as amended, the Department of Energy Organization Act, or any other statute. An occupant agency, if it is the only Federal occupant agency in the building, or the Facility Security Committee (FSC), as applicable, uses the facility security assessment reports they receive from the U.S. Department of Homeland Security—Federal Protective Service to inform deliberations regarding recommended countermeasures and other security-related actions. GSA will facilitate the implementation of the countermeasures or other actions after occupant agency or FSC approval, as applicable, and commitment of each occupant agency to pay its
No, the RMP Standard applies to existing nonmilitary Federal facilities as part of the periodic risk assessment process. The security organization responsible for the Federal facility or Federal grounds will conduct a periodic risk assessment and recommend countermeasures and design features to be implemented at the Federal facility or on the Federal grounds. The FSC will determine whether the recommended countermeasures will be implemented or if risk will be accepted. The design and implementation of approved countermeasures at existing facilities must comply with applicable laws, regulations, and Executive orders. For approved countermeasures that cannot be implemented immediately, a plan to phase in countermeasures and achieve compliance must be instituted and documented in accordance with the RMP Standard. In some cases, the implementation of countermeasures must be delayed until renovations or modernization programs occur.
Yes. GSA will coordinate with the occupant agency and the security organization responsible for the Federal facility or Federal grounds when determining the applicable physical security clauses to use in the procurement package.
Federal Communications Commission.
Final rule and announcement of compliance date.
In this document, the Federal Communications Commission (Commission or FCC) announces that the Office of Management and Budget (OMB) has approved the public information collection associated with a rule that requires all voice service providers respond to traceback “fully and in a timely manner” and gateway providers must respond within 24 hours adopted in the
This rule is effective September 23, 2022. Compliance with 47 CFR 64.1200(n)(1), published at 87 FR 42916, July 18, 2022, is required on September 23, 2022.
Jerusha Burnett, Consumer Policy Division, Consumer and Governmental Affairs Bureau, at (202) 418–0526, or email:
This document announces that OMB approved the information collection requirement in 47 CFR 64.1200(n)(1) on July 20, 2022. The rule was modified in the
To request materials in accessible formats for people with disabilities (Braille, large print, electronic files, audio format), send an email to
This document also modifies § 64.1200(p) of the Commission's rules, which advised that compliance was not required until OMB approval was obtained.
As required by the Paperwork Reduction Act of 1995 (44 U.S.C. 3507), the FCC is notifying the public that it received final OMB approval on July 20, 2022, for the information collection requirement contained in the modification to 47 CFR 64.1200(n)(1).
Under 5 CFR part 1320.5(b), an agency may not conduct or sponsor a collection of information unless it displays a current, valid OMB Control Number.
No person shall be subject to any penalty for failing to comply with a collection of information subject to the Paperwork Reduction Act that does not display a current, valid OMB Control Number. The OMB Control Number for the information collection requirement in 47 CFR 64.1200(n)(1) is 3060–1303.
The foregoing notice is required by the Paperwork Reduction Act of 1995, Public Law 104–13, October 1, 1995, and 44 U.S.C. 3507.
The total annual reporting burdens and costs for the respondents are as follows:
This document also modifies § 64.1200(p) of the Commission's rules, which advised that compliance was not required until OMB approval was obtained.
Carrier equipment, Communications common carriers. Reporting and recordkeeping requirements, Telecommunications, Telephone.
The Federal Communications Commission amends 47 CFR part 64 as follows:
47 U.S.C. 151, 152, 154, 201, 202, 217, 218, 220, 222, 225, 226, 227, 227b, 228, 251(a), 251(e), 254(k), 255, 262, 276, 403(b)(2)(B), (c), 616, 620, 716, 1401–1473, unless otherwise noted; Pub. L. 115–141, Div. P, sec. 503, 132 Stat. 348, 1091.
(p) Paragraph (o) of this section may contain an information collection and/or recordkeeping requirement. Compliance with paragraph (o) will not be required until this paragraph (p) is removed or contains a compliance date, which will not occur until after the Office of Management and Budget completes review of such requirements pursuant to the Paperwork Reduction Act or until after the Consumer and Governmental Affairs Bureau determines that such review is not required. The Commission directs the Consumer and Governmental Affairs Bureau to announce a compliance date for paragraph (o) by subsequent Public Notice and notification in the
Surface Transportation Board.
Final rule.
The Board updates for 2022 the fees that the public must pay to file certain cases and pleadings with the Board. Pursuant to this update, 84 of the Board's 135 fees will increase and 51 fees will remain at their current levels.
This final rule is effective September 23, 2022.
Laura Mizner, (202) 245–0318, or Andrea Pope-Matheson, (202) 245–0363. Assistance for the hearing impaired is available through the Federal Relay Service at (800) 877–8339.
The Board's regulations at 49 CFR 1002.3(a) provide for an annual update of the Board's entire user-fee schedule. Fees are generally revised based on the cost study formula set forth at 49 CFR 1002.3(d), which looks to changes in salary costs, publication costs, and Board overhead cost factors. Applying that formula, 84 of the Board's 135 fees will increase and 51 fees will remain at their current levels.
Additional information is contained in the Board's decision. To obtain a free copy of the full decision, visit the Board's website at
Administrative practice and procedure, Common carriers, Freedom of information.
By the Board, Board Members Fuchs, Hedlund, Oberman, Primus, and Schultz.
For the reasons set forth in the preamble, title 49, chapter X, part 1002, of the Code of Federal Regulations is amended as follows:
5 U.S.C. 552(a)(4)(A), (a)(6)(B), and 553; 31 U.S.C. 9701; and 49 U.S.C. 1321. Section 1002.1(f)(11) is also issued under 5 U.S.C. 5514 and 31 U.S.C. 3717.
(a) Certificate of the Records Officer, $21.00.
(b) Services involved in examination of tariffs or schedules for preparation of certified copies of tariffs or schedules or extracts therefrom at the rate of $49.00 per hour.
(c) Services involved in checking records to be certified to determine authenticity, including clerical work, etc. incidental thereto, at a rate of $34.00 per hour.
(f)
Fish and Wildlife Service, Interior.
Final rule.
We, the U.S. Fish and Wildlife Service (Service), are removing the Braken Bat Cave meshweaver (
This rule is effective September 23, 2022.
The proposed rule and this final rule are available on the internet at
Catherine Yeargan, Acting Field Supervisor, U.S. Fish and Wildlife Service, 10711 Burnet Road, Suite 200, Austin, TX 78758; by telephone at 512–490–0057. Individuals in the United States who are deaf, deafblind, hard of hearing, or have a speech disability may dial 711 (TTY, TDD, or TeleBraille) to access telecommunications relay services. Individuals outside the United States should use the relay services offered within their country to make international calls to the point-of-contact in the United States.
On September 30, 2021, we published a proposed rule (86 FR 54145) to remove Braken Bat Cave meshweaver from the Federal List of Endangered and Threatened Wildlife (
In accordance with our policy, “Notice of Interagency Cooperative Policy for Peer Review in Endangered Species Act Activities,” which was published on July 1, 1994 (59 FR 34270) and our August 22, 2016, Director's Memorandum “Peer Review Process,” we sought the expert review of our September 30, 2021, proposed rule to delist the Braken Bat Cave meshweaver (86 FR 54145). We sent the proposed rule to three independent peer reviewers and received two responses. We also sent the rule to one partner reviewer and received a response. The purpose of such review is to ensure that our decisions are based on scientifically sound data, assumptions, and analysis.
In preparing this final rule, we reviewed and fully considered comments on our September 30, 2021, proposed rule (86 FR 54145). We did not receive substantial additional information during the comment period, and therefore we did not make any changes from the proposed rule in this final rule.
Section 4 of the Act (16 U.S.C. 1533) and its implementing regulations (50 CFR part 424) set forth the procedures for determining whether a species is an endangered species or a threatened species. On July 5, 2022, the U.S. District Court for the Northern District of California vacated regulations that the Service (jointly with the National Marine Fisheries Service) had promulgated in 2019 (
The Braken Bat Cave meshweaver is a small, troglobitic (cave-dwelling) spider that inhabits caves and mesocaverns (humanly impassable voids in karst limestone) in Bexar County, Texas. Because the Braken Bat Cave meshweaver is restricted to the subterranean environment, individuals exhibit morphological adaptations to that environment, such as elongated appendages and loss or reduction of eyes and pigment (Service 2011b, p. 2).
Habitat for the Braken Bat Cave meshweaver includes karst-forming rock containing subterranean spaces (caves and connected mesocaverns) with stable temperatures, high humidities (near saturation), and suitable substrates (for example, spaces between and underneath rocks for foraging and sheltering) that are free of contaminants (Service 2011b, p. 2). Although the Braken Bat Cave meshweaver spends its entire life underground, its ecosystem is dependent on the overlying surface habitat (Service 2011b, p. 2). Examples of nutrient sources include leaf litter that has fallen or washed in, animal droppings, and animal carcasses. Individuals require surface and subsurface sources (such as plants and their roots, fruits, and leaves, and animal (
The Braken Bat Cave meshweaver is known from only two caves in the Culebra Anticline karst fauna region. One is located on private property, and the other occurs on a highway right-of-way. The species was first collected in 1980 and 1983 in Braken Bat Cave, but the cave itself was not initially described until 1988 (Reddell 1993, p. 38). The cave entrance was filled during construction of a home in 1990. Without excavation, it is difficult to determine what effect this incident had on the Braken Bat Cave meshweaver; however, there may still be some nutrient input, from a reported small side passage. The remaining location was discovered in 2012, during construction of State Highway 151 in San Antonio, Texas. Originally a void with no entrance, that feature was capped with concrete and the soil and vegetation above it was restored to the extent possible.
Threats to the Braken Bat Cave meshweaver and its habitat include destruction and/or deterioration of habitat by construction; filling of caves and karst features; increase of impermeable cover; contamination from septic effluent, sewer leaks, run-off, pesticides, and other sources; predation by and competition with nonnative fire ants; and vandalism (65 FR 81419; December 26, 2000).
Spider taxonomy generally relies largely on genitalic differences in adult specimens to delimit species (Paquin and Hedin 2004, p. 3240; Paquin
The Braken Bat Cave meshweaver and Madla Cave meshweaver were originally described in 1992, from single female specimens found in Braken Bat Cave and Madla's Cave, respectively (Gertsch 1992, pp. 109, 111). These species were two of only four cave-dwelling spiders of the genus
Various genetic data were combined to address species delimitation questions in troglobitic
Therefore, based on similarity of morphologic characteristics and mitochondrial and nuclear DNA results, Braken Bat Cave meshweaver was synonomized under Madla Cave meshweaver (Hedin
In the September 30, 2021, proposed rule (86 FR 54145), we requested that all interested parties submit written comments on or before November 29, 2021. We also contacted appropriate State agencies and scientific experts and invited them to comment on the
In accordance with our peer review policy published on July 1, 1994 (59 FR 34270), and our August 22, 2016, memorandum updating and clarifying the role of peer review actions under the Act, we sought the expert opinions of three specialists with expertise in the biology, habitat, and threats to the Braken Bat Cave meshweaver. We received responses from two experts. Both peer reviewers agreed that the Braken Bat Cave meshweaver should be delisted because it is no longer a taxonomically valid species and should be synonymized with the Madla Cave meshweaver. They did not provide any additional substantial information that would result in a change from the proposed rule.
We received one comment from Texas Parks and Wildlife Department that supported our determination to delist the Braken Bat Cave meshweaver. The agency did not provide any further substantive information.
We received four public comments during the comment period in response to the proposed rule. We reviewed all comments we received during the public comment period for substantive issues and new information regarding the proposed rule. None of the comments we received included new information concerning the proposed delisting of the Braken Bat Cave meshweaver. Two commenters supported our proposal to delist the Braken Bat Cave meshweaver, and the other two comments did not address or provide any information concerning the Braken Bat Cave meshweaver's delisting. We did not receive any comments opposing the proposed rule. Because all of the public comments we received did not provide any new or substantial information or pose questions to be addressed, they do not warrant an explicit response in this rule.
Section 4 of the Act (16 U.S.C. 1533) and its implementing regulations (50 CFR part 424) set forth the procedures for listing species on, reclassifying species on, or removing species from the Federal Lists of Endangered and Threatened Wildlife and Plants. The Act defines “species” as including any species or subspecies of fish or wildlife or plants, and any distinct population segment of vertebrate fish or wildlife that interbreeds when mature (16 U.S.C. 1532(16)). Our regulations at 50 CFR 424.11 identify three reasons why we might determine that a listed species is neither an endangered species nor a threatened species: (1) The species is extinct; (2) the species has recovered; or (3) the original data or interpretations of the data used at the time the species was classified were in error. Here, we have determined that the Braken Bat Cave meshweaver was listed based on data or interpretations of data that were in error; therefore, we are delisting it. Consideration of the Recovery Criteria for the Braken Bat Cave meshweaver is not appropriate because it was delisted based on a previous taxonomic classification error. Both the Braken Bat Cave meshweaver and the Madla Cave meshweaver are covered under the Bexar County Karst Invertebrates Recovery Plan (Service 2011, entire); the Braken Bat Cave meshweaver will now be addressed under that recovery plan as the Madla Cave meshweaver (16 U.S.C. 1533(g)(1)).
This final rule revises 50 CFR 17.11(h) by removing the Braken Bat Cave meshweaver from the Federal List of Endangered and Threatened Wildlife. However, because the Braken Bat Cave meshweaver has been synonymized under the Madla Cave meshweaver, its status, and thus its protections under the Act, remain the same because the Madla Cave meshweaver is listed as endangered, wherever it is found, under the Act. The additional Braken Bat Cave meshweaver localities were included in the Madla Cave meshweaver 5-year review and did not change the endangered status of the Madla Cave meshweaver species (Service 2019, p. 17).
Unit 15, the area surrounding Braken Bat Cave, was designated as critical habitat for Braken Bat Cave meshweaver in 2012 (77 FR 8450; February 14, 2012). Because Braken Bat Cave meshweaver has designated critical habitat, this rule also amends 50 CFR 17.95(g) to remove the Braken Bat Cave meshweaver's designated critical habitat. This area has not yet been evaluated to determine if it is essential to the conservation of the Madla Cave meshweaver. Should we evaluate it in the future and determine that it is essential for the conservation of the Madla Cave meshweaver, proposing this unit as critical habitat for Madla Cave meshweaver would be completed in a subsequent rulemaking. Unit 15, however, is also critical habitat for an endangered beetle with no common name,
We have determined that environmental assessments and environmental impact statements, as defined under the authority of the National Environmental Policy Act (NEPA; 42 U.S.C. 4321
In accordance with the President's memorandum of April 29, 1994 (Government-to-Government Relations with Native American Tribal Governments; 59 FR 22951), Executive Order 13175 (Consultation and Coordination with Indian Tribal Governments), and the Department of the Interior's manual at 512 DM 2, we readily acknowledge our responsibility to communicate meaningfully with recognized Federal Tribes on a government-to-government basis. In accordance with Secretarial Order 3206 of June 5, 1997 (American Indian Tribal Rights, Federal-Tribal Trust Responsibilities, and the Endangered Species Act), we readily acknowledge our responsibilities to work directly with Tribes in developing programs for healthy ecosystems, to acknowledge that Tribal lands are not subject to the same controls as Federal public lands, to remain sensitive to Indian culture, and to make information available to Tribes. We do not expect any Tribes to be affected by this delisting because there are no Tribal lands in or near the range of the Braken Bat Cave meshweaver. Additionally, we did not receive any comments from any Tribes or Tribal members on the proposed rule (86 FR 54145; September 30, 2021).
A complete list of references cited in this rulemaking is available on the internet at
The primary authors of this rule are the staff members of the Fish and Wildlife Service's Species Assessment Team and the Austin Ecological Services Field Office.
Endangered and threatened species, Exports, Imports, Plants, Reporting and recordkeeping requirements, Transportation, Wildlife.
Accordingly, we amend part 17, subchapter B of chapter I, title 50 of the Code of Federal Regulations, as set forth below:
16 U.S.C. 1361–1407; 1531–1544; 16 U.S.C. 4201–4245, unless otherwise noted.
Fish and Wildlife Service, Interior.
Final rule.
We, the U.S. Fish and Wildlife Service (Service), are removing the plant
This rule is effective September 23, 2022.
This final rule, supporting documents, and the public comments received on the proposed rule are available on the internet at
Edwin Muñiz, Field Supervisor, Caribbean Ecological Services Field Office, P.O. Box 491, Boquerón, PR 00622;
On June 9, 1993, we listed
We completed two 5-year reviews for
On July 30, 2021, we proposed to delist
There are no changes in this final rule from our proposed rule (86 FR 40996; July 30, 2021) based on the comments we received and that are summarized below under Summary of Comments and Recommendations.
Section 4 of the Act (16 U.S.C. 1533) and its implementing regulations (50 CFR part 424) set forth the procedures for determining whether a species is an endangered species or a threatened species. On July 5, 2022, the U.S. District Court for the Northern District of California vacated regulations that the Service (jointly with the National Marine Fisheries Service) had promulgated in 2019 (
The following discussion contains information that was presented in the proposed rule to delist
When the species was listed in 1993, it was known from only one population, which was estimated at 1,000 plants or growing apices by Proctor (1991, p. 5). The population was later documented in 2000 at the same location occurring in an area of 21 meters (m) by 10 m (68.9 feet (ft) by 32.8 ft) by Sepúlveda-Orengo (2000, p. 21). In the vicinity of this area, eight other species of the genus
A morphometric analysis of
Based on spore observations in the light microscopy and SEM studies,
Based on the initial taxonomic analysis discussed above,
More recently, the Fairchild Tropical Botanical Garden (Fairchild) has
Leaf material for DNA extraction was collected in the field in Puerto Rico in February 2017, and from herbarium specimens, including the isotype (duplicate or very similar type specimen) for
The analysis found that five samples, including the
The Act and supporting regulations define a species as any species or subspecies of fish, wildlife, or plant, and any distinct population segment of any vertebrate species that interbreeds when mature, but do not further define the terms “species” or “subspecies” used in this definition. Rather, per 50 CFR 424.11(a), the Service shall rely on standard taxonomic distinctions and the biological expertise of the Department of the Interior (Department) and the scientific community in determining whether a particular taxon or population is a species for the purposes of the Act. The standard biological definition of a “species” is a group of organisms that are capable of interbreeding when mature. The application of this definition becomes more complicated with plant species, as many can exhibit asexual reproduction (NRC 1995, p. 50). For this reason, we consulted with experts to assist in determining the appropriate treatment for this entity (Riibe 2020, pers. comm.; Sessa 2020, pers. comm).
Based upon expert input, here we are considering a species to be a distinct unit with a natural evolutionary trajectory, meaning that it has the ability to establish a lineage that could be lost to extinction (NRC 1995, p. 54; Riibe 2020, pers. comm.; Sessa 2020, pers. comm.). In the case of
Despite the extensive botanical research and inventories in Puerto Rico by the late Dr. George Proctor (former authority on ferns across the Caribbean) and other experts,
In the proposed rule published in the
In addition, in accordance with our joint policy on peer review published in the
During the comment period, we received four comments from the public on the proposal to delist
Some public commenters did not state whether or not they support the delisting; others did not support delisting, but did not provide any evidence that
Section 4 of the Act (16 U.S.C. 1533) and its implementing regulations (50 CFR part 424) set forth the procedures for adding species to, removing species from, or reclassifying species on the Lists of Endangered and Threatened Wildlife and Plants. Our regulations at 50 CFR 424.11 identify three reasons why we might determine that a listed species is neither an endangered species nor a threatened species: (1) The species is extinct; (2) the species has recovered, or (3) the original data used at the time the species was classified were in error.
Under section 3 of the Act and our implementing regulations at 50 CFR 424.02, a “species” includes any subspecies of fish or wildlife or plant, and any distinct population segment of any species of vertebrate species which interbreeds when mature. As such, a species under the Act may include any taxonomically defined species of fish, wildlife, or plant; any taxonomically defined subspecies of fish, wildlife, or plant; or any distinct population segment of any vertebrate species as determined by us per our Policy Regarding the Recognition of District Vertebrate Population Segments Under the Endangered Species Act (61 FR 4722; February 7, 1996).
Our implementing regulations provide further guidance on determining whether a particular taxon or population is a species or subspecies for the purposes of the Act; under 50 CFR 424.11(a), the Service shall rely on standard taxonomic distinctions and the biological expertise of the Department and the scientific community in determining whether a particular taxon or population is a species for the purposes of the Act. For listing determinations, section 4(b)(1)(A) of the Act mandates that we use the best scientific and commercial data available for each species under consideration. Given the wide range of taxa and the multitude of situations and types of data that apply to species under review, the application of a single set of criteria that would be applicable to all taxa is not practical or useful. In addition, because of the wide variation in the kinds of available data for a given circumstance, we do not assign a priority or weight to any particular type of data, but must consider it in the context of all the available data for a given species.
To determine what constitutes a listable entity under the Act, we evaluate and consider all available types of data, which may or may not include genetic information, to determine whether a taxon is a distinguishable species or subspecies. As a matter of practice, and in accordance with our regulations, in deciding which alternative taxonomic interpretations to recognize, the Service rely on the professional judgment available within the Service and the scientific community to evaluate the most recent taxonomic studies and other relevant information available for the subject species. Therefore, we continue to make listing decisions based solely on the best scientific and commercial data available for each species under consideration on a case-by-case basis.
In making our determination whether
After a review of all information available, we determined to remove
Our review of the best available scientific and commercial information available indicates that
This rule revises 50 CFR 17.12(h) by removing
We have determined that environmental assessments and environmental impact statements, as defined under the authority of the National Environmental Policy Act (NEPA; 42 U.S.C. 4321
In accordance with the President's memorandum of April 29, 1994 (Government-to-Government Relations with Native American Tribal Governments; 59 FR 22951), Executive Order 13175 (Consultation and Coordination with Indian Tribal Governments), and the Department of the Interior's manual at 512 DM 2, we readily acknowledge our responsibility to communicate meaningfully with recognized Federal Tribes on a government-to-government basis. In accordance with Secretarial Order 3206 of June 5, 1997 (American Indian Tribal Rights, Federal-Tribal Trust Responsibilities, and the Endangered Species Act), we readily acknowledge our responsibilities to work directly with Tribes in developing programs for healthy ecosystems, to acknowledge that Tribal lands are not subject to the same controls as Federal public lands, to remain sensitive to Indian culture, and to make information available to Tribes. We have determined that there are no Tribal lands that may be affected by this rulemaking.
A complete list of all references cited in this rule is available at
The primary authors of this rule are the staff members of the Fish and Wildlife Service's Species Assessment Team and the Caribbean Ecological Services Field Office.
Endangered and threatened species, Exports, Imports, Plants, Reporting and recordkeeping requirements, Transportation, Wildlife.
Accordingly, we amend part 17, subchapter B of chapter I, title 50 of the Code of Federal Regulations, as follows:
16 U.S.C. 1361 1407; 1531 1544; and 4201 4245, unless otherwise noted.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Temporary rule; closure.
NMFS is prohibiting directed fishing for Kamchatka flounder in the Bering Sea and Aleutian Islands management area (BSAI). This action is necessary to prevent exceeding the 2022 Kamchatka flounder initial total allowable catch (ITAC) in the BSAI.
Effective 1200 hours, Alaska local time (A.l.t.), August 20, 2022, through 2400 hours, A.l.t., December 31, 2022.
Steve Whitney, 907–586–7228.
NMFS manages the groundfish fishery in the BSAI according to the Fishery Management Plan for Groundfish of the Bering Sea and Aleutian Islands Management Area (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.
The 2022 Kamchatka flounder ITAC in the BSAI is 9,214 metric tons (mt) as established by the final 2022 and 2023 harvest specifications for groundfish in the BSAI (87 FR 11626, March 2, 2022) and inseason action (87 FR 43220, July 20, 2022). In accordance with § 679.20(d)(1)(i), the Administrator, Alaska Region, NMFS (Regional Administrator), has determined that the 2022 Kamchatka flounder ITAC in the BSAI will soon be reached. Therefore, the Regional Administrator is establishing a directed fishing allowance of 8,214 mt, and is setting aside the remaining 1,000 mt as incidental catch to support other anticipated groundfish fisheries. In accordance with § 679.20(d)(1)(iii), the Regional Administrator finds that this directed fishing allowance has been reached. Consequently, NMFS is prohibiting directed fishing for Kamchatka flounder in the BSAI.
While this closure is effective the maximum retainable amounts at § 679.20(e) and (f) apply at any time during a trip.
NMFS issues this action pursuant to section 305(d) of the Magnuson-Stevens Act. This action is required by 50 CFR part 679, which was issued pursuant to section 304(b), and is exempt from review under Executive Order 12866.
Pursuant to 5 U.S.C. 553(b)(B), there is good cause to waive prior notice and an opportunity for public comment on this action, as notice and comment would be impracticable and contrary to the public interest, as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would delay the closure of Kamchatka flounder in the BSAI. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of August 18, 2022.
The Assistant Administrator for Fisheries, NOAA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment.
16 U.S.C. 1801
Social Security Administration.
Proposed rule; extension of comment period.
On June 29, 2022, we published the proposed rule Revised Medical Criteria for Evaluating Cardiovascular Disorders in the
The comment period for the proposed rule published June 29, 2022, at 87 FR 38838, is extended. Comments should be received on or before September 30, 2022.
You may submit comments by any one of three methods—internet, fax, or mail. Do not submit the same comments multiple times or by more than one method. Regardless of which method you choose, please state that your comments refer to Docket No. SSA–2019–0013 so that we may associate your comments with the correct regulation.
1.
2.
3.
Comments are available for public viewing on the Federal eRulemaking portal at
Michael J. Goldstein, Office of Disability Policy, Social Security Administration, 6401 Security Boulevard, Baltimore, MD 21235–6401, (410) 965–1020. For information on eligibility or filing for benefits, call our national toll-free number, 1–800–772–1213 or TTY 1–800–325–0778, or visit our internet site, Social Security Online, at
The Acting Commissioner of the Social Security Administration, Kilolo Kijakazi, Ph.D., M.S.W., having reviewed and approved this document, is delegating the authority to electronically sign this document to Faye I. Lipsky, who is the primary Federal Register Liaison for SSA, for purposes of publication in the
Environmental Protection Agency (EPA).
Proposed rule.
The Environmental Protection Agency (EPA) is proposing to approve state implementation plan (SIP) revisions submitted by the Commonwealth of Kentucky, through the Energy and Environment Cabinet (Cabinet), on March 29, 2021. The SIP revisions include the 1997 8-hour ozone National Ambient Air Quality Standards (NAAQS or standards) Limited Maintenance Plans (LMPs) for the Kentucky portion (hereinafter referred to as the Boyd County Area) of the Huntington-Ashland, WV-KY 19978-hour ozone maintenance area (hereinafter referred to as the Huntington-Ashland, WV-KY Area) and the Kentucky portion (hereinafter referred to as the Christian County Area) of the Clarksville-Hopkinsville, TN-KY 1997 8-hour ozone maintenance area (hereinafter referred to as the Clarksville-Hopkinsville, TN-KY Area). EPA is proposing to approve Kentucky's LMPs for the Boyd County and Christian County Areas because they provide for the maintenance of the 1997 8-hour ozone NAAQS within the Huntington-Ashland, WV-KY Area and the Clarksville-Hopkinsville, TN-KY Area, respectively. The effect of these actions would be to make certain commitments related to maintenance of the 19978-hour ozone NAAQS in the Boyd County and Christian County Areas federally enforceable as part of the Kentucky SIP.
Comments must be received on or before September 14, 2022.
Submit your comments, identified by Docket ID No. EPA–R04–OAR–2022–0167 at
Josue Ortiz Borrero, Air Regulatory Management Section, Air Planning and Implementation Branch, Air and Radiation Division, U.S. Environmental Protection Agency, Region 4, 61 Forsyth Street SW, Atlanta, Georgia 30303–8960. The telephone number is (404) 562–8085. Mr. Ortiz Borrero can also be reached via electronic mail at
In accordance with the Clean Air Act (CAA or Act), EPA is proposing to approve the Boyd County and Christian County Areas' LMPs for the 1997 8-hour ozone NAAQS, adopted by the Cabinet on March 29, 2021, and submitted by the Cabinet as revisions to the Kentucky SIP on March 29, 2021. On April 30, 2004, the Huntington-Ashland, WV-KY Area, which includes the Boyd County Area, was designated as nonattainment for the 1997 8-hour ozone standard. Subsequently, on September 29, 2006, the Cabinet submitted a redesignation request and the first 10-year maintenance plan for the Boyd County Area. In 2007, after having clean data and EPA's approval of a maintenance plan, the Boyd County Area was redesignated to attainment for the 1997 8-hour ozone NAAQS.
Additionally, on April 30, 2004, the Clarksville-Hopkinsville, TN-KY Area, which includes the Christian County Area, was designated as nonattainment for the 1997 8-hour ozone standard. Subsequently, on May 20, 2005, the Cabinet submitted a redesignation request and the first 10-year maintenance plan for the Christian County Area. In 2006, after having clean data and EPA's approval of a maintenance plan, the Area was redesignated to attainment for the 1997 8-hour ozone NAAQS.
The Boyd County and Christian County Areas' LMPs for the 1997 8-hour ozone NAAQS, submitted by the Cabinet on March 29, 2021, are designed to maintain the 1997 8-hour ozone NAAQS within the Boyd County and Christian County Areas through the end of the second 10-year portion of the maintenance period beyond redesignation. EPA is proposing to approve the plans because they meet all applicable requirements under CAA sections 110 and 175A. As a general matter, the Boyd County and Christian County Areas' LMPs rely on the same control measures and contingency provisions to maintain the 1997 8-hour ozone NAAQS during the second 10-year portion of the maintenance periods as the maintenance plans submitted by the Cabinet for the first 10-year periods.
Ground-level ozone is formed when oxides of nitrogen (NO
Ozone exposure also has been associated with increased susceptibility to respiratory infections; increased medication use, doctor visits, and emergency department visits; and increased hospital admissions for individuals with lung disease. Children are at increased risk from exposure to ozone because their lungs are still developing and they are more likely to be active outdoors, which increases their exposure.
In 1979, under section 109 of the CAA, EPA established primary and secondary NAAQS for ozone at 0.12 parts per million (ppm), averaged over a 1-hour period.
Following promulgation of a new or revised NAAQS, EPA is required by the CAA to designate areas throughout the nation as attaining or not attaining the NAAQS. On April 15, 2004, EPA designated the Huntington-Ashland, WV-KY Area, which consists of Boyd County in Kentucky and Cabell County and Wayne County in West Virginia, and the Clarksville-Hopkinsville, TN-KY Area, which consists of Christian County in Kentucky and Montgomery County in Tennessee, as nonattainment for the 1997 8-hour ozone NAAQS. Those designations became effective on June 15, 2004.
Similarly, on May 21, 2012, EPA designated areas as unclassifiable/attainment or nonattainment for the 2008 8-hour ozone NAAQS. EPA designated the Boyd County and Christian County Areas as unclassifiable/attainment for the 2008 8-hour ozone NAAQS. These designations became effective on July 20, 2012.
A state may submit a request that EPA redesignate a nonattainment area that is attaining a NAAQS to attainment, and, if the area has met the criteria described in section 107(d)(3)(E) of the CAA, EPA
EPA has published long-standing guidance for states on developing maintenance plans. The Calcagni memo
EPA has interpreted CAA section 175A as permitting the LMP option because section 175A of the Act does not define how areas may demonstrate maintenance, and in EPA's experience implementing the various NAAQS, areas that qualify for an LMP and have approved LMPs have rarely, if ever, experienced subsequent violations of the NAAQS. As noted in the LMP guidance memoranda, states seeking an LMP must still submit the other maintenance plan elements outlined in the Calcagni memo, including an attainment emissions inventory, provisions for the continued operation of the ambient air quality monitoring network, verification of continued attainment, and a contingency plan in the event of a future violation of the NAAQS. Moreover, a state seeking an LMP must still submit its section 175A maintenance plan as a revision to its SIP, with all attendant notice and comment procedures. While the LMP guidance memoranda were originally written with respect to certain NAAQS,
In this case, EPA is proposing to approve Kentucky's LMPs because the Commonwealth has made a showing, consistent with EPA's prior LMP guidance, that ozone concentrations in the Huntington-Ashland, WV-KY and Clarksville-Hopkinsville, TN-KY Areas are well below the 1997 8-hour ozone NAAQS and have been historically stable and that the Commonwealth has met the other maintenance plan requirements. The Cabinet submitted the LMPs for the Boyd County and Christian County Areas to fulfill the CAA's second maintenance plan requirement. EPA's evaluation of the Boyd County and Christian County Areas' LMPs is presented in section IV of this document, below.
On May 20, 2005, and September 29, 2006, the Cabinet submitted requests to EPA to redesignate the Christian County and Boyd County Areas, respectively, to attainment for the 1997 8-hour ozone NAAQS. Those submittals included plans, for inclusion in the Kentucky SIP, to provide for maintenance of the 1997 8-hour ozone NAAQS in the Clarksville-Hopkinsville, TN-KY Area through 2016 and in the Huntington-Ashland, WV-TN Area through 2018. EPA approved the Boyd County and the Christian County Areas' Maintenance Plans and the Commonwealth's requests to redesignate these Areas to attainment for the 1997 8-hour ozone NAAQS, effective September 4, 2007, and February 24, 2006, respectively.
Section 175A(b) of the CAA requires states to submit a revision to the first maintenance plan eight years after redesignation to provide for maintenance of the NAAQS for ten additional years following the end of the first 10-year period. However, EPA's final implementation rule for the 2008 8-hour ozone NAAQS revoked the 1997 8-hour ozone NAAQS and stated that one consequence of revocation was that areas that had been redesignated to attainment (
In
In recognition of the continuing record of air quality monitoring data showing ambient 8-hour ozone concentrations in the Huntington-Ashland, WV-KY and Clarksville-Hopkinsville, TN-KY Areas well below the 1997 8-hour ozone NAAQS, the Cabinet chose the LMP option for the development of second 1997 8-hour ozone NAAQS maintenance plans. On March 29, 2021, the Cabinet adopted the second 10-year 1997 8-hour ozone maintenance plans and also submitted the Boyd County and the Christian County Areas' LMPs to EPA as revisions to the Kentucky SIP.
As mentioned above, on March 29, 2021, the Cabinet submitted the Boyd County and Christian County Areas' LMPs to EPA as revisions to the Kentucky SIP. The submittals include the LMPs, air quality data, emissions inventory information, and appendices. Appendices to the plans include comments and responses between EPA and the Cabinet; documentation of notice, hearing, and public participation prior to adoption of the plans by the Cabinet on March 29, 2021; and a Cabinet order, which notes that Kentucky's LMP submittals for the remainder of the 20-year maintenance period for the Boyd County and the Christian County Areas are in response to the D.C. Circuit's decision overturning aspects of EPA's implementation rule for the 2008 8-hour ozone NAAQS (
The Boyd County and Christian County Areas' LMPs do not include any additional emissions reduction measures but rely on the same emission reduction strategy as the first 10-year maintenance plans that provide for maintenance of the 1997 ozone NAAQS through 2018 and 2016, respectively. Prevention of significant deterioration (PSD) requirements and control measures contained in the SIP will continue to apply, and Federal measures (
EPA has reviewed the Boyd County and Christian County Areas' LMPs, which are designed to maintain the 1997 8-hour ozone NAAQS within these Areas through the end of the 20-year period beyond redesignation, as required under CAA section 175A(b). The following is a summary of EPA's interpretation of the section 175A requirements
For maintenance plans, a state should develop a comprehensive, accurate inventory of actual emissions for an attainment year to identify the level of emissions which is sufficient to maintain the NAAQS. A state should develop this inventory consistent with EPA's most recent guidance on emissions inventory development. For ozone, the inventory should be based on typical summer day emissions of VOC and NO
The Boyd County Area LMP includes an ozone attainment inventory for Boyd County that reflects typical summer day emissions in 2014. Table 1 presents a summary of the inventory for 2014 contained in the LMP.
The LMP
The Christian County Area LMP includes an ozone attainment inventory for Christian County that reflects typical summer day emissions in 2014. Table 2 presents a summary of the inventory for 2014 contained in the LMP.
As with
The maintenance demonstration requirement is considered to be satisfied in an LMP if the state can provide sufficient weight of evidence indicating that air quality in the area is well below the level of the NAAQS, that past air quality trends have been shown to be stable, and that the probability of the area experiencing a violation over the second 10-year maintenance period is low.
To attain the 1997 8-hour ozone NAAQS, the three-year average of the fourth-highest daily maximum 8-hour average ozone concentrations (design value) at each monitor within an area must not exceed 0.08 ppm. Based on the rounding convention described in 40 CFR part 50, Appendix I, the 1997 8-hour ozone NAAQS is attained if the design value is 0.084 ppm or below.
There are currently two ozone monitors in the Huntington-Ashland, WV-KY Maintenance Area, one in Boyd County, Kentucky, and one in Cabell County, West Virginia (which was relocated to a new location in 2019). Based on quality assured and certified monitoring data for 2019–2021, the current design value for the Huntington-Ashland, WV-KY is 0.059 ppm, or 70 percent of the level of the 1997 8-hour ozone NAAQS. Consistent with prior guidance, EPA believes that if the most recent air quality design value for the area is at a level that is well below the NAAQS (
Table 3 presents the design values (in ppm) for each monitor in the Huntington-Ashland, WV-KY Maintenance Area over the 2006–2021 period. As shown, the AQS monitors in the area—Ashland Primary-(FIVCO) Monitor (AQS ID 21–019–0017) and Huntington Monitors (AQS ID 54–011–0006 and AQS 54–011–0007)
Therefore, the Boyd County Area is eligible for the LMP option, and EPA proposes to find that the long record of monitored ozone concentrations that attain the NAAQS, together with the continuation of existing VOC and NO
Additional supporting information that the Area is expected to continue to maintain the NAAQS can be found in
As discussed above, the Huntington-Ashland, WV-KY Area has maintained air quality well below the 1997 8-hour ozone NAAQS over the past fourteen years. Additionally, the design value data shown within Table 3 of this document, illustrates that ozone levels have been relatively stable over this timeframe, with an overall downward trend. For example, the data within Table 3 of this document indicates that the largest year-over-year change in design value at any one monitor during fourteen years was seven parts per billion (ppb), which occurred between the 2006–2008 and between the 2007–2009 and 2008–2010 design values. Furthermore, the overall ozone concentrations for the Area decreased by 15 ppb between the 2007–2009 and 2019–2021 design values at the Ashland Primary-Monitor (AQS ID 21–019–0017). This downward trend in ozone levels, coupled with the relatively small, year-over-year variation in ozone design values, makes it reasonable to conclude that Huntington-Ashland, WV-KY Area will not exceed the 1997 8-hour ozone NAAQS during the second 10-year maintenance period.
As stated above, the maintenance demonstration requirement is considered to be satisfied in an LMP if the state can provide sufficient weight of evidence indicating that air quality in the area is well below the level of the NAAQS, that past air quality trends have been shown to be stable, and that the probability of the area experiencing a violation over the second 10-year maintenance period is low. These criteria are evaluated below with regard to the Christian County Area.
To attain the 1997 8-hour ozone NAAQS, the three-year average of the fourth-highest daily maximum 8-hour average ozone concentrations (design value) at each monitor within an area must not exceed 0.08 ppm. Based on the rounding convention described in 40 CFR part 50, Appendix I, the NAAQS is attained if the design value is 0.084 ppm or below. There is currently one ozone monitor in the Clarksville-Hopkinsville, TN-KY Maintenance Area, in Christian County, Kentucky.
Based on quality assured and certified monitoring data for 2019–2021, the current design value for the Clarksville-Hopkinsville, TN-KY Area is 0.058 ppm, or 69 percent of the level of the 1997 8-hour ozone NAAQS. Consistent with prior guidance, EPA believes that if the most recent air quality design value for the area is at a level that is well below the NAAQS (
Table 4 presents the design values (in ppm) for the Christian County, Kentucky, monitor for the three-year periods 2006–2008 through 2019–2021. As shown in Table 4, the Clarksville-Hopkinsville, TN-KY Area has been well below the level of the 1997 8-hour ozone NAAQS over the entire first 10-year maintenance period since the Area was redesignated to attainment, and the most current design value is below the level of 85 percent of the NAAQS, consistent with prior LMP guidance.
Therefore, the Christian County Area is eligible for the LMP option, and EPA proposes to find that the long record of monitored ozone concentrations that attain the NAAQS, together with the continuation of existing VOC and NO
Additional supporting information that the Clarksville-Hopkinsville, TN-KY Area is expected to continue to maintain the NAAQS can be found in projections of future year design values that EPA recently completed to assist states with development of interstate transport SIPs for the 2015 ozone NAAQS.
As discussed above, the Clarksville-Hopkinsville, TN-KY Area has maintained air quality well below the 1997 8-hour ozone NAAQS over the past fourteen years. Additionally, the design value data shown within Table 4 of this document, illustrates that ozone levels have been relatively stable over this timeframe, with an overall downward trend. For example, the data within Table 4 of this document, indicates that the largest year-over-year change in design value at any one monitor during these fourteen years was five ppb which occurred between the 2007–2009 design value and the 2008–2010 design value, and it represented only a six percent change. Furthermore, the overall ozone concentrations for the
EPA annually reviews the ozone monitoring network that the Cabinet operates and maintains in accordance with 40 CFR part 58. This network is described in the ambient air monitoring network plan that is developed by the Cabinet and submitted to EPA annually, following a public notification and comment process. EPA has reviewed and approved Kentucky's 2021 Ambient Air Monitoring Network Plan (2021 Annual Network Plan).
To verify the attainment status of the area over the maintenance period, the maintenance plan should contain provisions for continued operation of an appropriate EPA-approved monitoring network in accordance with 40 CFR part 58. As noted above, the Cabinet's monitoring networks in the Boyd County and Christian County Areas have been approved by the EPA in accordance with 40 CFR part 58, and the Cabinet has committed to continue to maintain a network in accordance with the EPA requirements. For further details on monitoring, the reader is referred to the 2021 Kentucky Annual Network Plan
Section 175A(d) of the Act requires that a maintenance plan include contingency provisions. The purpose of such contingency provisions is to prevent future violations of the NAAQS or to promptly remedy any NAAQS violations that might occur during the maintenance period. The state should identify specific triggers which will be used to determine when the contingency measures need to be implemented.
For the Boyd County and Christian County Areas, if a monitored violation of the 8-hour ozone design value occurs in any portion the Huntington-Ashland, WV-KY Area or Clarksville-Hopkinsville, TN-KY Area, respectively, or if periodic emission inventory updates reveal excessive or unanticipated growth in ozone precursor emissions, the contingency plans in Kentucky's LMPs require the Commonwealth to evaluate existing control measures to see if any further emission reduction measures should be implemented. In the event of a monitored violation of the 1997 ozone NAAQS in the Huntington-Ashland, WV-KY Area or the Clarksville-Hopkinsville, TN-KY Area, Kentucky commits to adopt, within a period of nine months, one or more of several potential contingency measures listed in the plan to re-attain the standard. After the triggering monitored violation, all of the selected regulatory programs will be implemented within 18 months.
The plans also provide that the Cabinet will complete any necessary analyses to submit to EPA and that contingency measures will be adopted and implemented as quickly as possible but no later than eighteen months after the triggering event. Should the affected area return to attainment prior to the implementation of the contingency measure(s), those measures may not be implemented. In addition, the plans provide that Cabinet reserves the right to implement other contingency measures if new control programs should be developed and deemed more advantageous for the area. Prior to the implementation of any contingency measure(s) not listed, the Cabinet will solicit input from all interested and affected parties in the area. No contingency measure will be implemented without notification to EPA and approval granted by EPA.
EPA proposes to find that the contingency provisions in Kentucky's second maintenance plans for both the Boyd County and Christian County Areas for the 1997 8-hour Ozone NAAQS meet the requirements of the CAA section 175A(d).
EPA proposes to find that the Boyd County and Christian County Areas' LMPs for the 1997 8-hour ozone NAAQS include an approvable update of the various elements (including attainment inventory, assurance of adequate monitoring and verification of continued attainment, and contingency provisions) of the initial EPA-approved Maintenance Plan for the 1997 8-hour ozone NAAQS. EPA also proposes to find that the Boyd County and Christian County Areas qualify for the LMP option and adequately demonstrate maintenance of the 1997 8-hour ozone NAAQS through the documentation of monitoring data showing maximum 1997 8-hour ozone levels well below the NAAQS and historically stable design values.
EPA also believes the Boyd County and Christian County Areas' LMPs, which retain all existing control measures in the SIP, are sufficient to provide for maintenance of the 1997 8-hour ozone NAAQS in the Huntington-Ashland, WV-KY and Clarksville-Hopkinsville, TN-KY Areas, respectively, over the second maintenance period (
Transportation conformity is required by section 176(c) of the CAA. Conformity to a SIP means that transportation activities will not produce new air quality violations, worsen existing violations, or delay timely attainment of the NAAQS.
Under the conformity rule, LMP areas may demonstrate conformity without a regional emissions analysis.
After approval of or an adequacy finding for each of these LMPs, there is no requirement to meet the budget test pursuant to the transportation conformity rule for the respective maintenance area. All actions that would require a transportation conformity determination for the Boyd County and Christian County Areas under EPA's transportation conformity rule provisions are considered to have already satisfied the regional emissions analysis and “budget test” requirements in 40 CFR 93.118 as a result of EPA's adequacy finding for the LMP.
However, because LMP areas are still maintenance areas, certain aspects of transportation conformity determinations still will be required for transportation plans, programs, and projects. Specifically, for such determinations, RTPs, TIPs and transportation projects still will have to demonstrate that they are fiscally constrained (40 CFR 93.108) and meet the criteria for consultation (40 CFR 93.105) and Transportation Control Measure implementation in the conformity rule provisions (40 CFR 93.113) as well as meet the hot-spot requirements for projects (40 CFR 93.116).
Under sections 110(k) and 175A of the CAA and for the reasons set forth above, EPA is proposing to approve the Boyd County and Christian County Areas' LMPs for the 1997 8-hour ozone NAAQS, submitted by the Cabinet on March 29, 2021, as revisions to the Kentucky SIP. EPA is proposing to approve the Boyd County and Christian County Areas' LMPs because they include an acceptable update of the various elements of the 1997 8-hour ozone NAAQS Maintenance Plan approved by EPA for the first 10-year period (including emissions inventory, assurance of adequate monitoring and verification of continued attainment, and contingency provisions), and essentially carry forward all of the control measures and contingency provisions relied upon in the earlier plans.
EPA also finds that the Boyd County and Christian County Areas qualify for the LMP option and that, therefore, the Boyd County and Christian County Areas' LMPs adequately demonstrate maintenance of the 1997 8-hour ozone NAAQS through documentation of monitoring data showing maximum 1997 8-hour ozone levels well below the NAAQS and continuation of existing control measures. EPA believes that the Boyd County and Christian County Areas' 1997 8-Hour ozone LMPs are sufficient to provide for maintenance of the 1997 8-hour ozone NAAQS in the Huntington-Ashland, WV-KY and Clarksville-Hopkinsville, TN-KY Areas, respectively, over the second 10-year maintenance period, through 2027 and 2026, respectively, and thereby satisfy the requirements for such a plan under CAA section 175A(b).
Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations.
• Are not significant regulatory actions subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Do not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Are certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Do not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4);
• Do not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Are not economically significant regulatory actions based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Are not significant regulatory actions subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Are not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and
• Do not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
The SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the proposed rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), nor will it impose substantial direct costs on tribal governments or preempt tribal law.
Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations,
42 U.S.C. 7401
Environmental Protection Agency (EPA).
Proposed rule.
The Environmental Protection Agency (EPA or Agency) is proposing to approve changes to the North Carolina State Implementation Plan (SIP), submitted by the State of North Carolina through the North Carolina Department of Environmental Quality, Division of Air Quality (NCDAQ), through a letter dated October 9, 2020. The SIP revisions include changes to NCDAQ's regulations regarding monitoring and performance testing for stationary sources of air pollution. EPA is proposing to approve these changes pursuant to the Clean Air Act (CAA or Act).
Comments must be received on or before September 23, 2022.
Submit your comments, identified by Docket ID No. EPA–R04–OAR–2021–0036 at
Andres Febres, Air Regulatory Management Section, Air Planning and Implementation Branch, Air and Radiation Division, U.S. Environmental Protection Agency, Region 4, 61 Forsyth Street SW, Atlanta, Georgia 30303–8960. Mr. Febres can be reached via electronic mail at
EPA is proposing to approve changes to North Carolina's SIP that were provided to EPA via a letter dated October 9, 2020, regarding 15A North Carolina Administrative Code (NCAC) Subchapter 02D, Section .0600,
The October 9, 2020, SIP revision modifies several rules under 02D Section .0600,
Rule 02D .0608,
Rule 02D .0610,
Rule 02D .0612,
Paragraph .0612(e) establishes the minimum criteria for approval of a petition for alternative monitoring or reporting, and the SIP revision includes mostly ministerial and formatting changes. Under paragraph (e)(3), North Carolina removes the qualifying phrase “with reasonable certainty” from the requirement that alternative monitoring and reporting must provide information of sufficient quality to determine “with reasonable certainty” the amount of emissions or the adequacy of a control device or practice in order to be approvable by the Director. Removing this phrase does not negatively impact the quality of information that would be collected with alternative monitoring or reporting procedures. In addition, under paragraph .0612(e) the Director can only approve petitions for alternatives that include the information required under paragraph .0612(c), which requires the petition to include “a demonstration that the alternative procedure is at least as accurate as that prescribed by the rule” at (c)(6), and satisfy the showing required in .0612(c)(7).
Finally, Rule 02D .0613,
SIP-approved paragraph .0613(b) states that the Director may require the owner or operator of a facility required to operate a monitoring device under Subchapters 02D or 02Q to submit a quality assurance program if the criteria in .0613(b)(1) through (3) are met. The SIP revision changes the phrase “the Director may” to “the Director shall” and changes the phrase “quality assurance program” to “a description of the quality assurance program.” SIP-approved paragraph .0613(g) states that a quality assurance program shall be available on-site for inspection within 30 days of monitor certification. The SIP revision also changes the phrase “quality assurance program” to “a description of the quality assurance program” in this paragraph.
Although the change to “a description of the quality assurance program” may alter the name of the required document, NCDAQ explained that the materials that this document must contain remain the same, as detailed in paragraph .0613(c) and more specifically in .0613(c)(1) through (7).
The October 9, 2020, SIP revision modifies the rules under 02D Section .2600,
The October 9, 2020, submittal transmits changes to Rule 02D .2603,
Next, Rule 02D .2606,
As provided in paragraph .2606(a), Method 3 of Appendix A to 40 CFR part 60 is still used to determine molecular weight of the gas being sampled, with the exceptions presented in paragraph .2606(b). Method 3 requires sampling and analysis of the sample for percent carbon dioxide (CO
Rule 02D .2608,
Rule 02D .2610,
Finally, Rule 02D .2613,
In this document, EPA is proposing to include in a final EPA rule regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, EPA is proposing to incorporate by reference the following North Carolina rules, with a state effective date of November 1, 2019: Rule 02D .0607,
EPA is proposing to approve portions of the October 9, 2020, SIP revisions to incorporate various changes to North Carolina's source monitoring and testing provisions into the SIP. Specifically, EPA is proposing to approve various changes as described above in 02D Section .0600,
Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations.
• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4);
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and
• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
The SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the proposed rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), nor will it impose substantial direct costs on tribal governments or preempt tribal law.
Environmental protection, Air pollution control, Carbon monoxide, Incorporation by reference, Intergovernmental relations, Lead, Nitrogen dioxide, Ozone, Particulate matter, Reporting and recordkeeping requirements, Sulfur oxides, Volatile organic compounds.
42 U.S.C. 7401
Environmental Protection Agency (EPA).
Proposed rule.
The Environmental Protection Agency (EPA) is proposing to approve a State Implementation Plan (SIP) revision submitted by Tennessee, on April 9, 2021. Specifically, EPA is proposing to approve updates to the incorporation by reference of federal guidelines on air quality modeling in the Tennessee SIP. Based on its proposal to approve this revision, EPA is also proposing to convert the previous conditional approval regarding infrastructure SIP prevention of significant deterioration (PSD) elements for the 2015 Ozone National Ambient Air Quality Standard (NAAQS) for Tennessee to a full approval. EPA is proposing to approve this revision pursuant to the Clean Air Act (CAA or Act).
Comments must be received on or before September 23, 2022.
Submit your comments, identified by Docket ID No. EPA–R04–OAR–2021–0569 at
Josue Ortiz Borrero, Air Regulatory Management Section, Air Planning and Implementation Branch, Air and Radiation Division, U.S. Environmental Protection Agency, Region 4, 61 Forsyth Street SW, Atlanta, Georgia 30303–8960. The telephone number is (404) 562–8085. Mr. Ortiz Borrero can also be reached via electronic mail at staff email
On October 1, 2015, EPA promulgated a revised primary and secondary NAAQS for ozone, revising the 8-hour ozone standards from 0.075 parts per million (ppm) to a new more protective level of 0.070 ppm.
On September 13, 2018, Tennessee met the requirement to submit an iSIP for the 2015 8-hour ozone NAAQS by the October 1, 2018, deadline. Through previous rulemakings, EPA approved most of the infrastructure SIP elements for the 2015 Ozone NAAQS for Tennessee.
For elements C and J to be approved for PSD, a state needs to demonstrate that its SIP meets the PSD-related infrastructure requirements of these sections. These requirements are met if the state's implementation plan includes a PSD program that meets current federal requirements. Prong 3 is also approvable when a state's implementation plan contains a fully approved, up-to-date PSD program. EPA's PSD regulations at 40 CFR 51.166(l) require that modeling be conducted in accordance with Appendix W,
As discussed in the conditional approval for the 2015 ozone iSIP PSD elements, Tennessee's SIP contained outdated references to Appendix W and the State committed to update the outdated references and submit a SIP revision within one year of EPA's final rule conditionally approving these PSD elements. Accordingly, Tennessee was required to submit a SIP revision by April 9, 2021. Tennessee met its commitment by submitting a SIP revision to correct the deficiencies on or before the deadline. Through this Notice of Proposed Rulemaking (NPRM), EPA is now proposing to approve changes to the Tennessee SIP and to convert the conditional approval to a full approval for Tennessee regarding element C, Prong 3, and element J, for the 2015 8-hour ozone NAAQS infrastructure SIP.
As discussed above, whenever EPA promulgates a new or revised NAAQS, CAA section 110(a)(1) requires states to submit infrastructure SIPs that meet the various requirements of CAA section 110(a)(2), as applicable. Due to ambiguity in some of the language of CAA section 110(a)(2), EPA believes that it is appropriate to interpret these provisions in the specific context of acting on infrastructure SIP submissions. EPA has previously provided comprehensive guidance on the application of these provisions through a guidance document for infrastructure SIP submissions and through regional actions on infrastructure submissions.
On April 9, 2021, Tennessee submitted a SIP revision to address outdated references to EPA's modeling guidelines in order to meet the PSD iSIP requirements for the 2015 8-hour ozone NAAQS. The SIP revision includes changes to two SIP-approved rules to update the incorporation by reference date for Appendix W and a request to convert the April 9, 2020, Conditional Approval of element C, Prong 3, and element J of Tennessee's 2015 8-hour ozone NAAQS infrastructure SIP to a full approval. Specifically, the April 9, 2021, SIP revision makes changes to Tennessee Rules 1200–03–09–.01,
Paragraph 1200–03–09–.01(1) is a set of general construction permitting requirements that apply to new or modified sources, including sources subject to PSD, and subparagraph (f) requires estimates of ambient concentration to be based on air quality models. Previously, this provision referenced EPA publication No. 450/2–78–027R, “Guidelines on Air Quality Models (revised)” (1986), and certain specified supplements for modeling. However, the April 9, 2021, SIP revision deletes this reference to EPA publication No. 450/2–78–027R and replaces it with a specific incorporation by reference of 40 CFR part 51 Appendix W, as published in the July 1, 2019, edition of the Code of Federal Regulations (CFR). This provision currently allows the Technical Secretary to approve the use of a modified or substitute model on a case-by-case basis after consultation with and written approval by EPA, and is revised to limit the use of a modified or substitute model to incidences where the air quality model in Appendix W is inappropriate, which is consistent with 40 CFR 51.166(l)(2) for PSD. Tennessee also changed the word “another” to “substituted” in the model substitution provision. The changes to Paragraph 1200–03–09–.01(1)(f) align with federal requirements to make use of the most current version of Appendix W.
In addition, modeling requirements under the State's PSD rule at Paragraph 1200–03–09–.01(4)(k) are revised to similarly include an incorporation by reference date for Appendix W of the July 1, 2019, CFR publication edition, and includes the same minor edit to change “another” to “substituted”.
Lastly, Paragraph 1200–03–21–.01(2)(c), which provides procedures for alternative emission standards, is also revised to delete a reference to EPA publication No. 450/2–78–027R and replace it with a specific incorporation by reference of 40 CFR part 51 Appendix W, as published in the July 1, 2019, edition of the CFR, as in Rule 1200–03–09–.01 described above.
As explained in the April 9, 2020, conditional approval, Tennessee committed to update its PSD regulations to reference the most current version of Appendix W. EPA approved the most current version of Appendix W on January 17, 2017 (82 FR 5182), so by incorporating by reference the July 1, 2019, version of Appendix W into the SIP, Tennessee is meeting the commitment of the conditional approval, as well as the requirements of the PSD elements for the 2015 8-hour ozone infrastructure SIP.
For the reasons stated above, EPA is proposing to approve the changes into the Tennessee SIP and convert the April 9, 2020, conditional approval of element C, Prong 3, and element J, of Tennessee's 2015 8-hour ozone NAAQS infrastructure SIP to a full approval.
In this document, EPA is proposing to include in a final EPA rule regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, EPA is proposing to incorporate by reference Tennessee Rules 1200–03–09–.01,
EPA is proposing to approve changes to the Tennessee SIP, and convert the conditional approval for element C, Prong 3, and element J, for the 2015 8-hour ozone Infrastructure SIP to a full approval. Specifically, EPA is proposing to approve changes to Tennessee Rules 1200–03–09–.01,
Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations.
• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4);
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and
• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
The SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the proposed rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), nor will it impose substantial direct costs on tribal governments or preempt tribal law.
Environmental protection, Air pollution control, Carbon monoxide, Incorporation by reference, Intergovernmental relations, Lead, Nitrogen dioxide, Ozone, Particulate matter, Reporting and recordkeeping requirements, Sulfur oxides, Volatile organic compounds.
42 U.S.C. 7401
Environmental Protection Agency (EPA).
Proposed rule.
The Environmental Protection Agency (EPA) is proposing to approve a portion of a State Implementation Plan (SIP) revision to the Mecklenburg County portion of the North Carolina SIP, hereinafter referred to as the Mecklenburg County Local Implementation Plan (LIP). The revision was submitted through the North Carolina Division of Air Quality (NCDAQ), on behalf of Mecklenburg County Air Pollution Control (MCAQ), via a letter dated April 24, 2020, which was received by EPA on June 19, 2020. This SIP revision includes changes to Mecklenburg County Air Pollution Control Ordinance (MCAPCO) rules incorporated into the LIP regarding Prevention of Significant Deterioration (PSD) permitting to address changes to the Federal new source review (NSR) regulations in recent years. EPA is proposing to approve these changes pursuant to the Clean Air Act (CAA or Act).
Comments must be received on or before September 23, 2022.
Submit your comments, identified by Docket ID No. EPA–R04–OAR–2021–0867 at
D. Brad Akers, Air Regulatory Management Section, Air Planning and Implementation Branch, Air and Radiation Division, U.S. Environmental Protection Agency, Region 4, 61 Forsyth Street SW, Atlanta, Georgia 30303–8960. Mr. Akers can be reached via electronic mail at
The Mecklenburg LIP was submitted to EPA on June 14, 1990, and EPA approved the plan on May 2, 1991.
This proposed rulemaking would modify the LIP by updating the PSD program rules incorporated into the LIP in Rule 2.0530,
The PSD program is a preconstruction permitting program that requires “major” stationary sources of air pollution to obtain a PSD permit prior to beginning construction in areas classified as either in attainment with the National Ambient Air Quality Standards (NAAQS) or unclassifiable.
In this Notice of Proposed Rulemaking (NPRM), EPA is proposing to approve Mecklenburg's PSD rule revisions as meeting the requirements of the CAA and 40 CFR 51.166. EPA most recently approved Mecklenburg's PSD rules on May 2, 1991, with a local effective date of June 14, 1990.
On December 31, 2002, EPA published final rule revisions to 40 CFR parts 51 and 52, regarding the CAA's PSD and Nonattainment New Source Review (NNSR) programs.
Following publication of the 2002 NSR Rule, EPA received numerous petitions requesting reconsideration of several aspects of the final rule, along with portions of EPA's 1980 NSR Rules.
The 2002 NSR Reform Rules were challenged in the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit), and the court issued a decision on the challenges on June 24, 2005.
Meanwhile, EPA continued to move forward with its evaluation of the portion of its NSR Reform Rules that were remanded by the D.C. Circuit. On March 8, 2007 (72 FR 10445), EPA responded to the Court's remand regarding the recordkeeping provisions by proposing two alternative options to clarify what constitutes “reasonable possibility” and when the “reasonable possibility” recordkeeping requirements apply. The “reasonable possibility” standard identifies the circumstances under which a major stationary source must keep records for modifications that do not trigger major NSR. EPA later finalized these changes on December 21, 2007 (72 FR 72607).
Separately from the petitions received that led to the 2002 NSR Reconsideration Rule, EPA received another petition for reconsideration on July 11, 2003. Specifically, the petitioner requested EPA to reconsider the inclusion of “fugitive emissions” when assessing whether a proposed physical or operational change qualified as a “major modification.” On November 13, 2007, EPA granted the petition for reconsideration, and on December 19, 2008, finalized the revision of the language to clarify which types of sources were required to include “fugitive emissions” in their calculations.
Finally, on February 17, 2009, EPA received a petition for reconsideration of the Fugitive Emissions Rule. Due to this petition, and after several stays,
In summary, after several court decisions and public petitions, the Federal major NSR program (found in 40 CFR 51.165, 51.166, and 52.21) no longer includes the provisions related to Clean Units or PCPs that were part of the 2002 NSR reform rules. Additionally, an indefinite stay has been placed on the Fugitive Emissions Rule. Mecklenburg County is adopting most of the surviving provisions from the 2002 NSR Reform Rules, with changes. More details on Mecklenburg County's adoption of the 2002 NSR Reform Rules and EPA's analysis of its submittal can be found in section III.A of this NPRM.
On May 16, 2008 (73 FR 28321), EPA published the “Implementation of the New Source Review (NSR) Program for Particulate Matter Less than 2.5 Micrometers (PM
On February 11, 2010 (75 FR 6827), EPA proposed to repeal the grandfathering provision for PM
The NSR PM
Among the changes included in the NSR PM
On October 25, 2012 (77 FR 65107), EPA took final action to amend the definition, promulgated in the 2008 NSR PM
On October 20, 2010 (75 FR 64863), EPA published a final rule entitled “Prevention of Significant Deterioration (PSD) for Particulate Matter less than 2.5 Micrometers (PM
Subsequently, in response to a challenge to the PM
The PM
Mecklenburg County is adopting the Federal provisions relevant to PSD permitting for PM
On November 29, 2005 (70 FR 71612), EPA published a final rule entitled “Final Rule To Implement the 8-Hour Ozone National Ambient Air Quality Standard—Phase 2; Final Rule To Implement Certain Aspects of the 1990 Amendments Relating to New Source Review and Prevention of Significant Deterioration as They Apply in Carbon Monoxide, Particulate Matter and Ozone NAAQS; Final Rule for Reformulated Gasoline” (hereinafter referred to as the Phase 2 Rule). The Phase 2 Rule addressed control and planning requirements as they applied to areas designated nonattainment for the 1997 8-hour ozone NAAQS
The April 24, 2020, LIP revision adopts the relevant PSD provisions of 40 CFR 51.166, thus recognizing NO
On January 2, 2011, emissions of greenhouse gases (GHGs) were, for the first time, covered by the PSD and title V operating permit programs.
In Step 2 of the GHG Tailoring Rule, which took effect on July 1, 2011, the PSD and title V permitting requirements extended beyond the sources and modifications covered under Step 1 to apply to sources that were classified as major sources based solely on their GHG emissions or potential to emit GHGs. Step 2 also applied PSD permitting requirements to modifications of otherwise major sources that would increase only GHG emissions above the threshold in the Federal PSD regulations. EPA generally described the
Subsequently, EPA published Step 3 of the GHG Tailoring Rule on July 12, 2012.
On June 23, 2014, the U.S. Supreme Court addressed the application of stationary source permitting requirements to GHG emissions in
In accordance with the Supreme Court's decision, on April 10, 2015, the D.C. Circuit issued an Amended Judgment vacating the regulations that implemented Step 2 of the GHG Tailoring Rule, but not the regulations that implement Step 1 of the GHG Tailoring Rule.
In response, EPA promulgated a good cause final rule on August 19, 2015, entitled “Prevention of Significant Deterioration and Title V Permitting for Greenhouse Gases: Removal of Certain Vacated Elements.”
On July 20, 2011, EPA finalized the Biomass Deferral Rule, which deferred for a period of three years, the application of PSD and Title V permitting requirements to carbon dioxide (CO
On July 12, 2013, the D.C. Circuit vacated the Biomass Deferral Rule, but on November 14, 2013, issued an order delaying the vacatur of the Biomass Deferral Rule until the U.S. Supreme Court made a final decision in the
The April 24, 2020, LIP revision adopts the PSD plan requirements of 40 CFR 51.166, and adopts other relevant provisions directly to implement PSD for greenhouse gases, consistent with the Federal PSD provisions as well as North Carolina's rules. See section III.D of this NPRM for more details.
Under Federal regulations, certain activities are not considered to be a physical change or a change in the method of operation at a source, and thus do not trigger NSR review. One category of such activities is routine maintenance, repair and replacement (RMRR). On October 27, 2003 (68 FR 61248), EPA published a rule entitled “Prevention of Significant Deterioration (PSD) and Non-Attainment New Source Review (NSR): Equipment Replacement Provision of the Routine Maintenance, Repair and Replacement Exclusion” (hereinafter referred to as the “ERP Rule”). The ERP Rule provided criteria for determining whether an activity falls within the RMRR exemption. The ERP Rule also provided a list of equipment replacement activities that are exempt from NSR permitting requirements, while ensuring that industries maintain safe, reliable, and efficient operations that will have little or no impact on emissions. Under the ERP Rule, a facility undergoing equipment replacement would not be required to undergo NSR review if the facility replaced any component of a process unit with an identical or functionally equivalent component. The rule included several modifications to the NSR rules to explain what would qualify as an identical or functionally equivalent component.
Shortly after the October 27, 2003, rule, several parties filed petitions for review of the ERP Rule in the D.C. Circuit. The court stayed the effective date of the rule pending resolution of the petitions. A collection of environmental groups, public interest groups, and states, subsequently filed a petition for reconsideration with EPA, requesting that the Agency reconsider certain aspects of the ERP Rule. EPA granted the petition for reconsideration on July 1, 2004 (69 FR 40278).
Rule 2.0530 in the April 24, 2020, Mecklenburg submittal adopts the requirements of 40 CFR 51.166 as amended July 1, 2014, with exceptions. Likewise, Rule 2.0544 of the April 24, 2020, Mecklenburg submittal adopts the requirements of 40 CFR 51.166 as amended July 20, 2011, with exceptions. In this NPRM, EPA is not proposing to act on the incorporation by reference of language to implement the ERP, as provided in EPA's October 27, 2003, rule.
Under the CAA, there are two possible thresholds for determining whether a source is a major emitting facility that is potentially subject to the construction permitting requirements under the PSD program; one threshold is 100 tons per year (tpy) per pollutant, and the other is 250 tpy per pollutant. Section 169(1) of the CAA lists twenty-eight source categories that qualify as major emitting facilities if their emissions equal or exceed the 100 tpy threshold. If the source does not fall within one of twenty-eight source categories listed in section 169, then the 250 tpy threshold is applicable.
One of the source categories in the list of twenty-eight source categories, to which the 100 tpy threshold applies, is chemical process plants. Since the Standard Industrial Classification (SIC) code for chemical process plants includes facilities primarily engaged in manufacturing ethanol fuel, EPA and states had previously considered such facilities to be subject to the 100 tpy thresholds.
As a result of this classification, pursuant to EPA's major NSR regulations, chemical process plants were also required to include fugitive emissions for determining the potential emissions of such sources. Thus, prior to promulgation of the 2007 Ethanol Rule, the classification of fuel and industrial ethanol facilities as chemical process plants had the effect of requiring these plants to include fugitive emissions when determining whether their emissions exceed the applicability thresholds for the PSD and NNSR permit programs.
On May 1, 2007, EPA published the 2007 Ethanol Rule (72 FR 24060), which amended EPA's PSD and NNSR regulations to exclude ethanol manufacturing facilities that produce ethanol by natural fermentation processes from the “chemical process plants” category under the regulatory definition of “major stationary source.” This change to EPA's NSR regulations affected the threshold used to determine PSD applicability for these ethanol production facilities, clarifying that such facilities were subject to the 250 tpy major source threshold. The 2007 Ethanol Rule also included changes to other provisions which established that ethanol facilities need not count fugitive emissions when determining whether such a source is “major” under the Federal PSD, NNSR, and Title V permitting programs.
On July 2, 2007, the National Resources Defense Council (NRDC) petitioned the D.C. Circuit to review the 2007 Ethanol Rule. On that same day, EPA received a petition for administrative reconsideration and request for stay of the 2007 Ethanol Rule from NRDC. On March 27, 2008, EPA denied NRDC's 2007 administrative petition for reconsideration.
On March 2, 2009, EPA received a second petition for reconsideration and request for stay from NRDC. In 2009, NRDC also filed a petition for judicial review challenging EPA's March 27, 2008, denial of NRDC's 2007 administrative petition in the D.C. Circuit. This challenge was consolidated with NRDC's challenge to the 2007 Ethanol Rule. In August of 2009, the D.C. Circuit granted a joint motion to hold the case in abeyance, and the case has remained in abeyance.
On October 21, 2019, EPA partially granted and partially denied NRDC's 2009 administrative petition for reconsideration.
Mecklenburg County's incorporation by reference of Federal PSD provisions as of July 1, 2014, includes the 2007 Ethanol Rule's changes to the treatment of ethanol production facilities. See section III.F of this NPRM and EPA's technical support document in the docket for this proposed action for more details.
MCAQ adopts the Federal PSD requirements of 40 CFR 51.166 with several changes, consistent with the State of North Carolina's PSD provisions.
This SIP revision addresses baseline actual emissions, actual-to-projected actual applicability tests, PALs, recordkeeping requirements, and reporting requirements.
As a general matter, state and local agencies may meet the requirements of 40 CFR part 51 with different but equivalent (or more stringent) regulations. As mentioned above, MCAQ chose to adopt the Federal rules with several changes, consistent with North Carolina's SIP-approved PSD provisions. The definition of “baseline actual emissions” at Rule 2.0530(b)(1) was changed from the Federal provisions to remove the provision allowing emissions units that are not electric utility steam generating units (EUSGUs) to look back 10 years to select the baseline period. Mecklenburg
With regard to the PAL adjustment provision at 51.166(w)(10)(iv)(
With regard to the remanded portions of the 2002 NSR Reform Rules related to recordkeeping and EPA's December 21, 2007, clarifications of the term “reasonable possibility” (72 FR 72607), Mecklenburg County did not adopt all the provisions at 40 CFR 51.166(r)(6) or adopt the Federal “reasonable possibility” standard. Instead, Mecklenburg County adopted recordkeeping and reporting requirements at paragraph 2.0530(u) that apply to all modifications that use the actual-to-projected-actual applicability test. Therefore, the Mecklenburg County provisions meet the minimum recordkeeping and reporting requirements of the Federal rule.
In addition to incorporating the Federal rules by reference with several changes, Mecklenburg County's rule revisions include two additional provisions that do not directly relate to the 2002 NSR Reform rules, including: (1) incorporating by reference 40 CFR 52.21(r)(2) to clarify the period of validity of approval to construct; and (2) requiring that all new natural gas-fired EUSGUs install best available control technology or lowest achievable emission rate, as appropriate. This second requirement was included in the North Carolina rules originally for clarity and consistency with restrictions on use of allowances imposed by an agreement resulting from provisions of the North Carolina Clean Smokestacks Act, and Mecklenburg County adopted the same provision to be consistent with the State.
EPA believes that approval of these changes would not have a negative impact on air quality in the Mecklenburg County area. With these proposed changes, the local regulations will now be consistent with the State's current SIP-approved PSD program, which already underwent updates concerning the 2002 NSR Reform Rules on August 10, 2011.
The April 24, 2020, submittal adopts the PM
Next, Rule 2.0530(e)'s adoption of the July 1, 2014, requirements of 40 CFR 51.166(c) include required elements of EPA's PM
Finally, Rule 2.0530 does not include (1) the grandfathering provisions from the PM
Mecklenburg County adopts the PSD provisions from the Ozone Phase 2 Rule, as noted in section II.C of this NPRM. Consistent with North Carolina's rules and the Federal rules, Rule 2.0530(b) adopts the same language regarding the Phase 2 Rule via the incorporation by reference of 40 CFR 51.166(b)(1)(ii), 51.166(b)(2)(ii), 51.166(b)(23)(i), and 51.166(b)(49)(i), which effectively recognizes VOCs and NOx as precursors to ozone for purposes of PSD. Therefore, EPA has preliminarily determined that MCAQ's proposed LIP revision is consistent with the Ozone Phase 2 Rule.
The April 24, 2020, SIP revision establishes thresholds for determining which new stationary sources and modification projects become subject to permitting requirements for GHG emissions under Mecklenburg County's PSD program. This SIP revision updates MCAQ's existing PSD program to include a new rule applicable to GHGs only. Specifically, the revision incorporates a new PSD rule into Mecklenburg County's LIP, at MCAPCO Rule 2.0544,
Additionally, Rule 2.0544(a) reflects the effects of the 2014
The Rule also includes a mechanism at Rule 2.0554(d) to automatically incorporate any changes to the Federal GHG global warming potentials into the definition of “subject to regulation” incorporated by reference from 40 CFR 51.166(b)(48) that may occur after the incorporation by reference (“IBR”) date. In order to determine if a source is subject to regulation for GHGs, a source's total GHG emissions are calculated using the global warming potentials published in Table A–1 of Subpart A of 40 CFR part 98.
The July 20, 2011, version of the definition of “subject to regulation” at 40 CFR 51.166(b)(48) includes the text of the Biomass Deferral Rule, discussed in section II.D of this NPRM, at 51.166(b)(48)(ii)(
In the February 4, 2022, supplemental letter, Mecklenburg County also clarifies that while Rule 2.0544's definition of “baseline actual emissions” does not include the term “immediately” at subparagraph 2.0544(b)(1), MCAQ will enforce the provision as if the term were present based on MCAQ's interpretation and North Carolina's interpretation that this word is extraneous. This rule previously included the term “immediately” in its locally effective version, as follows:
For an existing emissions unit, baseline actual emissions means the average rate, in tons per year, at which the emissions unit actually emitted the pollutant during any consecutive 24-month period selected by the owner or operator within the 5-year period immediately preceding the date that a complete permit application is received by the Department for a permit required under this Rule. The Director shall allow a different time period, not to exceed 10 years immediately preceding the date that a complete permit application is received by the Department, if the owner or operator demonstrates that it is more representative of normal source operation. . . .
Without the term “immediately,” this provision reads as follows:
For an existing emissions unit, baseline actual emissions mean the average rate, in tons per year, at which the emissions unit actually emitted the pollutant during any consecutive 24-month period selected by the owner or operator within the 5-year period preceding the date that a complete permit application is received by the Department for a permit required under this Rule. The Director shall allow a different time period, not to exceed 10 years preceding the date that a complete permit application is received by the Department, if the owner or operator demonstrates that it is more representative of normal source operation. . . .
The term “immediately” was eliminated from the State's analogous rule at 15A North Carolina Administrative Code Rule 02D .0544 subparagraph (b)(1) as the result of a technical correction from the North Carolina Rules Review Commission to remove this word as extraneous text. North Carolina previously submitted a letter clarifying that the State intends to enforce its provision at 15A North Carolina Administrative Code Rule 02D .0544 subparagraph (b)(1) as if the term “immediately” were present in the rule. MCAQ's February 4, 2022, letter notes that MCAQ intends to be consistent with the State and therefore also intends to enforce subparagraph 2.0544(b)(1) as if the term “immediately” were present. EPA also notes that the definition of “baseline actual emissions,” as included in Rule 2.0530(b)(1) for other regulated NSR pollutants, includes the term “immediately.” Therefore, MCAQ would be enforcing 2.0544(b)(1) consistent with how the term is defined at 2.0530(b)(1). EPA's proposed action to incorporate the definition of “baseline actual emissions” is based on Mecklenburg County's interpretation of this subparagraph as explained in the February 4, 2022, letter.
EPA has preliminarily determined that MCAQ's proposed LIP revision is consistent with the Tailoring Rule. Furthermore, EPA has preliminarily determined that this revision to Mecklenburg County's LIP is consistent with section 110 of the CAA. Therefore, EPA is proposing to incorporate Rule 2.0544 into the Mecklenburg County LIP, excluding the language of the Biomass Deferral Rule from the incorporation by reference of 40 CFR 51.166.
As noted in section II.E of this NPRM, the April 24, 2020, submittal adopts the Federal PSD plan requirements contained within 40 CFR 51.166 as amended July 1, 2014, with certain revisions, into Rule 2.0530,
MCAPCO Rule 2.0530 is consistent with EPA's PSD program requirements in 40 CFR 51.166, as amended in the 2007 Ethanol Rule.
Emissions for four criteria pollutants are analyzed in the TSD. EPA also graphed air quality trends in the TSD in Mecklenburg County, since the date of promulgation of the 2007 Ethanol Rule, until 2021, for all criteria pollutants associated with ethanol production. The air quality trends reveal air quality improved for generally every pollutant monitored. Additionally, there has been no ethanol production in or near Mecklenburg County, North Carolina.
EPA also describes requirements for MCAQ's minor source NSR program in the TSD because the facilities that would be below the 250 tpy PSD major source threshold under this rulemaking will still need to obtain minor source construction permits. EPA further analyzes the impact of increasing the threshold to 250 tpy on ozone and PM precursors. As the analysis for ozone and secondary PM in the TSD demonstrates that sources below the 250 tpy threshold will not cause any interference with attainment or maintenance of the standard in Mecklenburg County.
Based on EPA's analysis in the TSD, EPA's exclusion of these facilities from MCAQ's PSD program, as proposed herein, would not interfere with any applicable requirement concerning attainment and reasonable further progress (as defined in section 171 of the CAA) or any other applicable requirement of the CAA. Therefore, this proposed action is consistent with CAA section 110(l).
In this document, EPA is proposing to include in a final EPA rule regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, EPA is proposing to incorporate by reference the following Mecklenburg County Rules: 2.0530,
EPA is proposing to approve the aforementioned changes to the Mecklenburg County LIP. Specifically, EPA is proposing to incorporate updates to PSD permitting provisions in Rule 2.0530,
Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations.
• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4);
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and
• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
The SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), nor will it impose substantial direct costs on tribal governments or preempt tribal law.
Environmental protection, Air pollution control, Carbon monoxide, Incorporation by reference, Intergovernmental relations, Lead, Nitrogen dioxide, Ozone, Particulate matter, Reporting and recordkeeping requirements, Sulfur oxides, Volatile organic compounds.
42 U.S.C. 7401
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Proposed rule; request for comments.
NMFS proposes regulations to implement Amendment 20 to the Atlantic Surfclam and Ocean Quahog Fishery Management Plan. The Mid-Atlantic Fishery Management Council developed this action to limit the amount of surfclam or ocean quahog individual transferable quota share or annual allocation in the form of cage tags that an individual or their family members could hold. These changes are intended to ensure the management plan is consistent with requirements of the Magnuson-Stevens Fishery Conservation and Management Act, and to improve the management of these fisheries.
Comments must be received by September 23, 2022.
You may submit comments on this document, identified by NOAA–NMFS–2020–0112, by any of the following methods:
•
•
Copies of Amendment 20, including the draft Environmental Assessment (EA), are available on request from the Mid-Atlantic Fishery Management Council, 800 North State Street, Suite 201, Dover, DE 19901. These documents are also accessible via the internet at
Douglas Potts, Fishery Policy Analyst, 978–281–9341.
This action proposes regulations to implement Amendment 20, also known as the Excessive Shares Amendment, to the Atlantic Surfclam and Ocean Quahog Fishery Management Plan (FMP). The Mid-Atlantic Fishery Management Council developed this amendment to establish limits to the amount of individual transferable quota (ITQ) quota share or cage tags such that any particular individual, corporation, or other entity can not acquire an excessive share of such privileges, as required by the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act), and to make administrative changes to improve the efficiency of the FMP.
The Magnuson-Stevens Act requires that any FMP or implementing regulation be consistent with ten national standards for fishery conservation and management. National Standard 4 stipulates that, “If it becomes necessary to allocate or assign fishing privileges among various United States fishermen, such allocation shall be . . . carried out in such manner that no particular individual, corporation, or other entity acquires an excessive share of such privileges.” When the Council adopted Amendment 8 to the Atlantic Surfclam and Ocean Quahog FMP, which created the individual transferable quota (ITQ) system for managing the fishery, it relied on Federal antitrust laws to prevent entities from acquiring excessive shares. In 2002, the Government Accountability Office (GAO) released a report titled,
As part of the development of this action, an economic consulting company, Compass Lexecon, was contracted to evaluate the fishery and to provide advice on how to set an excessive share limit on ITQ systems that could protect against market power without constraining the workings of competition. The 2011 Compass Lexecon report and associated Center for Independent Experts review indicated that, in order to implement an excessive shares definition, managers would need more reliable information regarding quota share ownership, and would need to better monitor control of the quota by tracking transfers and long-term leases of cage tags in the surfclam and ocean quahog fisheries.
In 2012, the Council voted to split the FMP amendment that was under development. The cost recovery provisions became Amendment 17 (81 FR 38969, June 15, 2016). The Council requested that NMFS create a data collection program as authorized under Section 402A of the Magnuson-Stevens Act, and the Council subsequently established a new fishery management action team (FMAT) to develop recommendations for the program. The new program became effective on January 1, 2016 (80 FR 42747, July 20, 2015), and collected more detailed
In 2017, the Council reformed the FMAT to continue development of the Excessive Shares Amendment. The FMAT developed a wide range of options for defining an excessive share in this fishery and for potential management measures to prevent anyone from acquiring an excessive share. The full range of alternatives considered by the Council is described in the amendment document and not repeated here.
In December 2019, the Council selected preferred alternatives, and approved the Excessive Shares Amendment for submission to NMFS. However, additional work was needed to prepare the environmental analysis of the action and for NMFS to develop the systems and protocols that would be needed to effectively monitor and enforce the excessive share caps approved by the Council.
Under the Council's preferred alternative, separate caps would be established for quota share and for annual cage tags for both the surfclam and ocean quahog ITQ programs. The amount of quota share that an individual or entity could have ownership in would be capped at 35 percent of the surfclam quota and 40 percent of the ocean quahog quota. A higher cap would be established for cage tags in recognition that additional temporary consolidation through leasing or other transactions may be warranted within a fishing year to meet market demand because of the limited number of processors available. There is a limited market for fresh surfclams or ocean quahogs. The fisheries largely rely on a small number of processing plants to convert these species into final products or ingredients for other food companies. These plants operate by leasing cage tags from multiple quota shareholders and then providing those tags to harvesting vessels that deliver clams, as needed by the plants. The amount of annual cage tags that an individual or entity could have in a given year would be capped at 65 percent for surfclam and 70 percent for ocean quahog.
No person or entity currently exceeds the proposed quota share cap, nor has any entity exceeded the proposed cap on annual cage tags in recent years. The analysis conducted by Compass Lexecon did not support a conclusion that market power was being exercised through withholding of quota in this fishery. The Council's preferred cap limits were chosen to ensure that potential future consolidation does not reach the level of an excessive share of this fishery, and were not intended to restrict current quota share holdings.
Once implemented, NMFS would determine where each individual or entity that holds quota share is relative to the cap. This determination is based on the allocation held in whole or in part by that individual and the allocation held in whole or in part by their immediate family members. When an ITQ permit holder submits an application to transfer quota share and/or cage tags, NMFS would review the total allocation held by the ITQ permit holder and their immediate family members to determine whether the transfer would exceed the quota share cap or cage tag cap. If the ITQ permit is held by a business or partnership, the allocation held by the owners of that business (and their family members, if applicable) would be used in that determination.
An individual's immediate family members, for the purposes of monitoring these caps would consist of the individual's: Spouse and the spouse's parents; children and their spouses; parents and their spouses; siblings and their spouses; and grandparents and grandchildren and their spouses.
The excessive share caps would be monitored using a calculation of potential control. A person or entity would be considered to have potential control of any allocation held by themselves, their family members, or any business they have an ownership interest in. Here is a set of example calculations of potential control.
• Sue has potential control of 7 percent (the 2 percent of the quota in her name plus the 5 percent of the quota held by the company she part owns);
• Mary has potential control of 9 percent (the 5 percent of the quota held by the company she part owns plus the 4 percent of the quota held by her brother); and
• ABC Clams, Inc., has potential control of 11 percent of the quota (the 5 percent of the quota it holds directly plus the quota controlled by its owners, which in this case is the 2 percent of the quota Sue holds separately and the 4 percent of the quota Mary's brother holds).
Using tags to land surfclams does not reduce the calculation of potential control of cage tags, nor does transferring tags to another allocation holder. Continuing this example, ABC Clams uses all 100 tags it physically holds to land surfclams for a processor. The company agrees to acquire, through a temporary transfer, an additional 200 tags from another source in order to continue fishing. Because the potential control of allocation is considered cumulative in any given fishing year, this results in ABC Clams having potential control of 340 tags, even though it only has 200 tags physically in its possession. The tag transfer would also result in a corresponding increase to the potential control calculations for Sue (300 tags), John (300 tags), and Mary (340 tags). If ABC Clams decides to transfer 50 tags to another company, the transfer would not reduce ABC Clams calculation of potential control because ABC Clams controlled those tags at some point during the fishing year. If, later in the year, ABC Clams acquires another 50 tags to replace those it transferred earlier, its potential control would increase to 390 tags. In this way, acquiring tags during the fishing year would increase the calculated potential control, but using tags to land clams or transferring tags to others would not reduce the level of potential control.
If an entity inadvertently exceeds a cap, they would be required to take action to correct the situation. Such an overage could occur because of a change in company ownership that does not require a transfer application, for example. There may be a number of ways an entity could address such an overage and NMFS would not specify how the overage is to be corrected.
The Magnuson-Stevens Act specifies that any information submitted to the Secretary by any person in compliance with the requirements of the Act is confidential unless it falls under one of the listed exceptions. One of these exceptions is for information that is required to be submitted to the Secretary for any determination under a limited access program. If these regulations are finalized as proposed, the ownership information used by NMFS to monitor and enforce these caps would likely meet this exception and would no longer be subject to the Act's confidentiality requirements. This would include the identities of individuals who own businesses that hold quota share and annual cage tags as well as the family relationships that are used to link those individuals.
The information collection program implemented in 2016 included a wide range of information to ensure the Council had the data it needed to design and analyze a range of alternative management measures. The monitoring and enforcement of the caps being proposed do not require continued collection of some data elements, which would no longer be collected. The ITQ Ownership form would be modified to remove the collection of the names of corporate officers. The ITQ transfer form would be modified to remove most of the questions under “additional transaction details” except for total price. The questions being removed include broker fees and whether the transfer is part of a long-term contract.
The FMP currently limits multi-year specifications to a maximum duration of three years. The proposed change would allow the Council to develop specifications for the number of years needed to align with the stock assessment schedule approved by the Northeast Region Coordinating Council (NRCC). The NRCC is comprised of representatives from the Mid-Atlantic Fishery Management Council, the New England Fishery Management Council, the Atlantic States Marine Fisheries Commission, the NMFS Greater Atlantic Regional Fisheries Office, and the Northeast Fishery Science Center. One of its roles is to develop a schedule for fishery stock assessments that balances the needs of the numerous fisheries in the region with the available resources. The current schedule calls for an updated stock assessment every four years for surfclam and every six years for ocean quahog. These assessment intervals are the result of recent improvements to the methods used to survey these wild populations. Changing the duration of specifications to match the assessments will allow the Council, Council staff, and NMFS staff to avoid spending time developing new specifications packages when no new information on the health of the stocks are available. The Council and its Scientific and Statistical Committee will continue the current practice of reviewing the specifications each year, and making mid-cycle adjustments if conditions warrant.
Pursuant to section 303(c) of the Magnuson-Stevens Act, the Council has deemed that this proposed rule is necessary and appropriate for the purpose of implementing Amendment 20.
Pursuant to section 304(b)(1)(A) of the Magnuson-Stevens Act, the Assistant Administrator for Fisheries, NOAA, has determined that this proposed rule is consistent with Amendment 20, other provisions of the Magnuson-Stevens Act, and other applicable law, subject to further consideration after public comment.
This proposed rule has been determined to be not significant for purposes of Executive Order 12866.
The Chief Counsel for Regulation of the Department of Commerce certified to the Chief Counsel for Advocacy of the Small Business Administration (SBA) that this proposed rule, if adopted, would not have a significant economic impact on a substantial number of small entities. The factual basis for this certification is as follows.
A complete description of the measures, why they are being considered, and the legal basis for proposing and implementing these measures for the surfclam and ocean quahog fisheries are contained above in the preamble to this proposed rule.
The measures proposed by this action apply to surfclam and ocean quahog allocation owners. These are the individuals or entities that received initial individual transferable quota (ITQ) allocations (
For Regulatory Flexibility Act purposes, NMFS has established a size standard for small businesses, including their affiliated operations, whose primary industry is commercial fishing (see 50 CFR 200.2). A business primarily engaged in commercial fishing (North American Industry Classification System (NAICS) code 11411) is classified as small if it is independently owned and operated, is not dominant in its field of operation (including its affiliates), and has combined annual receipts not in excess of $11.0 million for all its affiliated operations worldwide. For other types of businesses, the SBA size standards for the relevant NAICS codes were used to categorize businesses by industry description. Of the 64 initial surfclam allocation owners of record for 2019, 19 were categorized as “Commercial Fishing,” with 100 percent of them classified as small entities (under $11 million in revenues). Of the nine allocation owners that were categorized as “Fish and Seafood Merchant Wholesalers,” one was classified as a small entity (under 100 employees) (11
Of the 33 initial ocean quahog allocation owners of record for 2019, 14 were categorized as “Commercial Fishing,” with 100 percent of them classified as small entities. Of the six allocation owners that were categorized as “Fish and Seafood Merchant Wholesalers,” two were classified as small entities (33 percent) and four were classified as large entities (67 percent). One allocation owner was categorized as “Commercial Banking” and one was categorized as “Credit Unions” with 100 percent of them classified as large entities. The SBA classification for the remaining allocations owners is unknown.
The proposed measures are administrative in nature and are not expected to have impacts on the prosecution of the surfclam and ocean quahog fisheries, including landings levels (no changes in surfclam or ocean quahog ex-vessel revenues are expected), fishery distribution, or fishing methods and practices. The proposed action is not expected to result in changes to the manner in which the surfclam and ocean quahog fisheries are prosecuted, or the manner in which the industry operates. An analysis of the operation of the fishery in 2017 shows that if the proposed caps had been in place, all entities would have fallen below the proposed cap levels. As such, no entity would have been constrained by those cap levels, and the caps would help prevent future excessive consolidation of the fishery. The proposed change to the maximum duration of multi-year specifications is administrative and would not affect how the fishery currently operates.
The proposed actions would have no impact on the way the fishery operates, and, therefore, is not expected to disproportionately affect small entities. Nor are the proposed actions expected to have a significant economic impact on a substantial number of small entities. As a result, an initial regulatory flexibility analysis is not required and none has been prepared.
This proposed rule contains a collection-of-information requirement subject to review and approval by OMB under the Paperwork Reduction Act (PRA). This rule revises the existing requirements for the collection of information 0648–0240 by removing the section of the ITQ Ownership form that requires identification of corporate officers and removing some of the “additional transaction details” questions from the ITQ transfer form. The Council chose not to use this information to define or monitor the excessive share caps and collecting the information would no longer be necessary. Removing these questions is not anticipated to change to the number of respondents or responses and would not have a measurable reduction in burden hours or costs. An extension of the collection is also requested through this action. Public reporting burden for the ITQ ownership form is estimated to be one hour to complete for new entrants and five minutes to review a pre-filled form for renewing entities. The ITQ transfer form is estimated to take five minutes to complete. These estimates include the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information.
Public comment is sought regarding: Whether this proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; the accuracy of the burden estimate; ways to enhance the quality, utility, and clarity of the information to be collected; and ways to minimize the burden of the collection of information, including through the use of automated collection techniques or other forms of information technology. Submit comments on these or any other aspects of the collection of information at
Notwithstanding any other provisions of the law, no person is required to respond to, nor shall any person by subject to a penalty for failure to comply with, a collection of information subject to the requirements of the PRA, unless that collection of information displays a currently valid OMB Control Number.
Fisheries, Fishing, Reporting and recordkeeping requirements.
For the reasons set out in the preamble, 50 CFR part 648 is proposed to be amended as follows:
16 U.S.C. 1801
(j) * * *
(3) * * *
(viii) Take action to circumvent an ITQ quota share cap or cage tag cap specified in 648.74(a)(2) or fail to take corrective action if such cap is exceeded inadvertently.
The revisions to read as follows:
(a)
(1)
(b)
(a) * * *
(2)
(ii)
(iii)
(A) Any partial or shared ownership is counted as full ownership by each party for the purpose of monitoring these caps. For example, if two people share ownership of a business with quota share, the full amount of quota share held by the business counts toward the cap for both owners.
(B) Having an ownership interest includes, but is not limited to, persons who are shareholders in a corporation that holds an ITQ permit, who are partners (general or limited) to an ITQ permit holder, who are immediate family members of an ITQ permit holder, or who, in any way, partly own an entity that holds an ITQ permit.
(C) Immediate family members include individuals connected by the following relationships:
(
(
(
(
(
(D) The quota share and cage tag caps do not apply to a bank or other lender that holds ITQ quota share as collateral on a loan as described in paragraph (a)(1)(i)(C) of this section. The quota share held as collateral and the associated cage tags will be treated as if it is held by the borrower.
(E) Compliance with these ownership caps is based on the total amount of quota share or cage tags controlled throughout a fishing year. In this instance, control means the cumulative total amount of quota share or cage tags, including the amount held by the ITQ permit at the start of the fishing year plus any quota share or cage tags acquired by the ITQ permit throughout the fishing year. This measure of control during the fishing year is increased by acquiring quota share or cage tags from other ITQ permits, but is not reduced by any quota share or cage tags that are transferred to another ITQ permit.
(iv)
(b) * * *
(3)
Federal Crop Insurance Corporation and Risk Management Agency, U.S. Department of Agriculture (USDA).
Notification of funding availability.
The Risk Management Agency (RMA), on behalf of the Federal Crop Insurance Corporation (FCIC), announces the availability of funding under the Transitional and Organic Grower Assistance (TOGA) Program. The TOGA Program aims to assist producers that transition to and continue using organic agricultural systems. To address the economic challenges that arose due to the COVID–19 pandemic, this crop insurance support to growers is a part of building more and better markets for American growers and consumers and increasing the resilience of the food supply chain. TOGA premium assistance will be applied to the premium billing statements for the 2023 reinsurance year, which covers applicable policies with sales closing dates from July 1, 2022, to June 30, 2023. For most eligible crops, the 2023 reinsurance year is also the 2023 crop year. However, a few crops are in the 2023 reinsurance year but cover a different crop year. Some examples include raisins, California avocados, macadamia nuts, and several citrus crops.
Francie Tolle; telephone: (816) 926–7829; email:
This document specifies the terms and conditions of the TOGA Program. RMA, on behalf of FCIC, will administer the TOGA Program. The TOGA program aims to assist producers that transition to and continue using organic agricultural systems. To address the economic challenges that arose due to the COVID–19 pandemic, this crop insurance support to growers is a part of building more and better markets for American growers and consumers and increasing the resilience of the food supply chain. The TOGA Program provides the following benefits:
• For crops in transition to certified organic, premium assistance of an additional 10 percentage points of premium subsidy; and
• For organic grain and feed crops, an additional premium subsidy of up to $5 per insured acre.
Funding is for crop policies for the 2023 reinsurance year. Funds from Division N of the Consolidated Appropriations Act, 2021, (Pub. L. 116–260) will be used for the TOGA Program.
These crop insurance incentives amplify and assist producers transitioning to organic agricultural systems as part of the Administration's commitment to climate-smart agriculture. The premium assistance will make crop insurance more affordable for growers as they transition to organic agricultural systems and continue to produce certified organic feed and grain crops. Participation in crop insurance provides assurance to banks for loans to help producers secure the funds they need to help pay operating costs.
For crops in transition, the premium assistance of an additional 10 percentage points of premium subsidy is similar to Beginning Farmer and Rancher and Veteran Farmer and Rancher benefits. Targeting crops in transition will help provide economic stability for producers as they transition to certified organic. The 3-year transition period requires producers to farm organically, while receiving a conventional price for their crop despite employing organic practices.
For certified organic grain and feed crops, the premium assistance subsidy of up to $5 per insured acre is consistent with the Pandemic Cover Crop Program. Growing demand for organic products is outpacing domestic supply. The United States is becoming reliant on imports, particularly for grain and feed. Targeting organic grain and feed crops offers an opportunity for increased production to meet growing demand. Increasing local supply for these products allows for a shift in demand for domestic products and away from imports.
Due to the complexity of Whole Farm Revenue Protection (WFRP) policies covering more than one crop and some crops being reported in different quantity measures, such as trees rather than acres, there is a separate benefit for WFRP of an additional 10 percentage points of premium subsidy.
To be eligible for premium assistance under the TOGA Program, the participant must be a person who is eligible to receive Federal benefits and who has purchased a 2023 reinsurance year additional coverage crop insurance policy for crops in transition or a certified organic grain or feed crop.
The added premium assistance for the TOGA Program can be in addition to premium assistance received from any other premium subsidy assistance sources.
WFRP policies with crops in transition or certified organic practice crops are eligible for premium assistance of an additional 10 percentage points of premium subsidy. Eligible producers who have individual crop insurance policies for crops in transition or organic grain and feed crops in addition to their WFRP policy will receive the premium assistance on both the individual crop insurance policies and WFRP policy, as applicable.
Stacked Income Protection Plan (STAX) and Margin Protection (MP) policies are only eligible for TOGA when insured as a standalone crop insurance policy.
Participants who are in violation of Highly Erodible Land or Wetlands Conservation (16 U.S.C. 3811, 3812, and 3821) are not eligible for premium support under the TOGA Program.
Supplemental Coverage Option, Enhanced Coverage Option, Post-Application Coverage Endorsement, and Hurricane Insurance Protection—Wind Index options or endorsements are not eligible for TOGA.
STAX and MP endorsements to underlying policies are not eligible for TOGA.
The total funding available for the TOGA Program is $25 million. When the total premium support sum of $25 million for the TOGA Program are reached or may be reached, the RMA Administrator may suspend the program at their sole discretion.
For eligible 2023 reinsurance year crop insurance policies, for crops in transition, the TOGA Program will provide an additional 10 percentage points of premium subsidy, calculated on a total premium basis for the crops in transition, with a maximum equal to the amount of premium owed by the eligible producer. If the full amount under the TOGA Program would result in a negative premium balance for the producer, the TOGA Program amount will be limited to the full amount of premium owed.
For eligible 2023 reinsurance year crop insurance policies, for eligible insured certified organic acres, the TOGA Program will provide an additional premium subsidy of $5 per insured acre, with a maximum equal to the amount of premium owed by the producer. Amounts under the TOGA Program are limited to the full amount of premium owed by the producer for the eligible insured certified organic acres. If the full amount under the TOGA Program would result in a negative premium balance for the producer on a per insured acre basis, the TOGA Program amounts will be limited to the full amount of premium owed on a per insured acre basis.
For eligible 2023 reinsurance year WFRP policies with crops in transition or certified organic practice, the TOGA Program will provide an additional 10 percentage points of premium subsidy, calculated on a total premium basis, with a maximum equal to the amount of premium owed by the eligible producer. If the full amount under the TOGA Program would result in a negative premium balance for the producer, the TOGA Program amounts will be limited to the full amount of premium owed.
All other Federal premium assistance will be applied before TOGA premium assistance. If the crop insurance policy is amended for any reason, such as overreporting, the amount under the TOGA Program will be based on the crop insurance policy after any such amendment.
The amount under the TOGA Program will not be paid directly to participants but will be accounted for in calculating total producer premium due from producers for the crop and reflected in their premium bills, and as subject to the applicable premium billing date. All bills still follow the same terms and conditions specified in the crop insurance policy, regardless of the TOGA Program amounts.
The payment limitations in 7 CFR 760.1507 are not applicable to the TOGA Program.
TOGA premium support will be provided via premium billing adjustments on the applicable billing statements for crops in transition and organic grain or feed crops. RMA will use all necessary records provided by AIPs, including producer crop insurance forms to determine eligibility. The eligible producers do not need to provide any additional information to their crop insurance agent to enroll in the TOGA Program.
If any TOGA Program amount is determined to be incorrect, the amount will be recalculated until the applicable reinsurance year annual settlement date, unless otherwise specified by the RMA Administrator. After that date, the amount will be final except in cases of misrepresentation, fraud, scheme, or device.
In accordance with the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35, subchapter I), the notice does not change the information collection approved by OMB under control numbers 0563–0053.
The environmental impacts of this final rule have been considered in a manner consistent with the provisions of the National Environmental Policy
The title and number of the Federal assistance programs, as found in the Assistance Listing,
In accordance with Federal civil rights law and USDA civil rights regulations and policies, USDA, its Agencies, offices, and employees, and institutions participating in or administering USDA programs are prohibited from discriminating based on race, color, national origin, religion, sex, gender identity (including gender expression), sexual orientation, disability, age, marital status, family or parental status, income derived from a public assistance program, political beliefs, or reprisal or retaliation for prior civil rights activity, in any program or activity conducted or funded by USDA (not all bases apply to all programs). Remedies and complaint filing deadlines vary by program or incident.
Persons with disabilities who require alternative means of communication for program information (for example, braille, large print, audiotape, American Sign Language, etc.) should contact the responsible Agency or USDA TARGET Center at (202) 720–2600 or (844) 433–2774 (toll-free nationwide). Additionally, program information may be made available in languages other than English.
To file a program discrimination complaint, complete the USDA Program Discrimination Complaint Form, AD–3027, found online at
USDA is an equal opportunity provider, employer, and lender.
Food and Nutrition Service (FNS), USDA.
Notice.
In accordance with the Paperwork Reduction Act of 1995, this notice invites the general public and other public agencies to comment on this proposed information collection. This is a revision of a currently approved collection. This information collection consists of State agency notification and data collection activities associated with a major change in Supplemental Nutrition Assistance Program (SNAP) operations at the State level.
Written comments must be received on or before October 24, 2022.
Comments may be sent to: Jessica Luna, Food and Nutrition Service, U.S. Department of Agriculture, 1320 Braddock Place, 5th Floor, Alexandria, VA 22314. Comments may also be submitted via email to
Requests for additional information or copies of this information collection should be directed to Jess Luna at 703–305–4391.
Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions that were used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on those who are to respond, including use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.
As decisions to make major changes to program operations rest with each individual State agency, the frequency and timing of the changes can only be estimated. Prior to any major change to
(A) 7 CFR 272.15(a)(3) Initial Analysis of Major Change: Based upon FNS' experience over the last six years, out of the 53 State agencies this data collection impacts, FNS estimates that on average 13 States will submit major changes annually. FNS estimates that the overall annual total of the collection of information for the State agencies is 65 total annual responses and 6,704 burden hours. With an estimated 13 States reporting 1 major change per year, the initial reporting and analysis aspect of the rulemaking would be 13 annual responses × 40 hours per initial response per State = an estimated 520 burden hours per year.
(B) 7 CFR 272.15(b)(1)–(3) Reports Required without Additional Data Collection: After notifying FNS of a major change, States must report to FNS on a quarterly basis the mandatory reporting requirements outlined in 7 CFR 272.15(b)(1)–(3) and may be subject to additional reporting requirements depending on the major change. Therefore, FNS projects that for 8 of the 13 major changes expected each year there would be no additional reporting burden beyond the mandatory reporting. All 13 of the major changes (8 States report without additional data collection and 5 State reports required with additional data collection) estimated each year are expected to require some automated system reprogramming to generate the required mandatory data reporting. Therefore, FNS estimates 8 States will submit this report on a quarterly basis for a total of 4 responses/reports annually for a total of 32 annual responses. We estimate it will take approximately 42 hours per report, per State for a total of 1,344 annual burden hours. [In consultation with States, we determined it will take 96 hours per State agency to program its system to provide the data for the report which would be 1,248 hours per year (13 × 96). Preparing the 52 quarterly reports are estimated to require 18 hours per State agency. The total for the 13 States would be 1,248 + 936 hours = 2,184 total hours for reporting (divided by the 13 States = 168 hours per State per year).]
(C) 7 CFR 272.15(b)(4) Reports Required with Additional Data Collection: Furthermore, FNS estimates it will require 5 States to report additional data on a quarterly basis for a year (a total of 4 responses/reports annually for a total of 20 annual responses). We estimate it will take each State agency 242 hours per response for a total of 4,840 burden hours. [Such data will generally be collected through a sample of case reviews. While the required sample sizes may vary based on the type of major change and the proportion of the State's SNAP caseload it may affect, 200 cases per quarter would likely be an upper limit on what FNS would ask of a State. At an estimated one hour to review and report on a case, this would require 800 hours per year for one State each year.]
When the 520 hours for major change notifications, the 1,344 hours for reports required without additional data and 4,480 hours for reports required with additional data are added the total for the 13 States is 6,704 total annual burden hours. There are 13 total annual responses for major change notifications, 32 total annual responses for reports required without additional data and 20 total annual responses for reports required with additional data for a total of 65 total annual responses.
(D)
This information collection does not contain burden associated with recordkeeping and/or third party or public disclosures.
Food and Nutrition Service (FNS), USDA.
Notice.
In accordance with the Paperwork Reduction Act of 1995, this notice invites the general public and other public agencies to comment on this proposed information collection. This is a revision of a currently approved collection codified in Food and Nutrition Service (FNS) regulations.
Written comments must be received on or before October 24, 2022.
Comments may be sent to: Maribelle Balbes, Chief, State Administration Branch, Food and Nutrition Service, U.S. Department of Agriculture, 1320 Braddock Place Alexandria, VA 22314, 5th Floor. Comments may also be submitted via email to
Requests for additional information or copies of this information collection should be directed to Evan Sieradzki 703–605–3212.
Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions that were used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on those who are to respond, including use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.
FNS regulations at 7 CFR 274.6(b)(5) and (b)(5)(i)
FNS regulations at 7 CFR 274.6(b)(6) and (b)(6)(i)
FNS is currently aware out of the 53 State agencies, six State agencies have opted to follow our regulations at 7 CFR 274.6(b)(5) to withhold replacement cards. The remaining 47 State agencies follow our regulations at 7 CFR 274.6(b)(6) for the Excessive Replacement Card Notice.
There is no third party reporting associated with this information collection request.
See the table below for estimated total reporting annual burden for each type of respondent.
The Materials and Equipment Technical Advisory Committee will meet on September 8, 2022, 10:00 a.m., Eastern Daylight Time, via teleconference. The Committee advises the Office of the Assistant Secretary for Export Administration with respect to technical questions that affect the level of export controls applicable to materials and related technology.
1. Opening Remarks and Introduction by BIS Senior Management.
2. Presentation by Dr. Elizabeth Vitalis, Inscripta `Genome Engineering and Biosecurity'.
3. Questions and Answers Session.
4. Presentation by Dr. Betty Lee, BIS, `Analyzing Networks Using an Open Source Analysis Tool'.
5. Discussion of matters determined to be exempt from the provisions relating to public meetings found in 5 U.S.C. App. §§ 10(a)(1) and 10(a)(3).
The open session will be accessible via teleconference on a first come, first serve basis. To join the conference, submit inquiries to Ms. Yvette Springer at
To the extent time permits, members of the public may present oral statements to the Committee. Written statements may be submitted at any time before or after the meeting. However, to facilitate distribution of public presentation materials to Committee members, the materials should be forwarded prior to the meeting to Ms. Springer via email.
The Assistant Secretary for Administration, with the concurrence of the delegate of the General Counsel, formally determined on February 14, 2022, pursuant to Section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App. § 10(d)), that the portion of the meeting dealing with pre-decisional changes to the Commerce Control List and the U.S. export control policies shall be exempt from the provisions relating to public meetings found in 5 U.S.C. App. §§ 10(a)(1) and 10(a)(3). The remaining portions of the meeting will be open to the public.
For more information, contact Yvette Springer via email.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) continues to determine that Honda Power Products (China) Co., Ltd. (Honda) is the successor-in-interest to Jialing-Honda Motors Co., Ltd. (Jialing) and is entitled to the same cash deposit rate as Jialing under the antidumping duty (AD) order on certain vertical shaft engines between 225cc and 999cc and parts thereof (vertical shaft engines) from the People's Republic of China (China).
Applicable August 24, 2022.
Leo Ayala or Jacob Saude AD/CVD Operations, Office VII, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482–3945 or (202) 482–0981, respectively.
On June 9, 2022, Commerce published the
The merchandise covered by the
Engines covered by this scope normally must comply with and be certified under Environmental Protection Agency (EPA) air pollution controls title 40, chapter I, subchapter U, part 1054 of the Code of Federal Regulations standards for small non-road spark-ignition engines and equipment. Engines that otherwise meet the physical description of the scope but are not certified under 40 CFR part 1054 and are not certified under other parts of subchapter U of the EPA air pollution controls are not excluded from the scope of the
For purposes of the
The engines subject to the
Having received no comments or information that calls into question the
Consequently, Commerce will instruct U.S. Customs and Border Protection to suspend liquidation of all shipments of subject merchandise exported by Honda and entered, or withdrawn from warehouse, for consumption on or after the publication date of this notice in the
This notice serves as a final reminder to parties subject to an administrative protective order (APO) of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3). Timely written notification of the return or destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and terms of an APO is a sanctionable violation.
This notice is published in accordance with sections 751(b)(1) and 777(i) of the Tariff Act of 1930, as amended, and 19 CFR 351.216(e).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) determines that countervailable subsidies are being provided to the producers and exporters subject to the administrative review of wooden cabinets and vanities and components thereof (cabinets) from the People's Republic of China (China) during the period of review (POR) August 12, 2019, through December 31, 2020. Commerce is also rescinding the review with respect to four companies that had no reviewable entries during the POR.
Applicable August 24, 2022.
Thomas Schauer, AD/CVD Operations, Office I, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482–0410.
Commerce published the
The product covered by the
All issues raised by interested parties in briefs are addressed in the Issues and Decision Memorandum accompanying this notice. A list of the issues raised by interested parties and to which Commerce responded in the Issues and Decision Memorandum is provided in the Appendix to this notice. The Issues and Decision Memorandum is a public document and is on file electronically via Enforcement and Compliance's Antidumping and Countervailing Duty Centralized Electronic Service System (ACCESS). ACCESS is available to registered users at
Based on comments in case and rebuttal briefs and record evidence, Commerce made certain changes from the
Commerce conducted this administrative review in accordance with section 751(a)(1)(A) of the Tariff Act of 1930, as amended (the Act). For each subsidy program found to be countervailable, Commerce finds that there is a subsidy,
It is Commerce's practice to rescind an administrative review of a CVD order, pursuant to 19 CFR 351.213(d)(3), when there are no reviewable entries of subject merchandise during the POR for which liquidation is suspended.
As noted in the
The statute and Commerce's regulations do not address the establishment of a rate to be applied to companies not selected for examination when Commerce limits its examination in an administrative review pursuant to section 777A(c)(2) of the Act. Generally, Commerce looks to section 705(c)(5) of the Act, which provides instructions for determining the all-others rate in an investigation, for guidance when calculating the rate for companies which were not selected for individual examination in an administrative review. Under section 705(c)(5)(A) of the Act, the all-others rate is normally “an amount equal to the weighted average of the countervailable subsidy rates established for exporters and producers individually investigated, excluding any zero or
There are two companies for which a review was requested and not rescinded, and which were not selected as mandatory respondents or found to be cross owned with a mandatory respondent: (1) Jiangsu Xiangsheng Bedtime Furniture Co., Ltd., and (2) Senke Manufacturing Company. For these non-selected companies, we are basing the subsidy rate on the subsidy rate calculated for Hualing, the only mandatory respondent with a final subsidy rate that is not zero,
In accordance with 19 CFR 351.221(b)(5), Commerce calculated the following net countervailable subsidy rates for the period August 12, 2019, through December 31, 2020
We intend to disclose the calculations performed in connection with these final results to parties in this proceeding within five days after public announcement of the final results or, if there is no public announcement, within five days of the date of publication of the notice of final results in the
Pursuant to section 751(a)(2)(C) of the Act and 19 CFR 351.212(b)(2), Commerce will determine, CBP shall assess, countervailing duties on all appropriate entries of subject merchandise covered by this review. We intend to issue assessment instructions to CBP 35 days after the date of publication of these final results of review. If a timely summons is filed at the U.S. Court of International Trade, the assessment instructions will direct CBP not to liquidate relevant entries until the time for parties to file a request for a statutory injunction has expired (
For the companies for which this review is rescinded, Commerce will instruct CBP to assess countervailing duties on all appropriate entries at a rate equal to the cash deposit of estimated countervailing duties required at the time of entry, or withdrawal from warehouse, for consumption, during the POR in accordance with 19 CFR 351.212(c)(l)(i).
In accordance with section 751(a)(1) of the Act, Commerce intends to instruct CBP to collect cash deposits of estimated countervailing duties in the amounts shown for each of the respective companies listed above on shipments of subject merchandise entered, or withdrawn from warehouse, for consumption on or after the date of publication of the final results of this administrative review. For all non-reviewed firms subject to the order, we will instruct CBP to continue to collect cash deposits of estimated countervailing duties at the most recent company-specific or all-others rate applicable to the company, as appropriate. These cash deposit requirements, effective upon publication of these final results, shall remain in effect until further notice.
This notice also serves as a reminder to parties subject to an administrative protective order (APO) of their responsibility concerning the destruction of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3). Timely written notification of the return or destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and terms of an APO is a sanctionable violation.
Commerce is issuing and publishing these final results in accordance with sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR 351.221(b)(5).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
Applicable August 24, 2022.
Jacob Saude or Myrna Lobo, AD/CVD Operations, Office VII, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482–0981 or (202) 482–2371, respectively.
On April 20, 2022, the U.S. Department of Commerce (Commerce) initiated a less-than-fair-value (LTFV) investigation of imports of white grape juice concentrate (WGJC) from Argentina.
Section 733(b)(1)(A) of the Tariff Act of 1930, as amended (the Act), requires Commerce to issue the preliminary determination in an LTFV investigation within 140 days after the date on which Commerce initiated the investigation. However, section 733(c)(1) of the Act permits Commerce to postpone the preliminary determination until no later than 190 days after the date on which Commerce initiated the investigation if: (A) the petitioner makes a timely request for a postponement; or (B) Commerce concludes that the parties concerned are cooperating, that the investigation is extraordinarily complicated, and that additional time is necessary to make a preliminary determination. Under 19 CFR 351.205(e), the petitioner must submit a request for postponement 25 days or more before the scheduled date of the preliminary determination and must state the reasons for the request. Commerce will grant the request unless it finds compelling reasons to deny the request.
On August 5, 2022, the petitioner
For the reasons stated above and because there are no compelling reasons to deny the request, Commerce, in accordance with section 733(c)(1)(A) of the Act and 19 CFR 351.205(e), is postponing the deadline for the preliminary determination by 50 days (
This notice is issued and published pursuant to section 733(c)(2) of the Act and 19 CFR 351.205(f)(1).
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; receipt of application.
Notice is hereby given that Robin Baird, Ph.D., Cascadia Research Collective, 218
Written, telefaxed, or email comments must be received on or before September 23, 2022.
The application and related documents are available for review by selecting “Records Open for Public Comment” from the “Features” box on the Applications and Permits for Protected Species (APPS) home page,
Written comments on this application should be submitted via email to
Those individuals requesting a public hearing should submit a written request via email to
Shasta McClenahan, Ph.D. or Courtney Smith, Ph.D., (301) 427–8401.
The subject permit is requested under the authority of the Marine Mammal Protection Act of 1972, as amended (MMPA; 16 U.S.C. 1361
The applicant requests a 5-year permit to take marine mammals in the Pacific Ocean to study population structure, size, and range, movements, habitat use,
In compliance with the National Environmental Policy Act of 1969 (42 U.S.C. 4321
Concurrent with the publication of this notice in the
National Assessment Governing Board, U.S. Department of Education.
Notice of closed teleconference meeting.
This notice sets forth the agenda and instructions to submit written comment for an August 29, 2022 closed teleconference meeting of the National Assessment Governing Board's (Governing Board) Executive Committee. This notice provides information to members of the public who may be interested in providing written comments related to the work of the Governing Board. Notice of this meeting is required under section 10(a)(2) of the Federal Advisory Committee Act (FACA). This notice is being published less than 15 days prior to the meeting due to changes in committee leadership necessitating changes in responsibilities with respect to agenda items. The Chair of the Assessment Development committee resigned from the Board on August 9, 2022, and there were subsequent delays in rescheduling the meeting date with updated agenda topics.
August 29, 2022.
The meeting will be conducted via teleconference.
Munira Mwalimu, Executive Officer/Designated Federal Official for the Governing Board, 800 North Capitol Street NW, Suite 825, Washington, DC 20002, telephone: (202) 357–6938, fax: (202) 357–6945, email:
(1) selecting the subject areas to be assessed; (2) developing appropriate student achievement levels; (3) developing assessment objectives and testing specifications that produce an assessment that is valid and reliable, and are based on relevant widely accepted professional standards; (4) developing a process for review of the assessment which includes the active participation of teachers, curriculum specialists, local school administrators, parents, and concerned members of the public; (5) designing the methodology of the assessment to ensure that assessment items are valid and reliable, in consultation with appropriate technical experts in measurement and assessment, content and subject matter, sampling, and other technical experts who engage in large scale surveys; (6) measuring student academic achievement in grades 4, 8, and 12 in the authorized academic subjects; (7) developing guidelines for reporting and disseminating results; (8) developing standards and procedures for regional and national comparisons; (9) taking appropriate actions needed to improve the form, content use, and reporting of results of an assessment; and (10) planning and executing the initial public release of NAEP reports.
According to the Assessment Framework Development policy approved at the March 2022 quarterly Board meeting, the Governing Board delegated authority to the Executive Committee to review and approve a final list of science experts to serve on a review panel that will provide feedback on content areas for the National Assessment of Educational Progress (NAEP) Science Framework.
NAEP frameworks provide the blueprint for the content and design of each NAEP assessment. For each framework, the Governing Board works with a committee of subject matter experts, practitioners, and members of the public—including researchers, educators, business leaders, and policymakers—to develop a rich and rigorous set of standards that define what students should know and be able to do in a particular subject. Additional information on how NAEP Frameworks are developed can be found at
Federal Student Aid (FSA), Department of Education (ED).
Notice
In accordance with the Paperwork Reduction Act of 1995, ED is proposing a new collection.
Interested persons are invited to submit comments on or before September 23, 2022.
Written comments and recommendations for proposed information collection requests should be sent within 30 days of publication of this notice to
For specific questions related to collection activities, please contact Beth Grebeldinger, (202) 377–4018.
The Department, in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. ED is soliciting comments on the proposed ICR that is described below. The Department is especially interested in public comments addressing the following issues: (1) is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology. Please note that written comments received in response to this notice will be considered public record.
The license for the Hinckley (Gregory B. Jarvis) Hydroelectric Project No. 3211 was issued for a period ending July 31, 2022.
Section 15(a)(1) of the FPA, 16 U.S.C. 808(a)(1), requires the Commission, at the expiration of a license term, to issue from year-to-year an annual license to the then licensee(s) under the terms and conditions of the prior license until a new license is issued, or the project is otherwise disposed of as provided in section 15 or any other applicable section of the FPA. If the project's prior license waived the applicability of section 15 of the FPA, then, based on section 9(b) of the Administrative Procedure Act, 5 U.S.C. 558(c), and as set forth at 18 CFR 16.21(a), if the licensee of such project has filed an application for a subsequent license, the licensee may continue to operate the project in accordance with the terms and conditions of the license after the minor or minor part license expires, until the Commission acts on its application. If the licensee of such a project has not filed an application for a subsequent license, then it may be required, pursuant to 18 CFR 16.21(b), to continue project operations until the Commission issues someone else a license for the project or otherwise orders disposition of the project.
If the project is subject to section 15 of the FPA, notice is hereby given that an annual license for Project No. 3211 is issued to the Power Authority of the State of New York for a period effective August 1, 2022 through July 31, 2023, or until the issuance of a new license for the project or other disposition under the FPA, whichever comes first. If issuance of a new license (or other disposition) does not take place on or before July 31, 2023, notice is hereby given that, pursuant to 18 CFR 16.18(c), an annual license under section 15(a)(1) of the FPA is renewed automatically without further order or notice by the Commission, unless the Commission orders otherwise.
If the project is not subject to section 15 of the FPA, notice is hereby given that the Power Authority of the State of New York is authorized to continue operation of the Hinckley (Gregory B. Jarvis) Hydroelectric Project under the terms and conditions of the prior license until the issuance of a new license for the project or other disposition under the FPA, whichever comes first.
On March 28, 2022, PacifiCorp filed an application for a major, new license for the 30-megawatt Cutler Hydroelectric Project (Cutler Project; FERC No. 2420). The Cutler Project is located on the Bear River in Box Elder and Cache Counties, Utah. No federal or tribal lands occur within the project boundary or along the Bear River downstream of the project. There are three parcels of land located in Cutler Canyon adjacent to the project boundary that are administered by the Bureau of Land Management.
In accordance with the Commission's regulations, on July 6, 2022, Commission staff issued a notice that the project was ready for environmental analysis (REA Notice). Based on the information in the record, including comments filed on the REA Notice, staff does not anticipate that licensing the project would constitute a major federal action significantly affecting the quality of the human environment. Therefore, staff intends to prepare a draft and final Environmental Assessment (EA) on the application to relicense the Cutler Project.
The EA will be issued and circulated for review by all interested parties. All comments filed on the EA will be analyzed by staff and considered in the Commission's final licensing decision.
The application will be processed according to the following schedule. Revisions to the schedule may be made as appropriate.
Any questions regarding this notice may be directed to Khatoon Melick at (202) 502–8433 or
Take notice that the Commission has received the following Natural Gas Pipeline Rate and Refund Report filings:
Any person desiring to protest in any the above proceedings must file in accordance with Rule 211 of the Commission's Regulations (18 CFR 385.211) on or before 5:00 p.m. Eastern time on the specified comment date.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
The filings are accessible in the Commission's eLibrary system (
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that the following hydroelectric application has been filed with the Commission and is available for public inspection:
a.
b.
c.
d.
e.
f.
g.
h.
i.
j. Deadline for filing comments, motions to intervene, and protests is September 7, 2022.
The Commission strongly encourages electronic filing. Please file comments, motions to intervene, and protests using the Commission's eFiling system at
The Commission's Rules of Practice and Procedure require all intervenors filing documents with the Commission to serve a copy of that document on each person whose name appears on the official service list for the project. Further, if an intervenor files comments or documents with the Commission relating to the merits of an issue that may affect the responsibilities of a particular resource agency, they must also serve a copy of the document on that resource agency.
k.
l.
m. Individuals desiring to be included on the Commission's mailing list should so indicate by writing to the Secretary of the Commission.
n.
o.
Federal Energy Regulatory Commission.
Notice of information collection and request for comments.
In compliance with the requirements of the Paperwork Reduction Act of 1995, the Federal Energy Regulatory Commission (Commission or FERC) is soliciting public comment on the currently approved information collection, FERC–604 (Cash Management Agreements), which will be submitted to the Office of Management and Budget (OMB) for a review of the information collection requirements.
Comments on the collection of information are due September 23, 2022.
Send written comments on FERC–604 to OMB through
Please submit copies of your comments (identified by Docket No. IC22–14–000) to the Commission as noted below. Electronic filing through
•
• For those unable to file electronically, comments may be filed by USPS mail or by hand (including courier) delivery.
○
○
FERC submissions must be formatted and filed in accordance with submission guidelines at:
Ellen Brown may be reached by email at
• Sections 8 and 10 of the Natural Gas Act (15 U.S.C. 717g and 717i);
• Sections 301 and 304 of the Federal Power Act (16 U.S.C. 835 and 825c); and
• Sections 20(1) and 20(5) of the Interstate Commerce Act (49 App. U.S.C. 20(1) and 20(5)).
Cash management or “money pool” programs typically concentrate affiliates' cash assets in joint accounts for the purpose of providing financial flexibility and lowering the cost of borrowing. In a 2001 investigation, FERC staff found that balances in cash management programs affecting FERC-regulated entities totaled approximately $16 billion. Additionally, other investigations revealed large transfers of funds (amounting to more than $1 billion) between regulated pipeline affiliates and non-regulated parents whose financial conditions were precarious. The Commission found that these and other fund transfers and the enormous (mostly unregulated) pools of money in cash management programs could detrimentally affect regulated rates.
To protect customers and promote transparency, the Commission issued Order 634–A (2003) requiring entities to formalize in writing and file with the Commission their cash management agreements. At that time, the Commission obtained OMB clearance for this new reporting requirement under the FERC–555 information collection (OMB Control No. 1902–0098). Now, the Commission includes these reporting requirements for cash management agreements under the FERC–604 information collection (OMB Control No. 1902–0267). The Commission implements these reporting requirements in accordance with 18 CFR 141.500, 260.400, and 357.5.
Comments are invited on: (1) whether the collection of information is necessary for the proper performance of the functions of the Commission, including whether the information will have practical utility; (2) the accuracy of the agency's estimate of the burden and cost of the collection of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility and clarity of the information collection; and (4) ways to minimize the burden of the collection of information on those who are to respond, including the use of automated collection techniques or other forms of information technology.
Take notice that the Commission received the following exempt wholesale generator filings:
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system (
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
On July 26, 2021, Pond Peak Energy Storage LLC, filed an application for a preliminary permit, pursuant to section 4(f) of the Federal Power Act (FPA), proposing to study the feasibility of the Pond Peak Pumped Storage Project (Pond Peak Project or project), a closed-loop pumped storage project to be located in Washoe County, Nevada. The sole purpose of a preliminary permit, if issued, is to grant the permit holder priority to file a license application during the permit term. A preliminary permit does not authorize the permit holder to perform any land-disturbing activities or otherwise enter upon lands or waters owned by others without the owners' express permission.
The proposed project would consist of the following new facilities: (1) a 1,250-foot-long, 75-foot-high earthen dam and a 650-foot-long, 35-foot-high earthen dam, collectively creating a 3,400 acre-foot upper reservoir with a maximum surface elevation of 7,530 feet above mean sea level (msl); (2) a 7,830-foot-long, 17-foot-diameter concrete- and steel-lined underground conduit system to connect the upper reservoir to the powerhouse; (3) a 4,000-foot-long, 19-foot-diameter concrete-lined underground tailrace tunnel from the powerhouse to the lower reservoir; (4) an underground powerhouse containing three variable-speed reversible pump-turbine and motor-generator units with a generation and pumping capacity of 200 megawatts each (total capacity of 600 megawatts); (5) a 1,400-foot-long, 185-foot-high dam creating a 3,460 acre-foot lower reservoir with a maximum surface elevation of 5,920 feet above msl; (6) a 230-kilovolt transmission line from the powerhouse to one of two alternative points of interconnection,
Deadline for filing comments, motions to intervene, competing applications (without notices of intent), or notices of intent to file competing applications: 60 days from the issuance of this notice. Competing applications and notices of intent must meet the requirements of 18 CFR 4.36.
The Commission strongly encourages electronic filing. Please file comments, motions to intervene, notices of intent, and competing applications using the Commission's eFiling system at
More information about this project, including a copy of the application, can be viewed or printed on the “eLibrary” link of Commission's website at
On July 22, 2022, Tennessee Gas Pipeline Company, L.L.C. submitted to the Federal Energy Regulatory Commission (Commission) a copy of its application for a Clean Water Act section 401(a)(1) water quality certification filed with Tennessee Department of Environment and Conservation, in conjunction with the above captioned project. Pursuant to 40 CFR 121.6 and section 157.22 of the Commission's regulations,
If the Tennessee Department of Environment and Conservation fails or refuses to act on the water quality certification request on or before the above date, then the agency certifying authority is deemed waived pursuant to section 401(a)(1) of the Clean Water Act, 33 U.S.C. 1341(a)(1).
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency is planning to submit an information collection request (ICR), “Production, Import, Export, Recycling, Destruction, Transhipment, and Feedstock Use of Ozone-Depleting Substances” (EPA ICR No. 1432.38, OMB Control No. 2060–0170) to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act. Before doing so, EPA is soliciting public comments on specific aspects of the proposed information collection as described below. This is a proposed extension of the ICR, which is currently approved through April 30, 2023. 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.
Comments must be submitted on or before October 24, 2022.
Submit your comments, referencing Docket ID No. EPA–HQ–OAR–2022–0706, online using
EPA's policy is that all comments received will be included in the public docket without change including any personal information provided, unless the comment includes profanity, threats, information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute.
Robert Burchard, Stratospheric Protection Division, (6205A), Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460; telephone number: (202) 343–9126; email address:
Supporting documents which explain in detail the information that EPA will be collecting are available in the public docket for this ICR. The docket can be viewed online at
Pursuant to section 3506(c)(2)(A) of the Paperwork Reduction Act, EPA is soliciting comments and information to enable it to: (i) evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the Agency, including whether the information will have practical utility; (ii) evaluate the accuracy of the Agency's estimate of the
Environmental Protection Agency (EPA).
Notice of intended approval.
Notice is hereby given that the State of Georgia is revising its approved Public Water System Supervision Program. Georgia has adopted drinking water regulations for the Lead and Copper Rule Minor Revisions, Public Notification Rule, Radionuclides Rule, Arsenic and Clarifications to Compliance and New Source Contaminants Monitoring Rule, Stage 2 Disinfectants and Disinfection Byproducts Rule, Long Term 2 Enhanced Surface Water Treatment Rule, Ground Water Rule, Lead and Copper Rule Short-Term Regulatory Revisions and Clarifications, and Revised Total Coliform Rule. The Environmental Protection Agency (EPA) has determined that Georgia's regulations are no less stringent than these Federal rules and the revisions otherwise meet applicable Safe Drinking Water Act requirements. Therefore, the EPA intends to approve these revisions to the State of Georgia's Public Water System Supervision Program.
Any interested person may request a public hearing. A request for a public hearing must be submitted by September 23, 2022, to the Regional Administrator at the following address: U.S. Environmental Protection Agency, Region 4, Atlanta Federal Center, 61 Forsyth Street SW, Atlanta, Georgia 30303. The Regional Administrator may deny frivolous or insubstantial requests for a hearing. However, if a substantial request for a public hearing is made by September 23, 2022, a public hearing will be held. If no timely and appropriate request for a hearing is received and the Regional Administrator does not elect to hold a hearing on his own motion, this determination shall become final on September 23, 2022. Any request for a public hearing shall include the following information: the name, address, and telephone number of the individual, organization, or other entity requesting a hearing; a brief statement of the requesting person's interest in the Regional Administrator's determination and a brief statement of the information that the requesting person intends to submit at such hearing; and the signature of the individual making the request, or, if the request is made on behalf of an organization or other entity, the signature of a responsible official of the organization or other entity.
Documents relating to this determination are available for inspection between the hours of 9:00 a.m. and 4:00 p.m., Monday through Friday (excluding legal holidays), at the following location: Macon Conference Room, 3rd Floor Tower Building, Atlanta Federal Center, 61 Forsyth Street SW, Atlanta, Georgia 30303. Those intending to view documents should contact Dale Froneberger, EPA Region 4, by telephone at (404) 562–9446 at least 24 hours prior to arriving to coordinate viewing.
Dale Froneberger, EPA Region 4, Safe Drinking Water Branch, by telephone at (404) 562–9446, or by email at
The State of Georgia has submitted requests that the EPA approve revisions to the State's Safe Drinking Water Act Public Water System Supervision Program to include the authority to implement and enforce the Lead and Copper Rule Minor Revisions, Public Notification Rule, Radionuclides Rule, Arsenic and Clarifications to Compliance and New Source Contaminants Monitoring Rule, Stage 2 Disinfectants and Disinfection Byproducts Rule, Long Term 2 Enhanced Surface Water Treatment Rule, Ground Water Rule, Lead and Copper Rule Short-Term Regulatory Revisions and Clarifications, and
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency (EPA) is planning to submit an information collection request (ICR), “GreenChill Advanced Refrigeration Partnership (Renewal)” (EPA ICR No. 2349.03, OMB Control No. 2060–0702) to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act. Before doing so, EPA is soliciting public comments on specific aspects of the proposed information collection as described below. This is a proposed extension of the ICR, which is currently approved through March 31, 2023. 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.
Comments must be submitted on or before October 24, 2022.
Submit your comments, referencing Docket ID No. EPA–HQ–OAR–2022–0449, online using
EPA's policy is that all comments received will be included in the public docket without change including any personal information provided, unless the comment includes profanity, threats, information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute.
Kersey Manliclic, Stratospheric Protection Division—Office of Air and Radiation, (3204A), Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460; telephone number: (202) 566–9981; email address:
Supporting documents which explain in detail the information that the EPA will be collecting are available in the public docket for this ICR. The docket can be viewed online at
Pursuant to section 3506(c)(2)(A) of the PRA, EPA is soliciting comments and information to enable it to: (i) evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the Agency, including whether the information will have practical utility; (ii) evaluate the accuracy of the Agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (iii) enhance the quality, utility, and clarity of the information to be collected; and (iv) minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated electronic, mechanical, or other technological collection techniques or other forms of information technology,
Environmental Protection Agency (EPA).
Notice.
EPA has received applications to register new uses for pesticide products containing currently registered active ingredients. Pursuant to the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), EPA is hereby providing notice of receipt and opportunity to comment on these applications.
Comments must be received on or before September 23, 2022.
Submit your comments, identified by the docket identification (ID) number and the
Each application summary in Unit II specifies a contact division. The appropriate division contacts are identified as follows:
• AD (Antimicrobials Division) (Mail Code 7510M); Anita Pease, main telephone number: (202) 566–0737; email address:
• RD (Registration Division) (Mail Code 7505T); Marietta Echeverria; main telephone number: (202) 566–1030; email address:
The mailing address for each contact person: Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460–0001. As part of the mailing address, include the contact person's name, division, and mail code.
This action provides information that is directed to the public in general.
1.
2.
3.
EPA has received applications to register new uses for pesticide products containing currently registered active ingredients. Pursuant to the provisions of FIFRA section 3(c)(4), 7 U.S.C. 136a(c)(4), and 40 CFR 152.102, EPA is hereby providing notice of receipt and opportunity to comment on these applications. Notice of receipt of these applications does not imply a decision by the Agency on these applications. For actions being evaluated under EPA's public participation process for
•
•
•
•
•
•
Environmental Protection Agency (EPA).
Notice of proposed settlement.
Under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), the United States Environmental Protection Agency is proposing to enter into an Administrative Settlement Agreement and Order on Consent with Keystone Powered Metal Company concerning the L & R Oil Recovery Superfund Site located in Shelby, North Carolina. The settlement addresses recovery of CERCLA costs for a cleanup action performed by the EPA at the Site.
The Agency will consider public comments on the proposed settlement until September 23, 2022. The Agency will consider all comments received and may modify or withdraw its consent to the proposed settlement, if comments received disclose facts or considerations which indicate that the proposed settlement is inappropriate, improper or inadequate.
Copies of the settlement are available from the Agency by contacting Ms. Paula V. Painter, Program Analyst, using the contact information provided in this notice. Comments may also be submitted by referencing the Site's name through one of the following methods:
Paula V. Painter at (404) 562–8887.
Notice is given that a complaint has been filed with the Federal Maritime Commission (Commission) by MSRF, Inc. (MSRF), hereinafter “Complainant”, against HMM Company Limited (HMM), hereinafter “Respondent”. Complainant alleges that Respondent is a vessel-operating common carriers organized under the laws of the Republic of Korea.
Complainant alleges that Respondent violated 46 U.S.C. 41102(c), 41104(a)(2), 41104(a)(5), 41104(a)(9), and 41104 (a)(10), regarding its practices and the rates and terms of its service contract. The full text of the complaint can be found in the Commission's Electronic Reading Room at
This proceeding has been assigned to Office of Administrative Law Judges. The initial decision of the presiding officer in this proceeding shall be issued by August 19, 2023, and the final decision of the Commission shall be issued by March 4, 2024.
The Commission hereby gives notice of filing of the following agreements under the Shipping Act of 1984. Interested parties may submit comments, relevant information, or documents regarding the agreements to the Secretary by email at
Notice is given that a complaint has been filed with the Federal Maritime Commission (Commission) by MSRF, Inc. (MSRF), hereinafter “Complainant”, against Yang Ming Transport Corporation (Yang Ming), hereinafter “Respondent”. Complainant alleges that Respondent is a vessel-operating common carriers organized under the laws of Taiwan.
Complainant alleges that Respondent violated 46 U.S.C. 41102(c), 41104(a)(2), 41104(a)(5), 41104(a)(9), and 41104(a)(10), regarding its practices and the rates and terms of its service contract. The full text of the complaint can be found in the Commission's Electronic Reading Room at
This proceeding has been assigned to Office of Administrative Law Judges. The initial decision of the presiding officer in this proceeding shall be issued by August 19, 2023, and the final decision of the Commission shall be issued by March 4, 2024.
This notice corrects a notice (FR Doc. 2022–17925) published on page 51099 in the first column of the issue for Friday, August 19, 2022.
Under
1.
Comments on this application must be received by September 8, 2022.
Board of Governors of the Federal Reserve System.
The companies listed in this notice have applied to the Board for approval, pursuant to the Bank Holding Company Act of 1956 (12 U.S.C. 1841
The public portions of the applications listed below, as well as other related filings required by the Board, if any, are available for immediate inspection at the Federal Reserve Bank(s) indicated below and at the offices of the Board of Governors. This information may also be obtained on an expedited basis, upon request, by contacting the appropriate Federal Reserve Bank and from the Board's Freedom of Information Office at
Comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors, Ann E. Misback, Secretary of the Board, 20th Street and Constitution Avenue NW, Washington, DC 20551–0001, not later than September 23, 2022.
1.
1.
Board of Governors of the Federal Reserve System.
The notificants listed below have applied under the Change in Bank Control Act (Act) (12 U.S.C. 1817(j)) and § 225.41 of the Board's Regulation Y (12 CFR 225.41) to acquire shares of a bank or bank holding company. The factors that are considered in acting on the applications are set forth in paragraph 7 of the Act (12 U.S.C. 1817(j)(7)).
The public portions of the applications listed below, as well as other related filings required by the Board, if any, are available for immediate inspection at the Federal Reserve Bank(s) indicated below and at the offices of the Board of Governors. This information may also be obtained on an expedited basis, upon request, by contacting the appropriate Federal Reserve Bank and from the Board's Freedom of Information Office at
Comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors, Ann E. Misback, Secretary of the Board, 20th Street and Constitution Avenue NW, Washington, DC 20551–0001, not later than September 8, 2022.
1.
1.
Board of Governors of the Federal Reserve System.
Federal Trade Commission.
Notice.
In accordance with the Paperwork Reduction Act of 1995 (PRA), the Federal Trade Commission (FTC or Commission) is seeking public comment on its proposal to extend for an additional three years the FTC's portion of the information collection requirements contained in the Consumer Financial Protection Bureau's Regulation N (the Mortgage Acts and Practices—Advertising Rule). The FTC generally shares enforcement of Regulation N with the Consumer Financial Protection Bureau (CFPB). The current clearance expires on January 31, 2023.
Comments must be received on or before October 24, 2022.
Interested parties may file a comment online or on paper by following the instructions in the Request for Comments part of the
Carole L. Reynolds, Attorney, Division of Financial Practices, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue NW, Washington, DC 20580, (202) 326–3230.
Regulation N requires covered persons to retain: (1) Copies of materially different commercial communications and related materials, regarding any term of any mortgage credit product, that the person made or disseminated during the relevant time period; (2) documents describing or evidencing all mortgage credit products available to consumers during the relevant time period; and (3) documents describing or evidencing all additional products or services (such as credit insurance or credit disability insurance) that are or may be offered or provided with the mortgage credit products available to consumers during the relevant time period.
Commission staff believes the recordkeeping requirements pertain to
The information retained under the Rule's recordkeeping requirements is used by the Commission to substantiate compliance with the Rule and may also provide a basis for the Commission to bring an enforcement action. Without the required records, it would be difficult either to ensure that entities are complying with the Rule's requirements or to bring enforcement actions based on violations of the Rule.
• Derived from 1,000 likely respondents × approximately 3 hours for each respondent per year to do these tasks = 3,000 hours.
• Since the FTC shares enforcement authority with the CFPB for Regulation N, the FTC's allotted PRA burden is 1,500 annual hours.
As required by section 3506(c)(2)(A) of the PRA, 44 U.S.C. 3506(c)(2)(A), the FTC is providing this opportunity for public comment before requesting that OMB extend the existing clearance for the information collection requirements contained in Regulation N.
Commission staff estimates that the Rule's recordkeeping requirements will affect approximately 1,000 persons
Commission staff derived labor costs by applying appropriate hourly cost figures to the burden hours described above. Staff further assumes that office support file clerks will handle the Rule's record retention requirements at an hourly rate of $17.70.
Absent information to the contrary, staff anticipates that existing storage media and equipment that covered persons use in the ordinary course of business will satisfactorily accommodate incremental recordkeeping under the Rule. Accordingly, staff does not anticipate that the Rule will require any new capital or other non-labor expenditures.
Pursuant to Section 3506(c)(2)(A) of the PRA, the FTC invites comments on: (1) whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (2) the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of maintaining records and providing disclosures to consumers. All comments must be received on or before October 24, 2022.
You can file a comment online or on paper. For the FTC to consider your comment, we must receive it on or before October 24, 2022. Write “Paperwork Reduction Act Comment: FTC File No. P072108” on your comment. Your comment—including your name and your state—will be placed on the public record of this proceeding, including the
Due to the public health emergency in response to the COVID–19 outbreak and
If you prefer to file your comment on paper, write “Paperwork Reduction Act Comment: FTC File No. P072108” on your comment and on the envelope, and mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC–5610 (Annex J), 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 J), Washington, DC 20024. If possible, submit your paper comment to the Commission by courier or overnight service.
Because your comment will become publicly available at
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.
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 October 24, 2022. For information on the Commission's privacy policy, including routine uses permitted by the Privacy Act, see
Centers for Medicare & Medicaid Services, Health and Human Services (HHS).
Notice.
The Centers for Medicare & Medicaid Services (CMS) is announcing an opportunity for the public to comment on CMS' intention to collect information from the public. Under the Paperwork Reduction Act of 1995 (PRA), federal agencies are required to publish notice in the
Comments on the collection(s) of information must be received by the OMB desk officer by September 23, 2022.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
To obtain copies of a supporting statement and any related forms for the proposed collection(s) summarized in this notice, you may make your request using one of following:
1. Access CMS' website address at website address at:
William Parham at (410) 786–4669.
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501–3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. The term “collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA (44 U.S.C. 3506(c)(2)(A)) requires federal agencies to publish a 30-day notice in the
1.
Consistent with 42 CFR 405.1205 for Original Medicare and 422.620 for Medicare health plans, hospitals must provide the initial IM within 2 calendar days of admission. A follow-up copy of the signed IM is given no more than 2 calendar days before discharge. The follow-up copy is not required if the first IM is provided within 2 calendar days of discharge. In accordance with 42 CFR 405.1206 for Original Medicare and 422.622 for Medicare health plans, if a beneficiary/enrollee appeals the discharge decision, the beneficiary/enrollee and the QIO must receive a detailed explanation of the reasons services should end. This detailed explanation is provided to the beneficiary/enrollee using the DND, the second notice included in this renewal package.
2.
The MOON is a standardized notice delivered to persons entitled to Medicare benefits under Title XVIII of the Act who receive more than 24 hours of observation services, informing them that their hospital stay is outpatient and not inpatient, and the implications of being an outpatient. This information collection applies to beneficiaries in Original Medicare and enrollees in Medicare health plans.
Centers for Medicare & Medicaid Services, Health and Human Services (HHS).
Notice.
The Centers for Medicare & Medicaid Services (CMS) is announcing an opportunity for the public to comment on CMS' intention to collect information from the public. Under the Paperwork Reduction Act of 1995 (PRA), federal agencies are required to publish notice in the
Comments on the collection(s) of information must be received by the OMB desk officer by September 23, 2022.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
To obtain copies of a supporting statement and any related forms for the proposed collection(s) summarized in this notice, you may make your request using one of following:
William Parham at (410) 786–4669.
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501–3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. The term “collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA (44 U.S.C. 3506(c)(2)(A)) requires federal agencies to publish a 30-day notice in the
1.
The HAC Reduction Program identifies the worst-performing quartile of hospitals by calculating a Total HAC Score derived from the CMS Patient Safety and Adverse Events Composite (CMS PSI 90) and NHSN HAI measures, which require that we collect claims-based and chart-abstracted measures data, respectively. The HAC Reduction Program validates NHSN HAI data reported by subsection (d) hospitals to ensure that hospitals report correct NHSH HAI measure data, and the Total HAC Score is calculated using accurate data. The HAC Reduction Program may penalize any hospitals that fail validation by assigning the maximum Winsorized z-score for the set of measures that fail validation, for use in the Total HAC Score calculation. The collection of information for validation is necessary to ensure that the HAC Reduction Program and Total HAC Score are administered fairly.
The HAC Reduction Program will continue to receive NHSN HAI data for hospitals from CDC. Because the burden associated with submitting data for the HAI measures (CDI, CAUTI, CLABSI, MRSA, and SSI) is captured under a separate OMB control number, 0920–0666, we do not provide an independent estimate of the burden associated with collecting data for these measures for the HAC Reduction Program. We also do not provide an estimate of burden for the claims-based PSI 90 measure, because this measure is collected using Medicare FFS claims that hospitals are already submitting to the Medicare program for payment purposes. We also do not provide an estimate of burden for validation of data submitted for the PSI 90 measure, because Medicare claims are audited under the Medicare Fee for Service (FFS) Recovery Audit Program.
2.
When a death occurs in a hospital (including Critical Access Hospital (CAH) with a rehabilitation or psychiatric Distinct Part Unit (DPU)) that is associated with the use of restraints and/or seclusion, the hospital staff must complete the online Form CMS–10455 (42 CFR 482.13(g)(1)). The hospital staff must also document the date and time that CMS was notified of the death in the patient's medical record (42 CFR 482.13(g)(3)(i)).
When a death occurs during the use of 2-point soft cloth wrist restraints with no seclusion, or within 24 hours after the patient was removed from such restraints, the hospital must document the information required by 42 CFR 482.13(g)(4)(ii) into a hospital log or internal system within 7 days from the date of death (42 CFR 482.13(g)(4)(i)). The hospital is not required to submit this log or internal records to the CMS Location, however, they must be made available in either written or electronic form to CMS immediately upon request (42 CFR 482.13(g)(4)(iii)). In addition, the hospital staff must also document the date and time that the required information was entered into the hospital's log or internal system in the patient's medical record (42 CFR 482.13(g)(3)(ii)).
3.
Centers for Medicare & Medicaid Services, Health and Human Services (HHS).
Notice.
The Centers for Medicare & Medicaid Services (CMS) is announcing an opportunity for the public to comment on CMS' intention to collect information from the public. Under the Paperwork Reduction Act of 1995 (the PRA), federal agencies are required to publish notice in the
Comments must be received by October 24, 2022.
When commenting, please reference the document identifier or OMB control number. To be assured consideration, comments and recommendations must be submitted in any one of the following ways:
1.
2.
To obtain copies of a supporting statement and any related forms for the proposed collection(s) summarized in this notice, you may make your request using one of following:
William N. Parham at (410) 786–4669.
This notice sets out a summary of the use and burden associated with the following information collections. More detailed information can be found in each collection's supporting statement and associated materials (see
Under the PRA (44 U.S.C. 3501–3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. The term “collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA requires federal agencies to publish a 60-day notice in the
1.
The Rate Filing Justification consists of three parts. All issuers must continue to submit a Uniform Rate Review Template (URRT) (Part I of the Rate Filing Justification) for all single risk pool plans. Section 154.200(a)(1) establishes a 15 percent federal default threshold for reasonableness review. Issuers that submit a rate filing that includes a plan that meets or exceeds the threshold must include a written description justifying the rate increase, also known as the consumer justification narrative (Part II of the Rate Filing Justification). We note that the threshold set by CMS constitutes a minimum standard and most states currently employ stricter rate review standards and may continue to do so. Issuers offering a QHP or any single risk pool submission containing a rate increase of any size must continue to submit an actuarial memorandum (Part III of the Rate Filing Justification).
Centers for Medicare & Medicaid Services, Health and Human Services (HHS).
Notice.
The Centers for Medicare & Medicaid Services (CMS) is announcing an opportunity for the public to comment on CMS' intention to collect information from the public. Under the Paperwork Reduction Act of 1995 (the PRA), federal agencies are required to publish notice in the
Comments must be received by October 24, 2022.
When commenting, please reference the document identifier or OMB control number. To be assured consideration, comments and recommendations must be submitted in any one of the following ways:
1.
2.
To obtain copies of a supporting statement and any related forms for the proposed collection(s) summarized in this notice, you may make your request using one of following:
1. Access CMS' website address at website address at
William N. Parham at (410) 786–4669.
This notice sets out a summary of the use and burden associated with the following information collections. More detailed information can be found in each collection's supporting statement and associated materials (see
Under the PRA (44 U.S.C. 3501–3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. The term “collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA requires federal agencies to publish a 60-day notice in the
1.
The goal of this Generic clearance and its survey is to capture feedback from actual users of the system immediately after they finish using the system, while their user experience, negative or positive, is still fresh in their minds. This user feedback will allow our team to discover areas of improvement within EPS. It will help us improve the user experience, provide better service/support, improve marketing strategies, and identify gaps/issues that require resolution. For example, if we get several responses through the collection instrument stating that users feel that the EPS system is slow, we can use that feedback to invest efforts into increasing the EPS response times. As the feedback is analyzed and implemented over time, the survey questions will evolve to support implemented changes, providing the EPS team with the most up-to-date feedback on system improvement.
By using a Generic Instrument Collection, the survey will evolve over time. Within the CMS EPS, features are frequently added, and sometimes even removed. The team needs to be able to add new survey questions, specific to those new features, in order to capture valuable feedback on the effectiveness, ease-of-use, pain points, and areas of improvement for the 2 feature. When features are removed from the CMS EPS, questions relevant to those features must be modified or removed from the survey as well. In general, given that the CMS EPS is a dynamic system, designed to meet enterprise needs that change over time, a Generic Instrument Collection will allow the survey to evolve as the system evolves, and remain relevant, capturing up-to-date feedback on the system.
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA or Agency) is announcing an opportunity for public comment on the proposed collection of certain information by the Agency. Under the Paperwork Reduction Act of 1995 (PRA), Federal Agencies are required to publish notice in the
Either electronic or written comments on the collection of information must be submitted by October 24, 2022.
You may submit comments as follows. Please note that late, untimely filed comments will not be considered. The
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Dockets Management Staff, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on
Amber Sanford, Office of Operations, Food and Drug Administration, Three White Flint North, 10A–12M, 11601 Landsdown St., North Bethesda, MD 20852, 301–796–8867,
Under the PRA (44 U.S.C. 3501–3521), Federal Agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. “Collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes Agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA (44 U.S.C. 3506(c)(2)(A)) requires Federal Agencies to provide a 60-day notice in the
With respect to the following collection of information, FDA invites comments on these topics: (1) whether the proposed collection of information is necessary for the proper performance of FDA's functions, including whether the information will have practical utility; (2) the accuracy of FDA's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques,
This information collection supports implementation of medical device labeling requirements governed by section 502 of the Federal Food, Drug, and Cosmetic Act (FD&C Act) (21 U.S.C. 352), codified in Agency regulations, and discussed in associated Agency guidance. In accordance with the Unique Device Identification (UDI) system (see part 801, subpart B (21 CFR part 801, subpart B)), medical device labelers, unless excepted, are required to design and use medical device labels and device packages to bear a UDI, present dates on labels in a particular format, and submit data concerning each version or model of a device to the Global Unique Device Identification Database (GUDID) no later than the date the label of the device must bear a UDI. Once a device becomes subject to UDI requirements, respondents will be required to update the information reported whenever the information changes.
FDA has identified the following requirements as having burdens that must be accounted for under the PRA; the burdens associated with these requirements are summarized in the table that follows.
21 CFR 801.18 requires that whenever a labeler of a medical device includes an expiration date, a date of manufacture, or any other date intended to be brought to the attention of the user of the device, the labeler must present the date on the label in a format that meets the requirements of this section.
Section 801.20 requires every medical device label and package to bear a UDI.
Under § 801.35, any labeler of a device that is not required to bear a UDI on its label may include a UDI on the label of that device and utilize the GUDID.
Under § 801.45, any device that has to be labeled with a UDI also has to bear a permanent marking providing the UDI on the device itself if the device is intended for more than one use and intended to be reprocessed before each use.
Section 801.50 requires stand-alone software to comply with specific labeling requirements that identify the software.
Section 801.55 authorizes additional, case-by-case, labeling exceptions and alternatives to standard UDI labeling requirements.
If a labeler relabels or modifies a label of a device that is required to bear a UDI, under 21 CFR 830.60 it has to keep a record showing the relationship of the original device identifier to the new device identifier.
21 CFR 830.110 requires an applicant seeking initial FDA accreditation as a UDI-issuing agency to furnish FDA an application containing certain information, materials, and supporting documentation.
Under 21 CFR 830.120, an FDA-accredited issuing agency is required to disclose information concerning its system for the assignment of UDIs; maintain a list of labelers that use its system for the assignment of UDIs and provide FDA a copy of such list; and upon request, provide FDA with information concerning a labeler that is employing the issuing agency's system for assignment of UDIs.
21 CFR 830.310 and 830.320 require the labeler to provide certain information to the GUDID concerning the labeler and each version or model of a device required to be labeled with a UDI, unless the labeler obtains a waive.
21 CFR 830.360 requires each labeler to retain records showing all UDIs used to identify devices that must be labeled with a UDI and the particular version or model associated with each device identifier, until 3 years after it ceases to market a version or model of a device.
Respondents who are required to submit data to the Agency under certain other approved information collections are required to include UDI data elements for the device that is the subject of such information collection. Addition of the UDI data elements is included in this burden estimate for the conforming amendments in the following 21 CFR parts: part 803—Medical Device Reporting (OMB control number 0910–0437), part 806—Medical Devices; Reports of Corrections and Removals (OMB control number 0910–0359), part 814—Premarket Approval of Medical Devices (OMB control number 0910–0231), part 820—Quality System Regulation (OMB control number 0910–0073), part 821—Medical Device Tracking Requirements (OMB control number 0910–0442), and part 822—Postmarket Surveillance (OMB control number 0910–0449).
Medical device labeling requirements, among other things, provide for the label or labeling content of a medical device so that it is not misbranded and subject to regulatory action. Certain provisions under section 502 of the FD&C Act require that manufacturers, importers, and distributors of medical devices disclose information about themselves or the devices on the labels or labeling for the devices. Section 502 of the FD&C Act provides, in part, that a device shall be misbranded if, among other things, its label or labeling fails to bear certain required information concerning the device, is false or misleading in any particular way, or fails to contain adequate directions for use. Medical device labeling regulations in parts 800, 801, 809, and associated regulations in parts 660 and 1040 (21 CFR parts 660, 800, 801, 809, and 1040), prescribe the disclosure of specific information by manufacturers, importers, and distributors of medical devices about themselves and/or the devices, on the label or labeling for the devices, to health professionals and consumers.
In conjunction with provisions in part 800, part 801, subpart A sets forth general labeling provisions applicable to all medical devices, including content and format requirements pertaining to intended uses, adequate directions for use, misleading statements, and the prominence of required labeling. Information collection associated with labeling requirements for Over-the-Counter (OTC) Devices are found in part 801, subpart C, and cover principal display panel; statement of identity; declaration of net quantity of contents; and certain warning statement elements. Information collection associated with exemptions from adequate directions for use and other exemptions are found in part 801, subparts D and E, respectively. Information collection associated with special labeling requirements applicable to specific devices are found in part 801, subpart H. We also include information collection associated with labeling for in vitro diagnostic products for human use, as set forth in part 809, subpart B. In addition to the labeling requirements in part 801 and the certification and identification requirements of 21 CFR 1010.2 and 1010.3, sunlamp products and ultraviolet lamps are subject to specific labeling requirements as set forth in part 1040.
The information collection also includes provisions associated with stand-alone symbols (not accompanied by explanatory text adjacent to the symbol), when accompanied by a symbols glossary, as set forth in part 660, additional standards for diagnostic substances for laboratory standards for biological products, subparts A, C, D, E, and F. The requirements are also found in the general medical device labeling regulations part 801, subpart A, and part 809, subpart B.
The information collection also helps to implement section 502(b) of the FD&C Act which requires that, for packaged devices, labeling must bear the name and place of business of the manufacturer, packer, or distributor;
The guidance document is intended to identify circumstances in which the name or symbol of the original SUD manufacturer is not prominent and conspicuous, as used in section 502(u) of the FD&C Act.
FDA estimates the burden of this collection of information as follows:
Our figures are based on data from the FDA Unified Registration and Listing System and the Operational and Administration System for Import Support shipment information. FDA regulations allow for the use of stand-alone graphical representations of information, or symbols, in the labeling for the medical devices and diagnostic substances for laboratory standards, if the symbol has been established in a Standards Development Organization developed standard, provided that such symbol is explained in a symbols glossary that is included in the labeling for the medical device and otherwise complies with section 502 (misbranding) of the FD&C Act. These labeling requirements are set forth in part 660, subparts A, C, D, E, and F, in the additional standards for diagnostic substances for laboratory standards for biological products, including: general requirements (§ 660.2), using antibody to Hepatitis B surface antigen (§ 660.28), blood grouping reagent (§ 660.35), reagent red blood cells (§ 660.45), Hepatitis B surface antigen (§ 660.45); and anti-human globulin (§ 660.55). The requirements are also found in the general medical device labeling regulations (part 801, subpart A) and in the in vitro diagnostic product labeling regulations (part 809, subpart B).
As set forth in § 801.150(a)(2), device manufacturers are required to retain a copy of the agreement containing the specifications for the processing, labeling, or repacking of the device for 2 years after the final shipment or delivery of the device. Section 801.150(a)(2) requires that copies of this agreement be made available for inspection at any reasonable hour upon request by any officer or employee of the Department of Health and Human Services (HHS). In § 801.410(e) copies of invoices, shipping documents, and records of sale or distribution of all impact resistant lenses, including finished eyeglasses and sunglasses, are required to be maintained for 3 years by the retailer and made available upon request by any officer or employee of FDA or by any other officer or employee acting on behalf of the Secretary of HHS. Section 801.410(f) requires that the results of impact tests and description of the test method and apparatus be retained for a period of 3 years.
Specific recordkeeping requirements applicable to hearing aid dispensers, manufacturers of menstrual tampons, and manufacturers of latex condoms are set forth in §§ 801.421(d), 801.430(f), and 801.435(g), respectively.
Because many labeling provisions correspond to specific recordkeeping requirements, we have accounted for burden attendant to the provisions enumerated in table 3 as third-party disclosures. These figures reflect what we believe to be the average burden incurred by respondents to applicable information collection activities.
We are revising this information collection to include OMB control number 0910–0720. Our estimated burden for the information collection reflects an overall increase of 579,633 hours and a corresponding increase of 926,823 responses/records. We attribute this adjustment to the revision of this information collection to include OMB control number 0910–0720.
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA, Agency, or we) is announcing that a proposed collection of information has been submitted to the Office of Management and Budget (OMB) for review and clearance under the Paperwork Reduction Act of 1995.
Submit written comments (including recommendations) on the collection of information by September 23, 2022.
To ensure that comments on the information collection are received, OMB recommends that written comments be submitted to
Amber Sanford, Office of Operations, Food and Drug Administration, Three White Flint North, 10A–12M, 11601 Landsdown St., North Bethesda, MD 20852, 301–796–8867,
In compliance with 44 U.S.C. 3507, FDA has submitted the following proposed collection of information to OMB for review and clearance.
This collection of information implements the humanitarian use devices (HUDs) provision of section 520(m) of the Federal Food, Drug, and Cosmetic Act (FD&C Act) (21 U.S.C. 360j(m)) and part 814, subpart H (21 CFR part 814, subpart H). Under section 520(m) of the FD&C Act, FDA is authorized to exempt an HUD from the effectiveness requirements of sections 514 and 515 of the FD&C Act (21 U.S.C. 360d and 360e) provided that the device: (1) is designed to treat or diagnose a disease or condition that affects no more than 8,000 individuals in the United States; (2) would not be available to a person with a disease or condition unless an exemption is granted and there is no comparable device other than another HUD approved under this exemption that is available to treat or diagnose such disease or condition; and (3) will not expose patients to an unreasonable or significant risk of illness or injury and the probable benefit to health from the use of the device outweighs the risk of injury or illness from its use, taking into account the probable risks and benefits of currently available devices or alternative forms of treatment.
Respondents may submit a humanitarian device exemption (HDE) application seeking exemption from the effectiveness requirements of sections 514 and 515 of the FD&C Act as authorized by section 520(m)(2) of the FD&C Act. The information collected will assist FDA in making determinations on the following: (1) whether to grant HUD designation of a medical device; (2) whether to exempt an HUD from the effectiveness requirements under sections 514 and 515 of the FD&C Act, provided that the device meets requirements set forth under section 520(m) of the FD&C Act; and (3) whether to grant marketing approval(s) for the HUD. Failure to collect this information would prevent FDA from making a determination on the factors listed previously in this document. Further, the collected information would also enable FDA to determine whether the holder of an HUD is in compliance with the HUD provisions under section 520(m) of the FD&C Act.
HUDs approved under an HDE cannot be sold for an amount that exceeds the costs of research and development, fabrication, and distribution of the device (
Section 520(m)(6)(A)(ii) of the FD&C Act, provides that the Secretary of Health and Human Services will determine the annual distribution number (ADN) for devices that meet the eligibility criteria to be permitted to be sold for profit. The Cures Act amended the FD&C Act definition of the ADN as the number of devices reasonably needed to treat, diagnose, or cure a population of 8,000 individuals in the United States.
Section 520(m)(6)(A)(iii) of the FD&C Act provides that an HDE holder immediately notify the Agency if the number of such devices distributed during any calendar year exceeds the ADN. Section 520(m)(6)(C) of the FD&C Act provides that an HDE holder may petition to modify the ADN if additional information arises.
In the
FDA estimates the burden of this collection of information as follows:
Our estimated burden for the information collection reflects an increase of 360 total burden hours and a corresponding increase of five total annual responses. For efficiency of Agency operations, we are consolidating the related information activity and account for burden associated with HDE regulations currently approved in OMB control number 0910–0661. As a result, there is an increase in the total number of burden hours for this information collection.
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is announcing that a proposed collection of information has been submitted to the Office of Management and Budget (OMB) for review and clearance under the Paperwork Reduction Act of 1995.
Submit written comments (including recommendations) on the collection of information by September 23, 2022.
To ensure that comments on the information collection are received, OMB recommends that written comments be submitted to
Amber Sanford, Office of Operations, Food and Drug Administration, Three White Flint North, 10A–12M, 11601 Landsdown St., North Bethesda, MD 20852, 301–796–8867,
In compliance with 44 U.S.C. 3507, FDA has submitted the following proposed collection of information to OMB for review and clearance.
The FDA Food Safety Modernization Act (FSMA) (Pub. L. 111–353) enables FDA to better protect public health by helping to ensure the safety and security of the food supply. It enables FDA to focus more on preventing food safety problems rather than relying primarily on reacting to problems after they occur. FSMA recognizes the important role consumers and stakeholders play in ensuring the safety of the food supply, which helps ensure that suppliers produce food that meets U.S. safety standards.
Occasionally, FDA will need to communicate with consumers and other stakeholders about immediate health issues that could affect public health and safety. This collection of information allows the use of fast-track methods of communication such as quick turnaround surveys, focus groups, and indepth interviews collected from consumers and other stakeholders to communicate FDA issues of immediate and important public health significance. We plan on using these methods of communication to collect vital public health and safety information.
For example, these methods of communication might be used when there is a foodborne illness outbreak, food recall, or other situation requiring expedited FDA food, dietary supplement, cosmetics, or animal food or feed communications. So that FDA may better protect the public health, the Agency needs quick turnaround information provided by this collection of information to help ensure its messaging has reached the target audience, has been effective, and, if needed, to update its communications during these events.
Respondents to this collection of information include a wide range of consumers and other FDA stakeholders such as producers and manufacturers of FDA-regulated food and cosmetic products, dietary supplements, and animal food and feed. Participation will be voluntary.
In the
We estimate the burden of this collection of information as follows:
Based on a review of the information collection since our last request for OMB approval, we have made no adjustments to our burden estimate.
Food and Drug Administration, HHS.
Notice of availability.
The Food and Drug Administration (FDA) is announcing the availability of a final guidance for industry entitled “Tobacco Products: Principles for Designing and Conducting Tobacco Product Perception and Intention Studies.” The final guidance provides information intended to assist applicants design and conduct tobacco product perception and intention (TPPI) studies that may be submitted as part of a modified risk tobacco product application (MRTPA), a premarket tobacco product application (PMTA), or a substantial equivalence (SE) report. The final guidance discusses a variety of scientific issues applicants may want to consider as they design and conduct TPPI studies.
The announcement of the guidance is published in the
You may submit either electronic or written comments on Agency guidances at any time as follows:
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Dockets Management Staff, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the
You may submit comments on any guidance at any time (see 21 CFR 10.115(g)(5)).
Submit written requests for single copies of this guidance to the Center for Tobacco Products, Food and Drug Administration, Document Control Center, 10903 New Hampshire Ave., Bldg. 71, Rm. G335, Silver Spring, MD 20993–0002. Send one self-addressed adhesive label to assist that office in processing your request or include a Fax number to which the guidance document may be sent. See the
Paul Hart, Center for Tobacco Products, Food and Drug Administration, Document Control Center, 10903 New Hampshire Ave., Bldg. 71, Rm. G335, Silver Spring, MD 20993–0002, 1–877–287–1373, email:
FDA is announcing the availability of a guidance for industry entitled “Tobacco Products: Principles for Designing and Conducting Tobacco Product Perception and Intention Studies.”
The Family Smoking Prevention and Tobacco Control Act (Pub. L. 111–31) (Tobacco Control Act) amended the Federal Food, Drug, and Cosmetic Act (FD&C Act) and granted FDA authority to regulate the manufacture, marketing, and distribution of tobacco products to protect public health generally and to reduce tobacco use by minors. The FD&C Act, as amended by the Tobacco Control Act, requires new tobacco products to undergo premarket review and receive an order from FDA before being introduced or delivered for introduction into interstate commerce. The FD&C Act establishes three pathways to market for new tobacco products:
• Submission of a PMTA under section 910(b) of the FD&C Act (21 U.S.C. 387j(b)) and receipt of a marketing order under section 910(c)(1)(A)(i) of the FD&C Act (21 U.S.C. 387j(c)(1)(A)(i)),
• Submission of a SE report under section 905(j)(1)(A) of the FD&C Act (21 U.S.C. 387e(j)(1)(A)) and receipt of an SE marketing order, or
• Submission of a request for an exemption from the requirements of demonstrating SE under section 905(j)(3) of the FD&C Act (21 U.S.C. 387e(j)(3)) and receipt of an exemption from FDA (implemented at § 1107.1 (21 CFR 1107.1)).
To introduce or deliver for introduction into interstate commerce a modified risk tobacco product, there must be in effect an order under section 911(g) of the FD&C Act (21 U.S.C. 387k(g)) and the applicant must satisfy any applicable premarket review requirements under section 910 of the FD&C Act.
The final guidance is intended to assist applicants design and conduct TPPI studies that may be submitted as part of an MRTPA, a PMTA, or a SE report. TPPI studies can help applicants demonstrate that their product meets the applicable premarket authorization standard. For example, TPPI studies can be used to assess, among other things, individuals' perceptions of tobacco products, understanding of tobacco product information, and intentions to use tobacco products. The final guidance is intended to address a variety of scientific issues applicants may consider as they design and conduct TPPI studies to support tobacco product applications.
A notice of availability for the draft guidance appeared in the
This guidance is being issued consistent with FDA's good guidance practices regulation (21 CFR 10.115). The guidance represents the current thinking of FDA on designing and conducting tobacco product perception and intention studies, and should be viewed only as recommendations, unless specific regulatory or statutory requirements are cited. This guidance provides non-binding recommendations on TPPI studies and does not establish requirements for submitting studies in support of an application. It does not establish any rights for any person and is not binding on FDA or the public. You can use an alternative approach if it satisfies the requirements of the applicable statutes and regulations.
While this guidance contains no collection of information, it does refer to previously approved FDA collections 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 for this guidance. The previously approved collections of information are subject to review by OMB under the PRA. The collections of information in § 1107.1(b) and (c) have been approved under OMB control number 0910–0684. The collections of information under section 910 of the FD&C Act have been approved under OMB control number 0910–0768. The collections of information under 21 CFR part 1114 have been approved under OMB control number 0910–0879. The collections of information in 21 CFR part 1107, subparts B through E, have been approved under OMB control number 0910–0673.
Persons with access to the internet may obtain an electronic version of the guidance at
Health Resources and Services Administration (HRSA), Department of Health and Human Services.
Notice.
In accordance with the Federal Advisory Committee Act, this notice announces that the Secretary's National Advisory Committee on Rural Health and Human Services (NACRHHS) has scheduled a public meeting. Information about NACRHHS and the agenda for this meeting is available on the NACRHHS website at:
• Wednesday, September 14, 2022, 9:00 a.m.–5:00 p.m. Central Time (CT);
• Thursday, September 15, 2022, 9:00 a.m.–4:00 p.m. CT; and
• Friday, September 16, 2022, 9:00 a.m.–12:00 p.m. CT.
This meeting will be held at Spring Hill Suites, Naismith Ballroom, One Riverfront Plaza, Lawrence, Kansas 66044. On the morning of September 15, 2022, NACRHHS will break into subcommittees. One subcommittee will travel first to Midland Care Connection Inc. Emporia Program of All-inclusive Care for the Elderly (PACE) Center, 2720 W 15th Ave. Emporia, Kansas 66801 and then travel to Emporia State University, Union Building Room PKP, 1331 Market Street, Emporia, Kansas 66801. The other subcommittee will travel to Midland Care Connection Inc. Topeka PACE Center, 2134 SW Westport Drive, Topeka, Kansas 66614. In the afternoon, at approximately 3:00 p.m. CT., NACRHHS will reconvene at the Spring Hill Suites, Naismith Ballroom, One Riverfront Plaza, Lawrence, Kansas 66044.
On September 16, 2022, the address for the meeting is Spring Hill Suites, Naismith Ballroom, One Riverfront Plaza, Lawrence, Kansas 66044.
This meeting will also be held via webinar. This meeting is open to the public and can be joined by using these links:
Sahira Rafiullah, Chief Advisor at the Federal Office of Rural Health Policy, HRSA, 5600 Fishers Lane, 17W37, Rockville, Maryland 20857; 301–443–7095; or
NACRHHS provides advice and recommendations to the Secretary of Health and Human Services on policy, program development, and other matters of significance concerning both rural health and rural human services.
During the September 14–16, 2022 meeting, NACRHHS will discuss the provision of PACE in rural communities. Refer to the NACRHHS website for any updated information concerning the meeting.
Members of the public will have the opportunity to provide comments. Public participants wishing to provide oral comments must submit a written version of their statement at least 3 business days in advance of the scheduled meeting. Oral comments will be honored in the order they are requested and may be limited as time permits. Public participants wishing to offer a written statement should send it to Sahira Rafiullah, using the contact information above, at least 3 business days prior to the meeting.
Individuals who plan to attend and need special assistance or another reasonable accommodation should notify Sahira Rafiullah at the address and phone number listed above at least 10 business days prior to the meeting.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Information is also available on the Institute's/Center's home page:
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Information is also available on the Institute's/Center's home page:
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Information is also available on the Institute's/Center's home page:
Pursuant to section 10(a) of the Federal Advisory Committee Act, as amended, notice is hereby given of a meeting of the Center for Scientific Review Advisory Council.
The meeting will be open to the public, with attendance limited to space available. Individuals who plan to attend in person as well as those who need special assistance, such as sign language interpretation or other reasonable accommodations, should register at (
The meeting will be videocast and can be accessed from the NIH Videocasting website (
Any interested person may file written comments with the committee by forwarding the statement to the Contact Person listed on this notice. The statement should include the name, address, telephone number and when applicable, the business or professional affiliation of the interested person.
In the interest of security, NIH has procedures at
Additional Health and Safety Guidance: Before attending a meeting at an NIH facility, it is important that visitors review the NIH COVID–19 Safety Plan at
Information is also available on the Institute's/Center's home page:
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to Public Law 92–463, notice is hereby given of a meeting of the Substance Abuse and Mental Health Services Administration's (SAMHSA) Advisory Committee for Women's Services (ACWS) on September 6, 2022. This notice may publish under the 15 days due to agency's unforeseen exceptional scheduling conflict.
The meeting will include discussions on assessing SAMHSA's current strategies, including the mental health and substance use needs of the women and girls population. Additionally, the ACWS will be addressing priorities regarding the impact of COVID–19 on the behavioral health needs of women and children and directions around behavioral health services and access for women and children.
The meeting is open to the public and will be held virtually. Interested persons may present data, information, or views, orally or in writing, on issues pending before the committee. Written submissions should be forwarded to the contact person by September 1, 2022. Oral presentations from the public will be scheduled at the conclusion of the meeting. Individuals interested in making oral presentations are encouraged to notify the contact person on or before September 1, 2022. Up to five minutes will be allotted for each presentation.
The meeting may be accessed via telephone or web meeting. To obtain the call-in number and access code, submit written or brief oral comments, or request special accommodations for persons with disabilities, please register on-line at:
Substantive meeting information and a roster of ACWS members may be obtained either by accessing the SAMHSA Committees' Web
U.S. Customs and Border Protection, Department of Homeland Security.
Revocation of customs brokers' licenses.
This document provides notice of the revocation by operation of law of customs brokers' licenses.
Melba Hubbard, Branch Chief, Broker Management, Office of Trade, (202) 325–6986,
This document provides notice that, pursuant to section 641 of the Tariff Act of 1930, as amended (19 U.S.C. 1641), and section 111.30(d) of title 19 of the Code of Federal Regulations (19 CFR 111.30(d)), the following customs brokers' licenses were revoked by operation of law, without prejudice, for failure to file a triennial status report. A list of revoked customs brokers' licenses appears below with both the port, which issued the licenses, and the brokers' names within the port of issuance whose licenses were revoked, set forth alphabetically.
U.S. Customs and Border Protection, Department of Homeland Security.
General notice.
This document announces the transition of the Electronic Certification System (eCERT) to an updated version, eCERT 2.0, which will become the sole method for participating in the eCERT process. The updated version includes three new features that will enhance the existing system by implementing additional validations that verify the authorized use of quota certificates. The use of eCERT 2.0 will allow for the decrementing of quota certificates to prevent those certificates from being overused. Participating countries will have enhanced querying capabilities to query and track actual certificate usage. Additionally, importers will be able to query their usage of the quota certificates via the Automated Broker Interface. In order to participate in eCERT 2.0, importers must provide the participating country with the Importer of Record (IOR) number in advance of filing an entry, and, in turn, the participating country must submit the IOR number as an additional data element of information within the transmission for eCERT 2.0. The transition to eCERT 2.0 will not change the tariff-rate quota or tariff preference level filing process or requirements. Importers will continue to provide the export certificate or certificate of eligibility numbers from the participating countries in the same manner as when currently filing entry summaries with U.S. Customs and Border Protection. The format of the export certificate and certificate of eligibility numbers will remain the same for the corresponding eCERT transmissions.
The transition to eCERT 2.0 will be operational as of September 25, 2022.
Julia Peterson, Chief, Quota and Agriculture Branch, Trade Policy and Programs, Office of Trade, (202) 384–8905, or
The Electronic Certification System (eCERT) is a system developed by U.S. Customs and Border Protection (CBP) that uses electronic data transmissions of information normally associated with a required export document, such as a license or certificate, to facilitate the administration of quotas and ensure that the proper restraint levels are charged without being exceeded. Foreign countries participating in eCERT transmit information directly or via a global network service provider to CBP's automated electronic system for commercial trade processing, the Automated Commercial Environment (ACE).
Specific data elements are transmitted to CBP by the importer of record (or an authorized customs broker) when filing an entry summary with CBP, and those data elements must match eCERT data from the foreign country before an importer may claim any applicable in-quota tariff rate of duty or the preferential duty rate under a tariff preference level (TPL). An importer may claim an in-quota tariff rate or preferential duty rate when merchandise is entered, or withdrawn from warehouse, for consumption, only if the information transmitted by the importer matches the information transmitted by the foreign government. If there is no transmission by the foreign
Currently, Australia, Uruguay, New Zealand, and Argentina are approved for the use of eCERT for transmitting export certificates for certain beef entries subject to the tariff-rate quota.
This document announces that the transition of eCERT to eCERT 2.0 will be operational as of September 25, 2022, and eCERT 2.0 will become the sole method for participating in the eCERT process at that time. As of that date, the below-mentioned enhancements will become operational for the transmission of export certificates for certain beef entries from Australia, Uruguay, New Zealand and Argentina, and for the transmission of certificates of eligibility for certain textile and apparel goods from Mexico.
The updated system will include three new features that will enhance the existing eCERT system by implementing additional validations that verify the authorized use of quota certificates. One of the enhancements will allow the eCERT system to decrement the usage of quota certificates and prevent those certificates from being overused, and thus, provide CBP with better and more easily available awareness of the certificate usage. Secondly, participating countries will have enhanced querying capabilities to query and track actual certificate usage in eCERT 2.0. The third enhancement will be a new Automated Broker Interface (ABI) query which will enable importers to query their usage of quota certificates.
In order to participate in eCERT 2.0, importers must provide the participating country with their Importer of Record (IOR) number in advance of filing an entry, and, in turn, the participating country will submit the IOR number as part of the eCERT transmission to CBP.
At this time, CBP recommends that importers share the IOR numbers with their exporters in advance of September 25, 2022, to allow for participating countries to test the updated system with actual IOR numbers and avoid rejection of the transmission due to missing IOR numbers once eCERT 2.0 is deployed.
The transition to eCERT 2.0 will not change the tariff-rate quota or TPL filing process or requirements. Importers will continue to provide the export certificate or certificate of eligibility numbers from the participating countries in the same manner as when currently filing entry summaries with CBP. The format of the export certificate and certificate of eligibility numbers will remain the same for the corresponding eCERT transmissions.
Federal Emergency Management Agency, DHS.
Notice, request for comments.
The Federal Emergency Management Agency (FEMA) is accepting comments on its 2022 update to the Hazard Mitigation Assistance (HMA) Program and Policy Guide (formerly 2015 HMA Guidance and Addendum). The HMA Program and Policy Guide was last published in 2015. The primary purpose of this update is to incorporate existing policies and guidance materials issued since 2015, simplify guidance materials, and revise the document to increase overall accessibility and organization.
Comments must be received by September 23, 2022.
You may submit comments, identified by Docket ID FEMA–2022–0023, via the Federal eRulemaking Portal:
Jennie Orenstein, Branch Chief, Hazard Mitigation Division, Federal Emergency Management Agency, 400 C Street SW, Washington, DC 20472, (202) 212–4071,
Interested persons are invited to participate in this update to the Hazard Mitigation Assistance (HMA) Program and Policy Guide (formerly 2015 HMA Guidance and 2015 HMA Guidance Addendum) by submitting comments and related materials. We will consider all comments and material received during the comment period.
If you submit a comment, include the Docket ID FEMA–2022–0023, indicate the specific section of this document to which each comment applies, and give the reason for each comment. All submissions may be posted, without change, to the Federal e-Rulemaking Portal at
FEMA's Hazard Mitigation Assistance (HMA) grant programs provide funding for eligible mitigation activities that reduce disaster losses and protect life and property from future disaster damages.
The proposed 2022 HMA Program and Policy Guide consolidates the 2015 HMA Guidance and the 2015 HMA Guidance Addendum into one HMA guidance document, and renames the document as “Hazard Mitigation Assistance Program and Policy Guide.” The HMA Program and Policy Guide covers the following hazard mitigation assistance programs: (1) the Flood Mitigation Assistance (FMA) program; (2) the Hazard Mitigation Grant Program (HMGP); (3) the Hazard Mitigation Grant Program Post Fire (HMGP Post Fire); and (4) the Building Resilient Infrastructure and Communities (BRIC) program. FEMA implemented the BRIC program following the passage of the Disaster Recovery Reform Act of 2018, which amended Section 203 of the Stafford Act.
The updated HMA Program and Policy Guide includes the following content updates:
• Highlights FEMA priorities such as resilience and climate adaptation, community lifelines, whole community, equity, capability and capacity building, comprehensive planning, and building codes.
• Incorporates changes resulting from the Disaster Recovery Reform Act.
• Incorporates additional policy changes that were published after 2015, such as the Ecosystem Service Benefits in Benefit-Cost Analysis for FEMA's Mitigation Program Policy.
• Expands information on project types in Part 12 based on existing job aids and factsheets, such as aquifer storage and recovery,
• Incorporates 2021 updates to Hazard Mitigation Assistance and Mitigation Planning regulations.
• Clarifies issues specific to HMGP, including application period, the HMGP 12-month lock-in and de-obligation, extensions, and the total award amount for the purpose of management costs.
• Extends the period of performance for HMGP from 36 to 48 months.
• Expands the eligibility of codes and standards assistance in Part 11.
• Incorporates the 2020 regulatory changes made to 2 CFR part 200
• Expands guidance content and resources on mitigation planning, recognizing its importance to effective hazard mitigation.
• Includes new guiding principles, such as nature-based solutions and the National Mitigation Investment Strategy.
• Makes nonsubstantive revisions to increase overall accessibility and organization of the document.
FEMA seeks comment on the proposed 2022 HMA Program and Policy Guide, which is available online at
Most helpful to the agency will be comments that provide concrete suggestions and the reasoning for a proposed approach or change.
Federal Emergency Management Agency, Department of Homeland Security
30-Day notice of renewal and request for comments.
The Federal Emergency Management Agency (FEMA) will submit the information collection abstracted below to the Office of Management and Budget for review and clearance in accordance with the requirements of the Paperwork Reduction Act of 1995. The notice seeks comments concerning the Ready Campaign, which is a national public service advertising (PSA) campaign in support of FEMA's mission and is designed to educate and empower Americans to prepare for and respond to emergencies including natural and man-made disasters.
Comments must be submitted on or before September 23, 2022.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Requests for additional information or copies of the information collection should be made to Director, Information Management Division, 500 C Street SW, Washington, DC 20472, email address
This proposed information collection previously published in the
Comments may be submitted as indicated in the
Federal Emergency Management Agency, Department of Homeland Security.
60-Day notice of revision and request for comments.
The Federal Emergency Management Agency (FEMA), as part of its continuing effort to reduce paperwork and respondent burden, invites the general public to take this opportunity to comment on a revision of a currently approved information collection. In accordance with the Paperwork Reduction Act of 1995, this notice seeks comments concerning the Crisis Counseling Assistance and Training Program, which provides federal funding in response to a State or Federally recognized Tribe's request for Crisis Counseling services for a presidentially declared major disaster.
Comments must be submitted on or before October 24, 2022.
To avoid duplicate submissions to the docket, please submit comments at
All submissions received must include the agency name and Docket ID. Regardless of the method used for submitting comments or material, all
Ani Brown, EM Specialist, Recovery/Individual Assistance/Community Services at
Section 416 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, (Pub. L. 93–288, as amended and codified at 42 U.S.C. 5183) (“Act”), authorizes the President to provide professional counseling services, including financial assistance to States (which includes the fifty states, the District of Columbia, and the U.S. territories), Federally recognized Indian Tribal governments, local agencies or private mental health organizations for professional counseling services, to survivors of major disasters to relieve mental health problems caused or aggravated by a major disaster or its aftermath. The implementing regulations for Section 416 of the Stafford Act are at 44 CFR 206.171. Under 44 CFR 206.171 and by agreement, the U.S. Department of Health and Human Services-Center for Mental Health Services (HHS–CMHS), which has expertise in crisis counseling, coordinates with FEMA in administering the Crisis Counseling Assistance and Training Program (CCP). FEMA and HHS–CMHS provide program oversight, technical assistance, and training to States and Federally recognized Tribes applying for CCP funding for major disasters.
FEMA is proposing to revise the collection by rewording the sub-question from question 8 on the Crisis Counseling Assistance and Training Program (CCP), Immediate Services Program (ISP) Application, FEMA Form FF–104–FY–21–148 (formerly 003–0–1) and from question 12 on the Crisis Counseling Assistance and Training Program, Regular Services Program (RSP) Application, FEMA Form FF–104–FY–21–149 (formerly 003–0–2). The rewording of these sub-questions will allow for greater transparency of plans to ensure accessibility to all eligible survivors.
Comments may be submitted as indicated in the
Cybersecurity and Infrastructure Security Agency (CISA), Department of Homeland Security (DHS).
Notice of
CISA is publishing this notice to announce the following CISA Cybersecurity Advisory Committee virtual meeting. This meeting will be partially closed to the public.
The CISA Cybersecurity Advisory Committee's meeting will be open to the public, per 41 CFR 102–3.150, and held via conference call. For access to the conference call bridge,
•
•
A public comment period is scheduled to be held during the meeting from 2:10 p.m. to 2:25 p.m. ET. Speakers who wish to participate in the public comment period must email
Megan Tsuyi, 202–594–7374,
The CISA Cybersecurity Advisory Committee was established under the National Defense Authorization Act for Fiscal Year 2021, Public Law 116–283. Notice of this meeting is given under FACA, 5 U.S.C. appendix (Pub. L. 92–463). The CISA Cybersecurity Advisory Committee advises the CISA Director on matters related to the development, refinement, and implementation of policies, programs, planning, and training pertaining to the cybersecurity mission of the Agency.
The committee will also meet in a closed session from 1 p.m. to 2 p.m. ET to participate in an operational discussion that will address areas of critical cybersecurity vulnerabilities and priorities for CISA. Government officials will share sensitive information with CSAC members on initiatives and future security requirements for assessing cyber risks to critical infrastructure.
Basis for Closure: In accordance with section 10(d) of FACA and 5 U.S.C. 552b(c)(9)(B),
This agenda item addresses areas of CISA's operations that include critical cybersecurity vulnerabilities and priorities for CISA. Government officials will share sensitive information with CSAC members on initiatives and future security requirements for assessing cyber risks to critical infrastructure.
As the premature disclosure of the information that will be discussed would be likely to significantly frustrate implementation of proposed agency action, this portion of the meeting is required to be closed pursuant to section 10(d) of FACA and 5 U.S.C. 552b(c)(9)(B).
Department of Interior.
Notice of public meeting.
In accordance with the Federal Advisory Committee Act of 1972, the U.S. Geological Survey (USGS) is publishing this notice to announce that a Federal Advisory Committee meeting of the National Geospatial Advisory Committee (NGAC) will take place.
The meeting will be held as a webinar on Wednesday, September 7, 2022, from 1:00 p.m. to 5:00 p.m. and on Thursday, September 8, 2022, from 1:00 p.m. to 5:00 p.m. (Eastern Daylight Time).
The meeting will be held on-line and via teleconference. Instructions for accessing the meeting will be posted at
Mr. John Mahoney, Federal Geographic Data Committee (FGDC), USGS, by mail at 909 First Avenue, Room 703, Seattle, WA 98104; by email at
This meeting is being held under the provisions of the Federal Advisory
Please make requests in advance for sign language interpreter services, assistive listening devices, or other reasonable accommodations. We ask that you contact the person listed in the (see
Individuals in the United States who are deaf, blind, hard of hearing, or have a speech disability may dial 711 (TTY, TDD, or TeleBraille) to access telecommunications relay services. Individuals outside the United States should use the relay services offered within their country to make international calls to the point-of-contact in the United States.
Before including your address, phone number, email address, or other personally identifiable information (PII) in your comment, you should be aware that your entire comment—including your PII—may be made publicly available at any time. While you may ask us in your comment to withhold your PII from public review, we cannot guarantee that we will be able to do so.
Bureau of Indian Affairs (BIA), Interior.
Notice.
The Secretary of the Interior (Secretary), through the Office of Indian Economic Development (OIED), Division of Economic Development (DED), is soliciting proposals from eligible federally recognized Tribes and Tribal organizations for the Tribal Tourism Grant Program (TTGP). The grant funding will be used to support Tribal tourism by providing Tribes and Tribal organizations funding to obtain technical assistance to perform feasibility studies or develop Tribal tourism business plans. The TTGP grant will provide Tribes resources to explore opportunities to increase Tribal capacity to plan, develop, and manage tourism and related infrastructure, in support of economic development and the Native American Tourism and Improving Visitor Experience Act or NATIVE Act. The feasibility study or business plan will empower Tribes to make informed decisions on potential tourism project(s).
Grant application packages will be accepted until 5 p.m. ET, on October 24, 2022. OIED will not consider proposals received after this time and date.
The required method of submitting proposals is through
Mr. Dennis Wilson, Grant Management Specialist, Office of Indian Economic Development, telephone: (505) 917–3235; email:
Award Ceiling: $150,000.
Award Floor: $25,000.
CFDA Number: 15.032.
Cost Sharing or Matching Requirement: No.
Number of Awards: 20–35.
Category: Business Development.
OIED anticipates awarding of approximately 20 to 35 grants under this announcement ranging in value from approximately $25,000 to $150,000. The funded projects are for a one-year term. OIED will use a competitive evaluation process for awarding based on criteria described in the Review and Selection Process (Criteria) section of this notice. Only one application will be accepted from an eligible Tribe, and only one application will be accepted from an eligible Tribal Organization of that Tribe.
The Office of the Assistant Secretary—Indian Affairs, through OIED, is soliciting proposals from federally recognized Tribes listed as
The funding periods and amounts referenced in this solicitation are subject to the availability of non-recurring appropriation funds of the BIA budget at the time of award, as well as the Department of the Interior (DOI) and Indian Affairs priorities at the time of the award. Neither DOI nor Indian Affairs will be held responsible for proposal or application preparation costs. Publication of this solicitation does not obligate DOI or Indian Affairs to award any specific grant or to obligate all or any part of available funds. Future funding is subject to the availability of Congressional appropriations and cannot be guaranteed. DOI or Indian Affairs may cancel or withdraw this solicitation at any time.
The Office of the Assistant Secretary—Indian Affairs, through OIED, is soliciting proposals from federally recognized Tribes listed as
The applicant determines who will conduct its feasibility study or business plan. An applicant has several choices, including but not limited to:
• Universities and colleges, including but not limited to Tribal colleges and universities;
• Private consulting firms; or
• Non-academic, non-profit entities.
The applicant is subject to the procurement standards in 2 CFR 200.318 through 200.326. In accordance with 2 CFR 200.318, an applicant must use its own documented procurement procedures which reflect Tribal laws and regulations, provided the procurements conform to applicable Federal law and standards.
TTGP grant funding must be expended in accordance with applicable statutory and regulatory requirements, including 2 CFR 200. As part of the grant application review process, OIED may conduct a review of an applicant's prior OIED grant(s).
Applicants currently under BIA sanction Level 2 or higher resulting from non-compliance with the Single Audit Act are ineligible for a TTGP grants. Applicants at Sanction Level 1 will be considered for funding.
Only one application will be accepted from an eligible Tribe, and only one application will be accepted from an eligible Tribal Organization of that Tribe. Applications should address one project and any submissions that contain multiple project proposals will not be considered. OIED will apply the same objective ranking criteria to each proposal.
The purpose of TTGP grants is to empower Tribes to make informed decisions on potential tourism project(s), a Tribal tourism business, or Tribal tourism businesses recovering from the economic impacts of the COVID–19 pandemic. An application can request funding for a feasibility study, or a business plan, depending on the Tribe's needs.
TTGP grants may not be used for:
• Establishing or operating a Tribal office;
• Indirect costs or administrative costs as defined by the Federal Acquisition Regulation (FAR);
• Purchase of equipment used to develop the feasibility studies, such as computers, vehicles, field gear, etc. (however, leasing of this type of equipment for the purpose of developing feasibility studies is allowed);
• Creating Tribal jobs to complete the project. A TTGP grant is not intended to create temporary administrative jobs or supplement employment for Tribal members;
• Supplementing employment for current positions not significantly and directly involved in the proposed project (
• International travel;
• Legal fees;
• Application fees associated with permitting;
• Training;
• Contract negotiation fees;
• Feasibility studies of energy, mineral, energy legal infrastructure, or broadband related projects, businesses, or technologies that are addressed by OIED's Energy and Mineral Development Program (EMDP), Tribal Energy Development Capacity (TEDC); and
• Any other activities not authorized by the grant award letter.
All applications are required to be submitted in digital form to
The mandatory components, and forms identified below, must be included in the proposal package. Links to the mandatory forms can be found under the “package” tab on the TTGP FY2022 grant opportunity page at
• Cover Page;
• Application for Federal Assistance (SF–424) [V4.0];
• Cover Letter;
• Project Abstract Summary [V2.0];
• Project Narrative Attachment Form [V1.2];
• Budget Information for Non-Construction Programs (SF–424A) [V1.0];
• Attachments [V1.2];
• Key Contacts [V2.0].
A Cover Page must be included in the application and contain the following:
• Category of Funding for the TTGP application;
• Proposal Title;
• Total Amount of funding requested from the Program;
• Full and Proper Name of the applicant organization;
• Statement confirming the proposed work will have the potential to reach the intended goals and objectives;
• Confirm active registration in SAM, attaching print-out from
• Provide active enrollment in ASAP and your Recipient ID with the BIA. Allow 3–4; weeks to complete all steps of enrollment prior to submission deadline. The organization must be enrolled in ASAP with BIA, current enrollment with other federal agencies is not sufficient. See instructions and registration instructions in Appendix;
• Confirmation of other completed Mandatory Components identified in this section (SF–424, Project Abstract Summary, etc.);
• Identification of partnerships such as Tribes, other Tribal Organizations or Entities.
Applicants are required complete the Application for Federal Assistance SF–424. Please use a descriptive file name that includes tribal name and project description. For example: TTGPSF424.Tribalname.Project. The SF–424 form requires the Congressional District number of the applicant, which can be found at
A cover letter is not to exceed one (1) page that summarizes the interest and intent, complete with authorized signature(s) of organization leadership.
The first paragraph of the project narrative must include the title and basic description of the proposed Tribal tourism feasibility study and/or Tribal tourism business plan. The Project Narrative must not exceed 15-pages. Supplemental information such as letters of support, graphs, charts, maps, photographs and other graphic and/or other relevant information may be included in an appendix and not counted against the 15-page Project Narrative Limit. At a minimum, it should include:
• A technical description of the project and, if applicable, an explanation of how the proposed new study and/or business plan would benefit the applicant and does not duplicate previous work;
• A description of the project objectives and goals;
• Deliverable products that the consultant is expected to generate, including interim deliverables (such as status reports and technical data to be obtained) and final deliverables (the feasibility study); and
• Resumes of key consultants and personnel to be retained, if available, and the names of subcontractors, if applicable. This information may be included as an attachment to the application and will not be counted towards the 15-page limitation;
• Please use a descriptive file name that includes Tribal name and project description. For example: TTGPNarrative.Tribalname.Project.
In addition, unless prohibited by Tribal procurement procedures, please include a description of the consultant(s) the applicant wishes to retain, including the consultant's contact information, technical expertise, training, qualifications, and suitability to undertake the feasibility study. These documents may be included at the end of the Project Narrative and will not be counted toward the 15-page limitation.
Project Narratives are not judged based on their length. Please do not submit any unnecessary attachments or documents beyond what is listed above,
Applicants are required to utilize the SF–424A for the budget submission. Please use a descriptive file name that includes tribal name and project description. For example: TTGPBudget.Tribalname.Project. The budget must identify the amount of grant funding requested and a comprehensive breakdown of all projected and anticipated expenditures, including contracted personnel fees, consulting fees (hourly or fixed), travel costs, data collection and analysis costs, computer rentals, report generation, drafting, advertising costs for a proposed project and other relevant project expenses, and their subcomponents.
• Travel costs should be itemized by airfare, vehicle rental, lodging, and per diem, based on the current Federal government per diem schedule.
• Data collection and analysis costs should be itemized in sufficient detail for the OIED review committee to evaluate the charges.
• Other expenses may include computer rental, report generation, drafting, and advertising costs for a proposed project.
Utilize the “attachments form” to include the Tribal resolution issued in the fiscal year of the grant application, authorizing the submission of a TTGP 2022 grant application. It must be signed by authorized Tribal representative(s). The Tribal resolution must also include a description of the feasibility study or business plan to be developed. An application submitted without a Tribal Resolution will be considered incomplete. The attachments form can also be used to include any other attachments related to the proposal.
Grantees will be required to have two individuals who work directly on the project attend an in-person annual DOI/OIED-sponsored grantee 3-day meeting in Washington, DC, during the year of the grant award. Applicants must include costs in the budget to cover this requirement. Travel costs must not exceed $6,000 per person. Applicants should follow their own travel policies to budget for this 3-day meeting.
Please make sure that the System for Award Management (SAM) number used to apply is active, not expired, with a current Unique Entity Identifier (UEI) number on the SF–424. Please make sure an active Automated Standard Application for Payment (ASAP) number is provided. Applicants must have an ASAP number and be enrolled with the BIA to be eligible. Please list counties where the project is located and congressional district number where the project will be located.
Applicants must include the Key Contacts information page that includes:
• Please use a descriptive file name that includes tribal name and identifies it is the critical information page (CIP). For example: TTGPICIP.Tribalname.Project;
• Project Manager's contact information including address, email, desk, and cell phone number;
• Please make sure the System for Award Management (SAM) number used to apply is active, not expired, with a current UEI number on the SF–424;
• Please make sure an
Please list the county(ies) where the project is located and congressional district number(s) where the project is located.
Incomplete applications will not be accepted. Please ensure that all forms listed in the announcement are completed and submitted in
Upon receiving a TTGP application, OIED will determine whether the application is complete and that the proposed project does not duplicate or overlap previous or currently funded OIED tourism projects. Any proposal that is received after the date and time in the
The OIED Review Committee, comprised of OIED staff, staff from other Federal agencies, and subject matter experts, will evaluate the proposals against the ranking criteria. Proposals will be evaluated using the five ranking criteria listed below, with a maximum achievable total of 100 points.
Final award selections will be approved by the Assistant Secretary—Indian Affairs and the Associate Deputy Secretary, U.S. Department of the Interior. Applicants not selected for an award will be notified in writing.
Proposals (both feasibility or business plans) will be formally evaluated by an OIED review committee using the five criteria listed below. Each criterion provides a percentage of the total maximum rating of 100 points:
• The Project's Economic Benefits: 50 points;
• Project Deliverables: 20 Points;
• Feasibility Process and Analysis: 10 points;
• Costs of Proposal: 10 points;
• Specificity: 10 points.
The reviewers will determine if the proposal's scope of work clearly states the tourism opportunity to be studied. Factors that the reviewers will consider when allocating points are, but not limited to:
• Does the tourism proposal address what is needed to increase tourism capacity?
• Does the proposal describe the benefits that the tourism project would have if implemented?
• Does the proposal describe how the project will address economic development challenges such as unemployment, workforce development, infrastructure needs, and stimulate economic activity within a Native community?
• Does the proposal address sustainability planning, ensuring that the project has long-term benefits for the community?
• Does the proposal identify any partnerships with non-profit or private sector resources that might increase the potential that the tourism project will succeed?
The reviewers will determine if the proposal describes in detail applicable proposed deliverables. For example, a mountain biking tour study would include deliverables such as, but not limited to, site analysis, market demographics, marketing strategies, drive-time market, regional competition, market demands, and a financial model that includes investment and return on investment projections.
The reviewers will determine if a comprehensive timeline has been developed to address tasks that are needed to successfully complete the objectives outlined in the scope of work.
The reviewers will assess the costs listed in the budget to determine if the overall value of the project is competitively priced and in accordance with the goals stated within the proposal/scope of work.
In addition, the reviewers understand that applicants may retain consultant(s) that prepare the Tourism proposal to also conduct the feasibility study if the grant is awarded. This does not prejudice an applicant's chances of being selected as a grantee. However, proposals will be viewed unfavorably if they show little evidence of communication between the consultant(s) and the applicant or scant regard for the applicant community's unique circumstances. Facsimile applications prepared by the same consultant(s) and submitted by multiple applicants will receive scrutiny in this regard.
OIED's obligation under this solicitation is contingent on receipt of congressionally appropriated funds. No liability on the part of the U.S. Government for any payment may arise until funds are made available to the awarding officer for this grant and until the recipient receives notice of such availability, to be confirmed in writing by the grant officer.
All payments under this agreement will be made by electronic funds transfer through the ASAP. All grant recipients are required to have a current and accurate UEI number to receive funds. All payments will be deposited to the banking information designated by the applicant in the System for Award Management (SAM).
The applicant must deliver all products and data required by the signed Grant Agreement for the proposed TTGP feasibility study or business plan project to OIED within 30 days of the end of each reporting period and 120 days after completion of the project. The reporting periods will be established in the terms and conditions of the final award.
OIED requires that deliverable products be provided in digital format
The contract should include budget amounts for all printed and digital copies to be delivered in accordance with the grant agreement. In addition, the contract must specify that all products generated by a consultant belong to the grantee and cannot be released to the public without the grantee's written approval. Products include, but are not limited to, all reports and technical data obtained, maps, status reports, and the final report.
In addition, this funding opportunity and financial assistance award must adhere to the following provisions.
• This section intends to ensure that non-Federal entities and their employees take appropriate steps to avoid conflicts of interest in their responsibilities under or with respect to Federal financial assistance agreements.
• In the procurement of supplies, equipment, construction, and services by recipients and by sub-recipients, the conflict-of-interest provisions in 2 CFR 200.318 apply.
• Non-Federal entities must avoid prohibited conflicts of interest, including any significant financial interests that could cause a reasonable person to question the recipient's ability to provide impartial, technically sound, and objective performance under or with respect to a Federal financial assistance agreement.
• In addition to any other prohibitions that may apply with respect to conflicts of interest, no key official of an actual or proposed recipient or sub-recipient, who is substantially involved in the proposal or project, may have been a former Federal employee who, within the last one (1) year, participated personally and substantially in the evaluation, awarding, or administration of a grant with respect to that recipient or sub-recipient or in development of the requirement leading to the funding announcement.
• No actual or prospective recipient or sub-recipient may solicit, obtain, or use non-public information regarding the evaluation, grant, administration of a grant to that recipient or sub-recipient or the development of a Federal financial assistance opportunity that may be of competitive interest to that recipient or sub-recipient.
• Non-Federal entities, including applicants for financial assistance awards, must disclose in writing any conflict of interest to the DOI awarding agency or pass-through entity in accordance with 2 CFR 200.112, Conflicts of Interest.
• Recipients must establish internal controls that include, at a minimum, procedures to identify, disclose, and mitigate or eliminate identified conflicts of interest. The recipient is responsible for notifying the Financial Assistance Officer in writing of any conflicts of interest that may arise during the life of the grant, including those that have been reported by sub-recipients.
• Restrictions on Lobbying. Non-Federal entities are strictly prohibited from using funds under this grant or cooperative agreement for lobbying activities and must provide the required certifications and disclosures pursuant to 43 CFR part 18 and 31 U.S.C. 1352.
• Review Procedures. The Financial Assistance Officer will examine each conflict-of-interest disclosure on the basis of its particular facts and the nature of the proposed grant or cooperative agreement, and will determine whether a significant potential conflict exists and, if it does, develop an appropriate means for resolving it.
• Enforcement. Failure to resolve conflicts of interest in a manner that satisfies the Government may be cause for termination of the award. Failure to make the required disclosures may result in any of the remedies described in 2 CFR 200.338, Remedies for Noncompliance, including suspension or debarment (see also 2 CFR part 180).
• Applicability. The Department of the Interior is committed to basing its decisions on the best available science and providing the American people with enough information to thoughtfully and substantively evaluate the data, methodology, and analysis used by the Department to inform its decisions.
• Use of Data. The regulations at 2 CFR 200.315 apply to data produced under a Federal award, including the provision that the Federal Government has the right to obtain, reproduce, publish, or otherwise use the data produced under a Federal award as well as authorize others to receive, reproduce, publish, or otherwise use such data for Federal purposes.
• Availability of Data. The recipient shall make the data produced under this award and any subaward(s) available to the Government for public release, consistent with applicable law, to allow meaningful third-party evaluation and reproduction of the following:
○ The scientific data relied upon;
○ The analysis relied upon; and
○ The methodology, including models, used to gather and analyze data.
Technical consultation from OIED may include clarifying application requirements, confirming whether an applicant previously submitted the same or similar proposal, and registration information for SAM or ASAP. Technical assistance will be provided by the OIED contractor, Tribal Tech. The applicant is solely responsible for the preparation of its grant proposal. All eligible applicants will have access to scheduled training and can request assistance from the pre-application phase through the post-award close-out. It is strongly recommended that any assistance be a consolidation of items based off reasonably completed working drafts. Please complete an in-take form at
The information collection requirements contained in this notice have been reviewed and approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act, 44 U.S.C. 3504(h). The OMB control number is 4040–0004. The authorization expires on December 31, 2022. An agency may not conduct or sponsor, and you are not required to respond to, any information collection that does not display a currently valid OMB Control Number.
This is a discretionary grant program authorized under the NATIVE Act (25 U.S.C. 4354(b)). The NATIVE Act authorizes the head of an agency with assets or resources relating to travel,
Bureau of Land Management, Interior.
Notice of intent.
In compliance with the National Environmental Policy Act of 1969, as amended (NEPA), and the Federal Land Policy and Management Act of 1976, as amended, the Bureau of Land Management (BLM) Arizona State Director intends to prepare a Resource Management Plan (RMP) amendment with an associated environmental assessment (EA) concerning recreational target shooting for the Sonoran Desert National Monument (SDNM). By this notice the BLM is announcing the beginning of the scoping period to solicit public comments and identify issues and is providing the planning criteria for public review.
The BLM requests that the public submit comments concerning the scope of the analysis, potential alternatives, planning criteria, and identification of relevant information, and studies by September 23, 2022. To afford the BLM the opportunity to consider issues please ensure your comments are received prior to the close of the 30-day scoping period or 15 days after the last public meeting, whichever is later. The date(s) and time(s) of scoping meetings will be announced at least 15 days in advance through local news releases, newspapers, and the BLM Arizona Phoenix District web page,
You may submit comments on issues and planning criteria related to the SDNM RMP Amendment and EA addressing Recreational Target Shooting availability in the monument by any of the following methods:
•
•
•
Documents pertinent to this proposal may be examined online at
Katie White Bull, Acting Field Manager, telephone (480) 739–8721; address 2020 E. Bell Road, Phoenix, Arizona 85022; email
This document provides notice that the BLM Arizona State Director intends to prepare and consider an RMP amendment with an associated EA for recreational target shooting availability in the SDNM, announces the beginning of the scoping process, and seeks public input on issues, preliminary alternatives, and planning criteria. The RMP amendment would change the existing SDNM Record of Decision and Approved Resource Management Plan (BLM 2012), as amended by the 2018 Record of Decision and Approved Resource Management Plan Amendment.
The planning area is located in Maricopa and Pinal Counties, Arizona and encompasses approximately 486,400 acres of public land.
The scope of this land use planning process does not include addressing the evaluation or designation of Areas of Critical Environmental Concern (ACECs), and the BLM is not considering ACEC nominations as part of this process.
The purpose of the RMP amendment is to establish management guidance specific to recreational target shooting on public land within the SDNM while ensuring the decisions are consistent with the SDNM proclamation and other resource decisions in the 2012 SDNM Record of Decision and Approved Resource Management Plan. The need for this planning effort is to fulfill requirements of an April 2022 settlement agreement that the BLM entered to resolve litigation concerning the agency's 2018 Record of Decision and Approved Resource Management Plan Amendment for the SDNM.
The RMP amendment process will consider whether and where recreational target shooting should be allowed in the SDNM, along with any associated management actions. Preliminary alternatives include the No Action alternative, which reflects the 2018 Record of Decision and approved resource management plan amendment that identified approximately 435,700 acres of public land as available for dispersed recreational target shooting along with a monitoring and mitigation framework to avoid or minimize impacts on monument objects while increasing public safety. In accordance with the April 2022 settlement agreement referenced earlier, the BLM will also analyze an alternative under which several areas in the monument would be unavailable to recreational target shooting, including designated wilderness; lands with wilderness characteristics managed to protect those characteristics; an area in the northwest portion of the monument where the Komatke Trail is suspected to exist, along with a 0.5 mile buffer north of the suspected trail, unless, prior to the completion of the land use planning process, additional field work demonstrates the nonexistence of the trail; the area south of Highway 238 from the western edge of the monument boundary to the western edge of the South Maricopa Mountains Wilderness area boundary, and the area south of I–8 and west of the Table Top Wilderness, known as the Vekol Valley; the portion of the monument that used to be part of the Barry M. Goldwater Air Force Range before it was reconveyed to the BLM; and any area where the BLM's suitability analysis identifies monument objects and determines target shooting is inconsistent with the objects' proper
The planning criteria guide the planning effort and lay the groundwork for effects analysis by identifying the preliminary issues and their analytical frameworks. Preliminary issues for the planning area have been identified by BLM personnel and from early engagement conducted for this planning effort with Federal, State, and local agencies; Tribes; and other stakeholders. The BLM has identified three preliminary issues for this planning effort's analysis: (1) impacts on monument objects from recreational target shooting, (2) effectiveness of the mitigation and monitoring protocol in protecting monument objects, and (3) public health and safety. The planning criteria are available for public review and comment at the ePlanning website (see
This notice of intent initiates the scoping period and public review of the planning criteria, which guide the development and analysis of the RMP amendment and EA.
The BLM will be holding a minimum of two virtual public meetings. The specific date(s) and location(s) of these scoping meetings will be announced at least 15 days in advance through local media, newspapers, and the project ePlanning page. You may submit comments to the BLM using one of the methods listed in the
In accordance with the John D. Dingell, Jr. Conservation, Management, and Recreation Act of 2019 (Dingell Act, Pub. L. 116–9, Section 4103), the BLM is generally required to provide public notice and comment before a final decision is made to close an area to recreational shooting. If the BLM proposes any recreational shooting closures as part of the RMP amendment process, it will provide opportunities for public participation in accordance with 16 U.S.C. 7913.
The BLM will use an interdisciplinary approach to develop the plan amendment to consider the variety of resource issues and concerns identified. Specialists with expertise in various disciplines, such as recreation management, National Conservation Lands, wildlife, vegetation, range management and soils, cultural and heritage resources, social and economic conditions and environmental justice, planning and environmental coordination, and Geographic Information Systems will be involved in this planning effort.
The BLM will identify, analyze, and consider mitigation to address the reasonably foreseeable impacts to resources from the proposed plan amendment and all analyzed reasonable alternatives and, in accordance with 40 CFR 1502.14(e), include appropriate mitigation measures not already included in the proposed plan amendment or alternatives. Mitigation may include avoidance, minimization, rectification, reduction or elimination over time, and compensation; and it may be considered at multiple scales, including the landscape scale.
The BLM will utilize and coordinate the NEPA and land use planning processes for this planning effort to help support compliance with applicable procedural requirements under the Endangered Species Act (16 U.S.C. 1536) and Section 106 of the National Historic Preservation Act (54 U.S.C. 306108) as provided in 36 CFR 800.2(d)(3), including public involvement requirements of Section 106. The information about historic and cultural resources and threatened and endangered species within the area potentially affected by the proposed plan amendment will assist the BLM in identifying and evaluating impacts to such resources.
The BLM will consult with Indian Tribal Nations on a government-to-government basis in accordance with Executive Order 13175, BLM Manual Section 1780, and other Departmental policies. Tribal concerns, including impacts on Indian trust assets and potential impacts to cultural resources, will be given due consideration. Federal, State, and local agencies, along with Indian Tribal nations and other stakeholders that may be interested in or affected by the proposed plan amendment that the BLM is evaluating are invited to participate in the scoping process and, if eligible, may request or be requested by the BLM to participate in the development of the environmental analysis as a cooperating agency. The BLM intends to hold a series of government-to-government consultation meetings. The BLM will send invites to potentially affected Tribal nations prior to the meetings. The BLM will provide additional opportunities for government-to-government consultation during the NEPA process.
Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
Bureau of Land Management, Interior.
Notice of official filing.
The plats of survey of the following described land are scheduled to be officially filed 30 days after the date of this publication in the Bureau of Land Management (BLM), New Mexico Office, Santa Fe, New Mexico. The surveys announced in this notice are necessary for the management of lands administered by the agency indicated.
These plats will be available for inspection in the New Mexico Office, Bureau of Land Management, 301 Dinosaur Trail, Santa Fe, New Mexico, 85004–4427. Protests of a survey should be sent to the New Mexico Director at the above address.
Michael J. Purtee, Chief Cadastral Surveyor; (505) 761–8903;
The supplemental plat, Romero Tract, within the Las Trampas Grant, accepted March 16, 2020, for Group 1195, New Mexico.
This supplemental plat was prepared to correct the location of the Romero Tract.
The plat only, in two sheets, representing the dependent resurvey, subdivision of section 21, and metes-and-bounds surveys, Township 8 North, Range 11 West, accepted August 19, 2021, for Group 1208, New Mexico.
This plat was prepared at the request of the Bureau of Land Management, Rio Puerco Field Office.
The plat only, in two sheets, representing the dependent resurvey, metes-and-bounds survey, and survey of a public access easement, Township 20 North, Range 9 East, accepted September 13, 2021, for Group 1209, New Mexico.
This plat was prepared at the request of the Bureau of Land Management, Taos Field Office.
The plat only, in three sheets, representing the dependent resurvey and subdivision of section 9, Township 13 North, Range 3 East, accepted August 18, 2022, for Group 1211, New Mexico.
This plat was prepared at the request of the Bureau of Indian Affairs, Central Office.
The plat, representing the dependent resurvey and survey, Township 5 South, Range 9 West, accepted July 15, 2022, for Group 239, Oklahoma.
This plat was prepared at the request of the Bureau of Land Management, Oklahoma Field Office.
The plat, representing the dependent resurvey and survey, Township 14 North, Range 9 West, accepted August 12, 2021, for Group 244, Oklahoma.
This plat was prepared at the request of the Bureau of Indian Affairs, Southern Plains Regional Office, Oklahoma.
A person or party who wishes to protest against any of these surveys must file a written notice of protest within 30 calendar days from the date of this publication with the New Mexico Director, Bureau of Land Management, stating that they wish to protest.
A statement of reasons for a protest may be filed with the notice of protest to the State Director, or the statement of reasons must be filed with the State Director within 30 days after the protest is filed. Before including your address, or other personal information in your protest, please be aware that your entire protest, including your personal identifying information, may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
National Park Service, Interior.
Notice.
The National Park Service is soliciting electronic comments on the significance of properties nominated before August 13, 2022, for listing or related actions in the National Register of Historic Places.
Comments should be submitted electronically by September 8, 2022.
Comments are encouraged to be submitted electronically to
Sherry A. Frear, Chief, National Register of Historic Places/National Historic Landmarks Program, 1849 C Street NW, MS 7228, Washington, DC 20240,
The properties listed in this notice are being considered for listing or related actions in the National Register of Historic Places. Nominations for their consideration were received by the National Park Service before August 13, 2022. Pursuant to Section 60.13 of 36 CFR part 60, comments are being accepted concerning the significance of the nominated properties under the National Register criteria for evaluation.
Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
Nominations submitted by State or Tribal Historic Preservation Officers:
A request for removal has been made for the following resources:
Additional documentation has been received for the following resources:
U.S. International Trade Commission.
Notice.
Notice is hereby given that the U.S. International Trade Commission has determined to adopt the presiding administrative law judge's (“ALJ”) initial advisory opinion (“IAO”) and not to review the initial determination (“ID”) (Order No. 8), terminating the advisory opinion proceeding based on a joint stipulation. The advisory opinion proceeding is terminated.
Cathy Chen, Office of the General Counsel, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436, telephone 202–205–2392. Copies of non-confidential documents filed in connection with this investigation may be viewed on the Commission's electronic docket (EDIS) at
The Commission instituted the underlying investigation on March 24, 2020, based on a complaint filed on behalf of Corning Optical Communications LLC
On March 23, 2021, the ALJ issued a final ID finding a violation of section 337 with respect to claims 1 and 3 of the '320 patent; claims 11, 12, 14–16, 19, 21, 27, and 28 of the '456 patent; claims 9, 16, 23, and 26 of the '153 patent; and claims 22 and 23 of the '206 patent (collectively, “Asserted Patents”).
On May 24, 2021, the Commission determined to review the final ID in part. 86 FR 28890–93 (May 28, 2021). On August 3, 2021, the Commission determined that Corning established a violation by Respondents of section 337 with respect to claims 1 and 3 of the '320 patent; claims 11, 12, 14–16, 19, 21, 27, and 28 of the '456 patent; claims 9, 16, 23, and 26 of the '153 patent; and claims 22 and 23 of the '206 patent. 86 FR 43564–66 (Aug. 9, 2021). Among other findings, the Commission affirmed with modifications the ID's finding that Panduit induced infringement of the asserted claims of the '320, '456, and '153 patents and adopted the ID's finding that Panduit's accused products did not directly infringe the '206 patent. As a remedy, the Commission determined to issue a general exclusion order (“GEO”) prohibiting the entry of high-density fiber optic equipment and components thereof that infringe one or more asserted claims of the Asserted Patents; and cease and desist orders (“CDOs”), including one directed to Panduit.
On April 18, 2022, Panduit filed a request for an advisory opinion that three new fiber optic equipment designs that it developed do not infringe any asserted claims of the Asserted Patents and are therefore not covered by the GEO and CDO issued in this investigation. Panduit's new designs include: (1) a patch panel design with a density of 192 fiber optic connections in a 1U space; (2) a patch panel design with a density of 144 fiber optic connections in a 1U space; and (3) a new enclosure design with a density of 192 fiber optic connections in a 1U space (collectively, “New Designs”). On April 28, 2022, Corning and OUII filed responses to Panduit's request.
On May 18, 2022, the Commission determined to institute an advisory opinion proceeding to ascertain whether Panduit's New Designs infringe claims 1 and 3 of the '320 patent; claims 11, 12, 14–16, 19, 21, 27, and 28 of the '456 patent; claims 9, 16, 23, and 26 of the '153 patent; and claims 22 and 23 of the '206 patent, and are covered by the remedial orders issued in this investigation. The Commission further determined to refer the matter to the CALJ for assignment to an ALJ for appropriate proceedings and the issuance of an IAO at the earliest practicable time, preferably within 120 days of institution but no later than 7 months after institution. The ALJ was directed to set a target date at two months following the date of issuance of the IAO. The following entities were named as parties to the proceeding: (1) Panduit; (2) Corning; and (3) OUII.
On July 18, 2022, Panduit filed a motion requesting entry of an IAO finding that its New Designs are not subject to the remedial orders and termination of the advisory opinion proceeding. Order No. 8 (Jul. 20, 2022) at 2. Corning did not oppose the motion and OUII filed a response supporting the motion.
In view of the private parties' Joint Stipulation and the remedial orders, on July 20, 2022, the ALJ issued an IAO finding that Panduit's New Designs do not infringe claims 1 and 3 of the '320 patent; claims 11, 12, 14–16, 19, 21, 27, and 28 of the '456 patent; claims 9, 16, 23, and 26 of the '153 patent; and claims 22 and 23 of the '206 patent, and that Panduit's New Designs are not covered by the remedial orders issued in this investigation.
The Commission has determined to adopt the IAO as its final advisory opinion and has determined not to review the ID portion of Order No. 8 terminating the proceeding. The advisory opinion proceeding is terminated.
The Commission vote for this determination took place on August 19, 2022.
The authority for the Commission's determination is contained in section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. 1337, and in part 210 of the Commission's Rules of Practice and Procedure, 19 CFR part 210.
By order of the Commission.
Bureau of Labor Statistics, Department of Labor.
Notice of action.
Effective with the February 2023 release of CPI data for January 2023, BLS will update weights annually for the Consumer Price Index based on a single calendar year of data, using consumer expenditure data from 2021. This change impacts the CPI for urban consumers (CPI–U), wage earners and clerical workers (CPI–W), initial and interim versions of the Chained CPI–U, and CPI research series. This reflects a change from prior practice of updating weights biennially using two years of expenditure data. This shift will result in changes to some documents available from CPI, including the CPI Relative Importance tables Report and CPI Handbook of Methods.
The transition to annual weights will occur with the release of January 2023 data, scheduled for release Friday, February 10, 2023.
Bradley Akin, Information and Analysis Section, Consumer Price Index, Bureau of Labor Statistics, telephone number 202–691–7000 (this is not a toll-free number), or by email to:
To improve the accuracy and relevance of the Consumer Price Index (CPI), the Bureau of Labor Statistics (BLS) plans to update spending weights annually based on a single calendar year of data. This change will be effective with the calculation of January 2023 indexes using consumer expenditure data from 2021.
Historically, the BLS updated spending weights every 10 years to reflect spending habits of urban consumers. In 2002, the BLS began updating spending weights every two years to reflect changes in consumer spending more rapidly. Over time, many countries have adopted annual CPI spending weight updates. The BLS produces continuous estimates of consumer spending, enabling an annual weight update methodology.
Recent research conducted by the BLS demonstrates annual spending weight updates increase the overall accuracy of the CPI. As an accurate cost-of-living measure, the CPI should reflect consumers' changing spending habits. The formula the BLS uses to calculate the CPI–U and CPI–W can yield misleading results if spending weights are updated too frequently. The BLS conducted research in 2021 that demonstrates annual spending weight updates more closely reflect consumers' changing spending habits without yielding misleading results. The estimated impact between 2002–2020 is a reduction in the 12-month change of the CPI–U index of 0.036 percentage points, which is a 13% reduction in the impact of upper-level substitution bias. Upper-level substitution bias refers to the impact of using fixed weights even though consumers change (substitute) what they buy.
Annual spending weight updates enable the BLS to maintain relevancy when there are large shifts in consumer spending, as happened during the COVID–19 pandemic. While sudden shifts in spending habits cannot be reflected in an annual update, annual spending changes are an improvement over longer periods. The BLS analyzed annual spending changes and confirmed the spending weight update in January 2022 should use consumer spending from 2019 and 2020. While in past years, the most recent year is typically the most relevant, spending in 2020 was anomalous enough that averaging two years of data produced the most relevant spending weights for indexes in 2022. For 2023, the BLS determined consumer spending data in 2021 would be more relevant than 2019 and 2020. It is expected that moving forward, using the most recent year of data will produce the most relevant spending weights for CPI calculation.
Veterans' Employment and Training Service (VETS), Department of Labor (DOL).
Notice of open meeting.
This notice sets forth the schedule and proposed agenda of a forthcoming meeting of the ACVETEO. The ACVETEO will discuss the DOL core programs and services that assist veterans seeking employment and raise employer awareness as to the advantages of hiring veterans. There will be an opportunity for individuals or organizations to address the committee. Any individual or organization that wishes to do so should contact Mr. Gregory Green at
Tuesday, September 13, 2022 beginning at 9 a.m. and ending at approximately 4:30 p.m. (EDT).
The meeting will take place at the U.S. Department of Labor, Frances Perkins Building, 200 Constitution Avenue NW, Washington, DC 20210, Conference Room N–4437 A, B, C & D. Members of the public are encouraged to arrive early to allow for security clearance into the Frances Perkins Building. Security Instructions: Meeting participants should use the visitor's entrance to access the Frances Perkins Building, one block north of Constitution Avenue at 3rd and C Streets NW. For security purposes meeting participants must:
1. Present a valid photo ID to receive a visitor badge.
2. Know the name of the event being attended: The meeting event is the Advisory Committee on Veterans' Employment, Training and Employer Outreach (ACVETEO).
3. Visitor badges are issued by the security officer at the Visitor Entrance located at 3rd and C Streets NW. When receiving a visitor badge, the security officer will retain the visitor's photo ID until the visitor badge is returned to the security desk.
4. Laptops and other electronic devices may be inspected and logged for identification purposes.
5. Due to limited parking options, Metro's Judiciary Square station is the easiest way to access the Frances Perkins Building.
Individuals who will need accommodations for a disability in order to attend the meeting (
Mr. Gregory Green, Designated Federal Official for the ACVETEO,
The ACVETEO is a Congressionally mandated advisory committee authorized under Title 38, U.S. Code, Section 4110 and subject to the Federal Advisory Committee Act, 5 U.S.C. App. 2, as amended. The ACVETEO is responsible for: assessing employment and training needs of veterans; determining the extent to which the programs and activities of the U.S. Department of Labor meet these needs; assisting to conduct outreach to employers seeking to hire veterans; making recommendations to the Secretary, through the Assistant Secretary for Veterans' Employment and Training Service, with respect to
The National Science Board (NSB) hereby gives notice of the scheduling of two videoconferences for the transaction of National Science Board business, pursuant to the National Science Foundation Act and the Government in the Sunshine Act.
Closed videoconference of the Committee on Strategy (CS), to be held Wednesday, August 24, 2022, from 12:00–12:45 p.m. EDT.
Closed videoconference of the National Science Board (NSB), to be held Wednesday, August 24, 2022, at 12:45–1:00 p.m. EDT.
These meetings will be held by videoconference organized through the National Science Foundation.
Closed.
Point of contact for this meeting is: Chris Blair, (703) 292–7000,
The National Science Board's (NSB) Committee on Science and Engineering Policy hereby gives notice of the scheduling of a teleconference for the transaction of National Science Board business pursuant to the National Science Foundation Act and the Government in the Sunshine Act.
Monday, August 29, 2022, from 3:00 p.m.–3:30 p.m. EDT.
Tuesday, August 30, 2022, from 12:00 p.m.–12:30 p.m. EDT.
This meeting will be held by video conference through the National Science Foundation.
Open.
The agenda for the August 29 meeting is: Chair's opening remarks; discussion of the narrative outline for the SEI 2024 thematic report on K–12 Education.
The agenda for the August 30 meeting is: Chair's opening remarks; discussion of the narrative outline for the SEI 2024 thematic report on Academic R&D.
Point of contact for this meeting is: (Chris Blair,
Nuclear Regulatory Commission.
Renewal of existing information collection; request for comment.
The U.S. Nuclear Regulatory Commission (NRC) invites public comment on the renewal of Office of Management and Budget (OMB) approval for an existing collection of information. The information collection is entitled, NRC Form 313, “Application for Materials License” and NRC Forms 313A (RSO), 313A (AMP), 313A (ANP), 313A (AUD), 313A (AUT), and 313A (AUS).
Submit comments by October 24, 2022. Comments received after this date will be considered if it is practical to do so, but the Commission is able to ensure consideration only for comments received on or before this date.
You may submit comments by any of the following methods; however, the NRC encourages electronic comment submission through the Federal rulemaking website:
•
•
For additional direction on obtaining information and submitting comments, see “Obtaining Information and Submitting Comments” in the
David C. Cullison, Office of the Chief Information Officer, U.S. Nuclear Regulatory Commission, Washington, DC 20555–0001; telephone: 301–415–2084; email:
Please refer to Docket ID NRC–2022–0107 when contacting the NRC about the availability of information for this action. You may obtain publicly available information related to this action by any of the following methods:
•
•
•
•
The NRC encourages electronic comment submission through the Federal rulemaking website (
The NRC cautions you not to include identifying or contact information in comment submissions that you do not want to be publicly disclosed in your comment submission. All comment submissions are posted at
If you are requesting or aggregating comments from other persons for submission to the OMB, then you should inform those persons not to include identifying or contact information that they do not want to be publicly disclosed in their comment submission. Your request should state that comment submissions are not routinely edited to remove such information before making the comment submissions available to the public or entering the comment into ADAMS.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the NRC is requesting public comment on its intention to request the OMB's approval for the information collection summarized below.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
The NRC is seeking comments that address the following questions:
1. Is the proposed collection of information necessary for the NRC to properly perform its functions? Does the information have practical utility? Please explain your response.
2. Is the estimate of the burden of the information collection accurate? Please explain your response.
3. Is there a way to enhance the quality, utility, and clarity of the information to be collected?
4. How can the burden of the information collection on respondents be minimized, including the use of automated collection techniques or other forms of information technology?
The documents identified in the following table are available to interested persons through ADAMS.
For the Nuclear Regulatory Commission.
Office of Personnel Management (OPM).
Notice.
This notice identifies Schedule A, B, and C appointing authorities applicable to a single agency that were established or revoked from December 1, 2021 to December 31, 2021.
Julia Alford, Senior Executive Resources Services, Senior Executive Services and Performance Management, Employee Services, 202–606–2246.
In accordance with 5 CFR 213.103, Schedule A, B, and C appointing authorities available for use by all agencies are codified in the Code of Federal Regulations (CFR). Schedule A, B, and C appointing authorities applicable to a single agency are not codified in the CFR, but the Office of Personnel Management (OPM) publishes a notice of agency-specific authorities established or revoked each month in the
(l) National Telecommunication and Information Administration—
(1) Ninety-one (91) professional positions in grades GS–13 through GS–15.
(d) National Telecommunication and Information Administration—
(1) Not to exceed 27 positions of GS–0850 Electrical Engineer, GS–0855 Electronics Engineer, or GS–0854 Computer Engineer in grades GS–11 through GS–15. Employment under this authority may not exceed 2 years.
The following Schedule C appointing authorities were approved during December 2021.
The following Schedule C appointing authorities were revoked during December 2021.
Office of Personnel Management.
Office of Personnel Management (OPM).
Notice.
This notice identifies Schedule A, B, and C appointing authorities applicable to a single agency that were established or revoked from January 1, 2022 to January 31, 2022.
Julia Alford, Senior Executive Resources Services, Senior Executive Services and Performance Management, Employee Services, 202–606–2246.
In accordance with 5 CFR 213.103, Schedule A, B, and C appointing authorities available for use by all agencies are codified in the Code of Federal Regulations (CFR). Schedule A, B, and C appointing authorities applicable to a single agency are not codified in the CFR, but the Office of Personnel Management (OPM) publishes a notice of agency-specific authorities established or revoked each month in the
(m) First Responder Network (FirstNet) Authority—
(1) Not exceed 12 FirstNet Board Member positions. Employment and compensation must be in accordance with 47 U.S.C. 1424. Appointments are time-limited for up to 3 years and FirstNet may reappoint an individual hired under this authority to a second 3-year term. An appointment may be extended beyond the 3-year limit until a successor member has taken office, or until the end of the calendar year in which an appointment expires, whichever is earlier.
No Schedule B Authorities to report during January 2022.
The following Schedule C appointing authorities were approved during January 2022.
The following Schedule C appointing authorities were revoked during January 2022.
Office of Personnel Management.
Office of Personnel Management (OPM).
Notice.
This notice identifies Schedule A, B, and C appointing authorities applicable to a single agency that were established or revoked from May 1, 2020 to May 31, 2020.
Julia Alford, Senior Executive Resources Services, Senior Executive Services and Performance Management, Employee Services, 202–606–2246.
In accordance with 5 CFR 213.103, Schedule A, B, and C appointing authorities available for use by all agencies are codified in the Code of Federal Regulations (CFR). Schedule A, B, and C appointing authorities applicable to a single agency are not codified in the CFR, but the Office of Personnel Management (OPM) publishes a notice of agency-specific authorities established or revoked each month in the
No Schedule A Authorities to report during May 2020.
No Schedule B Authorities to report during May 2020.
The following Schedule C appointing authorities were approved during May 2020.
The following Schedule C appointing authorities were revoked during May 2020.
U.S. Office of Personnel Management.
30-Day notice and request for comments.
Retirement Services, Office of Personnel Management (OPM) offers the general public and other Federal agencies the opportunity to comment on an expiring information collection without change, Request for Case Review for Enhanced Disability Annuity Benefit, RI 20–123.
Comments are encouraged and will be accepted until September 23, 2022.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
A copy of this information collection, with applicable supporting documentation, may be obtained by contacting the Retirement Services Publications Team, Office of Personnel Management, 1900 E Street NW, Room 3316–L, Washington, DC 20415, Attention: Cyrus S. Benson, or sent via electronic mail to
As required by the Paperwork Reduction Act of 1995 OPM is soliciting comments for this collection. The information collection (OMB No. 3206–0254) was previously published in the
1. Evaluate whether the proposed collection of information is necessary for the proper performance of functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected; and
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
RI 20–123 will be available to annuitants and survivor annuitants on the OPM website by the end of 2022. It is used by retirees who have retired under disability annuity provisions and who have performed service as law enforcement officers, firefighters, nuclear materials carriers, air traffic controllers, Congressional employees, Members of Congress, Capitol and Supreme Court police, or Custom and Border protection officers (and their survivors or beneficiaries), to request that Retirement Operations review the computations of the retiree's disability annuities. Upon receipt of this form, OPM will ensure it has computed the disability annuity in accordance with applicable statues. These provisions require OPM to compute the disability annuities of affected retirees using the higher annuity amount computed under the disability annuity computation provisions or the enhanced immediate retirement computation provisions specifically applicable to these special employee populations. When OPM receives form RI 20–123 from an annuitant, survivor or beneficiary it will take action to review the retiree's annuity computation and, if the retiree is entitled to an increased benefit, or if a survivor or beneficiary is entitled to amounts accrued but unpaid to a deceased retiree, OPM will process accordingly.
Office of Personnel Management.
Notice.
This provides the consolidated notice of all agency specific excepted authorities, approved by the Office of Personnel Management (OPM), under Schedule A, B, and C, as of June 30, 2021, as required by Civil Service Rule VI, Exceptions from the Competitive Service.
Julia Alford, Senior Executive Resources Services, Senior Executive Service and Performance Management, Employee Services, 202–606–2246.
Civil Service Rule VI (5 CFR 6.1) requires the U.S. Office of Personnel Management (OPM) to publish notice of exceptions granted under Schedule A, B, and C. Under 5 CFR 213.103(a) it is required that all Schedule A, B, and C appointing authorities available for use by all agencies to be published as regulations in the
When making appointments under an agency-specific authority, agencies should first list the appropriate Schedule A, B, or C, followed by the applicable number, for example: Schedule A, 213.3104(x)(x). Agencies are reminded that all excepted authorities are subject to the provisions of 5 CFR part 302 unless specifically exempted by OPM at the time of approval.
OPM maintains continuing information on the status of all Schedule A, B, and C appointing authorities. Interested parties needing information about specific authorities during the year may obtain information by writing to the Senior Executive Resource Services, Office of Personnel Management, 1900 E Street NW, Room 7412, Washington, DC 20415, or by calling (202) 606–2246.
The following exceptions are current as of June 30, 2021.
(a) Office of Administration—
(1) Not to exceed 75 positions to provide administrative services and support to the White House Office.
(b) Office of Management and Budget—
(1) Not to exceed 20 positions at grades GS–5/15.
(2) Not to Exceed 34 positions that require unique technical skills needed for the re-designing and re-building of digital interfaces between citizens, businesses, and government as a part of
(c) Council on Environmental Quality—
(1) Professional and technical positions in grades GS–9 through 15 on the staff of the Council.
(d)–(f) (Reserved)
(g) National Security Council—
(1) All positions on the staff of the Council.
(h) Office of Science and Technology Policy—
(1) Thirty positions of Senior Policy Analyst, GS–15; Policy Analyst, GS–11/14; and Policy Research Assistant, GS–9, for employment of anyone not to exceed 5 years on projects of a high priority nature.
(i) Office of National Drug Control Policy—
(1) Not to exceed 18 positions, GS–15 and below, of senior policy analysts and other personnel with expertise in drug-related issues and/or technical knowledge to aid in anti-drug abuse efforts.
(a) Office of the Secretary—
(1) All positions, GS–15 and below, on the staff of the Family Liaison Office, Director General of the Foreign Service and the Director of Personnel, Office of the Under Secretary for Management.
(2) (Reserved)
(b)–(f) (Reserved)
(g) Bureau of Population, Refugees, and Migration—
(1) Not to exceed 10 positions at grades GS–5 through 11 on the staff of the Bureau.
(h) Bureau of Administration—
(1) (Reserved)
(2) One position of the Director, Art in Embassies Program, GM–1001–15.
(3) (Reserved)
(a) Office of the Secretary—
(1) Not to exceed 20 positions at the equivalent of GS–13 through GS–15 or Senior Level (SL) to supplement permanent staff in the study of complex problems relating to international financial, economic, trade, and energy policies and programs of the Government, when filled by individuals with special qualifications for the particular study being undertaken. Employment under this authority may not exceed 4 years.
(2) Covering no more than 100 positions supplementing permanent staff studying domestic economic and financial policy, with employment not to exceed 4 years.
(3) Not to exceed 100 positions in the Office of the Under Secretary for Terrorism and Financial Intelligence.
(4) Up to 35 temporary or time-limited positions at the GS–9 through 15 grade levels to support the organization, design, and stand-up activities for the Consumer Financial Protection Bureau (CFPB), as mandated by Public Law 111–203. This authority may be used for the following series: GS–201, GS–501, GS–560, GS–1035, GS–1102, GS–1150, GS–1720, GS–1801, and GS–2210. No new appointments may be made under this authority after July 21, 2011, the designated transfer date of the CFPB.
(b)–(d) (Reserved)
(e) Internal Revenue Service—
(1) Twenty positions of investigator for special assignments.
(f) (Reserved)
(g) (Reserved, moved to DOJ)
(h) Office of Financial Stability—
(1) Positions needed to perform investment, risk, financial, compliance, and asset management requiring unique qualifications currently not established by OPM. Positions will be in the Office of Financial Stability and the General Schedule (GS) grade levels 12–15 or Senior Level (SL), for initial employment not to exceed 4 years. No new appointments may be made under this authority after December 31, 2012.
(i) Office of the Special Inspector General for Pandemic Recovery—Temporary or time-limited positions at the GS level in the Office of the Special Inspector General for Pandemic Recovery. This authority may be used for the following occupational series: GS–1811 Special Agent, GS–18100 Investigator, GS–1805 Investigative Research/Analyst, GS–1801 Inspection/Investigative Analyst, GS–511 Auditor, GS–510 Accounting, GS–201 Human Resource Specialist, GS–343 Management Analyst, GS–301 Miscellaneous Administrative and Program, GS–2210 Information Technology, GS–1102 Contracting, GS–560 Budget Analyst, GS–1035 Public Affairs at the GS–9 through GS–15 levels. No new appointments may be made under this authority after December 14, 2025 or the termination of the SIGPR, whichever occurs first.
(a) Office of the Secretary—
(1)–(5) (Reserved)
(6) One Executive Secretary, US–USSR Standing Consultative Commission and Staff Analyst (SALT), Office of the Assistant Secretary of Defense (International Security Affairs).
(b) Entire Department (including the Office of the Secretary of Defense and the Departments of the Army, Navy, and Air Force) —
(1) Dependent School Systems overseas—Professional positions in Military Dependent School systems overseas.
(2) Positions in Attaché 1 systems overseas, including all professional and scientific positions in the Naval Research Branch Office in London.
(3) Positions of clerk-translator, translator, and interpreter overseas.
(4) Positions of Educational Specialist the incumbents of which will serve as Director of Religious Education on the staffs of the chaplains in the military services.
(5) Positions under the program for utilization of alien scientists, approved under pertinent directives administered by the Director of Defense Research and Engineering of the Department of Defense, when occupied by alien scientists initially employed under the program including those who have acquired United States citizenship during such employment.
(6) Positions in overseas installations of the DOD when filled by dependents of military or civilian employees of the U.S. Government residing in the area. Employment under this authority may not extend longer than 2 months following the transfer from the area or separation of a dependent's sponsor: Provided that
(i) A school employee may be permitted to complete the school year; and
(ii) An employee other than a school employee may be permitted to serve up to 1 additional year when the military department concerned finds that the additional employment is in the interest of management.
(7) Twenty secretarial and staff support positions at GS–12 or below on the White House Support Group.
(8) Positions in DOD research and development activities occupied by participants in the DOD Science and Engineering Apprenticeship Program for High School Students. Persons employed under this authority shall be bona fide high school students, at least 14 years old, pursuing courses related to the position occupied and limited to
(9) (Reserved)
(10) Temporary or time-limited positions in direct support of U.S. Government efforts to rebuild and create an independent, free and secure Iraq and Afghanistan, when no other appropriate appointing authority applies. Positions will generally be located in Iraq or Afghanistan, but may be in other locations, including the United States, when directly supporting operations in Iraq or in Afghanistan. No new appointments may be made under this authority after September 30, 2014.
(11) Not to exceed 3,000 positions that require unique cyber security skills and knowledge to perform cyber risk and strategic analysis, incident handling and malware/vulnerability analysis, program management, distributed control systems security, cyber incident response, cyber exercise facilitation and management, cyber vulnerability detection and assessment, network and systems engineering, enterprise architecture, investigation, investigative analysis and cyber-related infrastructure inter-dependency analysis. This authority may be used to make permanent, time-limited and temporary appointments in the following occupational series: Security (GS–0080), computer engineers (GS–0854), electronic engineers (GS–0855), computer scientists (GS–1550), operations research (GS–1515), criminal investigators (GS–1811), telecommunications (GS–0391), and IT specialists (GS–2210). Within the scope of this authority, the U.S. Cyber Command is also authorized to hire miscellaneous administrative and program (GS–0301) series when those positions require unique cyber security skills and knowledge. All positions will be at the General Schedule (GS) grade levels 09–15 or equivalent. No new appointments may be made under this authority after December 31, 2017
(c) (Reserved)
(d) General—
(1) Positions concerned with advising, administering, supervising, or performing work in the collection, processing, analysis, production, evaluation, interpretation, dissemination, and estimation of intelligence information, including scientific and technical positions in the intelligence function; and positions involved in the planning, programming, and management of intelligence resources when, in the opinion of OPM, it is impracticable to examine. This authority does not apply to positions assigned to cryptologic and communications intelligence activities/functions.
(2) Positions involved in intelligence-related work of the cryptologic intelligence activities of the military departments. This includes all positions of intelligence research specialist, and similar positions in the intelligence classification series; all scientific and technical positions involving the applications of engineering, physical, or technical sciences to intelligence work; and professional as well as intelligence technician positions in which a majority of the incumbent's time is spent in advising, administering, supervising, or performing work in the collection, processing, analysis, production, evaluation, interpretation, dissemination, and estimation of intelligence information or in the planning, programming, and management of intelligence resources.
(e) Uniformed Services University of the Health Sciences—
(1) Positions of President, Vice Presidents, Assistant Vice Presidents, Deans, Deputy Deans, Associate Deans, Assistant Deans, Assistants to the President, Assistants to the Vice Presidents, Assistants to the Deans, Professors, Associate Professors, Assistant Professors, Instructors, Visiting Scientists, Research Associates, Senior Research Associates, and Postdoctoral Fellows.
(2) Positions established to perform work on projects funded from grants.
(f) National Defense University—
(1) Not to exceed 16 positions of senior policy analyst, GS–15, at the Strategic Concepts Development Center. Initial appointments to these positions may not exceed 6 years, but may be extended thereafter in 1-, 2-, or 3-year increments, indefinitely.
(g) Defense Communications Agency—
(1) Not to exceed 10 positions at grades GS–10/15 to staff and support the Crisis Management Center at the White House.
(h) Defense Acquisition University—
(1) The Provost and professors.
(i) George C. Marshall European Center for Security Studies, Garmisch, Germany—
(1) The Director, Deputy Director, and positions of professor, instructor, and lecturer at the George C. Marshall European Center for Security Studies, Garmisch, Germany, for initial employment not to exceed 3 years, which may be renewed in increments from 1 to 2 years thereafter.
(j) Asia-Pacific Center for Security Studies, Honolulu, Hawaii—
(1) The Director, Deputy Director, Dean of Academics, Director of College, deputy department chairs, and senior positions of professor, associate professor, and research fellow within the Asia Pacific Center. Appointments may be made not to exceed 3 years and may be extended for periods not to exceed 3 years.
(k) Business Transformation Agency—
(1) Fifty temporary or time-limited (not to exceed four years) positions, at grades GS–11 through GS–15. The authority will be used to appoint persons in the following series: Management and Program Analysis, GS–343: Logistics Management, GS–346; Financial Management Programs, GS–501; Accounting, GS–510; Computer Engineering, GS–854; Business and Industry, GS–1101; Operations Research, GS–1515; Computer Science, GS–1550; General Supply, GS–2001; Supply Program Management, GS–2003; Inventory Management, GS–2010; and Information Technology, GS–2210.
(l) Special Inspector General for Afghanistan—
(1) Positions needed to establish the Special Inspector General for Afghanistan Reconstruction. These positions provide for the independent and objective conduct and supervision of audits and investigations relating to the programs and operations funded with amounts appropriated and otherwise made available for the reconstruction of Afghanistan. These positions are established at General Schedule (GS) grade levels for initial employment not to exceed 3 years and may, with prior approval of OPM, be extended for an additional period of 2 years. No new appointments may be made under this authority after January 31, 2011.
(a)–(c) (Reserved)
(d) U.S. Military Academy, West Point, New York—
(1) Civilian professors, instructors, teachers (except teachers at the Children's School), Cadet Social Activities Coordinator, Chapel Organist
(e)–(f) (Reserved)
(g) Defense Language Institute—
(1) All positions (professors, instructors, lecturers) which require proficiency in a foreign language or knowledge of foreign language teaching methods.
(h) Army War College, Carlisle Barracks, PA—
(1) Positions of professor, instructor, or lecturer associated with courses of instruction of at least 10 months duration for employment not to exceed 5 years, which may be renewed in 1-,2-, 3-, 4-, or 5-year increments indefinitely thereafter.
(i) (Reserved)
(j) U.S. Military Academy Preparatory School, West Point, New York—
(1) Positions of Academic Director, Department Head, and Instructor.
(k) U.S. Army Command and General Staff College, Fort Leavenworth, Kansas—
(1) Positions of professor, associate professor, assistant professor, and instructor associated with courses of instruction of at least 10 months duration, for employment not to exceed up to 5 years, which may be renewed in 1-, 2-, 3-, 4-, or 5-year increments indefinitely thereafter.
(a) General—
(1)–(14) (Reserved)
(15) Marine positions assigned to a coastal or seagoing vessel operated by a naval activity for research or training purposes.
(16) All positions necessary for the administration and maintenance of the official residence of the Vice President.
(b) Naval Academy, Naval Postgraduate School, and Naval War College—
(1) Professors, Instructors, and Teachers; the Director of Academic Planning, Naval Postgraduate School; and the Librarian, Organist-Choirmaster, Registrar, the Dean of Admissions, and Social Counselors at the Naval Academy.
(c) Chief of Naval Operations—
(1) One position at grade GS–12 or above that will provide technical, managerial, or administrative support on highly classified functions to the Deputy Chief of Naval Operations (Plans, Policy, and Operations).
(d) Military Sealift Command
(1) All positions on vessels operated by the Military Sealift Command.
(e)–(f) (Reserved)
(g) Office of Naval Research—
(1) Scientific and technical positions, GS–13/15, in the Office of Naval Research International Field Office which covers satellite offices within the Far East, Africa, Europe, Latin America, and the South Pacific. Positions are to be filled by personnel having specialized experience in scientific and/or technical disciplines of current interest to the Department of the Navy.
(a) Office of the Secretary—
(1) One Special Assistant in the Office of the Secretary of the Air Force. This position has advisory rather than operating duties except as operating or administrative responsibilities may be exercised in connection with the pilot studies.
(b) General—
(1) Professional, technical, managerial and administrative positions supporting space activities, when approved by the Secretary of the Air Force.
(2) Two hundred positions, serviced by Hill Air Force Base, Utah, engaged in interdepartmental activities in support of national defense projects involving scientific and technical evaluations.
(c) Norton and McClellan Air Force Bases, California—
(1) Not to exceed 20 professional positions, GS–11 through GS–15, in Detachments 6 and 51, SM–ALC, Norton and McClellan Air Force Bases, California, which will provide logistic support management to specialized research and development projects.
(d) U.S. Air Force Academy, Colorado—
(1) (Reserved)
(2) Positions of Professor, Associate Professor, Assistant Professor, and Instructor, in the Dean of Faculty, Commandant of Cadets, Director of Athletics, and Preparatory School of the United States Air Force Academy.
(e) (Reserved)
(f) Air Force Office of Special Investigations—
(1) Positions of Criminal Investigators/Intelligence Research Specialists, GS–5 through GS–15, in the Air Force Office of Special Investigations.
(g) Wright-Patterson Air Force Base, Ohio—
(1) Not to exceed eight positions, GS–12 through 15, in Headquarters Air Force Logistics Command, DCS Material Management, Office of Special Activities, Wright-Patterson Air Force Base, Ohio, which will provide logistic support management staff guidance to classified research and development projects.
(h) Air University, Maxwell Air Force Base, Alabama—
(1) Positions of Professor, Instructor, or Lecturer.
(i) Air Force Institute of Technology, Wright-Patterson Air Force Base, Ohio—
(1) Civilian deans and professors.
(j) Air Force Logistics Command—
(1) One Supervisory Logistics Management Specialist, GM–346–14, in Detachment 2, 2762 Logistics Management Squadron (Special), Greenville, Texas.
(k) Wright-Patterson AFB, Ohio—
(1) One position of Supervisory Logistics Management Specialist, GS–346–15, in the 2762nd Logistics Squadron (Special), at Wright-Patterson Air Force Base, Ohio.
(l) Air National Guard Readiness Center—
(1) One position of Commander, Air National Guard Readiness Center, Andrews Air Force Base, Maryland.
(a) General—
(1) Deputy U.S. Marshals employed on an hourly basis for intermittent service.
(2) Positions at GS–15 and below on the staff of an office of a special counsel.
(3)–(5) (Reserved)
(6) Positions of Program Manager and Assistant Program Manager supporting the International Criminal Investigative Training Assistance Program in foreign countries. Initial appointments under this authority may not exceed 2 years, but may be extended in 1-year increments for the duration of the in-country program.
(7) Positions necessary throughout DOJ, for the excepted service transfer of NDIC employees hired under Schedule A, 213.3110(d). Authority expires September 30, 2012.
(b) (Reserved)
(c) Drug Enforcement Administration—
(1) (Reserved)
(2) Four hundred positions of Intelligence Research Agent and/or Intelligence Operation Specialist in the GS–132 series, grades GS–9 through GS–15.
(3) Not to exceed 200 positions of Criminal Investigator (Special Agent).
(d) (Reserved, moved to Justice)
(e) Bureau of Alcohol, Tobacco, and Firearms—
(1) One hundred positions of Criminal Investigator for special assignments.
(2) One non-permanent Senior Level (SL) Criminal Investigator to serve as a senior advisor to the Assistant Director (Firearms, Explosives, and Arson).
(a) (Revoked 11/19/2009)
(b) Law Enforcement Policy—
(1) Ten positions for oversight policy and direction of sensitive law enforcement activities.
(c) Homeland Security Labor Relations Board/Homeland Security Mandatory Removal Board—
(1) Up to 15 Senior Level and General Schedule (or equivalent) positions.
(d) General—
(1) Not to exceed 800 positions to perform cyber risk and strategic analysis, incident handling and malware/vulnerability analysis, program management, distributed control systems security, cyber incident response, cyber exercise facilitation and management, cyber vulnerability detection and assessment, network and systems engineering, enterprise architecture, intelligence analysis, investigation, investigative analysis and cyber-related infrastructure interdependency analysis requiring unique qualifications currently not established by OPM. Positions will be in the following occupations: security (series 0080), intelligence analysis (series 0132), investigative analyst (series 1805), investigator (series 1810), and criminal investigator (series 1811) at the GS–9 through GS–15 grade levels. No new appointments may be made under this authority after January 5, 2022 or the effective date of the completion of regulations implementing the Border Patrol Agency Pay Reform Act of 2014, whichever comes first.
(e) Papago Indian Agency—Not to exceed 25 positions of Immigration and Customs Enforcement (ICE) Tactical Officers (Shadow Wolves) in the Papago Indian Agency in the State of Arizona when filled by the appointment of persons of one-fourth or more Indian blood. (Formerly 213.3105(b)(9))
(f) U.S. Citizenship and Immigration Services
(1) Reserved. (Formerly 213.3110(b)(1))
(2) Not to exceed 500 positions of interpreters and language specialists, GS–1040–5/9. (Formerly 213.3110(b)(2))
(3) Reserved. (Formerly 213.3110(b)(3))
(g) U.S. Immigration and Customs Enforcement—
(1) Not to exceed 200 staff positions, GS–15 and below for an emergency staff to provide health related services to foreign entrants. (Formerly 213.3116(b)(16))
(h) Federal Emergency Management Agency—
(1) Field positions at grades GS–15 and below, or equivalent, which are engaged in work directly related to unique response efforts to environmental emergencies not covered by the Disaster Relief Act of 1974, Public Law 93–288, as amended. Employment under this authority may not exceed 36 months on any single emergency. Persons may not be employed under this authority for long-term duties or for work not directly necessitated by the emergency response effort. (Formerly 213.3195(a))
(2) Not to exceed 30 positions at grades GS–15 and below in the Offices of Executive Administration, General Counsel, Inspector General, Comptroller, Public Affairs, Personnel, Acquisition Management, and the State and Local Program and Support Directorate which are engaged in work directly related to unique response efforts to environmental emergencies not covered by the Disaster Relief Act of 1974, Public Law 93–288, as amended. Employment under this authority may not exceed 36 months on any single emergency, or for long-term duties or work not directly necessitated by the emergency response effort. No one may be reappointed under this authority for service in connection with a different emergency unless at least 6 months have elapsed since the individual's latest appointment under this authority. (Formerly 213.3195(b))
(3) Not to exceed 350 professional and technical positions at grades GS–5 through GS–15, or equivalent, in Mobile Emergency Response Support Detachments (MERS). (Formerly 213.3195(c))
(i) U.S. Coast Guard—
(1) Reserved. (Formerly 213.3194(a))
(2) Lamplighters. (Formerly 213.3194(b))
(3) Professors, Associate Professors, Assistant Professors, Instructors, one Principal Librarian, one Cadet Hostess, and one Psychologist (Counseling) at the Coast Guard Academy, New London, Connecticut. (Formerly 213.3194(c))
(a) General—
(1) Technical, maintenance, and clerical positions at or below grades GS–7, WG–10, or equivalent, in the field service of the Department of the Interior, when filled by the appointment of persons who are certified as maintaining a permanent and exclusive residence within, or contiguous to, a field activity or district, and as being dependent for livelihood primarily upon employment available within the field activity of the Department.
(2) All positions on Government-owned ships or vessels operated by the Department of the Interior.
(3) Temporary or seasonal caretakers at temporarily closed camps or improved areas to maintain grounds, buildings, or other structures and prevent damages or theft of Government property. Such appointments shall not extend beyond 130 working days a year without the prior approval of OPM.
(4) Temporary, intermittent, or seasonal field assistants at GS–7, or its equivalent, and below in such areas as forestry, range management, soils, engineering, fishery and wildlife management, and with surveying parties. Employment under this authority may not exceed 180 working days a year.
(5) Temporary positions established in the field service of the Department for emergency forest and range fire prevention or suppression and blister rust control for not to exceed 180 working days a year: Provided, that an employee may work as many as 220 working days a year when employment beyond 180 days is required to cope with extended fire seasons or sudden emergencies such as fire, flood, storm, or other unforeseen situations involving potential loss of life or property.
(6) Persons employed in field positions, the work of which is financed jointly by the Department of the Interior and cooperating persons or organizations outside the Federal service.
(7) All positions in the Bureau of Indian Affairs and other positions in the Department of the Interior directly and primarily related to providing services to Indians when filled by the appointment of Indians. The Secretary of the Interior is responsible for defining the term “Indian.”
(8) Temporary, intermittent, or seasonal positions at GS–7 or below in Alaska, as follows: Positions in nonprofessional mining activities, such as those of drillers, miners, caterpillar operators, and samplers. Employment under this authority shall not exceed 180 working days a year and shall be appropriate only when the activity is carried on in a remote or isolated area and there is a shortage of available candidates for the positions.
(9) Temporary, part-time, or intermittent employment of mechanics, skilled laborers, equipment operators, and tradesmen on construction, repair, or maintenance work not to exceed 180 working days a year in Alaska, when the activity is carried on in a remote or isolated area and there is a shortage of available candidates for the positions.
(10) Seasonal airplane pilots and airplane mechanics in Alaska, not to exceed 180 working days a year.
(11) Temporary staff positions in the Youth Conservation Corps Centers operated by the Department of the Interior. Employment under this authority shall not exceed 11 weeks a year except with prior approval of OPM.
(12) Positions in the Youth Conservation Corps for which pay is fixed at the Federal minimum wage rate. Employment under this authority may not exceed 10 weeks.
(b) (Reserved)
(c) Indian Arts and Crafts Board—
(1) The Executive Director
(d) (Reserved)
(e) Office of the Assistant Secretary, Territorial and International Affairs—
(1) (Reserved)
(2) Not to exceed four positions of Territorial Management Interns, grades GS–5, GS–7, or GS–9, when filled by territorial residents who are U.S. citizens from the Virgin Islands or Guam; U.S. nationals from American Samoa; or in the case of the Northern Marianas, will become U.S. citizens upon termination of the U.S. trusteeship. Employment under this authority may not exceed 6 months.
(3) (Reserved)
(4) Special Assistants to the Governor of American Samoa who perform specialized administrative, professional, technical, and scientific duties as members of his or her immediate staff.
(f) National Park Service—
(1) (Reserved)
(2) Positions established for the administration of Kalaupapa National Historic Park, Molokai, Hawaii, when filled by appointment of qualified patients and Native Hawaiians, as provided by Public Law 95–565.
(3) Seven full-time permanent and 31 temporary, part-time, or intermittent positions in the Redwood National Park, California, which are needed for rehabilitation of the park, as provided by Public Law 95–250.
(4) One Special Representative of the Director.
(5) All positions in the Grand Portage National Monument, Minnesota, when filled by the appointment of recognized members of the Minnesota Chippewa Tribe.
(g) Bureau of Reclamation—
(1) Appraisers and examiners employed on a temporary, intermittent, or part-time basis on special valuation or prospective-entrymen-review projects where knowledge of local values on conditions or other specialized qualifications not possessed by regular Bureau employees are required for successful results. Employment under this provision shall not exceed 130 working days a year in any individual case: Provided, that such employment may, with prior approval of OPM, be extended for not to exceed an additional 50 working days in any single year.
(h) Office of the Deputy Assistant Secretary for Territorial Affairs—
(1) Positions of Territorial Management Interns, GS–5, when filled by persons selected by the Government of the Trust Territory of the Pacific Islands. No appointment may extend beyond 1 year.
(a) General—
(1) Agents employed in field positions the work of which is financed jointly by the Department and cooperating persons, organizations, or governmental agencies outside the Federal service. Except for positions for which selection is jointly made by the Department and the cooperating organization, this authority is not applicable to positions in the Agricultural Research Service or the National Agricultural Statistics Service. This authority is not applicable to the following positions in the Agricultural Marketing Service: Agricultural commodity grader (grain) and (meat), (poultry), and (dairy), agricultural commodity aid (grain), and tobacco inspection positions.
(2)–(4) (Reserved)
(5) Temporary, intermittent, or seasonal employment in the field service of the Department in positions at and below GS–7 and WG–10 in the following types of positions: Field assistants for sub professional services; agricultural helpers, helper-leaders, and workers in the Agricultural Research Service and the Animal and Plant Health Inspection Service; and subject to prior OPM approval granted in the calendar year in which the appointment is to be made, other clerical, trades, crafts, and manual labor positions. Total employment under this subparagraph may not exceed 180 working days in a service year: Provided, that an employee may work as many as 220 working days in a service year when employment beyond 180 days is required to cope with extended fire seasons or sudden emergencies such as fire, flood, storm, or other unforeseen situations involving potential loss of life or property. This paragraph does not cover trades, crafts, and manual labor positions covered by paragraph (i) of Sec. 213.3102 or positions within the Forest Service.
(6)–(7) (Reserved)
(b)–(c) (Reserved)
(d) Farm Service Agency—
(1) (Reserved)
(2) Members of State Committees: Provided, that employment under this authority shall be limited to temporary intermittent (WAE) positions whose principal duties involve administering farm programs within the State consistent with legislative and Departmental requirements and reviewing national procedures and policies for adaptation at State and local levels within established parameters. Individual appointments under this authority are for 1 year and may be extended only by the Secretary of Agriculture or his designee. Members of State Committees serve at the pleasure of the Secretary.
(e) Rural Development—
(1) (Reserved)
(2) County committeemen to consider, recommend, and advise with respect to the Rural Development program.
(3)–(5) (Reserved)
(6) Professional and clerical positions in the Trust Territory of the Pacific Islands when occupied by indigenous residents of the Territory to provide financial assistance pursuant to current authorizing statutes.
(f) Agricultural Marketing Service—
(1) Positions of Agricultural Commodity Graders, Agricultural Commodity Technicians, and Agricultural Commodity Aids at grades GS–9 and below in the tobacco, dairy, and poultry commodities; Meat Acceptance Specialists, GS–11 and below; Clerks, Office Automation Clerks, and Computer Clerks at GS–5 and below; Clerk-Typists at grades GS–4 and below; and Laborers under the Wage System. Employment under this authority is limited to either 1,280 hours or 180 days in a service year.
(2) Positions of Agricultural Commodity Graders, Agricultural Commodity Technicians, and Agricultural Commodity Aids at grades GS–11 and below in the cotton, raisin, peanut, and processed and fresh fruit and vegetable commodities and the following positions in support of these commodities: Clerks, Office Automation Clerks, and Computer Clerks and Operators at GS–5 and below; Clerk-Typists at grades GS–4 and below; and, under the Federal Wage System, High Volume Instrumentation (HVI) Operators and HVI Operator Leaders at WG/WL–2 and below, respectively,
(3) Milk Market Administrators
(4) All positions on the staffs of the Milk Market Administrators.
(g)–(k) (Reserved)
(l) Food Safety and Inspection Service—
(1)–(2) (Reserved)
(3) Positions of Meat and Poultry Inspectors (Veterinarians at GS–11 and below and non-Veterinarians at appropriate grades below GS–11) for employment on a temporary, intermittent, or seasonal basis, not to exceed 1,280 hours a year.
(m) Grain Inspection, Packers and Stockyards Administration—
(1) One hundred and fifty positions of Agricultural Commodity Aid (Grain), GS–2/4; 100 positions of Agricultural Commodity Technician (Grain), GS–4/7; and 60 positions of Agricultural Commodity Grader (Grain), GS–5/9, for temporary employment on a part-time, intermittent, or seasonal basis not to exceed 1,280 hours in a service year.
(n) Alternative Agricultural Research and Commercialization Corporation—
(1) Executive Director
(a) General—
(1)–(2) (Reserved)
(3) Not to exceed 50 scientific and technical positions whose duties are performed primarily in the Antarctic. Incumbents of these positions may be stationed in the continental United States for periods of orientation, training, analysis of data, and report writing.
(b)–(c) (Reserved)
(d) Bureau of the Census—
(1) Positions in support of decennial operations (including decennial pre-tests). Appointments may be made on a time limited basis that lasts the duration of decennial operations but may not exceed 7 years. Extensions beyond 7 years may be requested on a case-by-case basis.
(2) Positions of clerk, field representative, field leader, and field supervisor in support of data collection operations (non-decennial operations). Appointments may be made on a permanent or a time-limited basis. Appointments made on a time limited basis may not exceed 4 years. Extensions beyond 4 years may be requested on a case-by-case basis.
(e)–(h) (Reserved)
(i) Office of the Under Secretary for International Trade—
(1) Fifteen positions at GS–12 and above in specialized fields relating to international trade or commerce in units under the jurisdiction of the Under Secretary for International Trade. Incumbents will be assigned to advisory rather than to operating duties, except as operating and administrative responsibility may be required for the conduct of pilot studies or special projects. Employment under this authority will not exceed 2 years for an individual appointee.
(2) (Reserved)
(3) Not to exceed 15 positions in grades GS–12 through GS–15, to be filled by persons qualified as industrial or marketing specialists; who possess specialized knowledge and experience in industrial production, industrial operations and related problems, market structure and trends, retail and wholesale trade practices, distribution channels and costs, or business financing and credit procedures applicable to one or more of the current segments of U.S. industry served by the Under Secretary for International Trade, and the subordinate components of his organization which are involved in Domestic Business matters. Appointments under this authority may be made for a period not to exceed 2 years and may, with prior OPM approval, be extended for an additional 2 years.
(j) National Oceanic and Atmospheric Administration—
(1)–(2) (Reserved)
(3) All civilian positions on vessels operated by the National Ocean Service.
(4) Temporary positions required in connection with the surveying operations of the field service of the National Ocean Service. Appointment to such positions shall not exceed 8 months in any 1 calendar year.
(k) (Reserved)
(l) National Telecommunication and Information Administration—
(1) Thirty-eight professional positions in grades GS–13 through GS–15.
(a) Office of the Secretary—
(1) Chairman and five members, Employees' Compensation Appeals Board.
(2) Chairman and eight members, Benefits Review Board.
(b)–(c) (Reserved)
(d) Employment and Training Administration—
(1) Not to exceed 10 positions of Supervisory Manpower Development Specialist and Manpower Development Specialist, GS–7/15, in the Division of Indian and Native American Programs, when filled by the appointment of persons of one-fourth or more Indian blood. These positions require direct contact with Indian tribes and communities for the development and administration of comprehensive employment and training programs.
(a) General—
(1) Intermittent positions, at GS–15 and below and WG–10 and below, on teams under the National Disaster Medical System including Disaster Medical Assistance Teams and specialty teams, to respond to disasters, emergencies, and incidents/events involving medical, mortuary and public health needs.
(b) Public Health Service—
(1) (Reserved)
(2) Positions at Government sanatoria when filled by patients during treatment or convalescence.
(3) (Reserved)
(4) Positions concerned with problems in preventive medicine financed or participated in by the Department of Health and Human Services and a cooperating State, county, municipality, incorporated organization, or an individual in which at least one-half of the expense is contributed by the participating agency either in salaries, quarters, materials, equipment, or other necessary elements in the carrying on of the work.
(5)–(6) (Reserved)
(7) Not to exceed 50 positions associated with health screening programs for refugees.
(8) All positions in the Public Health Service and other positions in the Department of Health and Human Services directly and primarily related to providing services to Indians when filled by the appointment of Indians. The Secretary of Health and Human Services is responsible for defining the term “Indian.”
(9) (Reserved)
(10) Health care positions of the National Health Service Corps for employment of any one individual not to exceed 4 years of service in health manpower shortage areas.
(11)–(15) (Reserved)
(c)–(e) (Reserved)
(f) Reserved
(a) Positions concerned with problems in education financed and participated in by the Department of Education and a cooperating State educational agency, or university or college, in which there is joint responsibility for selection and supervision of employees, and at least one-half of the expense is contributed by the cooperating agency in salaries, quarters, materials, equipment, or other necessary elements in the carrying on of the work.
(a) All positions
(a) Construction Division—
(1) Temporary construction workers paid from “purchase and hire” funds and appointed for not to exceed the duration of a construction project.
(b) Alcoholism Treatment Units and Drug Dependence Treatment Centers—
(1) Not to exceed 400 positions of rehabilitation counselors, GS–3 through GS–11, in Alcoholism Treatment Units and Drug Dependence Treatment Centers, when filled by former patients.
(c) Board of Veterans' Appeals—
(1) Positions, GS–15, when filled by a member of the Board. Except as provided by section 201(d) of Public Law 100–687, appointments under this authority shall be for a term of 9 years, and may be renewed.
(2) Positions, GS–15, when filled by a non-member of the Board who is awaiting Presidential approval for appointment as a Board member.
(d) Vietnam Era Veterans Readjustment Counseling Service—
(1) Not to exceed 600 positions at grades GS–3 through GS–11, involved in the Department's Vietnam Era Veterans Readjustment Counseling Service.
(e) Not to Exceed 75 positions that require unique technical skills needed for the re-designing and re-building of digital interfaces between citizens, businesses, and government as a part of Smarter Information Technology Delivery Initiative. This authority may be used to make permanent, time-limited and temporary appointments to non-supervisory Digital Services Expert positions (GS–301) directly related to the implementation of the Smarter Information Technology Delivery Initiative at the GS–15 level. No new appointments may be made under this authority after September 30, 2017.
(a) When the President under 42 U.S.C. 5170–5189, the Secretary of Agriculture under 7 U.S.C. 1961, or the Small Business Administration under 15 U.S.C. 636(b)(1) declares an area to be a disaster area, positions filled by time-limited appointment of employees to make and administer disaster loans in the area under the Small Business Act, as amended. Service under this authority may not exceed 7 years. Exception to this time limit may only be made with prior U.S. Office of Personnel Management approval. No one may be appointed under this authority to positions engaged in long-term maintenance of loan portfolios.
(b) When the President under 42 U.S.C. 1855–1855g, the Secretary of Agriculture under 7 U.S.C. 1961, or the Small Business Administration under 15 U.S.C. 636(b)(1) declares an area to be a disaster area, positions filled by time-limited appointment of employees to make and administer disaster loans in that area under the Small Business Act, as amended. No one may serve under this authority for more than an aggregate of 2 years without a break in service of at least 6 months. Persons who have had more than 2 years of service under paragraph (a) of this section must have a break in service of at least 8 months following such service before appointment under this authority. No one may be appointed under this authority to positions engaged in long-term maintenance of loan portfolios.
(a)–(b) (Reserved)
(c) Temporary or time-limited positions that are directly related with resolving failing insured depository institutions; financial companies; or brokers and dealers; covered by the Dodd-Frank Wall Street Reform and Consumer Protection Act, including but not limited to, the marketing and sale of institutions and any associated assets; paying insured depositors; and managing receivership estates and all associated receivership management activities, up to termination. Time limited appointments under this authority may not exceed 7 years.
(a) (Reserved)
(b) Positions when filled by member-residents of the Home.
(a) Not to Exceed 203 positions that require unique technical skills needed for the re-designing and re-building of digital interfaces between citizens, businesses, and government as a part of Smarter Information Technology Delivery Initiative. This authority may be used nationwide to make permanent, time-limited and temporary appointments to Digital Services Expert positions (GS–301) directly related to the implementation of the Smarter Information Technology Delivery Initiative at the GS–11 to 15 level. No new appointments may be made under this authority after September 30, 2017.
(a) State Directors
(a) One hundred and fifty alien scientists having special qualifications in the fields of aeronautical and space research where such employment is deemed by the Administrator of the National Aeronautics and Space Administration to be necessary in the public interest.
(a) Arizona District Offices—
(1) Six positions of Social Insurance Representative in the district offices of the Social Security Administration in the State of Arizona when filled by the appointment of persons of one-fourth or more Indian blood.
(b) New Mexico—
(1) Seven positions of Social Insurance Representative in the district offices of the Social Security Administration in the State of New Mexico when filled by the appointment of persons of one-fourth or more Indian blood.
(c) Alaska—
(1) Two positions of Social Insurance Representative in the district offices of the Social Security Administration in the State of Alaska when filled by the appointments of persons of one-fourth or more Alaskan Native blood (Eskimos, Indians, or Aleuts).
(a) (Reserved)
(a) (Reserved)
(b) (Reserved)
(a) (Reserved, expired 3/31/2004)
(a) (Reserved, expired 9/30/2007)
(b)
(1) Positions of Resident Country Director and Deputy Resident Country Director, Threshold Director and Deputy Threshold Director. The length of appointments will correspond to the length or term of the compact agreements made between the MCC and the country in which the MCC will work, plus one additional year to cover pre- and post-compact agreement related activities.
(a) (Reserved)
(b) Smithsonian Tropical Research Institute—All positions located in Panama which are part of or which support the Smithsonian Tropical Research Institute.
(c) National Museum of the American Indian—Positions at GS–15 and below requiring knowledge of, and experience in, tribal customs and culture. Such positions comprise approximately 10 percent of the Museum's positions and, generally, do not include secretarial, clerical, administrative, or program support positions.
(a) One Asian Studies Program Administrator, one International Security Studies Program Administrator, one Latin American Program Administrator, one Russian Studies Program Administrator, four Social Science Program Administrators, one Middle East Studies Program Administrator, one African Studies Program Administrator, one Global Sustainability and Resilience Program Administrator, one Canadian Studies Program Administrator; one China Studies Program Administrator, one Science, Technology and Innovation Program Administrator, and one Mexico Studies Program Administrator.
(a) (Reserved, expired 9/23/1998)
(a) Executive Director
(a) National Endowment for the Arts—
(1) Artistic and related positions at grades GS–13 through GS–15 engaged in the review, evaluation and administration of applications and grants supporting the arts, related research and assessment, policy and program development, arts education, access programs and advocacy, or evaluation of critical arts projects and outreach programs. Duties require artistic stature, in-depth knowledge of arts disciplines and/or artistic-related leadership qualities.
(a) One Enterprise Development Fund Manager. Appointment is limited to four years unless extended by OPM.
(a)–(c) (Reserved)
(d) Part-time and intermittent positions of test examiners at grades GS–8 and below.
(a)–(d) (Reserved)
(e) Maritime Administration—
(1)–(2) (Reserved)
(3) All positions on Government-owned vessels or those bareboats chartered to the Government and operated by or for the Maritime Administration.
(4)–(5) (Reserved)
(6) U.S. Merchant Marine Academy, positions of: Professors, Instructors, and Teachers, including heads of Departments of Physical Education and Athletics, Humanities, Mathematics and Science, Maritime Law and Economics, Nautical Science, and Engineering; Coordinator of Shipboard Training; the Commandant of Midshipmen, the Assistant Commandant of Midshipmen; Director of Music; three Battalion Officers; three Regimental Affairs Officers; and one Training Administrator.
(7) U.S. Merchant Marine Academy positions of: Associate Dean; Registrar; Director of Admissions; Assistant Director of Admissions; Director, Office of External Affairs; Placement Officer; Administrative Librarian; Shipboard Training Assistant; three Academy Training Representatives; and one Education Program Assistant.
(f) Up to 40 positions at the GS–13 through 15 grade levels and within authorized SL allocations necessary to support the following credit agency programs of the Department: the Federal Highway Administration's Transportation Infrastructure Finance and Innovation Act Program, the Federal Railroad Administration's Railroad Rehabilitation and Improvement Financing Program, the Federal Maritime Administration's Title XI Program, and the Office of the Secretary's Office of Budget and Programs Credit Staff. This authority may be used to make temporary, time-limited, or permanent appointments, as the DOT deems appropriate, in the following occupational series: Director or Deputy Director SL–301/340, Origination Team Lead SL–301, Deputy Director/Senior Financial Analyst GS–1160, Origination Financial Policy Advisor GS–301, Credit Budgeting Team Lead GS–1160, Credit Budgeting Financial Analysts GS–1160, Portfolio Monitoring Lead SL–1160, Portfolio Monitoring Financial Analyst GS–1160, Financial Analyst GS–1160. No new appointments may be made under this authority after December 31, 2014.
Schedule B
(a) (Reserved)
(b) Office of the Special Representative for Trade Negotiations—
(1) Seventeen positions of economist at grades GS–12 through GS–15.
(a) (1) One non-permanent senior level position to serve as Science and Technology Advisor to the Secretary.
(b)–(c) (Reserved)
(d) Seventeen positions on the household staff of the President's Guest House (Blair and Blair-Lee Houses).
(e) (Reserved)
(f) Scientific, professional, and technical positions at grades GS–12 to GS–15 when filled by persons having special qualifications in foreign policy matters. Total employment under this authority may not exceed 4 years.
(g) Not to exceed 100 positions in the Bureau of Intelligence and Research (INR) at the GS–5 through GS–15 levels in the following occupational series GS–0080 Security Administration, GS–0110 Economics, GS–0130 Foreign Affairs, GS–0132 Intelligence, GS–0150 Geography, GS–0343 Management and Program Analysis, GS–1083 Technical Writing and Editing, GS–1370 Cartography, and GS–1530 Statistics. This authority may be used to make time-limited appointments of up to 48 months. No new appointments may be
(a) Positions of Deputy Comptroller of the Currency, Chief National Bank Examiner, Assistant Chief National Bank Examiner, Regional Administrator of National Banks, Deputy Regional Administrator of National Banks, Assistant to the Comptroller of the Currency, National Bank Examiner, Associate National Bank Examiner, and Assistant National Bank Examiner, whose salaries are paid from assessments against national banks and other financial institutions.
(b)–(c) (Reserved)
(d) (Reserved) Transferred to 213.3211(b)
(e) (Reserved) Transferred to 213.3210(f)
(f) (Reserved)
(g) (Reserved, moved to DOJ)
(h) Office of Financial Stability—
(1) Positions needed to perform investment, risk, financial, compliance, and asset management requiring unique qualifications currently not established by OPM. Positions will be in the Office of Financial Stability and the General Schedule (GS) grade levels 12–15 or Senior Level (SL), for initial employment not to exceed 4 years. No new appointments may be made under this authority after December 31, 2012.
(i) Office of the Special Inspector General for Pandemic Recovery
Temporary or time-limited positions at the GS level in the Office of the Special Inspector General for Pandemic Recovery. This authority may be used for the following occupational series: GS–1811 Special Agent, GS–18100 Investigator, GS–1805 Investigative Research/Analyst, GS–1801 Inspection/Investigative Analyst, GS–511 Auditor, GS–510 Accounting, GS–201 Human Resource Specialist, GS–343 Management Analyst, GS–301 Miscellaneous Administrative and Program, GS–2210 Information Technology, GS–1102 Contracting, GS–560 Budget Analyst, GS–1035 Public Affairs at the GS–9 through GS–15 levels. No new appointments may be made under this authority after December 14, 2025 or the termination of the SIGPR, whichever occurs first.
(a) Office of the Secretary—
(1) (Reserved)
(2) Professional positions at GS–11 through GS–15 involving systems, costs, and economic analysis functions in the Office of the Assistant Secretary (Program Analysis and Evaluation); and in the Office of the Deputy Assistant Secretary (Systems Policy and Information) in the Office of the Assistant Secretary (Comptroller).
(3)–(4) (Reserved)
(5) Four Net Assessment Analysts.
(b) Interdepartmental activities—
(1) Seven positions to provide general administration, general art and information, photography, and/or visual information support to the White House Photographic Service.
(2) Eight positions, GS–15 or below, in the White House Military Office, providing support for airlift operations, special events, security, and/or administrative services to the Office of the President.
(c) National Defense University—
(1) Sixty-one positions of Professor, GS–13/15, for employment of any one individual on an initial appointment not to exceed 3 years, which may be renewed in any increment from 1 to 6 years indefinitely thereafter.
(d) General—
(1) One position of Law Enforcement Liaison Officer (Drugs), GS–301–15, U.S. European Command.
(2) Acquisition positions at grades GS–5 through GS–11, whose incumbents have successfully completed the required course of education as participants in the Department of Defense scholarship program authorized under 10 U.S.C. 1744.
(e) Office of the Inspector General—
(1) Positions of Criminal Investigator, GS–1811–5/15.
(f) Department of Defense Polygraph Institute, Fort McClellan, Alabama—
(1) One Director, GM–15.
(g) Defense Security Assistance Agency—
All faculty members with instructor and research duties at the Defense Institute of Security Assistance Management, Wright Patterson Air Force Base, Dayton, Ohio. Individual appointments under this authority will be for an initial 3-year period, which may be followed by an appointment of indefinite duration.
(a) U.S. Army Command and General Staff College—
(1) Seven positions of professors, instructors, and education specialists. Total employment of any individual under this authority may not exceed 4 years.
(a) Naval Underwater Systems Center, New London, Connecticut—
(1) One position of Oceanographer, grade GS–14, to function as project director and manager for research in the weapons systems applications of ocean eddies.
(b) Armed Forces Staff College, Norfolk, Virginia—All civilian faculty positions of professors, instructors, and teachers on the staff of the Armed Forces Staff College, Norfolk, Virginia.
(c) Defense Personnel Security Research and Education Center—One Director and four Research Psychologists at the professor or GS–15 level.
(d) Marine Corps Command and Staff College—All civilian professor positions.
(e) Executive Dining facilities at the Pentagon—One position of Staff Assistant, GS–301, whose incumbent will manage the Navy's Executive Dining facilities at the Pentagon.
(f) (Reserved)
(a) Air Research Institute at the Air University, Maxwell Air Force Base, Alabama—Not to exceed four interdisciplinary positions for the Air Research Institute at the Air University, Maxwell Air Force Base, Alabama, for employment to complete studies proposed by candidates and acceptable to the Air Force. Initial appointments are made not to exceed 3 years, with an option to renew or extend the appointments in increments of 1-, 2-, or 3- years indefinitely thereafter.
(b)–(c) (Reserved)
(d) Air University—Positions of Instructor or professional academic staff at the Air University associated with courses of instruction of varying durations, for employment not to exceed 3 years, which may be renewed for an indefinite period thereafter.
(e) U.S. Air Force Academy, Colorado—One position of Director of Development and Alumni Programs, GS–301–13.
(a) Drug Enforcement Administration—
Criminal Investigator (Special Agent) positions in the Drug Enforcement Administration. New appointments may be made under this authority only at grades GS–5 through 11. Service under the authority may not exceed 4 years. Appointments made under this
(b) (Reserved)
(c) Not to exceed 400 positions at grades GS–5 through 15 assigned to regional task forces established to conduct special investigations to combat drug trafficking and organized crime.
(d) (Reserved)
(e) United States Trustees—Positions, other than secretarial, GS–6 through GS–15, requiring knowledge of the bankruptcy process, on the staff of the offices of United States Trustees or the Executive Office for U.S. Trustees.
(f) Bureau of Alcohol, Tobacco, and Firearms
(1) Positions, grades GS–5 through GS–12 (or equivalent), of Criminal Investigator. Service under this authority may not exceed 3 years and 120 days.
(a) Coast Guard.
(1) (Reserved)
(b) Secret Service—Positions concerned with the protection of the life and safety of the President and members of his immediate family, or other persons for whom similar protective services are prescribed by law, when filled in accordance with special appointment procedures approved by OPM. Service under this authority may not exceed:
(1) a total of 4 years; or
(2) 120 days following completion of the service required for conversion under Executive Order 11203.
(a) Foreign Agricultural Service—
(1) Positions of a project nature involved in international technical assistance activities. Service under this authority may not exceed 5 years on a single project for any individual unless delayed completion of a project justifies an extension up to but not exceeding 2 years.
(b) General—
(1) Temporary positions of professional Research Scientists, GS–15 or below, in the Agricultural Research Service, Economic Research Service, and the Forest Service, when such positions are established to support the Research Associateship Program and are filled by persons having a doctoral degree in an appropriate field of study for research activities of mutual interest to appointees and the agency. Appointments are limited to proposals approved by the appropriate Administrator. Appointments may be made for initial periods not to exceed 2 years and may be extended for up to 2 additional years. Extensions beyond 4 years, up to a maximum of 2 additional years, may be granted, but only in very rare and unusual circumstances, as determined by the Human Resources Officer for the Research, Education, and Economics Mission Area, or the Human Resources Officer, Forest Service.
(2) Not to exceed 55 Executive Director positions, GM–301–14/15, with the State Rural Development Councils in support of the Presidential Rural Development Initiative.
(a) Bureau of the Census—
(1) (Reserved)
(2) Not to exceed 50 Community Services Specialist positions at the equivalent of GS–5 through 12.
(b)–(c) (Reserved)
(d) National Telecommunications and Information Administration—
(1) Not to exceed 10 Telecommunications Policy Analysts, grades GS–11 through 15. Employment under this authority may not exceed 2 years.
(a) Administrative Review Board—Chair and a maximum of four additional Members.
(b) (Reserved)
(c) Bureau of International Labor Affairs—
(1) Positions in the Office of Foreign Relations, which are paid by outside funding sources under contracts for specific international labor market technical assistance projects. Appointments under this authority may not be extended beyond the expiration date of the project.
(a) Seventy-five positions, not to exceed GS–13, of a professional or analytical nature when filled by persons, other than college faculty members or candidates working toward college degrees, who are participating in mid-career development programs authorized by Federal statute or regulation, or sponsored by private nonprofit organizations, when a period of work experience is a requirement for completion of an organized study program. Employment under this authority shall not exceed 1 year.
(b) Fifty positions, GS–7 through GS–11, concerned with advising on education policies, practices, and procedures under unusual and abnormal conditions. Persons employed under this provision must be bona fide elementary school and high school teachers. Appointments under this authority may be made for a period of not to exceed 1 year, and may, with the prior approval of the Office of Personnel Management, be extended for an additional period of 1 year.
(a) Not to exceed 800 principal investigatory, scientific, professional, and technical positions at grades GS–11 and above in the medical research program.
(b) Not to exceed 25 Criminal Investigator (Undercover) positions, GS–1811, in grades 5 through 12, conducting undercover investigations in the Veterans Health Administration (VA) supervised by the VA, Office of Inspector General. Initial appointments shall be greater than 1 year, but not to exceed 4 years and may be extended indefinitely in 1-year increments.
(a) International Broadcasting Bureau—
(1) Not to exceed 200 positions at grades GS–15 and below in the Office of Cuba Broadcasting. Appointments may not be made under this authority to administrative, clerical, and technical support positions.
(a) (Reserved)
(b) Director, Health Care Services; Director, Member Services; Director, Logistics; and Director, Plans and Programs.
(a) Executive Director, National Historical Publications and Records Commission.
(a) Not to exceed 40 positions of Astronaut Candidates at grades GS–11 through 15. Employment under this authority may not exceed 3 years.
(a) One position of Deputy Director; and one position of Associate Director of the Division of Supervision, Enforcement, and Fair Lending.
(a) (Reserved)
(a) (Reserved)
(b) Freer Gallery of Art—
(1) Not to exceed four Oriental Art Restoration Specialists at grades GS–9 through GS–15.
(a) Two Program Coordinators.
(a) Naval Home, Gulfport, Mississippi—
(1) One Resource Management Officer position and one Public Works Officer position, GS/GM–15 and below.
(a) (Reserved)
(b) National Endowment for the Humanities—
(1) Professional positions at grades GS–11 through GS–15 engaged in the review, evaluation, and administration of grants supporting scholarship, education, and public programs in the humanities, the duties of which require in-depth knowledge of a discipline of the humanities.
(a) Not to exceed eight positions of Associate Director at the Executive Seminar Centers at grades GS–13 and GS–14. Appointments may be made for any period up to 3 years and may be extended without prior approval for any individual. Not more than half of the authorized faculty positions at any one Executive Seminar Center may be filled under this authority.
(b) Center for Leadership Development—No more than 72 positions of faculty members at grades GS–13 through GS–15. Initial appointments under this authority may be made for any period up to 3 years and may be extended in 1, 2, or 3 year increments.
5 U.S.C. 3301 and 3302; E.O.10577, 3 CFR, 1954–1958 Comp., p.218.
Office of Personnel Management.
Office of Personnel Management.
30-Day notice and request for comments.
Retirement Services, Office of Personnel Management (OPM) offers the general public and other Federal agencies the opportunity to comment on an expiring information collection request (ICR), Application for Death Benefits under the Federal Employees Retirement System (SF 3104); and Documentation & Elections in Support of Application for Death Benefits When Deceased Was an Employee at the Time of Death (SF 3104B).
Comments are encouraged and will be accepted until September 23, 2022.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
A copy of this information collection, with applicable supporting documentation, may be obtained by contacting the Retirement Services Publications Team, Office of Personnel Management, 1900 E Street NW, Room 3316–L, Washington, DC 20415, Attention: Cyrus S. Benson, or sent via electronic mail to
As required by the Paperwork Reduction Act of 1995 OPM is soliciting comments for this collection. The information collection (OMB No. 3206–0160) was previously published in the
1. Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected; and
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
Standard Form 3104, Application for Death Benefits under the Federal Employees Retirement System, is needed to collect information so that OPM can pay death benefits to the survivor of Federal employees and annuitants. SF 3104B, Documentation in Support of Application for Death Benefits When Deceased Was an Employee at the Time of Death, is needed for deaths in service so that survivors can make the needed elections regarding health benefits, military service and payment of the death benefit.
Office of Personnel Management (OPM).
Notice.
This notice identifies Schedule A, B, and C appointing authorities applicable to a single agency that were established or revoked from March 1, 2022, to March 31, 2022.
Julia Alford, Senior Executive Resources Services, Senior Executive Services and Performance Management, Employee Services, 202–606–2246.
In accordance with 5 CFR 213.103, Schedule A, B, and C appointing authorities available for use by all agencies are codified in the Code of Federal Regulations (CFR). Schedule A, B, and C appointing authorities applicable to a single agency are not codified in the CFR, but the Office of Personnel Management (OPM) publishes a notice of agency-specific authorities established or revoked each month in the
(a) One Asian Studies Program Administrator, one Global European Studies Program Administrator, one Latin American Program Administrator, one Russian Studies Program Administrator, four Social Science Program Administrators, one Middle East Studies Program Administrator, one African Studies Program Administrator, one Polar Studies Program Administrator, one Canadian Studies Program Administrator; one China Studies Program Administrator, one Science, Technology and Innovation Program Administrator, and one Mexico Studies Program Administrator.
No Schedule B Authorities to report during March 2022.
The following Schedule C appointing authorities were approved during March 2022.
The following Schedule C appointing authorities were revoked during March 2022.
Office of Personnel Management.
Office of Personnel Management (OPM).
Notice.
This notice identifies Schedule A, B, and C appointing authorities applicable to a single agency that were established or revoked from April 1, 2022, to April 30, 2022.
Julia Alford, Senior Executive Resources Services, Senior Executive Services and Performance Management, Employee Services, 202–606–2246.
In accordance with 5 CFR 213.103, Schedule A, B, and C appointing authorities available for use by all agencies are codified in the Code of Federal Regulations (CFR). Schedule A, B, and C appointing authorities applicable to a single agency are not codified in the CFR, but the Office of Personnel Management (OPM) publishes a notice of agency-specific authorities established or revoked each month in the
No Schedule A Authorities to report during April 2022.
No Schedule B Authorities to report during April 2022.
The following Schedule C appointing authorities were approved during April 2022.
The following Schedule C appointing authorities were revoked during April 2022.
Postal Regulatory Commission.
Notice.
The Commission is noticing a recent Postal Service filing for the Commission's consideration concerning a negotiated service agreement. This notice informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202–789–6820.
The Commission gives notice that the Postal Service filed request(s) for the Commission to consider matters related to negotiated service agreement(s). The request(s) may propose the addition or removal of a negotiated service agreement from the market dominant or the competitive product list, or the modification of an existing product currently appearing on the market dominant or the competitive product list.
Section II identifies the docket number(s) associated with each Postal Service request, the title of each Postal Service request, the request's acceptance date, and the authority cited by the Postal Service for each request. For each request, the Commission appoints an officer of the Commission to represent the interests of the general public in the proceeding, pursuant to 39 U.S.C. 505 (Public Representative). Section II also establishes comment deadline(s) pertaining to each request.
The public portions of the Postal Service's request(s) can be accessed via the Commission's website (
The Commission invites comments on whether the Postal Service's request(s) in the captioned docket(s) are consistent with the policies of title 39. For request(s) that the Postal Service states concern market dominant product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3622, 39 U.S.C. 3642, 39 CFR part 3030, and 39 CFR part 3040, subpart B. For request(s) that the Postal Service states concern competitive product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3632, 39 U.S.C. 3633, 39 U.S.C. 3642, 39 CFR part 3035, and 39 CFR part 3040, subpart B. Comment deadline(s) for each request appear in section II.
1.
2.
This Notice will be published in the
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Sean Robinson, 202–268–8405.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on August 15, 2022, it filed with the Postal Regulatory Commission a
Sunshine Act Meetings, 87 FR 48212 (August 8, 2022).
10:00 a.m., August 17, 2022.
On August 16, 2022, the Board voted unanimously to approve the following addition to the August 17, 2022 public meeting agenda:
4. Update to the GSA repurposing study and implementation of the GSA financial study.
Stephanie Hillyard, Secretary to the Board, Phone No. 312–751–4920.
Office of Science and Technology Policy (OSTP).
Notice of request for information.
In this notice, the White House Office of Science and Technology Policy (OSTP) requests input from the public to help inform the development of the Federal Evidence Agenda on LGBTQI+ Equity. Executive Order 14075 on Advancing Equality for Lesbian, Gay, Bisexual, Transgender, Queer, and Intersex Individuals (June 15, 2022) required the co-chairs of the Interagency Working Group on Equitable Data to establish a subcommittee on sexual orientation, gender identity, and variations in sex characteristics (SOGI) data. That body, now part of the National Science and Technology Council (NSTC) Subcommittee on Equitable Data, is tasked with the development and release of a Federal Evidence Agenda on LGBTQI+ Equity, which will improve the Federal government's ability to make data-informed policy decisions that advance equity for the LGBTQI+ community.
Responses must be received by October 3 to be considered.
You may submit comments by any of the following methods:
•
•
OSTP will not respond to individual submissions. This RFI is not accepting applications for financial assistance or financial incentives. Comments submitted in response to this notice are subject to the Freedom of Information Act (FOIA). Responses to this RFI may be posted without change online. OSTP therefore requests that no proprietary information, copyrighted information, or personally identifiable information be submitted in response to this RFI. Please note that the United States Government will not pay for response preparation, or for the use of any information contained in a response.
In accordance with FAR 15–202(3), responses to this notice are not offers and cannot be accepted by the U.S. Government to form a binding contract. Additionally, the U.S. Government will not pay for response preparation or for the use of any information contained in the response.
Meghan Maury, Senior Advisor for Data Policy at (202–456–6121) or by email at
The Interagency Working Group on Equitable Data was established on January 20, 2021, by Executive Order 13985 on Advancing Racial Equity and Support for Underserved Communities Through the Federal Government. Executive Order 14075 on Advancing Equality for Lesbian, Gay, Bisexual, Transgender, Queer, and Intersex Individuals, requires the co-chairs of the Interagency Working Group on Equitable Data to establish a subcommittee on sexual orientation, gender identity, and variations in sex characteristics (SOGI) data. That body, now part of the NSTC Subcommittee on Equitable Data, is tasked with the development and release of a Federal Evidence Agenda on LGBTQI+ Equity, which will improve the Federal government's ability to make data-informed policy decisions that advance equity for the LGBTQI+ community.
The Federal Evidence Agenda on LGBTQI+ Equity described in Executive Order 14075 must:
i. Describe disparities faced by LGBTQI+ individuals that could be better understood through Federal statistics and data collection;
ii. Identify, in coordination with agency Statistical Officials, Chief Science Officers, Chief Data Officers, and Evaluation Officers, Federal data collections where improved SOGI data collection may be important for advancing the Federal Government's ability to measure disparities facing LGBTQI+ individuals; and
iii. Identify practices for all agencies engaging in SOGI data collection to follow in order to safeguard privacy, security, and civil rights, including with regard to appropriate and robust practices of consent for the collection of this data and restrictions on its use or transfer.
We invite members of the public to share perspectives on how requirements in the Federal Evidence Agenda on LGBTQI+ Equity should be addressed by the Subcommittee on SOGI Data. OSTP seeks responses to one, some, or all of the questions that follow.
Section 11 of the Executive Order states that “Advancing equity and full inclusion for LGBTQI+ individuals requires that the Federal Government use evidence and data to measure and address the disparities that LGBTQI+ individuals, families, and households face.” With that charge in mind, OSTP seeks response to the following questions:
1. What disparities faced by LGBTQI+ people are not well-understood through existing Federal statistics and data collection? Are there disparities faced by LGBTQI+ people that Federal statistics and other data collections are currently not well-positioned to help the Government understand?
2. Are there community-based or non-Federal statistics or data collection that could help inform the creation of the Federal Evidence Agenda on LGBTQI+ Equity? Are there disparities that are better understood through community-based research than through Federal statistics and/or other data collection?
3. Community-based research has indicated that LGBTQI+ people experience disparities in a broad range of areas. What factors or criteria should the Subcommittee on SOGI Data consider when reflecting on policy research priorities?
Ultimately, individual agencies decide what data to collect and publish through their forms and surveys, taking into account considerations like informed consent, privacy risk, statistical rigor, intended use of the data, budget, burden to respondents, and more. With that in mind, OSTP seeks response to the following questions about where potentially useful data is lacking:
1. In some instances, there are multiple surveys or data collections that could be used to generate evidence about a particular disparity faced by the LGBTQI+ community. In addition to factors like sample size, timeliness of the data, and geographic specificity of related data publications, what other factors should be considered when determining which survey would best generate the relevant evidence? Are there data collections that would be uniquely valuable in improving the Federal Government's ability to make data-informed decisions that advance equity for the LGBTQI+ community?
2. To protect privacy and maintain statistical rigor, sometimes publicly-released data must combine sexual and gender minority respondents into a single category. While this approach can provide valuable evidence, it can also obscure important details and differences. Please tell us about the usefulness of combined data, and under what circumstances more detailed data may be necessary.
3. Are there any Federal surveys or administrative data collections for which you would recommend the Federal Government
4. How can Federal agencies best communicate with the public about methodological constraints to collecting or publishing SOGI data? Additionally, how can agencies encourage public response to questions about sexual orientation and gender identity in order to improve sample sizes and population coverage?
5. Data collection on vulnerable populations is often incomplete, creating challenges for creating data-informed decisions to advance equity for those populations. How can statistical techniques help identify missing SOGI data, and make statistically rigorous estimates for that missing data? How should qualitative information help agencies analyze what SOGI data might be missing?
The Executive Order calls on the interagency SOGI data body to identify privacy, confidentiality, and civil rights practices agencies should follow when collecting SOGI data. Though members have expertise in how privacy, confidentiality, and civil rights practices apply to other marginalized groups, OSTP seeks input on privacy, confidentiality, and civil rights considerations that are unique to the LGBTQI+ community and/or are experienced differently by LGBTQI+ people, including in intersection with other marginalized experiences. Accordingly, OSTP seeks response to the following questions:
1. While the confidentiality of data collected by the statistical system is protected by statute, OMB and other agency policies, and experience in protecting the confidentiality of respondents through data governance, privacy-preserving technology, and disclosure limitation practices, a wide range of privacy protections apply to data collected for programmatic purposes, such as applications for Federal programs or benefits, compliance forms, human resources data, and other data used to manage and operate Federal programs. What specific privacy and confidentiality considerations should the Subcommittee on SOGI Data keep in mind when determining promising practices for the collection of this data and restrictions on its use or transfer, especially in the context of government forms and other collections of data for programmatic use?
2. Unique risks may exist when collecting SOGI data in the context of both surveys and administrative forms. Please tell us about specific risks Federal agencies should think about when considering whether to collect these data in surveys or administrative contexts.
3. Once SOGI data have been collected for administrative or statistical purposes, are there considerations that Federal agencies should be aware of concerning retention of these data? Please tell us how privacy or confidentiality protections could mitigate or change these concerns.
4. Where programmatic data is used to enforce civil rights protections, such as in employment, credit applications, or education settings, what considerations should the Subcommittee on SOGI Data keep in mind when determining promising practices for the collection of this data and restrictions on its use or transfer?
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
Cboe EDGX Exchange, Inc. (the “Exchange” or “EDGX”) is filing with the Securities and Exchange Commission (“Commission”) a proposed rule change to Exchange Rule 13.8 to introduce a new data product to be known as the Short Volume Report. The text of the proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the Exchange's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed
The Exchange seeks to amend Rule 13.8 to adopt paragraph 13.8(h), which introduces a new data product, the Short Volume Report. A description of each market data product offered by the Exchange is provided in Exchange Rule 13.8 and proposed Rule 13.8(h) provides that the Short Volume Report is an end-of-day report that summarizes certain equity trading activity on the Exchange, and includes trade date,
The Exchange notes that the data fields included in the Short Volume Report are essentially identical to the fields included by the New York Stock Exchange LLC (“NYSE”) in their Daily Short Volume file.
The Exchange anticipates that a wide variety of market participants will purchase the proposed Short Volume Report, including, but not limited to, active equity trading firms and academic institutions. For example, the Exchange notes that academic institutions may utilize the Short Volume Report data and as a result promote research and studies of the equities industry to the benefit of all market participants. The Exchange further believes the proposed Short Volume Report may provide helpful trading information regarding investor sentiment that may allow market participants to make more informed trading decisions and may be used to create and test trading models and analytical strategies and provide comprehensive insight into trading on the Exchange. The proposal is a completely voluntary product, in that the Exchange is not required by any rule or regulation to make this data available and that potential subscribers may purchase it only if they voluntarily choose to do so.
The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
In adopting Regulation NMS, the Commission granted self-regulatory organizations (“SROs”) and broker-dealers increased authority and flexibility to offer new and unique market data to the public. It was believed that this authority would expand the amount of data available to consumers, and also spur innovation and competition for the provision of market data. The Exchange believes that
Moreover, as noted above, NYSE offers a Daily Short Volume file which provides data that is essentially identical to that currently proposed by the Exchange—trade date, symbol, short volume, short exempt volume, and total volume.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Rather, the Exchange believes that the proposal will promote fair competition among the national securities exchanges by permitting the Exchange to offer a data product that provides substantially the same data offered by other competitor equities exchanges. Additionally, the Short Volume Report will be available equally to Members and non-Members. Market participants are not required to purchase the Short Volume Report, and the Exchange is not required to make the Short Volume Report available to investors. Rather, the Exchange is voluntarily making the Short Volume Report available, as requested by customers, and market participants may choose to receive (and pay for) this data based on their own business needs. Potential purchasers may request the data at any time if they believe it to be valuable or may decline to purchase such data. Given the above, the Exchange does not believe the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
The Exchange neither solicited nor received comments on the proposed rule change.
Because the foregoing proposed rule change does not: (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act
A proposed rule change filed under Rule 19b–4(f)(6)
At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule change should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
Cboe BYX Exchange, Inc. (the “Exchange” or “BYX”) is filing with the Securities and Exchange Commission (“Commission”) a proposed rule change to Exchange Rule 11.22(f) to introduce a new data product to be known as the Short Volume Report. The text of the proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the Exchange's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange seeks to amend Rule 11.22 to adopt paragraph 11.22(f), which introduces a new data product, the Short Volume Report. A description of each market data product offered by the Exchange is provided in Exchange Rule 11.22 and proposed Rule 11.22(f) provides that the Short Volume Report is an end-of-day report that summarizes certain equity trading activity on the Exchange, and includes trade date,
The Exchange notes that the data fields included in the Short Volume Report are essentially identical to the fields included by the New York Stock Exchange LLC (“NYSE”) in their Daily Short Volume file.
The Exchange anticipates that a wide variety of market participants will purchase the proposed Short Volume Report, including, but not limited to, active equity trading firms and academic institutions. For example, the Exchange notes that academic institutions may utilize the Short Volume Report data and as a result promote research and studies of the equities industry to the benefit of all market participants. The Exchange further believes the proposed Short Volume Report may provide helpful trading information regarding investor sentiment that may allow market participants to make more informed trading decisions and may be used to create and test trading models and analytical strategies and provide comprehensive insight into trading on the Exchange. The proposal is a completely voluntary product, in that the Exchange is not required by any rule or regulation to make this data available and that potential subscribers may purchase it only if they voluntarily choose to do so.
The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
In adopting Regulation NMS, the Commission granted self-regulatory organizations (“SROs”) and broker-dealers increased authority and flexibility to offer new and unique market data to the public. It was believed that this authority would expand the amount of data available to consumers, and also spur innovation and competition for the provision of market data. The Exchange believes that the proposed Short Volume Report would further broaden the availability of U.S. equity market data to investors consistent with the principles of Regulation NMS. The proposal also promotes increased transparency through the dissemination of short volume data. The proposed rule change would benefit investors by providing access to the Short Volume Report data, which may promote better informed trading, as well as research and studies of the equities industry.
Moreover, as noted above, NYSE offers a Daily Short Volume file which provides data that is essentially identical to that currently proposed by the Exchange—trade date, symbol, short volume, short exempt volume, and total volume.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Rather, the Exchange believes that the proposal will promote fair competition among the national securities exchanges by permitting the Exchange to offer a data product that provides substantially the same data offered by other competitor equities exchanges. Additionally, the Short Volume Report will be available equally to Members and non-Members. Market participants are not required to purchase the Short Volume Report, and the Exchange is not required to make the Short Volume Report available to investors. Rather, the Exchange is voluntarily making the Short Volume Report available, as requested by customers, and market participants may choose to receive (and pay for) this data based on their own business needs. Potential purchasers may request the data at any time if they believe it to be valuable or may decline to purchase such data. Given the above, the Exchange does not believe the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
The Exchange neither solicited nor received comments on the proposed rule change.
Because the foregoing proposed rule change does not: (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act
A proposed rule change filed under Rule 19b–4(f)(6)
At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule change should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
Cboe EDGA Exchange, Inc. (the “Exchange” or “EDGA”) is filing with the Securities and Exchange Commission (“Commission”) a proposed rule change to Exchange Rule 13.8 to introduce a new data product to be known as the Short Volume Report. The text of the proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the Exchange's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange seeks to amend Rule 13.8 to adopt paragraph 13.8(h), which introduces a new data product, the Short Volume Report. A description of each market data product offered by the Exchange is provided in Exchange Rule 13.8 and proposed Rule 13.8(h) provides that the Short Volume Report is an end-of-day report that summarizes certain equity trading activity on the Exchange, and includes trade date,
The Exchange notes that the data fields included in the Short Volume Report are essentially identical to the fields included by the New York Stock Exchange LLC (“NYSE”) in their Daily Short Volume file.
The Exchange anticipates that a wide variety of market participants will purchase the proposed Short Volume Report, including, but not limited to, active equity trading firms and academic institutions. For example, the Exchange notes that academic institutions may utilize the Short Volume Report data and as a result promote research and studies of the equities industry to the benefit of all market participants. The Exchange further believes the proposed Short Volume Report may provide helpful trading information regarding investor sentiment that may allow market participants to make more informed trading decisions and may be used to create and test trading models and analytical strategies and provide comprehensive insight into trading on the Exchange. The proposal is a completely voluntary product, in that the Exchange is not required by any rule or regulation to make this data available and that potential subscribers may purchase it only if they voluntarily choose to do so.
The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
In adopting Regulation NMS, the Commission granted self-regulatory organizations (“SROs”) and broker-dealers increased authority and flexibility to offer new and unique market data to the public. It was believed that this authority would expand the amount of data available to consumers, and also spur innovation and competition for the provision of market data. The Exchange believes that the proposed Short Volume Report would further broaden the availability of U.S. equity market data to investors consistent with the principles of Regulation NMS. The proposal also promotes increased transparency through the dissemination of short volume data. The proposed rule change would benefit investors by providing
Moreover, as noted above, NYSE offers a Daily Short Volume file which provides data that is essentially identical to that currently proposed by the Exchange—trade date, symbol, short volume, short exempt volume, and total volume.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Rather, the Exchange believes that the proposal will promote fair competition among the national securities exchanges by permitting the Exchange to offer a data product that provides substantially the same data offered by other competitor equities exchanges. Additionally, the Short Volume Report will be available equally to Members and non-Members. Market participants are not required to purchase the Short Volume Report, and the Exchange is not required to make the Short Volume Report available to investors. Rather, the Exchange is voluntarily making the Short Volume Report available, as requested by customers, and market participants may choose to receive (and pay for) this data based on their own business needs. Potential purchasers may request the data at any time if they believe it to be valuable or may decline to purchase such data. Given the above, the Exchange does not believe the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
The Exchange neither solicited nor received comments on the proposed rule change.
Because the foregoing proposed rule change does not: (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act
A proposed rule change filed under Rule 19b–4(f)(6)
At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule change should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
Cboe BZX Exchange, Inc. (the “Exchange” or “BZX”) proposes to amend Rule 11.28(a) to extend the MOC Cut-Off Time from 3:35 p.m. Eastern Time to 3:49 p.m. Eastern Time. The text of the proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the Exchange's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
Exchange Rule 11.28 (Cboe Market Close, a Closing Match Process for Non-BZX-Listed Securities) provides Members an optional closing match process for non-BZX-Listed securities, known as Cboe Market Close (“CMC”). Currently, per Rule 11.28(a) (Order Entry) Members
By way of background, on May 5, 2017, the Exchange filed a proposed rule change to adopt CMC, a match process for MOC orders in non-BZX listed securities and on December 1, 2017, filed Amendment No. 1
The Commission conducted a de novo review of the CMC proposal and associated public record, including
Importantly, after reviewing the entire record, the Commission concluded that BZX met its burden to show that the proposed rule change was consistent with the Act, and pursuant to its January 21, 2020, order, set aside the Approval Order and approved BZX's CMC proposal, as amended (“Final Approval Order”).
Since the Original Proposal various exchanges have extended the MOC cut-off times for their closing auctions, moving them closer to 4:00 p.m.
The Exchange notes that Members have requested a MOC Cut-Off Time that is closer to the end of Regular Trading Hours
Additionally, Members have indicated that extending the MOC Cut-Off Time to 3:49 p.m. will help to make CMC a more comparable alternative to NYSE and Nasdaq, which have MOC cut-off times of 3:50 p.m.
The Exchange also notes that today's market participants, including users of CMC,
The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
In particular, the Exchange believes that moving the MOC Cut-Off Time to 3:49 p.m. would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would allow Members to retain control over their orders for a longer period, thereby assisting market participants in managing their trading at the close. As discussed more fully above, market participants may prefer to trade as close to 4:00 p.m. as possible, because doing so can provide them with more time to seek better priced liquidity for their orders in a variety of ways, as well as give them more time to determine the size of their outstanding orders that they may decide to commit to CMC or the primary auctions.
Additionally, the Exchange believes that a MOC Cut-Off Time fifteen-minutes (15) prior to NYSE's cut-off time, and twenty-five-minutes (25) prior to Nasdaq's cut-off time, is no longer necessary. Rather, the Exchange notes that today's market participants are technologically equipped
Furthermore, the Exchange believes that the extension of cut-off times by the primary exchanges since CMC's proposal, as well as the growth of off-exchange venues
Moreover, the Exchange believes that the proposed rule change will remove impediments to and perfect the mechanism of a free and open market and a national market system because extending the MOC Cut-Off Time to 3:49 p.m. would more closely align the CMC MOC Cut-Off Time to the cut-off times in place for the other exchanges.
Additionally, the proposed rule change would more closely align CMC's MOC Cut-Off Time with that of off-exchange venues that offer cut-off times aligned with those currently offered by the primary exchanges, and as little as
The Exchange believes that the proposed rule change is consistent with the Section 6(b)(5) requirements.
Moreover, the Exchange believes that even if extending the MOC Cut-Off Time to 3:49 p.m. reduces the number of MOC orders routed to a security's primary listing market, CMC is designed to remove any perceived adverse impact on the primary listing markets' close because the total matched shares would still be disseminated by the Exchange free of charge via the Cboe Auction Feed prior to the primary exchanges' cut-off times. Additionally, because of the technological capabilities of today's market participants discussed more fully above, this information can still be incorporated by the primary markets' closing processes, and CMC users will still have ample time
Another matter addressed by the Commission in their review of the Initial Proposal was fragmentation, and whether CMC would fragment the markets beyond what currently occurs through off-exchange close price matching venues.
The Exchange also notes that even if the proposed rule change results in fewer MOC orders participating in the primary exchanges' closing auctions, that the fragmentation of MOC orders already occurs in today's markets on off-exchange venues. As illustrated in the first two charts below, a growing proportion of trading volume at the close occurs on
Accordingly, the
The Exchange believes that the proposed rule change is simple and straightforward, and as such will not significantly increase market complexity or operational risk. The Exchange seeks only to extend the MOC Cut-Off Time to 3:49 p.m., leaving all other aspects of the CMC process intact. Members will not have to consider new operational requirements of monitoring and consuming a new data feed or consider the utilization of a new order type or implementation of new Exchange code. Rather, Members may continue to monitor the same data feed as they do today, the Cboe Auction Feed, and simply look for the publication of the CMC information at the new proposed MOC Cut-Off Time.
Additionally, as discussed more fully above, the Exchange discussed this proposal with current CMC users prior to submitting this proposal and learned that CMC users are technologically equipped to manage a MOC Cut-Off Time closer to the primary exchanges' cut-off times, and that they can respond to CMC's publication of matched shares and quickly reroute any unmatched MOC orders to the respective primary closing auction. Moreover, CMC is a voluntary offering, and Members may freely decide whether to participate.
Furthermore, as noted throughout, both off-exchange venues and other exchanges already offer MOC cut-off times that are closer in time to the end of Regular Trading Hours. Specifically, as mentioned above, in 2018 Nasdaq received approval to move the cut-off times for the entry of MOC and Limit-On-Close (“LOC”) orders from 3:50 to 3:55 p.m.
Accordingly, the Exchange believes that market participants are well accustomed to managing the various cut-off times in today's marketplace, and in incorporating these timelines into their trading decisions. The number of exchanges and off-exchange venues with extended cut-off times indicates that market participants find value in their ability to retain control of their trading heading into the end of Regular Trading Hours, and the exchanges and off-exchange venues have responded to such demand. Certainly, market participants would not desire cut-off times closer to the end of Regular Trading Hours if they could not technologically and operationally manage their trading accordingly. Therefore, the extension of CMC's MOC Cut-Off Time should not present market participants with any novel operational or technological complexities.
The Exchange does not expect that the proposed extension of the MOC Cut-Off Time to 3:49 p.m. will result in an increase of manipulative activity due to information asymmetries, or raise any unique manipulation concerns relative to how CMC exists today with a current MOC Cut-Time of 3:35 p.m. Specifically, any information CMC participants may be able to glean from their paired-off MOC orders, or from their unmatched MOC orders, is still limited in nature. For instance, any information that CMC participants may learn from receiving unmatched MOC order messages is still limited in nature because the CMC participant would still only know the unexecuted size of its own order.
Furthermore, as with the current MOC Cut-Off Time, the proposed extension does not present any information asymmetries that do not already exist in today's markets, as the very nature of trading creates short term asymmetries of information to those who are parties to a trade.
While this proposal would result in the total shares for buy and sell orders in CMC being disseminated closer in time to the primary exchanges' cut-off times, this change does not suddenly make the value of such information more valuable or useful in terms of enhancing opportunities for gaming and manipulating the official closing price. The proposed MOC Cut-off Time is one-minute prior to NYSE's cut-off time of 3:50 p.m., and six-minutes prior to Nasdaq's cut-off time of 3:55 p.m. As noted above, today's markets are marked by technological solutions which typically operate in durations of microseconds. In this context, the separation between the CMC MOC Cut-Off Time and that of NYSE's and Nasdaq's is a substantial duration of time, during which much can change in the marketplace, thus limiting the value of information, if any, that can be gleaned from CMC's dissemination of matched shares at 3:49 p.m. Moreover, there are currently controls and processes in place to monitor for manipulative trading activity, such as the supervisory responsibilities and capabilities of exchanges and the expansive cross market surveillance conducted by FINRA. Following approval of this proposal, the Exchange, FINRA and others will continue to surveil for potential manipulative activity and when appropriate, bring enforcement actions against market participants engaged in manipulative trading activity.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Rather, the proposed rule change seeks merely to extend the MOC Cut-Off Time from 3:35 p.m. to 3:49 p.m., enabling all Members to manage their trading for a longer period. The Exchange is not proposing to make any other changes to the CMC process. Moreover, CMC is a voluntary closing match process, and Members are not required to participate in the CMC. Additionally, the proposed rule change applies to equally to all Members. Importantly, based on feedback from CMC users, the proposed MOC Cut-Off Time will not prevent CMC's current user's from participating in CMC, as CMC's current users are technologically equipped to manage a 3:49 p.m. MOC Cut-Off Time, and should they choose to do so, reroute MOC orders not matched in CMC to the primary exchanges' closing auctions.
Furthermore, the Exchange does not believe that the proposed rule change will impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. As noted above, the proposed rule change more closely aligns the CMC MOC Cut-Off Time to the cut-off times of other exchanges, while still providing CMC participants with an opportunity to reroute any of their unpaired MOC orders to the primary exchanges. In this regard, the proposed rule change may make CMC a more viable alternative to the primary auctions and should therefore promote competition amongst the exchanges. Additionally, the proposed MOC Cut-Off Time may also enable the Exchange to more effectively compete with off-exchange venues that have cut-off times much closer in time to the market close and comprise a growing percentage of closing volume.
The Exchange neither solicited nor received comments on the proposed rule change.
Within 45 days of the date of publication of this notice in the
A. by order approve or disapprove such proposed rule change, or
B. institute proceedings to determine whether the proposed rule change should be disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
Cboe BZX Exchange, Inc. (the “Exchange” or “BZX”) is filing with the Securities and Exchange Commission (“Commission”) a proposed rule change to Exchange Rule 11.22(f) to introduce a new data product to be known as the Short Volume Report. The text of the proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the Exchange's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange seeks to amend Rule 11.22 to adopt paragraph 11.22(f), which introduces a new data product, the Short Volume Report. A description of each market data product offered by the Exchange is provided in Exchange Rule 11.22 and proposed Rule 11.22(f) provides that the Short Volume Report is an end-of-day report that summarizes certain equity trading activity on the Exchange, and includes trade date,
The Exchange notes that the data fields included in the Short Volume Report are essentially identical to the fields included by the New York Stock Exchange LLC (“NYSE”) in their Daily Short Volume file.
The Exchange anticipates that a wide variety of market participants will purchase the proposed Short Volume Report, including, but not limited to, active equity trading firms and academic institutions. For example, the Exchange notes that academic institutions may utilize the Short Volume Report data and as a result promote research and studies of the equities industry to the benefit of all market participants. The Exchange further believes the proposed Short Volume Report may provide helpful trading information regarding investor sentiment that may allow market participants to make more informed trading decisions and may be used to create and test trading models and analytical strategies and provide comprehensive insight into trading on the Exchange. The proposal is a completely voluntary product, in that the Exchange is not required by any rule or regulation to make this data available and that potential subscribers may purchase it only if they voluntarily choose to do so.
The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
In adopting Regulation NMS, the Commission granted self-regulatory organizations (“SROs”) and broker-dealers increased authority and flexibility to offer new and unique market data to the public. It was believed that this authority would expand the amount of data available to consumers, and also spur innovation and competition for the provision of market data. The Exchange believes that the proposed Short Volume Report would further broaden the availability of U.S. equity market data to investors consistent with the principles of Regulation NMS. The proposal also promotes increased transparency through the dissemination of short volume data. The proposed rule change would benefit investors by providing access to the Short Volume Report data, which may promote better informed trading, as well as research and studies of the equities industry.
Moreover, as noted above, NYSE offers a Daily Short Volume file which provides data that is essentially identical to that currently proposed by the Exchange—trade date, symbol, short volume, short exempt volume, and total volume.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Rather, the Exchange believes that the proposal will promote fair competition among the national securities exchanges by permitting the Exchange to offer a data product that provides substantially the same data offered by other competitor equities exchanges. Additionally, the Short Volume Report will be available equally to Members and non-Members. Market participants are not required to purchase the Short Volume Report, and the Exchange is not required to make the Short Volume Report available to investors. Rather, the Exchange is voluntarily making the Short Volume Report available, as requested by customers, and market participants may choose to receive (and pay for) this data based on their own business needs. Potential purchasers may request the data at any time if they believe it to be valuable or may decline to purchase such data. Given the above, the Exchange does not believe the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
The Exchange neither solicited nor received comments on the proposed rule change.
Because the foregoing proposed rule change does not: (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section
A proposed rule change filed under Rule 19b–4(f)(6)
At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule change should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
U.S. Small Business Administration.
Notice of SBIC fee increases.
The U.S. Small Business Administration (SBA) is providing notice of the increased licensing and examination fees charged to Small Business Investment Companies (SBICs) due to the annual inflation adjustment required under SBIC program regulations.
The changes to the SBIC program licensing and examination fees identified in this notice take effect on October 1, 2022.
Louis Cupp, Office of Investment and Innovation, at 202–619–0511 or
Beginning October 1, 2021, the SBIC program regulations at 13 CFR 107.300(b)(2) and 107.692(b)(2) require SBA to annually adjust the licensing and examination fees for SBICs using the Inflation Adjustment defined in 13 CFR 107.50. This document provides notice of that adjustment. The table below identifies the amounts of the adjusted licensing and examination fees payable by SBICs and SBIC license applicants, which become effective on October 1, 2022.
Notice of request for public comment.
The Department of State is seeking Office of Management and Budget (OMB) approval for the information collection described below. In accordance with the Paperwork Reduction Act of 1995, we are requesting comments on this collection from all interested individuals and organizations. The purpose of this notice is to allow 60 days for public comment preceding submission of the collection to OMB.
The Department will accept comments from the public up to October 24, 2022.
You may submit comments by any of the following methods:
•
•
•
•
You must include the DS form number (if applicable), information collection title, and the OMB control number in any correspondence.
Direct requests for additional information regarding the collection listed in this notice, including requests for copies of the proposed collection instrument, and supporting documents, to Annura N. Murtadha, U.S. Department of State, Office of Risk Analysis and Management, 2401 E St. NW, L408, Washington, DC 20037; who can be reached at 202–657–6020 or at
•
•
•
•
•
•
•
•
•
•
•
•
We are soliciting public comments to permit the Department to:
• Evaluate whether the proposed information collection is necessary for the proper functions of the Department.
• Evaluate the accuracy of our estimate of the time and cost burden for this proposed collection, including the validity of the methodology and assumptions used.
• Enhance the quality, utility, and clarity of the information to be collected.
• Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology.
Please note that comments submitted in response to this Notice are public record. Before including any detailed personal information, you should be aware that your comments as submitted, including your personal information, will be available for public review.
The information collected from individuals and organizations is used to conduct screening to ensure that State funded activities do not provide support to entities or individuals deemed to be a risk to national security.
The State Department has implemented a Risk Analysis and Management Program to vet potential contractors and grantees seeking funding from the Department of State to mitigate the risk that such funds might benefit entities or individuals who present a national security risk. To conduct this vetting program the Department collects information from contractors, sub-contractors, grantees and sub-grantees regarding their directors, officers and/or key employees through electronic submission. The information collected is compared to information gathered from commercial, public, and U.S. government databases to determine the risk that the applying organization, entity or individual might use Department funds or programs in a way that presents a threat to national security.
Office of the United States Trade Representative.
Request for comments and notice of public hearing.
The interagency Trade Policy Staff Committee (TPSC) will seek public comment to assist the Office of the United States Trade Representative (USTR) in the preparation of its annual report to Congress on Russia's implementation of its obligations as a Member of the World Trade Organization (WTO). This notice includes the schedule for the submission of comments to the TPSC for the Russia Report and a virtual public hearing.
USTR strongly prefers electronic submissions made through the Federal eRulemaking Portal:
For procedural questions concerning written comments, contact Spencer Smith Spencer Smith at
Russia became a Member of the WTO on August 22, 2012, and on December 21, 2012, following the termination of the application of the Jackson-Vanik amendment to Russia and the extension of permanent normal trade relations to the products of Russia, the United States and Russia both filed letters with the WTO withdrawing their notices of non-application and consenting to have the WTO Agreement apply between them. In accordance with Section 201(a) of the Russia and Moldova Jackson-Vanik Repeal and Sergei Magnitsky Rule of Law Accountability Act of 2012 (Pub. L. 112–208), USTR is required to submit annually a report to Congress on the extent to which Russia is implementing the WTO Agreement, including the Agreement on the Application of Sanitary and Phytosanitary Measures and the Agreement on Trade Related Aspects of Intellectual Property Rights. The report also must assess Russia's progress on acceding to and implementing the Information Technology Agreement (ITA) and the Government Procurement Agreement (GPA). In addition, to the extent that USTR finds that Russia is not implementing fully any WTO agreement or is not making adequate progress in acceding to the ITA or the GPA, USTR must describe in the report the actions it plans to take to encourage Russia to improve its implementation and/or increase its accession efforts. In accordance with Section 201(a), and to assist it in preparing this year's report, the TPSC is hereby soliciting public comments.
The terms of Russia's accession to the WTO are contained in the Marrakesh Agreement Establishing the World Trade Organization and the Protocol on the Accession of the Russian Federation to the WTO (including its annexes) (Protocol). The Report of the Working Party on the Accession of the Russian Federation (Working Party Report) provides detail and context to the commitments listed in the Protocol. You can find the Protocol and Working Party Report on USTR's website at
USTR invites public comments and/or oral testimony on Russia's implementation of its WTO commitments according to the schedule set out in the
a. Import regulation (
b. Export regulation.
c. Subsidies.
d. Standards and technical regulations.
e. Sanitary and phytosanitary measures.
f. Trade-related investment measures (including local content requirements).
g. Taxes and charges levied on imports and exports.
h. Other internal policies affecting trade.
i. Intellectual property rights (including intellectual property rights enforcement).
j. Services.
k. Government procurement.
l. Rule of law issues (
m. Other WTO commitments.
USTR requests small businesses (generally defined by the Small Business Administration as firms with fewer than 500 employees) or organizations representing small business members that submit comments to self-identify as such, so that we may be aware of issues of particular interest to small businesses.
The TPSC will convene a virtual public hearing via Zoom on Tuesday, October 4, 2022, beginning at 9:00 a.m. EDT. Persons wishing to observe the public hearing will find a link on USTR's web page for Russia on the day of the hearing at
Persons wishing to testify at the hearing must provide written notification of their intention to testify no later than September 21, 2022 at 11:59 p.m. EDT, as noted above in
Persons submitting written comments must do so in English and must identify on the first page of the submission `Comments Regarding Russia's Implementation of its WTO Commitments.' The submission deadline is September 21, 2022 at 11:59 p.m. EDT. USTR strongly encourages commenters to make online submissions, using
USTR prefers submissions in Microsoft Word (.doc) or Adobe Acrobat (.pdf). If you use an application other than those two, please indicate the name of the application in the 'type comment' field. At the beginning of the submission, include the following text: (1) 2022 Russia WTO Implementation Report; (2) your organization's name; and (3) whether the document is a comment or an answer to a TPSC question. Written comments should not exceed 30 single-spaced, standard letter-size pages in 12-point type, including attachments. Please do not attach separate cover letters to electronic submissions; rather, include any information that might appear in a cover letter in the comments themselves. Similarly, to the extent possible, please include any exhibits, annexes, or other attachments in the same file as the submission itself, not as separate files.
An interested party requesting that USTR treat information contained in a submission as BCI must certify that the information is business confidential. For
As noted, USTR strongly urges that you file submissions through
USTR will post comments in the docket for public inspection, except properly designated BCI. You can view comments at
Federal Aviation Administration (FAA), DOT.
Notice and request for comments.
In accordance with the Paperwork Reduction Act of 1995, FAA invites public comments about our intention to request the Office of Management and Budget (OMB) approval of a substantive change to multiple previously approved information collections. The FAA Reauthorization Act of 2018, section 546, requires the implementation of systems allowing a member of the public to submit any information or form to the Registry and conduct any transaction with the Registry by electronic or other remote means. In response to this requirement, the FAA created Civil Aviation Registry Electronic Services (CARES) and intends to change its current information collection to accommodate electronic registry applications.
Written comments should be submitted by September 23, 2022.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Bonnie Lefko by email at:
(1) 2120–0042, Aircraft Registration Application, AC Form 8050–1
(2) 2120–0042, Aircraft Registration Renewal Application, AC Form 8050–1B
(3) 2120–0042, Aircraft Bill of Sale, AC Form 8050–2
(4) 2120–0042, Certificate of Repossession of Encumbered Aircraft, AC Form 8050–4
(5) 2120–0024, Dealer's Aircraft Registration Certificate Application, AC Form 8050–5
(6) 2120–0043, Notice of Recordation—Aircraft Security Conveyance, AC Form 8050–41
(7) 2120–0042, Affidavit of Ownership, AC Form 8050–88
(8) 2120–0042, Affidavit of Ownership Light-Sport Aircraft, AC Form 8050–88A
(9) 2120–0042, Aircraft Security Agreement, AC Form 8050–98
(10) 2120–0042, Flight Hours for Corporations, AC Form 8050–117
(11) 2120–0697, International Registry Entry Form, AC Form 8050–135.
1. The digitization of non-digital Registry information, including paper documents, microfilm images, and photographs, from an analog or non-digital format to a digital format;
2. The digitalization of Registry manual and paper-based processes, business operations, and functions by leveraging digital technologies and a broader use of digitized data;
3. The implementation of systems allowing a member of the public to submit any information or form to the Registry and conduct any transaction with the Registry by electronic or other remote means; and
4. Allowing more efficient, broader, and remote access to the Registry.
In response to The Act, the FAA has initiated the creation of Civil Aviation Registry Electronic Services (CARES). CARES is intended to modernize and streamline the way these forms are submitted by providing online access to users wishing to submit information electronically. Public users will continue to have the paper-based submission option by providing the same information that is accepted today, along with the addition of an email address.
To accommodate the public user with these web-based services, a dedicated
As an alternative to the web-based services, public users will still be permitted to send in paper forms directly to the Registry office via conventional mail services. These paper forms will be revised to collect the email address of the public user to help streamline processing of the public users' request. The modified paper forms will supersede all prior forms.
Issued in Oklahoma City, OK on August 19, 2022.
Federal Aviation Administration, DOT.
Notice of receipt and request for review of noise compatibility program.
The Federal Aviation Administration (FAA) announces that it is reviewing a proposed noise compatibility program that was submitted for Newark Liberty International Airport by The Port Authority of New York and New Jersey. This program was submitted subsequent to a determination by FAA that associated noise exposure maps submitted for Newark Liberty International Airport were in compliance with applicable requirements, effective January 15, 2019. The proposed noise compatibility program will be approved or disapproved on or before February 15, 2023. This notice also announces the availability of this noise compatibility program for public review and comment.
The effective date of start of FAA's review of the noise compatibility program is August 19, 2022. The public comment period ends October 18, 2022.
Andrew Brooks, Regional Environmental Program Manager, Airports Division, Federal Aviation Administration, 1 Aviation Plaza, Room 516, Jamaica, NY 11434. Phone Number: 718–553–2511. Comments on the proposed noise compatibility program should also be submitted to the above office.
This notice announces that the FAA is reviewing a proposed noise compatibility program (NCP) for Newark Liberty International Airport which will be approved or disapproved on or before February 15, 2023. This notice also announces the availability of this program for public review and comment.
An airport operator who has submitted noise exposure maps (NEM) that are found by FAA to be in compliance with the requirements of title 49, chapter 475 of the United States Code (U.S.C.) (Aviation Safety and Noise Abatement Act, hereinafter referred to as “the Act”) and Title 14, Code of Federal Regulations (CFR) part 150 (14 CFR 150), promulgated pursuant to the Act, may submit a noise compatibility program for FAA approval which sets forth the measures the operator has taken or proposes to reduce existing non-compatible uses and prevent the introduction of additional non-compatible uses. The FAA previously determined that the NEMs for Newark Liberty International Airport were in compliance with applicable requirements under 14 CFR 150, effective January 15, 2019 (Noise Exposure Map Notice for Newark Liberty International Airport, Newark, New Jersey, volume 84,
The FAA has formally received the NCP for Newark Liberty International Airport on August 8, 2022. The airport operator has requested that the FAA review this material and that the noise mitigation measures, to be implemented jointly by the airport and surrounding communities, be approved as a NCP under section 47504 of the Act. Preliminary review of the submitted material indicates that it conforms to the requirements for the submittal of NCPs, but that further review will be necessary prior to approval or disapproval of the program for Newark Liberty International Airport. The formal review period, limited by law to a maximum of 180 days, was initiated on August 19, 2022 and will be completed on or before February 15, 2023.
The FAA's detailed evaluation will be conducted under the provisions of 14 CFR 150.33. The primary considerations in the evaluation process are whether the proposed measures may reduce the level of aviation safety, create an undue burden on interstate or foreign commerce, or be reasonably consistent with obtaining the goal of reducing existing non-compatible land uses and preventing the introduction of additional non-compatible land uses.
Interested persons are invited to comment on the proposed program with specific reference to these factors. All comments, other than those properly addressed to local land use authorities, will be considered by the FAA to the extent practicable. Copies of the proposed NCP for Newark Liberty International Airport are available for examination online at
The Port Authority of New York and New Jersey has also made a hard copy of the document available for review at the EWR Redevelopment Program Community Outreach Office, located at 79 West Jersey Street, Elizabeth, New Jersey. Interested parties can contact the office at (732) 258–1801 or via email at
Questions regarding this notice may be directed to the individual named above under the heading,
Federal Motor Carrier Safety Administration (FMCSA), DOT.
Notice of application for exemption; request for comments.
FMCSA announces that it has received an application for exemption from The Trucking Alliance, a group comprised of the following motor carriers: Cargo Transporters; Dupré Logistics LLC; Frozen Food Express; J.B. Hunt Transport, Inc.; KLLM Transport Services; Knight Transportation; Maverick Transportation LLC; Schneider; Swift Transportation; USXpress; and May Trucking Company. The Trucking Alliance applied for an exemption from the Federal Motor Carrier Safety Regulations (FMCSRs) “to amend the definition of actual knowledge to include the employer's knowledge of a driver's positive hair test, which would require such results be reported to the FMCSA Drug and Alcohol Clearinghouse (“Clearinghouse”) and to inquiring carriers.” Although FMCSA lacks the statutory authority to grant the Trucking Alliance's request for exemption until the Department of Health and Human Services has taken certain action, FMCSA requests public comment on the exemption application, as required by statute.
Comments must be received on or before September 23, 2022.
You may submit comments identified by Federal Docket Management System (FDMS) Number FMCSA–2022–0127 by any of the following methods:
•
•
•
•
Each submission must include the Agency name and the docket number (FMCSA–2022–0127) for this notice. Note that DOT posts all comments received without change to
Mr. Richard Clemente, Driver and Carrier Operations Division; Office of Carrier, Driver and Vehicle Safety Standards, FMCSA, at (202) 366–2722 or by email at
FMCSA encourages you to participate by submitting comments and related materials.
If you submit a comment, please include the docket number for this notice (FMCSA–2022–0127), indicate the specific section of this document to which the comment applies, and provide a reason for suggestions or recommendations. You may submit your comments and material online or by fax, mail, or hand delivery, but please use only one of these means. FMCSA recommends that you include your name and a mailing address, an email address, or a phone number in the body of your document so the Agency can contact you if it has questions regarding your submission.
To submit your comment online, go to
FMCSA has authority under 49 U.S.C. 31136(e) and 31315(b) to grant exemptions from FMCSRs. FMCSA must publish a notice of each exemption request in the
The Agency reviews safety analyses and public comments submitted and determines whether granting the exemption would likely achieve a level of safety equivalent to, or greater than, the level that would be achieved by the current regulation (49 CFR 381.305). The Agency must publish its decision in the
The Trucking Alliance applied for “an exemption from 49 CFR 382.107 to amend the definition of actual knowledge to include the employer's knowledge of a driver's positive hair test, which would require such results be reported to the FMCSA Drug and Alcohol Clearinghouse (“Clearinghouse”) and to inquiring carriers as required to comply with 49 CFR 391.23.”
A copy of The Trucking Alliance's application for exemption is available for review in the docket for this notice.
FMCSA drug and alcohol use and testing regulations are authorized by the Omnibus Transportation Employee Testing Act of 1991 (OTETA) (Pub. L. 102–143, Title V, 105 Stat. 917, at 952, codified at 49 U.S.C. 31306). Section 31306(c)(2) requires that DOT follow the Department of Health and Human Services' (HHS) Mandatory Guidelines
FMCSA notes that in section 5402(b) of the Fixing America's Surface Transportation Act (FAST Act) (Pub. L. 114–94, 129 Stat. 1548, codified at 49 U.S.C. 31306 note) (Dec. 4, 2015)), Congress required that the U.S. Department of Health and Human Services (HHS) “not later than one year after . . . this Act, . . . issue scientific and technical guidelines for hair testing as a method of detecting the use of a controlled substance for purposes of section 31306 of title 49, United States Code.” The FAST Act also amended OTETA by adding a requirement that FMCSA's drug and alcohol testing regulations permit the use of hair testing as an acceptable alternative to urine testing for pre-employment drug testing, and for random drug testing when the driver was subject to pre-employment hair testing (49 U.S.C. 31306(b)(1)(B)). The Conference Report accompanying the FAST Act noted that “[t]he FMCSA has informed the conferees, and the conferees agree that
HHS issued proposed Mandatory Guidelines for Federal Workplace Drug Testing Using Hair (HMG) in 2020 (85 FR 56108 (September 10, 2020)). However, HHS has not yet issued a final version of the HMG.
In accordance with 49 U.S.C. 31315(b), FMCSA requests public comment from all interested persons on The Trucking Alliance's application for an exemption from 49 CFR 382.107. All comments received before the close of business on the comment closing date indicated at the beginning of this notice will be considered and will be available for examination in the docket at the location listed under the Addresses section of this notice. Comments received after the comment closing date will be filed in the public docket and will be considered to the extent practicable. In addition to late comments, FMCSA will also continue to file, in the public docket, relevant information that becomes available after the comment closing date. Interested persons should continue to examine the public docket for new material.
Federal Motor Carrier Safety Administration (FMCSA), Department of Transportation (DOT).
Notice of renewal of exemptions; request for comments.
FMCSA announces its decision to renew exemptions for seven individuals from the hearing requirement in the Federal Motor Carrier Safety Regulations (FMCSRs) for interstate commercial motor vehicle (CMV) drivers. The exemptions enable these hard of hearing and deaf individuals to continue to operate CMVs in interstate commerce.
Each group of renewed exemptions were applicable on the dates stated in the discussions below and will expire on the dates provided below. Comments must be received on or before September 23, 2022.
You may submit comments identified by the Federal Docket Management System Docket No. FMCSA–2014–0106, Docket No. FMCSA–2015–0326, Docket No. FMCSA–2016–0002, or Docket No. FMCSA–2020–0026 using any of the following methods:
•
•
•
•
To avoid duplication, please use only one of these four methods. See the “Public Participation” portion of the
Ms. Christine A. Hydock, Chief, Medical Programs Division, (202) 366–4001,
If you submit a comment, please include the docket number for this notice (Docket No. FMCSA–2014–0106, Docket No. FMCSA–2015–0326, Docket No. FMCSA–2016–0002, or Docket No. FMCSA–2020–0026), indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation. You may submit your comments and material online or by fax, mail, or hand delivery, but please use only one of these means. FMCSA recommends that you include your name and a mailing address, an email address, or a phone number in the body of your document so that FMCSA can contact you if there are questions regarding your submission.
To submit your comment online, go to
If you submit your comments by mail or hand delivery, submit them in an unbound format, no larger than 8
FMCSA will consider all comments and material received during the comment period.
To view comments, go to
In accordance with 49 U.S.C. 31315(b)(6), DOT solicits comments from the public on the exemption request. DOT posts these comments, without edit, including any personal information the commenter provides, to
Under 49 U.S.C. 31136(e) and 31315(b), FMCSA may grant an exemption from the FMCSRs for no longer than a 5-year period if it finds such exemption would likely achieve a level of safety that is equivalent to, or greater than, the level that would be achieved absent such exemption. The statute also allows the Agency to renew exemptions at the end of the 5-year period. FMCSA grants medical exemptions from the FMCSRs for a 2-year period to align with the maximum duration of a driver's medical certification.
The physical qualification standard for drivers regarding hearing found in 49 CFR 391.41(b)(11) states that a person is physically qualified to drive a CMV if that person first perceives a forced whispered voice in the better ear at not less than 5 feet with or without the use of a hearing aid or, if tested by use of an audiometric device, does not have an average hearing loss in the better ear greater than 40 decibels at 500 Hz, 1,000 Hz, and 2,000 Hz with or without a hearing aid when the audiometric device is calibrated to American National Standard (formerly ASA Standard) Z24.5—1951.
This standard was adopted in 1970 and was revised in 1971 to allow drivers to be qualified under this standard while wearing a hearing aid, 35 FR 6458, 6463 (Apr. 22, 1970) and 36 FR 12857 (July 3, 1971).
The seven individuals listed in this notice have requested renewal of their exemptions from the hearing standard in § 391.41(b)(11), in accordance with FMCSA procedures. Accordingly, FMCSA has evaluated these applications for renewal on their merits and decided to extend each exemption for a renewable 2-year period.
Interested parties or organizations possessing information that would otherwise show that any, or all, of these drivers are not currently achieving the statutory level of safety should immediately notify FMCSA. The Agency will evaluate any adverse evidence submitted and, if safety is being compromised or if continuation of the exemption would not be consistent with the goals and objectives of 49 U.S.C. 31136(e) and 31315(b), FMCSA will take immediate steps to revoke the exemption of a driver.
In accordance with 49 U.S.C. 31136(e) and 31315(b), each of the seven applicants has satisfied the renewal conditions for obtaining an exemption from the hearing requirement. The seven drivers in this notice remain in good standing with the Agency. In addition, for commercial driver's license (CDL) holders, the Commercial Driver's License Information System and the Motor Carrier Management Information System are searched for crash and violation data. For non-CDL holders, the Agency reviews the driving records from the State Driver's Licensing Agency. These factors provide an adequate basis for predicting each driver's ability to continue to safely operate a CMV in interstate commerce. Therefore, FMCSA concludes that extending the exemption for each of these drivers for a period of 2 years is likely to achieve a level of safety equal to that existing without the exemption.
In accordance with 49 U.S.C. 31136(e) and 31315(b), the following groups of drivers received renewed exemptions in the month of September and are discussed below.
As of September 6, 2022, and in accordance with 49 U.S.C. 31136(e) and 31315(b), the following four individuals have satisfied the renewal conditions for obtaining an exemption from the hearing requirement in the FMCSRs for interstate CMV drivers:
The drivers were included in docket number FMCSA–2014–0106, FMCSA–2015–0326, or FMCSA–2016–0002. Their exemptions are applicable as of September 6, 2022 and will expire on September 6, 2024.
As of September 14, 2022, and in accordance with 49 U.S.C. 31136(e) and 31315(b), the following three individuals have satisfied the renewal conditions for obtaining an exemption from the hearing requirement in the FMCSRs for interstate CMV drivers:
The drivers were included in docket number FMCSA–2020–0026. Their exemptions are applicable as of September 14, 2022 and will expire on September 14, 2024.
The exemptions are extended subject to the following conditions: (1) each driver must report any crashes or accidents as defined in § 390.5; and (2) report all citations and convictions for disqualifying offenses under 49 CFR 383 and 49 CFR 391 to FMCSA; and (3) each driver prohibited from operating a motorcoach or bus with passengers in interstate commerce. The driver must also have a copy of the exemption when driving, for presentation to a duly authorized Federal, State, or local enforcement official. In addition, the exemption does not exempt the individual from meeting the applicable CDL testing requirements. Each exemption will be valid for 2 years unless rescinded earlier by FMCSA. The exemption will be rescinded if: (1) the person fails to comply with the terms and conditions of the exemption; (2) the exemption has resulted in a lower level of safety than was maintained before it was granted; or (3) continuation of the exemption would not be consistent with the goals and objectives of 49 U.S.C. 31136(e) and 31315(b).
During the period the exemption is in effect, no State shall enforce any law or regulation that conflicts with this exemption with respect to a person operating under the exemption.
Based upon its evaluation of the seven exemption applications, FMCSA renews the exemptions of the aforementioned drivers from the hearing requirement in § 391.41(b)(11). In accordance with 49 U.S.C. 31136(e) and 31315(b), each exemption will be valid for two years unless revoked earlier by FMCSA.
Federal Transit Administration, Department of Transportation (DOT).
Notice of request for comments.
In compliance with the Paperwork Reduction Act of 1995, this notice announces that the Information Collection Requirements (ICRs) abstracted below have been forwarded to the Office of Management and Budget (OMB) for review and comment. The ICR describe the nature of the information collection and their expected burdens.
Comments must be submitted on or before September 23, 2022.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Tia Swain, Office of Administration, Management Planning Division, 1200 New Jersey Avenue SE, Mail Stop TAD–10, Washington, DC 20590, (202) 366–0354 or
The Paperwork Reduction Act of 1995 (PRA), Pub. L. 104–13, Section 2, 109 Stat. 163 (1995) (codified as revised at 44 U.S.C. 3501–3520), and its implementing regulations, 5 CFR part 1320, require Federal agencies to issue two notices seeking public comment on information collection activities before OMB may approve paperwork packages. 44 U.S.C. 3506, 3507; 5 CFR 1320.5, 1320.8(d)(1), 1320.12. On April 22, 2022, FTA published a 60-day notice (87 FR 24222) in the
Before OMB decides whether to approve these proposed collections of information, it must provide 30 days for public comment. 44 U.S.C. 3507(b); 5 CFR 1320.12(d). Federal law requires OMB to approve or disapprove paperwork packages between 30 and 60 days after the 30-day notice is published. 44 U.S.C. 3507 (b)–(c); 5 CFR 1320.12(d);
The summaries below describe the nature of the information collection requirements (ICRs) and the expected burden. The requirements are being submitted for clearance by OMB as required by the PRA.
The information collection activities request is for a renewal without change of a currently approved collection. The information collection focus is on the activities of SSOAs and RTAs to report information to FTA. This request for renewal of an existing information collection does not reflect any changes as a result of the Bipartisan Infrastructure Law. In the event that FTA updates State Safety Oversight requirements, FTA will seek comment from stakeholders through the publication of a separate
The information collection request includes the annual report FTA requires from SSOAs, FTA's grant management reporting requirement and the triennial audit program, which requires information from both SSOAs and RTAs. Further, the information collection continues to reflect requirements for SSOAs and RTAs to respond to FTA directives and advisories, and SSOAs participation in monthly teleconference calls with FTA. Finally, the information collection request includes RTA event notifications to FTA.
Federal Transit Administration, Department of Transportation.
Notice of request for comments.
In accordance with the Paperwork Reduction Act of 1995, this notice announces the intention of the Federal Transit Administration (FTA) to request the Office of Management and Budget (OMB) to approve the extension of a currently approved information collection: Public Transportation Emergency Relief Program.
Comments must be submitted before October 24, 2022.
To ensure that your comments are not entered more than once into the docket, submit comments identified by the docket number by only one of the following methods:
1.
2.
3.
4.
Thomas Wilson, Office of Program Management (202) 366–5279 or
Interested parties are invited to send comments regarding any aspect of this information collection, including: (1) the necessity and utility of the information collection for the proper performance of the functions of the FTA; (2) the accuracy of the estimated burden; (3) ways to enhance the quality, utility, and clarity of the collected information; and (4) ways to minimize the collection burden without reducing the quality of the collected information. Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval of this information collection.
The first appropriation of funds for the program was in 2013 following Hurricane Sandy, for which the President declared a major disaster for areas of 12 States and the District of Columbia. Under the Disaster Relief Appropriations Act (Pub. L. 113–2), Congress provided $10.9 billion for FTA's Emergency Relief Program for recovery, relief, and resilience efforts in the counties specified in the disaster declaration. Approximately $10.0 billion remained available after implementation of the Balanced Budget and Emergency Deficit Control Act of 2011 (Pub. L. 112–25) and after intergovernmental transfers to other bureaus and offices within DOT. FTA has allocated the full amount in multiple tiers for response, recovery and rebuilding; for locally prioritized resilience projects, and for competitively selected resilience projects.
The second appropriation of funds for the Emergency Relief Program was in 2018 following Hurricanes Harvey, Irma, and Maria, for which the President declared major disasters in areas of Florida, Georgia, Louisiana, Puerto Rico, South Carolina, Texas, and the U.S. Virgin Islands. Under the Bipartisan Budget Act of 2018 (Pub. L. 115–123), Congress provided $330 million for FTA's Emergency Relief Program for transit systems affected by Hurricanes Harvey, Irma, and Maria. On May 31, 2018 FTA allocated $277.5 million for response, recovery, rebuilding, and resilience projects.
The third appropriation of funds for the Emergency Relief Program was in 2019. Under the Additional Supplemental Appropriations for Disaster Relief Act of 2019 (Pub. L. 116–20), Congress appropriated $10.5 million for FTA's Emergency Relief Program for transit systems affected by major declared disasters occurring in calendar year 2018.
On March 13, 2020, FTA announced that expanded eligibility of Federal assistance is available under FTA's Emergency Relief Program to help transit agencies respond to the coronavirus (COVID–19) in states where the Governor has declared an emergency. This includes allowing all transit providers, including those in large urban areas, to use Federal formula funds for emergency-related capital and operating expenses, and raises the cap on the Federal government's share of those expenses.
Federal Transit Administration, Department of Transportation.
Notice of request for comments.
In accordance with the Paperwork Reduction Act of 1995, this notice announces the intention of the Federal Transit Administration (FTA) to request the Office of Management and Budget (OMB) to approve the extension of a currently approved information collection: Bus Testing Program.
Comments must be submitted before October 24, 2022.
To ensure that your comments are not entered more than once into the docket, submit comments identified by the docket number by only one of the following methods:
1.
2.
3.
4.
Jamel El-Hamri at (202) 366–8985, or email:
Interested parties are invited to send comments regarding any aspect of this information collection, including: (1) the necessity and utility of the information collection for the proper performance of the functions of the FTA; (2) the accuracy of the estimated burden; (3) ways to enhance the quality, utility, and clarity of the collected information; and (4) ways to minimize the collection burden without reducing the quality of the collected information. Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval of this information collection.
The Bus Testing Center is operated by the Thomas D. Larson Pennsylvania Transportation Institute of the Pennsylvania State University (LTI). LTI operates and maintains the Center under a cooperative agreement with FTA and establishes and collects fees for the testing of the vehicles at the facility. Upon completion of the testing of the vehicle at the Center with a passing test score, a draft Bus Testing Report is provided to the manufacturer of the new bus model. If the manufacturer approves the Report for publication, the bus model becomes eligible for FTA funding. 49 CFR 665.7 requires a recipient of FTA funds to certify that a bus model has been tested at the bus testing facility, that the bus model received a passing score, and that the recipient has a copy of the applicable Bus Testing Report(s) on a bus model before final acceptance of any buses of that model. Recipients are strongly encouraged to review the Bus Testing Report(s) relevant to a bus model before final acceptance and/or selection of that bus model.
Federal Transit Administration, Department of Transportation.
Notice of request for comments.
In accordance with the Paperwork Reduction Act of 1995, this notice announces the intention of the Federal Transit Administration (FTA) to request the Office of Management and Budget (OMB) to approve the extension of a currently approved information collection: Transit Research Development, Demonstration, Deployment and Training Projects.
Comments must be submitted before October 24, 2022.
To ensure that your comments are not entered more than once into the docket, submit comments identified by the docket number by only one of the following methods:
1.
2.
3.
4.
Lisa Colbert, Office of Research and Innovation (202) 366–9261 or
Interested parties are invited to send comments regarding any aspect of this information collection, including: (1) the necessity and utility of the information collection for the proper performance of the functions of the FTA; (2) the accuracy of the estimated burden; (3) ways to enhance the quality, utility, and clarity of the collected information; and (4) ways to minimize the collection burden without reducing the quality of the collected information. Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval of this information collection.
Office of the Secretary (OST), Department of Transportation (Department).
Solicitation of memberships for appointment to the Air Carrier Access Act (ACAA) Advisory Committee (ACAA Advisory Committee or the Committee).
The Department is soliciting applications and nominations for memberships to the ACAA Advisory Committee. The ACAA Advisory Committee reviews issues related to the air travel needs of passengers with disabilities.
Nominations and applications for ACAA Advisory Committee membership must be received on or before September 14, 2022.
If you have questions about the ACAA Advisory Committee, you may contact Vinh Nguyen, Office of Aviation Consumer Protection, U.S. Department of Transportation, by email at
Section 439 of the FAA Reauthorization Act of 2018 (2018 FAA Act) requires the Secretary of Transportation to establish an advisory committee to identify and assess barriers to accessible air travel, determine the extent to which DOT is addressing those barriers, recommend improvements, and advise the Secretary on implementing the ACAA. The 2018 FAA Act specifies that the ACAA Committee shall comprise at least one representative of each of the following groups: passengers with disabilities; national disability organizations; air carriers; airport operators; contractor service providers; aircraft manufacturers; wheelchair manufacturers; and national veteran organizations representing disabled veterans.
In September 2019, the Department established the ACAA Advisory Committee, approved its charter, and appointed 19 members to serve on the ACAA Advisory Committee for 2-year terms. The Committee held public meetings in March 2020 and September 2021 and submitted a report with a number of recommendations to the Department in February 2022. The terms of the 19 Committee members have now expired. More information on the ACAA Advisory Committee is available online at
Because the terms of the previously appointed members have expired, the Department is soliciting new applications and nominations for individuals to serve on the ACAA Advisory Committee. Unless it is renewed, the Committee's charter expires on September 28, 2023, and individuals would be appointed to serve for a term not to exceed the life of the charter. Pursuant to the 2018 FAA Act and the ACAA Advisory Committee's Charter,
1. Passengers with disabilities;
2. National disability organizations;
3. Air carriers;
4. Airport operators;
5. Contractor service providers;
6. Aircraft manufacturers;
7. Wheelchair manufacturers; and
8. National veterans' organizations representing disabled veterans.
The chairperson will be designated from among the members appointed. The Department may select more than one representative for a group, if appropriate, to obtain a fairly balanced membership.
The Department will choose members based on four main criteria:
1. Representativeness (does the applicant represent a significant stakeholder group described above);
2. Expertise (does the applicant bring essential knowledge, expertise, and/or experience regarding accessibility);
3. Balance (do selected applicants comprise a balanced array of representative and expert stakeholders); and
4. Willingness to participate fully (is the applicant able and willing to attend the listed meetings and generally contribute constructively to a rigorous policy development process).
Individuals applying for membership should keep in mind that ACAA Advisory Committee members will be selected based on their ability and willingness to effectively represent the interests of all stakeholders in their category, as distinct from their parochial or personal interests. For example, an individual selected to serve on the Committee as a representative of ultra low cost carrier (ULCC) would represent not only his or her own airline, but all ULCCs. As such, the individual would be expected to consult with other airlines in bringing issues to the table and making decisions on proposals before the Committee.
Nominations are open to all individuals without regard to race, color, religion, sex, national origin, age, disability, marital status, or sexual orientation. Past members of the Committee will also be eligible to be nominated for or to seek reappointment on the Committee.
Individuals can self-apply or be nominated by any individual or organization. To be considered for the ACAA Advisory Committee, applicants/nominators must submit the following information:
1. Name, title, organization, and contact information (address, telephone number and email address) of nominee/applicant;
2. Category of membership that the nominee/applicant is qualified to represent;
3. Resume of the applicant or short biography of the nominee including professional and academic credentials;
4. A statement of nomination on why the applicant wants to serve or the nominator is nominating the individual to serve, and the unique perspectives and expenses the nominee brings to the Committee;
5. An affirmative statement that the applicant/nominee meets the eligibility requirements; and
6. Optional letters of support.
Please do not send company, trade association, organization brochures, or any other promotional information. Materials submitted should total five pages or less. Should more information be needed, Department staff will contact the applicant/nominee, obtain information from the applicant's/nominee's past affiliations, or obtain information from publicly available sources.
All application/nomination materials must be submitted electronically via email to
Pursuant to section 439(e) of the 2018 FAA Act, Committee members will be reimbursed for travel and per diem expenses as permitted under applicable Federal travel regulations. Reimbursement is subject to funding availability. Committee members will receive no salary or other compensation for participation in Committee activities.
The Secretary reserves the discretion to appoint members to serve on the ACAA Advisory Committee who were not nominated in response to this notice if necessary to meet specific statutory categories and departmental needs in a manner to ensure an appropriate balance of membership. Individuals selected for appointment to the ACAA Advisory Committee will be notified by return email and by a letter of appointment.
Office of Foreign Assets Control, Department of the Treasury.
Notice.
The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) is publishing the names of persons whose property and interests in property have been unblocked and who have been removed from the list of Specially Designated Nationals and Blocked Persons.
See Supplementary Information section for effective date(s).
OFAC: Associate Director for Global Targeting, tel: 202–622–2420; Assistant Director for Licensing, tel.: 202–622–2480; Assistant Director for Regulatory Affairs, tel.: 202–622–4855; or Assistant Director for Sanctions Compliance & Evaluation, tel.: 202–622–2490.
The Specially Designated Nationals and Blocked Persons List (SDN List) and additional information concerning OFAC sanctions programs are available on OFAC's website (
On August 19, 2022, OFAC determined that the property and interests in property subject to U.S. jurisdiction of the following persons are unblocked and they have been removed from the SDN List.
1. ALZATE GIRALDO, Rosalba; DOB 13 Sep 1956; POB Santuario, Antioquia, Colombia; citizen Colombia; Cedula No. 22082396 (Colombia) (individual) [SDNTK] (Linked To: MEJIA ALZATE ASOCIADOS Y CIA. LTDA.; Linked To: PROMOTORA TURISTICA SOL PLAZA S.A.; Linked To: CANTERAS COPACABANA S.A.; Linked To: ALMEQUIP S.A.S.; Linked To: ROSAGRO S.A.S.).
2. ARBELAEZ VELEZ, Ivan Dario, c/o FARBE COMUNICACIONES LTDA; c/o AGROESPINAL S.A.; DOB 26 Jul 1967; POB Medellin, Colombia; Cedula No. 98541418 (Colombia) (individual) [SDNTK].
3. MEJIA ALZATE, Andres Camilo; DOB 15 Aug 1987; POB Medellin, Colombia; citizen Colombia; Cedula No. 1128270678 (Colombia) (individual) [SDNTK] (Linked To: CANTERAS COPACABANA S.A.; Linked To: PROMOTORA TURISTICA SOL PLAZA S.A.; Linked To: TRITCON S.A.S.).
4. MEJIA ALZATE, Juan Carlos; DOB 17 Jul 1980; POB Medellin, Colombia; citizen
5. ORTEGA GALICIA, Ismael Marino (a.k.a. ORTEGA GALICIA, Israel Marino), Calle Mariano Matamoros, No. 58, Centro, Col. San Gabriel Chilac, Puebla, Mexico; Calle Sagitario y Lactea No. 3085, Col. Las Palmas, entre Lactea y Av. La Paz, Ciudad Victoria, Tamaulipas, Mexico; DOB 31 May 1974; POB San Gabriel Chilac, Puebla; nationality Mexico; citizen Mexico; R.F.C. OEGI740531 (Mexico); C.U.R.P. OEGI740531HPLRLS07 (Mexico); Electoral Registry No. ORGLIS740531121H100 (Mexico) (individual) [SDNTK].
6. PADROS DEGREGORI, Gino Dusan (a.k.a. PADROS DEGREGORI, Gino Dussan; a.k.a. “FLACO”), Lima, Peru; DOB 20 Oct 1977; alt. DOB 15 Oct 1977; POB Piura, Peru; citizen Peru; Gender Male; Passport 3096570 (Peru) issued 04 Jan 2005 expires 04 Jan 2010; alt. Passport 2395877 (Peru); RUC # 10068051059 (Peru); National ID No. 06805105–9 (Peru) (individual) [SDNTK] (Linked To: R INVER CORP S.A.C.; Linked To: G & M AUTOS S.A.C.; Linked To: SBK IMPORT S.A.C.).
7. RAHALL, Fawaz Mohamad, Calle 122, No. 11B–37, Colombia; DOB 23 Feb 1969; POB Lala, Lebanon; Cedula No. 5176876 (Colombia) (individual) [SDNTK].
1. FARBE COMUNICACIONES LTDA, Carrera 81 A 34, No. C–43, Medellin, Colombia; NIT # 811030724–4 (Colombia); Matricula Mercantil No 21–290521–03 (Colombia) [SDNTK].
2. G & M AUTOS S.A.C. (a.k.a. G AND M AUTOS S.A.C.), Copacabana 162, La Molina, Lima 12, Peru; RUC # 20513664339 (Peru) [SDNTK].
3. R INVER CORP S.A.C., Avenida Los Precursores Numero 288 Dpto. 203 Urb. Maranga (Piso 2), San Miguel, Lima, Peru; RUC # 20562939068 (Peru) [SDNTK].
4. ROSAGRO S.A.S., Circular 73B No. 39B–115, Of. 9901, Medellin, Colombia; NIT # 900314092–0 (Colombia) [SDNTK].
5. SBK IMPORT S.A.C., Calle Brigida Silva de Ochoa Numero 370, San Miguel, Lima, Peru; Avenida Los Precursores Numero 288, Urb. Maranga, San Miguel, Lima, Peru; RUC # 20520935461 (Peru) [SDNTK].
Office of Foreign Assets Control, Department of the Treasury.
Notice.
The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) is publishing the names of persons whose property and interests in property have been unblocked and who have been removed from the list of Specially Designated Nationals and Blocked Persons.
See
OFAC: Associate Director for Global Targeting, tel: 202–622–2420; Assistant Director for Licensing, tel.: 202–622–2480; Assistant Director for Regulatory Affairs, tel.: 202–622–4855; or Assistant Director for Sanctions Compliance & Evaluation, tel.: 202–622–2490.
The Specially Designated Nationals and Blocked Persons List (SDN List) and additional information concerning OFAC sanctions programs are available on OFAC's website (
On August 19, 2022, OFAC determined that the property and interests in property subject to U.S. jurisdiction of the following persons are unblocked and they have been removed from the SDN List.
1. SHAYBAZIAN, Lazar Gurgenovich (a.k.a. SHAYBAZYAN, Lazar); DOB 01 Apr 1966; Passport CA2485930 (Uzbekistan); alt. Passport CA2179793 (Uzbekistan) (individual) [TCO].
1. GUGA ARM SRO (a.k.a. GUGA ARM LTD), Dr. Davida Bechera 907/27, Karlovy Vary 36001, Czech Republic; National ID No. 27994783 (Czech Republic) [TCO].
2. GURGEN HOUSE FZCO (a.k.a. GOURGEN HOUSE LTD; a.k.a. GURGEN HOUSE CO LTD; a.k.a. GURGEN HOUSE LLC; a.k.a. GURGEN HOUSE OOO; a.k.a. GURGEN HOUSE TOO), 130 A, Ulitsa Klara Tsetkina, Shymkent 160000, Kazakhstan; Ulitsa Angarskaya, 22.1, Moscow 125635, Russia; Ulitsa General Dorokhova, A 6 A, Moscow 121357, Russia; Ulitsa Letnikovskaya, 13 A, Office 1, Moscow 115114, Russia; Al Quds Street, Dubai Airport Free Zone, Dubai, United Arab Emirates; Office 210, Building 3E, Dubai Airport Free Zone, P.O. Box 293751, Dubai, United Arab Emirates; P.O. Box 777, Jumeirah, Dubai, United Arab Emirates; Ulitsa Jami, 5, Tashkent 100057, Uzbekistan; National ID No. 40788618 (Kazakhstan); alt. National ID No. 582100259386 (Kazakhstan); Tax ID No. 7743693291 (Russia); Company Number 86483143 (Russia); Public Registration Number 1087746669845 (Russia) [TCO].
The Department of Veterans Affairs (VA) gives notice under the Federal Advisory Committee Act, 5 U.S.C., app. 2., that virtual meetings of the Advisory Committee on Homeless Veterans will be held on September 20 through September 22, 2022. The meeting sessions will begin and end at 12:00 p.m. to 4:00 p.m. Eastern Standard Time (EST). The virtual meeting sessions will be open to the public.
The purpose of the Committee is to provide the Secretary of Veterans Affairs with an ongoing assessment of the effectiveness of the policies, organizational structures, and services of VA in assisting Veterans at risk of and experiencing homelessness. The Committee shall assemble, and review information related to the needs of homeless Veterans and provide advice on the most appropriate means of assisting this Veteran population. The Committee will make recommendations to the Secretary regarding such activities.
On September 20 through September 22, 2022, the agenda will include briefings from VA and other Federal agency officials regarding services for homelessness among Veterans. The Committee will also discuss its proposed annual report recommendations to the Secretary of Veterans Affairs.
No time will be allocated at the meetings for receiving oral presentations from the public. Interested parties should provide written comments on issues affecting homeless Veterans for review by the Committee to Anthony Love, Designated Federal Officer, Veterans Health Administration Homeless Programs Office (11HPO), U.S. Department of Veterans Affairs, 811
Members of the public who wish to attend the virtual meetings should contact Anthony Love, Designated Federal Officer, Veterans Health Administration, Homeless Programs Office, at
Employee Benefits Security Administration, Labor.
Notice of proposed exemptions.
This document contains notices of pendency before the Department of Labor (the Department) of proposed exemptions from certain of the prohibited transaction restrictions of the Employee Retirement Income Security Act of 1974 (ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code). If granted, these proposed exemptions allow designated parties to engage in transactions that would otherwise be prohibited provided the conditions stated there in are met. This notice includes the following proposed exemptions:
All interested persons are invited to submit written comments or requests for a hearing on the pending exemptions, unless otherwise stated in the Notice of Proposed Exemption, within 45 days from the date of publication of this
All written comments and requests for a hearing should be sent to the Employee Benefits Security Administration (EBSA), Office of Exemption Determinations, U.S. Department of Labor, Attention: Application No. __, stated in each Notice of Proposed Exemption via email to
In light of the current circumstances surrounding the COVID–19 pandemic caused by the novel coronavirus which may result in disruption to the receipt of comments by U.S. Mail or hand delivery/courier, persons are encouraged to submit all comments electronically and not to follow with paper copies. Comments should state the nature of the person's interest in the proposed exemption and the manner in which the person would be adversely affected by the exemption, if granted. A request for a hearing can be requested by any interested person who may be adversely affected by an exemption. A request for a hearing must state: (1) The name, address, telephone number, and email address of the person making the request; (2) the nature of the person's interest in the exemption and the manner in which the person would be adversely affected by the exemption; and (3) a statement of the issues to be addressed and a general description of the evidence to be presented at the hearing. The Department will grant a request for a hearing made in accordance with the requirements above where a hearing is necessary to fully explore material factual issues identified by the person requesting the hearing. A notice of such hearing shall be published by the Department in the
Notice of the proposed exemptions will be provided to all interested persons in the manner agreed upon by the applicant and the Department, unless otherwise stated in the Notice of Proposed Exemption, within 15 days of the date of publication in the
The proposed exemptions were requested in applications filed pursuant to section 408(a) of the Act and/or section 4975(c)(2) of the Code, and in accordance with procedures set forth in 29 CFR part 2570, subpart B (76 FR 66637, 66644, October 27, 2011).
The applications contain representations with regard to the proposed exemptions which are summarized below. Interested persons are referred to the applications on file with the Department for a complete statement of the facts and representations.
The Department is considering granting an exemption under the authority of Section 408(a) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and Section 4975(c)(2) of the Internal Revenue Code of 1986, as amended (the Code). The proposed exemption relates to legal actions and claims (the Claims) against Allianz Global Investors U.S. LLC (Allianz) and Aon Investments USA Inc. (Aon), that arose from certain losses incurred by the Non-Contributory Retirement Program for Certain Employees of Blue Cross and Blue Shield Association (the Plan) in the first quarter of 2020.
This proposed exemption would permit the Plan sponsor, Blue Cross and Blue Shield Association (BCBSA), to make a series of payments to the Plan, including: (1) the past payment of $69,000,000, made on March 12, 2021; and (2) the past payment of $13,500,000, made on March 28, 2022 (the Restorative Payments). If the Plan receives litigation proceeds from the Claims, the Plan will transfer the lesser of the ligation proceeds amount or the Restorative Payments amount, plus reasonable attorney fees to BCBSA.
1. BCBSA is a national association of 35 independent, community-based and locally operated Blue Cross Blue Shield companies. BCBSA owns and manages the Blue Cross and Blue Shield trademarks and names in more than 170 countries around the world and also grants licenses to independent companies to use the trademarks and names in exclusive geographic areas.
2. The Plan is a defined benefit pension plan that covers eligible employees or participants of BCBSA who, as of December 31, 2006, had completed one year of service, reached the age of 21, and remained continuously employed. The Plan was amended effective January 1, 2007 to close participation to new entrants as of December 31, 2006. As of August 31, 2020, the Plan held $104,789.042 in total assets.
3. The Plan holds a beneficial interest in the Blue Cross and Blue Shield National Retirement Trust (the Trust). The Trust is a master trust that holds the assets of 16 defined benefit pension plans that participate in the BCBSA's National Retirement Program (the Participating Plans). Northern Trust serves as Trustee and asset custodian to the Trust and maintains separate records that reflect the net asset value of each Participating Plan. The Trust's earnings, market adjustments, and administrative expenses are allocated among the Participating Plans based on the respective Participating Plan's share of the Trust's assets. A Participating Plan's interest in the Trust's net assets is based on its share of the Trust.
4. The Committee serves as named fiduciary and administrator for each Participating Plan. The Committee is a standing committee of the BCBSA's board of directors. In 2011, the Committee invested a portion of the Trust's assets in funds managed by Allianz Global Investors U.S. LLC (Allianz), as part of a Structured Alpha Investment Strategy. These funds included: (a) AllianzGI Structured Alpha Multi-Beta Series LLC I; (b) AllianzGI Structured Alpha Emerging Markets Equity 350 LLC; and (c) AllianzGI Structured Alpha 1000 LLC (collectively, the Structured Alpha Funds).
5. The Applicant represents that the Allianz Structured Alpha strategy consisted of alpha and beta components. According to the Applicant, the alpha component was an options trading strategy that Allianz claimed would seek targeted positive return potential while maintaining structural risk protections. The beta component was intended to provide broad market exposure to a particular asset class through investments in financial products similar to an exchange-traded fund that replicates the performance of a market index, such as the S&P 500. According to the Applicant, Allianz represented that the Structured Alpha Strategy would capitalize on the return-generating features of option selling (short volatility) while simultaneously benefitting from the risk-control attributes associated with option buying (long volatility). According to the Applicant, Allianz represented further that the alpha component would include position hedging consisting of long-volatility positions designed to protect the portfolio in the event of a market crash.
6. As of December 31, 2019, the total market value of the Plan's portion of the Trust's investment in the Allianz Structured Alpha Funds was $224,525,108. At the time, this represented 77.66% of total Plan assets.
7. In 2009, the Committee retained Aon (then called Ennis Knupp) to provide investment advice regarding the investment of Plan assets held in the Trust. The Applicant represents that Aon provided regular investment advice pursuant to a written contract between it and the Committee. Pursuant to its engagement, Aon agreed to provide the following: “recommendations to [the Committee] regarding asset allocation” within the Trust; “recommendations to [the Committee] regarding the specific asset allocation and other investment guidelines” for the Trust's investment managers such as Allianz; and advice “regarding the diversification of assets” held in the Trust.” The Applicant represents that Aon agreed to: conduct “active, ongoing monitoring” of Allianz to “identify any forward-looking” risks “that could impact performance;” and “inform itself” of any information necessary to discharge its duty to monitor, including information about the actual options positions Allianz had constructed.
8. The Applicant represents that when equity markets sharply declined in February and March of 2020, volatility spiked and the options positions held within the Structured Alpha Strategy were exposed to a heightened risk of loss. The Applicant represents that, unbeknownst to the Committee, and in violation of Allianz's stated investment strategy, Allianz abandoned the hedging strategy that was the supposed cornerstone of the Structured Alpha Strategy, leaving the portfolio almost entirely unhedged against a spike in
The Applicant represents that, as of January 31, 2020, the Trust had invested approximately $2,916,049,486 in the Structured Alpha Strategy. Six weeks later, the Trust faced a margin call, which the Applicant states left it no choice but to liquidate the investment. The Trust was ultimately able to redeem only $646,762,678 of its $2,916,049,486 investment, resulting in a total loss of $2,269,286,808.
Specifically, regarding the Plan's portion of the loss, as of December 31, 2019, the market value for the Plan's assets totaled $289,100,229. As of March 31, 2020, the market value of total assets for the Plan decreased to $97,181,664. The Applicant represents that the Plan's total losses from the Allianz Structured Alpha Strategy was $183,368,144, which caused the Plan to be underfunded.
9. On September 16, 2020, the Committee filed a cause of action in the United States District Court for the Southern District of New York (Case number 20–CIV–07606) against Allianz and Aon for Breach of Fiduciary Duty under ERISA Section 404, Breach of Co-Fiduciary Duty under ERISA Section 405, and violation of ERISA Section 406(b) for managing the Plan assets in its self-interest and breach of contract. It is possible that resolution of this claim and other legal actions against Allianz and Aon in connection with the Plan's losses (the Claims) could take an extended period of time.
10. The Applicant states that rather than wait for the Claims to be resolved, BCBSA took steps to protect Plan benefits and avoid onerous benefit restrictions under Code section 436 that could apply to the Plan as a result of a funding shortfall. Therefore, on November 24, 2020, BCBSA and the Plan entered into a Contribution and Assignment Agreement (the Contribution and Assignment Agreement).
11. Pursuant to the Contribution and Assignment Agreement, BCBSA agreed to make the Restorative Payments to the Plan consisting of: (a) a payment not to exceed $74,000,000 by September 30, 2021; (b) a payment not to exceed $20,000,000 by September 30, 2022; and (c) a payment not to exceed $31,000,000 by September 30, 2023. Thereafter, BCBSA made Restorative Payments to the Plan of $69,000,000 on March 12, 2021, and $13,500,000 on March 28, 2022.
12. On June 22, 2022, BCBSA and the Plan amended the Restorative Payments provision of the Contribution and Assignment Agreement to provide that BCBSA's Restorative Payments under the Agreement will consist only of the $69,000,000 payment made on March 12, 2021, and the $13,500,000 payment made on March 28, 2022.
13. In exchange for the Restorative Payments, the Plan assigned to BCBSA its right to retain certain litigation and/or settlement proceeds recovered from the Claims (the Assigned Interests).
14. The Plan must ultimately receive at least the full value of the promised Restorative Payments ($82,500,000), minus the Attorney Fees. The Plan may ultimately receive more than the Restorative Payment amount required under the Contribution and Assignment Agreement. If the Plan receives litigation or settlement proceeds that exceed the amount of Restorative Payments that BCBSA has made to the Plan, the Plan's Repayment to BCBSA will be limited to the amount of Restorative Payments actually made by BCBSA, plus Attorney Fees. For example, if BCBSA reasonably incurred $100,000 in Attorney Fees and the Plan receives $120,000,000 in litigation proceeds, the Plan will make a Repayment to BCBSA totaling $82,600,000.
15. Alternatively, if the Plan receives less litigation or settlement proceeds than the amount of Restorative Payments that BCBSA has made to the Plan, the Plan will transfer to BCBSA the lesser amount of litigation or settlement proceeds, plus Attorney Fees. For example, if BCBSA has reasonably incurred $100,000 in Attorney Fees and the Plan receives $50,000,000 in litigation proceeds, the Plan will make a Repayment to BCBSA totaling $50,100,000.
16. The Department notes that if the Plan receives any restitution that is tied to the conduct underlying the Claims but was ordered pursuant to a proceeding or directive that is external to Case number 20–CIV–07606, the disposition of such proceeds must conform to the requirements of this exemption.
17. BCBSA retained Gallagher Fiduciary Advisors, LLC (Gallagher or the Independent Fiduciary) of New York, New York, to serve as the Plan's independent fiduciary with respect to the Required Restorative Payments and the potential repayment by the Plan of those Payments (collectively, the Proposed Transactions). Gallagher represents that it has extensive experience in institutional investment consulting and fiduciary decision-making regarding traditional and alternative investments. Gallagher further represents that its independent fiduciary decision-making work involves acting as a fiduciary advisor or decision-maker for plans and other ERISA-regulated asset pools and that it has experience with a wide range of asset classes and litigation claims.
18. Gallagher represents that it understands its duties and responsibilities under ERISA in acting as a fiduciary on behalf of the Plan. Gallagher also acknowledges that it is authorized to take all appropriate actions to safeguard the Plan's interests, and that it will monitor the Proposed Transactions on the Plan's behalf on a continuous basis and throughout the term required by this exemption.
19. Gallagher represents that it does not have any prior relationship with any parties in interest to the Plan, including BCBSA and any BCBSA affiliates. Gallagher further represents the total revenues it has received from the Plan and from parties in interest to the Plan in connection with its engagement as Independent Fiduciary represents
20. Gallagher represents that no party associated with this exemption application has or will indemnify it, in whole or in part, for negligence of any kind and/or any violation of state or federal law that may be attributable to Gallagher's performance of its duties as Independent Fiduciary to the Plan with respect to the Proposed Transactions. In addition, no contract or instrument entered into by Gallagher as Independent Fiduciary may purport to waive any liability under state or federal law for any such violation.
21. On November 23, 2020, Gallagher completed an Independent Fiduciary Report (the Independent Fiduciary Report) finding that the massive losses caused by the Trust's investment in the Allianz Structured Alpha Strategy resulted in a significant reduction to the Plan's total assets and funding level. Gallagher represents that the Required Restorative Payments, which will be received by the Plan substantially in advance of a final resolution of the Claims against Allianz and Aon, should restore the Plan's funded percentage to its pre-loss funded percentage as of January 1, 2019. The restoration of the Plan's funding status will secure ongoing benefit payments to participants and beneficiaries.
Gallagher notes that the Contribution and Assignment Agreement provides that the Trust must reimburse BCBSA only up to the Required Restorative Payment Amount already received, plus any reasonable legal expense paid to non-BCBSA-related parties that were incurred by, or allocated to, BCBSA as a result of the Claims.
Gallagher states that the Proposed Transactions and the terms of the Contribution and Assignment Agreement were negotiated and approved by Gallagher in its role as the Plan's Independent Fiduciary. Gallagher states that it approved the Proposed Transactions only after conducting an extensive analysis of the damages suffered by the Plan as a result of the failed Allianz Structured Alpha Strategy. Gallagher represents that it conducted numerous discussions with Trust representatives and counsel, along with the Plan's representatives and counsel to ensure that the interests of the Plan's participants and beneficiaries were protected with respect to all aspects of the Proposed Transactions. Based upon its assessment, Gallagher approved the Plan's receipt of the Required Restorative Payments from BCBSA in exchange for the Assignment.
22. Absent an exemption, the Plan's receipt of the Restorative Payments from BCBSA in exchange for the Plan's transfer of litigation or settlement proceeds to BCBSA would violate ERISA. In this regard, ERISA Section 406(a)(1)(A) prohibits a plan fiduciary from causing the plan to engage in a transaction if the fiduciary knows or should know that such transaction constitutes a direct or indirect sale or exchange of any property between a plan and a party in interest. BCBSA, as an employer whose employees are covered by the Plan, is a party in interest with respect to the Plan under ERISA Section 3(14)(C). The Required Restorative Payments to the Plan and the Plan's potential repayment to BCBSA with litigation or settlement proceeds would constitute impermissible exchanges between the Plan and a party-in-interest (BCBSA) in violation of ERISA Section 406(a)(1)(A).
ERISA Section 406(a)(1)(D) prohibits a plan fiduciary from causing a plan to engage in a transaction if the fiduciary knows or should know that the transaction constitutes a direct or indirect transfer to, or use by or for the benefit of, a party-in-interest, of the income or assets of the plan. The transfer of Plan assets to BCBSA in connection with the Repayment would constitute an impermissible transfer of Plan assets to a party-in-interest in violation of ERISA Section 406(a)(1)(D).
23. This proposed exemption contains a number of conditions that must be met. For example, the proposed exemption mandates that the Independent Fiduciary, in full accordance with its obligations of prudence and loyalty under ERISA Section 404(a)(1)(A) and (B) must:
(a) review, negotiate, and approve the terms and conditions of the Required Restorative Payments, the Repayment, and the Contribution and Assignment Agreement, before the Plan enters into such payments and the agreement;
(b) determine that the terms and conditions of the Required Restorative Payments, the Repayment, and the Contribution and Assignment Agreement are prudent, in the interest of the Plan and its participants and beneficiaries, and protective of the rights of the Plan's participants and beneficiaries;
(c) confirm that the Required Restorative Payments are fully and timely made;
(d) monitor the Claims and confirm that the Plan receives its proper share of any litigation or settlement proceeds received by the Trust in connection with the Claims;
(e) ensure that any Repayment by the Plan to BCBSA fully complies with the terms of this exemption and is for no more than the lesser of the total Restorative Payments actually made to the Plan by BCBSA or the amount the Plan received from the Claims, plus Attorney Fees;
(f) ensure that any Repayment by the Plan to BCBSA for legal expenses in connection with the Claims is limited to only reasonable legal expenses that were paid by BCBSA to unrelated third parties for representation of the Plan and its interests (as opposed to representation of BCBSA or the interests of any party other than the Plan) where BCBSA was not otherwise reimbursed from a non-Plan party;
(g) monitor the Plan's Assigned Interests on an ongoing basis to determine and confirm that any excess recovery amount from the Claims (
(h) ensure that all of the conditions and definitions of this proposed exemption are met; and
(i) represent that it has not and will not enter into any agreement or instrument that violates ERISA Section 410 or Department Regulations codified at 29 CFR 2509.75–4.
24. This proposed exemption also requires Gallagher to respond in writing to any information requests from the Department regarding Gallagher's activities as the Plan's Independent Fiduciary. Additionally, no later than 90 days after the resolution of the litigation, Gallagher must submit a written report to the Department demonstrating that all terms and
25. This proposed exemption requires that the Plan has not and will not release any claims, demands and/or causes of action it may have against: (a) any fiduciary of the Plan; (b) any fiduciary of the Trust; (c) BCBSA; and/or (d) any person or entity related to a person or entity described in (a)–(c) of this paragraph. Additionally, any Repayment by the Plan to BCBSA must be made in a manner designed to minimize unnecessary costs and disruption to the Plan and its investments.
26. The Plan may not make any Repayment to BCBSA before the date: the Plan has received from BCBSA the entire amount of the Restorative Payments agreed to in the Amended Contribution and Assignment Agreement; and all the Claims are settled. Furthermore, the Plan may not pay any interest to BCBSA in connection with its receipt of the Required Restorative Payments, nor pledge Plan assets to secure any portion of the Required Restorative Payments.
27. Pursuant to this proposed exemption, the Plan may not incur any expenses, commissions or transaction costs in connection with the Proposed Transactions. However, as noted above, under certain circumstances the Plan may reimburse BCBSA for reasonable legal expenses arising from the Claims that BCBSA paid to non-BCBSA-related parties for representation of the Plan and its interests (as opposed to representation of BCBSA or the interests of any party other than the Plan) where BCBSA was not otherwise reimbursed by a non-Plan party.
28. Finally, the exemptive relief provided under this proposed exemption is conditioned upon the Department's assumption that the material facts and representations set forth above in the Summary of Facts and Representation section are true and accurate at all times. In the event that a material fact or representation detailed above is untrue or inaccurate, the exemptive relief provided under this exemption will cease immediately.
29. ERISA Section 408(a) provides, in part, that the Department may not grant an exemption unless the Department finds that the exemption is administratively feasible, in the interest of affected plans and of their participants and beneficiaries, and protective of the rights of such participants and beneficiaries. Each of these criteria is discussed below.
a.
b.
c.
30. Based on the conditions described above, the Department has tentatively determined that the relief sought by the Applicant satisfies the statutory requirements under ERISA Section 408(a) for the Department to make findings that support its issuance of a proposed exemption.
The Department is considering granting an exemption under the authority of ERISA Section 408(a) and Code Section 4975(c)(2) and in accordance with the procedures set forth in the Department's exemption procedure regulation.
(a) The term “Attorney Fees” means reasonable legal expenses paid by BCBSA on behalf of the Plan in connection with the Claims, if such fees are reviewed and approved by a qualified independent fiduciary who confirms that the fees were reasonably incurred and paid by BCBSA to unrelated third parties. For the purposes of this exemption, the Attorney Fees reimbursable to BCBSA do not include: (1) legal expenses paid by the Plan; and (2) legal expenses paid by BCBSA for representation of BCBSA or the interests of any party other than the Plan.
(b) The term “BCBSA” means Blue Cross and Blue Shield Association.
(c) The term “Claims” means the legal claims against Allianz Global Investors U.S. LLC (Allianz) and Aon Investments USA Inc. (Aon), to recover certain losses incurred by the Plan in the first quarter of 2020.
(d) The term “Contribution and Assignment Agreement” means the written agreement dated November 24, 2020, and its amendment that became effective on June 22, 2022, containing all material terms regarding BCBSA's agreement to make Required Restorative Payments to the Plan in return for the Plan's potential Repayment to BCBSA of an amount that is no more than lesser of the Required Restorative Payment Amount (as described in Section I(h)) or the amount of litigation proceeds the Plan receives from the Claims, plus reasonable attorney fees paid to unrelated third parties by BCBSA in connection with the Claims.
(e) The term “Independent Fiduciary” means Gallagher Fiduciary Advisors, LLC (Gallagher) or a successor Independent Fiduciary to the extent Gallagher or the successor Independent
(1) Is not an affiliate of BCBSA and does not hold an ownership interest in BCBSA or affiliates of BCBSA;
(2) Was not a fiduciary with respect to the Plan before its appointment to serve as the Independent Fiduciary;
(3) Has acknowledged in writing that it:
(i) is a fiduciary with respect to the Plan and has agreed not to participate in any decision regarding any transaction in which it has an interest that might affect its best judgment as a fiduciary; and
(ii) Has appropriate technical training or experience to perform the services contemplated by the exemption;
(4) Has not entered into any agreement or instrument that violates the prohibitions on exculpatory provisions in ERISA Section 410 or the Department's regulation relating to indemnification of fiduciaries;
(5) Has not received gross income from BCBSA or its affiliates during any fiscal year in an amount that exceeds two percent (2%) of the Independent Fiduciary's gross income from all sources for the prior fiscal year. This provision also applies to a partnership or corporation of which the Independent Fiduciary is an officer, director, or 10 percent (10%) or more partner or shareholder, and includes as gross income amounts received as compensation for services provided as an independent fiduciary under any prohibited transaction exemption granted by the Department; and
(6) No organization or individual that is an Independent Fiduciary, and no partnership or corporation of which such organization or individual is an officer, director, or ten percent (10%) or more partner or shareholder, may acquire any property from, sell any property to, or borrow any funds from BCBSA or from affiliates of BCBSA while serving as an Independent Fiduciary. This prohibition will continue for six months after the party ceases to be an Independent Fiduciary and/or the Independent Fiduciary negotiates any transaction on behalf of the Plan during the period that the organization or individual serves as an Independent Fiduciary.
(f) The “Plan” means the Non-Contributory Retirement Program for Certain Employees of Blue Cross and Blue Shield Association.
(g) The term “Plan Losses” means the $183,368,144 in Plan losses the BCBSA's National Employee Benefits Committee alleges were the result of breaches of fiduciary responsibilities and breaches of contract by Allianz Global Investors U.S. LLC and/or Aon Investments USA Inc.
(h) The term “Restorative Payments” means the payments made by BCBSA to the Plan in connection with the Plan Losses, defined above, consisting of: (1) the past payment of $69,000,000 on March 12, 2021; and (2) the past payment of $13,500,000 on March 28, 2022. The sum of (1)–(2) is the Required Restorative Payment Amount.
(i) The “Repayment” means the payment, if any, that the Plan will transfer to BCBSA following the Plan's receipt of proceeds from the Claims, where the Repayment is made following the full and complete resolution of the Claims; and in a manner that is consistent with the terms of the exemption.
If the proposed exemption is granted, the restrictions of ERISA Sections 406(a)(1)(A), (B) and (D) and the sanctions resulting from the application of Code Section 4975, by reason of Code Sections 4975(c)(1)(A), (B) and (D), shall not apply, effective November 24, 2020, to the following transactions: BCBSA's transfer of Restorative Payments to the Plan; and, in return, the Plan's Repayment of an amount to BCBSA, which must be no more than the lesser of the Restorative Payment Amount or the amount of litigation proceeds the Plan received from the Claims, plus reasonable Attorney Fees, provided that the Definitions set forth in Section I and the Conditions set forth in Section III are met.
(a) The Plan received the entire Restorative Payment Amount no later than March 28, 2022;
(b) In connection with its receipt of the Required Restorative Payments, the Plan does not release any claims, demands and/or causes of action the Plan may have against the following: (1) any fiduciary of the Plan; (2) any fiduciary of the Trust; (3) BCBSA; and/or (4) any person or entity related to a person or entity identified in (1)–(3) of this paragraph;
(c) The Plan's Repayment to BCBSA is for no more than the lesser of the total Restorative Payments received by the Plan or the amount of litigation proceeds the Plan receives from the Claims. The Plan's Repayment to BCBSA may only occur after the Independent Fiduciary has determined that: all the conditions of the exemption are met; the Plan has received all the Restorative Payments it is due; and the Plan has received all the litigation proceeds it is due. The Plan's Repayment to BCBSA must be carried out in a manner designed to minimize unnecessary costs and disruption to the Plan and its investments;
(d) A qualified independent fiduciary (the Independent Fiduciary, as further defined in Section II(e)), acting solely on behalf of the Plan in full accordance with its obligations of prudence and loyalty under ERISA Sections 404(a)(1)(A) and (B) must:
(1) Review, negotiate and approve the terms and conditions of the Restorative Payments and the Repayment and the Contribution and Assignment Agreement, all of which must be in writing, before the Plan enters into those transactions/agreement;
(2) Determine that the Restorative Payments, the Repayment, and the terms of the Contribution and Assignment Agreement, are prudent and in the interest of the Plan and its participants and beneficiaries;
(3) Confirm that the Required Restorative Payment Amount was fully and timely made;
(4) Monitor the litigation related to the Claims and confirm that the Plan receives, in a timely manner, its proper share of any litigation or settlement proceeds received by the Trust;
(5) Ensure that any Repayment by the Plan to BCBSA for legal expenses in connection with the Claims is limited to only reasonable legal expenses that were paid by BCBSA to unrelated third parties;
(6) Ensure that all of the conditions and definitions of this proposed exemption are met;
(7) Submit a written report to the Department's Office of Exemption Determinations demonstrating and confirming that the terms and conditions of the exemption were met, within 90 days after the Repayment; and
(8) Not enter into any agreement or instrument that violates ERISA Section 410 or the Department's Regulations codified at 29 CFR Section 2509.75–4.
(f) The Plan pays no interest in connection with the Restorative Payments;
(g) The Plan does not pledge any Plan assets to secure any portion of the Restorative Payments;
(h) The Plan does not incur any expenses, commissions, or transaction costs in connection with the Proposed Transactions. However, if first approved by the Independent Fiduciary, the Plan may reimburse BCBSA for reasonable legal expenses paid in connection with the Claims by BCBSA to non-BCBSA-related parties. For purposes of determining the amount of Attorney
(i) The proposed transactions do not involve any risk of loss to either the Plan or the Plan's participants and beneficiaries;
(j) No party associated with this exemption has or will indemnify the Independent Fiduciary and the Independent Fiduciary will not request indemnification from any party, in whole or in part, for negligence and/or any violation of state or federal law that may be attributable to the Independent Fiduciary in performing its duties to the Plan with respect to the Proposed Transactions. In addition, no contract or instrument may purport to waive any liability under state or federal law for any such violation.
(k) If an Independent Fiduciary resigns, is removed, or for any reason is unable to serve as an Independent Fiduciary, the Independent Fiduciary must be replaced by a successor entity that: (1) meets the definition of Independent Fiduciary detailed above in Section II(e); and (2) otherwise meets all of the qualification, independence, prudence and diligence requirements set forth in this exemption. Further, any such successor Independent Fiduciary must assume all of the duties of the outgoing Independent Fiduciary. As soon as possible, including before the appointment of a successor Independent Fiduciary, BCBSA must notify the Department's Office of Exemption Determinations of the change in Independent Fiduciary and such notification must contain all material information regarding the successor Independent Fiduciary, including the successor Independent Fiduciary's qualifications; and
(l) All of the material facts and representations set forth in the Summary of Facts and Representation are true and accurate at all times.
The Applicant will give notice of the proposed exemption to all interested persons and all of the parties to the litigation described above, within fifteen calendar days after the publication of the notice of proposed exemption in the
All comments will be made available to the public.
The Department is considering granting an exemption under the authority of Section 408(a) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and Section 4975(c)(2) of the Internal Revenue Code of 1986, as amended (the Code). The proposed exemption relates to legal actions and claims (the Claims) against Allianz Global Investors U.S. LLC (Allianz) and Aon Investments USA Inc. (Aon), that arose from certain losses incurred by the Non-Contributory Retirement Program for Certain Employees of Blue Cross and Blue Shield of Kansas City (the Plan) in the first quarter of 2020.
This proposed exemption would permit the Plan sponsor, Blue Cross and Blue Shield of Kansas City (BCBS KC), to make a series of payments to the Plan, including the past payment of $87,000,000 made to the Plan on September 9, 2021, and additional payments to the Plan totaling $13,000,000 by December 31, 2024. If the Plan receives litigation proceeds from the Claims, the Plan will transfer the lesser of the ligation proceeds amount or the Restorative Payments amount already received by the Plan, plus reasonable attorney fees to BCBS KC.
1. BCBS KC is a not-for-profit company that provides health insurance products and services. BCBS KC is an independent licensee of the Blue Cross Blue Shield Association (BCBSA).
2. The Plan is an ERISA-covered qualified defined benefit pension plan that covers eligible employees of BCBS KC and employees of affiliated employers. On June 30, 2013, the Plan was closed to new entrants. As of August 31, 2020, the Plan covered 1,212 participants and held $80,441,432 in total assets.
3. The Plan holds a beneficial interest in the Blue Cross and Blue Shield National Retirement Trust (the Trust). The Trust is a master trust that holds the assets of 16 defined benefit pension plans that participate in the BCBSA's National Retirement Program (the Participating Plans). Northern Trust serves as Trustee and asset custodian to the Trust and maintains separate records that reflect the net asset value of each Participating Plan. The Trust's earnings, market adjustments, and administrative expenses are allocated among the Participating Plans based on the respective Participating Plan's share of the Trust's assets. A Participating Plan's interest in the Trust's net assets is based on its share of the Trust.
4. The Committee serves as named fiduciary and administrator for each Participating Plan. The Committee is a standing committee of the BCBSA's board of directors. In 2011, the Committee invested a portion of the Trust's assets in funds managed by Allianz Global Investors U.S. LLC
5. The Applicant represents that the Allianz Structured Alpha strategy consisted of alpha and beta components. According to the applicant, the alpha component was an options trading strategy that Allianz claimed would seek targeted positive return potential while maintaining structural risk protections. The beta component was intended to provide broad market exposure to a particular asset class through investments in financial products similar to an exchange-traded fund that replicates the performance of a market index, such as the S&P 500. According to the Applicant, Allianz represented that the Structured Alpha Strategy would capitalize on the return-generating features of option selling (short volatility) while simultaneously benefitting from the risk-control attributes associated with option buying (long volatility). According to the Applicant, Allianz represented further that the alpha component would include position hedging consisting of long-volatility positions designed to protect the portfolio in the event of a market crash.
6. As of December 31, 2019, the total market value of the Plan's portion of the Trust's investment in the Allianz Structured Alpha Funds was $170,800,689, which represented 77.66% of total Plan assets.
7. In 2009, the Committee retained Aon (then called Ennis Knupp) to provide investment advice regarding the investment of Plan assets held in the Trust. The Applicant represents that Aon provided regular investment advice pursuant to a written contract between it and the Committee. Pursuant to its engagement, Aon agreed to provide the following: “recommendations to [the Committee] regarding asset allocation” within the Trust; “recommendations to [the Committee] regarding the specific asset allocation and other investment guidelines” for the Trust's investment managers such as Allianz; and advice “regarding the diversification of assets” held in the Trust.” The Applicant represents that Aon agreed to: conduct “active, ongoing monitoring” of Allianz to “identify any forward-looking” risks “that could impact performance;” and “inform itself” of any information necessary to discharge its duty to monitor, including information about the actual options positions Allianz had constructed.
8. The Applicant represents that when equity markets sharply declined in February and March of 2020, volatility spiked and the options positions held within the Structured Alpha Strategy were exposed to a heightened risk of loss. The Applicant represents that, unbeknownst to the Committee, and in violation of Allianz's stated investment strategy, Allianz abandoned the hedging strategy that was the supposed cornerstone of the Structured Alpha Strategy, leaving the portfolio almost entirely unhedged against a spike in market volatility. As described in the Claims, although Allianz had represented that it would buy hedges at strike prices ranging from 10% to 25% below the market, the hedges it actually held at the end of February 2020 were as much as 60% below the market.
The Applicant represents that, as of January 31, 2020, the Trust had invested approximately $2,916,049,486 in the Structured Alpha Strategy. Six weeks later, the Trust faced a margin call, which the Applicant states left it no choice but to liquidate the investment. The Trust was ultimately able to redeem only $646,762,678 of its $2,916,049,486 investment, resulting in a total loss of $2,269,286,808.
Specifically, regarding the Plan's portion of the loss, as of December 31, 2019 the market value of Plan assets was $219,924,260. As of March 31, 2020, the market value of Plan assets decreased to $73,641,344. The Applicant represents that the Plan's total losses from the Allianz Structured Alpha Strategy were $139,613,178, which caused the Plan to be underfunded.
9. On September 16, 2020, the Committee filed a cause of action in the United States District Court for the Southern District of New York (Case number 20–CIV–07606) against Allianz and Aon for Breach of Fiduciary Duty under ERISA Section 404, Breach of Co-Fiduciary Duty under ERISA Section 405, and violation of ERISA Section 406(b) for managing the Plan assets in its self-interest and breach of contract. It is possible that resolution of this claim and other legal actions against Allianz and Aon in connection with the Plan's losses (the Claims) could take an extended period of time.
10. The Applicant states that rather than wait for the Claims to be resolved, BCBS KC took steps to protect Plan benefits and avoid onerous benefit restrictions under Code section 436 that could apply to the Plan as a result of a funding shortfall. Therefore, on November 5, 2020, BCBS KC and the Plan entered into a Contribution and Assignment Agreement (the Contribution and Assignment Agreement).
11. Pursuant to the Contribution and Assignment Agreement, BCBS KC agreed to make $100,000,000 in Restorative Payments to the Plan by September 30, 2021. On September 9, 2021, BCBS KC made an $87,000,000 Restorative Payment to the Plan. Subsequently, on September 23, 2021, BCBS KC and the Plan amended the Restorative Payments provision of the Contribution and Assignment Agreement to state that BCBS KC will make $100,000,000 in Restorative Payments to the Plan by December 31, 2024. The prior payment of $87,000,000 together with the required future payment of $13,000,000 constitutes the Required Restorative Payments under this exemption.
12. In exchange for the Restorative Payments, the Plan assigned to BCBS KC its right to retain certain litigation and/or settlement proceeds recovered from the Claims (the Assigned Interests).
For the purposes of this exemption, Attorney Fees reimbursable to BCBS KC do not include: (a) legal expenses paid by the Plan; and (b) legal expenses paid by BCBS KC for representation of its own interests or the interests of any party other than the Plan. For purposes of determining the amount of Attorney Fees the Plan may reimburse to BCBS KC under this exemption, the amount of reasonable attorney fees paid by BCBS KC on behalf of the Plan in connection with the Claims must be reduced by the amount of legal fees received by BCBS
13. The Plan must ultimately receive at least the full value of the promised Restorative Payments, minus the Attorney Fees. The Plan may ultimately receive more than the Restorative Payment amount required under the Contribution and Assignment Agreement. If the Plan receives litigation or settlement proceeds that exceed the amount of Restorative Payments that BCBS KC has made to the Plan, the Plan's Repayment to BCBS KC will be limited to the amount of Restorative Payments actually made by BCBS KC, plus Attorney Fees. For example, if BCBS KC has made $100,000,000 in Restorative Payments to the Plan and has reasonably incurred $100,000 in Attorney Fees, and if the Plan receives $120,000,000 in litigation proceeds, the Plan will make a Repayment to BCBS KC totaling $100,100,000.
14. Alternatively, if the Plan receives less litigation or settlement proceeds than the amount of Restorative Payments that BCBS KC has made to the Plan, the Plan will transfer to BCBS KC the lesser amount of litigation or settlement proceeds, plus Attorney Fees. For example, if BCBS KC has made $100,000,000 in Restorative Payments to the Plan and has reasonably incurred $100,000 in Attorney Fees, and if the Plan receives $50,000,000 in litigation proceeds, the Plan will make a Repayment to BCBS KC totaling $50,100,000.
15. The Department notes that if the Plan receives any restitution that is tied to the conduct underlying the Claims but was ordered pursuant to a proceeding or directive that is external to Case number 20–CIV–07606, the disposition of such proceeds must conform to the requirements of this exemption.
16. BCBS KC retained Gallagher Fiduciary Advisors, LLC (Gallagher or the Independent Fiduciary) of New York, New York, to serve as the Plan's independent fiduciary with respect to the Required Restorative Payments and the potential repayment by the Plan of those Payments (collectively, the Proposed Transactions). Gallagher represents that it has extensive experience in institutional investment consulting and fiduciary decision-making regarding traditional and alternative investments. Gallagher further represents that its independent fiduciary decision-making work involves acting as a fiduciary advisor or decision-maker for plans and other ERISA-regulated asset pools and that it has experience with a wide range of asset classes and litigation claims.
17. Gallagher represents that it understands its duties and responsibilities under ERISA in acting as a fiduciary on behalf of the Plan. Gallagher also acknowledges that it is authorized to take all appropriate actions to safeguard the Plan's interests, and that it will monitor the Proposed Transactions on the Plan's behalf on a continuous basis and throughout the term required by this exemption.
18. Gallagher represents that it does not have any prior relationship with any parties in interest to the Plan, including BCBS KC and any BCBS KC affiliates. Gallagher further represents the total revenues it has received from the Plan and from parties in interest to the Plan in connection with its engagement as Independent Fiduciary represents approximately 0.78% of Gallagher's total revenue.
19. Gallagher represents that no party associated with this exemption application has or will indemnify it, in whole or in part, for negligence of any kind and/or any violation of state or federal law that may be attributable to Gallagher's performance of its duties as Independent Fiduciary to the Plan with respect to the Proposed Transactions. In addition, no contract or instrument entered into by Gallagher as Independent Fiduciary may purport to waive any liability under state or federal law for any such violation.
20. On November 5, 2020, Gallagher completed an Independent Fiduciary Report (the Independent Fiduciary Report) finding that the massive losses caused by the Trust's investment in the Allianz Structured Alpha Strategy resulted in a significant reduction to the Plan's total assets and funding level. Gallagher represents that the Required Restorative Payments, which will be received by the Plan substantially in advance of a final resolution of the Claims against Allianz and Aon, should restore the Plan's funded percentage to its pre-loss funded percentage as of January 1, 2019. The restoration of the Plan's funding status will secure ongoing benefit payments to participants and beneficiaries.
Gallagher notes that the Contribution and Assignment Agreement provides that the Trust must reimburse BCBS KC only up to the Required Restorative Payment Amount by the Plan, plus any reasonable legal expense paid to non-BCBS KC-related parties that were incurred by, or allocated to, BCBS KC as a result of the Claims.
Gallagher states that the Proposed Transactions and the terms of the Contribution and Assignment Agreement were negotiated and approved by Gallagher in its role as the Plan's Independent Fiduciary. Gallagher states that it approved the Proposed Transactions only after conducting an extensive analysis of the damages suffered by the Plan as a result of the failed Allianz Structured Alpha Strategy. Gallagher represents that it conducted numerous discussions with Trust representatives and counsel, along with the Plan's representatives and counsel to ensure that the interests of the Plan's participants and beneficiaries were protected with respect to all aspects of the Proposed Transactions. Based upon its assessment, Gallagher approved the Plan's receipt of the Required Restorative Payments from BCBS KC in exchange for the Assignment.
21. Absent an exemption, the Plan's receipt of the Restorative Payments from BCBS KC in exchange for the Plan's transfer of litigation or settlement proceeds to BCBS KC would violate ERISA. In this regard, ERISA Section 406(a)(1)(A) prohibits a plan fiduciary from causing the plan to engage in a transaction if the fiduciary knows or should know that such transaction constitutes a direct or indirect sale or exchange of any property between a plan and a party in interest. BCBS KC, as an employer whose employees are covered by the Plan, is a party in interest with respect to the Plan under ERISA Section 3(14)(C). The Required Restorative Payments to the Plan and the Plan's potential repayment to BCBS KC with litigation or settlement proceeds would constitute impermissible exchanges between the Plan and a party-in-interest (BCBS KC) in violation of ERISA Section 406(a)(1)(A).
ERISA Section 406(a)(1)(B) prohibits the lending of money or other extension of credit between a plan and a party-in-interest. BCBS KC's promise to make
ERISA Section 406(a)(1)(D) prohibits a plan fiduciary from causing a plan to engage in a transaction if the fiduciary knows or should know that the transaction constitutes a direct or indirect transfer to, or use by or for the benefit of, a party-in-interest, of the income or assets of the plan. The transfer of Plan assets to BCBS KC in connection with the Repayment would constitute an impermissible transfer of Plan assets to a party-in-interest in violation of ERISA Section 406(a)(1)(D).
22. This proposed exemption contains a number of conditions that must be met. For example, the proposed exemption mandates that the Independent Fiduciary, in full accordance with its obligations of prudence and loyalty under ERISA Section 404(a)(1)(A) and (B) must:
(a) review, negotiate, and approve the terms and conditions of the Required Restorative Payments, the Repayment, and the Contribution and Assignment Agreement, before the Plan enters into such payments and the agreement;
(b) determine that the terms and conditions of the Required Restorative Payments, the Repayment, and the Contribution and Assignment Agreement are prudent, in the interest of the Plan and its participants and beneficiaries, and protective of the rights of the Plan's participants and beneficiaries;
(c) confirm that the Required Restorative Payments are fully and timely made;
(d) monitor the Claims and confirm that the Plan receives its proper share of any litigation or settlement proceeds received by the Trust in connection with the Claims;
(e) ensure that any Repayment by the Plan to BCBS KC fully complies with the terms of this exemption and is for no more than the lesser of the total Restorative Payments actually made to the Plan by BCBS KC or the amount the Plan received from the Claims, plus Attorney Fees;
(f) ensure that any Repayment by the Plan to BCBS KC for legal expenses in connection with the Claims is limited to only reasonable legal expenses that were paid by BCBS KC to unrelated third parties for representation of the Plan and its interests (as opposed to representation of BCBS KC or the interests of any party other than the Plan) where BCBS KC was not otherwise reimbursed from a non-Plan party;
(g) monitor the Plan's Assigned Interests on an ongoing basis to determine and confirm that any excess recovery amount from the Claims (
(h) ensure that all of the conditions and definitions of this proposed exemption are met; and
(i) represent that it has not and will not enter into any agreement or instrument that violates ERISA Section 410 or Department Regulations codified at 29 CFR 2509.75–4.
23. This proposed exemption also requires Gallagher to respond in writing to any information requests from the Department regarding Gallagher's activities as the Plan's Independent Fiduciary. Additionally, no later than 90 days after the resolution of the litigation, Gallagher must submit a written report to the Department demonstrating that all terms and conditions of the exemption have been met.
24. This proposed exemption requires that the Plan has not and will not release any claims, demands and/or causes of action it may have against: (a) any fiduciary of the Plan; (b) any fiduciary of the Trust; (c) BCBS KC; and/or (d) any person or entity related to a person or entity described in (a)-(c) of this paragraph. Additionally, any Repayment by the Plan to BCBS KC must be made in a manner designed to minimize unnecessary costs and disruption to the Plan and its investments.
25. The Plan may not make any Repayment to BCBS KC before the date: the Plan has received from BCBS KC the entire amount of the Restorative Payments agreed to in the Amended Contribution and Assignment Agreement; and all the Claims are settled. Furthermore, the Plan may not pay any interest to BCBS KC in connection with its receipt of the Required Restorative Payments, nor pledge Plan assets to secure any portion of the Required Restorative Payments.
26. Pursuant to this proposed exemption, the Plan may not incur any expenses, commissions or transaction costs in connection with the Proposed Transactions. However, as noted above, under certain circumstances the Plan may reimburse BCBS KC for reasonable legal expenses arising from the Claims that BCBS KC paid to non-BCBS KC-related parties for representation of the Plan and its interests (as opposed to representation of BCBS KC or the interests of any party other than the Plan) where BCBS KC was not otherwise reimbursed by a non-Plan party.
27. Finally, the exemptive relief provided under this proposed exemption is conditioned upon the Department's assumption that the material facts and representations set forth above in the Summary of Facts and Representation section are true and accurate at all times. In the event that a material fact or representation detailed above is untrue or inaccurate, the exemptive relief provided under this exemption will cease immediately.
28. ERISA Section 408(a) provides, in part, that the Department may not grant an exemption unless the Department finds that the exemption is administratively feasible, in the interest of affected plans and of their participants and beneficiaries, and protective of the rights of such participants and beneficiaries. Each of these criteria is discussed below.
a.
b.
c.
29. Based on the conditions described above, the Department has tentatively determined that the relief sought by the Applicant satisfies the statutory requirements under ERISA Section 408(a) for the Department to make findings that support its issuance of a proposed exemption.
The Department is considering granting an exemption under the authority of ERISA Section 408(a) and Code Section 4975(c)(2) and in accordance with the procedures set forth in the Department's exemption procedure regulation.
(a) The term “Attorney Fees” means reasonable legal expenses paid by BCBS KC on behalf of the Plan in connection with the Claims, if such fees are reviewed and approved by a qualified independent fiduciary who confirms that the fees were reasonably incurred and paid by BCBS KC to unrelated third parties. For the purposes of this exemption, the Attorney Fees reimbursable to BCBS KC do not include: (1) legal expenses paid by the Plan; and (2) legal expenses paid by BCBS KC for representation of BCBC KC or the interests of any party other than the Plan.
(b) The term “BCBS KC” means Blue Cross and Blue Shield of Kansas City.
(c) The term “Claims” means the legal claims against Allianz Global Investors U.S. LLC (Allianz) and Aon Investments USA Inc. (Aon), to recover certain losses incurred by the Plan in the first quarter of 2020.
(d) The term “Contribution and Assignment Agreement” means the written agreement between BCBS KC and the Plan, dated November 5, 2020, and its amendment that became effective on September 23, 2021, containing all material terms regarding BCBS KC's agreement to make Required Restorative Payments to the Plan in return for the Plan's potential Repayment to BCBS KC of an amount that is no more than lesser of the Required Restorative Payment Amount (as described in Section I(h)) or the amount of litigation proceeds the Plan receives from the Claims, plus reasonable attorney fees paid to unrelated third parties by BCBS KC in connection with the Claims.
(e) The term “Independent Fiduciary” means Gallagher Fiduciary Advisors, LLC (Gallagher) or a successor Independent Fiduciary to the extent Gallagher or the successor Independent Fiduciary continues to serve in such capacity who:
(1) Is not an affiliate of BCBS KC and does not hold an ownership interest in BCBS KC or affiliates of BCBS KC;
(2) Was not a fiduciary with respect to the Plan before its appointment to serve as the Independent Fiduciary;
(3) Has acknowledged in writing that it:
(i) is a fiduciary with respect to the Plan and has agreed not to participate in any decision regarding any transaction in which it has an interest that might affect its best judgment as a fiduciary; and
(ii) Has appropriate technical training or experience to perform the services contemplated by the exemption;
(4) Has not entered into any agreement or instrument that violates the prohibitions on exculpatory provisions in ERISA Section 410 or the Department's regulation relating to indemnification of fiduciaries;
(5) Has not received gross income from BCBS KC or its affiliates during any fiscal year in an amount that exceeds two percent (2%) of the Independent Fiduciary's gross income from all sources for the prior fiscal year. This provision also applies to a partnership or corporation of which the Independent Fiduciary is an officer, director, or 10 percent (10%) or more partner or shareholder, and includes as gross income amounts received as compensation for services provided as an independent fiduciary under any prohibited transaction exemption granted by the Department; and
(6) No organization or individual that is an Independent Fiduciary, and no partnership or corporation of which such organization or individual is an officer, director, or ten percent (10%) or more partner or shareholder, may acquire any property from, sell any property to, or borrow any funds from BCBS KC or from affiliates of BCBS KC while serving as an Independent Fiduciary. This prohibition will continue for six months after the party ceases to be an Independent Fiduciary and/or the Independent Fiduciary negotiates any transaction on behalf of the Plan during the period that the organization or individual serves as an Independent Fiduciary.
(f) The “Plan” means the Non-Contributory Retirement Program for Certain Employees of Blue Cross and Blue Shield of Kansas City.
(g) The term “Plan Losses” means the $139,613,178 in Plan losses the BCBSA's National Employee Benefits Committee alleges were the result of breaches of fiduciary responsibilities and breaches of contract by Allianz Global Investors U.S. LLC and/or Aon Investments USA Inc.
(h) The term “Restorative Payments” means the payments made by BCBS KC to the Plan in connection with the Plan Losses, defined above, consisting of: (1) the past payment of $87,000,000 on September 9, 2021; and (2) a second installment amount of $13,000,000 due to the Plan by December 31, 2024. The sum of (1) and (2) is the Required Restorative Payment Amount.
(i) The “Repayment” means the payment, if any, that the Plan will transfer to BCBS KC following the Plan's receipt of proceeds from the Claims, where the Repayment is made following the full and complete resolution of the Claims; and in a manner that is consistent with the terms of the exemption.
If the proposed exemption is granted, the restrictions of ERISA Sections 406(a)(1)(A), (B) and (D) and the sanctions resulting from the application of Code Section 4975, by reason of Code Sections 4975(c)(1)(A), (B) and (D), shall not apply, effective November 5, 2020, to the following transactions: BCBS KC's
(a) The Plan receives the entire Restorative Payment Amount no later than December 31, 2024;
(b) In connection with its receipt of the Required Restorative Payments, the Plan does not release any claims, demands and/or causes of action the Plan may have against the following: (1) any fiduciary of the Plan; (2) any fiduciary of the Trust; (3) BCBS KC; and/or (4) any person or entity related to a person or entity identified in (1)–(3) of this paragraph;
(c) The Plan's Repayment to BCBS KC is for no more than the lesser of the total Restorative Payments received by the Plan or the amount of litigation proceeds the Plan receives from the Claims. The Plan's Repayment to BCBS KC may only occur after the Independent Fiduciary has determined that: all the conditions of the exemption are met; the Plan has received all the Restorative Payments it is due; and the Plan has received all the litigation proceeds it is due. The Plan's Repayment to BCBS KC must be carried out in a manner designed to minimize unnecessary costs and disruption to the Plan and its investments;
(d) A qualified independent fiduciary (the Independent Fiduciary, as further defined in Section II(e)), acting solely on behalf of the Plan in full accordance with its obligations of prudence and loyalty under ERISA Sections 404(a)(1)(A) and (B) must:
(1) Review, negotiate and approve the terms and conditions of the Restorative Payments and the Repayment and the Contribution and Assignment Agreement, all of which must be in writing, before the Plan enters into those transactions/agreement;
(2) Determine that the Restorative Payments, the Repayment, and the terms of the Contribution and Assignment Agreement, are prudent and in the interest of the Plan and its participants and beneficiaries;
(3) Confirm that the Required Restorative Payment Amount was fully and timely made;
(4) Monitor the litigation related to the Claims and confirm that the Plan receives, in a timely manner, its proper share of any litigation or settlement proceeds received by the Trust;
(5) Ensure that any Repayment by the Plan to BCBS KC for legal expenses in connection with the Claims is limited to only reasonable legal expenses that were paid by BCBS KC to unrelated third parties;
(6) Ensure that all of the conditions and definitions of this proposed exemption are met;
(7) Submit a written report to the Department's Office of Exemption Determinations demonstrating and confirming that the terms and conditions of the exemption were met, within 90 days after the Repayment; and
(8) Not enter into any agreement or instrument that violates ERISA Section 410 or the Department's Regulations codified at 29 CFR Section 2509.75–4.
(f) The Plan pays no interest in connection with the Restorative Payments;
(g) The Plan does not pledge any Plan assets to secure any portion of the Restorative Payments;
(h) The Plan does not incur any expenses, commissions, or transaction costs in connection with the Proposed Transactions. However, if first approved by the Independent Fiduciary, the Plan may reimburse BCBS KC for reasonable legal expenses paid in connection with the Claims by BCBS KC to non-BCBS KC-related parties. For purposes of determining the amount of Attorney Fees the Plan may reimburse to BCBS KC under this proposal, the amount of reasonable attorney fees paid by BCBS KC on behalf of the Plan in connection with the Claims must be reduced by the amount of legal fees received by BCBS KC in connection with the Claims from any non-Plan party (
(i) The proposed transactions do not involve any risk of loss to either the Plan or the Plan's participants and beneficiaries;
(j) No party associated with this exemption has or will indemnify the Independent Fiduciary and the Independent Fiduciary will not request indemnification from any party, in whole or in part, for negligence and/or any violation of state or federal law that may be attributable to the Independent Fiduciary in performing its duties to the Plan with respect to the Proposed Transactions. In addition, no contract or instrument may purport to waive any liability under state or federal law for any such violation.
(k) If an Independent Fiduciary resigns, is removed, or for any reason is unable to serve as an Independent Fiduciary, the Independent Fiduciary must be replaced by a successor entity that: (1) meets the definition of Independent Fiduciary detailed above in Section II(e); and (2) otherwise meets all of the qualification, independence, prudence and diligence requirements set forth in this exemption. Further, any such successor Independent Fiduciary must assume all of the duties of the outgoing Independent Fiduciary. As soon as possible, including before the appointment of a successor Independent Fiduciary, BCBS KC must notify the Department's Office of Exemption Determinations of the change in Independent Fiduciary and such notification must contain all material information regarding the successor Independent Fiduciary, including the successor Independent Fiduciary's qualifications; and
(l) All of the material facts and representations set forth in the Summary of Facts and Representation are true and accurate at all times.
The Applicant will give notice of the proposed exemption to all interested persons and all of the parties to the litigation described above, within fifteen calendar days after the publication of the notice of proposed exemption in the
All comments will be made available to the public.
The Department is considering granting an exemption under the authority of Section 408(a) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and Section 4975(c)(2) of the Internal Revenue Code of 1986, as amended (the Code). The proposed exemption relates to legal actions and claims (the Claims) against Allianz Global Investors U.S. LLC (Allianz) and Aon Investments USA Inc. (Aon), that arose from certain losses incurred by the Non-Contributory Retirement Program for Certain Employees of Blue Cross and Blue Shield of Arizona, Inc. (the Plan) in the first quarter of 2020.
This proposed exemption would permit the Plan sponsor, Blue Cross and Blue Shield of Arizona, Inc. (BCBS AZ), to make a series of payments to the Plan, including: (a) past payments totaling $130,000,000; and (b) future amounts necessary for (i) the Plan's assets to be equal to or greater than 100% of the Plan's current liabilities, and (ii) the Plan to have an adjusted funding target attainment percentage (AFTAP) of 110% (the Restorative Payments).
If the Plan receives litigation proceeds from the Claims, the Plan will transfer the lesser of the ligation proceeds amount or the Restorative Payments, plus reasonable attorney fees to BCBS AZ.
1. Blue Cross and Blue Shield of Arizona, Inc. (BCBS AZ or the Applicant) is a not-for-profit company that provides health insurance products and services. BCBS AZ is an independent licensee of the Blue Cross Blue Shield Association (BCBSA).
2. The Plan is an ERISA-covered qualified defined benefit pension plan that covers eligible employees of BCBS AZ and employees of affiliated employers. On June 30, 2012, the Plan was closed to new entrants. As of August 31, 2020, the Plan held $178,703,160 in total assets.
3. The Plan holds a beneficial interest in the Blue Cross and Blue Shield National Retirement Trust (the Trust). The Trust is a master trust that holds the assets of 16 defined benefit pension plans that participate in the BCBSA's National Retirement Program (the Participating Plans). Northern Trust serves as Trustee and asset custodian to the Trust and maintains separate records that reflect the net asset value of each Participating Plan. The Trust's earnings, market adjustments, and administrative expenses are allocated among the Participating Plans based on the respective Participating Plan's share of the Trust's assets. A Participating Plan's interest in the Trust's net assets is based on its share of the Trust.
4. The Committee serves as named fiduciary and administrator for each Participating Plan. The Committee is a standing committee of the BCBSA's board of directors. In 2011, the Committee invested a portion of the Trust's assets in funds managed by Allianz Global Investors U.S. LLC (Allianz), as part of a Structured Alpha Investment Strategy. These funds included: (a) AllianzGI Structured Alpha Multi-Beta Series LLC I; (b) AllianzGI Structured Alpha Emerging Markets Equity 350 LLC; and (c) AllianzGI Structured Alpha 1000 LLC (collectively, the Structured Alpha Funds).
5. The Applicant represents that the Allianz Structured Alpha strategy consisted of alpha and beta components. According to the applicant, the alpha component was an options trading strategy that Allianz claimed would seek targeted positive return potential while maintaining structural risk protections. The beta component was intended to provide broad market exposure to a particular asset class through investments in financial products similar to an exchange-traded fund that replicates the performance of a market index, such as the S&P 500. According to the Applicant, Allianz represented that the Structured Alpha Strategy would capitalize on the return-generating features of option selling (short volatility) while simultaneously benefitting from the risk-control attributes associated with option buying (long volatility). According to the Applicant, Allianz represented further that the alpha component would include position hedging consisting of long-volatility positions designed to protect the portfolio in the event of a market crash.
6. As of December 31, 2019, the total market value of the Plan's portion of the Trust's investment in the Allianz Structured Alpha Funds was $369.3 million, which represented 77.67% of total Plan assets.
7. In 2009, the Committee retained Aon (then called Ennis Knupp) to provide investment advice regarding the investment of Plan assets held in the Trust. The Applicant represents that Aon provided regular investment advice pursuant to a written contract between it and the Committee. Pursuant to its engagement, Aon agreed to provide the following: “recommendations to [the Committee] regarding asset allocation” within the Trust; “recommendations to [the Committee] regarding the specific asset allocation and other investment guidelines” for the Trust's investment managers such as Allianz; and advice “regarding the diversification of assets” held in the Trust.” The Applicant represents that Aon agreed to: conduct “active, ongoing monitoring” of Allianz to “identify any forward-looking” risks “that could impact performance;” and “inform itself” of any information necessary to discharge its duty to monitor, including information about the actual options positions Allianz had constructed.
8. The Applicant represents that when equity markets sharply declined in February and March of 2020, volatility spiked and the options positions held within the Structured Alpha Strategy were exposed to a heightened risk of loss. The Applicant represents that, unbeknownst to the Committee, and in violation of Allianz's stated investment strategy, Allianz abandoned the hedging strategy that was the supposed cornerstone of the Structured Alpha Strategy, leaving the portfolio almost entirely unhedged against a spike in market volatility. As described in the
The Applicant represents that, as of January 31, 2020, the Trust had invested approximately $2,916,049,486 in the Structured Alpha Strategy. Six weeks later, the Trust faced a margin call, which the Applicant states left it no choice but to liquidate the investment. The Trust was ultimately able to redeem only $646,762,678 of its $2,916,049,486 investment, resulting in a total loss of $2,269,286,808.
Specifically, regarding the Plan's portion of the loss, as of December 31, 2019, the market value of the Plan and its Code section 401(h) Account were $416,127,759 and $59,347,737, respectively.
9. On September 16, 2020, the Committee filed a cause of action in the United States District Court for the Southern District of New York (Case number 20–CIV–07606) against Allianz and Aon for Breach of Fiduciary Duty under ERISA Section 404, Breach of Co-Fiduciary Duty under ERISA Section 405, and violation of ERISA Section 406(b) for managing the Plan assets in its self-interest and breach of contract. It is possible that resolution of this claim and other legal actions against Allianz and Aon in connection with the Plan's losses (the Claims) could take an extended period of time.
10. The Applicant states that rather than wait for the Claims to be resolved, BCBS AZ took steps to protect Plan benefits and avoid onerous benefit restrictions under Code section 436 that could apply to the Plan as a result of a funding shortfall. Therefore, on November 5, 2020, BCBS AZ and the Plan entered into a Contribution and Assignment Agreement (the Contribution and Assignment Agreement).
11. Pursuant to the Contribution and Assignment Agreement, BCBS AZ agreed to make $274 million in Restorative Payments to the Plan pursuant to an installment payment structure (the Restorative Payments). BCBS AZ made its first installment payment of $60 million to the Plan on September 15, 2020. Thereafter, BCBS AZ made a Restorative Payment to the Plan of $35,000,000 on December 28, 2020, and $10,000,000 on July 31, 2021. Thus, as of July 31, 2021, BCBS AZ had made Restorative Payments to the Plan totaling $105 million.
12. On October 13, 2021, BCBS AZ and the Plan amended the Restorative Payments provision of the Contribution and Assignment Agreement (the Restorative Payment Amendment). BCBS AZ agreed that before December 31, 2023, it would contribute amounts necessary for the Plan to have: (a) an adjusted funding target attainment percentage of 110% (after taking into account any waivers of the funding standard carryover balance by the Plan Sponsor); and (b) an amount of assets that is at least 100% of current Plan liabilities. In addition, any minimum required contributions made by BCBS AZ to the Plan on or after October 13, 2021, will not be included as part of the Restorative Payments required under the Contribution and Assignment Agreement. The prior restorative payments noted above in paragraph 11 together with the obligations noted here in paragraph 12 constitute the Required Restorative Payments under this exemption.
13. On December 21, 2021, BCBS AZ made a fourth Restorative Payment to the Plan totaling $25,000,000.
14. In exchange for the Restorative Payments, the Plan assigned to BCBS AZ its right to retain certain litigation and/or settlement proceeds recovered from the Claims (the Assigned Interests).
15. The Plan must ultimately receive at least the full value of the promised Restorative Payments, minus the Attorney Fees. The Plan may ultimately receive more than the Restorative Payment amount required under the Contribution and Assignment Agreement. If the Plan receives litigation or settlement proceeds that exceed the amount of Restorative Payments that BCBS AZ has made to the Plan, the Plan's Repayment to BCBS AZ will be limited to the amount of Restorative Payments actually made by BCBS AZ, plus Attorney Fees. For example, if BCBS AZ has made $130,000,000 in Restorative Payments to the Plan and reasonably incurred $100,000 in Attorney Fees, and the Plan receives $160,000,000 in litigation proceeds, the Plan will make a Repayment to BCBS AZ totaling $130,100,000.
16. Alternatively, if the Plan receives less litigation or settlement proceeds than the amount of Restorative Payments that BCBS AZ has made to the Plan, the Plan will transfer to BCBS AZ the lesser amount of litigation or settlement proceeds, plus Attorney Fees. For example, if BCBS AZ has made $130,000,000 in Restorative Payments to
17. The Department notes that if the Plan receives any restitution that is tied to the conduct underlying the Claims but was ordered pursuant to a proceeding or directive that is external to Case number 20–CIV–07606, the disposition of such proceeds must conform to the requirements of this exemption.
18. BCBS AZ retained Gallagher Fiduciary Advisors, LLC (Gallagher or the Independent Fiduciary) of New York, New York, to serve as the Plan's independent fiduciary with respect to the Required Restorative Payments and the potential repayment by the Plan of those Payments (collectively, the Proposed Transactions). Gallagher represents that it has extensive experience in institutional investment consulting and fiduciary decision-making regarding traditional and alternative investments. Gallagher further represents that its independent fiduciary decision-making work involves acting as a fiduciary advisor or decision-maker for plans and other ERISA-regulated asset pools and that it has experience with a wide range of asset classes and litigation claims.
19. Gallagher represents that it understands its duties and responsibilities under ERISA in acting as a fiduciary on behalf of the Plan. Gallagher also acknowledges that it is authorized to take all appropriate actions to safeguard the Plan's interests, and that it will monitor the Proposed Transactions on the Plan's behalf on a continuous basis and throughout the term required by this exemption.
20. Gallagher represents that it does not have any prior relationship with any parties in interest to the Plan, including BCBS AZ and any BCBS AZ affiliates. Gallagher further represents the total revenues it has received from the Plan and from parties in interest to the Plan in connection with its engagement as Independent Fiduciary represents approximately 0.78% of Gallagher's total revenue.
21. Gallagher represents that no party associated with this exemption application has or will indemnify it, in whole or in part, for negligence of any kind and/or any violation of state or federal law that may be attributable to Gallagher's performance of its duties as Independent Fiduciary to the Plan with respect to the Proposed Transactions. In addition, no contract or instrument entered into by Gallagher as Independent Fiduciary may purport to waive any liability under state or federal law for any such violation.
22. On November 3, 2020, Gallagher completed an Independent Fiduciary Report (the Independent Fiduciary Report) finding that the massive losses caused by the Trust's investment in the Allianz Structured Alpha Strategy resulted in a significant reduction to the Plan's total assets and funding level. Gallagher represents that the Required Restorative Payments, which will be received by the Plan substantially in advance of a final resolution of the Claims against Allianz and Aon, should restore the Plan's funded percentage to its pre-loss funded percentage as of January 1, 2019. The restoration of the Plan's funding status will secure ongoing benefit payments to participants and beneficiaries.
Gallagher notes that the Contribution and Assignment Agreement provides that the Trust must reimburse BCBS AZ only up to the Required Restorative Payment Amount, plus any reasonable legal expense paid to non-BCBS AZ-related parties that were incurred by, or allocated to, BCBS AZ as a result of the Claims.
Gallagher states that the Proposed Transactions and the terms of the Contribution and Assignment Agreement were negotiated and approved by Gallagher in its role as the Plan's Independent Fiduciary. Gallagher states that it approved the Proposed Transactions only after conducting an extensive analysis of the damages suffered by the Plan as a result of the failed Allianz Structured Alpha Strategy. Gallagher represents that it conducted numerous discussions with Trust representatives and counsel, along with the Plan's representatives and counsel to ensure that the interests of the Plan's participants and beneficiaries were protected with respect to all aspects of the Proposed Transactions. Based upon its assessment, Gallagher approved the Plan's receipt of the Required Restorative Payments from BCBS AZ in exchange for the Assignment.
23. Absent an exemption, the Plan's receipt of the Restorative Payments from BCBS AZ in exchange for the Plan's transfer of litigation or settlement proceeds to BCBS AZ would violate ERISA. In this regard, ERISA Section 406(a)(1)(A) prohibits a plan fiduciary from causing the plan to engage in a transaction if the fiduciary knows or should know that such transaction constitutes a direct or indirect sale or exchange of any property between a plan and a party in interest. BCBS AZ, as an employer whose employees are covered by the Plan, is a party in interest with respect to the Plan under ERISA Section 3(14)(C). The Required Restorative Payments to the Plan and the Plan's potential repayment to BCBS AZ with litigation or settlement proceeds would constitute impermissible exchanges between the Plan and a party-in-interest (BCBS AZ) in violation of ERISA Section 406(a)(1)(A).
ERISA Section 406(a)(1)(B) prohibits the lending of money or other extension of credit between a plan and a party-in-interest. BCBS AZ's promise to make Required Restorative Payments to the Plan, over time, constitutes an impermissible extension of credit between the Plan and a party-in-interest in violation of ERISA Section 406(a)(1)(B).
ERISA Section 406(a)(1)(D) prohibits a plan fiduciary from causing a plan to engage in a transaction if the fiduciary knows or should know that the transaction constitutes a direct or indirect transfer to, or use by or for the benefit of, a party-in-interest, of the income or assets of the plan. The transfer of Plan assets to BCBS AZ in connection with the Repayment would constitute an impermissible transfer of Plan assets to a party-in-interest in violation of ERISA Section 406(a)(1)(D).
24. This proposed exemption contains a number of conditions that must be met. For example, the proposed exemption mandates that the Independent Fiduciary, in full accordance with its obligations of prudence and loyalty under ERISA Section 404(a)(1)(A) and (B) must:
(a) review, negotiate, and approve the terms and conditions of the Required Restorative Payments, the Repayment, and the Contribution and Assignment Agreement, before the Plan enters into such payments and the agreement;
(b) determine that the terms and conditions of the Required Restorative Payments, the Repayment, and the
(c) confirm that the Required Restorative Payments are fully and timely made;
(d) monitor the Claims and confirm that the Plan receives its proper share of any litigation or settlement proceeds received by the Trust in connection with the Claims;
(e) ensure that any Repayment by the Plan to BCBS AZ fully complies with the terms of this exemption and is for no more than the lesser of the total Restorative Payments actually made to the Plan by BCBS AZ or the amount the Plan received from the Claims, plus Attorney Fees;
(f) ensure that any Repayment by the Plan to BCBS AZ for legal expenses in connection with the Claims is limited to only reasonable legal expenses that were paid by BCBS AZ to unrelated third parties for representation of the Plan and its interests (as opposed to representation of BCBS AZ or the interests of any party other than the Plan) where BCBS AZ was not otherwise reimbursed from a non-Plan party;
(g) monitor the Plan's Assigned Interests on an ongoing basis to determine and confirm that any excess recovery amount from the Claims (
(h) ensure that all of the conditions and definitions of this proposed exemption are met; and
(i) represent that it has not and will not enter into any agreement or instrument that violates ERISA Section 410 or Department Regulations codified at 29 CFR 2509.75–4.
25. This proposed exemption also requires Gallagher to respond in writing to any information requests from the Department regarding Gallagher's activities as the Plan's Independent Fiduciary. Additionally, no later than 90 days after the resolution of the litigation, Gallagher must submit a written report to the Department demonstrating that all terms and conditions of the exemption have been met.
26. This proposed exemption requires that the Plan has not and will not release any claims, demands and/or causes of action it may have against: (a) any fiduciary of the Plan; (b) any fiduciary of the Trust; (c) BCBS AZ; and/or (d) any person or entity related to a person or entity described in (a)–(c) of this paragraph. Additionally, any Repayment by the Plan to BCBS AZ must be made in a manner designed to minimize unnecessary costs and disruption to the Plan and its investments.
27. The Plan may not make any Repayment to BCBS AZ before the date: the Plan has received from BCBS AZ the entire amount of the Restorative Payments agreed to in the Amended Contribution and Assignment Agreement; and all the Claims are settled. Furthermore, the Plan may not pay any interest to BCBS AZ in connection with its receipt of the Required Restorative Payments, nor pledge Plan assets to secure any portion of the Required Restorative Payments.
28. Pursuant to this proposed exemption, the Plan may not incur any expenses, commissions or transaction costs in connection with the Proposed Transactions. However, as noted above, under certain circumstances the Plan may reimburse BCBS AZ for reasonable legal expenses arising from the Claims that BCBS AZ paid to non-BCBS AZ-related parties for representation of the Plan and its interests (as opposed to representation of BCBS AZ or the interests of any party other than the Plan) where BCBS AZ was not otherwise reimbursed by a non-Plan party.
29. Finally, the exemptive relief provided under this proposed exemption is conditioned upon the Department's assumption that the material facts and representations set forth above in the Summary of Facts and Representation section are true and accurate at all times. In the event that a material fact or representation detailed above is untrue or inaccurate, the exemptive relief provided under this exemption will cease immediately.
30. ERISA Section 408(a) provides, in part, that the Department may not grant an exemption unless the Department finds that the exemption is administratively feasible, in the interest of affected plans and of their participants and beneficiaries, and protective of the rights of such participants and beneficiaries. Each of these criteria is discussed below.
a.
b.
c.
31. Based on the conditions described above, the Department has tentatively determined that the relief sought by the Applicant satisfies the statutory requirements under ERISA Section 408(a) for the Department to make findings that support its issuance of a proposed exemption.
The Department is considering granting an exemption under the authority of ERISA Section 408(a) and Code Section 4975(c)(2) and in accordance with the procedures set forth in the Department's exemption procedure regulation.
(a) The term “Attorney Fees” means reasonable legal expenses paid by BCBS AZ on behalf of the Plan in connection with the Claims, if such fees are reviewed and approved by a qualified independent fiduciary who confirms that the fees were reasonably incurred and paid by BCBS AZ to unrelated third parties. For the purposes of this exemption, the Attorney Fees reimbursable to BCBS AZ do not include: (1) legal expenses paid by the Plan; and (2) legal expenses paid by BCBS AZ for representation of BCBC AZ or the interests of any party other than the Plan.
(b) The term “BCBS AZ” means Blue Cross and Blue Shield of Arizona, Inc.
(c) The term “Claims” means the legal claims against Allianz Global Investors U.S. LLC (Allianz) and Aon Investments USA Inc. (Aon), to recover certain losses incurred by the Plan in the first quarter of 2020.
(d) The term “Amended Contribution and Assignment Agreement” means the written agreement between BCBS AZ and the Plan, dated November 5, 2020, and its amendment that became effective on October 13, 2021, containing all material terms regarding BCBS AZ's agreement to make Required Restorative Payments to the Plan in return for the Plan's potential Repayment to BCBS AZ of an amount that is no more than lesser of the Required Restorative Payment Amount (as described in Section I(h)) already received or the amount of litigation proceeds the Plan receives from the Claims, plus reasonable attorney fees paid to unrelated third parties by BCBS AZ in connection with the Claims.
(e) The term “Independent Fiduciary” means Gallagher Fiduciary Advisors, LLC (Gallagher) or a successor Independent Fiduciary to the extent Gallagher or the successor Independent Fiduciary continues to serve in such capacity who:
(1) Is not an affiliate of BCBS AZ and does not hold an ownership interest in BCBS AZ or affiliates of BCBS AZ;
(2) Was not a fiduciary with respect to the Plan before its appointment to serve as the Independent Fiduciary;
(3) Has acknowledged in writing that it:
(i) is a fiduciary with respect to the Plan and has agreed not to participate in any decision regarding any transaction in which it has an interest that might affect its best judgment as a fiduciary; and
(ii) Has appropriate technical training or experience to perform the services contemplated by the exemption;
(4) Has not entered into any agreement or instrument that violates the prohibitions on exculpatory provisions in ERISA Section 410 or the Department's regulation relating to indemnification of fiduciaries;
(5) Has not received gross income from BCBS AZ or its affiliates during any fiscal year in an amount that exceeds two percent (2%) of the Independent Fiduciary's gross income from all sources for the prior fiscal year. This provision also applies to a partnership or corporation of which the Independent Fiduciary is an officer, director, or 10 percent (10%) or more partner or shareholder, and includes as gross income amounts received as compensation for services provided as an independent fiduciary under any prohibited transaction exemption granted by the Department; and
(6) No organization or individual that is an Independent Fiduciary, and no partnership or corporation of which such organization or individual is an officer, director, or ten percent (10%) or more partner or shareholder, may acquire any property from, sell any property to, or borrow any funds from BCBS AZ or from affiliates of BCBS AZ while serving as an Independent Fiduciary. This prohibition will continue for six months after the party ceases to be an Independent Fiduciary and/or the Independent Fiduciary negotiates any transaction on behalf of the Plan during the period that the organization or individual serves as an Independent Fiduciary.
(f) The “Plan” means the Non-Contributory Retirement Program for Certain Employees of Blue Cross and Blue Shield of Arizona, Inc.
(g) The term “Plan Losses” means the $302,470,379 in Plan losses the BCBSA's National Employee Benefits Committee alleges were the result of breaches of fiduciary responsibilities and breaches of contract by Allianz Global Investors U.S. LLC and/or Aon Investments USA Inc.
(h) The term “Restorative Payments” means the payments made by BCBS AZ to the Plan in connection with the Plan Losses, defined above, consisting of: (1) a first installment amount of $60,000,000 that BCBS AZ contributed to the Plan on September 15, 2020; (2) a second installment amount of $35,000,000 that BCBS AZ contributed to the Plan on December 28, 2020; (3) a third installment amount of $10,000,000 that BCBS AZ contributed to the Plan on July 30, 2021; (4) a fourth installment amount of $25,000,000 that BCBS AZ contributed to the Plan on December 21, 2021; and (5) other amounts contributed to the Plan by BCBS AZ before December 31, 2023 that are necessary for (i) the Plan to have an adjusted funding target attainment percentage of 110% after taking into account any waivers of the funding standard carryover balance by the Plan Sponsor, and (ii) the Plan's assets to be equal to or greater than 100% of the current liabilities of the Plan. The sum of (1)-(5) is the Required Restorative Payment Amount. The term “Required Restorative Payment” will not include any required minimum contributions that BCBS AZ makes to the Plan on and after October 13, 2021.
(i) The “Repayment” means the payment, if any, that the Plan will transfer to BCBS AZ following the Plan's receipt of proceeds from the Claims, where the Repayment is made following the full and complete resolution of the Claims; and in a manner that is consistent with the terms of the exemption.
If the proposed exemption is granted, the restrictions of ERISA Sections 406(a)(1)(A), (B) and (D) and the sanctions resulting from the application of Code Section 4975, by reason of Code Sections 4975(c)(1)(A), (B) and (D), shall not apply, effective September 15, 2020, to the following transactions: BCBS AZ's transfer of Restorative Payments to the Plan; and, in return, the Plan's Repayment of an amount to BCBS AZ, which must be no more than the lesser of the Restorative Payment Amount already received or the amount of litigation proceeds the Plan received from the Claims, plus reasonable
(a) The Plan receives the entire Restorative Payment Amount no later than December 31, 2023;
(b) In connection with its receipt of the Required Restorative Payments, the Plan does not release any claims, demands and/or causes of action the Plan may have against the following: (1) any fiduciary of the Plan; (2) any fiduciary of the Trust; (3) BCBS AZ; and/or (4) any person or entity related to a person or entity identified in (1)-(3) of this paragraph;
(c) The Plan's Repayment to BCBS AZ is for no more than the lesser of the total Restorative Payments received by the Plan or the amount of litigation proceeds the Plan receives from the Claims. The Plan's Repayment to BCBS AZ may only occur after the Independent Fiduciary has determined that: all the conditions of the exemption are met; the Plan has received all the Restorative Payments it is due; and the Plan has received all the litigation proceeds it is due. The Plan's Repayment to BCBS AZ must be carried out in a manner designed to minimize unnecessary costs and disruption to the Plan and its investments;
(d) A qualified independent fiduciary (the Independent Fiduciary, as further defined in Section II(e)), acting solely on behalf of the Plan in full accordance with its obligations of prudence and loyalty under ERISA Sections 404(a)(1)(A) and (B) must:
(1) Review, negotiate and approve the terms and conditions of the Restorative Payments and the Repayment and the Contribution and Assignment Agreement, all of which must be in writing, before the Plan enters into those transactions/agreement;
(2) Determine that the Restorative Payments, the Repayment, and the terms of the Contribution and Assignment Agreement, are prudent and in the interest of the Plan and its participants and beneficiaries;
(3) Confirm that the Required Restorative Payment Amount was fully and timely made;
(4) Monitor the litigation related to the Claims and confirm that the Plan receives, in a timely manner, its proper share of any litigation or settlement proceeds received by the Trust;
(5) Ensure that any Repayment by the Plan to BCBS AZ for legal expenses in connection with the Claims is limited to only reasonable legal expenses that were paid by BCBS AZ to unrelated third parties;
(6) Ensure that all of the conditions and definitions of this proposed exemption are met;
(7) Submit a written report to the Department's Office of Exemption Determinations demonstrating and confirming that the terms and conditions of the exemption were met, within 90 days after the Repayment; and
(8) Not enter into any agreement or instrument that violates ERISA Section 410 or the Department's Regulations codified at 29 CFR Section 2509.75–4.
(f) The Plan pays no interest in connection with the Restorative Payments;
(g) The Plan does not pledge any Plan assets to secure any portion of the Restorative Payments;
(h) The Plan does not incur any expenses, commissions, or transaction costs in connection with the Proposed Transactions. However, if first approved by the Independent Fiduciary, the Plan may reimburse BCBS AZ for reasonable legal expenses paid in connection with the Claims by BCBS AZ to non-BCBS AZ-related parties. For purposes of determining the amount of Attorney Fees the Plan may reimburse to BCBS AZ under this proposal, the amount of reasonable attorney fees paid by BCBS AZ on behalf of the Plan in connection with the Claims must be reduced by the amount of legal fees received by BCBS AZ in connection with the Claims from any non-Plan party (
(i) The proposed transactions do not involve any risk of loss to either the Plan or the Plan's participants and beneficiaries;
(j) No party associated with this exemption has or will indemnify the Independent Fiduciary and the Independent Fiduciary will not request indemnification from any party, in whole or in part, for negligence and/or any violation of state or federal law that may be attributable to the Independent Fiduciary in performing its duties to the Plan with respect to the Proposed Transactions. In addition, no contract or instrument may purport to waive any liability under state or federal law for any such violation.
(k) If an Independent Fiduciary resigns, is removed, or for any reason is unable to serve as an Independent Fiduciary, the Independent Fiduciary must be replaced by a successor entity that: (1) meets the definition of Independent Fiduciary detailed above in Section II(e); and (2) otherwise meets all of the qualification, independence, prudence and diligence requirements set forth in this exemption. Further, any such successor Independent Fiduciary must assume all of the duties of the outgoing Independent Fiduciary. As soon as possible, including before the appointment of a successor Independent Fiduciary, BCBS AZ must notify the Department's Office of Exemption Determinations of the change in Independent Fiduciary and such notification must contain all material information regarding the successor Independent Fiduciary, including the successor Independent Fiduciary's qualifications; and
(l) All of the material facts and representations set forth in the Summary of Facts and Representation are true and accurate at all times.
The Applicant will give notice of the proposed exemption to all interested persons and all of the parties to the litigation described above, within fifteen calendar days after the publication of the notice of proposed exemption in the
All comments will be made available to the public.
The Department is considering granting an exemption under the authority of Section 408(a) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and Section 4975(c)(2) of the Internal
This proposed exemption would permit the Plan sponsor, Blue Cross and Blue Shield of Vermont (BCBS VT), to make a series of payments to the Plan over a four-year period (the Restorative Payments). The Restorative Payments will return the Plan to at least the Plan's funding level (126.61%) as of January 1, 2019. If the Plan receives litigation proceeds from the Claims, the Plan will transfer the lesser of the ligation proceeds amount or the Restorative Payments amount, plus reasonable attorney fees to BCBS VT.
1. Blue Cross and Blue Shield of Vermont (BCBS VT or the Applicant) is a not-for-profit hospital and medical services corporation that issues and administers health care coverage for individuals and group health plans. BCBS VT is an independent licensee of the Blue Cross Blue Shield Association (BCBSA).
2. The Plan is an ERISA-covered qualified defined benefit pension plan that covers eligible employees of BCBS VT. As of August 31, 2020, the Plan held $28,331,698 in total assets.
3. The Plan holds a beneficial interest in the Blue Cross and Blue Shield National Retirement Trust (the Trust). The Trust is a master trust that holds the assets of 16 defined benefit pension plans that participate in the BCBSA's National Retirement Program (the Participating Plans). Northern Trust serves as Trustee and asset custodian to the Trust and maintains separate records that reflect the net asset value of each Participating Plan. The Trust's earnings, market adjustments, and administrative expenses are allocated among the Participating Plans based on the respective Participating Plan's share of the Trust's assets. A Participating Plan's interest in the Trust's net assets is based on its share of the Trust.
4. The Committee serves as named fiduciary and administrator for each Participating Plan. The Committee is a standing committee of the BCBSA's board of directors. In 2011, the Committee invested a portion of the Trust's assets in funds managed by Allianz Global Investors U.S. LLC (Allianz), as part of a Structured Alpha Investment Strategy. These funds included: (a) AllianzGI Structured Alpha Multi-Beta Series LLC I; (b) AllianzGI Structured Alpha Emerging Markets Equity 350 LLC; and (c) AllianzGI Structured Alpha 1000 LLC (collectively, the Structured Alpha Funds).
5. The Applicant represents that the Allianz Structured Alpha strategy consisted of alpha and beta components. According to the applicant, the alpha component was an options trading strategy that Allianz claimed would seek targeted positive return potential while maintaining structural risk protections. The beta component was intended to provide broad market exposure to a particular asset class through investments in financial products similar to an exchange-traded fund that replicates the performance of a market index, such as the S&P 500. According to the Applicant, Allianz represented that the Structured Alpha Strategy would capitalize on the return-generating features of option selling (short volatility) while simultaneously benefitting from the risk-control attributes associated with option buying (long volatility). According to the Applicant, Allianz represented further that the alpha component would include position hedging consisting of long-volatility positions designed to protect the portfolio in the event of a market crash.
6. As of December 31, 2019, the total market value of the Plan's portion of the Trust's investment in the Allianz Structured Alpha Funds was $53,105,089, which represented 76.48% of total Plan assets.
7. In 2009, the Committee retained Aon (then called Ennis Knupp) to provide investment advice regarding the investment of Plan assets held in the Trust. The Applicant represents that Aon provided regular investment advice pursuant to a written contract between it and the Committee. Pursuant to its engagement, Aon agreed to provide the following: “recommendations to [the Committee] regarding asset allocation” within the Trust; “recommendations to [the Committee] regarding the specific asset allocation and other investment guidelines” for the Trust's investment managers such as Allianz; and advice “regarding the diversification of assets” held in the Trust.” The Applicant represents that Aon agreed to: conduct “active, ongoing monitoring” of Allianz to “identify any forward-looking” risks “that could impact performance;” and “inform itself” of any information necessary to discharge its duty to monitor, including information about the actual options positions Allianz had constructed.
8. The Applicant represents that when equity markets sharply declined in February and March of 2020, volatility spiked and the options positions held within the Structured Alpha Strategy were exposed to a heightened risk of loss. The Applicant represents that, unbeknownst to the Committee, and in violation of Allianz's stated investment strategy, Allianz abandoned the hedging strategy that was the supposed cornerstone of the Structured Alpha Strategy, leaving the portfolio almost entirely unhedged against a spike in market volatility. As described in the Claims, although Allianz had represented that it would buy hedges at strike prices ranging from 10% to 25% below the market, the hedges it actually held at the end of February 2020 were as much as 60% below the market.
The Applicant represents that, as of January 31, 2020, the Trust had invested approximately $2,916,049,486 in the Structured Alpha Strategy. Six weeks later, the Trust faced a margin call, which the Applicant states left it no choice but to liquidate the investment. The Trust was ultimately able to redeem only $646,762,678 of its $2,916,049,486 investment, resulting in a total loss of $2,269,286,808.
Specifically, regarding the Plan's portion of the loss, as of December 31,
9. On September 16, 2020, the Committee filed a cause of action in the United States District Court for the Southern District of New York (Case number 20–CIV–07606) against Allianz and Aon for Breach of Fiduciary Duty under ERISA Section 404, Breach of Co-Fiduciary Duty under ERISA Section 405, and violation of ERISA Section 406(b) for managing the Plan assets in its self-interest and breach of contract. It is possible that resolution of this claim and other legal actions against Allianz and Aon in connection with the Plan's losses (the Claims) could take an extended period of time.
10. The Applicant states that rather than wait for the Claims to be resolved, BCBS VT took steps to protect Plan benefits and avoid onerous benefit restrictions under Code section 436 that could apply to the Plan as a result of a funding shortfall. Therefore, on December 21, 2020, BCBS VT and the Plan entered into a Contribution and Assignment Agreement (the Contribution and Assignment Agreement).
11.
12. Since the effective date of the Contribution and Assignment Agreement, BCBS VT has made two Restorative Payments to the Plan: a $13,000,000 payment remitted on December 23, 2020, and a $3,100,000 payment remitted on September 14, 2021.
13.
14. In exchange for the Restorative Payments, the Plan assigned to BCBS VT its right to retain certain litigation and/or settlement proceeds recovered from the Claims (the Assigned Interests).
15. The Plan must ultimately receive at least the full value of the promised Restorative Payments, minus the Attorney Fees. The Plan may ultimately receive more than the Restorative Payment amount required under the Contribution and Assignment Agreement. If the Plan receives litigation or settlement proceeds that exceed the amount of Restorative Payments that BCBS VT has made to the Plan, the Plan's Repayment to BCBS VT will be limited to the amount of Restorative Payments actually made by BCBS VT, plus Attorney Fees. For example, if BCBS VT made $18,000,000 in Restorative Payments to the Plan and reasonably incurred $100,000 in Attorney Fees, and if the Plan receives $30,000,000 in litigation proceeds, the Plan will make a Repayment to BCBS VT totaling $18,100,000.
16. Alternatively, if the Plan receives less litigation or settlement proceeds than the amount of Restorative Payments that BCBS VT has made to the Plan, the Plan will transfer to BCBS VT the lesser amount of litigation or settlement proceeds, plus Attorney Fees. For example, if BCBS VT made $18,000,000 in Restorative Payments to the Plan and has reasonably incurred $100,000 in Attorney Fees, and if the Plan receives $10,000,000 in litigation proceeds, the Plan will make a Repayment to BCBS VT totaling $10,100,000.
17. The Department notes that if the Plan receives any restitution that is tied to the conduct underlying the Claims but was ordered pursuant to a proceeding or directive that is external to Case number 20–CIV–07606, the disposition of such proceeds must conform to the requirements of this exemption.
18. BCBS VT retained Gallagher Fiduciary Advisors, LLC (Gallagher or the Independent Fiduciary) of New York, New York, to serve as the Plan's independent fiduciary with respect to the Required Restorative Payments and the potential repayment by the Plan of those Payments (collectively, the Proposed Transactions). Gallagher represents that it has extensive experience in institutional investment consulting and fiduciary decision-making regarding traditional and alternative investments. Gallagher further represents that its independent fiduciary decision-making work involves acting as a fiduciary advisor or decision-maker for plans and other ERISA-regulated asset pools and that it has experience with a wide range of asset classes and litigation claims.
19. Gallagher represents that it understands its duties and responsibilities under ERISA in acting as a fiduciary on behalf of the Plan. Gallagher also acknowledges that it is authorized to take all appropriate actions to safeguard the Plan's interests, and that it will monitor the Proposed Transactions on the Plan's behalf on a continuous basis and throughout the term required by this exemption.
20. Gallagher represents that it does not have any prior relationship with any
21. Gallagher represents that no party associated with this exemption application has or will indemnify it, in whole or in part, for negligence of any kind and/or any violation of state or federal law that may be attributable to Gallagher's performance of its duties as Independent Fiduciary to the Plan with respect to the Proposed Transactions. In addition, no contract or instrument entered into by Gallagher as Independent Fiduciary may purport to waive any liability under state or federal law for any such violation.
22. On December 21, 2020, Gallagher completed an Independent Fiduciary Report (the Independent Fiduciary Report) finding that the massive losses caused by the Trust's investment in the Allianz Structured Alpha Strategy resulted in a significant reduction to the Plan's total assets and funding level. Gallagher represents that the Required Restorative Payments, which will be received by the Plan substantially in advance of a final resolution of the Claims against Allianz and Aon, should restore the Plan's funded percentage to its pre-loss funded percentage as of January 1, 2019. The restoration of the Plan's funding status will secure ongoing benefit payments to participants and beneficiaries.
Gallagher notes that the Contribution and Assignment Agreement provides that the Trust must reimburse BCBS VT only up to the Required Restorative Payment Amount received, plus any reasonable legal expense paid to non-BCBS VT-related parties that were incurred by, or allocated to, BCBS VT as a result of the Claims.
Gallagher states that the Proposed Transactions and the terms of the Contribution and Assignment Agreement were negotiated and approved by Gallagher in its role as the Plan's Independent Fiduciary. Gallagher states that it approved the Proposed Transactions only after conducting an extensive analysis of the damages suffered by the Plan as a result of the failed Allianz Structured Alpha Strategy. Gallagher represents that it conducted numerous discussions with Trust representatives and counsel, along with the Plan's representatives and counsel to ensure that the interests of the Plan's participants and beneficiaries were protected with respect to all aspects of the Proposed Transactions. Based upon its assessment, Gallagher approved the Plan's receipt of the Required Restorative Payments from BCBS VT in exchange for the Assignment.
23. Absent an exemption, the Plan's receipt of the Restorative Payments from BCBS VT in exchange for the Plan's transfer of litigation or settlement proceeds to BCBS VT would violate ERISA. In this regard, ERISA Section 406(a)(1)(A) prohibits a plan fiduciary from causing the plan to engage in a transaction if the fiduciary knows or should know that such transaction constitutes a direct or indirect sale or exchange of any property between a plan and a party in interest. BCBS VT, as an employer whose employees are covered by the Plan, is a party in interest with respect to the Plan under ERISA Section 3(14)(C). The Required Restorative Payments to the Plan and the Plan's potential repayment to BCBS VT with litigation or settlement proceeds would constitute impermissible exchanges between the Plan and a party-in-interest (BCBS VT) in violation of ERISA Section 406(a)(1)(A).
ERISA Section 406(a)(1)(B) prohibits the lending of money or other extension of credit between a plan and a party-in-interest. BCBS VT's promise to make Required Restorative Payments to the Plan, over time, constitutes an impermissible extension of credit between the Plan and a party-in-interest in violation of ERISA Section 406(a)(1)(B).
ERISA Section 406(a)(1)(D) prohibits a plan fiduciary from causing a plan to engage in a transaction if the fiduciary knows or should know that the transaction constitutes a direct or indirect transfer to, or use by or for the benefit of, a party-in-interest, of the income or assets of the plan. The transfer of Plan assets to BCBS VT in connection with the Repayment would constitute an impermissible transfer of Plan assets to a party-in-interest in violation of ERISA Section 406(a)(1)(D).
24. This proposed exemption contains a number of conditions that must be met. For example, the proposed exemption mandates that the Independent Fiduciary, in full accordance with its obligations of prudence and loyalty under ERISA Section 404(a)(1)(A) and (B) must:
(a) review, negotiate, and approve the terms and conditions of the Required Restorative Payments, the Repayment, and the Contribution and Assignment Agreement, before the Plan enters into such payments and the agreement;
(b) determine that the terms and conditions of the Required Restorative Payments, the Repayment, and the Contribution and Assignment Agreement are prudent, in the interest of the Plan and its participants and beneficiaries, and protective of the rights of the Plan's participants and beneficiaries;
(c) confirm that the Required Restorative Payments are fully and timely made;
(d) monitor the Claims and confirm that the Plan receives its proper share of any litigation or settlement proceeds received by the Trust in connection with the Claims;
(e) ensure that any Repayment by the Plan to BCBS VT fully complies with the terms of this exemption and is for no more than the lesser of the total Restorative Payments actually made to the Plan by BCBS VT or the amount the Plan received from the Claims, plus Attorney Fees;
(f) ensure that any Repayment by the Plan to BCBS VT for legal expenses in connection with the Claims is limited to only reasonable legal expenses that were paid by BCBS VT to unrelated third parties for representation of the Plan and its interests (as opposed to representation of BCBS VT or the interests of any party other than the Plan) where BCBS VT was not otherwise reimbursed from a non-Plan party;
(g) monitor the Plan's Assigned Interests on an ongoing basis to determine and confirm that any excess recovery amount from the Claims (
(h) ensure that all of the conditions and definitions of this proposed exemption are met; and
(i) represent that it has not and will not enter into any agreement or instrument that violates ERISA Section
25. This proposed exemption also requires Gallagher to respond in writing to any information requests from the Department regarding Gallagher's activities as the Plan's Independent Fiduciary. Additionally, no later than 90 days after the resolution of the litigation, Gallagher must submit a written report to the Department demonstrating that all terms and conditions of the exemption have been met.
26. This proposed exemption requires that the Plan has not and will not release any claims, demands and/or causes of action it may have against: (a) any fiduciary of the Plan; (b) any fiduciary of the Trust; (c) BCBS VT; and/or (d) any person or entity related to a person or entity described in (a)–(c) of this paragraph. Additionally, any Repayment by the Plan to BCBS VT must be made in a manner designed to minimize unnecessary costs and disruption to the Plan and its investments.
27. The Plan may not make any Repayment to BCBS VT before the date: the Plan has received from BCBS VT the entire amount of the Restorative Payments agreed to in the Amended Contribution and Assignment Agreement; and all the Claims are settled. Furthermore, the Plan may not pay any interest to BCBS VT in connection with its receipt of the Required Restorative Payments, nor pledge Plan assets to secure any portion of the Required Restorative Payments.
28. Pursuant to this proposed exemption, the Plan may not incur any expenses, commissions or transaction costs in connection with the Proposed Transactions. However, as noted above, under certain circumstances the Plan may reimburse BCBS VT for reasonable legal expenses arising from the Claims that BCBS VT paid to non-BCBS VT-related parties for representation of the Plan and its interests (as opposed to representation of BCBS VT or the interests of any party other than the Plan) where BCBS VT was not otherwise reimbursed by a non-Plan party.
29. Finally, the exemptive relief provided under this proposed exemption is conditioned upon the Department's assumption that the material facts and representations set forth above in the Summary of Facts and Representation section are true and accurate at all times. In the event that a material fact or representation detailed above is untrue or inaccurate, the exemptive relief provided under this exemption will cease immediately.
30. ERISA Section 408(a) provides, in part, that the Department may not grant an exemption unless the Department finds that the exemption is administratively feasible, in the interest of affected plans and of their participants and beneficiaries, and protective of the rights of such participants and beneficiaries. Each of these criteria is discussed below.
a.
b.
c.
31. Based on the conditions described above, the Department has tentatively determined that the relief sought by the Applicant satisfies the statutory requirements under ERISA Section 408(a) for the Department to make findings that support its issuance of a proposed exemption.
The Department is considering granting an exemption under the authority of ERISA Section 408(a) and Code Section 4975(c)(2) and in accordance with the procedures set forth in the Department's exemption procedure regulation.
(a) The term “Attorney Fees” means reasonable legal expenses paid by BCBS VT on behalf of the Plan in connection with the Claims, if such fees are reviewed and approved by a qualified independent fiduciary who confirms that the fees were reasonably incurred and paid by BCBS VT to unrelated third parties. For the purposes of this exemption, the Attorney Fees reimbursable to BCBS VT do not include: (1) legal expenses paid by the Plan; and (2) legal expenses paid by BCBS VT for representation of BCBC VT or the interests of any party other than the Plan.
(b) The term “BCBS VT” means Blue Cross and Blue Shield of Vermont.
(c) The term “Claims” means the legal claims against Allianz Global Investors U.S. LLC (Allianz) and Aon Investments USA Inc. (Aon), to recover certain losses incurred by the Plan in the first quarter of 2020.
(d) The term “Contribution and Assignment Agreement” means the written agreement between BCBS VT
(e) The term “Independent Fiduciary” means Gallagher Fiduciary Advisors, LLC (Gallagher) or a successor Independent Fiduciary to the extent Gallagher or the successor Independent Fiduciary continues to serve in such capacity who:
(1) Is not an affiliate of BCBS VT and does not hold an ownership interest in BCBS VT or affiliates of BCBS VT;
(2) Was not a fiduciary with respect to the Plan before its appointment to serve as the Independent Fiduciary;
(3) Has acknowledged in writing that it:
(i) is a fiduciary with respect to the Plan and has agreed not to participate in any decision regarding any transaction in which it has an interest that might affect its best judgment as a fiduciary; and
(ii) Has appropriate technical training or experience to perform the services contemplated by the exemption;
(4) Has not entered into any agreement or instrument that violates the prohibitions on exculpatory provisions in ERISA Section 410 or the Department's regulation relating to indemnification of fiduciaries;
(5) Has not received gross income from BCBS VT or its affiliates during any fiscal year in an amount that exceeds two percent (2%) of the Independent Fiduciary's gross income from all sources for the prior fiscal year. This provision also applies to a partnership or corporation of which the Independent Fiduciary is an officer, director, or 10 percent (10%) or more partner or shareholder, and includes as gross income amounts received as compensation for services provided as an independent fiduciary under any prohibited transaction exemption granted by the Department; and
(6) No organization or individual that is an Independent Fiduciary, and no partnership or corporation of which such organization or individual is an officer, director, or ten percent (10%) or more partner or shareholder, may acquire any property from, sell any property to, or borrow any funds from BCBS VT or from affiliates of BCBS VT while serving as an Independent Fiduciary. This prohibition will continue for six months after the party ceases to be an Independent Fiduciary and/or the Independent Fiduciary negotiates any transaction on behalf of the Plan during the period that the organization or individual serves as an Independent Fiduciary.
(f) The “Plan” means the Non-Contributory Retirement Program for Certain Employees of Blue Cross and Blue Shield of Vermont.
(g) The term “Plan Losses” means the $41,588,205 in Plan losses the BCBSA's National Employee Benefits Committee alleges were the result of breaches of fiduciary responsibilities and breaches of contract by Allianz Global Investors U.S. LLC and/or Aon Investments USA Inc.
(h) The term “Restorative Payments” means the payments made by BCBS VT to the Plan in connection with the Plan Losses, including: (1) the past payment of $13,000,000 made on December 23, 2020, (2) the past payment of $3,100,000 made on September 14, 2021, and (3) amounts necessary to restore the Plan to its funding level of 126.91% before December 31, 2024. The sum of (1)–(3) is the Required Restorative Payment Amount.
(i) The “Repayment” means the payment, if any, that the Plan will transfer to BCBS VT following the Plan's receipt of proceeds from the Claims, where the Repayment is made following the full and complete resolution of the Claims; and in a manner that is consistent with the terms of the exemption.
If the proposed exemption is granted, the restrictions of ERISA Sections 406(a)(1)(A), (B) and (D) and the sanctions resulting from the application of Code Section 4975, by reason of Code Sections 4975(c)(1)(A), (B) and (D), shall not apply, effective December 21, 2020, to the following transactions: BCBS VT's transfer of Restorative Payments to the Plan; and, in return, the Plan's Repayment of an amount to BCBS VT, which must be no more than the lesser of the Restorative Payment Amount or the amount of litigation proceeds the Plan received from the Claims, plus reasonable Attorney Fees, provided that the Definitions set forth in Section I and the Conditions set forth in Section III are met.
(a) The Plan receives the entire Restorative Payment Amount no later than December 31, 2024;
(b) In connection with its receipt of the Required Restorative Payments, the Plan does not release any claims, demands and/or causes of action the Plan may have against the following: (1) any fiduciary of the Plan; (2) any fiduciary of the Trust; (3) BCBS VT; and/or (4) any person or entity related to a person or entity identified in (1)–(3) of this paragraph;
(c) The Plan's Repayment to BCBS VT is for no more than the lesser of the total Restorative Payments received by the Plan or the amount of litigation proceeds the Plan receives from the Claims. The Plan's Repayment to BCBS VT may only occur after the Independent Fiduciary has determined that: all the conditions of the exemption are met; the Plan has received all the Restorative Payments it is due; and the Plan has received all the litigation proceeds it is due. The Plan's Repayment to BCBS VT must be carried out in a manner designed to minimize unnecessary costs and disruption to the Plan and its investments;
(d) A qualified independent fiduciary (the Independent Fiduciary, as further defined in Section II(e)), acting solely on behalf of the Plan in full accordance with its obligations of prudence and loyalty under ERISA Sections 404(a)(1)(A) and (B) must:
(1) Review, negotiate and approve the terms and conditions of the Restorative Payments and the Repayment and the Contribution and Assignment Agreement, all of which must be in writing, before the Plan enters into those transactions/agreement;
(2) Determine that the Restorative Payments, the Repayment, and the terms of the Contribution and Assignment Agreement, are prudent and in the interest of the Plan and its participants and beneficiaries;
(3) Confirm that the Required Restorative Payment Amount was fully and timely made;
(4) Monitor the litigation related to the Claims and confirm that the Plan receives, in a timely manner, its proper share of any litigation or settlement proceeds received by the Trust;
(5) Ensure that any Repayment by the Plan to BCBS VT for legal expenses in connection with the Claims is limited to only reasonable legal expenses that were paid by BCBS VT to unrelated third parties;
(6) Ensure that all of the conditions and definitions of this proposed exemption are met;
(7) Submit a written report to the Department's Office of Exemption Determinations demonstrating and confirming that the terms and
(8) Not enter into any agreement or instrument that violates ERISA Section 410 or the Department's Regulations codified at 29 CFR Section 2509.75–4.
(f) The Plan pays no interest in connection with the Restorative Payments;
(g) The Plan does not pledge any Plan assets to secure any portion of the Restorative Payments;
(h) The Plan does not incur any expenses, commissions, or transaction costs in connection with the Proposed Transactions. However, if first approved by the Independent Fiduciary, the Plan may reimburse BCBS VT for reasonable legal expenses paid in connection with the Claims by BCBS VT to non-BCBS VT-related parties. For purposes of determining the amount of Attorney Fees the Plan may reimburse to BCBS VT under this proposal, the amount of reasonable attorney fees paid by BCBS VT on behalf of the Plan in connection with the Claims must be reduced by the amount of legal fees received by BCBS VT in connection with the Claims from any non-Plan party (
(i) The proposed transactions do not involve any risk of loss to either the Plan or the Plan's participants and beneficiaries;
(j) No party associated with this exemption has or will indemnify the Independent Fiduciary and the Independent Fiduciary will not request indemnification from any party, in whole or in part, for negligence and/or any violation of state or federal law that may be attributable to the Independent Fiduciary in performing its duties to the Plan with respect to the Proposed Transactions. In addition, no contract or instrument may purport to waive any liability under state or federal law for any such violation.
(k) If an Independent Fiduciary resigns, is removed, or for any reason is unable to serve as an Independent Fiduciary, the Independent Fiduciary must be replaced by a successor entity that: (1) meets the definition of Independent Fiduciary detailed above in Section II(e); and (2) otherwise meets all of the qualification, independence, prudence and diligence requirements set forth in this exemption. Further, any such successor Independent Fiduciary must assume all of the duties of the outgoing Independent Fiduciary. As soon as possible, including before the appointment of a successor Independent Fiduciary, BCBS VT must notify the Department's Office of Exemption Determinations of the change in Independent Fiduciary and such notification must contain all material information regarding the successor Independent Fiduciary, including the successor Independent Fiduciary's qualifications; and
(l) All of the material facts and representations set forth in the Summary of Facts and Representation are true and accurate at all times.
The Applicant will give notice of the proposed exemption to all interested persons and all of the parties to the litigation described above, within fifteen calendar days after the publication of the notice of proposed exemption in the
All comments will be made available to the public.
The Department is considering granting an exemption under the authority of Section 408(a) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and Section 4975(c)(2) of the Internal Revenue Code of 1986, as amended (the Code). The proposed exemption relates to legal actions and claims (the Claims) against Allianz Global Investors U.S. LLC (Allianz) and Aon Investments USA Inc. (Aon), that arose from certain losses incurred by the Non-Contributory Retirement Program for Certain Employees of Hawaii Medical Service Association (the Plan) in the first quarter of 2020.
This proposed exemption would permit the past payment of $50,000,000 by Hawaii Medical Service Association (HMSA), the Plan sponsor, to the Plan (the Restorative Payment). If the Plan receives litigation proceeds from the Claims, the Plan will transfer the lesser of the ligation proceeds amount or the Restorative Payment amount, plus reasonable attorney fees to HMSA.
1. HMSA is a not-for-profit company that provides health insurance products and services. HMSA is an independent licensee of the Blue Cross Blue Shield Association (BCBSA).
2. The Plan is an ERISA-covered qualified defined benefit pension plan that covers eligible employees of HMSA and employees of affiliated employers. On December 31, 2014, the Plan was closed to new entrants. In August 2020, the Sponsor elected to freeze Plan benefits for all participants effective December 31, 2024. As of December 31, 2020, the Plan covered 1,638 participants and held $167,536,184 in total assets.
3. Up until 2020, the Plan held a beneficial interest in the Blue Cross and Blue Shield National Retirement Trust (the Trust).
4. The Committee serves as named fiduciary and administrator for each Participating Plan. The Committee is a standing committee of the BCBSA's board of directors. In 2011, the Committee invested a portion of the Trust's assets in funds managed by Allianz Global Investors U.S. LLC (Allianz), as part of a Structured Alpha Investment Strategy. These funds included: (a) AllianzGI Structured Alpha Multi-Beta Series LLC I; (b) AllianzGI Structured Alpha Emerging Markets Equity 350 LLC; and (c) AllianzGI Structured Alpha 1000 LLC (collectively, the Structured Alpha Funds).
5. The Applicant represents that the Allianz Structured Alpha strategy consisted of alpha and beta components. According to the applicant, the alpha component was an options trading strategy that Allianz claimed would seek targeted positive return potential while maintaining structural risk protections. The beta component was intended to provide broad market exposure to a particular asset class through investments in financial products similar to an exchange-traded fund that replicates the performance of a market index, such as the S&P 500. According to the Applicant, Allianz represented that the Structured Alpha Strategy would capitalize on the return-generating features of option selling (short volatility) while simultaneously benefitting from the risk-control attributes associated with option buying (long volatility). According to the Applicant, Allianz represented further that the alpha component would include position hedging consisting of long-volatility positions designed to protect the portfolio in the event of a market crash.
6. As of December 31, 2019, the total market value of the Plan's portion of the Trust's investment in the Allianz Structured Alpha Funds was $229,799,688, which represented 86.11% of total Plan assets.
7. In 2009, the Committee retained Aon (then called Ennis Knupp) to provide investment advice regarding the investment of Plan assets held in the Trust. The Applicant represents that Aon provided regular investment advice pursuant to a written contract between it and the Committee. Pursuant to its engagement, Aon agreed to provide the following: “recommendations to [the Committee] regarding asset allocation” within the Trust; “recommendations to [the Committee] regarding the specific asset allocation and other investment guidelines” for the Trust's investment managers such as Allianz; and advice “regarding the diversification of assets” held in the Trust.” The Applicant represents that Aon agreed to: conduct “active, ongoing monitoring” of Allianz to “identify any forward-looking” risks “that could impact performance;” and “inform itself” of any information necessary to discharge its duty to monitor, including information about the actual options positions Allianz had constructed.
8. The Applicant represents that when equity markets sharply declined in February and March of 2020, volatility spiked and the options positions held within the Structured Alpha Strategy were exposed to a heightened risk of loss. The Applicant represents that, unbeknownst to the Committee, and in violation of Allianz's stated investment strategy, Allianz abandoned the hedging strategy that was the supposed cornerstone of the Structured Alpha Strategy, leaving the portfolio almost entirely unhedged against a spike in market volatility. As described in the Claims, although Allianz had represented that it would buy hedges at strike prices ranging from 10% to 25% below the market, the hedges it actually held at the end of February 2020 were as much as 60% below the market.
The Applicant represents that, as of January 31, 2020, the Trust had invested approximately $2,916,049,486 in the Structured Alpha Strategy. Six weeks later, the Trust faced a margin call, which the Applicant states left it no choice but to liquidate the investment. The Trust was ultimately able to redeem only $646,762,678 of its $2,916,049,486 investment, resulting in a total loss of $2,269,286,808.
Specifically, regarding the Plan's portion of the loss, as of December 31, 2019, the market value of the Plan was $266,849,059. As of March 31, 2020, the market value of the Plan's total assets decreased to $90,420,304. The Applicant represents that the Plan's total losses from the Allianz Structured Alpha Strategy were $187,271,581, which caused the Plan to be underfunded.
9. On September 16, 2020, the Committee filed a cause of action in the United States District Court for the Southern District of New York (Case number 20–CIV–07606) against Allianz and Aon for Breach of Fiduciary Duty under ERISA Section 404, Breach of Co-Fiduciary Duty under ERISA Section 405, and violation of ERISA Section 406(b) for managing the Plan assets in its self-interest and breach of contract. It is possible that resolution of this claim and other legal actions against Allianz and Aon in connection with the Plan's losses (the Claims) could take an extended period of time.
10. The Applicant states that rather than wait for the Claims to be resolved, HMSA took steps to protect Plan benefits and avoid onerous benefit restrictions under Code section 436 that could apply to the Plan as a result of a funding shortfall. Therefore, on November 3, 2020, HMSA and the Plan entered into a Contribution and Assignment Agreement (the Contribution and Assignment Agreement) whereby HMSA agreed to make a $50,000,000 Restorative Payment to the Plan. Subsequently, on December 18, 2020, HMSA made a $50,000,000 Restorative Payment to the Plan. This $50,000,000 payment is the Required Restorative Payment Amount under this exemption.
11. In exchange for the Restorative Payment, the Plan assigned to HMSA its right to retain certain litigation and/or settlement proceeds recovered from the Claims (the Assigned Interests).
For the purposes of this exemption, Attorney Fees reimbursable to HMSA do not include: (a) legal expenses paid by
12. The Plan must ultimately receive at least the full value of the promised Restorative Payment, minus the Attorney Fees. The Plan may ultimately receive more than the Restorative Payment amount required under the Contribution and Assignment Agreement. If the Plan receives litigation or settlement proceeds that exceed the $50,000,000 Restorative Payment that HMSA made to the Plan, the Plan's Repayment to HMSA will be limited to $50,000,000 plus Attorney Fees. For example, if the Plan receives $80,000,000 in litigation proceeds and HMSA has reasonably incurred $100,000 in Attorney Fees, the Plan will make a Repayment to HMSA totaling $50,100,000.
13. Alternatively, if the Plan receives less litigation or settlement proceeds than the $50,000,000 Restorative Payment that HMSA made to the Plan, the Plan will transfer to HMSA the lesser amount of litigation or settlement proceeds, plus Attorney Fees. For example, if the Plan receives $30,000,000 in litigation proceeds and HMSA has reasonably incurred $100,000 in Attorney Fees, the Plan will make a Repayment to HMSA totaling $30,100,000.
14. The Department notes that if the Plan receives any restitution that is tied to the conduct underlying the Claims but was ordered pursuant to a proceeding or directive that is external to Case number 20–CIV–07606, the disposition of such proceeds must conform to the requirements of this exemption.
15. HMSA retained Gallagher Fiduciary Advisors, LLC (Gallagher or the Independent Fiduciary) of New York, New York, to serve as the Plan's independent fiduciary with respect to the Required Restorative Payment and the potential repayment by the Plan of those Payments (collectively, the Proposed Transactions). Gallagher represents that it has extensive experience in institutional investment consulting and fiduciary decision-making regarding traditional and alternative investments. Gallagher further represents that its independent fiduciary decision-making work involves acting as a fiduciary advisor or decision-maker for plans and other ERISA-regulated asset pools and that it has experience with a wide range of asset classes and litigation claims.
16. Gallagher represents that it understands its duties and responsibilities under ERISA in acting as a fiduciary on behalf of the Plan. Gallagher also acknowledges that it is authorized to take all appropriate actions to safeguard the Plan's interests, and that it will monitor the Proposed Transactions on the Plan's behalf on a continuous basis and throughout the term required by this exemption.
17. Gallagher represents that it does not have any prior relationship with any parties in interest to the Plan, including HMSA and any HMSA affiliates. Gallagher further represents the total revenues it has received from the Plan and from parties in interest to the Plan in connection with its engagement as Independent Fiduciary represents approximately 0.78% of Gallagher's total revenue.
18. Gallagher represents that no party associated with this exemption application has or will indemnify it, in whole or in part, for negligence of any kind and/or any violation of state or federal law that may be attributable to Gallagher's performance of its duties as Independent Fiduciary to the Plan with respect to the Proposed Transactions. In addition, no contract or instrument entered into by Gallagher as Independent Fiduciary may purport to waive any liability under state or federal law for any such violation.
19. On March 18, 2021, Gallagher completed an Independent Fiduciary Report (the Independent Fiduciary Report) finding that the massive losses caused by the Trust's investment in the Allianz Structured Alpha Strategy resulted in a significant reduction to the Plan's total assets and funding level. Gallagher represents that the Required Restorative Payment, which will be received by the Plan substantially in advance of a final resolution of the Claims against Allianz and Aon, should restore the Plan's funded percentage to its pre-loss funded percentage as of January 1, 2019. The restoration of the Plan's funding status will secure ongoing benefit payments to participants and beneficiaries.
Gallagher notes that the Contribution and Assignment Agreement provides that the Trust must reimburse HMSA only up to the Required Restorative Payment Amount, plus any reasonable legal expense paid to non-HMSA-related parties that were incurred by, or allocated to, HMSA as a result of the Claims.
Gallagher states that the Proposed Transactions and the terms of the Contribution and Assignment Agreement were negotiated and approved by Gallagher in its role as the Plan's Independent Fiduciary. Gallagher states that it approved the Proposed Transactions only after conducting an extensive analysis of the damages suffered by the Plan as a result of the failed Allianz Structured Alpha Strategy. Gallagher represents that it conducted numerous discussions with Trust representatives and counsel, along with the Plan's representatives and counsel to ensure that the interests of the Plan's participants and beneficiaries were protected with respect to all aspects of the Proposed Transactions. Based upon its assessment, Gallagher approved the Plan's receipt of the Required Restorative Payment from HMSA in exchange for the Assignment.
20. Absent an exemption, the Plan's receipt of the Restorative Payment from HMSA in exchange for the Plan's transfer of litigation or settlement proceeds to HMSA would violate ERISA. In this regard, ERISA Section 406(a)(1)(A) prohibits a plan fiduciary from causing the plan to engage in a transaction if the fiduciary knows or should know that such transaction constitutes a direct or indirect sale or exchange of any property between a plan and a party in interest. HMSA, as an employer whose employees are covered by the Plan, is a party in interest with respect to the Plan under ERISA Section 3(14)(C). The Required Restorative Payment to the Plan and the Plan's potential repayment to HMSA with litigation or settlement proceeds would constitute impermissible exchanges between the Plan and a party-in-interest (HMSA) in violation of ERISA Section 406(a)(1)(A).
ERISA Section 406(a)(1)(D) prohibits a plan fiduciary from causing a plan to engage in a transaction if the fiduciary knows or should know that the
21. This proposed exemption contains a number of conditions that must be met. For example, the proposed exemption mandates that the Independent Fiduciary, in full accordance with its obligations of prudence and loyalty under ERISA Section 404(a)(1)(A) and (B) must:
(a) review, negotiate, and approve the terms and conditions of the Required Restorative Payment, the Repayment, and the Contribution and Assignment Agreement, before the Plan enters into such payments and the agreement;
(b) determine that the terms and conditions of the Required Restorative Payment, the Repayment, and the Contribution and Assignment Agreement are prudent, in the interest of the Plan and its participants and beneficiaries, and protective of the rights of the Plan's participants and beneficiaries;
(c) confirm that the Required Restorative Payment was fully and timely made;
(d) monitor the Claims and confirm that the Plan receives its proper share of any litigation or settlement proceeds received by the Trust in connection with the Claims;
(e) ensure that any Repayment by the Plan to HMSA fully complies with the terms of this exemption and is for no more than the lesser of the total Restorative Payment actually made to the Plan by HMSA or the amount the Plan received from the Claims, plus Attorney Fees;
(f) ensure that any Repayment by the Plan to HMSA for legal expenses in connection with the Claims is limited to only reasonable legal expenses that were paid by HMSA to unrelated third parties for representation of the Plan and its interests (as opposed to representation of HMSA or the interests of any party other than the Plan) where HMSA was not otherwise reimbursed from a non-Plan party;
(g) monitor the Plan's Assigned Interests on an ongoing basis to determine and confirm that any excess recovery amount from the Claims (
(h) ensure that all of the conditions and definitions of this proposed exemption are met; and
(i) represent that it has not and will not enter into any agreement or instrument that violates ERISA Section 410 or Department Regulations codified at 29 CFR 2509.75–4.
22. This proposed exemption also requires Gallagher to respond in writing to any information requests from the Department regarding Gallagher's activities as the Plan's Independent Fiduciary. Additionally, no later than 90 days after the resolution of the litigation, Gallagher must submit a written report to the Department demonstrating that all terms and conditions of the exemption have been met.
23. This proposed exemption requires that the Plan has not and will not release any claims, demands and/or causes of action it may have against: (a) any fiduciary of the Plan; (b) any fiduciary of the Trust; (c) HMSA; and/or (d) any person or entity related to a person or entity described in (a)–(c) of this paragraph. Additionally, any Repayment by the Plan to HMSA must be made in a manner designed to minimize unnecessary costs and disruption to the Plan and its investments.
24. The Plan may not make any Repayment to HMSA before the date: the Plan has received from HMSA the entire amount of the Restorative Payment agreed to in the Contribution and Assignment Agreement; and all the Claims are settled. Furthermore, the Plan may not pay any interest to HMSA in connection with its receipt of the Required Restorative Payment, nor pledge Plan assets to secure any portion of the Required Restorative Payment.
25. Pursuant to this proposed exemption, the Plan may not incur any expenses, commissions or transaction costs in connection with the Proposed Transactions. However, as noted above, under certain circumstances the Plan may reimburse HMSA for reasonable legal expenses arising from the Claims that HMSA paid to non-HMSA-related parties for representation of the Plan and its interests (as opposed to representation of HMSA or the interests of any party other than the Plan) where HMSA was not otherwise reimbursed by a non-Plan party.
26. Finally, the exemptive relief provided under this proposed exemption is conditioned upon the Department's assumption that the material facts and representations set forth above in the Summary of Facts and Representation section are true and accurate at all times. In the event that a material fact or representation detailed above is untrue or inaccurate, the exemptive relief provided under this exemption will cease immediately.
27. ERISA Section 408(a) provides, in part, that the Department may not grant an exemption unless the Department finds that the exemption is administratively feasible, in the interest of affected plans and of their participants and beneficiaries, and protective of the rights of such participants and beneficiaries. Each of these criteria is discussed below.
a.
b.
c.
28. Based on the conditions described above, the Department has tentatively determined that the relief sought by the Applicant satisfies the statutory requirements under ERISA Section 408(a) for the Department to make findings that support its issuance of a proposed exemption.
The Department is considering granting an exemption under the authority of ERISA Section 408(a) and Code Section 4975(c)(2) and in accordance with the procedures set forth in the Department's exemption procedure regulation.
(a) The term “Attorney Fees” means reasonable legal expenses paid by HMSA on behalf of the Plan in connection with the Claims, if such fees are reviewed and approved by a qualified independent fiduciary who confirms that the fees were reasonably incurred and paid by HMSA to unrelated third parties. For the purposes of this exemption, the Attorney Fees reimbursable to HMSA do not include: (1) legal expenses paid by the Plan; and (2) legal expenses paid by HMSA for representation of HMSA or the interests of any party other than the Plan.
(b) The term “Claims” means the legal claims against Allianz Global Investors U.S. LLC (Allianz) and Aon Investments USA Inc. (Aon), to recover certain losses incurred by the Plan in the first quarter of 2020.
(c) The term “Contribution and Assignment Agreement” means the written agreement between HMSA and the Plan, dated November 3, 2020, containing all material terms regarding HMSA's agreement to make a $50,000,000 payment to the Plan in return for the Plan's potential Repayment to HMSA of an amount that is no more than the lesser of the total Restorative Payments actually made by HMSA or the amount of litigation proceeds the Plan receives from the Claims, plus reasonable Attorney Fees paid to unrelated third parties by HMSA in connection with the Claims.
(d) The term “HMSA” means Hawaii Medical Service Association.
(e) The term “Independent Fiduciary” means Gallagher Fiduciary Advisors, LLC (Gallagher) or a successor Independent Fiduciary to the extent Gallagher or the successor Independent Fiduciary continues to serve in such capacity who:
(1) Is not an affiliate of HMSA and does not hold an ownership interest in HMSA or affiliates of HMSA;
(2) Was not a fiduciary with respect to the Plan before its appointment to serve as the Independent Fiduciary;
(3) Has acknowledged in writing that it:
(i) is a fiduciary with respect to the Plan and has agreed not to participate in any decision regarding any transaction in which it has an interest that might affect its best judgment as a fiduciary; and
(ii) Has appropriate technical training or experience to perform the services contemplated by the exemption;
(4) Has not entered into any agreement or instrument that violates the prohibitions on exculpatory provisions in ERISA Section 410 or the Department's regulation relating to indemnification of fiduciaries;
(5) Has not received gross income from HMSA or its affiliates during any fiscal year in an amount that exceeds two percent (2%) of the Independent Fiduciary's gross income from all sources for the prior fiscal year. This provision also applies to a partnership or corporation of which the Independent Fiduciary is an officer, director, or 10 percent (10%) or more partner or shareholder, and includes as gross income amounts received as compensation for services provided as an independent fiduciary under any prohibited transaction exemption granted by the Department; and
(6) No organization or individual that is an Independent Fiduciary, and no partnership or corporation of which such organization or individual is an officer, director, or ten percent (10%) or more partner or shareholder, may acquire any property from, sell any property to, or borrow any funds from HMSA or from affiliates of HMSA while serving as an Independent Fiduciary. This prohibition will continue for six months after the party ceases to be an Independent Fiduciary and/or the Independent Fiduciary negotiates any transaction on behalf of the Plan during the period that the organization or individual serves as an Independent Fiduciary.
(f) The “Plan” means the Non-Contributory Retirement Program for Certain Employees of Hawaii Medical Service Association.
(g) The term “Plan Losses” means the $187,271,581 in Plan losses the BCBSA's National Employee Benefits Committee alleges were the result of breaches of fiduciary responsibilities and breaches of contract by Allianz Global Investors U.S. LLC and/or Aon Investments USA Inc.
(h) The term “Restorative Payment” means the payment made by HMSA to the Plan in connection with the Plan Losses, defined above, consisting of a $50,000,000 payment that HMSA contributed to the Plan on December 18, 2020. This $50,000,000 payment is the Required Restorative Payment Amount.
(i) The “Repayment” means the payment, if any, that the Plan will transfer to HMSA following the Plan's receipt of proceeds from the Claims, where the Repayment is made following the full and complete resolution of the Claims; and in a manner that is consistent with the terms of the exemption.
If the proposed exemption is granted, the restrictions of ERISA Sections 406(a)(1)(A) and (D) and the sanctions resulting from the application of Code Section 4975, by reason of Code Sections 4975(c)(1)(A) and (D), does not apply, effective November 3, 2020, to the following transactions: HMSA's transfer of Restorative Payment to the Plan; and, in return, the Plan's Repayment of an amount to HMSA, which must be no more than the lesser of the Restorative Payment Amount or the amount of litigation proceeds the Plan received from the Claims, plus reasonable Attorney Fees, provided that the Definitions set forth in Section I and the Conditions set forth in Section III are met.
(a) The Plan received the entire Restorative Payment on December 18, 2020;
(b) In connection with its receipt of the Restorative Payment, the Plan does not release any claims, demands and/or causes of action the Plan may have against the following: (1) any fiduciary of the Plan; (2) any fiduciary of the Trust; (3) HMSA; and/or (4) any person or entity related to a person or entity identified in (1)–(3) of this paragraph;
(c) The Plan's Repayment to HMSA is for no more than the lesser of the total Restorative Payment received by the Plan or the amount of litigation proceeds the Plan receives from the Claims. The Plan's Repayment to HMSA may only occur after the Independent Fiduciary has determined that: all the conditions of the exemption are met; the Plan has received the Restorative Payment it is due; and the Plan has received all the litigation proceeds it is due. The Plan's Repayment to HMSA must be carried out in a manner designed to minimize unnecessary costs and disruption to the Plan and its investments;
(d) A qualified independent fiduciary (the Independent Fiduciary, as further defined in Section II(e)), acting solely on behalf of the Plan in full accordance with its obligations of prudence and loyalty under ERISA Sections 404(a)(1)(A) and (B) must:
(1) Review, negotiate and approve the terms and conditions of the Restorative Payment and the Repayment and the Contribution and Assignment Agreement, all of which must be in writing, before the Plan enters into those transactions/agreement;
(2) Determine that the Restorative Payment, the Repayment, and the terms of the Contribution and Assignment Agreement, are prudent and in the interest of the Plan and its participants and beneficiaries;
(3) Confirm that the Required Restorative Payment Amount was fully and timely made;
(4) Monitor the litigation related to the Claims and confirm that the Plan receives, in a timely manner, its proper share of any litigation or settlement proceeds received by the Trust;
(5) Ensure that any Repayment by the Plan to HMSA for legal expenses in connection with the Claims is limited to only reasonable legal expenses that were paid by HMSA to unrelated third parties;
(6) Ensure that all of the conditions and definitions of this proposed exemption are met;
(7) Submit a written report to the Department's Office of Exemption Determinations demonstrating and confirming that the terms and conditions of the exemption were met, within 90 days after the Repayment; and
(8) Not enter into any agreement or instrument that violates ERISA Section 410 or the Department's Regulations codified at 29 CFR Section 2509.75–4.
(f) The Plan pays no interest in connection with the Restorative Payment;
(g) The Plan does not pledge any Plan assets to secure any portion of the Restorative Payment;
(h) The Plan does not incur any expenses, commissions, or transaction costs in connection with the Proposed Transactions. However, if first approved by the Independent Fiduciary, the Plan may reimburse HMSA for reasonable legal expenses paid in connection with the Claims by HAS to non-HMSA-related parties. For purposes of determining the amount of Attorney Fees the Plan may reimburse to HMSA under this proposal, the amount of reasonable attorney fees paid by HMSA on behalf of the Plan in connection with the Claims must be reduced by the amount of legal fees received by HMSA in connection with the Claims from any non-Plan party (
(i) The proposed transactions do not involve any risk of loss to either the Plan or the Plan's participants and beneficiaries;
(j) No party associated with this exemption has or will indemnify the Independent Fiduciary and the Independent Fiduciary will not request indemnification from any party, in whole or in part, for negligence and/or any violation of state or federal law that may be attributable to the Independent Fiduciary in performing its duties to the Plan with respect to the Proposed Transactions. In addition, no contract or instrument may purport to waive any liability under state or federal law for any such violation.
(k) If an Independent Fiduciary resigns, is removed, or for any reason is unable to serve as an Independent Fiduciary, the Independent Fiduciary must be replaced by a successor entity that: (1) meets the definition of Independent Fiduciary detailed above in Section II(e); and (2) otherwise meets all of the qualification, independence, prudence and diligence requirements set forth in this exemption. Further, any such successor Independent Fiduciary must assume all of the duties of the outgoing Independent Fiduciary. As soon as possible, including before the appointment of a successor Independent Fiduciary, HMSA must notify the Department's Office of Exemption Determinations of the change in Independent Fiduciary and such notification must contain all material information regarding the successor Independent Fiduciary, including the successor Independent Fiduciary's qualifications; and
(l) All of the material facts and representations set forth in the Summary of Facts and Representation are true and accurate at all times.
The Applicant will give notice of the proposed exemption to all interested persons and all of the parties to the litigation described above, within fifteen calendar days after the publication of the notice of proposed exemption in the
All comments will be made available to the public.
The Department is considering granting an exemption under the authority of Section 408(a) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and Section 4975(c)(2) of the Internal Revenue Code of 1986, as amended (the Code). The proposed exemption relates to legal actions and claims (the Claims) against Allianz Global Investors U.S. LLC (Allianz) and Aon Investments USA Inc. (Aon), that arose from certain losses incurred by the Non-Contributory
This proposed exemption would permit the Plan sponsor, BCS Financial Corporation (BCS), to make a series of payments to the Plan, including: (a) past payments totaling $19,600,000; and (b) a payment of $1,800,000 on or before September 13, 2023 (the Restorative Payments). If the Plan receives litigation proceeds from the Claims, the Plan will transfer the lesser of the ligation proceeds amount or the Restorative Payments, plus reasonable attorney fees to BCS.
1. BCS is a not-for-profit company that provides health insurance products and services. BCS is wholly-owned by all of the primary licensees of Blue Cross Blue Shield Association (BCBSA) that are headquartered in Illinois.
2. The Plan is an ERISA-covered qualified defined benefit pension plan that covers eligible employees of BCS. On December 31, 2019, the Plan was closed to new entrants. As of December 31, 2020, the Plan covered 242 participants and held $35,258,813 in total assets.
3. The Plan holds a beneficial interest in the Blue Cross and Blue Shield National Retirement Trust (the Trust). The Trust is a master trust that holds the assets of 16 defined benefit pension plans that participate in the BCBSA's National Retirement Program (the Participating Plans). Northern Trust serves as Trustee and asset custodian to the Trust and maintains separate records that reflect the net asset value of each Participating Plan. The Trust's earnings, market adjustments, and administrative expenses are allocated among the Participating Plans based on the respective Participating Plan's share of the Trust's assets. A Participating Plan's interest in the Trust's net assets is based on its share of the Trust.
4. The Committee serves as named fiduciary and administrator for each Participating Plan. The Committee is a standing committee of the BCBSA's board of directors. In 2011, the Committee invested a portion of the Trust's assets in funds managed by Allianz Global Investors U.S. LLC (Allianz), as part of a Structured Alpha Investment Strategy. These funds included: (a) AllianzGI Structured Alpha Multi-Beta Series LLC I; (b) AllianzGI Structured Alpha Emerging Markets Equity 350 LLC; and (c) AllianzGI Structured Alpha 1000 LLC (collectively, the Structured Alpha Funds).
5. The Applicant represents that the Allianz Structured Alpha strategy consisted of alpha and beta components. According to the applicant, the alpha component was an options trading strategy that Allianz claimed would seek targeted positive return potential while maintaining structural risk protections. The beta component was intended to provide broad market exposure to a particular asset class through investments in financial products similar to an exchange-traded fund that replicates the performance of a market index, such as the S&P 500. According to the Applicant, Allianz represented that the Structured Alpha Strategy would capitalize on the return-generating features of option selling (short volatility) while simultaneously benefitting from the risk-control attributes associated with option buying (long volatility). According to the Applicant, Allianz represented further that the alpha component would include position hedging consisting of long-volatility positions designed to protect the portfolio in the event of a market crash.
6. As of December 31, 2019, the total market value of the Plan's portion of the Trust's investment in the Allianz Structured Alpha Funds was $36,190,972, which represented 77.66% of total Plan assets.
7. In 2009, the Committee retained Aon (then called Ennis Knupp) to provide investment advice regarding the investment of Plan assets held in the Trust. The Applicant represents that Aon provided regular investment advice pursuant to a written contract between it and the Committee. Pursuant to its engagement, Aon agreed to provide the following: “recommendations to [the Committee] regarding asset allocation” within the Trust; “recommendations to [the Committee] regarding the specific asset allocation and other investment guidelines” for the Trust's investment managers such as Allianz; and advice “regarding the diversification of assets” held in the Trust.” The Applicant represents that Aon agreed to: conduct “active, ongoing monitoring” of Allianz to “identify any forward-looking” risks “that could impact performance;” and “inform itself” of any information necessary to discharge its duty to monitor, including information about the actual options positions Allianz had constructed.
8. The Applicant represents that when equity markets sharply declined in February and March of 2020, volatility spiked and the options positions held within the Structured Alpha Strategy were exposed to a heightened risk of loss. The Applicant represents that, unbeknownst to the Committee, and in violation of Allianz's stated investment strategy, Allianz abandoned the hedging strategy that was the supposed cornerstone of the Structured Alpha Strategy, leaving the portfolio almost entirely unhedged against a spike in market volatility. As described in the Claims, although Allianz had represented that it would buy hedges at strike prices ranging from 10% to 25% below the market, the hedges it actually held at the end of February 2020 were as much as 60% below the market.
The Applicant represents that, as of January 31, 2020, the Trust had invested approximately $2,916,049,486 in the Structured Alpha Strategy. Six weeks later, the Trust faced a margin call, which the Applicant states left it no choice but to liquidate the investment. The Trust was ultimately able to redeem only $646,762,678 of its $2,916,049,486 investment, resulting in a total loss of $2,269,286,808.
Specifically, regarding the Plan's portion of the loss, as of December 31, 2019, the market value of the Plan was $46,599,770. As of March 31, 2020, the market value of the Plan's total assets decreased to $15,806,147. The Applicant represents that the Plan's total losses from the Allianz Structured Alpha Strategy were $29,496,983, which caused the Plan to be underfunded.
9. On September 16, 2020, the Committee filed a cause of action in the United States District Court for the Southern District of New York (Case number 20–CIV–07606) against Allianz and Aon for Breach of Fiduciary Duty under ERISA Section 404, Breach of Co-Fiduciary Duty under ERISA Section 405, and violation of ERISA Section 406(b) for managing the Plan assets in its self-interest and breach of contract. It is possible that resolution of this claim and other legal actions against Allianz and Aon in connection with the Plan's losses (the Claims) could take an extended period of time.
10. The Applicant states that rather than wait for the Claims to be resolved, BCS took steps to protect Plan benefits and avoid onerous benefit restrictions under Code section 436 that could apply to the Plan as a result of a funding shortfall. Therefore, on October 9, 2020, BCS and the Plan entered into a Contribution and Assignment Agreement (the Contribution and Assignment Agreement).
11. Pursuant to the Contribution and Assignment Agreement, BCS agreed to make a $16,000,000 Restorative Payment to the Plan within seven business days after the Agreement's effective date. Subsequently, on October 13, 2020, BCS made a $16,000,000 Restorative Payment to the Plan.
12. On September 27, 2021, BCS and the Plan amended the Restorative Payments provision of the Contribution and Assignment Agreement (the Restorative Payment Amendment). Pursuant to the amendment, BCS agreed to make the following three additional Restorative Payments to the Plan: (a) a payment of $1,800,000 on or before September 13, 2021; (b) a payment of $1,800,000 on or before September 13, 2022; and (c) a payment of $1,800,000 on or before September 13, 2023. Since the effective date of the Restorative Payment Amendment, BCS Financial has made two additional Restorative Payments to the Plan: a $1,800,000 payment on September 14, 2021, and a $1,800,000 payment on January 14, 2022.
13. In exchange for the Restorative Payments, the Plan assigned to BCS its right to retain certain litigation and/or settlement proceeds recovered from the Claims (the Assigned Interests).
14. The Plan must ultimately receive at least the full value of the promised Restorative Payments, minus the Attorney Fees. The Plan may ultimately receive more than the Restorative Payment amount required under the Contribution and Assignment Agreement. If the Plan receives litigation or settlement proceeds that exceed the amount of Restorative Payments that BCS has made to the Plan, the Plan's Repayment to BCS will be limited to the amount of Restorative Payments actually made by BCS, plus Attorney Fees. For example, if BCS has made $19,600,000 in Restorative Payments to the Plan and reasonably incurred $100,000 in Attorney Fees, and if the Plan receives $30,000,000 in litigation proceeds, the Plan will make a Repayment to BCS totaling $19,700,000.
15. Alternatively, if the Plan receives less litigation or settlement proceeds than the amount of Restorative Payments that BCS has made to the Plan, the Plan will transfer to BCS the lesser amount of litigation or settlement proceeds, plus Attorney Fees. For example, if BCS has made $19,600,000 in Restorative Payments to the Plan and has reasonably incurred $100,000 in Attorney Fees, and if the Plan receives $10,000,000 in litigation proceeds, the Plan will make a Repayment to BCS totaling $10,100,000.
16. The Department notes that if the Plan receives any restitution that is tied to the conduct underlying the Claims but was ordered pursuant to a proceeding or directive that is external to Case number 20–CIV–07606, the disposition of such proceeds must conform to the requirements of this exemption.
17. BCS retained Gallagher Fiduciary Advisors, LLC (Gallagher or the Independent Fiduciary) of New York, New York, to serve as the Plan's independent fiduciary with respect to the Required Restorative Payments and the potential repayment by the Plan of those Payments (collectively, the Proposed Transactions). Gallagher represents that it has extensive experience in institutional investment consulting and fiduciary decision-making regarding traditional and alternative investments. Gallagher further represents that its independent fiduciary decision-making work involves acting as a fiduciary advisor or decision-maker for plans and other ERISA-regulated asset pools and that it has experience with a wide range of asset classes and litigation claims.
18. Gallagher represents that it understands its duties and responsibilities under ERISA in acting as a fiduciary on behalf of the Plan. Gallagher also acknowledges that it is authorized to take all appropriate actions to safeguard the Plan's interests, and that it will monitor the Proposed Transactions on the Plan's behalf on a continuous basis and throughout the term required by this exemption.
19. Gallagher represents that it does not have any prior relationship with any parties in interest to the Plan, including BCS and any BCS affiliates. Gallagher further represents the total revenues it has received from the Plan and from parties in interest to the Plan in connection with its engagement as Independent Fiduciary represents approximately 0.78% of Gallagher's total revenue.
20. Gallagher represents that no party associated with this exemption application has or will indemnify it, in whole or in part, for negligence of any kind and/or any violation of state or federal law that may be attributable to Gallagher's performance of its duties as Independent Fiduciary to the Plan with respect to the Proposed Transactions. In addition, no contract or instrument entered into by Gallagher as Independent Fiduciary may purport to waive any liability under state or federal law for any such violation.
21. On October 9, 2020, Gallagher completed an Independent Fiduciary Report (the Independent Fiduciary Report) finding that the massive losses caused by the Trust's investment in the Allianz Structured Alpha Strategy resulted in a significant reduction to the
Gallagher notes that the Contribution and Assignment Agreement provides that the Trust must reimburse BCS only up to the Required Restorative Payment Amount, plus any reasonable legal expense paid to non-BCS-related parties that were incurred by, or allocated to, BCS as a result of the Claims.
Gallagher states that the Proposed Transactions and the terms of the Contribution and Assignment Agreement were negotiated and approved by Gallagher in its role as the Plan's Independent Fiduciary. Gallagher states that it approved the Proposed Transactions only after conducting an extensive analysis of the damages suffered by the Plan as a result of the failed Allianz Structured Alpha Strategy. Gallagher represents that it conducted numerous discussions with Trust representatives and counsel, along with the Plan's representatives and counsel to ensure that the interests of the Plan's participants and beneficiaries were protected with respect to all aspects of the Proposed Transactions. Based upon its assessment, Gallagher approved the Plan's receipt of the Required Restorative Payments from BCS in exchange for the Assignment.
22. Absent an exemption, the Plan's receipt of the Restorative Payments from BCS in exchange for the Plan's transfer of litigation or settlement proceeds to BCS would violate ERISA. In this regard, ERISA Section 406(a)(1)(A) prohibits a plan fiduciary from causing the plan to engage in a transaction if the fiduciary knows or should know that such transaction constitutes a direct or indirect sale or exchange of any property between a plan and a party in interest. BCS, as an employer whose employees are covered by the Plan, is a party in interest with respect to the Plan under ERISA Section 3(14)(C). The Required Restorative Payments to the Plan and the Plan's potential repayment to BCS with litigation or settlement proceeds would constitute impermissible exchanges between the Plan and a party-in-interest (BCS) in violation of ERISA Section 406(a)(1)(A).
ERISA Section 406(a)(1)(B) prohibits the lending of money or other extension of credit between a plan and a party-in-interest. BCS's promise to make Required Restorative Payments to the Plan, over time, constitutes an impermissible extension of credit between the Plan and a party-in-interest in violation of ERISA Section 406(a)(1)(B).
ERISA Section 406(a)(1)(D) prohibits a plan fiduciary from causing a plan to engage in a transaction if the fiduciary knows or should know that the transaction constitutes a direct or indirect transfer to, or use by or for the benefit of, a party-in-interest, of the income or assets of the plan. The transfer of Plan assets to BCS in connection with the Repayment would constitute an impermissible transfer of Plan assets to a party-in-interest in violation of ERISA Section 406(a)(1)(D).
23. This proposed exemption contains a number of conditions that must be met. For example, the proposed exemption mandates that the Independent Fiduciary, in full accordance with its obligations of prudence and loyalty under ERISA Section 404(a)(1)(A) and (B) must:
(a) review, negotiate, and approve the terms and conditions of the Required Restorative Payments, the Repayment, and the Contribution and Assignment Agreement, before the Plan enters into such payments and the agreement;
(b) determine that the terms and conditions of the Required Restorative Payments, the Repayment, and the Contribution and Assignment Agreement are prudent, in the interest of the Plan and its participants and beneficiaries, and protective of the rights of the Plan's participants and beneficiaries;
(c) confirm that the Required Restorative Payments are fully and timely made;
(d) monitor the Claims and confirm that the Plan receives its proper share of any litigation or settlement proceeds received by the Trust in connection with the Claims;
(e) ensure that any Repayment by the Plan to BCS fully complies with the terms of this exemption and is for no more than the lesser of the total Restorative Payments actually made to the Plan by BCS or the amount the Plan received from the Claims, plus Attorney Fees;
(f) ensure that any Repayment by the Plan to BCS for legal expenses in connection with the Claims is limited to only reasonable legal expenses that were paid by BCS to unrelated third parties for representation of the Plan and its interests (as opposed to representation of BCS or the interests of any party other than the Plan) where BCS was not otherwise reimbursed from a non-Plan party;
(g) monitor the Plan's Assigned Interests on an ongoing basis to determine and confirm that any excess recovery amount from the Claims (
(h) ensure that all of the conditions and definitions of this proposed exemption are met; and
(i) represent that it has not and will not enter into any agreement or instrument that violates ERISA Section 410 or Department Regulations codified at 29 CFR 2509.75–4.
24. This proposed exemption also requires Gallagher to respond in writing to any information requests from the Department regarding Gallagher's activities as the Plan's Independent Fiduciary. Additionally, no later than 90 days after the resolution of the litigation, Gallagher must submit a written report to the Department demonstrating that all terms and conditions of the exemption have been met.
25. This proposed exemption requires that the Plan has not and will not release any claims, demands and/or causes of action it may have against: (a) any fiduciary of the Plan; (b) any fiduciary of the Trust; (c) BCS; and/or (d) any person or entity related to a person or entity described in (a)–(c) of this paragraph. Additionally, any Repayment by the Plan to BCS must be made in a manner designed to minimize unnecessary costs and disruption to the Plan and its investments.
26. The Plan may not make any Repayment to BCS before the date: the Plan has received from BCS the entire amount of the Restorative Payments agreed to in the Amended Contribution and Assignment Agreement; and all the Claims are settled. Furthermore, the Plan may not pay any interest to BCS in connection with its receipt of the Required Restorative Payments, nor pledge Plan assets to secure any portion of the Required Restorative Payments.
27. Pursuant to this proposed exemption, the Plan may not incur any expenses, commissions or transaction costs in connection with the Proposed Transactions. However, as noted above, under certain circumstances the Plan may reimburse BCS for reasonable legal expenses arising from the Claims that BCS paid to non-BCS-related parties for representation of the Plan and its interests (as opposed to representation of BCS or the interests of any party other than the Plan) where BCS was not otherwise reimbursed by a non-Plan party.
28. Finally, the exemptive relief provided under this proposed exemption is conditioned upon the Department's assumption that the material facts and representations set forth above in the Summary of Facts and Representation section are true and accurate at all times. In the event that a material fact or representation detailed above is untrue or inaccurate, the exemptive relief provided under this exemption will cease immediately.
29. ERISA Section 408(a) provides, in part, that the Department may not grant an exemption unless the Department finds that the exemption is administratively feasible, in the interest of affected plans and of their participants and beneficiaries, and protective of the rights of such participants and beneficiaries. Each of these criteria is discussed below.
a.
b.
c.
30. Based on the conditions described above, the Department has tentatively determined that the relief sought by the Applicant satisfies the statutory requirements under ERISA Section 408(a) for the Department to make findings that support its issuance of a proposed exemption.
The Department is considering granting an exemption under the authority of ERISA Section 408(a) and Code Section 4975(c)(2) and in accordance with the procedures set forth in the Department's exemption procedure regulation.
(a) The term “Attorney Fees” means reasonable legal expenses paid by BCS on behalf of the Plan in connection with the Claims, if such fees are reviewed and approved by a qualified independent fiduciary who confirms that the fees were reasonably incurred and paid by BCS to unrelated third parties. For the purposes of this exemption, the Attorney Fees reimbursable to BCS do not include: (1) legal expenses paid by the Plan; and (2) legal expenses paid by BCS for representation of BCS or the interests of any party other than the Plan.
(b) The term “BCS” means BCS Financial Corporation.
(c) The term “Claims” means the legal claims against Allianz Global Investors U.S. LLC (Allianz) and Aon Investments USA Inc. (Aon), to recover certain losses incurred by the Plan in the first quarter of 2020.
(d) The term “Contribution and Assignment Agreement” means the written agreement between BCS and the Plan, dated October 9, 2020, and its amendment that became effective on September 27, 2021, containing all material terms regarding BCS's agreement to make Required Restorative Payments (as described in Section I(h)) to the Plan in return for the Plan's potential Repayment to BCS of an amount that is no more than the lesser of the total Restorative Payments or the amount of litigation proceeds the Plan receives from the Claims, plus reasonable Attorney Fees paid to unrelated third parties by BCS in connection with the Claims.
(e) The term “Independent Fiduciary” means Gallagher Fiduciary Advisors, LLC (Gallagher) or a successor Independent Fiduciary to the extent Gallagher or the successor Independent Fiduciary continues to serve in such capacity who:
(1) Is not an affiliate of BCS and does not hold an ownership interest in BCS or affiliates of BCS;
(2) Was not a fiduciary with respect to the Plan before its appointment to serve as the Independent Fiduciary;
(3) Has acknowledged in writing that it:
(i) is a fiduciary with respect to the Plan and has agreed not to participate in any decision regarding any transaction in which it has an interest that might affect its best judgment as a fiduciary; and
(ii) Has appropriate technical training or experience to perform the services contemplated by the exemption;
(4) Has not entered into any agreement or instrument that violates the prohibitions on exculpatory provisions in ERISA Section 410 or the Department's regulation relating to indemnification of fiduciaries;
(5) Has not received gross income from BCS or its affiliates during any fiscal year in an amount that exceeds two percent (2%) of the Independent Fiduciary's gross income from all sources for the prior fiscal year. This provision also applies to a partnership or corporation of which the Independent Fiduciary is an officer, director, or 10 percent (10%) or more partner or shareholder, and includes as gross income amounts received as compensation for services provided as an independent fiduciary under any prohibited transaction exemption granted by the Department; and
(6) No organization or individual that is an Independent Fiduciary, and no partnership or corporation of which such organization or individual is an officer, director, or ten percent (10%) or more partner or shareholder, may acquire any property from, sell any property to, or borrow any funds from BCS or from affiliates of BCS while serving as an Independent Fiduciary. This prohibition will continue for six months after the party ceases to be an Independent Fiduciary and/or the Independent Fiduciary negotiates any transaction on behalf of the Plan during the period that the organization or individual serves as an Independent Fiduciary.
(f) The “Plan” means the Non-Contributory Retirement Program for Certain Employees of BCS Financial Corporation.
(g) The term “Plan Losses” means the $29,496,983 in Plan losses the BCBSA's National Employee Benefits Committee alleges were the result of breaches of fiduciary responsibilities and breaches of contract by Allianz Global Investors U.S. LLC and/or Aon Investments USA Inc.
(h) The term “Restorative Payments” means the payments made by BCS in connection with the Plan Losses, defined above, consisting of: (1) the past payment of $16,000,000, made on October 13, 2020; (2) the past payment of $1,800,000, made on September 14, 2021; (3) the past payment of $1,800,000 made on January 14, 2022; and (4) a payment of $1,800,000 to be made on or before September 13, 2023. The sum of (1)–(4) is the Required Restorative Payment Amount.
(i) The “Repayment” means the payment, if any, that the Plan will transfer to BCS following the Plan's receipt of proceeds from the Claims, where the Repayment is made following the full and complete resolution of the Claims; and in a manner that is consistent with the terms of the exemption.
If the proposed exemption is granted, the restrictions of ERISA Sections 406(a)(1)(A), (B) and (D) and the sanctions resulting from the application of Code Section 4975, by reason of Code Sections 4975(c)(1)(A), (B) and (D), shall not apply, effective October 9, 2020, to the following transactions: BCS's transfer of Restorative Payments to the Plan; and, in return, the Plan's Repayment of an amount to BCS, which must be no more than the lesser of the Restorative Payment Amount or the amount of litigation proceeds the Plan received from the Claims, plus reasonable Attorney Fees, provided that the Definitions set forth in Section I and the Conditions set forth in Section III are met.
(a) The Plan receives the entire Restorative Payment Amount no later than September 13, 2023;
(b) In connection with its receipt of the Required Restorative Payments, the Plan does not release any claims, demands and/or causes of action the Plan may have against the following: (1) any fiduciary of the Plan; (2) any fiduciary of the Trust; (3) BCS; and/or (4) any person or entity related to a person or entity identified in (1)–(3) of this paragraph;
(c) The Plan's Repayment to BCS is for no more than the lesser of the total Restorative Payments received by the Plan or the amount of litigation proceeds the Plan receives from the Claims. The Plan's Repayment to BCS may only occur after the Independent Fiduciary has determined that: all the conditions of the exemption are met; the Plan has received all the Restorative Payments it is due; and the Plan has received all the litigation proceeds it is due. The Plan's Repayment to BCS must be carried out in a manner designed to minimize unnecessary costs and disruption to the Plan and its investments;
(d) A qualified independent fiduciary (the Independent Fiduciary, as further defined in Section II(e)), acting solely on behalf of the Plan in full accordance with its obligations of prudence and loyalty under ERISA Sections 404(a)(1)(A) and (B) must:
(1) Review, negotiate and approve the terms and conditions of the Restorative Payments and the Repayment and the Contribution and Assignment Agreement, all of which must be in writing, before the Plan enters into those transactions/agreement;
(2) Determine that the Restorative Payments, the Repayment, and the terms of the Contribution and Assignment Agreement, are prudent and in the interest of the Plan and its participants and beneficiaries;
(3) Confirm that the Required Restorative Payment Amount was fully and timely made;
(4) Monitor the litigation related to the Claims and confirm that the Plan receives, in a timely manner, its proper share of any litigation or settlement proceeds received by the Trust;
(5) Ensure that any Repayment by the Plan to BCS for legal expenses in connection with the Claims is limited to only reasonable legal expenses that were paid by BCS to unrelated third parties;
(6) Ensure that all of the conditions and definitions of this proposed exemption are met;
(7) Submit a written report to the Department's Office of Exemption Determinations demonstrating and confirming that the terms and conditions of the exemption were met, within 90 days after the Repayment; and
(8) Not enter into any agreement or instrument that violates ERISA Section 410 or the Department's Regulations codified at 29 CFR Section 2509.75–4.
(f) The Plan pays no interest in connection with the Restorative Payments;
(g) The Plan does not pledge any Plan assets to secure any portion of the Restorative Payments;
(h) The Plan does not incur any expenses, commissions, or transaction costs in connection with the Proposed Transactions. However, if first approved by the Independent Fiduciary, the Plan may reimburse BCS for reasonable legal expenses paid in connection with the Claims by BCS to non-BCS-related parties. For purposes of determining the amount of Attorney Fees the Plan may reimburse to BCS under this proposal, the amount of reasonable attorney fees paid by BCS on behalf of the Plan in connection with the Claims must be reduced by the amount of legal fees received by BCS in connection with the Claims from any non-Plan party (
(i) The proposed transactions do not involve any risk of loss to either the Plan or the Plan's participants and beneficiaries;
(j) No party associated with this exemption has or will indemnify the Independent Fiduciary and the Independent Fiduciary will not request indemnification from any party, in whole or in part, for negligence and/or any violation of state or federal law that may be attributable to the Independent Fiduciary in performing its duties to the Plan with respect to the Proposed Transactions. In addition, no contract or instrument may purport to waive any liability under state or federal law for any such violation.
(k) If an Independent Fiduciary resigns, is removed, or for any reason is unable to serve as an Independent Fiduciary, the Independent Fiduciary must be replaced by a successor entity that: (1) meets the definition of Independent Fiduciary detailed above in Section II(e); and (2) otherwise meets all of the qualification, independence, prudence and diligence requirements set forth in this exemption. Further, any such successor Independent Fiduciary must assume all of the duties of the outgoing Independent Fiduciary. As soon as possible, including before the appointment of a successor Independent Fiduciary, BCS must notify the Department's Office of Exemption Determinations of the change in Independent Fiduciary and such notification must contain all material information regarding the successor Independent Fiduciary, including the successor Independent Fiduciary's qualifications; and
(l) All of the material facts and representations set forth in the Summary of Facts and Representation are true and accurate at all times.
The Applicant will give notice of the proposed exemption to all interested persons and all of the parties to the litigation described above, within fifteen calendar days after the publication of the notice of proposed exemption in the
All comments will be made available to the public.
The Department is considering granting an exemption under the authority of Section 408(a) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and Section 4975(c)(2) of the Internal Revenue Code of 1986, as amended (the Code). The proposed exemption relates to legal actions and claims (the Claims) against Allianz Global Investors U.S. LLC (Allianz) and Aon Investments USA Inc. (Aon), that arose from certain losses incurred by the Non-Contributory Retirement Program for Certain Employees of Blue Cross and Blue Shield of Mississippi (the Plan) in the first quarter of 2020.
This proposed exemption would permit the past payments of $70,000,000 and $12,000,000 by the Plan sponsor, Blue Cross and Blue Shield of Mississippi, A Mutual Insurance Company (BCBS MS), to the Plan (the Restorative Payments). If the Plan receives litigation proceeds from the Claims, the Plan will transfer the lesser of the ligation proceeds amount or the Restorative Payments, plus reasonable attorney fees to BCBS MS.
1. BCBS MS is a not-for-profit company that provides health insurance products and services. BCBS MS is an independent licensee of the Blue Cross Blue Shield Association (BCBSA).
2. The Plan is an ERISA-covered qualified defined benefit pension plan that covers eligible employees of BCBS MS and employees of affiliated employers. As of December 31, 2006, the Plan was closed to new entrants. As of December 31, 2020, the Plan covered 976 participants and held $153,536,775 in total assets.
3. The Plan holds a beneficial interest in the Blue Cross and Blue Shield National Retirement Trust (the Trust). The Trust is a master trust that holds the assets of 16 defined benefit pension plans that participate in the BCBSA's National Retirement Program (the Participating Plans). Northern Trust serves as Trustee and asset custodian to the Trust and maintains separate records that reflect the net asset value of each Participating Plan. The Trust's earnings, market adjustments, and administrative expenses are allocated among the Participating Plans based on the respective Participating Plan's share of the Trust's assets. A Participating Plan's interest in the Trust's net assets is based on its share of the Trust.
4. The Committee serves as named fiduciary and administrator for each Participating Plan. The Committee is a standing committee of the BCBSA's board of directors. In 2011, the Committee invested a portion of the Trust's assets in funds managed by Allianz Global Investors U.S. LLC (Allianz), as part of a Structured Alpha Investment Strategy. These funds included: (a) AllianzGI Structured Alpha Multi-Beta Series LLC I; (b) AllianzGI Structured Alpha Emerging Markets Equity 350 LLC; and (c) AllianzGI Structured Alpha 1000 LLC (collectively, the Structured Alpha Funds).
5. The Applicant represents that the Allianz Structured Alpha strategy
6. As of December 31, 2019, the total market value of the Plan's portion of the Trust's investment in the Allianz Structured Alpha Funds was $122,962,882, which represented 71.18% of total Plan assets.
7. In 2009, the Committee retained Aon (then called Ennis Knupp) to provide investment advice regarding the investment of Plan assets held in the Trust. The Applicant represents that Aon provided regular investment advice pursuant to a written contract between it and the Committee. Pursuant to its engagement, Aon agreed to provide the following: “recommendations to [the Committee] regarding asset allocation” within the Trust; “recommendations to [the Committee] regarding the specific asset allocation and other investment guidelines” for the Trust's investment managers such as Allianz; and advice “regarding the diversification of assets” held in the Trust.” The Applicant represents that Aon agreed to: conduct “active, ongoing monitoring” of Allianz to “identify any forward-looking” risks “that could impact performance;” and “inform itself” of any information necessary to discharge its duty to monitor, including information about the actual options positions Allianz had constructed.
8. The Applicant represents that when equity markets sharply declined in February and March of 2020, volatility spiked and the options positions held within the Structured Alpha Strategy were exposed to a heightened risk of loss. The Applicant represents that, unbeknownst to the Committee, and in violation of Allianz's stated investment strategy, Allianz abandoned the hedging strategy that was the supposed cornerstone of the Structured Alpha Strategy, leaving the portfolio almost entirely unhedged against a spike in market volatility. As described in the Claims, although Allianz had represented that it would buy hedges at strike prices ranging from 10% to 25% below the market, the hedges it actually held at the end of February 2020 were as much as 60% below the market.
The Applicant represents that, as of January 31, 2020, the Trust had invested approximately $2,916,049,486 in the Structured Alpha Strategy. Six weeks later, the Trust faced a margin call, which the Applicant states left it no choice but to liquidate the investment. The Trust was ultimately able to redeem only $646,762,678 of its $2,916,049,486 investment, resulting in a total loss of $2,269,286,808.
Specifically, regarding the Plan's portion of the loss, as of December 31, 2019 the market value of Plan assets was $172,731,750. As of March 31, 2020, the market value of Plan assets decreased to $67,238,446. The Applicant represents that the Plan's total losses from the Allianz Structured Alpha Strategy were $102,446,155, which caused the Plan to be underfunded.
9. On September 16, 2020, the Committee filed a cause of action in the United States District Court for the Southern District of New York (Case number 20–CIV–07606) against Allianz and Aon for Breach of Fiduciary Duty under ERISA Section 404, Breach of Co-Fiduciary Duty under ERISA Section 405, and violation of ERISA Section 406(b) for managing the Plan assets in its self-interest and breach of contract. It is possible that resolution of this claim and other legal actions against Allianz and Aon in connection with the Plan's losses (the Claims) could take an extended period of time.
10. The Applicant states that rather than wait for the Claims to be resolved, BCBS MS took steps to protect Plan benefits and avoid onerous benefit restrictions under Code section 436 that could apply to the Plan as a result of a funding shortfall. Therefore, on September 17, 2020, BCBS MS and the Plan entered into a Contribution and Assignment Agreement (the Contribution and Assignment Agreement).
11. Pursuant to the Contribution and Assignment Agreement, BCBS MS agreed to make the following Restorative Payments to the Plan: (a) a $70,000,000 payment within seven business days of the effective date of the Contribution and Assignment Agreement; and (b) a $12,000,000 payment on or about November 24, 2020. BCBS MS subsequently made the following Restorative Payments to the Plan: (a) a payment of $70,000,000 on September 21, 2020; and (b) a payment of $12,000,000 on November 25, 2020.
12. In exchange for the Restorative Payments, the Plan assigned to BCBS MS its right to retain certain litigation and/or settlement proceeds recovered from the Claims (the Assigned Interests).
For the purposes of this exemption, Attorney Fees reimbursable to BCBS MS do not include: (a) legal expenses paid by the Plan; and (b) legal expenses paid by BCBS MS for representation of its own interests or the interests of any party other than the Plan. For purposes of determining the amount of Attorney Fees the Plan may reimburse to BCBS MS under this exemption, the amount of reasonable attorney fees paid by BCBS MS on behalf of the Plan in connection with the Claims must be reduced by the amount of legal fees received by BCBS MS in connection with the Claims from any non-Plan party (for example, from a third party pursuant to a court award).
13. The Plan must ultimately receive at least the full value of the promised Restorative Payments, minus the Attorney Fees. The Plan, however, may ultimately receive more than the Restorative Payment amount required under the Contribution and Assignment Agreement. If the Plan receives litigation or settlement proceeds that exceed the amount of Restorative Payments that BCBS MS has made to the Plan, the Plan's Repayment to BCBS MS will be limited to the amount of
14. Alternatively, if the Plan receives less litigation or settlement proceeds than the amount of Restorative Payments that BCBS MS has made to the Plan, the Plan will transfer to BCBS MS the lesser amount of litigation or settlement proceeds, plus Attorney Fees. For example, if BCBS MS has reasonably incurred $100,000 in Attorney Fees, and the Plan receives $50,000,000 in litigation proceeds, the Plan will make a Repayment to BCBS MS totaling $50,100,000.
15. The Department notes that if the Plan receives any restitution that is tied to the conduct underlying the Claims but was ordered pursuant to a proceeding or directive that is external to Case number 20–CIV–07606, the disposition of such proceeds must conform to the requirements of this exemption.
16. BCBS MS retained Gallagher Fiduciary Advisors, LLC (Gallagher or the Independent Fiduciary) of New York, New York, to serve as the Plan's independent fiduciary with respect to the Required Restorative Payments and the potential repayment by the Plan of those Payments (collectively, the Proposed Transactions). Gallagher represents that it has extensive experience in institutional investment consulting and fiduciary decision-making regarding traditional and alternative investments. Gallagher further represents that its independent fiduciary decision-making work involves acting as a fiduciary advisor or decision-maker for plans and other ERISA-regulated asset pools and that it has experience with a wide range of asset classes and litigation claims.
17. Gallagher represents that it understands its duties and responsibilities under ERISA in acting as a fiduciary on behalf of the Plan. Gallagher also acknowledges that it is authorized to take all appropriate actions to safeguard the Plan's interests, and that it will monitor the Proposed Transactions on the Plan's behalf on a continuous basis and throughout the term required by this exemption.
18. Gallagher represents that it does not have any prior relationship with any parties in interest to the Plan, including BCBS MS and any BCBS MS affiliates. Gallagher further represents the total revenues it has received from the Plan and from parties in interest to the Plan in connection with its engagement as Independent Fiduciary represents approximately 0.78% of Gallagher's total revenue.
19. Gallagher represents that no party associated with this exemption application has or will indemnify it, in whole or in part, for negligence of any kind and/or any violation of state or federal law that may be attributable to Gallagher's performance of its duties as Independent Fiduciary to the Plan with respect to the Proposed Transactions. In addition, no contract or instrument entered into by Gallagher as Independent Fiduciary may purport to waive any liability under state or federal law for any such violation.
20. On September 17, 2020, Gallagher completed an Independent Fiduciary Report (the Independent Fiduciary Report) finding that the massive losses caused by the Trust's investment in the Allianz Structured Alpha Strategy resulted in a significant reduction to the Plan's total assets and funding level. Gallagher represents that the Required Restorative Payments, which will be received by the Plan substantially in advance of a final resolution of the Claims against Allianz and Aon, should restore the Plan's funded percentage to its pre-loss funded percentage as of January 1, 2019. The restoration of the Plan's funding status will secure ongoing benefit payments to participants and beneficiaries.
Gallagher notes that the Contribution and Assignment Agreement provides that the Trust must reimburse BCBS MS only up to the Required Restorative Payment Amount received by the Plan, plus any reasonable legal expense paid to non-BCBS MS-related parties that were incurred by, or allocated to, BCBS MS as a result of the Claims.
Gallagher states that the Proposed Transactions and the terms of the Contribution and Assignment Agreement were negotiated and approved by Gallagher in its role as the Plan's Independent Fiduciary. Gallagher states that it approved the Proposed Transactions only after conducting an extensive analysis of the damages suffered by the Plan as a result of the failed Allianz Structured Alpha Strategy. Gallagher represents that it conducted numerous discussions with Trust representatives and counsel, along with the Plan's representatives and counsel to ensure that the interests of the Plan's participants and beneficiaries were protected with respect to all aspects of the Proposed Transactions. Based upon its assessment, Gallagher approved the Plan's receipt of the Required Restorative Payments from BCBS MS in exchange for the Assignment.
21. Absent an exemption, the Plan's receipt of the Restorative Payments from BCBS MS in exchange for the Plan's transfer of litigation or settlement proceeds to BCBS MS would violate ERISA. In this regard, ERISA Section 406(a)(1)(A) prohibits a plan fiduciary from causing the plan to engage in a transaction if the fiduciary knows or should know that such transaction constitutes a direct or indirect sale or exchange of any property between a plan and a party in interest. BCBS MS, as an employer whose employees are covered by the Plan, is a party in interest with respect to the Plan under ERISA Section 3(14)(C). The Required Restorative Payments to the Plan and the Plan's potential repayment to BCBS MS with litigation or settlement proceeds would constitute impermissible exchanges between the Plan and a party-in-interest (BCBS MS) in violation of ERISA Section 406(a)(1)(A).
ERISA Section 406(a)(1)(B) prohibits the lending of money or other extension of credit between a plan and a party-in-interest. BCBS MS's promise to make Required Restorative Payments to the Plan, over time, constitutes an impermissible extension of credit between the Plan and a party-in-interest in violation of ERISA Section 406(a)(1)(B).
ERISA Section 406(a)(1)(D) prohibits a plan fiduciary from causing a plan to engage in a transaction if the fiduciary knows or should know that the transaction constitutes a direct or indirect transfer to, or use by or for the benefit of, a party-in-interest, of the income or assets of the plan. The transfer of Plan assets to BCBS MS in connection with the Repayment would constitute an impermissible transfer of Plan assets to a party-in-interest in violation of ERISA Section 406(a)(1)(D).
22. This proposed exemption contains a number of conditions that must be met. For example, the proposed exemption mandates that the Independent Fiduciary, in full accordance with its obligations of prudence and loyalty under ERISA Section 404(a)(1)(A) and (B) must:
(a) review, negotiate, and approve the terms and conditions of the Required Restorative Payments, the Repayment, and the Contribution and Assignment Agreement, before the Plan enters into such payments and the agreement;
(b) determine that the terms and conditions of the Required Restorative Payments, the Repayment, and the Contribution and Assignment Agreement are prudent, in the interest of the Plan and its participants and beneficiaries, and protective of the rights of the Plan's participants and beneficiaries;
(c) confirm that the Required Restorative Payments are fully and timely made;
(d) monitor the Claims and confirm that the Plan receives its proper share of any litigation or settlement proceeds received by the Trust in connection with the Claims;
(e) ensure that any Repayment by the Plan to BCBS MS fully complies with the terms of this exemption and is for no more than the lesser of the total Restorative Payments actually made to the Plan by BCBS MS or the amount the Plan received from the Claims, plus Attorney Fees;
(f) ensure that any Repayment by the Plan to BCBS MS for legal expenses in connection with the Claims is limited to only reasonable legal expenses that were paid by BCBS MS to unrelated third parties for representation of the Plan and its interests (as opposed to representation of BCBS MS or the interests of any party other than the Plan) where BCBS MS was not otherwise reimbursed from a non-Plan party;
(g) monitor the Plan's Assigned Interests on an ongoing basis to determine and confirm that any excess recovery amount from the Claims (
(h) ensure that all of the conditions and definitions of this proposed exemption are met; and
(i) represent that it has not and will not enter into any agreement or instrument that violates ERISA Section 410 or Department Regulations codified at 29 CFR 2509.75–4.
23. This proposed exemption also requires Gallagher to respond in writing to any information requests from the Department regarding Gallagher's activities as the Plan's Independent Fiduciary. Additionally, no later than 90 days after the resolution of the litigation, Gallagher must submit a written report to the Department demonstrating that all terms and conditions of the exemption have been met.
24. This proposed exemption requires that the Plan has not and will not release any claims, demands and/or causes of action it may have against: (a) any fiduciary of the Plan; (b) any fiduciary of the Trust; (c) BCBS MS; and/or (d) any person or entity related to a person or entity described in (a)-(c) of this paragraph. Additionally, any Repayment by the Plan to BCBS MS must be made in a manner designed to minimize unnecessary costs and disruption to the Plan and its investments.
25. The Plan may not make any Repayment to BCBS MS before the date: the Plan has received from BCBS MS the entire amount of the Restorative Payments agreed to in the Amended Contribution and Assignment Agreement; and all the Claims are settled. Furthermore, the Plan may not pay any interest to BCBS MS in connection with its receipt of the Required Restorative Payments, nor pledge Plan assets to secure any portion of the Required Restorative Payments.
26. Pursuant to this proposed exemption, the Plan may not incur any expenses, commissions or transaction costs in connection with the Proposed Transactions. However, as noted above, under certain circumstances the Plan may reimburse BCBS MS for reasonable legal expenses arising from the Claims that BCBS MS paid to non-BCBS MS-related parties for representation of the Plan and its interests (as opposed to representation of BCBS MS or the interests of any party other than the Plan) where BCBS MS was not otherwise reimbursed by a non-Plan party.
27. Finally, the exemptive relief provided under this proposed exemption is conditioned upon the Department's assumption that the material facts and representations set forth above in the Summary of Facts and Representation section are true and accurate at all times. In the event that a material fact or representation detailed above is untrue or inaccurate, the exemptive relief provided under this exemption will cease immediately.
28. ERISA Section 408(a) provides, in part, that the Department may not grant an exemption unless the Department finds that the exemption is administratively feasible, in the interest of affected plans and of their participants and beneficiaries, and protective of the rights of such participants and beneficiaries. Each of these criteria is discussed below.
a.
b.
c.
29. Based on the conditions described above, the Department has tentatively determined that the relief sought by the Applicant satisfies the statutory requirements under ERISA Section 408(a) for the Department to make findings that support its issuance of a proposed exemption.
The Department is considering granting an exemption under the authority of ERISA Section 408(a) and Code Section 4975(c)(2) and in accordance with the procedures set forth in the Department's exemption procedure regulation.
(a) The term “Attorney Fees” means reasonable legal expenses paid by BCBS MS on behalf of the Plan in connection with the Claims, if such fees are reviewed and approved by a qualified independent fiduciary who confirms that the fees were reasonably incurred and paid by BCBS MS to unrelated third parties. For the purposes of this exemption, the Attorney Fees reimbursable to BCBS MS do not include: (1) legal expenses paid by the Plan; and (2) legal expenses paid by BCBS MS for representation of BCBC MS or the interests of any party other than the Plan.
(b) The term “BCBS MS” means Blue Cross and Blue Shield of Mississippi, a Mutual Insurance Company.
(c) The term “Claims” means the legal claims against Allianz Global Investors U.S. LLC (Allianz) and Aon Investments USA Inc. (Aon), to recover certain losses incurred by the Plan in the first quarter of 2020.
(d) The term “Contribution and Assignment Agreement” means the written agreement between BCBS MS and the Plan, dated September 17, 2020, containing all material terms regarding BCBS MS's agreement to make Required Restorative Payments to the Plan in return for the Plan's potential Repayment to BCBS MS of an amount that is no more than lesser of the Required Restorative Payment Amount (as described in Section I(h)) or the amount of litigation proceeds the Plan receives from the Claims, plus reasonable attorney fees paid to unrelated third parties by BCBS MS in connection with the Claims.
(e) The term “Independent Fiduciary” means Gallagher Fiduciary Advisors, LLC (Gallagher) or a successor Independent Fiduciary to the extent Gallagher or the successor Independent Fiduciary continues to serve in such capacity who:
(1) Is not an affiliate of BCBS MS and does not hold an ownership interest in BCBS MS or affiliates of BCBS MS;
(2) Was not a fiduciary with respect to the Plan before its appointment to serve as the Independent Fiduciary;
(3) Has acknowledged in writing that it:
(i) is a fiduciary with respect to the Plan and has agreed not to participate in any decision regarding any transaction in which it has an interest that might affect its best judgment as a fiduciary; and
(ii) Has appropriate technical training or experience to perform the services contemplated by the exemption;
(4) Has not entered into any agreement or instrument that violates the prohibitions on exculpatory provisions in ERISA Section 410 or the Department's regulation relating to indemnification of fiduciaries;
(5) Has not received gross income from BCBS MS or its affiliates during any fiscal year in an amount that exceeds two percent (2%) of the Independent Fiduciary's gross income from all sources for the prior fiscal year. This provision also applies to a partnership or corporation of which the Independent Fiduciary is an officer, director, or 10 percent (10%) or more partner or shareholder, and includes as gross income amounts received as compensation for services provided as an independent fiduciary under any prohibited transaction exemption granted by the Department; and
(6) No organization or individual that is an Independent Fiduciary, and no partnership or corporation of which such organization or individual is an officer, director, or ten percent (10%) or more partner or shareholder, may acquire any property from, sell any property to, or borrow any funds from BCBS MS or from affiliates of BCBS MS while serving as an Independent Fiduciary. This prohibition will continue for six months after the party ceases to be an Independent Fiduciary and/or the Independent Fiduciary negotiates any transaction on behalf of the Plan during the period that the organization or individual serves as an Independent Fiduciary.
(f) The “Plan” means the Non-Contributory Retirement Program for Certain Employees of Blue Cross and Blue Shield of Mississippi.
(g) The term “Plan Losses” means the $102,446,155 in Plan losses the BCBSA's National Employee Benefits Committee alleges were the result of breaches of fiduciary responsibilities and breaches of contract by Allianz Global Investors U.S. LLC and/or Aon Investments USA Inc.
(h) The term “Restorative Payments” means the payments made by BCBS MS to the Plan in connection with the Plan Losses, defined above, consisting of: (1) the past payment of $70,000,000 made on September 21, 2020; and (2) the past payment of $12,000,000 made on November 25, 2020. The sum of (1) and (2) is the Required Restorative Payment Amount.
(i) The “Repayment” means the payment, if any, that the Plan will transfer to BCBS MS following the Plan's receipt of proceeds from the Claims, where the Repayment is made following the full and complete resolution of the Claims; and in a manner that is consistent with the terms of the exemption.
If the proposed exemption is granted, the restrictions of ERISA Sections 406(a)(1)(A), (B) and (D) and the sanctions resulting from the application of Code Section 4975, by reason of Code Sections 4975(c)(1)(A), (B) and (D), shall not apply, effective September 17, 2020, to the following transactions: BCBS MS's transfer of Restorative Payments to the Plan; and, in return, the Plan's Repayment of an amount to BCBS MS, which must be no more than the lesser of the Restorative Payments or the amount of litigation proceeds the Plan received from the Claims, plus reasonable Attorney Fees, provided that the Definitions set forth in Section I and the Conditions set forth in Section III are met.
(a) The Plan received the entire Restorative Payment Amount no later than November 25, 2020;
(b) In connection with its receipt of the Required Restorative Payments, the Plan does not release any claims, demands and/or causes of action the Plan may have against the following: (1) any fiduciary of the Plan; (2) any fiduciary of the Trust; (3) BCBS MS; and/or (4) any person or entity related to a person or entity identified in (1)–(3) of this paragraph;
(c) The Plan's Repayment to BCBS MS is for no more than the lesser of the total Restorative Payments received by the Plan or the amount of litigation proceeds the Plan receives from the Claims. The Plan's Repayment to BCBS MS may only occur after the Independent Fiduciary has determined that: all the conditions of the exemption are met; the Plan has received all the Restorative Payments it is due; and the Plan has received all the litigation proceeds it is due. The Plan's Repayment to BCBS MS must be carried out in a manner designed to minimize unnecessary costs and disruption to the Plan and its investments;
(d) A qualified independent fiduciary (the Independent Fiduciary, as further defined in Section II(e)), acting solely on behalf of the Plan in full accordance with its obligations of prudence and loyalty under ERISA Sections 404(a)(1)(A) and (B) must:
(1) Review, negotiate and approve the terms and conditions of the Restorative Payments and the Repayment and the Contribution and Assignment Agreement, all of which must be in writing, before the Plan enters into those transactions/agreement;
(2) Determine that the Restorative Payments, the Repayment, and the terms of the Contribution and Assignment Agreement, are prudent and in the interest of the Plan and its participants and beneficiaries;
(3) Confirm that the Required Restorative Payments were fully and timely made;
(4) Monitor the litigation related to the Claims and confirm that the Plan receives, in a timely manner, its proper share of any litigation or settlement proceeds received by the Trust;
(5) Ensure that any Repayment by the Plan to BCBS MS for legal expenses in connection with the Claims is limited to only reasonable legal expenses that were paid by BCBS MS to unrelated third parties;
(6) Ensure that all of the conditions and definitions of this proposed exemption are met;
(7) Submit a written report to the Department's Office of Exemption Determinations demonstrating and confirming that the terms and conditions of the exemption were met, within 90 days after the Repayment; and
(8) Not enter into any agreement or instrument that violates ERISA Section 410 or the Department's Regulations codified at 29 CFR Section 2509.75–4.
(f) The Plan pays no interest in connection with the Restorative Payments;
(g) The Plan does not pledge any Plan assets to secure any portion of the Restorative Payments;
(h) The Plan does not incur any expenses, commissions, or transaction costs in connection with the Proposed Transactions. However, if first approved by the Independent Fiduciary, the Plan may reimburse BCBS MS for reasonable legal expenses paid in connection with the Claims by BCBS MS to non-BCBS MS-related parties. For purposes of determining the amount of Attorney Fees the Plan may reimburse to BCBS MS under this proposal, the amount of reasonable attorney fees paid by BCBS MS on behalf of the Plan in connection with the Claims must be reduced by the amount of legal fees received by BCBS MS in connection with the Claims from any non-Plan party (
(i) The proposed transactions do not involve any risk of loss to either the Plan or the Plan's participants and beneficiaries;
(j) No party associated with this exemption has or will indemnify the Independent Fiduciary and the Independent Fiduciary will not request indemnification from any party, in whole or in part, for negligence and/or any violation of state or federal law that may be attributable to the Independent Fiduciary in performing its duties to the Plan with respect to the Proposed Transactions. In addition, no contract or instrument may purport to waive any liability under state or federal law for any such violation.
(k) If an Independent Fiduciary resigns, is removed, or for any reason is unable to serve as an Independent Fiduciary, the Independent Fiduciary must be replaced by a successor entity that: (1) meets the definition of Independent Fiduciary detailed above in Section II(e); and (2) otherwise meets all of the qualification, independence, prudence and diligence requirements set forth in this exemption. Further, any such successor Independent Fiduciary must assume all of the duties of the outgoing Independent Fiduciary. As soon as possible, including before the appointment of a successor Independent Fiduciary, BCBS MS must notify the Department's Office of Exemption Determinations of the change in Independent Fiduciary and such notification must contain all material information regarding the successor Independent Fiduciary, including the successor Independent Fiduciary's qualifications; and
(l) All of the material facts and representations set forth in the Summary of Facts and Representation are true and accurate at all times.
The Applicant will give notice of the proposed exemption to all interested persons and all of the parties to the litigation described above, within fifteen calendar days after the publication of the notice of proposed exemption in the
All comments will be made available to the public.
The Department is considering granting an exemption under the authority of Section 408(a) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and Section 4975(c)(2) of the Internal Revenue Code of 1986, as amended (the Code). The proposed exemption relates to legal actions and claims (the Claims) against Allianz Global Investors U.S.
This proposed exemption would permit the past payments of $7,000,000 and $6,600,000 by the Plan sponsor, Blue Cross and Blue Shield of Nebraska, Inc. (BCBS Nebraska or the Applicant), to the Plan (the Restorative Payments). If the Plan receives litigation proceeds from the Claims, the Plan will transfer the lesser of the ligation proceeds amount or the Restorative Payments, plus reasonable attorney fees to BCBS Nebraska.
1. BCBS Nebraska is a not-for-profit company that provides health insurance products and services. BCBS Nebraska is an independent licensee of the Blue Cross Blue Shield Association (BCBSA).
2. The Plan is an ERISA-covered qualified defined benefit pension plan that covers eligible employees of BCBS Nebraska. The Plan was amended, effective January 1, 2006, to close participation to new entrants as of December 31, 2005. As of August 31, 2020, the Plan covered 418 participants and held $36,863,722 in total assets.
3. The Plan holds a beneficial interest in the Blue Cross and Blue Shield National Retirement Trust (the Trust). The Trust is a master trust that holds the assets of 16 defined benefit pension plans that participate in the BCBSA's National Retirement Program (the Participating Plans). Northern Trust serves as Trustee and asset custodian to the Trust and maintains separate records that reflect the net asset value of each Participating Plan. The Trust's earnings, market adjustments, and administrative expenses are allocated among the Participating Plans based on the respective Participating Plan's share of the Trust's assets. A Participating Plan's interest in the Trust's net assets is based on its share of the Trust.
4. The Committee serves as named fiduciary and administrator for each Participating Plan. The Committee is a standing committee of the BCBSA's board of directors. In 2011, the Committee invested a portion of the Trust's assets in funds managed by Allianz Global Investors U.S. LLC (Allianz), as part of a Structured Alpha Investment Strategy. These funds included: (a) AllianzGI Structured Alpha Multi-Beta Series LLC I; (b) AllianzGI Structured Alpha Emerging Markets Equity 350 LLC; and (c) AllianzGI Structured Alpha 1000 LLC (collectively, the Structured Alpha Funds).
5. The Applicant represents that the Allianz Structured Alpha strategy consisted of alpha and beta components. According to the applicant, the alpha component was an options trading strategy that Allianz claimed would seek targeted positive return potential while maintaining structural risk protections. The beta component was intended to provide broad market exposure to a particular asset class through investments in financial products similar to an exchange-traded fund that replicates the performance of a market index, such as the S&P 500. According to the Applicant, Allianz represented that the Structured Alpha Strategy would capitalize on the return-generating features of option selling (short volatility) while simultaneously benefitting from the risk-control attributes associated with option buying (long volatility). According to the Applicant, Allianz represented further that the alpha component would include position hedging consisting of long-volatility positions designed to protect the portfolio in the event of a market crash.
6. As of December 31, 2019, the total market value of the Plan's portion of the Trust's investment in the Allianz Structured Alpha Funds was $42,147,684, which represented 59.39% of total Plan assets.
7. In 2009, the Committee retained Aon (then called Ennis Knupp) to provide investment advice regarding the investment of Plan assets held in the Trust. The Applicant represents that Aon provided regular investment advice pursuant to a written contract between it and the Committee. Pursuant to its engagement, Aon agreed to provide the following: “recommendations to [the Committee] regarding asset allocation” within the Trust; “recommendations to [the Committee] regarding the specific asset allocation and other investment guidelines” for the Trust's investment managers such as Allianz; and advice “regarding the diversification of assets” held in the Trust.” The Applicant represents that Aon agreed to: conduct “active, ongoing monitoring” of Allianz to “identify any forward-looking” risks “that could impact performance;” and “inform itself” of any information necessary to discharge its duty to monitor, including information about the actual options positions Allianz had constructed.
8. The Applicant represents that when equity markets sharply declined in February and March of 2020, volatility spiked and the options positions held within the Structured Alpha Strategy were exposed to a heightened risk of loss. The Applicant represents that, unbeknownst to the Committee, and in violation of Allianz's stated investment strategy, Allianz abandoned the hedging strategy that was the supposed cornerstone of the Structured Alpha Strategy, leaving the portfolio almost entirely unhedged against a spike in market volatility. As described in the Claims, although Allianz had represented that it would buy hedges at strike prices ranging from 10% to 25% below the market, the hedges it actually held at the end of February 2020 were as much as 60% below the market.
The Applicant represents that, as of January 31, 2020, the Trust had invested approximately $2,916,049,486 in the Structured Alpha Strategy. Six weeks later, the Trust faced a margin call, which the Applicant states left it no choice but to liquidate the investment. The Trust was ultimately able to redeem only $646,762,678 of its $2,916,049,486 investment, resulting in a total loss of $2,269,286,808.
Specifically, regarding the Plan's portion of the loss, as of December 31, 2019 the market value of Plan assets was $70,967,280. As of March 31, 2020, the market value of Plan assets decreased to $36,028,581. The Applicant represents
9. On September 16, 2020, the Committee filed a cause of action in the United States District Court for the Southern District of New York (Case number 20–CIV–07606) against Allianz and Aon for Breach of Fiduciary Duty under ERISA Section 404, Breach of Co-Fiduciary Duty under ERISA Section 405, and violation of ERISA Section 406(b) for managing the Plan assets in its self-interest and breach of contract. It is possible that resolution of this claim and other legal actions against Allianz and Aon in connection with the Plan's losses (the Claims) could take an extended period of time.
10. The Applicant states that rather than wait for the Claims to be resolved, BCBS Nebraska took steps to protect Plan benefits and avoid onerous benefit restrictions under Code section 436 that could apply to the Plan as a result of a funding shortfall. Therefore, on November 5, 2020, BCBS Nebraska and the Plan entered into a Contribution and Assignment Agreement (the Contribution and Assignment Agreement). Pursuant to the Contribution and Assignment Agreement, BCBS Nebraska agreed to make Restorative Payments to the Plan not in excess of $33,649,481 by September 15, 2022. Subsequently, on August 25, 2021, BCBS Nebraska made a $7,000,000 Restorative Payment to the Plan.
11. On March 17, 2022, BCBS Nebraska and the Plan amended the Restorative Payments provision of the Contribution and Assignment Agreement to require BCBS Nebraska to make one additional Restorative Payment of $6,600,000 to the Plan by September 15, 2022. Subsequently, on March 29, 2022, BCBS Nebraska made a $6,600,000 Restorative Payment to the Plan.
12. In exchange for the Restorative Payments, the Plan assigned to BCBS Nebraska its right to retain certain litigation and/or settlement proceeds recovered from the Claims (the Assigned Interests).
For the purposes of this exemption, Attorney Fees reimbursable to BCBS Nebraska do not include: (a) legal expenses paid by the Plan; and (b) legal expenses paid by BCBS Nebraska for representation of its own interests or the interests of any party other than the Plan. For purposes of determining the amount of Attorney Fees the Plan may reimburse to BCBS Nebraska under this exemption, the amount of reasonable attorney fees paid by BCBS Nebraska on behalf of the Plan in connection with the Claims must be reduced by the amount of legal fees received by BCBS Nebraska in connection with the Claims from any non-Plan party (for example, from a third party pursuant to a court award).
13. The Plan must ultimately receive at least the full value of the promised Restorative Payments, minus the Attorney Fees. The Plan may ultimately receive more than the Restorative Payment amount required under the Contribution and Assignment Agreement. If the Plan receives litigation or settlement proceeds that exceed the amount of Restorative Payments that BCBS Nebraska has made to the Plan, the Plan's Repayment to BCBS Nebraska will be limited to the amount of Restorative Payments actually made by BCBS Nebraska, plus Attorney Fees. For example, if BCBS Nebraska has reasonably incurred $100,000 in Attorney Fees, and the Plan receives $30,000,000 in litigation proceeds, the Plan will make a Repayment to BCBS Nebraska totaling $13,700,000.
14. Alternatively, if the Plan receives less litigation or settlement proceeds than the amount of Restorative Payments that BCBS Nebraska has made to the Plan, the Plan will transfer to BCBS Nebraska the lesser amount of litigation or settlement proceeds, plus Attorney Fees. For example, if BCBS Nebraska reasonably incurred $100,000 in Attorney Fees, and the Plan receives $5,000,000 in litigation proceeds, the Plan will make a Repayment to BCBS Nebraska totaling $5,100,000.
15. The Department notes that if the Plan receives any restitution that is tied to the conduct underlying the Claims but was ordered pursuant to a proceeding or directive that is external to Case number 20–CIV–07606, the disposition of such proceeds must conform to the requirements of this exemption.
16. BCBS Nebraska retained Gallagher Fiduciary Advisors, LLC (Gallagher or the Independent Fiduciary) of New York, New York, to serve as the Plan's independent fiduciary with respect to the Required Restorative Payments and the potential repayment by the Plan of those Payments (collectively, the Proposed Transactions). Gallagher represents that it has extensive experience in institutional investment consulting and fiduciary decision-making regarding traditional and alternative investments. Gallagher further represents that its independent fiduciary decision-making work involves acting as a fiduciary advisor or decision-maker for plans and other ERISA-regulated asset pools and that it has experience with a wide range of asset classes and litigation claims.
17. Gallagher represents that it understands its duties and responsibilities under ERISA in acting as a fiduciary on behalf of the Plan. Gallagher also acknowledges that it is authorized to take all appropriate actions to safeguard the Plan's interests, and that it will monitor the Proposed Transactions on the Plan's behalf on a continuous basis and throughout the term required by this exemption.
18. Gallagher represents that it does not have any prior relationship with any parties in interest to the Plan, including BCBS Nebraska and any BCBS Nebraska affiliates. Gallagher further represents the total revenues it has received from the Plan and from parties in interest to the Plan in connection with its engagement as Independent Fiduciary represents approximately 0.78% of Gallagher's total revenue.
19. Gallagher represents that no party associated with this exemption application has or will indemnify it, in whole or in part, for negligence of any kind and/or any violation of state or federal law that may be attributable to Gallagher's performance of its duties as Independent Fiduciary to the Plan with respect to the Proposed Transactions. In addition, no contract or instrument entered into by Gallagher as Independent Fiduciary may purport to waive any liability under state or federal law for any such violation.
20. On November 5, 2020, Gallagher completed an Independent Fiduciary Report (the Independent Fiduciary Report) finding that the massive losses caused by the Trust's investment in the Allianz Structured Alpha Strategy resulted in a significant reduction to the Plan's total assets and funding level.
Gallagher notes that the Contribution and Assignment Agreement provides that the Trust must reimburse BCBS Nebraska only up to the Required Restorative Payment Amount received by the Plan, plus any reasonable legal expense paid to non-BCBS Nebraska-related parties that were incurred by, or allocated to, BCBS Nebraska as a result of the Claims.
Gallagher states that the Proposed Transactions and the terms of the Contribution and Assignment Agreement were negotiated and approved by Gallagher in its role as the Plan's Independent Fiduciary. Gallagher states that it approved the Proposed Transactions only after conducting an extensive analysis of the damages suffered by the Plan as a result of the failed Allianz Structured Alpha Strategy. Gallagher represents that it conducted numerous discussions with Trust representatives and counsel, along with the Plan's representatives and counsel to ensure that the interests of the Plan's participants and beneficiaries were protected with respect to all aspects of the Proposed Transactions. Based upon its assessment, Gallagher approved the Plan's receipt of the Required Restorative Payments from BCBS Nebraska in exchange for the Assignment.
21. Absent an exemption, the Plan's receipt of the Restorative Payments from BCBS Nebraska in exchange for the Plan's transfer of litigation or settlement proceeds to BCBS Nebraska would violate ERISA. In this regard, ERISA Section 406(a)(1)(A) prohibits a plan fiduciary from causing the plan to engage in a transaction if the fiduciary knows or should know that such transaction constitutes a direct or indirect sale or exchange of any property between a plan and a party in interest. BCBS Nebraska, as an employer whose employees are covered by the Plan, is a party in interest with respect to the Plan under ERISA Section 3(14)(C). The Required Restorative Payments to the Plan and the Plan's potential repayment to BCBS Nebraska with litigation or settlement proceeds would constitute impermissible exchanges between the Plan and a party-in-interest (BCBS Nebraska) in violation of ERISA Section 406(a)(1)(A).
ERISA Section 406(a)(1)(B) prohibits the lending of money or other extension of credit between a plan and a party-in-interest. BCBS Nebraska's promise to make Required Restorative Payments to the Plan, over time, constitutes an impermissible extension of credit between the Plan and a party-in-interest in violation of ERISA Section 406(a)(1)(B).
ERISA Section 406(a)(1)(D) prohibits a plan fiduciary from causing a plan to engage in a transaction if the fiduciary knows or should know that the transaction constitutes a direct or indirect transfer to, or use by or for the benefit of, a party-in-interest, of the income or assets of the plan. The transfer of Plan assets to BCBS Nebraska in connection with the Repayment would constitute an impermissible transfer of Plan assets to a party-in-interest in violation of ERISA Section 406(a)(1)(D).
22. This proposed exemption contains a number of conditions that must be met. For example, the proposed exemption mandates that the Independent Fiduciary, in full accordance with its obligations of prudence and loyalty under ERISA Section 404(a)(1)(A) and (B) must:
(a) review, negotiate, and approve the terms and conditions of the Required Restorative Payments, the Repayment, and the Contribution and Assignment Agreement, before the Plan enters into such payments and the agreement;
(b) determine that the terms and conditions of the Required Restorative Payments, the Repayment, and the Contribution and Assignment Agreement are prudent, in the interest of the Plan and its participants and beneficiaries, and protective of the rights of the Plan's participants and beneficiaries;
(c) confirm that the Required Restorative Payments are fully and timely made;
(d) monitor the Claims and confirm that the Plan receives its proper share of any litigation or settlement proceeds received by the Trust in connection with the Claims;
(e) ensure that any Repayment by the Plan to BCBS Nebraska fully complies with the terms of this exemption and is for no more than the lesser of the total Restorative Payments actually made to the Plan by BCBS Nebraska or the amount the Plan received from the Claims, plus Attorney Fees;
(f) ensure that any Repayment by the Plan to BCBS Nebraska for legal expenses in connection with the Claims is limited to only reasonable legal expenses that were paid by BCBS Nebraska to unrelated third parties for representation of the Plan and its interests (as opposed to representation of BCBS Nebraska or the interests of any party other than the Plan) where BCBS Nebraska was not otherwise reimbursed from a non-Plan party;
(g) monitor the Plan's Assigned Interests on an ongoing basis to determine and confirm that any excess recovery amount from the Claims (
(h) ensure that all of the conditions and definitions of this proposed exemption are met; and
(i) represent that it has not and will not enter into any agreement or instrument that violates ERISA Section 410 or Department Regulations codified at 29 CFR 2509.75–4.
23. This proposed exemption also requires Gallagher to respond in writing to any information requests from the Department regarding Gallagher's activities as the Plan's Independent Fiduciary. Additionally, no later than 90 days after the resolution of the litigation, Gallagher must submit a written report to the Department demonstrating that all terms and conditions of the exemption have been met.
24. This proposed exemption requires that the Plan has not and will not release any claims, demands and/or causes of action it may have against: (a) any fiduciary of the Plan; (b) any fiduciary of the Trust; (c) BCBS
25. The Plan may not make any Repayment to BCBS Nebraska before the date: the Plan has received from BCBS Nebraska the entire amount of the Restorative Payments agreed to in the Amended Contribution and Assignment Agreement, and all the Claims are settled. Furthermore, the Plan may not pay any interest to BCBS Nebraska in connection with its receipt of the Required Restorative Payments, nor pledge Plan assets to secure any portion of the Required Restorative Payments.
26. Pursuant to this proposed exemption, the Plan may not incur any expenses, commissions or transaction costs in connection with the Proposed Transactions. However, as noted above, under certain circumstances the Plan may reimburse BCBS Nebraska for reasonable legal expenses arising from the Claims that BCBS Nebraska paid to non-BCBS Nebraska-related parties for representation of the Plan and its interests (as opposed to representation of BCBS Nebraska or the interests of any party other than the Plan) where BCBS Nebraska was not otherwise reimbursed by a non-Plan party.
27. Finally, the exemptive relief provided under this proposed exemption is conditioned upon the Department's assumption that the material facts and representations set forth above in the Summary of Facts and Representation section are true and accurate at all times. In the event that a material fact or representation detailed above is untrue or inaccurate, the exemptive relief provided under this exemption will cease immediately.
28. ERISA Section 408(a) provides, in part, that the Department may not grant an exemption unless the Department finds that the exemption is administratively feasible, in the interest of affected plans and of their participants and beneficiaries, and protective of the rights of such participants and beneficiaries. Each of these criteria is discussed below.
a.
b.
c.
29. Based on the conditions described above, the Department has tentatively determined that the relief sought by the Applicant satisfies the statutory requirements under ERISA Section 408(a) for the Department to make findings that support its issuance of a proposed exemption.
The Department is considering granting an exemption under the authority of ERISA Section 408(a) and Code Section 4975(c)(2) and in accordance with the procedures set forth in the Department's exemption procedure regulation.
(a) The term “Attorney Fees” means reasonable legal expenses paid by BCBS Nebraska on behalf of the Plan in connection with the Claims, if such fees are reviewed and approved by a qualified independent fiduciary who confirms that the fees were reasonably incurred and paid by BCBS Nebraska to unrelated third parties. For the purposes of this exemption, the Attorney Fees reimbursable to BCBS Nebraska do not include: (1) legal expenses paid by the Plan; and (2) legal expenses paid by BCBS Nebraska for representation of BCBC Nebraska or the interests of any party other than the Plan.
(b) The term “BCBS Nebraska” means Blue Cross and Blue Shield of Nebraska, Inc.
(c) The term “Claims” means the legal claims against Allianz Global Investors U.S. LLC (Allianz) and Aon Investments USA Inc. (Aon), to recover certain losses incurred by the Plan in the first quarter of 2020.
(d) The term “Contribution and Assignment Agreement” means the written agreement between BCBS Nebraska and the Plan, dated November 5, 2020, and its amendment that became effective on March 17, 2022, containing all material terms regarding BCBS Nebraska's agreement to make Required Restorative Payments to the Plan in return for the Plan's potential Repayment to BCBS Nebraska of an amount that is no more than lesser of the Required Restorative Payment Amount (as described in Section I(h)) received by the Plan or the amount of litigation proceeds the Plan receives from the Claims, plus reasonable attorney fees paid to unrelated third parties by BCBS Nebraska in connection with the Claims.
(e) The term “Independent Fiduciary” means Gallagher Fiduciary Advisors, LLC (Gallagher) or a successor Independent Fiduciary to the extent Gallagher or the successor Independent Fiduciary continues to serve in such capacity who:
(1) Is not an affiliate of BCBS Nebraska and does not hold an ownership interest in BCBS Nebraska or affiliates of BCBS Nebraska;
(2) Was not a fiduciary with respect to the Plan before its appointment to serve as the Independent Fiduciary;
(3) Has acknowledged in writing that it:
(i) is a fiduciary with respect to the Plan and has agreed not to participate in any decision regarding any transaction in which it has an interest that might affect its best judgment as a fiduciary; and
(ii) Has appropriate technical training or experience to perform the services contemplated by the exemption;
(4) Has not entered into any agreement or instrument that violates the prohibitions on exculpatory provisions in ERISA Section 410 or the Department's regulation relating to indemnification of fiduciaries;
(5) Has not received gross income from BCBS Nebraska or its affiliates during any fiscal year in an amount that exceeds two percent (2%) of the Independent Fiduciary's gross income from all sources for the prior fiscal year. This provision also applies to a partnership or corporation of which the Independent Fiduciary is an officer, director, or 10 percent (10%) or more partner or shareholder, and includes as gross income amounts received as compensation for services provided as an independent fiduciary under any prohibited transaction exemption granted by the Department; and
(6) No organization or individual that is an Independent Fiduciary, and no partnership or corporation of which such organization or individual is an officer, director, or ten percent (10%) or more partner or shareholder, may acquire any property from, sell any property to, or borrow any funds from BCBS Nebraska or from affiliates of BCBS Nebraska while serving as an Independent Fiduciary. This prohibition will continue for six months after the party ceases to be an Independent Fiduciary and/or the Independent Fiduciary negotiates any transaction on behalf of the Plan during the period that the organization or individual serves as an Independent Fiduciary.
(f) The “Plan” means the Non-Contributory Retirement Program for Certain Employees of Blue Cross and Blue Shield of Nebraska, Inc.
(g) The term “Plan Losses” means the $33,649,481 in Plan losses the BCBSA's National Employee Benefits Committee alleges were the result of breaches of fiduciary responsibilities and breaches of contract by Allianz Global Investors U.S. LLC and/or Aon Investments USA Inc.
(h) The term “Restorative Payments” means the payments made by BCBS Nebraska to the Plan in connection with the Plan Losses, defined above, consisting of: (1) the past payment of $7,000,000 on August 25, 2021; and (2) the past payment of $6,600,000 on March 29, 2022. The sum of (1) and (2) is the Required Restorative Payment Amount.
(i) The “Repayment” means the payment, if any, that the Plan will transfer to BCBS Nebraska following the Plan's receipt of proceeds from the Claims, where the Repayment is made following the full and complete resolution of the Claims, and in a manner that is consistent with the terms of the exemption.
If the proposed exemption is granted, the restrictions of ERISA Sections 406(a)(1)(A), (B) and (D) and the sanctions resulting from the application of Code Section 4975, by reason of Code Sections 4975(c)(1)(A), (B) and (D), shall not apply, effective November 5, 2020, to the following transactions: BCBS Nebraska's transfer of Restorative Payments to the Plan; and, in return, the Plan's Repayment of an amount to BCBS Nebraska, which must be no more than the lesser of the Restorative Payment received by the Plan or the amount of litigation proceeds the Plan received from the Claims, plus reasonable Attorney Fees, provided that the Definitions set forth in Section I and the Conditions set forth in Section III are met.
(a) The Plan received the entire Restorative Payment Amount no later than March 29, 2022;
(b) In connection with its receipt of the Required Restorative Payments, the Plan does not release any claims, demands and/or causes of action the Plan may have against the following: (1) any fiduciary of the Plan; (2) any fiduciary of the Trust; (3) BCBS Nebraska; and/or (4) any person or entity related to a person or entity identified in (1)–(3) of this paragraph;
(c) The Plan's Repayment to BCBS Nebraska is for no more than the lesser of the total Restorative Payments received by the Plan or the amount of litigation proceeds the Plan receives from the Claims. The Plan's Repayment to BCBS Nebraska may only occur after the Independent Fiduciary has determined that: all the conditions of the exemption are met; the Plan has received all the Restorative Payments it is due; and the Plan has received all the litigation proceeds it is due. The Plan's Repayment to BCBS Nebraska must be carried out in a manner designed to minimize unnecessary costs and disruption to the Plan and its investments;
(d) A qualified independent fiduciary (the Independent Fiduciary, as further defined in Section II(e)), acting solely on behalf of the Plan in full accordance with its obligations of prudence and loyalty under ERISA Sections 404(a)(1)(A) and (B) must:
(1) Review, negotiate and approve the terms and conditions of the Restorative Payments and the Repayment and the Contribution and Assignment Agreement, all of which must be in writing, before the Plan enters into those transactions/agreement;
(2) Determine that the Restorative Payments, the Repayment, and the terms of the Contribution and Assignment Agreement, are prudent and in the interest of the Plan and its participants and beneficiaries;
(3) Confirm that the Required Restorative Payment Amount was fully and timely made;
(4) Monitor the litigation related to the Claims and confirm that the Plan receives, in a timely manner, its proper share of any litigation or settlement proceeds received by the Trust;
(5) Ensure that any Repayment by the Plan to BCBS Nebraska for legal expenses in connection with the Claims is limited to only reasonable legal expenses that were paid by BCBS Nebraska to unrelated third parties;
(6) Ensure that all of the conditions and definitions of this proposed exemption are met;
(7) Submit a written report to the Department's Office of Exemption Determinations demonstrating and confirming that the terms and conditions of the exemption were met, within 90 days after the Repayment; and
(8) Not enter into any agreement or instrument that violates ERISA Section 410 or the Department's Regulations codified at 29 CFR Section 2509.75–4.
(f) The Plan pays no interest in connection with the Restorative Payments;
(g) The Plan does not pledge any Plan assets to secure any portion of the Restorative Payments;
(h) The Plan does not incur any expenses, commissions, or transaction costs in connection with the Proposed Transactions. However, if first approved by the Independent Fiduciary, the Plan may reimburse BCBS Nebraska for reasonable legal expenses paid in connection with the Claims by BCBS
(i) The proposed transactions do not involve any risk of loss to either the Plan or the Plan's participants and beneficiaries;
(j) No party associated with this exemption has or will indemnify the Independent Fiduciary and the Independent Fiduciary will not request indemnification from any party, in whole or in part, for negligence and/or any violation of state or federal law that may be attributable to the Independent Fiduciary in performing its duties to the Plan with respect to the Proposed Transactions. In addition, no contract or instrument may purport to waive any liability under state or federal law for any such violation.
(k) If an Independent Fiduciary resigns, is removed, or for any reason is unable to serve as an Independent Fiduciary, the Independent Fiduciary must be replaced by a successor entity that: (1) meets the definition of Independent Fiduciary detailed above in Section II(e); and (2) otherwise meets all of the qualification, independence, prudence and diligence requirements set forth in this exemption. Further, any such successor Independent Fiduciary must assume all of the duties of the outgoing Independent Fiduciary. As soon as possible, including before the appointment of a successor Independent Fiduciary, BCBS Nebraska must notify the Department's Office of Exemption Determinations of the change in Independent Fiduciary and such notification must contain all material information regarding the successor Independent Fiduciary, including the successor Independent Fiduciary's qualifications; and
(l) All of the material facts and representations set forth in the Summary of Facts and Representation are true and accurate at all times.
The Applicant will give notice of the proposed exemption to all interested persons and all of the parties to the litigation described above, within fifteen calendar days after the publication of the notice of proposed exemption in the
All comments will be made available to the public.
The Department is considering granting an exemption under the authority of Section 408(a) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and Section 4975(c)(2) of the Internal Revenue Code of 1986, as amended (the Code). The proposed exemption relates to legal actions and claims (the Claims) against Allianz Global Investors U.S. LLC (Allianz) and Aon Investments USA Inc. (Aon), that arose from certain losses incurred by the BlueCross BlueShield of Tennessee, Inc. Pension Plan (the Plan) in the first quarter of 2020.
This proposed exemption would permit the past payment of $100,000,000 to the Plan by the Plan sponsor, BlueCross BlueShield of Tennessee, Inc. (BCBS Tennessee). If the Plan receives litigation proceeds from the Claims, the Plan will transfer the lesser of the ligation proceeds amount or the Restorative Payment, plus reasonable attorney fees to BCBS Tennessee.
1. BCBS Tennessee is a not-for-profit company incorporated in Tennessee with its principal office in Chattanooga, Tennessee. BCBS Tennessee issues and administers health care coverage for individuals and group health plans sponsored by Tennessee-based employers and is an independent licensee of the Blue Cross Blue Shield Association (BCBSA).
2. The Plan is an ERISA-covered, frozen defined benefit pension plan that covers eligible employees of BCBS Tennessee and employees of affiliated employers. BCBS Tennessee makes all contributions to the Plan for the exclusive benefit of participants and their beneficiaries, and to cover administrative expenses. As of August 31, 2020, the Plan covered 2,628 participants and held $203,341,148 in total assets.
3. The Plan holds a beneficial interest in the Blue Cross and Blue Shield National Retirement Trust (the Trust). The Trust is a master trust that holds the assets of 16 defined benefit pension plans that participate in the BCBSA's National Retirement Program (the Participating Plans). Northern Trust serves as Trustee and asset custodian to the Trust and maintains separate records that reflect the net asset value of each Participating Plan. The Trust's earnings, market adjustments, and administrative expenses are allocated among the Participating Plans based on the respective Participating Plan's share of the Trust's assets. A Participating Plan's interest in the Trust's net assets is based on its share of the Trust.
4. The Committee serves as named fiduciary and administrator for each Participating Plan. The Committee is a standing committee of the BCBSA's
5. The Applicant represents that the Allianz Structured Alpha strategy consisted of alpha and beta components. According to the applicant, the alpha component was an options trading strategy that Allianz claimed would seek targeted positive return potential while maintaining structural risk protections. The beta component was intended to provide broad market exposure to a particular asset class through investments in financial products similar to an exchange-traded fund that replicates the performance of a market index, such as the S&P 500. According to the Applicant, Allianz represented that the Structured Alpha Strategy would capitalize on the return-generating features of option selling (short volatility) while simultaneously benefitting from the risk-control attributes associated with option buying (long volatility). According to the Applicant, Allianz represented further that the alpha component would include position hedging consisting of long-volatility positions designed to protect the portfolio in the event of a market crash.
6. As of December 31, 2019, the total market value of the Plan's portion of the Trust's investment in the Allianz Structured Alpha Funds was $138,015,536, which represented 68.57% of total Plan assets.
7. In 2009, the Committee retained Aon (then called Ennis Knupp) to provide investment advice regarding the investment of Plan assets held in the Trust. The Applicant represents that Aon provided regular investment advice pursuant to a written contract between it and the Committee. Pursuant to its engagement, Aon agreed to provide the following: “recommendations to [the Committee] regarding asset allocation” within the Trust; “recommendations to [the Committee] regarding the specific asset allocation and other investment guidelines” for the Trust's investment managers such as Allianz; and advice “regarding the diversification of assets” held in the Trust.” The Applicant represents that Aon agreed to: conduct “active, ongoing monitoring” of Allianz to “identify any forward-looking” risks “that could impact performance;” and “inform itself” of any information necessary to discharge its duty to monitor, including information about the actual options positions Allianz had constructed.
8. The Applicant represents that when equity markets sharply declined in February and March of 2020, volatility spiked and the options positions held within the Structured Alpha Strategy were exposed to a heightened risk of loss. The Applicant represents that, unbeknownst to the Committee, and in violation of Allianz's stated investment strategy, Allianz abandoned the hedging strategy that was the supposed cornerstone of the Structured Alpha Strategy, leaving the portfolio almost entirely unhedged against a spike in market volatility. As described in the Claims, although Allianz had represented that it would buy hedges at strike prices ranging from 10% to 25% below the market, the hedges it actually held at the end of February 2020 were as much as 60% below the market.
The Applicant represents that, as of January 31, 2020, the Trust had invested approximately $2,916,049,486 in the Structured Alpha Strategy. Six weeks later, the Trust faced a margin call, which the Applicant states left it no choice but to liquidate the investment. The Trust was ultimately able to redeem only $646,762,678 of its $2,916,049,486 investment, resulting in a total loss of $2,269,286,808.
Specifically, regarding the Plan's portion of the loss, as of December 31, 2019, the market value of the Plan's assets was $201,265,786. As of March 31, 2020, the market value of the Plan's assets decreased to $103,023,619. The Applicant represents that the Plan's total losses from the Allianz Structured Alpha Strategy were $93,576,015, which caused the Plan to be underfunded.
9. On September 16, 2020, the Committee filed a cause of action in the United States District Court for the Southern District of New York (Case number 20–CIV–07606) against Allianz and Aon for Breach of Fiduciary Duty under ERISA Section 404, Breach of Co-Fiduciary Duty under ERISA Section 405, and violation of ERISA Section 406(b) for managing the Plan assets in its self-interest and breach of contract. It is possible that resolution of this claim and other legal actions against Allianz and Aon in connection with the Plan's losses (the Claims) could take an extended period of time.
10. The Applicant states that rather than wait for the Claims to be resolved, BCBS Tennessee took steps to protect Plan benefits and avoid onerous benefit restrictions under Code section 436 that could apply to the Plan as a result of a funding shortfall. Therefore, on October 8, 2020, BCBS Tennessee and the Plan entered into a Contribution and Assignment Agreement (the Contribution and Assignment Agreement), whereby BCBS Tennessee agreed to make a $100,000,000 payment to the Plan within seven business days of the effective date of the Contribution and Assignment Agreement (the Restorative Payment). BCBS Tennessee remitted $100,000,000 to the Plan on October 8, 2020.
11. In exchange for the Restorative Payment, the Plan assigned to BCBS Tennessee its right to retain certain litigation and/or settlement proceeds recovered from the Claims (the Assigned Interests).
12. The Plan must ultimately receive at least the full value of the promised
13. Alternatively, if the Plan receives less litigation or settlement proceeds than the amount of the Restorative Payment that BCBS Tennessee made to the Plan, the Plan will transfer to BCBS Tennessee the lesser amount of litigation or settlement proceeds, plus Attorney Fees. For example, if BCBS Tennessee has reasonably incurred $100,000 in Attorney Fees, and the Plan receives $50,000,000 in litigation proceeds, the Plan will make a Repayment to BCBS Tennessee totaling $50,100,000.
14. The Department notes that if the Plan receives any restitution that is tied to the conduct underlying the Claims but was ordered pursuant to a proceeding or directive that is external to Case number 20–CIV–07606, the disposition of such proceeds must conform to the requirements of this exemption.
15. BCBS Tennessee retained Gallagher Fiduciary Advisors, LLC (Gallagher or the Independent Fiduciary) of New York, New York, to serve as the Plan's independent fiduciary with respect to the Required Restorative Payment and the potential repayment by the Plan of that Payment (collectively, the Proposed Transactions). Gallagher represents that it has extensive experience in institutional investment consulting and fiduciary decision-making regarding traditional and alternative investments. Gallagher further represents that its independent fiduciary decision-making work involves acting as a fiduciary advisor or decision-maker for plans and other ERISA-regulated asset pools and that it has experience with a wide range of asset classes and litigation claims.
16. Gallagher represents that it understands its duties and responsibilities under ERISA in acting as a fiduciary on behalf of the Plan. Gallagher also acknowledges that it is authorized to take all appropriate actions to safeguard the Plan's interests, and that it will monitor the Proposed Transactions on the Plan's behalf on a continuous basis and throughout the term required by this exemption.
17. Gallagher represents that it does not have any prior relationship with any parties in interest to the Plan, including BCBS Tennessee and any BCBS Tennessee affiliates. Gallagher further represents the total revenues it has received from the Plan and from parties in interest to the Plan in connection with its engagement as Independent Fiduciary represents approximately 0.78% of Gallagher's total revenue.
18. Gallagher represents that no party associated with this exemption application has or will indemnify it, in whole or in part, for negligence of any kind and/or any violation of state or federal law that may be attributable to Gallagher's performance of its duties as Independent Fiduciary to the Plan with respect to the Proposed Transactions. In addition, no contract or instrument entered into by Gallagher as Independent Fiduciary may purport to waive any liability under state or federal law for any such violation.
19. On October 8, 2020, Gallagher completed an Independent Fiduciary Report (the Independent Fiduciary Report) finding that the massive losses caused by the Trust's investment in the Allianz Structured Alpha Strategy resulted in a significant reduction to the Plan's total assets and funding level. Gallagher represents that the Required Restorative Payment, which was received by the Plan substantially in advance of a final resolution of the Claims against Allianz and Aon, should restore the Plan's funded percentage to its pre-loss funded percentage as of January 1, 2019. The restoration of the Plan's funding status will secure ongoing benefit payments to participants and beneficiaries.
Gallagher notes that the Contribution and Assignment Agreement provides that the Trust must reimburse BCBS Tennessee only up to the Required Restorative Payment Amount received, plus any reasonable legal expense paid to non-BCBS Tennessee-related parties that were incurred by, or allocated to, BCBS Tennessee as a result of the Claims.
Gallagher states that the Proposed Transactions and the terms of the Contribution and Assignment Agreement were negotiated and approved by Gallagher in its role as the Plan's Independent Fiduciary. Gallagher states that it approved the Proposed Transactions only after conducting an extensive analysis of the damages suffered by the Plan as a result of the failed Allianz Structured Alpha Strategy. Gallagher represents that it conducted numerous discussions with Trust representatives and counsel, along with the Plan's representatives and counsel to ensure that the interests of the Plan's participants and beneficiaries were protected with respect to all aspects of the Proposed Transactions. Based upon its assessment, Gallagher approved the Plan's receipt of the Required Restorative Payment from BCBS Tennessee in exchange for the Assignment.
20. Absent an exemption, the Plan's receipt of the Restorative Payment from BCBS Tennessee in exchange for the Plan's transfer of litigation or settlement proceeds to BCBS Tennessee would violate ERISA. In this regard, ERISA Section 406(a)(1)(A) prohibits a plan fiduciary from causing the plan to engage in a transaction if the fiduciary knows or should know that such transaction constitutes a direct or indirect sale or exchange of any property between a plan and a party in interest. BCBS Tennessee, as an employer whose employees are covered by the Plan, is a party in interest with respect to the Plan under ERISA Section 3(14)(C). The Required Restorative Payment to the Plan and the Plan's potential repayment to BCBS Tennessee with litigation or settlement proceeds would constitute impermissible exchanges between the Plan and a party-in-interest (BCBS Tennessee) in violation of ERISA Section 406(a)(1)(A).
ERISA Section 406(a)(1)(D) prohibits a plan fiduciary from causing a plan to engage in a transaction if the fiduciary knows or should know that the transaction constitutes a direct or indirect transfer to, or use by or for the benefit of, a party-in-interest, of the income or assets of the plan. The transfer of Plan assets to BCBS Tennessee in connection with the Repayment would constitute an impermissible transfer of Plan assets to
21. This proposed exemption contains a number of conditions that must be met. For example, the proposed exemption mandates that the Independent Fiduciary, in full accordance with its obligations of prudence and loyalty under ERISA Section 404(a)(1)(A) and (B) must:
(a) review, negotiate, and approve the terms and conditions of the Required Restorative Payment, the Repayment, and the Contribution and Assignment Agreement, before the Plan enters into such payments and the agreement;
(b) determine that the terms and conditions of the Required Restorative Payment, the Repayment, and the Contribution and Assignment Agreement are prudent, in the interest of the Plan and its participants and beneficiaries, and protective of the rights of the Plan's participants and beneficiaries;
(c) confirm that the Required Restorative Payment was fully and timely made;
(d) monitor the Claims and confirm that the Plan receives its proper share of any litigation or settlement proceeds received by the Trust in connection with the Claims;
(e) ensure that any Repayment by the Plan to BCBS Tennessee fully complies with the terms of this exemption and is for no more than the lesser of the total Restorative Payment actually made to the Plan by BCBS Tennessee or the amount the Plan received from the Claims, plus Attorney Fees;
(f) ensure that any Repayment by the Plan to BCBS Tennessee for legal expenses in connection with the Claims is limited to only reasonable legal expenses that were paid by BCBS Tennessee to unrelated third parties for representation of the Plan and its interests (as opposed to representation of BCBS Tennessee or the interests of any party other than the Plan) where BCBS Tennessee was not otherwise reimbursed from a non-Plan party;
(g) monitor the Plan's Assigned Interests on an ongoing basis to determine and confirm that any excess recovery amount from the Claims (
(h) ensure that all of the conditions and definitions of this proposed exemption are met; and
(i) represent that it has not and will not enter into any agreement or instrument that violates ERISA Section 410 or Department Regulations codified at 29 CFR 2509.75–4.
22. This proposed exemption also requires Gallagher to respond in writing to any information requests from the Department regarding Gallagher's activities as the Plan's Independent Fiduciary. Additionally, no later than 90 days after the resolution of the litigation, Gallagher must submit a written report to the Department demonstrating that all terms and conditions of the exemption have been met.
23. This proposed exemption requires that the Plan has not and will not release any claims, demands and/or causes of action it may have against: (a) any fiduciary of the Plan; (b) any fiduciary of the Trust; (c) BCBS Tennessee; and/or (d) any person or entity related to a person or entity described in (a)–(c) of this paragraph. Additionally, any Repayment by the Plan to BCBS Tennessee must be made in a manner designed to minimize unnecessary costs and disruption to the Plan and its investments.
24. The Plan may not make any Repayment to BCBS Tennessee before the date: the Plan has received from BCBS Tennessee the entire amount of the Restorative Payment agreed to in the Amended Contribution and Assignment Agreement; and all the Claims are settled. Furthermore, the Plan may not pay any interest to BCBS Tennessee in connection with its receipt of the Required Restorative Payment, nor pledge Plan assets to secure any portion of the Required Restorative Payment.
25. Pursuant to this proposed exemption, the Plan may not incur any expenses, commissions or transaction costs in connection with the Proposed Transactions. However, as noted above, under certain circumstances the Plan may reimburse BCBS Tennessee for reasonable legal expenses arising from the Claims that BCBS Tennessee paid to non-BCBS Tennessee-related parties for representation of the Plan and its interests (as opposed to representation of BCBS Tennessee or the interests of any party other than the Plan) where BCBS Tennessee was not otherwise reimbursed by a non-Plan party.
26. Finally, the exemptive relief provided under this proposed exemption is conditioned upon the Department's assumption that the material facts and representations set forth above in the Summary of Facts and Representation section are true and accurate at all times. In the event that a material fact or representation detailed above is untrue or inaccurate, the exemptive relief provided under this exemption will cease immediately.
27. ERISA Section 408(a) provides, in part, that the Department may not grant an exemption unless the Department finds that the exemption is administratively feasible, in the interest of affected plans and of their participants and beneficiaries, and protective of the rights of such participants and beneficiaries. Each of these criteria is discussed below.
a.
b.
c.
28. Based on the conditions described above, the Department has tentatively determined that the relief sought by the Applicant satisfies the statutory requirements under ERISA Section 408(a) for the Department to make findings that support its issuance of a proposed exemption.
The Department is considering granting an exemption under the authority of ERISA Section 408(a) and Code Section 4975(c)(2) and in accordance with the procedures set forth in the Department's exemption procedure regulation.
(a) The term “Attorney Fees” means reasonable legal expenses paid by BCBS Tennessee on behalf of the Plan in connection with the Claims, if such fees are reviewed and approved by a qualified independent fiduciary who confirms that the fees were reasonably incurred and paid by BCBS Tennessee to unrelated third parties. For the purposes of this exemption, the Attorney Fees reimbursable to BCBS Tennessee do not include: (1) legal expenses paid by the Plan; and (2) legal expenses paid by BCBS Tennessee for representation of BCBC Tennessee or the interests of any party other than the Plan.
(b) The term “BCBS Tennessee” means BlueCross BlueShield of Tennessee, Inc.
(c) The term “Claims” means the legal claims against Allianz Global Investors U.S. LLC (Allianz) and Aon Investments USA Inc. (Aon), to recover certain losses incurred by the Plan in the first quarter of 2020.
(d) The term “Contribution and Assignment Agreement” means the written agreement between BCBS Tennessee and the Plan, dated October 8, 2020, containing all material terms regarding Tennessee's agreement to make the Required Restorative Payment to the Plan in return for the Plan's potential Repayment to BCBS Tennessee of an amount that is no more than lesser of the Required Restorative Payment Amount (as described in Section I(h)) received or the amount of litigation proceeds the Plan receives from the Claims, plus reasonable attorney fees paid to unrelated third parties by BCBS Tennessee in connection with the Claims.
(e) The term “Independent Fiduciary” means Gallagher Fiduciary Advisors, LLC (Gallagher) or a successor Independent Fiduciary to the extent Gallagher or the successor Independent Fiduciary continues to serve in such capacity who:
(1) Is not an affiliate of BCBS Tennessee and does not hold an ownership interest in BCBS Tennessee or affiliates of BCBS Tennessee;
(2) Was not a fiduciary with respect to the Plan before its appointment to serve as the Independent Fiduciary;
(3) Has acknowledged in writing that it:
(i) is a fiduciary with respect to the Plan and has agreed not to participate in any decision regarding any transaction in which it has an interest that might affect its best judgment as a fiduciary; and
(ii) Has appropriate technical training or experience to perform the services contemplated by the exemption;
(4) Has not entered into any agreement or instrument that violates the prohibitions on exculpatory provisions in ERISA Section 410 or the Department's regulation relating to indemnification of fiduciaries;
(5) Has not received gross income from BCBS Tennessee or its affiliates during any fiscal year in an amount that exceeds two percent (2%) of the Independent Fiduciary's gross income from all sources for the prior fiscal year. This provision also applies to a partnership or corporation of which the Independent Fiduciary is an officer, director, or 10 percent (10%) or more partner or shareholder, and includes as gross income amounts received as compensation for services provided as an independent fiduciary under any prohibited transaction exemption granted by the Department; and
(6) No organization or individual that is an Independent Fiduciary, and no partnership or corporation of which such organization or individual is an officer, director, or ten percent (10%) or more partner or shareholder, may acquire any property from, sell any property to, or borrow any funds from BCBS Tennessee or from affiliates of BCBS Tennessee while serving as an Independent Fiduciary. This prohibition will continue for six months after the party ceases to be an Independent Fiduciary and/or the Independent Fiduciary negotiates any transaction on behalf of the Plan during the period that the organization or individual serves as an Independent Fiduciary.
(f) The “Plan” means the BlueCross BlueShield of Tennessee, Inc. Pension Plan.
(g) The term “Plan Losses” means the $93,576,015 in Plan losses the BCBSA's National Employee Benefits Committee alleges were the result of breaches of fiduciary responsibilities and breaches of contract by Allianz Global Investors U.S. LLC and/or Aon Investments USA Inc.
(h) The term “Restorative Payment” means the payment made by BCBS Tennessee to the Plan in connection with the Plan Losses, defined above, consisting of a $100,000,000 payment that BCBS Tennessee contributed to the Plan on October 8, 2020. This $100,000,000 payment is the Required Restorative Payment Amount.
(i) The “Repayment” means the payment, if any, that the Plan will transfer to BCBS Tennessee following the Plan's receipt of proceeds from the Claims, where the Repayment is made following the full and complete resolution of the Claims; and in a manner that is consistent with the terms of the exemption.
If the proposed exemption is granted, the restrictions of ERISA Sections 406(a)(1)(A), (B) and (D) and the sanctions resulting from the application of Code Section 4975, by reason of Code Sections 4975(c)(1)(A), (B) and (D), shall not apply, effective September 15, 2020, to the following transactions: BCBS Tennessee's transfer of the Restorative Payment to the Plan; and, in return, the Plan's Repayment of an amount to BCBS Tennessee, which must be no more than the lesser of the Restorative Payment Amount received or the amount of litigation proceeds the Plan received from the Claims, plus reasonable Attorney Fees, provided that the Definitions set forth in Section I and the Conditions set forth in Section III are met.
(a) The Plan received the entire Restorative Payment Amount no later than October 8, 2020;
(b) In connection with its receipt of the Required Restorative Payment, the Plan does not release any claims, demands and/or causes of action the Plan may have against the following: (1) any fiduciary of the Plan; (2) any fiduciary of the Trust; (3) BCBS Tennessee; and/or (4) any person or entity related to a person or entity identified in (1)–(3) of this paragraph;
(c) The Plan's Repayment to BCBS Tennessee is for no more than the lesser of the total Restorative Payment received by the Plan or the amount of litigation proceeds the Plan receives from the Claims. The Plan's Repayment to BCBS Tennessee may only occur after the Independent Fiduciary has determined that: all the conditions of the exemption are met; the Plan has received the entirety of the Restorative Payment it is due; and the Plan has received all the litigation proceeds it is due. The Plan's Repayment to BCBS Tennessee must be carried out in a manner designed to minimize unnecessary costs and disruption to the Plan and its investments;
(d) A qualified independent fiduciary (the Independent Fiduciary, as further defined in Section II(e)), acting solely on behalf of the Plan in full accordance with its obligations of prudence and loyalty under ERISA Sections 404(a)(1)(A) and (B) must:
(1) Review, negotiate and approve the terms and conditions of the Restorative Payment and the Repayment and the Contribution and Assignment Agreement, all of which must be in writing, before the Plan enters into those transactions/agreement;
(2) Determine that the Restorative Payment, the Repayment, and the terms of the Contribution and Assignment Agreement, are prudent and in the interest of the Plan and its participants and beneficiaries;
(3) Confirm that the Required Restorative Payment Amount was fully and timely made;
(4) Monitor the litigation related to the Claims and confirm that the Plan receives, in a timely manner, its proper share of any litigation or settlement proceeds received by the Trust;
(5) Ensure that any Repayment by the Plan to BCBS Tennessee for legal expenses in connection with the Claims is limited to only reasonable legal expenses that were paid by BCBS Tennessee to unrelated third parties;
(6) Ensure that all of the conditions and definitions of this proposed exemption are met;
(7) Submit a written report to the Department's Office of Exemption Determinations demonstrating and confirming that the terms and conditions of the exemption were met, within 90 days after the Repayment; and
(8) Not enter into any agreement or instrument that violates ERISA Section 410 or the Department's Regulations codified at 29 CFR Section 2509.75–4.
(f) The Plan pays no interest in connection with the Restorative Payment;
(g) The Plan does not pledge any Plan assets to secure any portion of the Restorative Payment;
(h) The Plan does not incur any expenses, commissions, or transaction costs in connection with the Proposed Transactions. However, if first approved by the Independent Fiduciary, the Plan may reimburse BCBS Tennessee for reasonable legal expenses paid in connection with the Claims by BCBS Tennessee to non-BCBS Tennessee-related parties. For purposes of determining the amount of Attorney Fees the Plan may reimburse to BCBS Tennessee under this proposal, the amount of reasonable attorney fees paid by BCBS Tennessee on behalf of the Plan in connection with the Claims must be reduced by the amount of legal fees received by BCBS Tennessee in connection with the Claims from any non-Plan party (
(i) The proposed transactions do not involve any risk of loss to either the Plan or the Plan's participants and beneficiaries;
(j) No party associated with this exemption has or will indemnify the Independent Fiduciary and the Independent Fiduciary will not request indemnification from any party, in whole or in part, for negligence and/or any violation of state or federal law that may be attributable to the Independent Fiduciary in performing its duties to the Plan with respect to the Proposed Transactions. In addition, no contract or instrument may purport to waive any liability under state or federal law for any such violation.
(k) If an Independent Fiduciary resigns, is removed, or for any reason is unable to serve as an Independent Fiduciary, the Independent Fiduciary must be replaced by a successor entity that: (1) meets the definition of Independent Fiduciary detailed above in Section II(e); and (2) otherwise meets all of the qualification, independence, prudence and diligence requirements set forth in this exemption. Further, any such successor Independent Fiduciary must assume all of the duties of the outgoing Independent Fiduciary. As soon as possible, including before the appointment of a successor Independent Fiduciary, BCBS Tennessee must notify the Department's Office of Exemption Determinations of the change in Independent Fiduciary and such notification must contain all material information regarding the successor Independent Fiduciary, including the successor Independent Fiduciary's qualifications; and
(l) All of the material facts and representations set forth in the Summary of Facts and Representation are true and accurate at all times.
The Applicant will give notice of the proposed exemption to all interested persons and all of the parties to the litigation described above, within fifteen calendar days after the publication of the notice of proposed exemption in the
All comments will be made available to the public.
The Department is considering granting an exemption under the authority of Section 408(a) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and Section 4975(c)(2) of the Internal Revenue Code of 1986, as amended (the Code). The proposed exemption relates to legal actions and claims (the Claims)
This proposed exemption would permit the past payment of $10,000,000 by Triple-S Management Corporation (Triple-S), the Plan sponsor, to the Plan (the Restorative Payment). If the Plan receives litigation proceeds from the Claims, the Plan will transfer the lesser of the ligation proceeds amount or the Restorative Payment amount, plus reasonable attorney fees to Triple-S.
1. Triple-S is an insurance holding company that provides health insurance products and services. Triple-S is the only independent licensee of the Blue Cross Blue Shield Association (BCBSA) in Puerto Rico and has a presence in markets such as the U.S. Virgin Islands and Costa Rica.
2. The Plan is an ERISA-covered qualified defined benefit pension plan that covers eligible employees or participants of Triple-S. The Plan was amended effective January 31, 2017, to freeze benefit accruals as of that date with respect to all participants. As of August 31, 2020, the Plan covered 1,144 participants and held $64,771,505 in total assets.
3. The Plan holds a beneficial interest in the Blue Cross and Blue Shield National Retirement Trust (the Trust). The Trust is a master trust that holds the assets of 16 defined benefit pension plans that participate in the BCBSA's National Retirement Program (the Participating Plans). Northern Trust serves as Trustee and asset custodian to the Trust and maintains separate records that reflect the net asset value of each Participating Plan. The Trust's earnings, market adjustments, and administrative expenses are allocated among the Participating Plans based on the respective Participating Plan's share of the Trust's assets. A Participating Plan's interest in the Trust's net assets is based on its share of the Trust.
4. The Committee serves as named fiduciary and administrator for each Participating Plan. The Committee is a standing committee of the BCBSA's board of directors. In 2011, the Committee invested a portion of the Trust's assets in funds managed by Allianz Global Investors U.S. LLC (Allianz), as part of a Structured Alpha Investment Strategy. These funds included: (a) AllianzGI Structured Alpha Multi-Beta Series LLC I; (b) AllianzGI Structured Alpha Emerging Markets Equity 350 LLC; and (c) AllianzGI Structured Alpha 1000 LLC (collectively, the Structured Alpha Funds).
5. The Applicant represents that the Allianz Structured Alpha strategy consisted of alpha and beta components. According to the applicant, the alpha component was an options trading strategy that Allianz claimed would seek targeted positive return potential while maintaining structural risk protections. The beta component was intended to provide broad market exposure to a particular asset class through investments in financial products similar to an exchange-traded fund that replicates the performance of a market index, such as the S&P 500. According to the Applicant, Allianz represented that the Structured Alpha Strategy would capitalize on the return-generating features of option selling (short volatility) while simultaneously benefitting from the risk-control attributes associated with option buying (long volatility). According to the Applicant, Allianz represented further that the alpha component would include position hedging consisting of long-volatility positions designed to protect the portfolio in the event of a market crash.
6. As of December 31, 2019, the total market value of the Plan's portion of the Trust's investment in the Allianz Structured Alpha Funds was $127,024,812, which represented 77.66% of total Plan assets.
7. In 2009, the Committee retained Aon (then called Ennis Knupp) to provide investment advice regarding the investment of Plan assets held in the Trust. The Applicant represents that Aon provided regular investment advice pursuant to a written contract between it and the Committee. Pursuant to its engagement, Aon agreed to provide the following: “recommendations to [the Committee] regarding asset allocation” within the Trust; “recommendations to [the Committee] regarding the specific asset allocation and other investment guidelines” for the Trust's investment managers such as Allianz; and advice “regarding the diversification of assets” held in the Trust.” The Applicant represents that Aon agreed to: conduct “active, ongoing monitoring” of Allianz to “identify any forward-looking” risks “that could impact performance;” and “inform itself” of any information necessary to discharge its duty to monitor, including information about the actual options positions Allianz had constructed.
8. The Applicant represents that when equity markets sharply declined in February and March of 2020, volatility spiked and the options positions held within the Structured Alpha Strategy were exposed to a heightened risk of loss. The Applicant represents that, unbeknownst to the Committee, and in violation of Allianz's stated investment strategy, Allianz abandoned the hedging strategy that was the supposed cornerstone of the Structured Alpha Strategy, leaving the portfolio almost entirely unhedged against a spike in market volatility. As described in the Claims, although Allianz had represented that it would buy hedges at strike prices ranging from 10% to 25% below the market, the hedges it actually held at the end of February 2020 were as much as 60% below the market.
The Applicant represents that, as of January 31, 2020, the Trust had invested approximately $2,916,049,486 in the Structured Alpha Strategy. Six weeks later, the Trust faced a margin call, which the Applicant states left it no choice but to liquidate the investment. The Trust was ultimately able to redeem only $646,762,678 of its $2,916,049,486 investment, resulting in a total loss of $2,269,286,808.
Specifically, regarding the Plan's portion of the loss, as of December 31,
9. On September 16, 2020, the Committee filed a cause of action in the United States District Court for the Southern District of New York (Case number 20–CIV–07606) against Allianz and Aon for Breach of Fiduciary Duty under ERISA Section 404, Breach of Co-Fiduciary Duty under ERISA Section 405, and violation of ERISA Section 406(b) for managing the Plan assets in its self-interest and breach of contract. It is possible that resolution of this claim and other legal actions against Allianz and Aon in connection with the Plan's losses (the Claims) could take an extended period of time.
10. The Applicant states that rather than wait for the Claims to be resolved, Triple-S took steps to protect Plan benefits and avoid onerous benefit restrictions under Code section 436 that could apply to the Plan as a result of a funding shortfall. Therefore, on November 6, 2020, Triple-S and the Plan entered into a Contribution and Assignment Agreement whereby Triple-S agreed to make a $10,000,000 Restorative Payment to the Plan not later than December 31, 2021 (the Contribution and Assignment Agreement). Subsequently, on June 28, 2021, Triple-S made a $10,000,000 Restorative Payment to the Plan.
11. In exchange for the Restorative Payment, the Plan assigned to Triple-S its right to retain certain litigation and/or settlement proceeds recovered from the Claims (the Assigned Interests).
For the purposes of this exemption, Attorney Fees reimbursable to Triple-S do not include: (a) legal expenses paid by the Plan; and (b) legal expenses paid by Triple-S for representation of its own interests or the interests of any party other than the Plan. For purposes of determining the amount of Attorney Fees the Plan may reimburse to Triple-S under this exemption, the amount of reasonable attorney fees paid by Triple-S on behalf of the Plan in connection with the Claims must be reduced by the amount of legal fees received by Triple-S in connection with the Claims from any non-Plan party (for example, from a third party pursuant to a court award).
12. The Plan must ultimately receive at least the full value of the promised Restorative Payment, minus the Attorney Fees. The Plan may ultimately receive more than the Restorative Payment amount required under the Contribution and Assignment Agreement. If the Plan receives litigation or settlement proceeds that exceed the amount of Restorative Payment that Triple-S has made to the Plan, the Plan's Repayment to Triple-S will be limited to the Restorative Payment amount, plus Attorney Fees. For example, if Triple-S reasonably incurred $100,000 in Attorney Fees, and the Plan receives $20,000,000 in litigation proceeds, the Plan will make a Repayment to Triple-S totaling $10,100,000.
13. Alternatively, if the Plan receives less litigation or settlement proceeds than the amount of the Restorative Payment, the Plan will transfer to Triple-S the lesser amount of litigation or settlement proceeds, plus Attorney Fees. For example, if Triple-S reasonably incurred $100,000 in Attorney Fees, and the Plan receives $5,000,000 in litigation proceeds, the Plan will make a Repayment to Triple-S totaling $5,100,000.
14. The Department notes that if the Plan receives any restitution that is tied to the conduct underlying the Claims but was ordered pursuant to a proceeding or directive that is external to Case number 20–CIV–07606, the disposition of such proceeds must conform to the requirements of this exemption.
15. Triple-S retained Gallagher Fiduciary Advisors, LLC (Gallagher or the Independent Fiduciary) of New York, New York, to serve as the Plan's independent fiduciary with respect to the Required Restorative Payment and the potential repayment by the Plan of those Payments (collectively, the Proposed Transactions). Gallagher represents that it has extensive experience in institutional investment consulting and fiduciary decision-making regarding traditional and alternative investments. Gallagher further represents that its independent fiduciary decision-making work involves acting as a fiduciary advisor or decision-maker for plans and other ERISA-regulated asset pools and that it has experience with a wide range of asset classes and litigation claims.
16. Gallagher represents that it understands its duties and responsibilities under ERISA in acting as a fiduciary on behalf of the Plan. Gallagher also acknowledges that it is authorized to take all appropriate actions to safeguard the Plan's interests, and that it will monitor the Proposed Transactions on the Plan's behalf on a continuous basis and throughout the term required by this exemption.
17. Gallagher represents that it does not have any prior relationship with any parties in interest to the Plan, including Triple-S and any Triple-S affiliates. Gallagher further represents the total revenues it has received from the Plan and from parties in interest to the Plan in connection with its engagement as Independent Fiduciary represents approximately 0.78% of Gallagher's total revenue.
18. Gallagher represents that no party associated with this exemption application has or will indemnify it, in whole or in part, for negligence of any kind and/or any violation of state or federal law that may be attributable to Gallagher's performance of its duties as Independent Fiduciary to the Plan with respect to the Proposed Transactions. In addition, no contract or instrument entered into by Gallagher as Independent Fiduciary may purport to waive any liability under state or federal law for any such violation.
19. On November 5, 2020, Gallagher completed an Independent Fiduciary Report (the Independent Fiduciary Report) finding that the massive losses caused by the Trust's investment in the Allianz Structured Alpha Strategy resulted in a significant reduction to the Plan's total assets and funding level. Gallagher represents that the Required Restorative Payment, which will be received by the Plan substantially in advance of a final resolution of the Claims against Allianz and Aon, should restore the Plan's funded percentage to its pre-loss funded percentage as of January 1, 2019. The restoration of the Plan's funding status will secure ongoing benefit payments to participants and beneficiaries.
Gallagher notes that the Contribution and Assignment Agreement provides that the Trust must reimburse Triple-S only up to the Required Restorative
Gallagher states that the Proposed Transactions and the terms of the Contribution and Assignment Agreement were negotiated and approved by Gallagher in its role as the Plan's Independent Fiduciary. Gallagher states that it approved the Proposed Transactions only after conducting an extensive analysis of the damages suffered by the Plan as a result of the failed Allianz Structured Alpha Strategy. Gallagher represents that it conducted numerous discussions with Trust representatives and counsel, along with the Plan's representatives and counsel to ensure that the interests of the Plan's participants and beneficiaries were protected with respect to all aspects of the Proposed Transactions. Based upon its assessment, Gallagher approved the Plan's receipt of the Required Restorative Payment from Triple-S in exchange for the Assignment.
20. Absent an exemption, the Plan's receipt of the Restorative Payment from Triple-S in exchange for the Plan's transfer of litigation or settlement proceeds to Triple-S would violate ERISA. In this regard, ERISA Section 406(a)(1)(A) prohibits a plan fiduciary from causing the plan to engage in a transaction if the fiduciary knows or should know that such transaction constitutes a direct or indirect sale or exchange of any property between a plan and a party in interest. Triple-S, as an employer whose employees are covered by the Plan, is a party in interest with respect to the Plan under ERISA Section 3(14)(C). The Required Restorative Payment to the Plan and the Plan's potential repayment to Triple-S with litigation or settlement proceeds would constitute impermissible exchanges between the Plan and a party-in-interest (Triple-S) in violation of ERISA Section 406(a)(1)(A).
ERISA Section 406(a)(1)(B) prohibits the lending of money or other extension of credit between a plan and a party-in-interest. Triple's promise to make the Required Restorative Payment to the Plan, over time, constitutes an impermissible extension of credit between the Plan and a party-in-interest in violation of ERISA Section 406(a)(1)(B).
ERISA Section 406(a)(1)(D) prohibits a plan fiduciary from causing a plan to engage in a transaction if the fiduciary knows or should know that the transaction constitutes a direct or indirect transfer to, or use by or for the benefit of, a party-in-interest, of the income or assets of the plan. The transfer of Plan assets to Triple-S in connection with the Repayment would constitute an impermissible transfer of Plan assets to a party-in-interest in violation of ERISA Section 406(a)(1)(D).
21. This proposed exemption contains a number of conditions that must be met. For example, the proposed exemption mandates that the Independent Fiduciary, in full accordance with its obligations of prudence and loyalty under ERISA Section 404(a)(1)(A) and (B) must:
(a) review, negotiate, and approve the terms and conditions of the Required Restorative Payment, the Repayment, and the Contribution and Assignment Agreement, before the Plan enters into such payments and the agreement;
(b) determine that the terms and conditions of the Required Restorative Payment, the Repayment, and the Contribution and Assignment Agreement are prudent, in the interest of the Plan and its participants and beneficiaries, and protective of the rights of the Plan's participants and beneficiaries;
(c) confirm that the Required Restorative Payment was fully and timely made;
(d) monitor the Claims and confirm that the Plan receives its proper share of any litigation or settlement proceeds received by the Trust in connection with the Claims;
(e) ensure that any Repayment by the Plan to Triple-S fully complies with the terms of this exemption and is for no more than the lesser of the total Restorative Payment or the amount the Plan received from the Claims, plus Attorney Fees;
(f) ensure that any Repayment by the Plan to Triple-S for legal expenses in connection with the Claims is limited to only reasonable legal expenses that were paid by Triple-S to unrelated third parties for representation of the Plan and its interests (as opposed to representation of Triple-S or the interests of any party other than the Plan) where Triple-S was not otherwise reimbursed from a non-Plan party;
(g) monitor the Plan's Assigned Interests on an ongoing basis to determine and confirm that any excess recovery amount from the Claims (
(h) ensure that all of the conditions and definitions of this proposed exemption are met; and
(i) represent that it has not and will not enter into any agreement or instrument that violates ERISA Section 410 or Department Regulations codified at 29 CFR 2509.75–4.
22. This proposed exemption also requires Gallagher to respond in writing to any information requests from the Department regarding Gallagher's activities as the Plan's Independent Fiduciary. Additionally, no later than 90 days after the resolution of the litigation, Gallagher must submit a written report to the Department demonstrating that all terms and conditions of the exemption have been met.
23. This proposed exemption requires that the Plan has not and will not release any claims, demands and/or causes of action it may have against: (a) any fiduciary of the Plan; (b) any fiduciary of the Trust; (c) Triple-S; and/or (d) any person or entity related to a person or entity described in (a)–(c) of this paragraph. Additionally, any Repayment by the Plan to Triple-S must be made in a manner designed to minimize unnecessary costs and disruption to the Plan and its investments.
24. The Plan may not make any Repayment to Triple-S before the date: the Plan has received from Triple-S the entire amount of the Restorative Payment agreed to in the Amended Contribution and Assignment Agreement; and all the Claims are settled. Furthermore, the Plan may not pay any interest to Triple-S in connection with its receipt of the Required Restorative Payment, nor pledge Plan assets to secure any portion of the Required Restorative Payment.
25. Pursuant to this proposed exemption, the Plan may not incur any expenses, commissions or transaction costs in connection with the Proposed Transactions. However, as noted above, under certain circumstances the Plan may reimburse Triple-S for reasonable legal expenses arising from the Claims that Triple-S paid to non-Triple-S-related parties for representation of the Plan and its interests (as opposed to representation of Triple-S or the interests of any party other than the Plan) where Triple-S was not otherwise reimbursed by a non-Plan party.
26. Finally, the exemptive relief provided under this proposed exemption is conditioned upon the Department's assumption that the material facts and representations set forth above in the Summary of Facts and Representation section are true and accurate at all times. In the event that a material fact or representation detailed above is untrue or inaccurate, the exemptive relief provided under this exemption will cease immediately.
27. ERISA Section 408(a) provides, in part, that the Department may not grant an exemption unless the Department finds that the exemption is administratively feasible, in the interest of affected plans and of their participants and beneficiaries, and protective of the rights of such participants and beneficiaries. Each of these criteria is discussed below.
a.
b.
c.
28. Based on the conditions described above, the Department has tentatively determined that the relief sought by the Applicant satisfies the statutory requirements under ERISA Section 408(a) for the Department to make findings that support its issuance of a proposed exemption.
The Department is considering granting an exemption under the authority of ERISA Section 408(a) and Code Section 4975(c)(2) and in accordance with the procedures set forth in the Department's exemption procedure regulation.
(a) The term “Attorney Fees” means reasonable legal expenses paid by Triple-S on behalf of the Plan in connection with the Claims, if such fees are reviewed and approved by a qualified independent fiduciary who confirms that the fees were reasonably incurred and paid by Triple-S to unrelated third parties. For the purposes of this exemption, the Attorney Fees reimbursable to Triple-S do not include: (1) legal expenses paid by the Plan; and (2) legal expenses paid by Triple-S for representation of Triple-S or the interests of any party other than the Plan.
(b) The term “Triple-S” means Triple-S Management Corporation.
(c) The term “Claims” means the legal claims against Allianz Global Investors U.S. LLC (Allianz) and Aon Investments USA Inc. (Aon), to recover certain losses incurred by the Plan in the first quarter of 2020.
(d) The term “Contribution and Assignment Agreement” means the written agreement between Triple-S and the Plan, dated November 6, 2020, containing all material terms regarding Triple-S's agreement to make Required Restorative Payment to the Plan in return for the Plan's potential Repayment to Triple-S of an amount that is no more than lesser of the Required Restorative Payment Amount (as described in Section I(h)) received by the Plan or the amount of litigation proceeds the Plan receives from the Claims, plus reasonable attorney fees paid to unrelated third parties by Triple-S in connection with the Claims.
(e) The term “Independent Fiduciary” means Gallagher Fiduciary Advisors, LLC (Gallagher) or a successor Independent Fiduciary to the extent Gallagher or the successor Independent Fiduciary continues to serve in such capacity who:
(1) Is not an affiliate of Triple-S and does not hold an ownership interest in Triple-S or affiliates of Triple-S;
(2) Was not a fiduciary with respect to the Plan before its appointment to serve as the Independent Fiduciary;
(3) Has acknowledged in writing that it:
(i) is a fiduciary with respect to the Plan and has agreed not to participate in any decision regarding any transaction in which it has an interest that might affect its best judgment as a fiduciary; and
(ii) Has appropriate technical training or experience to perform the services contemplated by the exemption;
(4) Has not entered into any agreement or instrument that violates the prohibitions on exculpatory provisions in ERISA Section 410 or the Department's regulation relating to indemnification of fiduciaries;
(5) Has not received gross income from Triple-S or its affiliates during any fiscal year in an amount that exceeds
(6) No organization or individual that is an Independent Fiduciary, and no partnership or corporation of which such organization or individual is an officer, director, or ten percent (10%) or more partner or shareholder, may acquire any property from, sell any property to, or borrow any funds from Triple-S or from affiliates of Triple-S while serving as an Independent Fiduciary. This prohibition will continue for six months after the party ceases to be an Independent Fiduciary and/or the Independent Fiduciary negotiates any transaction on behalf of the Plan during the period that the organization or individual serves as an Independent Fiduciary.
(f) The “Plan” means the Triple-S Management Corporation Non-Contributory Retirement Plan.
(g) The term “Plan Losses” means the $103,793,253 in Plan losses the BCBSA's National Employee Benefits Committee alleges were the result of breaches of fiduciary responsibilities and breaches of contract by Allianz Global Investors U.S. LLC and/or Aon Investments USA Inc.
(h) The term “Restorative Payment” means the payment made by Triple-S of $10,000,000 to the Plan in connection with the Plan Losses, defined above, consisting of a $10,000,000 payment that Triple-S contributed to the Plan on June 28, 2021.
(i) The “Repayment” means the payment, if any, that the Plan will transfer to Triple-S following the Plan's receipt of proceeds from the Claims, where the Repayment is made following the full and complete resolution of the Claims, and in a manner that is consistent with the terms of the exemption.
If the proposed exemption is granted, the restrictions of ERISA Sections 406(a)(1)(A), (B), and (D) and the sanctions resulting from the application of Code Section 4975, by reason of Code Sections 4975(c)(1)(A), (B) and (D), shall not apply, effective November 5, 2020, to the following transactions: Triple-S's transfer of Restorative Payment to the Plan; and, in return, the Plan's Repayment of an amount to Triple-S, which must be no more than the lesser of the Restorative Payment received by the Plan or the amount of litigation proceeds the Plan received from the Claims, plus reasonable Attorney Fees, provided that the Definitions set forth in Section I and the Conditions set forth in Section III are met.
(a) The Plan received the entire Restorative Payment Amount no later than June 28, 2021;
(b) In connection with its receipt of the Required Restorative Payment, the Plan does not release any claims, demands and/or causes of action the Plan may have against the following: (1) any fiduciary of the Plan; (2) any fiduciary of the Trust; (3) Triple-S; and/or (4) any person or entity related to a person or entity identified in (1)–(3) of this paragraph;
(c) The Plan's Repayment to Triple-S is for no more than the lesser of the total Restorative Payment received by the Plan or the amount of litigation proceeds the Plan receives from the Claims. The Plan's Repayment to Triple-S may only occur after the Independent Fiduciary has determined that: all the conditions of the exemption are met; the Plan has received all the Restorative Payments it is due; and the Plan has received all the litigation proceeds it is due. The Plan's Repayment to Triple-S must be carried out in a manner designed to minimize unnecessary costs and disruption to the Plan and its investments;
(d) A qualified independent fiduciary (the Independent Fiduciary, as further defined in Section II(e)), acting solely on behalf of the Plan in full accordance with its obligations of prudence and loyalty under ERISA Sections 404(a)(1)(A) and (B) must:
(1) Review, negotiate and approve the terms and conditions of the Restorative Payment and the Repayment and the Contribution and Assignment Agreement, all of which must be in writing, before the Plan enters into those transactions/agreement;
(2) Determine that the Restorative Payment, the Repayment, and the terms of the Contribution and Assignment Agreement, are prudent and in the interest of the Plan and its participants and beneficiaries;
(3) Confirm that the Required Restorative Payment Amount was fully and timely made;
(4) Monitor the litigation related to the Claims and confirm that the Plan receives, in a timely manner, its proper share of any litigation or settlement proceeds received by the Trust;
(5) Ensure that any Repayment by the Plan to Triple-S for legal expenses in connection with the Claims is limited to only reasonable legal expenses that were paid by Triple-S to unrelated third parties;
(6) Ensure that all of the conditions and definitions of this proposed exemption are met;
(7) Submit a written report to the Department's Office of Exemption Determinations demonstrating and confirming that the terms and conditions of the exemption were met, within 90 days after the Repayment; and
(8) Not enter into any agreement or instrument that violates ERISA Section 410 or the Department's Regulations codified at 29 CFR Section 2509.75–4.
(f) The Plan pays no interest in connection with the Restorative Payment;
(g) The Plan does not pledge any Plan assets to secure any portion of the Restorative Payment;
(h) The Plan does not incur any expenses, commissions, or transaction costs in connection with the Proposed Transactions. However, if first approved by the Independent Fiduciary, the Plan may reimburse Triple-S for reasonable legal expenses paid in connection with the Claims by Triple-S to non-Triple-S-related parties. For purposes of determining the amount of Attorney Fees the Plan may reimburse to Triple-S under this proposal, the amount of reasonable attorney fees paid by Triple-S on behalf of the Plan in connection with the Claims must be reduced by the amount of legal fees received by Triple-S in connection with the Claims from any non-Plan party (
(i) The proposed transactions do not involve any risk of loss to either the Plan or the Plan's participants and beneficiaries;
(j) No party associated with this exemption has or will indemnify the Independent Fiduciary and the Independent Fiduciary will not request indemnification from any party, in whole or in part, for negligence and/or any violation of state or federal law that may be attributable to the Independent Fiduciary in performing its duties to the Plan with respect to the Proposed Transactions. In addition, no contract or instrument may purport to waive any liability under state or federal law for any such violation.
(k) If an Independent Fiduciary resigns, is removed, or for any reason is unable to serve as an Independent Fiduciary, the Independent Fiduciary must be replaced by a successor entity
(l) All of the material facts and representations set forth in the Summary of Facts and Representation are true and accurate at all times.
The Applicant will give notice of the proposed exemption to all interested persons and all of the parties to the litigation described above, within fifteen calendar days after the publication of the notice of proposed exemption in the
All comments will be made available to the public.
The Department is considering granting an exemption under the authority of Section 408(a) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and Section 4975(c)(2) of the Internal Revenue Code of 1986, as amended (the Code). The proposed exemption relates to legal actions and claims (the Claims) against Allianz Global Investors U.S. LLC (Allianz) and Aon Investments USA Inc. (Aon), that arose from certain losses incurred by the Non-Contributory Retirement Program for Certain Employees of National Account Service Company (the Plan) in the first quarter of 2020.
This proposed exemption would permit the Plan sponsor, the National Account Service Company LLC (NASCO), to make payments totaling $50 million to the Plan (the Restorative Payments). If the Plan receives litigation proceeds from the Claims, the Plan will transfer the lesser of the ligation proceeds amount or the Restorative Payments, plus reasonable attorney fees to NASCO.
1. NASCO is a healthcare technology company dedicated to co-creating digital health solutions for Blue Cross and Blue Shield companies. NASCO provides information technology products and services and offers payment management, system delivery, business optimization solutions, membership enrollment, and other related services. NASCO is owned by Blue Cross Blue Shield of Michigan Mutual Insurance Company.
2. The Plan is an ERISA-covered qualified defined benefit pension plan that covers eligible employees of NASCO. The Plan was amended effective January 1, 2009 to close participation to new entrants as of December 31, 2008. As of December 31, 2020, the Plan covered 264 participants and held $47,306,049 in total assets.
3. The Plan holds a beneficial interest in the Blue Cross and Blue Shield National Retirement Trust (the Trust). The Trust is a master trust that holds the assets of 16 defined benefit pension plans that participate in the BCBSA's National Retirement Program (the Participating Plans). Northern Trust serves as Trustee and asset custodian to the Trust and maintains separate records that reflect the net asset value of each Participating Plan. The Trust's earnings, market adjustments, and administrative expenses are allocated among the Participating Plans based on the respective Participating Plan's share of the Trust's assets. A Participating Plan's interest in the Trust's net assets is based on its share of the Trust.
4. The Committee serves as named fiduciary and administrator for each Participating Plan. The Committee is a standing committee of the BCBSA's board of directors. In 2011, the Committee invested a portion of the Trust's assets in funds managed by Allianz Global Investors U.S. LLC (Allianz), as part of a Structured Alpha Investment Strategy. These funds included: (a) AllianzGI Structured Alpha Multi-Beta Series LLC I; (b) AllianzGI Structured Alpha Emerging Markets Equity 350 LLC; and (c) AllianzGI Structured Alpha 1000 LLC (collectively, the Structured Alpha Funds).
5. The Applicant represents that the Allianz Structured Alpha strategy consisted of alpha and beta components. According to the applicant, the alpha component was an options trading strategy that Allianz claimed would seek targeted positive return potential while maintaining structural risk protections. The beta component was intended to provide broad market exposure to a particular asset class through investments in financial products similar to an exchange-traded fund that replicates the performance of a market index, such as the S&P 500. According to the Applicant, Allianz
6. As of December 31, 2019, the total market value of the Plan's portion of the Trust's investment in the Allianz Structured Alpha Funds was $63,571,918, which represented 77.66% of total Plan assets.
7. In 2009, the Committee retained Aon (then called Ennis Knupp) to provide investment advice regarding the investment of Plan assets held in the Trust. The Applicant represents that Aon provided regular investment advice pursuant to a written contract between it and the Committee. Pursuant to its engagement, Aon agreed to provide the following: “recommendations to [the Committee] regarding asset allocation” within the Trust; “recommendations to [the Committee] regarding the specific asset allocation and other investment guidelines” for the Trust's investment managers such as Allianz; and advice “regarding the diversification of assets” held in the Trust.” The Applicant represents that Aon agreed to: conduct “active, ongoing monitoring” of Allianz to “identify any forward-looking” risks “that could impact performance;” and “inform itself” of any information necessary to discharge its duty to monitor, including information about the actual options positions Allianz had constructed.
8. The Applicant represents that when equity markets sharply declined in February and March of 2020, volatility spiked and the options positions held within the Structured Alpha Strategy were exposed to a heightened risk of loss. The Applicant represents that, unbeknownst to the Committee, and in violation of Allianz's stated investment strategy, Allianz abandoned the hedging strategy that was the supposed cornerstone of the Structured Alpha Strategy, leaving the portfolio almost entirely unhedged against a spike in market volatility. As described in the Claims, although Allianz had represented that it would buy hedges at strike prices ranging from 10% to 25% below the market, the hedges it actually held at the end of February 2020 were as much as 60% below the market.
The Applicant represents that, as of January 31, 2020, the Trust had invested approximately $2,916,049,486 in the Structured Alpha Strategy. Six weeks later, the Trust faced a margin call, which the Applicant states left it no choice but to liquidate the investment. The Trust was ultimately able to redeem only $646,762,678 of its $2,916,049,486 investment, resulting in a total loss of $2,269,286,808.
Specifically, regarding the Plan's portion of the loss, as of December 31, 2019 the market value of Plan assets was $81,855,683. As of March 31, 2020, the market value of Plan assets decreased to $28,120,905. The Applicant represents that the Plan's total losses from the Allianz Structured Alpha Strategy were $51,662,561, which caused the Plan to be underfunded.
9. On September 16, 2020, the Committee filed a cause of action in the United States District Court for the Southern District of New York (Case number 20–CIV–07606) against Allianz and Aon for Breach of Fiduciary Duty under ERISA Section 404, Breach of Co-Fiduciary Duty under ERISA Section 405, and violation of ERISA Section 406(b) for managing the Plan assets in its self-interest and breach of contract. It is possible that resolution of this claim and other legal actions against Allianz and Aon in connection with the Plan's losses (the Claims) could take an extended period of time.
10. The Applicant states that rather than wait for the Claims to be resolved, NASCO took steps to protect Plan benefits and avoid onerous benefit restrictions under Code section 436 that could apply to the Plan as a result of a funding shortfall. Therefore, on March 1, 2021, NASCO and the Plan entered into a Contribution and Assignment Agreement pursuant to which NASCO agreed to make Restorative Payments to the Plan not in excess of $50,000,000 over the course of 2021 through 2025 (the Contribution and Assignment Agreement).
11. NASCO has made Restorative Payments to the Plan totaling $22,800,000, including: (a) a $2,000,000 payment on August 3, 2020; (b) a $2,000,000 payment on September 2, 2020; (c) a $3,625,000 payment on June 21, 2021; (d) a $3,625,000 payment on July 21, 2021; (e) a $3,625,000 payment on August 16, 2021; (f) a $3,625,000 payment on September 13, 2021; and (g) a $4,300,000 payment on June 21, 2021.
12. In exchange for the Restorative Payments, the Plan assigned to NASCO its right to retain certain litigation and/or settlement proceeds recovered from the Claims (the Assigned Interests).
For the purposes of this exemption, Attorney Fees reimbursable to NASCO do not include: (a) legal expenses paid by the Plan; and (b) legal expenses paid by NASCO for representation of its own interests or the interests of any party other than the Plan. For purposes of determining the amount of Attorney Fees the Plan may reimburse to NASCO under this exemption, the amount of reasonable attorney fees paid by NASCO on behalf of the Plan in connection with the Claims must be reduced by the amount of legal fees received by NASCO in connection with the Claims from any non-Plan party (for example, from a third party pursuant to a court award).
13. The Plan must ultimately receive at least the full value of the promised Restorative Payments, minus the Attorney Fees. The Plan may ultimately receive more than the Restorative Payment amount required under the Contribution and Assignment Agreement. If the Plan receives litigation or settlement proceeds that exceed the amount of Restorative Payments that NASCO has made to the Plan, the Plan's Repayment to NASCO will be limited to the amount of Restorative Payments actually made by NASCO, plus Attorney Fees. For example, if NASCO has made $22,800,000 in Restorative Payments to the Plan and reasonably incurred $100,000 in Attorney Fees, and the Plan receives $50,000,000 in litigation proceeds, the Plan will make a Repayment to NASCO totaling $22,900,000.
14. Alternatively, if the Plan receives less litigation or settlement proceeds than the amount of Restorative Payments that NASCO has made to the
15. The Department notes that if the Plan receives any restitution that is tied to the conduct underlying the Claims but was ordered pursuant to a proceeding or directive that is external to Case number 20–CIV–07606, the disposition of such proceeds must conform to the requirements of this exemption.
16. NASCO retained Gallagher Fiduciary Advisors, LLC (Gallagher or the Independent Fiduciary) of New York, New York, to serve as the Plan's independent fiduciary with respect to the Required Restorative Payments and the potential repayment by the Plan of those Payments (collectively, the Proposed Transactions). Gallagher represents that it has extensive experience in institutional investment consulting and fiduciary decision-making regarding traditional and alternative investments. Gallagher further represents that its independent fiduciary decision-making work involves acting as a fiduciary advisor or decision-maker for plans and other ERISA-regulated asset pools and that it has experience with a wide range of asset classes and litigation claims.
17. Gallagher represents that it understands its duties and responsibilities under ERISA in acting as a fiduciary on behalf of the Plan. Gallagher also acknowledges that it is authorized to take all appropriate actions to safeguard the Plan's interests, and that it will monitor the Proposed Transactions on the Plan's behalf on a continuous basis and throughout the term required by this exemption.
18. Gallagher represents that it does not have any prior relationship with any parties in interest to the Plan, including NASCO and any NASCO affiliates. Gallagher further represents the total revenues it has received from the Plan and from parties in interest to the Plan in connection with its engagement as Independent Fiduciary represents approximately 0.78% of Gallagher's total revenue.
19. Gallagher represents that no party associated with this exemption application has or will indemnify it, in whole or in part, for negligence of any kind and/or any violation of state or federal law that may be attributable to Gallagher's performance of its duties as Independent Fiduciary to the Plan with respect to the Proposed Transactions. In addition, no contract or instrument entered into by Gallagher as Independent Fiduciary may purport to waive any liability under state or federal law for any such violation.
20. On March 1, 2021, Gallagher completed an Independent Fiduciary Report (the Independent Fiduciary Report) finding that the massive losses caused by the Trust's investment in the Allianz Structured Alpha Strategy resulted in a significant reduction to the Plan's total assets and funding level. Gallagher represents that the Required Restorative Payments, which will be received by the Plan substantially in advance of a final resolution of the Claims against Allianz and Aon, should restore the Plan's funded percentage to its pre-loss funded percentage as of January 1, 2019. The restoration of the Plan's funding status will secure ongoing benefit payments to participants and beneficiaries.
Gallagher notes that the Contribution and Assignment Agreement provides that the Trust must reimburse NASCO only up to the Required Restorative Payment Amount received by the Plan, plus any reasonable legal expense paid to non-NASCO-related parties that were incurred by, or allocated to, NASCO as a result of the Claims.
Gallagher states that the Proposed Transactions and the terms of the Contribution and Assignment Agreement were negotiated and approved by Gallagher in its role as the Plan's Independent Fiduciary. Gallagher states that it approved the Proposed Transactions only after conducting an extensive analysis of the damages suffered by the Plan as a result of the failed Allianz Structured Alpha Strategy. Gallagher represents that it conducted numerous discussions with Trust representatives and counsel, along with the Plan's representatives and counsel to ensure that the interests of the Plan's participants and beneficiaries were protected with respect to all aspects of the Proposed Transactions. Based upon its assessment, Gallagher approved the Plan's receipt of the Required Restorative Payments from NASCO in exchange for the Assignment.
21. Absent an exemption, the Plan's receipt of the Restorative Payments from NASCO in exchange for the Plan's transfer of litigation or settlement proceeds to NASCO would violate ERISA. In this regard, ERISA Section 406(a)(1)(A) prohibits a plan fiduciary from causing the plan to engage in a transaction if the fiduciary knows or should know that such transaction constitutes a direct or indirect sale or exchange of any property between a plan and a party in interest. NASCO, as an employer whose employees are covered by the Plan, is a party in interest with respect to the Plan under ERISA Section 3(14)(C). The Required Restorative Payments to the Plan and the Plan's potential repayment to NASCO with litigation or settlement proceeds would constitute impermissible exchanges between the Plan and a party-in-interest (NASCO) in violation of ERISA Section 406(a)(1)(A).
ERISA Section 406(a)(1)(B) prohibits the lending of money or other extension of credit between a plan and a party-in-interest. NASCO's promise to make Required Restorative Payments to the Plan, over time, constitutes an impermissible extension of credit between the Plan and a party-in-interest in violation of ERISA Section 406(a)(1)(B).
ERISA Section 406(a)(1)(D) prohibits a plan fiduciary from causing a plan to engage in a transaction if the fiduciary knows or should know that the transaction constitutes a direct or indirect transfer to, or use by or for the benefit of, a party-in-interest, of the income or assets of the plan. The transfer of Plan assets to NASCO in connection with the Repayment would constitute an impermissible transfer of Plan assets to a party-in-interest in violation of ERISA Section 406(a)(1)(D).
22. This proposed exemption contains a number of conditions that must be met. For example, the proposed exemption mandates that the Independent Fiduciary, in full accordance with its obligations of
(a) review, negotiate, and approve the terms and conditions of the Required Restorative Payments, the Repayment, and the Contribution and Assignment Agreement, before the Plan enters into such payments and the agreement;
(b) determine that the terms and conditions of the Required Restorative Payments, the Repayment, and the Contribution and Assignment Agreement are prudent, in the interest of the Plan and its participants and beneficiaries, and protective of the rights of the Plan's participants and beneficiaries;
(c) confirm that the Required Restorative Payments are fully and timely made;
(d) monitor the Claims and confirm that the Plan receives its proper share of any litigation or settlement proceeds received by the Trust in connection with the Claims;
(e) ensure that any Repayment by the Plan to NASCO fully complies with the terms of this exemption and is for no more than the lesser of the total Restorative Payments actually made to the Plan by NASCO or the amount the Plan received from the Claims, plus Attorney Fees;
(f) ensure that any Repayment by the Plan to NASCO for legal expenses in connection with the Claims is limited to only reasonable legal expenses that were paid by NASCO to unrelated third parties for representation of the Plan and its interests (as opposed to representation of NASCO or the interests of any party other than the Plan) where NASCO was not otherwise reimbursed from a non-Plan party;
(g) monitor the Plan's Assigned Interests on an ongoing basis to determine and confirm that any excess recovery amount from the Claims (
(h) ensure that all of the conditions and definitions of this proposed exemption are met; and
(i) represent that it has not and will not enter into any agreement or instrument that violates ERISA Section 410 or Department Regulations codified at 29 CFR 2509.75–4.
23. This proposed exemption also requires Gallagher to respond in writing to any information requests from the Department regarding Gallagher's activities as the Plan's Independent Fiduciary. Additionally, no later than 90 days after the resolution of the litigation, Gallagher must submit a written report to the Department demonstrating that all terms and conditions of the exemption have been met.
24. This proposed exemption requires that the Plan has not and will not release any claims, demands and/or causes of action it may have against: (a) any fiduciary of the Plan; (b) any fiduciary of the Trust; (c) NASCO; and/or (d) any person or entity related to a person or entity described in (a)–(c) of this paragraph. Additionally, any Repayment by the Plan to NASCO must be made in a manner designed to minimize unnecessary costs and disruption to the Plan and its investments.
25. The Plan may not make any Repayment to NASCO before the date: the Plan has received from NASCO the entire amount of the Restorative Payments agreed to in the Amended Contribution and Assignment Agreement; and all the Claims are settled. Furthermore, the Plan may not pay any interest to NASCO in connection with its receipt of the Required Restorative Payments, nor pledge Plan assets to secure any portion of the Required Restorative Payments.
26. Pursuant to this proposed exemption, the Plan may not incur any expenses, commissions, or transaction costs in connection with the Proposed Transactions. However, as noted above, under certain circumstances the Plan may reimburse NASCO for reasonable legal expenses arising from the Claims that NASCO paid to non-NASCO-related parties for representation of the Plan and its interests (as opposed to representation of NASCO or the interests of any party other than the Plan) where NASCO was not otherwise reimbursed by a non-Plan party.
27. Finally, the exemptive relief provided under this proposed exemption is conditioned upon the Department's assumption that the material facts and representations set forth above in the Summary of Facts and Representation section are true and accurate at all times. In the event that a material fact or representation detailed above is untrue or inaccurate, the exemptive relief provided under this exemption will cease immediately.
28. ERISA Section 408(a) provides, in part, that the Department may not grant an exemption unless the Department finds that the exemption is administratively feasible, in the interest of affected plans and of their participants and beneficiaries, and protective of the rights of such participants and beneficiaries. Each of these criteria is discussed below.
a.
b.
c.
29. Based on the conditions described above, the Department has tentatively determined that the relief sought by the Applicant satisfies the statutory requirements under ERISA Section 408(a) for the Department to make findings that support its issuance of a proposed exemption.
The Department is considering granting an exemption under the authority of ERISA Section 408(a) and Code Section 4975(c)(2) and in accordance with the procedures set forth in the Department's exemption procedure regulation.
(a) The term “Attorney Fees” means reasonable legal expenses paid by NASCO on behalf of the Plan in connection with the Claims, if such fees are reviewed and approved by a qualified independent fiduciary who confirms that the fees were reasonably incurred and paid by NASCO to unrelated third parties. For the purposes of this exemption, the Attorney Fees reimbursable to NASCO do not include: (1) legal expenses paid by the Plan; and (2) legal expenses paid by NASCO for representation of NASCO or the interests of any party other than the Plan.
(b) The term “NASCO” means National Account Service Company LLC.
(c) The term “Claims” means the legal claims against Allianz Global Investors U.S. LLC (Allianz) and Aon Investments USA Inc. (Aon), to recover certain losses incurred by the Plan in the first quarter of 2020.
(d) The term “Contribution and Assignment Agreement” means the written agreement between NASCO and the Plan, dated March 1, 2021, containing all material terms regarding NASCO's agreement to make Required Restorative Payments to the Plan in return for the Plan's potential Repayment to NASCO of an amount that is no more than lesser of the Required Restorative Payment Amount (as described in Section I(h)) received by the Plan or the amount of litigation proceeds the Plan receives from the Claims, plus reasonable attorney fees paid to unrelated third parties by NASCO in connection with the Claims.
(e) The term “Independent Fiduciary” means Gallagher Fiduciary Advisors, LLC (Gallagher) or a successor Independent Fiduciary to the extent Gallagher or the successor Independent Fiduciary continues to serve in such capacity who:
(1) Is not an affiliate of NASCO and does not hold an ownership interest in NASCO or affiliates of NASCO;
(2) Was not a fiduciary with respect to the Plan before its appointment to serve as the Independent Fiduciary;
(3) Has acknowledged in writing that it:
(i) is a fiduciary with respect to the Plan and has agreed not to participate in any decision regarding any transaction in which it has an interest that might affect its best judgment as a fiduciary; and
(ii) Has appropriate technical training or experience to perform the services contemplated by the exemption;
(4) Has not entered into any agreement or instrument that violates the prohibitions on exculpatory provisions in ERISA Section 410 or the Department's regulation relating to indemnification of fiduciaries;
(5) Has not received gross income from NASCO or its affiliates during any fiscal year in an amount that exceeds two percent (2%) of the Independent Fiduciary's gross income from all sources for the prior fiscal year. This provision also applies to a partnership or corporation of which the Independent Fiduciary is an officer, director, or 10 percent (10%) or more partner or shareholder, and includes as gross income amounts received as compensation for services provided as an independent fiduciary under any prohibited transaction exemption granted by the Department; and
(6) No organization or individual that is an Independent Fiduciary, and no partnership or corporation of which such organization or individual is an officer, director, or ten percent (10%) or more partner or shareholder, may acquire any property from, sell any property to, or borrow any funds from NASCO or from affiliates of NASCO while serving as an Independent Fiduciary. This prohibition will continue for six months after the party ceases to be an Independent Fiduciary and/or the Independent Fiduciary negotiates any transaction on behalf of the Plan during the period that the organization or individual serves as an Independent Fiduciary.
(f) The “Plan” means the Non-Contributory Retirement Program for Certain Employees of National Account Service Company.
(g) The term “Plan Losses” means the $51,662,561 in Plan losses the BCBSA's National Employee Benefits Committee alleges were the result of breaches of fiduciary responsibilities and breaches of contract by Allianz Global Investors U.S. LLC and/or Aon Investments USA Inc.
(h) The term “Restorative Payments” means the $50 Million in payments NASCO is required to pay the Plan by December 21, 2025, as set forth in the Contribution and Assignment Agreement.
(i) The “Repayment” means the payment, if any, that the Plan will transfer to NASCO following the Plan's receipt of proceeds from the Claims, where the Repayment is made following the full and complete resolution of the Claims, and in a manner that is consistent with the terms of the exemption.
If the proposed exemption is granted, the restrictions of ERISA Sections 406(a)(1)(A), (B) and (D) and the sanctions resulting from the application of Code Section 4975, by reason of Code Sections 4975(c)(1)(A), (B) and (D), shall not apply, effective September 2, 2020, to the following transactions: NASCO's transfer of Restorative Payments to the Plan; and, in return, the Plan's Repayment of an amount to NASCO, which must be no more than the lesser of the Restorative Payment received by the Plan or the amount of litigation proceeds the Plan received from the Claims, plus reasonable Attorney Fees, provided that the Definitions set forth in Section I and the Conditions set forth in Section III are met.
(a) The Plan receives the entire Restorative Payment Amount no later than December 31, 2025;
(b) In connection with its receipt of the Required Restorative Payments, the Plan does not release any claims, demands and/or causes of action the Plan may have against the following: (1) any fiduciary of the Plan; (2) any fiduciary of the Trust; (3) NASCO; and/or (4) any person or entity related to a person or entity identified in (1)–(3) of this paragraph;
(c) The Plan's Repayment to NASCO is for no more than the lesser of the total Restorative Payments received by the Plan or the amount of litigation
(d) A qualified independent fiduciary (the Independent Fiduciary, as further defined in Section II(e)), acting solely on behalf of the Plan in full accordance with its obligations of prudence and loyalty under ERISA Sections 404(a)(1)(A) and (B) must:
(1) Review, negotiate and approve the terms and conditions of the Restorative Payments and the Repayment and the Contribution and Assignment Agreement, all of which must be in writing, before the Plan enters into those transactions/agreement;
(2) Determine that the Restorative Payments, the Repayment, and the terms of the Contribution and Assignment Agreement, are prudent and in the interest of the Plan and its participants and beneficiaries;
(3) Confirm that the Required Restorative Payment Amount was fully and timely made;
(4) Monitor the litigation related to the Claims and confirm that the Plan receives, in a timely manner, its proper share of any litigation or settlement proceeds received by the Trust;
(5) Ensure that any Repayment by the Plan to NASCO for legal expenses in connection with the Claims is limited to only reasonable legal expenses that were paid by NASCO to unrelated third parties;
(6) Ensure that all of the conditions and definitions of this proposed exemption are met;
(7) Submit a written report to the Department's Office of Exemption Determinations demonstrating and confirming that the terms and conditions of the exemption were met, within 90 days after the Repayment; and
(8) Not enter into any agreement or instrument that violates ERISA Section 410 or the Department's Regulations codified at 29 CFR Section 2509.75–4.
(f) The Plan pays no interest in connection with the Restorative Payments;
(g) The Plan does not pledge any Plan assets to secure any portion of the Restorative Payments;
(h) The Plan does not incur any expenses, commissions, or transaction costs in connection with the Proposed Transactions. However, if first approved by the Independent Fiduciary, the Plan may reimburse NASCO for reasonable legal expenses paid in connection with the Claims by NASCO to non-NASCO-related parties. For purposes of determining the amount of Attorney Fees the Plan may reimburse to NASCO under this proposal, the amount of reasonable attorney fees paid by NASCO on behalf of the Plan in connection with the Claims must be reduced by the amount of legal fees received by NASCO in connection with the Claims from any non-Plan party (
(i) The proposed transactions do not involve any risk of loss to either the Plan or the Plan's participants and beneficiaries;
(j) No party associated with this exemption has or will indemnify the Independent Fiduciary and the Independent Fiduciary will not request indemnification from any party, in whole or in part, for negligence and/or any violation of state or federal law that may be attributable to the Independent Fiduciary in performing its duties to the Plan with respect to the Proposed Transactions. In addition, no contract or instrument may purport to waive any liability under state or federal law for any such violation.
(k) If an Independent Fiduciary resigns, is removed, or for any reason is unable to serve as an Independent Fiduciary, the Independent Fiduciary must be replaced by a successor entity that: (1) meets the definition of Independent Fiduciary detailed above in Section II(e); and (2) otherwise meets all of the qualification, independence, prudence and diligence requirements set forth in this exemption. Further, any such successor Independent Fiduciary must assume all of the duties of the outgoing Independent Fiduciary. As soon as possible, including before the appointment of a successor Independent Fiduciary, NASCO must notify the Department's Office of Exemption Determinations of the change in Independent Fiduciary and such notification must contain all material information regarding the successor Independent Fiduciary, including the successor Independent Fiduciary's qualifications; and
(l) All of the material facts and representations set forth in the Summary of Facts and Representation are true and accurate at all times.
The Applicant will give notice of the proposed exemption to all interested persons and all of the parties to the litigation described above, within fifteen calendar days after the publication of the notice of proposed exemption in the
All comments will be made available to the public.
The attention of interested persons is directed to the following:
(1) The fact that a transaction is the subject of an exemption under section 408(a) of the Act and/or section 4975(c)(2) of the Code does not relieve a fiduciary or other party in interest or disqualified person from certain other provisions of the Act and/or the Code, including any prohibited transaction provisions to which the exemption does not apply and the general fiduciary responsibility provisions of section 404 of the Act, which, among other things, require a fiduciary to discharge his duties respecting the plan solely in the interest of the participants and beneficiaries of the plan and in a prudent fashion in accordance with section 404(a)(1)(B) of the Act; nor does it affect the requirement of section 401(a) of the Code that the plan must operate for the exclusive benefit of the employees of the employer maintaining the plan and their beneficiaries;
(2) Before an exemption may be granted under section 408(a) of the Act and/or section 4975(c)(2) of the Code, the Department must find that the exemption is administratively feasible, in the interests of the plan and of its participants and beneficiaries, and protective of the rights of participants and beneficiaries of the plan;
(3) The proposed exemptions, if granted, will be supplemental to, and not in derogation of, any other provisions of the Act and/or the Code, including statutory or administrative exemptions and transitional rules. Furthermore, the fact that a transaction is subject to an administrative or statutory exemption is not dispositive of whether the transaction is in fact a prohibited transaction; and
(4) The proposed exemptions, if granted, will be subject to the express condition that the material facts and representations contained in each application are true and complete, and that each application accurately describes all material terms of the transaction which is the subject of the exemption.
Commodity Futures Trading Commission.
Final rule.
The Commodity Futures Trading Commission (Commission or CFTC) is modifying its existing interest rate swap clearing requirement regulations under applicable provisions of the Commodity Exchange Act (CEA) due to the global transition from reliance on certain interbank offered rates (IBORs) (
This rule is effective September 23, 2022, except for amendatory instructions 3 and 5, which are effective July 1, 2023. Specific compliance dates are discussed in the
Sarah E. Josephson, Deputy Director, at 202–418–5684 or
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) established a comprehensive new regulatory framework for swaps.
Section 2(h)(2)(D)(ii) of the CEA requires the Commission to consider the following five factors when making a clearing requirement determination: (I) the existence of significant outstanding notional exposures, trading liquidity, and adequate pricing data; (II) the availability of rule framework, capacity, operational expertise and resources, and credit support infrastructure to clear the contract on terms that are consistent with the material terms and trading conventions on which the contract is traded; (III) the effect on the mitigation of systemic risk, taking into account the size of the market for such contract and the resources of the DCOs available to clear the contract; (IV) the effect on competition, including appropriate fees and charges applied to clearing; and (V) the existence of reasonable legal certainty in the event of the insolvency of the relevant DCO or one or more of its clearing members with regard to the treatment of customer and swap counterparty positions, funds, and property.
The Commission adopted its first clearing requirement determination (First Determination) in 2012.
In making its initial interest rate swap clearing determination, the Commission focused on the size of the interest rate swap market relative to the swap market overall, as well as the fact that these swaps were already widely being cleared.
The First Determination covered a number of interest rate swaps that reference IBORs, including fixed-to-floating swaps, basis swaps, and FRAs denominated in USD, GBP, JPY, and EUR, referencing USD LIBOR, GBP LIBOR, JPY LIBOR, and the Euro Interbank Offered Rate (EURIBOR), respectively. The First Determination also included OIS denominated in EUR referencing the Euro Overnight Index Average (EONIA), as well as OIS denominated in USD referencing FedFunds and GBP referencing the Sterling Overnight Index Average (SONIA). The Commission observed that interest rate swaps referencing those rates had significant outstanding notional amounts and trading liquidity.
The Commission adopted its second clearing requirement determination for interest rate swaps (Second Determination) in 2016.
LIBOR is an interest rate benchmark that was intended to measure the average rate at which a bank can obtain unsecured funding in the London interbank market for a given tenor and currency. It had been one of the world's most frequently referenced interest rate benchmarks, serving as a reference rate for a wide variety of swaps and other financial products. Over the years, LIBOR was calculated based on submissions from panels of contributor banks and published every London business day. Immediately prior to January 1, 2022, LIBOR was published for five currencies (USD, GBP, EUR, CHF, and JPY) and seven tenors (overnight or spot-next depending on currency, one-week, one-month, two-month, three-month, six-month, and 12-month), resulting in 35 individual LIBOR rates.
Government investigations into LIBOR that occurred nearly a decade ago, as well as a decline in the volume of interbank lending transactions that LIBOR was intended to measure, gave rise to concerns regarding the integrity and reliability of LIBOR and other IBORs.
(i) EUR LIBOR in all tenors;
(ii) CHF LIBOR in all tenors;
(iii) JPY LIBOR in the spot-next, one-week, two-month, and 12-month tenors;
(iv) GBP LIBOR in the overnight, one-week, two-month, and 12-month tenors; and
(v) USD LIBOR in the one-week and two-month tenors.
The FCA further determined that GBP and JPY LIBOR in one-month, three-month, and six-month tenors would become nonrepresentative after December 31, 2021.
The circumstances surrounding the transition from IBORs to RFRs are the result of significant private and public sector coordinated efforts.
Table 1 that follows this paragraph contains a non-exhaustive list of RFRs that have been identified to replace IBORs. Each of these RFRs is currently being published.
Regulators and global standard-setting bodies have urged market participants to accelerate their adoption of USD SOFR and other RFRs and cease entering new swaps referencing LIBOR and other IBORs,
As explained in the NPRM,
DCOs played an important role in the transition from IBORs to RFRs by offering clearing services for RFR swaps and converting cleared EUR EONIA and GBP, EUR, CHF, and JPY LIBOR swaps to RFR OIS.
In responding to the Commission's November 23, 2021 RFI regarding updates to the clearing requirement to account for the transition to RFRs, CME, LSEG, and Eurex also discussed plans to convert cleared USD LIBOR swaps to market standard USD SOFR OIS. In April 2022, LCH published a consultation on its proposed conversion process.
Since the publication of the NPRM, CME and Eurex published more detailed information regarding their plans to convert cleared USD LIBOR contracts to USD SOFR OIS, ahead of the June 30, 2023 end date for USD LIBOR.
To be clear, these final rules apply only to swaps entered into on or after the implementation dates discussed below. As was in the case with the First Determination in 2012 and the Second Determination in 2016, only these new swaps are required to be cleared. Market participants may wish to clear other interest rate swaps in their portfolios on a voluntary basis, as has been the case with a majority of RFR OIS. As reflected in the data presented below, the overwhelming majority of RFR OIS are being voluntarily cleared already.
Market participants also play a critical role in the transition from reliance on IBORs to the adoption of RFRs through engagement with RFR working groups, such as ARRC, and the provision of trading liquidity in interest rate swaps referencing RFRs.
The global shift from IBORs to RFRs represents a historic effort by international bodies such as IOSCO and FSB, regulators, cross-jurisdictional working groups, market infrastructure providers, market participants, and others, to move the global interest rate swap market toward more reliable benchmarks.
The Commission is committed to working with domestic authorities, such as the FRB, FRBNY, and the Securities and Exchange Commission, to ensure transparency in its efforts and, to the greatest extent possible, consistency in the transition from IBORs to RFRs. For example, the Commission sought input from domestic authorities through this rulemaking process and continued its participation in relevant coordinating committees. Commission staff also shared a draft of this final rulemaking with certain domestic authorities.
Section 752(a) of the Dodd-Frank Act directs the Commission to consult and coordinate with foreign regulatory authorities on the establishment of consistent international standards for the regulations of swaps.
In particular, as part of the ongoing regulatory dialogue among authorities, Commission staff consulted with counterparts, including those at Australian Securities and Investments Commission (ASIC), Bank of England, ESMA, Hong Kong Securities and Futures Commission (HKSFC),
The discussion below sets forth relevant updates and coordination efforts among international authorities. As part of this rulemaking process, the Commission sought input from overseas counterparts to ensure a coordinated approach to required clearing of interest rate swaps during the move from use of swaps referencing IBORs to swaps referencing RFRs and shared information regarding this final rulemaking with international counterparts.
Regulators and public-private working groups have been working to identify, develop, and encourage market uptake of interest rate swaps referencing RFRs to replace interest rate swaps referencing IBORs. As relevant to these amendments, RFRs identified as alternatives for IBORs, in addition to SOFR for USD, include: (i) SONIA for GBP; (ii) SARON for CHF; (iii) TONA for JPY; and (iv) €STR for EUR.
In finalizing these amendments, the Commission considered relevant changes to clearing requirements in other jurisdictions. As noted in the NPRM, the Commission sought to
On December 6, 2021, ASIC published a consultation proposing changes to its interest rate swap clearing requirement. The consultation proposed (i) removing contracts referencing EUR EONIA from the OIS class and replacing them with OIS referencing EUR €STR with a termination date range of seven days to two years; (ii) removing contracts referencing JPY LIBOR from the fixed-to-floating swap, basis swap, and FRA classes and replacing them with OIS referencing JPY TONA with a termination date range of seven days to 30 years; and (iii) removing contracts referencing GBP LIBOR from the fixed-to-floating swap, basis swap, and FRA classes, and extending the termination date range for OIS referencing GBP SONIA to include seven days to 50 years.
On May 12, 2022, Australia finalized changes to its clearing requirement. There was only one change from the proposal: the termination date range for EUR-denominated €STR OIS required to be cleared was expanded from two years to three years, in line with final European Union (EU) rules.
In the EU, the Working Group on Euro Risk-Free Rates, convened in 2018 by the ECB in connection with Belgian Financial Services, ESMA, and European Commission (EC), identified EUR €STR as its preferred alternative to EUR EONIA, which ceased publication on January 3, 2022.
In 2021, ESMA published a consultation proposing to (i) remove swaps referencing EUR EONIA from the OIS class and replace them with swaps referencing EUR €STR with a termination date range of seven days to three years; (ii) remove swaps referencing GBP LIBOR from the fixed-to-floating swap, basis swap, and FRA classes and extend the termination date range for OIS referencing GBP SONIA to include seven days to 50 years; (iii) remove swaps referencing JPY LIBOR from the fixed-to-floating and basis swap classes; and (iv) add swaps referencing USD SOFR to the OIS class with a termination date range of seven days to three years.
On February 8, 2022, ESMA adopted final regulatory technical standards (RTS), which also removed swaps referencing USD LIBOR from the fixed-to-floating swap, basis swap, and FRA classes.
On July 11, 2022, ESMA proposed adding OIS referencing JPY TONA (seven days to 30 years) to its clearing obligation, as well as expanding the termination date range for OIS referencing USD SOFR to include seven days to 50 years.
HKSFC and HKMA have jurisdiction over the clearing obligation in Hong Kong. As of September 1, 2016, clearing mandate rules promulgated jointly by HKSFC and HKMA require that swaps between certain local and foreign-incorporated entities covering fixed-to-floating and basis swaps denominated in USD, GBP, and JPY each referencing LIBOR, fixed-to-floating and basis swaps denominated in EUR referencing EURIBOR, and fixed-to-floating and basis swaps denominated in HKD referencing HIBOR be cleared.
A recent publication of frequently asked questions indicated that “certain indexes may not be relevant if they are no longer maintained. For example, we do not expect HIBOR–ISDC will be used as it is no longer maintained by [ISDA]. The list of indexes may evolve over time but changes will be subject to consultation and the industry will be given time to make necessary arrangement before changes are implemented.”
On December 6, 2021, proposed changes to JFSA's clearing rules became effective.
Japanese authorities accomplished the smooth transition from swaps referencing JPY LIBOR to JPY TONA OIS in coordination with JSCC. As JSCC explains in its comment letter,
With regard to SGD denominated interest rate swaps, MAS established the Steering Committee for SOR & SIBOR Transition to SORA. This group has been working to oversee a transition from SGD SOR–VWAP to SGD SORA.
On May 9, 2022, FINMA launched a consultation on amendments to its Financial Market Infrastructure Ordinance to, among other things, update the list of interest rate swaps subject to mandatory clearing. The consultation closed on July 5, 2022. In relevant part, the proposal would require clearing of the following OIS: (i) EUR €STR OIS for a termination date range of seven days to three years; (ii) GBP SONIA OIS for a termination date range of seven days to 50 years; and (iii) USD SOFR OIS for a termination date range of seven days to three years.
The publicly available English language documents state that proposed changes to FINMA's clearing mandate “will be adjusted in line with foreign legal developments to the altered market conditions resulting from benchmark reform,” and that, more specifically, FINMA will “align[ ] itself closely with EU law.”
As explained in the NPRM, following the Commission's action in 2016, FINMA did not require clearing of swaps referencing CHF LIBOR, and to date no jurisdiction has implemented mandatory clearing for swaps referencing CHF SARON.
On May 20, 2021, Bank of England proposed to (i) effective October 18, 2021, remove contracts referencing EUR EONIA from the OIS class and replace them with contracts referencing EUR €STR with a termination date range of seven days to three years; and (ii) effective December 20, 2021, remove contracts referencing GBP LIBOR from the fixed-to-floating swap, basis swap, and FRA classes, and extend the termination date range for OIS referencing GBP SONIA to include seven days to 50 years.
On June 9, 2022, Bank of England published a proposal to remove contracts referencing USD LIBOR from the fixed-to-floating swap, basis swap, and FRA classes, that would come into force “around the same time as a number of CCPs contractually convert these contracts and remove them from their list of contracts eligible for clearing,” and add OIS referencing USD SOFR effective October 31, 2022.
This proposal, and the proposed implementation approach, are largely aligned with the Commission's proposal.
The interest rate swap market has made tremendous progress toward completing the transition from reliance on swaps that reference LIBOR and other IBORs to clearing and trading swaps that reference RFRs. In issuing this final rule, the Commission further facilitates this transition by amending its interest rate swap clearing requirement to reflect the cessation or loss of representativeness of certain IBORs and the market adoption of swaps referencing RFRs.
On May 31, 2022, the Commission published an NPRM seeking public input regarding how it should amend the interest rate swap clearing requirement to address the cessation or loss of representativeness of IBORs that have been used as benchmark reference rates and the market adoption of swaps that reference RFRs. The NPRM was preceded by an RFI that the Commission issued on November 23, 2021.
The NPRM proposed amending regulation § 50.4(a) to remove from the clearing requirement interest rate swaps in all classes referencing LIBOR (USD, GBP, CHF, and JPY), EUR EONIA, and SGD SOR–VWAP, as applicable. The NPRM also proposed updating the clearing requirement to include OIS referencing USD SOFR (seven days to 50 years), CHF SARON (seven days to 30 years), JPY TONA (seven days to 30 years), EUR €STR (seven days to three years), and SGD SORA (seven days to 10 years), as well as extending the termination date range of GBP SONIA OIS to include seven days to 50 years. The NPRM proposed an implementation date of 30 days after publication of final rules in the
The Commission received 12 comments on its NPRM from a variety of market infrastructure providers, market participants, and industry organizations.
Nearly all of the commenters expressed support for the scope of the OIS covered under the Commission's proposal, and many agreed with the Commission's analysis that an updated swap clearing requirement would enhance financial stability by reducing systemic risk, improving market integrity, and increasing transparency in the interest rate swap market.
Commenters, including CCP12, CME, Citadel, ISDA, JSCC, and MFA supported the Commission's goal of harmonizing its clearing requirement with those of non-U.S. jurisdictions. CCP12 stated such coordination with counterparts would allow the U.S. to align its interest rate swap clearing requirement with other major jurisdictions in a manner that promotes legal certainty, regulatory transparency, and the preservation of liquidity in cleared swaps. CME stated its support for adding the RFR OIS covered by the NPRM to the clearing requirement in light of rapid market adoption of voluntary clearing of RFR OIS and the objective of harmonizing global clearing requirements to the extent possible. CME also noted the Commission's commitment to coordination, transparency, and consistency in engaging with domestic authorities. JSCC stated support for the inclusion of JPY TONA OIS in the modifications to regulation § 50.4(a) because such action would harmonize the Commission's interest rate swap clearing requirement with those of other jurisdictions. JSCC stated that this harmonization, in turn, would lower the operational and compliance burden for market participants active across multiple jurisdictions. Market participants including those represented by ISDA, MFA, and others stated their support for global harmonization efforts as well.
CCP12 highlighted the work done by CCPs to support the transition to RFRs. CCP12 stated that CCPs offered clearing for new RFR swaps, which has encouraged participation, growth, and liquidity in these products, and enabled a smooth conversion of certain cleared
This point is consistent with comments submitted by both CME and JSCC, among others. For example, CME stated that with the expected increase in the number of transactions, it is prepared to continue clearing RFR OIS. JSCC stated that requiring JPY TONA OIS to be cleared would not affect the ability of DCOs to comply with the CEA or the relevant legal and regulatory regime of any other jurisdiction.
ISDA recommended that the Commission delay the issuance of a clearing requirement for CHF-denominated interest rate swaps referencing SARON that would take the place of an existing Commission clearing requirement for interest rate swaps referencing LIBOR, until such time as the Swiss authorities adopt a clearing requirement for interest rate swaps referencing CHF SARON.
ACLI stated its support for the Commission's decision not to include USD SOFR–USD LIBOR basis swaps in the interest rate swap clearing requirement. ACLI pointed to the limited and dwindling use cases for these swaps, along with low liquidity and limitations on the ability to electronically execute such basis swaps. No other commenter responded to the NPRM's question on this topic.
ACLI stated that because both the cleared swaps framework and uncleared swap margin rules reduce risk, life insurers should be free to weigh the pros and cons of cleared versus uncleared swaps and choose a regime that provides the most flexibility in allocating collateral.
No other commenter raised these issues.
In its comment letter, SOFR Academy recommended that the Commission clarify the definition of USD SOFR OIS in the final rule to avoid potential confusion in the event a market develops for OIS referencing a new index that combines USD SOFR as administered and published by FRBNY with a credit spread supplement.
In its comment letter, CME referred to the ongoing industry transition of swaps referencing LIBOR to the relevant nominated successor RFRs and noted that market participants have demonstrated a preference for transition to market standard RFR OIS.
Commenters expressed a number of views with regard to the implementation schedule for the RFR OIS clearing requirement and the removal of the existing clearing requirement for LIBOR, EUR EONIA, and SGD SOR–VWAP interest rate swaps.
A majority of commenters favored the Commission's proposed approach of implementing the RFR OIS clearing requirement 30 days after publication of this final rulemaking in the
ISDA recommended that the implementation date for the RFR OIS
No other commenter expressly recommended October 31, 2022, as an implementation date for all RFR OIS. However, despite supporting the Commission's 30-day implementation approach, CCP12 stated that a harmonized approach to timing would reduce the potential operational burden for clearing members and clients of having to comply with the same, or very similar, clearing mandates at different times and in different jurisdictions.
ACLI stated that the Commission should postpone the inclusion of USD SOFR OIS in the clearing requirement until June 30, 2023, which would coincide with the date USD LIBOR swaps are removed from the clearing requirement and create an incentive for market participants concerned about clearing trades to move from USD LIBOR to USD SOFR swaps. ACLI stated that the Commission and other regulators have offered significant relief to smooth the transition from USD LIBOR to USD SOFR, and that postponing implementation of the USD SOFR OIS clearing requirement would be consistent with that approach. No other commenter supported this view.
AIMA supported the Commission's proposal, particularly the proposal to require USD SOFR OIS clearing out to 50 years, and to maintain the USD LIBOR clearing requirement until July 1, 2023. Likewise, Citadel agreed with the Commission's proposal to maintain the current clearing requirement for USD LIBOR swaps until July 1, 2023, in light of continued significant trading activity in USD LIBOR swaps. Citadel stated that this would provide the Commission with flexibility to continue evaluating market developments for specific tenors and adjust requirements as necessary.
CME supported the Commission's proposal to retain its USD LIBOR swap clearing requirement because USD LIBOR is widely expected to continue until June 30, 2023, and clearing services are expected to continue to be offered up to or shortly before that date. CME stated that retaining the USD LIBOR swap clearing requirement until CCPs cease to provide clearing services and/or convert swaps would provide clarity and certainty for market participants.
ISDA proposed March 6, 2023, as the implementation date for removing rules requiring clearing interest rate swaps referencing USD LIBOR. ISDA stated that the removal date for USD LIBOR swaps should be no earlier than any CCP conversion date because a later removal date would be inconsistent with Commission objectives. ISDA stated that because CCPs are unlikely to convert simultaneously, there will be confusion when one converts and others do not.
MFA stated that the Commission's proposal to maintain its USD LIBOR interest rate swap clearing requirement until July 1, 2023, is appropriate, as liquidity in swaps denominated in USD that reference LIBOR in the fixed-to-floating swap, basis swap, and FRA classes is sufficient to continue to support required clearing.
Commenters raised the following two issues that are related to the IBOR transition. They are presented for the sake of a complete consideration of comments submitted, but the Commission observes that, as discussed below, they are beyond the scope of this rulemaking.
ICI supported the proposed modifications to the interest rate swap clearing requirement, but urged the Commission to recognize the separate nature of the trade execution requirement. ICI commented that the Commission should not approve or allow certification of a subsequent made-available-to-trade (MAT) determination solely on the basis of the swap being subject to a clearing requirement. ICI stated that the MAT process is especially important with respect to longer-dated swaps proposed to be cleared, which are less liquid. ISDA also stated that a corresponding MAT determination alongside or closely following a clearing mandate could challenge a smooth and orderly IBOR transition, and ISDA requested that the Commission consider changes to its MAT determination process to ensure that any MAT determination in new RFRs occur at the appropriate time and in line with overall policy objectives.
Pursuant to section 2(h)(8) of the CEA and Commission regulations §§ 37.10 and 38.12, a trade execution requirement could, in the future, apply to some or all of the interest rate swaps covered by this rulemaking. The process for determining which swaps are subject to the trade execution requirement is separate from the clearing requirement determination process. Therefore, it is beyond the scope of this rulemaking for the Commission to address the suitability of particular swaps for a trade execution requirement or to address issues related to the MAT process.
ISDA stated that currently swap dealers are able to book OIS into their cleared or uncleared portfolios to match changes in risk as part of portfolio compression exercises. According to ISDA, a clearing requirement for RFR OIS would impair swap dealers' ability to manage their uncleared portfolios. ISDA requested that the Commission consider an exemptive order or staff no-action from the clearing requirement for RFR swaps where the trades result from post-trade risk reduction (PTRR) exercises.
By contrast, Citadel stated that the Commission should continue to reject requests for additional exemptions, including for PTRR services, when updating the clearing requirement.
No other commenters raised this issue.
In 2013, Commission staff issued a no-action letter regarding PTRR services.
The Commission is finalizing amendments to regulation § 50.4(a) to remove certain IBORs and EUR EONIA interest rate swap clearing requirements and add requirements to clear corresponding RFR OIS. The IBOR swaps for which clearing requirements are being removed span all four classes of swaps currently required to be cleared—fixed-to-floating swaps, basis swaps, FRAs, and (in the case of EUR EONIA) OIS.
These amendments to the interest rate swap clearing requirement are the first rule changes that the Commission has issued to facilitate the transition from IBORs to RFRs. The amendments update the existing clearing requirement. In effect, the amendments replace the requirement to clear certain IBOR swaps in a number of different classes with a requirement to clear RFR OIS because the IBOR swaps have become unavailable and liquidity has shifted into RFR OIS. Accordingly, pursuant to this final rulemaking, the following swaps will no longer be required to be cleared:
• Swaps denominated in USD, GBP, CHF, and JPY that reference LIBOR as a floating rate index in each of the fixed-to-floating swap, basis swap, and FRA classes, as applicable.
• Swaps denominated in EUR that reference EONIA as a floating rate index in the OIS class.
• Swaps denominated in SGD that reference SOR–VWAP as a floating rate index in the fixed-to-floating swap class.
The Commission is amending the OIS class of interest rate swaps under regulation § 50.4(a) that are required to be cleared to include the following:
• Swaps denominated in USD that reference SOFR as a floating rate index with a stated termination date range of seven days to 50 years,
• Swaps denominated in EUR that reference €STR as a floating rate index with a stated termination date range of seven days to three years,
• Swaps denominated in CHF that reference SARON as a floating rate index with a stated termination date range of seven days to 30 years,
• Swaps denominated in JPY that reference TONA as a floating rate index with a stated termination date range of seven days to 30 years, and
• Swaps denominated in SGD that reference SORA as a floating rate index with a stated termination date range of seven days to 10 years.
• Swaps denominated in GBP that reference SONIA as a floating rate index with a stated termination date range of seven days to 50 years.
While these amendments are legally effective 30 days after publication of the final rule in the
SOFR Academy and one of the individual commenters requested clarification regarding the product specifications subject to this rulemaking. These commenters asked which interest rates apply to the USD-denominated OIS referencing SOFR.
The final rules apply to the USD SOFR OIS that are offered for clearing at registered and exempt DCOs. These DCOs' product specifications provide that the USD SOFR OIS that they clear reference USD–SOFR–COMPOUND under the 2006 ISDA Definitions and USD–SOFR–OIS Compound under the 2021 ISDA Definitions. Similarly, GBP SONIA, CHF SARON, JPY TONA, SGD SORA, and EUR €STR OIS clearing requirements refer to the GBP SONIA, CHF SARON, JPY TONA, SGD SORA, and EUR €STR OIS that are offered for clearing at registered and exempt DCOs. Each of these rates reference compound RFR indexes as defined in ISDA Definitions.
The Commission is the only authority to require CHF LIBOR swaps be submitted for clearing. In 2016, FINMA considered adopting a clearing mandate for swaps referencing CHF LIBOR, but after the Commission's final rules that included CHF LIBOR swaps went into effect, FINMA did not adopt a similar mandate.
Likewise, while MAS did not require clearing of SGD SOR–VWAP swaps with a termination date range of 28 days to 10 years until October 2018, the Commission was aware of this expected action, and took it into account when adopting a clearing requirement for SGD
Against this regulatory backdrop, clearing rates for CHF SARON OIS and SGD SORA OIS are already high. The Commission estimates that more than 97% of notional transacted in these rates each month between November 2021 and April 2022 was cleared.
Furthermore, the Commission estimates that, as of April 29, 2022, there was $1,497 billion in outstanding notional in CHF SARON OIS, whereas there was $282 billion in outstanding notional in CHF LIBOR fixed-to-floating swaps.
Comparing the January and April 2022 month-end estimates, there is a slight decline in outstanding notional in CHF SARON OIS, but a steep decline in outstanding notional for CHF LIBOR fixed-to-floating swaps. With respect to the SGD rates, there is a decline in outstanding notional for SGD SOR–VWAP fixed-to-floating swaps roughly proportional to the increase in outstanding notional for SGD SORA OIS. The Commission believes these numbers demonstrate that CHF LIBOR and SGD SOR–VWAP are steadily being replaced by their corresponding RFRs.
Based on this data, it would appear that, since the time the Commission issued its NPRM, the CHF interest rate swap market has moved from comprising roughly one-half LIBOR swaps to only approximately one-fifth LIBOR swaps. Additionally, while SGD SOR–VWAP is anticipated to continue until June 30, 2023, the transition to SGD SORA is well underway. Data presented in tables 2 and 3 below further illustrate that the CHF LIBOR and SGD SOR–VWAP swap markets have rapidly diminished as markets shift to swaps referencing RFRs. The Commission estimates that, in April 2022, there were no CHF LIBOR fixed-to-floating swap transactions, and 39 SGD SOR–VWAP fixed-to-floating swap transactions (comprising $2 billion notional). The Commission also estimates that, in April 2022, there were 1,913 CHF SARON OIS transactions (comprising $91 billion notional) and 3,277 SGD SORA OIS transactions (comprising $124 billion notional).
In response to the NPRM, ISDA commented that the Commission should delay the update of the CHF-denominated interest rate swap clearing requirement until such time as the Swiss authorities issue a clearing mandate. The requirement to clear interest rate swaps denominated in Swiss francs has been in place under U.S. law since 2016.
With regard to SGD-denominated interest rate swaps, the Commission did not receive any comments. Nor is the Commission aware of any concerns on the part of its fellow authorities with regard to update the clearing requirement to include SGD SORA OIS. The requirement to clear interest rate swaps denominated in SGD has been in place under U.S. law since 2016.
The Commission is unaware of any risk-related or operational concerns that have arisen with regard to this requirement. In addition, to delay updating the Commission's existing interest rate swap clearing requirement for swaps denominated in these two currencies would limit the scope of the Commission's existing clearing requirement. It also would risk introducing unnecessary market confusion by unexpectedly changing the scope of the interest rate swap market that is required to be cleared.
Swiss and European authorities generally have indicated that they are reviewing this matter and may act to require clearing of CHF SARON OIS under the laws of their respective jurisdictions at some point in the future. The Commission proceeded in 2016 under the Second Determination and now updates those regulations to further the extensive work pursuant to a public-private partnership that has taken place to prepare the interest rate swap markets for IBOR conversions. While Singaporean authorities have not yet amended their regulations, a similar justification exists with regard to updating the SGD-denominated interest rate swap clearing requirement.
Based on responses to the RFI, as well as ACLI's comment, the Commission is not adding any new requirements to clear RFR-linked basis swaps at this time. These swaps are used primarily to move out of IBOR swap positions and into RFR swap positions.
The Commission is amending its interest rate swap clearing requirement to include OIS referencing RFRs by adopting a new clearing requirement determination. The Commission has completed a review of the current RFR OIS offered for clearing and has considered the specific statutory factors required to make a new clearing requirement determination.
CME, LCH, and Eurex provided the Commission with regulation § 39.5(b)
This clearing requirement determination is distinguishable from prior determinations insofar as it responds to a public and private sector, consensus-driven market event that has resulted, or will result, in liquidity shifting to new benchmark rates from rates that have become, or will soon become, unavailable. In that sense, central clearing in the RFR OIS markets, which rely on benchmark rates that are less susceptible to manipulation, may offer unique benefits that prior interest rate swap market clearing did not.
Section 2(h)(2)(D)(i) of the CEA requires the Commission to determine whether a clearing requirement determination is consistent with core principles for DCOs set forth in section 5b(c)(2) of the CEA.
The Commission believes that CME, LCH, and Eurex will be able to maintain compliance with the DCO core principles and applicable Commission regulations following adoption of this clearing requirement determination. For the reasons discussed below, the Commission has determined that subjecting any of the RFR OIS to required clearing is unlikely to impair CME's, LCH's, or Eurex's ability to comply with the DCO core principles, along with applicable Commission regulations.
While exempt DCOs are not subject to the DCO core principles
As outlined in the summary of comments, the Commission's conclusions regarding the DCOs' ability to remain in compliance with applicable regulations, as well as sound risk management practices, is supported by commenters.
Clearing the RFR OIS swaps subject to this determination does not pose financial or legal risks that are materially distinguishable from those posed by the IBOR interest rate swaps that the Commission required to be cleared in 2012 and 2016 and that DCOs have been offering for clearing for over a decade. For additional information regarding the ability of DCOs and exempt DCOs to clear these swaps, see the discussion of Factor II in the Commission's determination analysis below.
Set forth below is the Commission's consideration of the five factors set forth in section 2(h)(2)(D)(ii) of the CEA as they relate to all OIS being added to the interest rate swap clearing requirement, which includes OIS (i) denominated in USD and referencing SOFR; (ii) denominated in GBP and referencing SONIA; (iii) denominated in CHF and referencing SARON; (iv) denominated in JPY and referencing TONA; (v) denominated in EUR and referencing €STR; and (vi) denominated in SGD and referencing SORA.
Liquidity has shifted, and continues to shift, from swaps referencing IBORs to swaps referencing RFRs. The first of the five factors under section 2(h)(2)(D)(ii) of the CEA requires the Commission to consider “the existence of significant outstanding notional exposures, trading liquidity, and adequate pricing data” related to “a submission made [by a DCO].”
The Commission reviewed data to determine whether there is an active market for the swap, including whether there is a measurable amount of notional exposure and whether the swap is traded regularly as reflected by trade count. The data presented in the NPRM and below indicates that there is sufficient outstanding notional exposure and trading liquidity in RFR OIS to support a clearing requirement determination.
In Table 2 below, the Commission provides estimates of notional transacted by month for various categories of RFR OIS, and IBOR fixed-to-floating and basis swaps, for the period beginning November 1, 2021, and ending April 30, 2022. The data in Table 2 generally indicates significant, and relatively steady or increasing, amounts of notional transacted in RFR OIS from November 2021 through April 2022. The data also illustrates that there was comparatively little notional transacted during the same time period in fixed-to-floating swaps referencing IBORs that ceased publication or became nonrepresentative in December 2021 and January 2022.
Significant amounts of notional were transacted in USD LIBOR fixed-to-floating swaps. In the NPRM, the Commission observed that while notional traded per month in USD SOFR OIS nearly doubled between December 2021 and January 2022, the amount of such notional transacted in January 2022 was still less than half that of the amount of notional transacted during the same month in USD LIBOR fixed-to-floating swaps. However, as shown below, in April 2022, notional transacted in USD SOFR OIS outpaced notional transacted in USD LIBOR fixed-to-floating swaps. Thus, while the transition of liquidity from USD LIBOR fixed-to-floating swaps to USD SOFR OIS is not yet complete, it is well underway.
Table 3 that follows this paragraph provides estimates of trade counts for the same categories of RFR and IBOR swaps during the same six-month period. The data in Table 3 indicates that, with regard to RFR OIS, monthly trade count generally increased or was relatively steady between November 2021 and April 2022, with an especially pronounced increase in the number of USD SOFR OIS transactions. Conversely, trade counts for swaps referencing IBORs that ceased or became nonrepresentative in December 2021 and January 2022 dropped off precipitously by January 2022. While there were still a significant number of USD LIBOR fixed-to-floating swap transactions during the six-month period that Table 3 measures, the monthly trade count for such transactions declined significantly during that period. Similarly, the monthly trade count for SGD SOR–VWAP fixed-to-floating swaps declined significantly between November 2021 and April 2022.
Table 4 that
Table 5 that follows this paragraph presents a breakdown of notional transacted and trade count for the period beginning April 1, 2022 and ending April 30, 2022, by tenor, for the relevant RFR OIS. Table 5 illustrates that RFR OIS are being cleared across a wide range of maturities. By notional and trade count, most clearing activity occurs in RFR OIS dated between three months and 15 years. However, with respect to USD SOFR and GBP SONIA OIS in particular, there is also significant clearing activity in swaps dated 15 years or greater.
In addition to this transaction–level data, Table 6 that follows this paragraph presents open swaps data illustrating outstanding notional in the RFR OIS subject to this determination.
Finally, to demonstrate that clearing has expanded beyond the short–dated maturities for USD SOFR fixed–to–floating swaps, in particular, the data in Table 7 that follows this paragraph reflects the total volumes of cleared outstanding notional by tenor for USD LIBOR fixed–to–floating swaps and USD SOFR OIS. The Commission has determined that the data collectively indicates sufficient outstanding notional exposures and regular trading activity in RFR OIS for purposes of demonstrating the liquidity necessary for DCOs to risk manage these products and to support a clearing requirement. The Commission anticipates that RFR OIS notional exposures and trading activity will increase over time as markets continue to adopt RFR OIS in place of swaps referencing IBORs that have, or will by mid–2023, become unavailable. In addition to the extensive data presented and analyzed in this rulemaking, and as discussed in detail below, the Commission is basing this determination on its ongoing supervision of DCOs and its monitoring of the cleared interest rate swap market for purposes of risk surveillance.
The Commission regularly reviews pricing data for the RFR OIS subject to this determination and has found that these OIS are capable of being priced off of deep and liquid markets. Commission staff regularly receives and reviews margin model information from DCOs that includes particular procedures that they follow to ensure that market liquidity exists in order to close out a position in a stressed market, including the time required to determine a price.
In addition, as part of their regulation § 39.5(b) submissions, the registered DCOs that clear the RFR OIS subject to this determination provided information to support the Commission's conclusion that there exists adequate pricing data to justify a clearing requirement determination. In its regulation § 39.5(b) submissions, CME provided data regarding transaction volumes and market participation, and LCH provided information on daily volumes, and noted that pricing data for each of the RFR OIS that it clears is available from brokers. LCH also noted the range of maturities for which quotes can be obtained from brokers. In its submissions to the Commission, Eurex provided relevant language from its FCM Regulations and Clearing Conditions regarding determination of daily pricing. Eurex stated that it believes its reliance on Reuters for pricing data is accurate because it is a readily available and conventional source. Eurex noted that it also can receive pricing data from Bloomberg and has multiple backup sources.
Commenters provided support for the conclusion that sufficient liquidity and pricing data exists in RFR OIS markets to withstand stressed market conditions. Commenters also supported the DCOs' representations that adequate pricing data exists for DCO risk and default management of swaps referencing RFRs. CCP12 noted that SOFR liquidity improved materially in the past 12 months as a function of SOFR First and subsequent restrictions on new USD LIBOR activity that began on January 1, 2022. Citadel agreed that the data in the NPRM clearly demonstrates that there are significant outstanding notional amounts in USD SOFR OIS, and that trading in USD SOFR OIS continues to increase. Citadel also cited more recent data demonstrating that trading in USD SOFR OIS has steadily increase since January 2022, noting that over half of the USD interest rate derivatives market references SOFR as of May 2022. Citadel stated that this data demonstrates that significant outstanding notional exposures, trading liquidity, and adequate pricing data are present in the USD SOFR OIS market to support a clearing requirement determination.
CME stated that adequate pricing data for risk and default management purposes is available across all stated termination date ranges, and stated that CME is capable of offering uninterrupted clearing services for all instruments it clears even during times of market stress.
JSCC likewise noted that the JPY swaps market has now fully transitioned away from JPY LIBOR interest rate swaps and that as of the end of April 2022, JPY TONA OIS accounted for 97% of DV01 traded in the under two-year tenor category, in the interest rate derivatives market. Additionally, JSCC stated that, because the JPY swaps market has fully migrated from JPY LIBOR interest rate swaps to JPY TONA OIS, JSCC believes there is adequate pricing data in a liquid market across different tenors for DCO risk and default management of JPY TONA OIS. JSCC also regularly holds default management fire drills to verify that its default management process is robust and would be capable of managing a default in stressed market conditions.
Based on the data presented and analyzed above, and in light of the comments received, the Commission has determined that there are sufficient outstanding notional exposures, trading liquidity, and pricing information for the RFR OIS subject to this rulemaking to support a clearing requirement determination.
Section 2(h)(2)(D)(ii)(II) of the CEA requires the Commission to consider the availability of rule framework, capacity, operational expertise and resources, and credit support infrastructure to clear the classes of swaps on terms that are consistent with current material terms and trading conventions. Based on their regulation § 39.5(b) submissions, as well as ongoing oversight, the Commission has determined that each of the registered DCOs has developed rule frameworks, capacity, operational expertise and resources, and credit support infrastructure to clear the interest rate swaps they currently clear, including the RFR OIS subject to this rulemaking, on terms that are consistent with the material terms and trading conventions on which those swaps are being traded. The Commission subjects each of the registered DCOs to ongoing review, risk surveillance, and examination to ensure compliance with the CEA's core principles and Commission regulations, including with respect to the submitted swaps.
Each of the registered DCOs has procedures pursuant to which they regularly review their RFR OIS clearing in order to confirm or adjust margin and other risk management tools. When reviewing each of the registered DCOs' risk management tools, the Commission considers whether the DCO is able to manage risk during stressed market conditions to be one of the most significant considerations. Each of the registered DCOs has developed detailed risk management practices, including a description of risk factors considered when establishing margin levels.
The registered DCOs clearing the RFR OIS subject to this determination design and conduct stress tests, and Commission staff monitors development of these stress tests. Each of the registered DCOs also conducts reverse stress tests to ensure that their default funds are sized appropriately and to ascertain whether any changes to their financial resources or margin models are necessary.
Before offering a new product for clearing, each of the DCOs considers stress tests and back testing results in determining whether it has sufficient financial resources to offer new clearing services. The Commission also reviews initial margin models and default resources to ensure that the DCOs can risk manage their portfolio of products offered for clearing. This combination of stress testing and back testing in anticipation of offering swaps for clearing provides the registered DCOs with greater certainty that their offerings will be risk-managed appropriately. The process of stress testing and back testing also gives DCOs practice incorporating new swaps into their models. In addition to the Commission's surveillance and oversight, each of the registered DCOs continues to monitor and test their margin models over time so that they can operate effectively in stressed and non-stressed market environments. Registered DCOs review and validate their margin models regularly.
Each DCO monitors and manages credit risk exposure by asset class, clearing member, account, or individual customer. They manage credit risk by establishing position and concentration limits based on product type or counterparty. These limits reduce potential market risks so that DCOs are better able to withstand stressed market conditions. Each of the DCOs monitors exposure concentrations and may require additional margin deposits for clearing members with weak credit scores, with large or concentrated positions, with positions that are illiquid or exhibit correlation with the member itself, and/or where the member has particularly large exposures under stress scenarios. DCOs also can call for additional margin, on top of collecting initial and variation margin, to meet the current DCO exposure and protect against stressed market conditions.
In support of its ability to clear RFR OIS subject to this determination, CME's regulation § 39.5(b) submissions cite to its rulebook to demonstrate the availability of rule framework, capacity, operational expertise and resources, and credit support infrastructure to clear interest rate swap contracts on terms that are consistent with the material terms and trading conventions on which the contracts are traded. LCH's submissions state that it has a well-developed rule framework and support infrastructure for clearing interest rate swaps, which it leverages to offer clearing services for RFR OIS. Eurex's submissions state that Eurex has a well-developed rule framework and support infrastructure for clearing RFR OIS. Eurex further states that it has the appropriate risk management, operations, and technology capabilities to ensure that it is able to liquidate positions in such swaps in an orderly manner in the event of a clearing member default, and that the RFR OIS are subject to margin and clearing fund requirements set forth in Eurex's FCM Regulations and Clearing Conditions.
Commenters supported these positions. In particular, Citadel commented that it is clear that market participants, including FCMs, have the operational and technological infrastructure in place to support the clearing of USD SOFR OIS, pointing out that almost all USD SOFR OIS transactions are cleared. Citadel stated that this significant voluntary clearing activity demonstrates that market participants are confident in current DCO offerings.
For all of these reasons, the Commission has determined that there are available rule frameworks, capacity, operational expertise and resources, and credit support infrastructures, consistent with material terms and trading conventions, to support the required clearing of the RFR OIS subject to this clearing requirement determination. The application of DCO risk management practices to the RFR OIS subject to this clearing requirement determination should ensure that the swaps subject to this rulemaking can be cleared safely, even during times of market stress.
Section 2(h)(2)(D)(ii)(III) of the CEA requires the Commission to consider the effect of the clearing requirement on the mitigation of systemic risk in light of the size of the market for such contract and the resources of the DCO available to clear the contract. As presented in the data and discussion above, the Commission has concluded that the market for each RFR OIS subject to this determination is significant, and mitigating counterparty credit risk through clearing likely will reduce systemic risk in the interest rate swap market generally. While not every individual RFR OIS market has large outstanding notional exposures, each such market is important, and as liquidity shifts from IBOR swaps to RFR OIS, continuity of clearing for RFR OIS serves to reduce systemic risk.
In its regulation § 39.5(b) submissions, CME explains the benefits of centralized clearing, including freer counterparty credit lines, enhanced risk management, operational efficiencies, and ease of offsetting risk exposures. LCH's submissions note that clearing avoids complex bilateral relationships, provides for default management, and enhances transparency into the risks posed by swap positions. Eurex's submissions highlight the benefits of reduction of counterparty risk, margin and collateral efficiencies, protections for customer assets, and legal certainty. Each DCO's submissions indicate that they maintain adequate resources to clear the swaps that are the subject of this rulemaking. Additionally, JSCC noted that it has been clearing JPY TONA OIS since 2014 “without facing any challenge from a governance, rule framework, operational, resourcing, or credit support infrastructure perspective.”
CME commented on the RFI that mitigation of systemic risk is one of the key advantages of centralized clearing over bilateral arrangements.
Commenters on the NPRM further supported these positions. CME, Citadel, ISDA, and MFA each described the importance of central clearing as a means of mitigating systemic risk. ACLI also noted the importance of central clearing.
Centrally clearing the RFR OIS subject to this rulemaking through a registered or exempt DCO should reduce systemic risk by providing counterparties with daily mark-to-market valuations upon which to exchange variation margin pursuant to the DCO's risk management framework and requiring posting of initial margin to cover potential future exposures in the event of a default. In
Central clearing was developed and designed to handle significant concentration of risk. Each of the DCOs that clears the RFR OIS covered by this rulemaking has a procedure for closing out and/or transferring a defaulting clearing member's positions and collateral.
Each DCO has experience risk managing interest rate swaps, and the Commission believes that the DCOs have the necessary financial resources available to clear the RFR OIS that are the subject of this determination. In addition, the application of DCO risk management practices to the RFR OIS subject to this clearing requirement determination should ensure that the swaps subject to this rulemaking can be cleared safely.
The RFR OIS data presented in this rulemaking indicates varying levels of activity, measured by outstanding notional amounts and trade counts. The Commission acknowledges that the data comes from various, limited periods of time that do not explicitly include periods of market stress. However, the Commission concludes that the data demonstrates sufficient regular trading activity and outstanding notional exposures in these RFR OIS to provide the liquidity necessary for DCOs to successfully risk manage these products and to support the adoption of a clearing requirement.
Accordingly, the Commission determines that these DCOs would be able to manage the risk posed by clearing the RFR OIS required to be cleared pursuant to this determination. In addition, the central clearing of the RFR OIS that are added under this rulemaking serves to mitigate counterparty credit risk, thereby potentially reducing systemic risk. Having considered the comments and the likely effect on the mitigation of systemic risk, the Commission is issuing this determination to add these RFR OIS to the clearing requirement.
Section 2(h)(2)(D)(ii)(IV) of the CEA requires the Commission to consider the effect on competition, including appropriate fees and charges applied to clearing. Of particular concern to the Commission is whether this determination would harm competition by creating, enhancing, or entrenching market power in an affected product or service market, or facilitating the exercise of market power.
The Commission has identified one putative service market as potentially affected by this clearing determination: a DCO service market encompassing those clearinghouses that currently clear the RFR OIS subject to this determination.
Any competitive import likely would stem from the fact that the determination and regulations would remove the alternative of not clearing for RFR OIS subject to this rulemaking. The determination does not specify who may or may not compete to provide clearing services for the RFR OIS subject to this rulemaking, as well as those not required to be cleared.
Removing the choice to enter into a swap without submitting it for clearing under this rulemaking is not determinative of negative competitive impact. Other factors, including the availability of other substitutes within the market or potential for new entry into the market, may constrain market power. The Commission does not foresee that the determination constructs barriers that would deter or impede new entry into a clearing services market,
Respondents to the RFI who provided feedback regarding the potential effect on competition due to a modified clearing requirement did not identify any potential negative effects. To the contrary, Citadel stated that applying a clearing requirement to OTC derivatives referencing USD SOFR would increase liquidity and competition, citing, among
For the reasons described above and in light of the comments received, the Commission concludes that it has considered the effect of the updated clearing requirement on competition and found that it potentially could impact competition within the affected market, but anticompetitive behavior is likely to be constrained and demand for clearing services is expected to grow. Accordingly, the Commission reaffirms its conclusion stated in the NPRM that its consideration of competitiveness is sufficient to modify the existing interest rate swap clearing requirement to include the RFR OIS subject to this rulemaking.
Section 2(h)(2)(D)(ii)(V) of the CEA requires the Commission to consider the existence of reasonable legal certainty in the event of the insolvency of the relevant DCO or one or more of its clearing members with regard to the treatment of customer and swap counterparty positions, funds, and property. The Commission is issuing this clearing requirement determination based on its view that there is reasonable legal certainty regarding the treatment of customer and swap counterparty positions, funds, and property in connection with cleared swaps, including RFR OIS, in the event of the insolvency of the relevant DCO or one or more of the DCO's clearing members.
The Commission believes that, in the case of a clearing member insolvency at CME, where the clearing member is the subject of a proceeding under the U.S. Bankruptcy Code, subchapter IV of Chapter 7 of the U.S. Bankruptcy Code (11 U.S.C. 761–767) along with parts 22 and 190 of the Commission's regulations would govern the treatment of customer positions.
Similarly, 11 U.S.C. 761–767 and part 190 would govern the bankruptcy of a DCO where the DCO is the subject of a proceeding under the U.S. Bankruptcy Code, in conjunction with DCO rules providing for the termination of outstanding contracts and/or return of remaining clearing member and customer property to clearing members.
With regard to LCH, the Commission understands that in general the default of an LCH clearing member would be governed by LCH's rules, and LCH would be permitted to close out and/or transfer positions of a defaulting clearing member. The Commission further understands that, under applicable law, LCH's rules governing a clearing member default would supersede insolvency laws in the clearing member's jurisdiction. For an FCM based in the United States and clearing at LCH, the applicable law as a general matter, would be the U.S. Bankruptcy Code and part 190 of the Commission's regulations. According to LCH's regulation § 39.5(b) submissions, the insolvency of LCH itself would be governed by English insolvency law, which protects the enforceability of the default-related provisions of LCH's rulebook, including in respect of compliance with applicable provisions of the U.S. Bankruptcy Code and part 190 of the Commission's regulations. LCH has obtained, and made available to the Commission, legal opinions that support the existence of such legal certainty in relation to the protection of customer and swap counterparty positions, funds, and property in the event of the insolvency of one or more of its clearing members.
On December 20, 2018, the Commission issued permission for Eurex to begin clearing swap transactions on behalf of customers of FCMs.
In response to the NPRM, CME stated that the legal framework on which it operates complies with DCO Core Principle R and regulation § 39.27(b) (requiring legal certainty of clearing arrangements). CME stated that its legal framework is sound, tested, and provides a high degree of assurance that it will be able to conduct its clearing and settlement activities on an ongoing basis, including managing a clearing member default, and that its legal framework also provides arrangements for the failure of a DCO. CME stated that the U.S. Bankruptcy Code and part 190 of the Commission's regulations provide safe harbors that protect a DCO's right to immediately enforce its interest in the collateral it holds to margin positions and to guarantee performance of its clearing members' obligations.
Finally, as exempt DCOs, JSCC and HKEX demonstrate they are subject to ongoing comparable, comprehensive supervision by their home country regulator with regard to legal certainty in the event of insolvency.
Lastly, JSCC provided information regarding how it would address a default by a clearing member under its rules,
JSCC's comment also recommended that the Commission reconsider its restrictions on exempt DCOs offering clearing services for U.S. customers in order to allow U.S. customers access non-U.S. swap markets. The Commission issued JSCC an order of exemption from registration as a DCO in 2015.
The Commission received no other comments related to legal certainty in the event of insolvency. For the reasons described above and in light of the comments received, the Commission reaffirms its conclusion stated in the NPRM that reasonable legal certainty exists in the event of the insolvency of each of the relevant DCOs or one or more of their clearing members with regard to the treatment of customer and swap counterparty positions, funds, and property to modify the interest rate swap clearing requirement to include the RFR OIS subject to this rulemaking.
The Commission phased in the First Determination according to the schedule contained in regulation § 50.25.
In arriving at an appropriate implementation schedule, the Commission considered the fact that EUR EONIA and non-USD LIBOR rates have now entirely ceased publication or become nonrepresentative,
Significantly, no DCOs offering OIS for clearing identified any operational challenges with regard to prompt implementation of the RFR OIS clearing requirement. During its IBOR conversion processes, LCH has not encountered any operational challenges nor have its members identified any issues related to proprietary or customer clearing.
As stated above, these final amendments to part 50 will become legally effective 30 days after publication of the final rule in the
The implementation date of the requirement to clear RFR OIS for which the corresponding IBOR rate has ceased publication or become nonrepresentative will be the same as the effective date of the final rulemaking,
Amendments to remove clearing requirement rules for IBOR swaps from regulation § 50.4(a) will be implemented in two stages. For the removal of the requirement to clear all interest rate swaps for which the IBOR rate has ceased publication or become nonrepresentative,
The majority of commenters supported the Commission's proposal to implement the final rulemaking 30 days after publication in the
By contrast, ACLI stated that implementation of the USD SOFR OIS clearing requirement should be delayed until June 30, 2023, which would coincide with the date USD LIBOR swaps are removed from the clearing requirement. In ACLI's view, this alignment would create an incentive for market participants concerned about clearing trades to move from USD LIBOR to USD SOFR swaps, thereby supporting overall LIBOR transition objectives.
ISDA recommended a date that would promote “efficient implementation” of the amended rules for all RFR OIS and suggested October 31, 2022, as such a date. In ISDA's view, this date would serve two purposes: (1) harmonizing with Bank of England's proposed implementation date for its USD SOFR OIS clearing requirement; and (2) avoiding unnecessary strain on market participants' resources and operational capabilities. ISDA also recommended March 6, 2023, as the date for removal of the requirement to clear interest rate swaps referencing USD LIBOR.
CME, LCH, Eurex, and JSCC have completed their conversion plans for all cleared EUR EONIA and non-USD LIBOR swaps into RFR OIS. Moreover, EUR EONIA and non-USD LIBOR interest rate swaps are generally no longer offered for clearing.
Non-USD LIBOR rates ceased publication or became nonrepresentative at the end of 2021, and EUR EONIA ceased publication in early 2022. In many instances, non-U.S. jurisdictions have updated their clearing mandates to reflect this fact already, and market participants are voluntarily clearing the vast majority of the OIS subject to this rulemaking. By adding these OIS to the clearing requirement as
Given the overwhelming amount of voluntary clearing, reflecting a significant volume of the outstanding market for these OIS, and the fact that DCOs no longer offer EUR EONIA and non-USD LIBOR interest rate swaps for clearing, the Commission is adopting its implementation schedule for required clearing of EUR €STR, GBP SONIA, CHF SARON, and JPY TONA OIS as proposed. Accordingly, rules requiring clearing of these OIS will be implemented 30 days after publication of the final rules in the
To the extent practicable, the Commission believes that an implementation schedule for these modified rules should provide flexibility for market participants and further the Commission's goals of harmonizing its clearing requirement rules with those abroad. Commenters generally supported the Commission's efforts to implement a modified clearing requirement in a manner that provides certainty and fosters further international harmonization with regard to swap clearing requirements. Over the years, commenters have applauded Commission efforts to work cooperatively with regulators in other jurisdictions while responding to the operational needs of market participants in a flexible manner.
Recognizing all these factors and striking a middle ground, the Commission is adjusting its proposed implementation schedule with respect to clearing requirement rules for OIS referencing USD SOFR and SGD SORA to reflect input from commenters and align with Bank of England's proposed implementation date for mandatory clearing of USD SOFR OIS under UK law. Accordingly, the implementation date for required clearing of USD SOFR and SGD SORA OIS will be October 31, 2022.
In addition to adding certain RFR OIS to the clearing requirement, these amendments modify the existing clearing requirement to reflect the cessation or loss of representativeness of certain IBORs. For purposes of this rulemaking, all relevant LIBOR settings with the exception of overnight, one-month, three-month, six-month, and 12-month USD LIBOR, and EUR EONIA, have ceased publication or become nonrepresentative.
As discussed above, DCOs no longer offer these IBOR swaps for clearing. In addition, regulators in the United States and other jurisdictions have called on market participants to transfer their swap positions from IBORs to RFRs, with corresponding liquidity shifting, and continuing to shift, from swaps referencing these IBORs to swaps referencing RFRs. No commenter raised concerns regarding removing the requirement to clear swaps referencing IBOR rates that have ceased publication or become nonrepresentative.
For these reasons, the Commission will implement the rules removing all interest rate swaps referencing EUR EONIA, GBP LIBOR, CHF LIBOR, and JPY LIBOR as proposed. Accordingly, the implementation date for the removal of these swaps from regulation § 50.4 shall be 30 days after publication of the final rule in the
In the interests of international harmonization and in alignment with many commenters, the Commission will retain its existing requirement to clear swaps referencing USD LIBOR and SGD SOR–VWAP until July 1, 2023. International authorities are in the process of updating their clearing mandates to reflect the fact that USD LIBOR will cease publication or become nonrepresentative after June 30, 2023. Bank of England has indicated that existing clearing mandates will remain in place until near the time USD LIBOR ceases publication.
Remaining USD LIBOR settings will cease publication or become nonrepresentative after June 30, 2023. SGD SOR–VWAP, which relies on USD LIBOR as an input, will also cease after June 30, 2023. The Commission expects that there will be no new interest rate swaps referencing USD LIBOR entered into on or after July 1, 2023. In anticipation of USD LIBOR ceasing publication, DCOs will continue to conduct conversion events to replace all outstanding USD LIBOR swaps with USD SOFR OIS, and will cease offering clearing services for USD LIBOR swaps.
International authorities are in the process of updating their clearing mandates to reflect the fact that USD LIBOR will cease publication or become nonrepresentative after June 30, 2023. Bank of England's recent proposal indicated support for leaving its existing clearing mandates in place until close to the time that USD LIBOR ceases publication or becomes non-representative. Bank of England proposed removing its USD LIBOR interest rate swap clearing requirement “around the same time as a number of CCPs contractually convert” USD LIBOR swaps and remove these swaps from clearing eligibility.
Last year, ESMA adopted regulatory technical standards that removed its existing USD LIBOR clearing obligation and added a requirement to clear USD SOFR OIS (seven days to three years).
As noted above, commenters, including AIMA, Citadel, CME, and MFA, were generally supportive of the Commission's proposal to retain USD LIBOR and SGD SOR–VWAP swap clearing requirements until July 1, 2023, while ISDA suggested March 6, 2023 or, in the alternative, the first conversion date at any registered or exempt DCO clearing USD LIBOR swaps.
Setting a specified date for the removal of the Commission's USD LIBOR (and SGD SOR–VWAP) interest rate swap clearing requirement will provide clarity to the interest rate swap market as a whole. Removing the USD LIBOR and SGD SOR–VWAP interest rate swap clearing requirement on July 1, 2023, also reflects both international coordination and input from the public. Retaining these clearing requirement rules until such time as USD LIBOR is
Lastly, the Commission observes that its clearing requirement for interest rate swaps referencing EUR EONIA and non-USD LIBOR has remained in place for months after the DCO conversion events for those rates, and the Commission is unaware of any market difficulties resulting from those rules remaining in place, despite U.S. market participant activity throughout global interest rate swap markets.
The Commission will continue to monitor the use of interest rate swaps referencing USD LIBOR and SGD SOR–VWAP as the IBOR transition process concludes.
As a technical amendment, because the Commission is removing certain interest rate swaps from regulation § 50.4, it is also removing those same swaps from regulation § 50.26. The Commission is changing this regulation for consistency and to eliminate any confusion that might arise if different swap products are included in regulations §§ 50.4 and 50.26. Additionally, the Commission is making technical revisions related to the formatting of the table of compliance dates for required clearing of credit default swaps in regulation § 50.26.
Amended regulation § 50.4(a) identifies certain swaps that are required to be cleared under section 2(h)(1)(A) of the CEA in addition to those required to be cleared by existing regulations §§ 50.2 and 50.4(a), and removes certain other swaps from the clearing requirement. These clearing requirement amendments are designed to update the Commission's regulations in light of the interest rate swap market's move away from use of swaps referencing IBORs to swaps referencing RFRs. Currently, most RFR OIS are being cleared voluntarily, so the amended regulation largely serves to ensure that the swap market under the Commission's jurisdiction continues to clear all RFR OIS subject to this clearing requirement determination. The continued central clearing of RFR OIS may limit the counterparty risk associated with such swaps, thereby mitigating the possibility of such risks having a systemic impact, which might cause or exacerbate instability in the financial system. In addition, required clearing of RFR OIS would reflect the global effort to rely on benchmark rates that are less susceptible to manipulation.
This determination is consistent with one of the fundamental premises of the Dodd-Frank Act and the 2009 commitments adopted by the G20 nations: the use of central clearing can reduce systemic risk. The following discussion is a consideration of the costs and benefits of the Commission's action in this rulemaking, pursuant to the regulatory requirements discussed above.
When a bilateral swap is cleared, the DCO becomes the counterparty to each original swap counterparty. This arrangement mitigates counterparty risk to the extent that the DCO may be a more creditworthy counterparty than the original swap counterparties. Central clearing reduces the interconnectedness of market participants' swap positions because the DCO, an independent third party that takes no market risk, guarantees the collateralization of swap counterparties' exposures. DCOs have demonstrated resilience in the face of past market stress.
The Commission anticipates that DCOs will continue to be some of the most creditworthy swap counterparties because, among other things, they are able to monitor and manage counterparty risk effectively through (1) collection of initial and variation margin associated with outstanding swap positions; (2) marking positions to market regularly, usually multiple times per day, and issuing margin calls when the margin in a customer's account has dropped below predetermined levels that the DCO sets; (3) adjusting the amount of margin that is required to be held against swap positions in light of changing market circumstances, such as increased volatility in the underlying product; and (4) closing out swap positions if margin calls are not met within a specified period of time.
With the passage of the Dodd-Frank Act, Congress gave the Commission the responsibility for determining which swaps would be required to be cleared pursuant to section 2(h)(1)(A) of the CEA. Since 2012, there is ample evidence that the interest rate swap market has been moving toward increased use of central clearing in response to both market incentives and clearing requirements.
Section 15(a) of the CEA requires the Commission to “consider the costs and benefits” of its actions before promulgating a regulation under the CEA or issuing certain orders.
The Commission is considering these costs and benefits against a baseline of the current set of interest rates swaps subject to the clearing requirement adopted under regulation § 50.4. This determination adds specified RFR OIS to the clearing requirement and it removes certain swaps referencing IBORs from the clearing requirement.
In most cases, this will be a simultaneous exchange: as an IBOR swap is removed from the clearing requirement, an RFR swap is added. This is the case for almost all non-USD LIBOR and non-SGD SOR–VWAP interest rate swaps. (For the existing GBP SONIA OIS clearing requirement, the termination date range will be extended to include 7 days to 50 years.) However, for USD SOFR OIS and SGD SORA OIS there will be a delay in this substitution. The Commission is adopting a clearing requirement for USD SOFR and SGD SORA OIS that will be implemented on October 31, 2022, but it is not removing the requirement to clear USD LIBOR and SGD SOR–VWAP interest rate swaps until July 1, 2023. Thus, the requirement to clear USD LIBOR and SGD SOR–VWAP swaps will coexist with requirement to clear USD SOFR and SGD SORA OIS for approximately eight months. The period includes the planned DCO conversion processes.
As explained above, almost all RFR OIS that are subject to this determination are cleared voluntarily today, so the percentage of such swaps that would be cleared following implementation of this rulemaking is unlikely to increase materially. The Commission's analysis below compares amendments in this rulemaking to the clearing requirement in effect today. The costs and benefits discussed below are, for the most part, already accounted for in the market through the current industry practice of high levels of RFR OIS clearing.
The swap market functions internationally with (i) transactions that involve U.S. firms and DCOs occurring across different international jurisdictions; (ii) some entities organized outside of the United States that are, or may become, Commission registrants or registered entities; and (iii) some entities that typically operate both within and outside the United States and that follow substantially similar business practices wherever located. Where the Commission does not specifically refer to matters of location, this discussion of costs and benefits refers to the effects of the determination on all relevant swaps activity, whether based on their actual occurrence in the United States or on their connection with activities in, or effect on, commerce of the United States, pursuant to section 2(i) of the CEA.
Market participants may incur certain costs in order to clear the RFR OIS included in this determination. For example, to the extent that there are market participants entering into RFR OIS that are not already clearing interest rate swaps voluntarily or pursuant to the Commission's prior clearing requirement determinations, such market participants may incur certain startup and ongoing costs related to developing technology and infrastructure, updating or creating new legal agreements, service provider fees, and collateralization of the cleared positions.
As noted above, almost all RFR OIS subject to this determination are already cleared voluntarily, and market participants currently clearing RFR OIS already realize the benefits of clearing. The Commission believes that this determination will ensure that the percentage of RFR OIS that are cleared remains high in the future and that these benefits continue to be realized. These benefits include reduced and standardized counterparty credit risk, increased transparency, and easier swap market access for market participants who are required to clear. Together, these benefits contribute significantly to the stability and efficiency of the financial system, but they are difficult to quantify with any degree of precision.
While there may be a benefit to removing certain swaps from required clearing, such as fewer costs to market participants who no longer have to submit such swaps to clearinghouses, in this instance, the reason the Commission is removing certain swaps referencing IBORs from the clearing requirement is because they are, with limited exceptions, no longer offered for clearing. The swap rates that the Commission is removing from the clearing requirement, other than USD LIBOR and SGD SOR–VWAP, should no longer be available or used by market participants, pursuant to broad international consensus and industry progress, as described above.
Any potential costs associated with this determination should be viewed in light of the fact that each new RFR OIS that is required to be cleared is already widely cleared voluntarily, and stands in the place of an IBOR swap that is already subject to required clearing and is being removed from required clearing under this rulemaking.
Liquidity tied to IBORs has shifted, and will continue to shift, to RFRs as those IBORs are discontinued or become nonrepresentative. That shift has occurred, and continues to occur, as a result of numerous market events, including DCO conversions of IBOR swaps to RFR swaps, the operation of contractual fallbacks, and new use of RFRs in parallel with declining liquidity in IBOR swaps. The RFR OIS subject to this determination are already widely cleared so that the costs associated with clearing these swaps are already being incurred. In the NPRM, the Commission stated that the additional cost of compliance for market participants would be
As stated above, the Commission received 12 comment letters following publication of the NPRM, and almost all of these commenters supported the rulemaking. Some commenters specifically addressed the costs and benefits of the proposed rule. This summary of the comments is divided into categories of costs and benefits, but all commenters accounted for the fact that the Commission's rulemaking updates rather than materially expands or alters the underlying interest rate swap clearing requirement.
Commenters made several key points regarding
The potential costs of using FCMs identified by ACLI are not increased by this rulemaking. As ACLI acknowledges, these potential costs are associated with central clearing as a general matter, and are applicable as much to RFR OIS as to IBOR swaps (and other types of swaps) that are required to be cleared. Additionally, ACLI did not submit data regarding the number of life insurers who might need establish a business relationship with an FCM or associated costs resulting from an RFR OIS clearing requirement.
CCP12 stated that the overall cost of the transition to non-USD RFR IRS has already been borne by the market and so the introduction of clearing requirements for these swaps should not increase the cost of clearing. JSCC stated that JPY TONA OIS is accepted for clearing at three registered DCOs (CME, LCH, and Eurex) and one exempt DCO (JSCC), and that, therefore, replacing JPY LIBOR with JPY TONA OIS in regulation § 50.4 would not change the cost of clearing services in any regard.
Commenters made several key points regarding
CCP12 stated that the benefits of central clearing and the voluntary market move towards CCP clearing of RFR swaps is consistent with the 2009 Pittsburgh G20 commitments, which supports the Commission's appropriate decision to require clearing for RFR swaps. CME stated that the benefits of central clearing include CCP risk management protections, multilateral netting, and reduced capital requirements for exposures to DCOs. CME stated that these benefits have incentivized, and will continue to incentivize, voluntary clearing ahead of any clearing requirement determination. JSCC stated that the proposal would harmonize the CFTC's interest rate swap clearing requirement with those of other jurisdictions, which would lower operational and compliance burdens for market participants active across multiple jurisdictions.
JSCC also stated that the benefits of the proposal would be significantly enhanced if the CFTC's swap customer clearing regime, which currently limits clearing to DCOs registered with the CFTC through CFTC-registered FCMs, is reviewed with an eye toward giving U.S. customers expanded access to non-U.S. swap markets cleared by non-U.S. exempt DCOs. JSCC contended that, under the current regime, these non-U.S. exempt DCOs are subject to comparable and comprehensive supervision and regulation by their home country regulators, but U.S. customers are not able to access their clearing services because registration with the CFTC would require application of the U.S. Bankruptcy Code and the relevant CFTC regulations to the local operations of non-U.S. exempt DCOs. This application of U.S. law may create legal conflicts in some jurisdictions. JSCC recommended that the Commission prioritize a review of these restrictions for U.S. customers with a view toward allowing U.S. customers to access non-U.S. swap markets.
Market participants already clearing swaps may incur costs in making necessary changes to technology systems if they are not yet clearing RFR OIS. Such market participants may incur costs if they need to implement technology to connect to FCMs that will clear their transactions.
As a general matter, it is likely that most market participants already complied with prior clearing requirements and that the incremental burdens associated with clearing any of the new RFR OIS should be minimal, especially given that these products are intended to replace already widely
In the NPRM, the Commission requested comment, including any quantifiable data and analysis, on the changes that market participants would have to make to their technological and legal infrastructures in order to clear the RFR OIS subject to the proposed determination.
In addition to costs associated with technological and legal infrastructures, market participants transacting in RFR OIS subject to the determination face ongoing costs associated with fees charged by FCMs. DCOs typically charge FCMs an initial transaction fee for each cleared interest rate swap its customers enter, as well as an annual maintenance fee for each open position. The Commission understands that customers that occasionally transact in swaps are typically required to pay a monthly or annual fee to each FCM.
As discussed above, it is difficult to predict precisely how the requirement to clear RFR OIS will promote the use of swap clearing, as compared to the use of clearing that would occur in the absence of the requirement. However, as presented by the data above, voluntary clearing rates are so high that the percentage of swaps that would be cleared pursuant to the rule is unlikely to increase materially. The estimated percentage of USD SOFR OIS (based on monthly notional transacted) that were cleared in April 2022 was approximately 96 percent.
The Commission anticipates that a similar percentage of RFR OIS subject to this determination will continue to be cleared given that subpart C of part 50 has not changed. Because the clearing percentages for non-USD RFR OIS are even higher than for USD SOFR OIS, the increase in clearing as a result of this rule also will likely be
Market participants that enter into RFR OIS subject to the amended rule will be required to post initial margin at a DCO. The Commission understands that the RFR OIS subject to this clearing requirement determination already are being widely cleared on a voluntary basis, and so any additional amounts of initial margin that market participants would be required to post to a DCO as a result of this determination likely would be relatively small. In reaching this view, the Commission considered situations where (1) uncleared RFR OIS may be otherwise collateralized;
The Commission acknowledges that market participants who are not clearing voluntarily and not otherwise required to post margin or collateral may incur costs related to funding collateral once they are required to clear. The greater the funding cost relative to the rate of return on the asset used as initial margin, the greater the cost of procuring collateral.
In the NPRM, the Commission requested comments on all aspects of quantifying the cost of funding initial margin that would be required to be posted at a DCO pursuant to the proposed rule. ACLI commented on the ability of life insurers to be able to choose how to allocate financial resources as between cleared and uncleared interest rate swaps. In ACLI's view this choice should rest with life insurers.
ACLI did not assert or provide any evidence that life insurers are choosing to clear the RFR OIS subject to this rulemaking at a lower rate than they would if such swaps were subject to required clearing, nor that life insurers are clearing these swaps at a lower rate than they cleared swaps referencing the corresponding IBOR rates. Data presented in Table 4 above, indicates there is an overwhelming preference for clearing in the RFR OIS market. The Commission estimates that more than 94% of notional transacted each month between November 2021 and April 2022 in non-inter-affiliate trades in USD SOFR OIS has been cleared, with clearing rates for other RFR OIS subject to this rulemaking approaching 100%.
Regarding the requirement to post cash collateral, ACLI stated that posting such collateral to a clearinghouse could pose liquidity risk for life insurers if they were required to liquidate higher-yielding securities for cash. ACLI did not provide any quantifiable data in support of this comment. As ACLI acknowledged in its comment, the requirement to post cash collateral is imposed by DCOs and FCMs.
As explained in prior clearing requirement determinations, the CEA directs the Commission to consider whether swaps should be required to be cleared. In 2012 and 2016, the Commission issued rules requiring the clearing of certain interest rate swaps. Additionally, in issuing its 2016 clearing requirement determination, the Commission noted specific benefits offered by central clearing over bilateral margining in terms of mitigation of systemic risk for swaps that are sufficiently standardized and meet the Commission's suitability requirements, including applicability to a wider set of counterparties and the security offered by a DCO's guaranty fund and other resources.
Additionally, the Commission recognizes that the new initial margin amounts required to be posted to DCOs for cleared RFR OIS will, for entities required to post initial margin under the uncleared swap margin regulations, replace the initial margin amount that has been, or will be, required to be posted to their swap counterparties, pursuant to the uncleared swap margin regulations. The uncleared swap margin regulations require swap dealers and certain “financial end-users” to post and collect initial and variation margin for uncleared swaps, subject to various conditions and limitations.
The Commission anticipates that initial margin required to be posted for a cleared swap to be added under this determination typically will be less than the initial margin that would be required to be posted for uncleared swaps pursuant to the uncleared swap margin regulations. Whereas the initial margin requirement for cleared swaps must be established according to a margin period of risk of at least five days,
With respect to swaps added to the clearing requirement under this determination, but not subject to the uncleared swap margin regulations, the Commission believes that the new initial margin amounts to be deposited will displace costs that are currently embedded in the prices and fees for transacting the swaps on an uncleared and uncollateralized basis, rather than add a new cost. Entering into a swap is costly for any market participant because of the default risk posed by its counterparty. When a market participant faces a DCO, the DCO accounts for that counterparty credit risk by requiring the market participant to post collateral, and the cost of capital for the collateral is part of the cost that is necessary to maintain the swap position.
When a market participant faces a swap dealer or other counterparty in an uncleared swap, however, the uncleared swap contains an implicit line of credit upon which the market participant effectively draws when its swap position is out of the money. Typically, counterparties charge for this implicit line of credit in the spread they offer on uncollateralized, uncleared swaps.
The amended rule also may result in added operational costs for those few market participants who are not already clearing these swaps voluntarily. With uncleared swaps, under some circumstances, counterparties may agree not to collect variation margin until certain thresholds are reached thereby reducing or eliminating the need to exchange daily variation margin.
The amended rule may result in slight additional costs for clearing members in the form of guaranty fund contributions that are held by the DCO. However, it also could decrease guaranty fund contributions for certain clearing members. Once the determination takes effect, there may be market participants who currently trade swaps bilaterally who would have to either become clearing members of a DCO or submit such swaps for clearing through an existing clearing member. A market participant who becomes a direct clearing member must make a guaranty fund contribution, while a market participant who clears its swaps through a clearing member may pay higher fees if the clearing member passes the costs of the guaranty fund contribution to its customers. While the addition of new clearing members and new customers for existing clearing members may result in an increase in guaranty fund requirements, it should be noted that if (1) new clearing members are not among the two clearing members used to calculate the guaranty fund and (2) any new customers trading through a clearing member do not increase the size of uncollateralized risks at either of the two clearing members used to calculate the guaranty fund, all else held constant, existing clearing members may experience a decrease in their guaranty fund requirement.
In the NPRM, the Commission requested comment regarding the total amount of additional collateral that would be posted due to required clearing of the RFR OIS covered by the proposed determination. The Commission also invited comment, and the provision of quantifiable data and analysis, regarding (1) the cost of capital and returns on capital for that collateral, (2) the effects of required clearing on the capital requirements for financial institutions, and (3) the costs and benefits associated with operational differences related to the collateralization of uncleared versus cleared swaps.
As discussed above, only ACLI raised the issue of allocation of capital as between cleared and uncleared interest rate swaps. ACLI did not provide specific data in support of its comment. Life insurers are not eligible to elect an exception or exemption from the swap clearing requirement under the section 2(h)(7)(C) of the CEA, as implemented by subpart C of part 50 of the Commission's regulations. Similarly, life insurers entering into bilateral swaps with swap dealers are considered to be financial entities for purposes of margin requirements under part 23 of the Commission's regulations.
Moreover, the CEA and Commission rules direct the Commission to determine which swaps are required to be cleared.
As noted above, there are significant benefits to central clearing of swaps. These benefits include reducing and standardizing counterparty credit risk, improving market transparency, and promoting access to clearing services. Specifically, there are important risk mitigation benefits of clearing RFR OIS that replace IBOR swaps (which are removed from the clearing requirement under this rulemaking). In addition, requiring the central clearing of RFR OIS promotes regulatory continuity and cross-border harmonization of clearing requirements.
The Commission believes that while the requirement to margin uncleared swaps mitigates counterparty credit risk, such risk is mitigated further for swaps that are cleared through a central counterparty. Moreover, the determination applies to a larger set of market participants than the uncleared swaps margin requirements. Thus, to the extent that the determination to add RFR OIS to the clearing requirement leads to increased clearing overall, these benefits are likely to result. As is the case for the costs noted above, it is likely that the use of clearing will not increase materially as a result of the amended rule, but implementing a clearing requirement helps ensure the benefits of the rule continue to be realized as market participants continue to clear RFR OIS.
The amended rule's requirement that certain swaps be cleared is intended to ensure that market participants face a DCO, and therefore, face a highly creditworthy counterparty. As discussed above, DCOs are some of the most creditworthy counterparties in the swap market because of the risk management tools they have available. The Commission recognizes that the beneficial value of adding RFR OIS to the clearing requirement may be lessened, in part, because the swap volumes that will be subject to a new clearing requirement are expected to be shifting from one set of swaps (IBORs) to another (RFRs) rather than a straightforward addition of new swap
In the NPRM, the Commission requested comment on the benefits of the proposed rule, such as the expected magnitude of such benefits and whether the rule would further international harmonization of swap clearing requirements. As explained throughout the preamble, many commenters noted the benefits of central clearing for interest rate swaps generally and the importance of international harmonization for the IBOR transition in particular.
One commenter, JSCC, stated that the benefits of the proposal would be enhanced if the Commission's swap customer clearing regime is reviewed in order to provide U.S. customers with expanded access to non-U.S. swap markets cleared by non-U.S. DCOs. JSCC stated that, under the current regime, exempt DCOs are subject to comparable and comprehensive regulation by their home country regulators, but U.S. customers are not able to access their clearing services. Currently, DCO registration is limited to registered DCOs and FCMs because registration with the CFTC requires application of the U.S. Bankruptcy Code and the relevant CFTC regulations. As explained above, because this issue is outside the scope of this rulemaking, this benefit is not applicable.
Lastly, with regard to the benefits of clearing, the current high rates of voluntary clearing for the RFR OIS subject to this rulemaking reflect the high value that market participants place on central clearing. Amending the interest rate swap clearing requirement to remove IBOR swaps and add RFR OIS will ensure the continuation of these benefits, including by shifting market activity into RFR OIS markets and away from IBOR swap markets.
The final rule accounts for the market importance of the RFR OIS subject to this clearing requirement determination and the fact that these swaps already are widely cleared. The Commission believes that these interest rate swaps should be required to be cleared because they are widely used and infrastructure for clearing and risk management of these swaps already exists.
DCOs, FCMs, and market participants already have experience clearing the swaps subject to this determination. Because of the wide use of these swaps and their importance to the market, and because these swaps are already successfully being cleared, the Commission is adding RFR OIS to the interest rate swap clearing requirement. The Commission believes that RFR OIS should be added to the swap clearing requirement after analyzing the factors under section 2(h)(2)(D) of the CEA, in order to promote consistency with its regulatory counterparts in other jurisdictions and to ensure that the benefits of required clearing accrue to the RFR OIS that replace IBOR swaps no longer offered for clearing.
The Commission considered alternative implementation scenarios for this RFR OIS clearing requirement. Specifically, the Commission considered the implementation plan for removing existing requirements to clear USD LIBOR and SGD SOR–VWAP swaps 30 days after publication of the final rule in the
As discussed in section VI, the Commission modified its implementation plan in response to input from commenters. For example, rather than going into effect 30 days after the final rules are published, the requirement to clear USD SOFR OIS and SGD SORA OIS will be implemented on October 31, 2022.
In declining to delay implementation of the proposed requirement to clear USD SOFR and SGD SORA OIS until July 1, 2023, the Commission considered the alternative in light of whether there is sufficient outstanding notional and liquidity (or pricing data) to support requiring clearing of USD SOFR OIS out to 50 years, and SGD SORA OIS out to 10 years. Both the data discussed with regard to Factor I in section V above and input from commenters support the Commission's decision to require these swaps be cleared and implement the clearing requirement on October 31, 2022. Proceeding with this alternative reflects a compromise approach that harmonizes with international counterparts and incorporates feedback from market participants.
Similarly, the Commission accounted for market input when declining to adjust the implementation plan for removing the requirements to clear interest rate swaps referencing IBORs. For the reasons discussed above, removal of USD LIBOR and SGD SOR–VWAP swaps from the existing interest rate swap clearing requirement will not take place 30 days after the final rules go into effect, but will remain in place until the underlying IBOR rates upon which the swap is based cease publication or become nonrepresentative.
Finally, the Commission considered an alternative scenario in which it did not adopt any new clearing requirement for RFR OIS. Under this alternative, the cost to the market would be an increased risk of uncleared swaps (and the associated financial stability risks) should market participants decide to clear less in the future. This cost may be significant because of the potential effect on the market-wide effort to replace IBOR swaps with RFR swaps, but may be mitigated given the current high level of clearing. The benefit of not adopting any new clearing requirements would be a savings experienced by market participants that would not be required to clear new swaps referencing an RFR and that would not otherwise find it beneficial to do so. However, given the high rate of voluntary clearing, any cost savings in the aggregate would be
The Commission anticipates that the amendments to add certain swaps to the clearing requirement while removing others will result in a slight increase in the already high use of clearing, although it is impossible to quantify with certainty the extent of that increase.
The required clearing of the RFR OIS added under this rulemaking should ensure the reduction of counterparty risk for market participants that clear those swaps, because they will be required to face the DCO rather than another market participant that lacks the full set of risk management tools that the DCO possesses. This also should reduce uncertainty in times of market stress because, for cleared trades, market participants facing a DCO would not be concerned with the impact of such stress on the solvency of their original
In addition, uncleared swaps subject to collateral agreements can be the subject of valuation disputes, which sometimes require several months or longer to resolve. Potential future exposures can grow significantly and even beyond the amount of initial margin posted during that time, leaving one of the two counterparties exposed to counterparty credit risk. DCOs virtually eliminate valuation disputes for cleared swaps, as well as the risk that uncollateralized exposure can develop and accumulate during the time when such a dispute would have otherwise occurred, thus providing additional protection to market participants who transact in swaps that are cleared. Because most RFR OIS are cleared voluntarily, these protections are currently being widely realized by market participants. Requiring clearing under part 50 of the Commission's regulations ensures that they continue to be realized.
As noted above, while required clearing of RFR OIS may result in certain costs for market participants (
Swap clearing, in general, reduces uncertainty regarding counterparty risk in times of market stress and promotes liquidity and efficiency during those times. Increased liquidity promotes the ability of market participants to limit losses by exiting positions effectively and efficiently when necessary in order to manage risk during a time of market stress. In addition, to the extent that positions move from facing multiple counterparties in the bilateral market to being cleared through a smaller number of clearinghouses, clearing facilitates increased netting. This reduces the amount of collateral that a party must post in margin accounts. As discussed above, in formulating this determination, the Commission considered a number of specific factors that relate to the financial integrity of the swap markets. Specifically, the Commission assessed whether the registered DCOs that clear RFR OIS have the rule framework, capacity, operational expertise and resources, and credit support infrastructure to clear these swaps on terms that are consistent with the material terms and trading conventions on which the contract is then traded.
Also, as discussed above, bilateral swaps create counterparty risk that may lead market participants to discriminate among potential counterparties based on their creditworthiness. Such discrimination is expensive and time consuming insofar as market participants must conduct due diligence in order to evaluate a potential counterparty's creditworthiness. Requiring certain types of swaps to be cleared reduces the number of transactions for which such due diligence is necessary, thereby contributing to the efficiency of the swap markets.
In adopting a clearing requirement for RFR OIS, the Commission must consider the effect on competition, including appropriate fees and charges applied to clearing. There are a number of potential outcomes that may result from required clearing. Some of these outcomes may impose costs, such as if a DCO possessed market power and exercised that power in an anti-competitive manner, and some of the outcomes would be positive, such as if the clearing requirement facilitated a stronger entry opportunity for competitors.
Clearing, in general, encourages better price discovery because it eliminates the importance of counterparty creditworthiness in pricing swaps cleared through a given DCO. By making the counterparty creditworthiness of all swaps of a certain type essentially the same, prices should reflect factors related to the terms of the swap, rather than the idiosyncratic risk posed by the entities trading it. Because most of these swaps are cleared voluntarily, these effects on price discovery are currently being realized. Requiring clearing ensures that they continue to be realized.
As discussed above, CME, LCH, and Eurex obtain adequate pricing data for the interest rate swaps that they clear. Each of these DCOs establishes a rule framework for its pricing methodology and rigorously tests its pricing models to ensure that its risk management regime is as sound as possible.
If a firm enters into uncleared and uncollateralized swaps to hedge certain positions and then the counterparty to those swaps defaults unexpectedly, the firm could be left with large outstanding exposures. Even for uncleared swaps that are subject to the Commission's uncleared swap margin regulations, some counterparty credit risk remains.
In addition, to the extent that required clearing reduces or deters a potential increase in bilateral trading, it reduces the complexity of unwinding or transferring swap positions from large entities that default. Procedures for transfer of swap positions and mutualization of losses among DCO members are already in place, and the Commission anticipates that they are much more likely to function in a manner that enables rapid transfer of defaulted positions than legal processes that would surround the enforcement of bilateral contracts for uncleared swaps.
Central clearing has evolved since the 2009 G20 Pittsburgh Summit, when G20 leaders committed to central clearing of all standardized swaps.
However, the Commission believes that DCOs are capable of risk managing the swaps that are the subject of this determination. Moreover, because most of the RFR OIS to be added to the clearing requirement are already cleared voluntarily, the Commission anticipates that the extent to which this determination will increase the credit risk and liquidity risk that is concentrated at DCOs will be relatively small.
The Commission requested comment on the extent to which the determination would increase the credit risk and liquidity risk that is concentrated at DCOs. As discussed above, ACLI raised concerns about concentrating credit and liquidity risk in DCOs. Other commenters, including CCP12 and two DCOs, responded to questions and provided an explanation to account for such concerns.
In September 2009, the President and other leaders of the G20 nations met in Pittsburgh and committed to a program of action that includes, among other things, central clearing of all standardized swaps.
The Regulatory Flexibility Act (RFA) requires agencies to consider whether their rules have a significant economic impact on a substantial number of small entities and, if so, provide a regulatory flexibility analysis with respect to such impact.
The Paperwork Reduction Act (PRA)
Section 15(b) of the CEA requires the Commission to take into consideration the public interest to be protected by the antitrust laws and endeavor to take the least anti-competitive means of achieving the objectives of the CEA, as well as the policies and purposes of the CEA, in issuing any order or adopting any Commission rule or regulation (including any exemption under section 4(c) or 4c(b)), or in requiring or approving any bylaw, rule, or regulation of a contract market or registered futures association established pursuant to section 17 of the CEA.
The Commission confirms its determination that this final rule is not anti-competitive and has no anti-competitive effects. Given this determination, the Commission has not identified any less anti-competitive means of achieving the purposes of the CEA.
Pursuant to the Congressional Review Act (5 U.S.C. 801
Business and industry, Clearing, Swaps.
For the reasons set forth in the preamble, the Commodity Futures Trading Commission amends 17 CFR part 50 as follows:
7 U.S.C. 2(h), 6(c), and 7a–1, as amended by Pub. L. 111–203, 124 Stat. 1376.
(a)
(a)
(a)
(b)
(a)
The following appendices will not appear in the Code of Federal Regulations.
On this matter, Chairman Behnam and Commissioners Johnson, Goldsmith Romero, and Mersinger voted in the affirmative. Commissioner Pham concurred. No Commissioner voted in the negative.
In the fall of 2008, global financial markets reeled as evidence emerged indicating that market participants failed to effectively manage risks in the then-unregulated $400 trillion (notional) swaps market. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) directed the Commodity Futures Trading Commission (Commission) to develop and implement formal rules, and bring the swaps market under the ambit of the Commission's authority.
To determine which swaps are subject to clearing requirements, the Commission examines several transaction-based risk factors.
Even though the clearing requirement for LIBOR and other IBORs have reduced certain risks arising from the origination and trading of swaps, the clearing requirement did not eliminate risks inherent in the manner these reference rates were calculated. Determinations of LIBOR and other IBORs were based on submissions received from a relatively small and select panel of major banks. These rates were calculated and published daily for several different currencies by the British Banker's Association. While the rates were intended to reflect the cost to the banks of borrowing unsecured funds, evidence revealed through a number of enforcement actions brought by the CFTC over the past decade
The comments received in response to our notice of proposed rulemaking earlier this year support this proposal. Moreover, this final rule represents the culmination of years of work by the Commission as well as its counterparts across the globe to ensure a more reliable, more transparent set of interest rate benchmarks. In collaboration with our international colleagues' efforts in jurisdictions around the world, the Commission's efforts to adopt and implement this final rule serves to preserve the stability and integrity of our markets and to reduce the systemic risks that precipitated the financial crisis. Accordingly, I support the Commission's modification of its clearing requirements and transition from LIBOR and other IBORs to the RFR OISs.
I support the Commission's amended clearing requirement for swaps referencing rates less susceptible to manipulation than the London Interbank Offered Rate (“LIBOR”) because it promotes market integrity and supports the risk-mitigating benefits of central clearing. I thank the CFTC staff for their work on this and other efforts to support the transition away from LIBOR.
The 2008 financial crisis revealed how over-the-counter derivatives could render market participants vulnerable to the weaknesses of their counterparties and leave the markets and regulators in the dark about risks. Pre-crisis, risks were hidden, and firms were vulnerable to interconnected and complex, bilateral transactions. This contributed to the failure of many banks and financial institutions. American households paid the price, left with the catastrophic consequences of a near meltdown of the U.S. financial system, a housing crisis, the inability to access credit, and an unprecedented government bailout.
One of the most critical reforms in the Dodd-Frank Act was a framework to channel swaps through central clearing, thereby reducing risk and increasing transparency across U.S. financial markets. The CFTC has been a global leader in driving swaps trading into centralized clearing, and coordinating with international regulators in a globally harmonized approach.
Central clearing has lived up to its promise. The markets, investors, end users, and regulators have benefited from increased visibility into swap exposures and from reduced interconnectedness and complexity.
Reliable and sound benchmark rates promote market integrity and protect the American public. A decade ago, allegations of LIBOR manipulation led to investigations by government authorities, including the CFTC, that resulted in billions of dollars of penalties and other sanctions. These investigations revealed that a handful of dominant players profited from manipulating LIBOR and markets, including U.S. mortgage markets. Here again, American households paid the price.
Through significant coordinated efforts across the public and private sectors, great progress has been made to transition towards sounder, alternative reference rates—namely, overnight, so-called “nearly risk-free” reference rates. Today's final rule amends the CFTC's swap clearing requirement to account for the continuing shift in liquidity to these more reliable rates. Market reliance on USD LIBOR has already considerably decreased, and we have experienced significant liquidity in, and voluntary clearing of, swaps referencing the Secured Overnight Financing Rate (“SOFR”). We aim to bolster and accelerate this shift and ensure the risk-mitigating benefits of clearing continue to be realized in the evolving interest-rate swaps markets.
The final rule also reflects the CFTC's longstanding priority of harmonizing with international regulators. The certainty of the CFTC's timeline for adding interest rate swaps referencing USD SOFR to its clearing requirement, and for removing interest rate swaps referencing USD LIBOR, should assist international regulators who are also revising clearing requirements for these swaps.
Given the global nature of financial markets, international coordination is necessary in order for the LIBOR transition to be successful. International coordination will also help to ensure that central clearing remains a cornerstone of post-crisis financial reforms.
I respectfully concur with the final rule updating the CFTC's interest rate swap clearing requirement regulations. Pursuant to the Commodity Exchange Act (CEA) and the Commission's regulations, subject to Commission determination, certain interest rate swaps are required to be submitted for clearing to a derivatives clearing organization (DCO) registered under the CEA or a DCO exempted from registration under the CEA.
I would like to note, however, a few points. I believe in international harmonization and a practical approach wherever possible.
First, with those principles in mind, we should not impose a clearing requirement for CHF Swiss Average Rate Overnight (SARON) swaps or SGD Singapore Overnight Rate Average (SORA) swaps until the Swiss
Second, absent a compelling reason otherwise, I would support an October 31, 2022 effective date, rather than 30 days after publication in the
Finally, I note two issues relating to the IBOR transition that are identified as beyond the scope of the rulemaking. These relate to trade execution requirements and to post-trade risk reduction.
Pipeline and Hazardous Materials Safety Administration (PHMSA), Department of Transportation (DOT).
Final rule.
PHMSA is revising the Federal Pipeline Safety Regulations to improve the safety of onshore gas transmission pipelines. This final rule addresses several lessons learned following the Pacific Gas and Electric Company incident that occurred in San Bruno, CA, on September 9, 2010, and responds to public input received as part of the rulemaking process. The amendments in this final rule clarify certain integrity management provisions, codify a management of change process, update and bolster gas transmission pipeline corrosion control requirements, require operators to inspect pipelines following extreme weather events, strengthen integrity management assessment requirements, adjust the repair criteria for high-consequence areas, create new repair criteria for non-high consequence areas, and revise or create specific definitions related to the above amendments.
The final rule is effective May 24, 2023. The incorporation by reference of certain publications listed in the rule is approved by the Director of the Federal Register as of May 24, 2023. The incorporation by reference of other publications listed in this rule was approved by the Director of the Federal Register on July 1, 2020.
Technical questions: Steve Nanney, Senior Technical Advisor, by telephone at 713–272–2855. General information: Robert Jagger, Senior Transportation Specialist, by telephone at 202–366–4361.
This final rule concludes a decade-long effort by PHMSA to amend its regulations governing onshore natural gas transmission pipelines in response to the tragic September 9, 2010, incident at a Pacific Gas and Electric Company (PG&E) gas transmission pipeline in San Bruno, CA, which resulted in the death of 8 people, injuries to more than 60 other people, and the destruction or damage of over 100 homes. PHMSA expects the new requirements in this final rule will reduce the frequency and consequences of failures and incidents from onshore natural gas transmission pipelines through earlier detection of threats to pipeline integrity, including those from corrosion or following extreme weather events. The safety enhancements in this final rule, therefore, are expected to improve public safety, reduce threats to the environment (including, but not limited to, reduction of greenhouse gas emissions released during natural gas pipeline incidents), and promote environmental justice for minority populations, low-income populations, and other underserved and disadvantaged communities that are located near interstate gas transmission pipelines.
Although the Federal Pipeline Safety Regulations (49 Code of Federal Regulations (CFR) parts 190 through 199; PSR) applicable to gas transmission and gathering pipeline systems set forth in parts 191 and 192 have increased the level of safety associated with the transportation of gas, serious safety incidents continue to occur on gas transmission and gathering pipeline systems, resulting in serious risks to life and property. In its investigation of the 2010 PG&E incident, the National Transportation Safety Board (NTSB) found among several causal factors that PG&E had an inadequate integrity management (IM) program that failed to detect and repair or remove a defective pipe section on its gas transmission line.
Prior to the PG&E incident, PHMSA had initiated an advance notice of proposed rulemaking (ANPRM) to seek comment on whether the IM requirements in part 192 should be changed and whether other issues related to pipeline system integrity should be addressed by strengthening or expanding non-IM requirements.
Based on the comments on the ANPRM, PHMSA published a notice of proposed rulemaking (NPRM) on April 8, 2016, to seek public comments on proposed changes to the PSR governing transmission and gathering lines.
PHMSA determined that the most efficient way to manage the proposals in the NPRM was to divide them into three separate final rule actions. The first of these final rules was published on October 1, 2019, and addressed topics primarily relating to congressional mandates and safety recommendations, including maximum allowable operating pressure (MAOP) reconfirmation and material properties verification, the expansion of integrity assessments beyond high-consequence areas (HCA), the consideration of seismicity, in-line inspection (ILI) launcher and receiver safety, MAOP exceedance reporting, and strengthened requirements for assessment methods (2019 Gas Transmission Rule).
To reduce the risks of pipeline incidents, PHMSA is amending the PSR applicable to gas transmission pipelines to improve the protection of the public, property, and the environment; close regulatory gaps; and adopt additional safety measures to improve safety inside and outside of HCAs. Specifically, PHMSA is making changes to clarify the IM requirements; improve the management of change (MOC) process; strengthen corrosion control requirements; provide parameters for inspections following extreme weather events; strengthen requirements related to the IM assessment methods; and improve the repair criteria for pipeline anomalies. PHMSA is also amending certain definitions in part 192 in support of these provisions.
PHMSA is modifying the IM regulations by adding specificity to the data integration language. The final rule establishes several pipeline attributes that must be included in an operator's risk analysis when an operator determines what threats are applicable to a pipeline segment. PHMSA is also explicitly requiring that operators integrate analyzed information into their IM programs and is requiring that data be verified and validated. Additionally, PHMSA is issuing requirements for applying knowledge gained through an operator's IM program, including provisions for analyzing interacting threats, potential failures, and worst-case incident scenarios from the initial failure to incident termination. Several of these items were proposed in response to NTSB findings following the PG&E incident that suggested pipeline operators were often not conducting data analysis, data integration, threat identification, and risk assessment in the manner originally intended and specified in subpart O of part 192.
Similarly, following the PG&E incident, PHMSA, informed by (inter alia) the NTSB's evaluation of the incident and ANPRM comments, determined that the existing MOC requirements and industry practices were not sufficient
This final rule also improves and updates the corrosion control requirements for gas transmission pipeline operators. Based on lessons PHMSA has learned following several pipeline failures, and following PHMSA's workshop on pipeline construction in Fort Worth, TX, on April 23, 2009,
Extreme weather has been a contributing factor in several pipeline failures. PHMSA issued Advisory Bulletins in 2015, 2016, and 2019 to communicate the potential for damage to pipeline facilities caused by severe flooding, including actions that operators should consider taking to ensure the integrity of pipelines in the event of flooding, river scour, river channel migration, and earth movement.
Because of the frequency and severe consequences of these events,
PHMSA is also strengthening the standards for performing pipeline assessments by incorporating by reference certain consensus standards for both stress corrosion cracking (NACE International Standard Practice 0204–2008, “Stress Corrosion Cracking Direct Assessment Methodology” (2008) (NACE 0204–2008)) and internal corrosion direct assessments (NACE International Standard Practice 0206–2006, “Internal Corrosion Direct Assessment Methodology for Pipelines Carrying Normally Dry Natural Gas” (2006) (NACE SP0206–2006)). Operators are already required to assess the condition of gas transmission pipelines in HCAs and certain non-HCAs periodically in accordance with §§ 192.710, 192.921, and 192.937. When the initial IM regulations creating subpart O were issued in 2003 (2003 IM rule), industry standards did not exist for these types of assessments.
This final rule also updates the existing repair criteria for HCAs by incorporating criteria for additional anomaly types such as crack anomalies, certain corrosion metal loss defects, and certain mechanical damage defects. Such revisions will provide greater assurance that operators will repair injurious anomalies and defects before those defects grow to a size that causes a leak or rupture. PHMSA also is finalizing explicit repair criteria for non-HCAs. Prior to this final rule, there were only general requirements in the regulations for operators to perform repairs in non-HCAs. The content of the non-HCA repair criteria being finalized in this rule is consistent with the criteria for HCAs; however, PHMSA has provided longer timeframes for the remediation of conditions that are not categorized as “immediate” conditions to provide operators the ability to prioritize remediating anomalous conditions in HCAs where consequences of a pipeline failure may be greater.
The various changes in this rule have also prompted additions and changes to certain definitions in part 192. PHMSA has created or made changes to the following terms: “close interval survey,” “distribution center,” “dry gas or dry natural gas,” “hard spot,” “in-line inspection (ILI),” “in-line inspection tool or instrumented internal inspection device,” “transmission line,” and “wrinkle bend.”
PHMSA has prepared an assessment of the benefits and costs of the final rule as well as reasonable alternatives. PHMSA estimates the annual costs of the rule to be approximately $17 million, calculated using a 7 percent discount rate. The costs reflect improvements made to the MOC process, additional corrosion control requirements, the provisions related to inspections following extreme weather events, and the changes made to the repair criteria. PHMSA finds that the other final rule requirements will not result in incremental costs.
PHMSA is posting the Regulatory Impact Analysis (RIA) for this rule in the public docket. PHMSA has determined that the regulatory amendments adopted in this final rule will improve public safety, reduce threats to the environment (including, but not limited to, reduction of methane emissions contributing to the climate crisis), and promote environmental justice for minority populations, low-income populations, and other underserved and disadvantaged communities. PHMSA finds the regulatory amendments adopted in this final rule are technically feasible, reasonable, cost-effective, and practicable because the public safety, environmental, and equity benefits of its regulatory amendments described herein and within its supporting documents (including the RIA and environmental assessment, each available in the docket for this rulemaking) will justify any associated costs and demonstrate and the superiority of the final rule compared to alternatives.
On September 9, 2010, a 30-inch-diameter natural gas transmission pipeline, owned and operated by PG&E, ruptured in a residential neighborhood in San Bruno, CA. The rupture produced a crater approximately 72 feet long by 26 feet wide. The segment of pipe that ruptured weighed approximately 3,000 pounds, was 28 feet long, and was found 100 feet south of the crater. When the escaping gas ignited, the resulting fire killed 8 people, injured approximately 60 more, destroyed or damaged 108 homes, and caused the evacuation of over 300 people. In its pipeline accident report for the incident, the NTSB determined that the probable cause of the incident was PG&E's inadequate quality control and assurance when it relocated the line in 1956 and its inadequate IM program. The NTSB determined that PG&E's IM program was deficient and ineffective because it was based on incomplete and inaccurate pipeline information, did not consider how the pipeline's design and materials contributed to the risk of a pipeline failure, and failed to consider the presence of previously identified welded seam cracks as part of its risk assessment. These deficiencies resulted in the selection of an assessment method that could not detect welded seam defects and led to internal assessments of PG&E's IM program that were superficial and resulted in no improvements. Ultimately, this inadequate IM program failed to detect and repair or replace the defective pipe section.
In response to this incident, Congress, the NTSB, and the Government Accountability Office (GAO) called for PHMSA to improve IM and address other weaknesses and gaps in the PSR. As described in more detail in the sections that follow, this is the second of three planned rulemakings that are the culmination of this rulemaking initiative.
On August 25, 2011, PHMSA published an ANPRM to seek public comments regarding potential revisions to the PSR pertaining to the safety of gas transmission and gathering pipelines. PHMSA requested comments on 122 questions spread across 15 broad issues involving IM and non-IM requirements. The issues related to IM requirements included whether the definition of an HCA should be revised and whether additional restrictions should be placed on the use of certain pipeline assessment methods. The issues related to non-IM requirements included whether revised requirements were needed for mainline valve spacing and actuation, whether requirements for corrosion control should be strengthened, and whether new regulations were needed to govern the safety of gas gathering lines and underground natural gas storage facilities. Based on the comments received on several of the ANPRM topics, PHMSA developed specific proposals for some of those topics in an NPRM that was the basis for this final rule.
On April 8, 2016, PHMSA published an NPRM seeking public comments on proposed revisions to the PSR pertaining to the safety of onshore gas transmission pipelines and gas gathering pipelines. PHMSA considered the comments it received from the ANPRM and proposed new pipeline safety requirements and revisions of existing requirements in several major topic areas. A summary of the NPRM proposals and topics pertinent to this rulemaking, the comments received on those specific proposals, and PHMSA's response to the comments received, is provided under section III (Discussion of NPRM Comments, GPAC Recommendations, and PHMSA Response).
On October 1, 2019, PHMSA promulgated a subset of the rules proposed in the NPRM by issuing the first of three planned final rules. In that rule, PHMSA addressed gas transmission pipelines and established minimum Federal safety standards for MAOP reconfirmation, pipeline physical material properties verification, the expansion of integrity assessments beyond HCAs, the consideration of seismicity in an operator's risk assessment and P&M measures, ILI tool launcher and receiver safety, MAOP exceedance reporting, and strengthened requirements for IM assessment methods.
This final rule, the second of three planned rules, finalizes several proposed amendments in the NPRM related to gas transmission pipelines, including provisions related addressing repair criteria, IM improvements, cathodic protection, MOC processes, and other related amendments. A separate rulemaking, dealing with the safety of onshore gas gathering pipelines, was the subject of a final rule published on November 15, 2021, and extended reporting and safety requirements to certain gathering pipelines that were formerly not subject to Federal safety oversight. PHMSA estimated in that Gas Gathering Final Rule that there were over 400,000 miles of gas gathering pipelines that were not subject to minimum Federal pipeline safety standards, including basic incident and mileage reporting. The Gas Gathering Final Rule extended annual and incident reporting requirements to all gathering pipelines and defined a new category of “Type C” gathering pipelines to address the safety of larger-diameter, higher-pressure onshore gathering pipelines that were formerly unregulated. The scope of the requirements for Type C gas gathering pipelines are risk-based; basic damage prevention provisions apply to all Type C gas gathering pipelines while other safety requirements apply to larger-diameter Type C gas gathering pipelines or those Type C gas gathering pipelines that are located near buildings intended for human occupancy.
The comment period for the NPRM ended on July 7, 2016. PHMSA received approximately 300 submissions to the docket containing thousands of comments on the NPRM. Submissions were received from the NTSB; groups representing the regulated pipeline industry; groups representing public interests, including environmental groups; State utility commissions and regulators; members of Congress; individual pipeline operators; and private citizens. PHMSA also received late-filed comments to this rulemaking from the major industry trade associations and others following advisory committee meetings as discussed below. Consistent with DOT Order 2100.6 and 190.323, PHMSA considered all comments, including those that were filed late, given their relevance to the rulemaking and the absence of additional expense or delay resulting from considering these comments.
Some of the comments PHMSA received in response to the NPRM were considered in finalizing the 2019 Gas Transmission Rule targeted at statutory mandates, while other comments were considered in response to the third final rule on gas gathering pipelines (under RIN 2137–AE38). In this final rule, PHMSA considers those comments that are relevant to repair criteria, IM improvements, cathodic protection, MOC, and other related amendments. PHMSA does not address the comments on pipeline safety issues that were beyond the scope of the NPRM and, therefore, beyond the scope of this final rule. However, that does not mean that PHMSA determined the comments lack merit or do not support additional rules or amendments. Such issues may be the subject of other existing rulemaking proceedings or may be addressed in future rulemaking proceedings. The remaining comments reflect a wide variety of views on the merits of particular sections of the proposed regulations.
The Technical Pipeline Safety Standards Committee, commonly known as the Gas Pipeline Advisory Committee (GPAC or “the committee”), is a statutorily mandated advisory committee that advises and comments on PHMSA's proposed safety standards, risk assessments, and safety policies for natural gas pipelines prior to their final adoption. The GPAC is one of two pipeline advisory committees focused on technical safety standards that were established under the Federal Advisory Committee Act (Pub. L. 92–463) and section 60115 of the Federal Pipeline Safety Statutes (49 U.S.C. 60101
Due to the size and technical detail of the NPRM, the GPAC met 5 times in 2017 and 2018 to discuss the proposed
For the proposals addressed in this final rule, the committee came to consensus when voting on the technical feasibility, reasonableness, cost-effectiveness, and practicability of the NPRM's provisions. In many instances, the committee recommended changes to certain proposals that the committee found would make the rule more feasible, reasonable, cost-effective, or practicable.
This section discusses the substantive comments on the NPRM that were submitted to the docket, as well as the GPAC's recommendations. They are organized by topic and include PHMSA's response to, and resolution of, those comments.
Subpart O of 49 CFR part 192 prescribes requirements for managing pipeline integrity in HCAs and requires that operators identify and evaluate all potential threats to each covered pipeline segment. Operators are required to identify threats to which the pipeline is susceptible, collect data for analysis, and perform a risk assessment that informs the operator's baseline assessment schedule and reassessment intervals as well as any additional P&M measures that may be needed for the covered segment. The regulations also require operators to address particular threats, such as third-party damage and manufacturing and construction defects. For these requirements, the regulations reference, through incorporation, ASME/ANSI B31.8S.
For threat identification, the regulations in § 192.917 specify that the potential threats operators must consider include, but are not limited to, the threats listed in section 2 of ASME/ANSI B31.8S. Those threats are grouped into time-dependent threats, static or resident threats, time-independent threats, and human error. In performing data gathering and integration, operators must follow the requirements in ASME/ANSI B31.8S, section 4. At a minimum, operators must gather and evaluate the set of data specified in Appendix A to ASME/ANSI B31.8S, which are the year of installation; pipe inspection reports; leak history; wall thickness; diameter; past hydrostatic test information; gas, liquid, or solid analysis; bacteria culture test results; corrosion detection devices; operating parameters; and operating stress level. An operator must also conduct a risk assessment that follows ASME/ANSI B31.8S section 5.
In a risk-based IM approach, data collection and integration is the backbone of an effective IM program. The PG&E incident exposed several problems in the way operators collect and manage pipeline condition data, showing that some operators have inadequate records regarding the physical and operational characteristics of their pipelines. The use of erroneous information leads to insufficient understanding of pipeline risks and incorrect integrity-related decision making. PG&E's IM program was missing or misidentified data elements that were necessary to characterize risk correctly and establish and validate MAOP, which is critically important for providing an appropriate margin of safety to the public.
Threat identification, data collection, and data integration are basic pillars on which IM was founded with the issuance of the 2003 IM rule. As specified in § 192.907(a), operators were to start with a framework, evolve that framework into a more detailed and comprehensive program, and continually improve their IM programs.
Data collection for new pipeline construction is relatively simple. However, collecting missing material property records for pipeline segments that have been in the ground for years can be challenging, as such data collection must be completed through integrity assessments or excavations. Operators are required to identify missing data and apply conservative assumptions, but incomplete data presents issues for risk assessment. The over-application of assumptions in the absence of real data, even if those assumptions are conservative, can lead to skewed or otherwise inaccurate risk analysis results.
In the NPRM, PHMSA proposed to revise § 192.917 to include specific requirements for collecting, validating, and integrating pipeline data. These requirements would add further specificity to the data integration regulations, list specific pipeline attributes that must be included in these analyses, explicitly require that operators integrate analyzed information, and require that data be verified and validated. PHMSA also proposed to require that operators use validated, objective data to the maximum extent practical. To the degree that subjective data from subject matter experts (SME) must be used, PHMSA would require that operator programs include specific features to compensate for SME bias, including training SMEs to recognize or avoid bias, and using outside technical experts or independent expert reviews to assess SME judgment and logic. Further, in § 192.917(b)(3), PHMSA proposed to require operators to identify and analyze spatial relationships among anomalous information (
Many stakeholders agreed with PHMSA that verified and validated data is important for data integration and threat analysis. The NTSB expressed support for the proposed additions to the IM analysis requirements and commented that expanded pipeline record and data requirements are a significant safety improvement in the management of pipelines through their service lifecycle. However, certain
PHMSA also received comments from the industry on the feasibility of threat identification, data gathering, and integration. The American Petroleum Institute (API) stated that while the totality of attributes listed in proposed § 192.917 should not pose a major burden on the industry, some specific attributes listed may not be feasible to obtain in practice. Enterprise Products stated that including just four or five attributes that point to a specific conclusion would be more useful than the lengthy list of attributes in the proposed provisions. A few commenters requested PHMSA clarify what they meant by “data integration, verification, and validation,” as these terms were not clear.
The Interstate Natural Gas Association of America (INGAA) and the Texas Pipeline Association (TPA) expressed concern that the proposed provisions are more prescriptive than the ASME/ANSI standard that is referenced in the current IM requirements. INGAA also commented that PHMSA's proposed inclusion of specific attributes from ASME/ANSI B31.8S in the regulatory text alongside the existing incorporation by reference of that standard could cause confusion. INGAA further stated that PHMSA should retain the current regulatory language requiring operators to “consider” the relevant data for covered segments and similar non-covered segments, instead of adopting the proposed provisions that would require data evaluation for non-covered segments. INGAA also stated that many of the data elements required by ASME/ANSI B31.8S are not available for older pipelines, which can include non-covered segments. INGAA and other commenters also asserted that PHMSA should provide sufficient time for operators to comply with the proposed data validation and integration requirements given the expansion of § 192.917(b)(1) to non-covered segments.
Several commenters provided input on PHMSA's proposed requirements to address SME bias. INGAA suggested PHMSA should delete the references to SME bias listed in § 192.917(b)(2) and replace the text with more general language to include peer reviews and external SME verification, citing this alternative as more consistent and clearer than what PHMSA proposed. National Fuel stated that using outside technical experts for bias control would be unnecessarily costly to pipeline operators. The American Gas Association (AGA) asserted that using outside technical subject matter experts for bias control is already standard practice within the industry and that it is not necessary to codify it into regulation. PG&E also suggested improvements to the section, stating that there is not an existing industry standard to provide guidance on what constitutes an outside technical expert to perform this specific function, and PHMSA should provide further guidance on this topic.
Several industry trade groups provided input on the proposed language in § 192.917(b)(3) that would require operators to identify and analyze the spatial relationship among anomalous information (
At the GPAC meeting on June 7, 2017, the committee noted that the NPRM's proposed revisions to § 192.917 do not include a way for operators to address the lack of availability of some data sets. The committee suggested that operators could assume the pipeline segment is susceptible to the threat associated with the missing data. The committee also questioned the purpose for the extensive, prescriptive data list, with some members believing it would turn into a compliance paperwork exercise without safety benefit. This, in turn, led to a discussion of how an operator demonstrates to a regulator that it is performing an effective risk analysis and whether that is a checklist of items or performing actions to generate better safety outcomes. Some committee members suggested PHMSA clarify that operators should only collect the pertinent data for operations and maintenance (O&M) tasks.
Committee members representing the industry noted the rule has no timeframe for the implementation of data collection and challenged the conclusion in the preliminary regulatory impact assessment (PRIA) that the data collection elements had a cost of zero, as databases may need to be upgraded to implement the listed attributes. Members representing the industry also requested PHMSA remove the proposed requirement to address SME bias; however, other committee members representing the public noted that SME bias in risk analysis is recognized across different disciplines and reflects a need to address how humans think about risk. Certain committee members representing the industry were also concerned that the requirements mandated the use of a GIS, which might be impractical for small operators.
Following the discussion, the committee voted 11–0 that the proposed rule, as published in the
The current regulations at § 192.917(b) explicitly require that, at a minimum, an operator must gather and evaluate the set of data specified in Appendix A to ASME/ANSI B31.8S. Operators may not ignore that requirement to collect the minimum set of data needed for a robust threat evaluation and risk assessment. PHMSA agrees that some assumptions regarding threat applicability based upon pipe type, operating parameters, and operating environment (
Regarding INGAA's comment on retaining the current regulatory
PHMSA further disagrees that it is appropriate to allow industry to continue to “consider” data elements selectively or that only specifying a few required data elements is the best approach. While some pipelines without associated data may not pose a risk, some may pose a significant risk. Comprehensive data is the best way to ensure an appropriate assessment and, in turn, reduction of risk. The addition of the specific data elements in the regulatory text clarifies PHMSA's expectations of data collection. PHMSA agrees, however, that some data elements may not be pertinent to all pipeline segments. Therefore, in this final rule, PHMSA is revising the proposed requirement to specify that the operator must collect “pertinent” data “about pipeline attributes to assure safe operation and pipeline integrity, including information derived from operations and maintenance activities,” as recommended by the GPAC. Regarding the cost of this data collection, all the proposed elements were listed in ASME/ANSI B31.8S. As that standard has been incorporated by reference since 2004 for covered segments (
Additionally, in response to comments and the GPAC recommendation, PHMSA is revising the listing of data elements to be more consistent with ASME/ANSI B31.8S. In some cases, PHMSA has clarified the meaning of generic terms in the data collection list found in ASME/ANSI B31.8S within this final rule. For example, where the ASME/ANSI standard lists “material properties,” PHMSA has elaborated by specifying these are “material properties including, but not limited to, grade, SMYS, and ultimate tensile strength.” In another example, where the standard lists “pipe inspection reports,” PHMSA has itemized, in this final rule, the pipe inspections required by part 192 and that are commonly performed by operators.
PHMSA agrees with commenters that sufficient time should be allotted for operators to comply with the data integration requirements. However, PHMSA also agrees with the comments made that operators should have been collecting and accounting for the pertinent items of this data set since the publication of the original IM rule almost 20 years ago. Therefore, in this final rule, PHMSA is providing a phased-in timeframe. The GPAC recommended that the implementation timeframe should begin in year 1, with full incorporation by 3 years. Given the existing requirements for collecting and using the data elements from ASME/ANSI B31.8S, and given the discussion at the GPAC meetings and the public comments received, PHMSA has revised this final rule to require that an operator must begin data integration on the effective date of the rule and integrate all attributes within 18 months of this rule's publication date.
Regarding comments calling for clarification of what “data integration, verification, and validation” meant, PHMSA notes that, at a minimum, an operator should consider the same set of data on a periodic basis and analyze changes and trends that would indicate the need for additional integrity evaluations.
Regarding SME bias, PHMSA believes that it is important for operators to address SME bias in data collection and risk assessment to account for the reality of how humans think about risk. Operators should take this into consideration when incorporating SME opinion as fact or when treating input from all SMEs as equivalent. While some operators may effectively account for SME bias, PHMSA has not observed this to be universal practice in the industry. To the point commenters made that using outside technical experts for bias control is unnecessarily costly, PHMSA notes that the use of outside technical experts would be optional: this final rule contemplates that operators could also employ training to ensure information provided by their own SMEs is consistent and accurate. While commenters also correctly noted that there is not an existing industry standard as to what constitutes an outside technical expert or an independent technical expert for SME bias control, an operator is ultimately responsible for determining the appropriateness and conductors of such a review. As a part of such a review, should an operator decide to have another SME review input from another SME, the operator must use a qualified SME—
PHMSA was persuaded, consistent with a GPAC recommendation, that some adjustments to the rule language are appropriate for clarity, or to eliminate redundant language, within the non-exhaustive list of specific types of data to be collected at § 192.179(a) and (b). Specific changes adopted in this final rule include the following:
• Section 192.917(a)(2): deleted a redundant reference to “or equipment defects;”
• Section 192.917(b)(1)(iii): deleted explicit material properties (
• Section 192.917(b)(1)(xxiv): added “seam cracking” within the list of pipe operational and maintenance inspection reports to be reviewed;
• Section 192.917(b)(1)(xxv): deleted a redundant reference to “outer/inner diameter corrosion monitoring;”
• Section 192.917(b)(1)(xxviii): eliminated specific examples of “encroachments;” and
• Section 192.917(b)(1)(xxxvi): deleted a redundant savings clause for “other pertinent information” when the lead-in to the section noted that the information listed was non-exhaustive.
PHMSA has also, consistent with a recommendation by the GPAC revised the rule by (1) requiring that operators employ adequate control measures for SME input to ensure consistent and accurate information rather than “correct” SME “bias;” and (2) requiring that operators document the names and qualifications of individuals who approve SME input rather than document the names of the SMEs and the information provided.
Concerning the use of a GIS, the NPRM's proposed revisions to § 192.917 were not intended to imply that all operators were required to implement a GIS system but were meant to clarify that data integration is not achieved solely by maintaining spatially located data in a GIS system. Accordingly, PHMSA has revised this final rule as recommended by the GPAC to delete reference to the use of a GIS system and maintain the core requirement to identify and analyze spatial relationships among anomalous information.
Section 192.917(c) requires operators to perform a risk assessment as part of an effective IM program. A risk assessment is an important element of a good IM plan. PHMSA analyzed the issues related to risk assessments that the NTSB identified in its investigation and held a workshop on July 21, 2011, to address perceived shortcomings in the implementation of IM risk assessments. PHMSA also sought input from stakeholders on these issues in the ANPRM. Based on the input received from both the ANPRM and the workshop, PHMSA determined that additional clarification was needed to emphasize the functions that risk assessments must accomplish and to elaborate on effective processes for risk management, both of which are critical to effective IM.
To address these issues, PHMSA proposed to clarify the risk assessment aspects of the IM regulations at subpart O by including the following functional requirements for risk assessments that operators should perform to assure pipeline integrity:
• Evaluate the effects of interacting threats;
• Ensure validity of the methods used to conduct the risk assessment;
• Determine additional P&M measures needed;
• Analyze how a potential failure could affect an HCA, including the consequences of the entire worst-case incident scenario, from initial failure to incident termination;
• Identify how each risk factor, or each combination of risk factors that simultaneously interact, contribute to risk at a common location;
• Account and compensate for uncertainties in the model and the data used in the risk assessment; and
• Evaluate risk reduction associated with candidate activities, such as P&M measures.
Public interest groups supported PHMSA's proposed revisions at § 192.917(c) to strengthen the functional requirements for risk assessment models. The Pipeline Safety Trust (PST) stated that the risk assessment models currently used by pipeline operators are inadequate and further noted that the proposed provisions could go farther to advance risk assessment quality. Other GPAC members representing the public supported the proposed revisions at § 192.917(c) during the committee meetings and noted that the NPRM language for this topic was written using a risk-informed approach that articulated the functions and purposes of risk assessments without being prescriptive as to the method or process to be used, which is consistent with IM principles.
Multiple industry trade associations and individual operators acknowledged the importance of risk assessments but believed that the proposed revisions at § 192.917(c) were too prescriptive. Several individual operators emphasized their voluntary efforts to improve their risk models and disagreed that the industry's risk models needed further prescription.
Many commenters emphasized that different pipeline systems are susceptible to different threats and believed that operators are best suited to determine which threat analyses are relevant to their systems. Multiple operators expressed the opinion that the proposed revisions at § 192.917(c) would require operators to expand datasets substantially but would contribute little benefit to risk identification, suggesting instead that integrating unnecessary datasets would distract from other safety efforts. AGA and several individual operators requested that PHMSA give operators discretion to select which data sets to incorporate into risk assessments for their system.
Some commenters requested that PHMSA specify what the NPRM meant when it proposed to revise § 192.917(c) to require operators to “validate” data. These commenters expressed doubts regarding the technical feasibility of implementing the proposed regulations in § 192.917(c), noting that some of the data PHMSA proposed requiring for the validation of risk assessment models is not available. These commenters proposed that operators be permitted to apply conservative values or values determined using engineering judgement. Southwest Gas Corporation, Paiute Pipeline, and Consumers Pipeline expressed concern that developing the newly required datasets would require the usage of ILI tools that their pipelines are not configured to accommodate. These commenters stated that gathering these datasets would present costs that were not captured by PHMSA's PRIA because PHMSA did not account for the cost of making lines piggable.
Multiple commenters were concerned that the proposed revisions would make operators' current relative risk models invalid and would require a transition to quantitative or probabilistic risk models. Similarly, API agreed with that assessment and noted that quantitative and probabilistic models are not useful or appropriate for the analysis, prediction, or prevention of low-frequency, high-consequence events such as the PG&E incident. Further, API noted that the probabilities of certain infrequent circumstances and conditions occurring at a single location and single time are so low that the quantitative or probabilistic risk models would not identify them because there are no statistics available from which to predict them. AGA asserted that the proposed requirements deviate from industry standards and that PHMSA did not provide sufficient justification for this departure. Commenters also emphasized the high costs associated with implementing quantitative risk models, which can include the procurement of specialist expertise, development of new datasets, and transition to a GIS or other new database management system.
Kern River requested clarification regarding which elements of § 192.917 need to be included in an operator's risk model and which elements only need to be included in the overall IM plan. They noted that integrity assessment method determinations, repair decisions, P&M measures selection, root cause analyses, and similar pipe studies all play a part in the overall IM plan and have at times overlapping, but also unique, requirements for data gathering, integration, and threat analysis.
AGA and several individual operators expressed concerns that the proposed rule does not provide a timeline for implementing new risk assessment requirements, thereby implying that operators must implement new requirements by the rule's effective date. Multiple operators and industry trade associations requested that operators be permitted to develop their own implementation schedules or provided suggestions for specific implementation schedules. For example, Enterprise Products requested that PHMSA include a 2-year implementation period for operators to incorporate the data integration and risk assessment requirements into their IM programs.
At the GPAC meeting on January 12, 2017, some committee members noted that any revisions to the risk assessment requirements should be deferred until after PHMSA's Pipeline Risk Modeling Work Group issues its pipeline system risk modeling technical document.
Following the discussion, the committee voted 11–0 that the proposed provisions for the risk assessment requirements were technically feasible, reasonable, cost-effective, and practicable if PHMSA modified the proposed rule to restore the reference to ASME/ANSI B31.8S, section 5, to clarify that other methods besides probabilistic techniques may be used; change the term “probability” to “likelihood” and delete the term “risk factors” from § 192.917 (c)(2); and provide a 3-year phase-in period for risk assessments to meet the functional objectives specified in § 192.917(c).
On March 6, 2020, PHMSA published the final report titled “Pipeline Risk Modeling—Overview of Methods and Tools for Improved Implementation” from the joint PHMSA/industry working group on risk modeling.
PHMSA believes that the revisions to § 192.917(c) are important to include in this rulemaking now, as many operators have not substantially improved their risk assessment techniques or models since the early initial efforts to prioritize baseline assessment plans in 2004, with the findings from the PG&E incident being a prime, national example. Therefore, PHMSA is establishing explicit minimum standards for the functional requirements of a risk assessment to help assure that operators will achieve this specific aspect of a “more detailed and comprehensive” program as discussed in the 2003 IM rule.
In the NPRM's proposed revisions to § 192.917(c), when PHMSA used terms such as “probability” and “risk factors,” it was not intended to imply that an operator must perform probabilistic risk analysis. To address this, PHMSA has modified the rule language to replace the term “probability” with “likelihood” and restored the reference to ASME/ANSI B31.8S, section 5, for acceptable risk assessment methodologies as recommended by the GPAC. Similarly, and as also recommended by the GPAC, PHMSA has deleted the phrase “or risk factors” from paragraph § 192.917(c)(2) for clarity. Whichever risk assessment methodology an operator chooses, the result must meet the functional requirements and accomplish the purposes specified in this final rule.
PHMSA notes that all data elements specified in § 192.917(b) are important for a robust risk assessment. While operators do have the discretion to expand their data collection efforts, this minimum defined data set is required to be used. As was emphasized by multiple operators in their comments, each pipeline system is susceptible to different threats, and the individual operator is best suited to determine these threats. However, an operator needs the specified data elements to identify threats objectively. As noted in the previous section, PHMSA has modified the rule to refer to the “pertinent” data elements, including information derived from O&M activities that assure safe operation and pipeline integrity. This revision clarifies that data elements that are not pertinent for a given pipeline segment need not be included in a risk assessment.
Pertaining to comments regarding the validity of the method used, an operator must ensure the soundness of the risk modelling method they are using applicable to the threats to a given pipeline segment, including its specific leak or failure history. To Kern River's comment as to which elements of § 192.917 need to be included in an operator's risk model and which elements need to be included in an operator's IM plan, PHMSA will note that integrity assessment method determinations, repair decisions, P&M measure selection, and root cause analyses are examples of items that could be included in an operator's risk model based on the particular types of threats being assessed. The existing regulations state that a “particular threat” is an identified threat being assessed for each covered segment.
As discussed above, some commenters claimed there would be high costs associated with implementing quantitative risk models, which might include the procurement of specialist expertise, the development of new data sets, and a transition to a GIS or other new database management system. PHMSA notes that operators can use the same data they have been, and are currently, collecting when implementing a quantitative risk model. Operators do not necessarily have to “recollect” or otherwise change their existing data to use a probabilistic risk model.
Given the state of some operators' risk assessment programs, PHMSA is persuaded that it is reasonable to allow operators a reasonable amount of time to upgrade their risk assessment models, methodologies, and analyses. However, this is an important provision that operators need to implement as soon as practicable. Therefore, and to be more consistent with the implementation for the data attributes discussed earlier, PHMSA is modifying this final rule to allow an 18-month implementation period for this provision.
PHMSA proposed to add to the regulations examples of threats unique to plastic pipe that operators must consider, such as poor joint fusion practices, pipe with poor slow crack
PHMSA did not receive any public comments on this section. At the GPAC meeting on June 7, 2017, PHMSA noted in its presentation to the committee that there were no public comments on the issue. Subsequently, the GPAC voted 11–0 that the proposed changes to the provisions for IM clarifications for threat assessments for plastic pipe were technically feasible, reasonable, cost-effective, and practicable, and they did not recommend any additional changes to § 192.917(d).
Since PHMSA did not receive any public comments or additional GPAC recommendations regarding threat assessment for plastic pipe, the final rule includes the requirement in § 192.917(d) as proposed in the NPRM. PHMSA proposed these changes to highlight these potential threats to both operators and inspectors, and finalizing these requirements will provide additional safety and enforcement awareness.
PHMSA's inspection experience shows that some operators do not implement additional P&M measures based on the evaluation required at § 192.935(a). PHMSA believes that strengthening requirements related to operators' use of insights gained from their IM programs is prudent to ensure effective risk management. Therefore, PHMSA proposed to clarify the expectation that operators use knowledge from risk assessments to establish and implement adequate P&M measures and provided more explicit examples of the types of P&M measures for operators to evaluate.
Several commenters requested that PHMSA revise the requirements at § 192.935(a) to remove the requirement for operators to perform all the listed measures to prevent a pipeline failure and to mitigate the consequences of a pipeline failure in an HCA. These commenters stated that requiring operators to perform all the measures listed at § 192.935(a) negates the need for a risk analysis, as the rule would then require that operators perform each of the listed actions regardless of whether conditions warrant these actions or whether past efforts have been taken. INGAA suggested that PHMSA should keep the existing language, which states that an operator must base the additional measures on the threats the operator has identified to each pipeline segment. GPAC members representing the industry echoed INGAA's claims during the committee meetings.
During the GPAC meeting on June 7, 2017, the GPAC noted that PHMSA's proposed changes removed a statement that an operator must base additional P&M measures on the threats an operator has identified for each pipeline segment. The proposed text, the members believed, implied an operator would be required to evaluate and implement each listed P&M measure every time. Based on PHMSA's webinars and other discussions, the committee members didn't believe that was PHMSA's intent.
Following that discussion, the committee voted 11–0 that the proposed provisions for strengthening the requirements for applying IM knowledge were technically feasible, reasonable, cost-effective, and practicable if PHMSA clarified it was not the agency's intent to require that all listed P&M measures be implemented, and that operators “must consider” the listed items.
PHMSA agrees that all listed measures are not mandatory for implementation in all cases. Requiring an operator to implement P&M measures against threats that might not be applicable to their particular system could be overly burdensome. However, PHMSA has determined that requiring operators to consider the listed measures in their risk analyses and apply them to threats as appropriate is a practical requirement. As recommended by the GPAC, the final rule has been modified to reflect that position; each operator will be required to consider the listed measures and determine the appropriateness of each for their system.
Section 192.911(k) requires that an operator's IM program include a MOC process as outlined in ASME/ANSI B31.8S, section 11. That document guides operators to develop formal MOC procedures to identify and consider the impact of major and minor changes to pipeline systems and their integrity. These changes can include technical, physical, procedural, and organizational changes, and they can be either temporary or permanent changes. Per ASME/ANSI B31.8S, section 11, an operator's MOC process should include the reason for the change, the authority for approving changes, an analysis of the implications of the change, the proper acquisition of the necessary work permits, appropriate documentation, communications of the change to any affected parties, time limitations of the change, and the qualification of staff. The document notes that changes to a pipeline system might require changes to an operator's IM program; similarly, changes to an IM program might also cause changes to a pipeline system. If changes in land use (
Inadequately reviewed or documented design, construction, maintenance, or operational changes can contribute to pipeline failures. In the PG&E incident, the NTSB investigation determined that a substandard piece of pipe was substituted in the field without proper authorization, design review, or approval. PHMSA has subsequently determined that more specific attributes of the MOC process should be explicitly codified within the text of §§ 192.13 (general requirements) and 192.911(k) (IM requirements). As a result, PHMSA proposed to require that operators have a MOC process that includes the reasons for the change; the authority for approving changes; an analysis of implications; the acquisition of required work permits; and evidence documenting communication of the change to affected parties, time limitations, and the qualification of staff.
Public interest groups, such as the PST, and the National Association of Pipeline Safety Representatives (NAPSR) agreed with and supported the proposed MOC provisions, stating that these provisions would enhance pipeline safety. Several individual pipeline operators and trade associations opposed the proposed MOC provisions, stating that the provisions are generally too broad and would be applied to many routine activities that already have established procedures. More specifically, AGA stated that they would create a new requirement for each transmission operator to have a formal MOC process to document and evaluate all changes to pipelines and processes. They further stated that the proposed revisions are unnecessary due to current industry progress related to MOC and the voluntary adoption of industry consensus standards.
Several commenters opposed the proposed addition of four types of changes (design, environmental, operational, and maintenance), asserting that these elements are not included in current industry standards or recommended practices. Similarly, INGAA asserted that PHMSA should eliminate the changes it proposed to § 192.13 that go beyond the recommendations of ASME/ANSI B31.8S. These commenters stated that PHMSA significantly underestimated the impact and burden caused by codifying and expanding the scope of MOC.
Several commenters, including AGA, API, and INGAA, opposed the proposed immediate implementation of the MOC provisions, with some commenters requesting an implementation period of 1 to 5 years. These commenters stated that the proposed changes were significant and would need to be incorporated into existing MOC processes, and that additional time would be needed to complete this in an effective manner. Many commenters also expressed concern over the retroactive application of the proposed MOC provisions.
At the GPAC meeting on January 12, 2017, the committee voted 8—2 that the proposed MOC revisions were technically feasible, reasonable, cost-effective, and practicable if PHMSA provided a 2-year phase-in period for the regulations as they pertain to non-IM pipeline assets, provided a notification procedure for justified extensions, clarified the requirements only covers significant changes that affect safety and the environment, and clearly stated that the revisions do not apply to distribution or gathering lines. The dissenters in the vote (representatives from the Environmental Defense Fund (EDF) and PST) were members representing the public, who thought that the proposed revisions were acceptable as proposed in the NPRM, the phase-in period recommended by the majority of the GPAC was too long, and that there was no reason that the proposed revisions should not apply to gathering lines.
PHMSA believes that an operator must understand the impacts that their decisions have on safety and the environment. Therefore, PHMSA believes that specifying the types of changes that must be addressed under a MOC program is appropriate. PHMSA also believes that the proposed changes to the MOC provisions conform with the requirements and intent of ASME/ANSI B31.8S.
However, based on the comments received and GPAC recommendations, PHMSA is persuaded that, as published in the NPRM, the language of proposed § 192.13(d) could be overly broad. Therefore, PHMSA has revised the requirement to specify the requirement applies to a “significant change that poses a risk to safety or the environment” to limit the application of this requirement to significant changes, as the GPAC recommended. Additionally, and as also recommended by the GPAC, PHMSA is specifying that § 192.13(d) is not retroactive and applies only to onshore transmission pipelines (
PHMSA agrees that operators should be afforded time to comply with this new requirement, but also believes that operators can apply this process to non-HCA assets more promptly than the period that the GPAC recommended. Therefore, operators have 18 months for the MOC process to be fully incorporated for non-HCA pipeline segments. PHMSA is also including a notification procedure in accordance with § 192.18 for operators to apply for an extension, of up to 1 year, of the compliance deadline. PHMSA believes including this compliance deadline strikes a balance between the GPAC recommendation and the implementation of a procedure that operators already have in place for HCA pipeline segments, and including a notification procedure to provide operators with more time, if necessary, effectively implements the GPAC recommendations.
Incidents attributed to corrosion continue to occur, which demonstrates that the current requirements can be more effective at preventing incidents caused by certain types of corrosion. This includes compromised pipe or pipe coating caused by damage from construction, cathodic protection deficiencies, interference currents, and internal corrosion. As a result, PHMSA proposed several changes to the regulations for corrosion control, including new requirements for pipe coating assessments, protective coating strength, P&M measures, and additional mitigation of stray current (also referred to as interference current). PHMSA also proposed changes regarding gas stream monitoring program requirements to mitigate internal corrosion. These proposed revisions were made in §§ 192.319, 192.461, 192.465, 192.473, and 192.935(f) and (g) and are discussed more thoroughly in this section. PHMSA also proposed to add a new § 192.478 for the monitoring and mitigation of internal corrosion.
The Coalition to Reroute Nexus, the Michigan Coalition to Protect Public Rights-of-Way, NAPSR, and the PST supported the proposed changes regarding corrosion control and pipeline condition monitoring. Earthworks suggested that PHMSA issue even more stringent requirements given the number of post-Carlsbad incidents that have occurred due to corrosion.
Some commenters requested clarification regarding whether the proposed provisions were intended to include transmission, distribution, and gathering pipelines. Other commenters provided input on whether gathering pipelines should be included in the corrosion control requirements, especially alternating current voltage gradient (ACVG) and direct current voltage gradient (DCVG) inspections in proposed § 192.461.
During the meeting on June 7, 2017, GPAC committee members questioned whether the corrosion control requirements would apply to gathering lines—the presumption among the majority of the members was that the requirements were not intended to include gathering or distribution lines. The committee provided other feedback specific to the applicability and implementation of specific corrosion topic areas, which are discussed in the applicable sections below.
PHMSA has considered the comments received regarding the applicability of the proposed corrosion control requirements. PHMSA stated at the June 2017 GPAC meetings, in response to comments received on the NPRM and the discussions during the GPAC meeting, that it would in the final rule exclude gathering and distribution pipelines from the NPRM's proposed requirements in subpart I related to corrosion control. Accordingly, PHMSA has revised § 192.9 to exempt gathering lines from several of these requirements. PHMSA, however, may consider expanding this provision to gathering lines in the future. Comments on the specific provisions proposed for corrosion control are addressed in the following sections.
As to commenters requesting the regulations be made even more strict than proposed, PHMSA notes that changes more stringent than those proposed would require further notice. PHMSA believes that currently, there is also not sufficient data to justify more stringent changes. PHMSA will continue to review all data sources on the subject, including incident and annual reports, and consider more stringent corrosion control safety requirements in a future rulemaking if there is data supporting the need.
Section 192.319 prescribes requirements for installing pipe in a ditch, including requirements to protect pipe coating from damage during the process. While most operators perform the required high-voltage holiday detection
Section 192.461 prescribes requirements for protective coating systems. PHMSA notes that pipe coating can disbond
In the NPRM, PHMSA proposed to revise § 192.461(a) to require that pipelines have sufficient coating to protect against damage from being handled. PHMSA also proposed to add § 192.461(f) to require operators to perform an above-ground coating survey within 3 months of placing the pipeline into service and require operators to repair moderate or severe coating damage within 6 months of the assessment.
Stakeholders representing the public, including NAPSR and the PST, generally agreed with and supported the revisions to this section, stating that such requirements would increase safety and were a good step towards reducing the number of incidents that occur due to corrosion. Many commenters stated that ACVG/DCVG surveys are not always feasible and that PHMSA should not limit the tools for performing coating surveys to the two types specified in §§ 192.319 and 192.461(f). For example, INGAA stated that PHMSA did not provide justification for requiring coating surveys, such as ACVG and DCVG, to be used to detect coating issues after construction or after performing a repair or replacement. INGAA further stated that PHMSA should allow operators to use other assessment technologies, such as close interval surveys (CIS) and high- resolution geometry ILI inspection tools, to detect and manage post-construction, post-repair, and post-replacement conditions that contribute to external corrosion.
AGA and AGL Resources (now Southern Company Gas) commented that depth of cover and excessive pavement can make indirect surveys impossible. Further, AGA stated that while conducting post-construction surveys is industry best practice, activities that are not always feasible for operators to complete should not be codified within the regulations.
NACE expressed concern that ACVG and DCVG surveys do not address the stated goal of identifying coatings that impede cathodic protection and objected to setting specific thresholds for these tests. Similarly, INGAA stated that if the requirements for operators to perform coating surveys using ACVG and DCVG are finalized, the proposed voltage drop threshold value in § 192.461(f) should be eliminated.
Industry commenters also stated objections or suggested limitations to the timeframe proposed in § 192.461(f) regarding when these surveys should be performed, stating that the 3-month timeline is inconsistent with the 1-year period allowed to install cathodic protection after the construction of a
API and Enterprise Products commented that PHMSA does not provide any supporting evidence that backfilling a ditch for an onshore transmission pipeline is, or has been, an issue meriting the need for ACVG or DCVG surveys to assess coating integrity. Further, API and Southern California Gas Company stated that § 192.319(a) already requires all operators of transmission gas pipelines to “protect the pipe coating from damage,” either in initial installation, or any time the pipe is exposed and backfill material is added. Therefore, the proposed provisions may be duplicative with § 192.461.
At the GPAC meeting on June 6 and 7, 2017, committee members representing the industry echoed many of the comments received, noting also that ACVG and DCVG surveys may not address issues related to coatings impeding CP. Additionally, some of these members noted that coating surveys are not always feasible, and that PHMSA should not limit the tools for performing such surveys. Further, several GPAC members representing the industry suggested that PHMSA should not set specific repair thresholds in the regulations, and that the provisions do not align with current NACE standards.
Therefore, the committee voted 10–0 that these provisions proposed at §§ 192.319 and 192.461 were technically feasible, reasonable, cost-effective, and practicable if PHMSA: (1) raised the repair threshold from “moderate” to “severe” indications, (2) modified the requirements to apply to segments greater than 1,000 feet in length to be consistent with other similar corrosion control requirements, (3) extended the assessment and remediation timeframe to 6 months after a pipeline is placed into service and made allowances for delayed permitting, (4) adjusted the recordkeeping requirements so that operators would be required to make and retain for the life of the pipeline records documenting indirect assessment findings and remedial actions, and (5) provided flexibility for the use of alternative technology unless the agency objected.
Operators have historically assumed that coating is functioning as intended after construction. However, the NTSB report on the Enbridge crude oil accident near Marshall, MI, identified shielded CP due to disbonded coating as being a contributing cause of the failure. Whenever an operator backfills a pipeline, there is the potential for coating damage. PHMSA believes that conducting coating surveys after backfill is a reasonable and reliable way for operators to identify coating damage inflicted during the construction process before significant corrosion occurs. This is a means for an operator to confirm, after pipeline construction or replacement, that the pipe coating is not compromised and is functioning as intended.
PHMSA believes that ACVG/DCVG surveys are currently the best and most reliable means of detecting coating damage following construction, as opposed to a CIS survey, which is a complementary survey employed to assess the performance of CP systems. However, PHMSA desires to promote the development of new technologies and methods and acknowledges that other technology could be used for performing coating assessments. Therefore, in this final rule, PHMSA is allowing an operator to notify PHMSA of the intent to use other technology, which it may use unless an objection is received, as was recommended by the GPAC. PHMSA's review of such notification would evaluate whether an operator has demonstrated that the “other technology” provides equivalent protection to public safety and the environment compared the existing technologies contemplated by this final rule. As a part of its evaluation, PHMSA considers whether there are technical papers from standard developing organizations that support the use of the new technology, as well as any research that has been conducted on that technology and any usage of the technology in other industries and non-regulated pipelines.
PHMSA disagrees that the voltage drop threshold value used as the remediation criterion should be eliminated from the regulation but does agree that the values in the proposed revisions to §§ 192.319 and 192.461 in the NPRM were conservative as they would indicate “moderate” coating damage. Therefore, in this final rule and as recommended by the GPAC, PHMSA is specifying the voltage drop threshold value associated with a “severe” indication of coating damage as recommended by GPAC.
As recommended by the GPAC, PHMSA is persuaded that the 3-month proposed timeline may not be practical in all situations and has modified the final rule to allow operators up to 6 months after the pipeline is placed into service to complete the necessary assessments and remediation (with allowance for time required to obtain permits, if required). PHMSA has also included a requirement for the associated recordkeeping requirements of these provisions that includes the editorial changes recommended by the GPAC; specifically, that operators must make and retain for the life of the pipeline records documenting the indirect assessment findings and remedial actions.
PHMSA also modified both sections to apply to segments greater than 1,000 feet in length to be consistent with other corrosion control requirements that were similarly altered in this final rule. PHMSA notes that the application of these requirements to segments greater than 1,000 feet in length is also consistent with conditions that have been applied in several special permit applications.
As a part of the requirements for these sections, PHMSA has provided in the regulatory text that the applicable coating surveys must be conducted, except in locations where effective coating surveys are precluded by geographical, technical, or safety reasons.
As noted before, PHMSA did not intend for these provisions to apply to gathering or distribution pipelines, and it has clarified the applicability of these provisions to transmission lines only. However, PHMSA may expand the application of these provisions in a future rulemaking.
Interference currents occur when metallic structures pick up a stray electrical current from elsewhere and discharge the current, thereby causing corrosion. These currents can negate the effectiveness of cathodic protection systems. The sources of stray current problems are commonplace; they can result from other underground facilities, such as the cathodic protection systems from crossing or parallel pipelines, light rail systems, commuter train systems, high-voltage alternating current (HVAC) electrical lines, or other sources of electrical energy in proximity to the pipeline. Stray current corrosion is electrochemical corrosion that occurs when potential differences between a high-conductivity steel pipeline and lower-conductivity environments causes the stray current to flow through the pipe and create a corrosion cell. If stray current or interference issues are not remediated, accelerated corrosion could occur and potentially result in a leak or rupture. Section 192.473 prescribes general requirements to minimize the detrimental effects of interference currents. However, specific requirements to monitor and mitigate detrimental interference currents have not been prescribed in subpart I of part 192. Therefore, in the NPRM, PHMSA proposed to explicitly require operators to conduct interference surveys and remediate adverse conditions in a timely manner. Specifically, PHMSA proposed to amend § 192.473 to require that an operator's program include interference surveys to detect the presence of interference currents and take remedial actions within 6 months of completing the survey. Additionally, PHMSA proposed to require in § 192.473 that operators perform periodic interference surveys whenever needed.
Generally, stakeholders representing the public agreed with and supported the revisions to this section, noting that the requirements, as proposed, could help reduce the number of pipeline incidents caused by corrosion. Numerous trade associations and pipeline companies were concerned about the proposed requirements for interference surveys under § 192.473. Commenters, including Atmos Energy Corporation and AGA, expressed doubt regarding the ability of individual operators to obtain the necessary information from electric transmission providers. APGA and INGAA urged PHMSA to limit this new requirement to specific transmission lines, such as those pipelines subject to the threat of stray electric current. Commenters, including INGAA, also stated that the provisions should allow for the phased-in implementation of remediation measures and provided timeframes from 12 to 18 months. Some commenters suggested a lengthened implementation period for this requirement due to the potential difficulties in obtaining the proper permits.
At the GPAC meeting on June 7, 2017, certain committee members believed that these requirements should apply only to lines that are subject to stray current risks and noted that interference surveys might not be feasible depending on the information operators can obtain from electricity transmission companies. Committee members also suggested a phased-in compliance period between 12 and 18 months for these requirements, and noted, similarly to the proposed external corrosion provisions, that the remediation period did not account for activities like obtaining the necessary permits. There was also extensive discussion at the meeting regarding PHMSA's proposed use of the word “significant” in context of the level of corrosion that would need to be remediated, with several committee members suggesting that phrase be tied to a numeric threshold for easier compliance. The committee also discussed, at length, what PHMSA's expectation for a remediation “plan” is and what the necessary paper trail would look like for compliance.
After discussion, the committee voted 9–0 that the provisions for external corrosion interference currents are technically feasible, reasonable, cost-effective, and practicable if PHMSA clarified that the surveys are required for lines subject to stray currents and updated the remediation timeframe to require operators create a remediation procedure and apply for necessary permits within 6 months and complete remediation activities within 12 months with allowances for delayed permitting. The committee also specifically recommended that PHMSA clarify that operators must take remedial action when the interference is at a level that could cause significant corrosion as being 100 amps per meter squared, or if it impedes the safe operating pressure of the pipeline, or if it may cause a condition that would adversely affect the environment or the public.
PHMSA agrees with commenters that every pipeline segment is not equally subject to stray current. Therefore, in this final rule, PHMSA is modifying § 192.473 as recommended by the GPAC to clarify that interference surveys are required when electric potential monitoring indicates a significant increase in stray current, or new potential stray current sources are introduced. Additionally, PHMSA recognizes the need for objective remediation criteria and has included the criteria recommended by the GPAC, specifically “greater than or equal to 100 amps per meter squared or if it impedes the safe operation of a pipeline or may cause a condition that would adversely impact the environment or the public.” PHMSA has also revised this final rule to establish a remediation timeframe of 15 months, with allowance for delayed permitting, as recommended by the GPAC.
Section 192.477 prescribes requirements to monitor internal corrosion by coupon testing or other means if corrosive gas is being transported. However, the regulation is silent on standards for determining whether corrosive gas is being transported or regarding any changes occurring that could introduce corrosive contaminants in the gas stream. The existing regulations also do not prescribe that operators continually or periodically monitor the gas stream for the introduction of corrosive constituents through system changes, changing gas supply, abnormal conditions, or other changes. This could result in pipelines that are not monitored for internal corrosion because an initial assessment did not identify the presence of corrosive gas.
As such, PHMSA determined that additional requirements are needed to ensure that operators effectively monitor gas stream quality to identify if and when corrosive gas is being transported and to mitigate deleterious gas stream constituents such as contaminants or
NAPSR generally agreed with and supported the addition of this section. They did note, however, that PHMSA should consider the applicability of these requirements to pipelines that are transporting dry, tariff-quality gas. The PST noted that these proposed requirements in this section provided an enforceable mechanism to hold operators accountable for future incidents caused by internal corrosion.
Multiple commenters considered the proposed changes to requirements for internal corrosion control in § 192.478 to be overly prescriptive, particularly regarding gas monitoring and the list of corrosive constituents. INGAA stated that transmission operators are already taking comprehensive steps to address internal corrosion under subparts I and O of part 192 and that proposed § 192.478 should be eliminated for this reason. Atmos Energy Corporation and INGAA asserted that the internal corrosion monitoring timeline proposed in § 192.478(d) is unreasonable and too frequent, particularly for pipeline systems that are not susceptible to internal corrosion. They further stated that mitigation of internal corrosion is necessary only if a pipeline is transporting, or has the potential to transport, corrosive gas. At the GPAC meeting on June 6, 2017, committee members representing the industry supported those comments made by Atmos Energy Corporation and INGAA.
Commenters at the GPAC meeting, including committee members, noted that some distribution operators rely on upstream transmission pipeline gas suppliers to monitor gas quality and do not own any gas monitoring equipment. A committee member noted that if pipeline operators are getting gas from native sources, gathering lines, or underground storage fields, it might be necessary to determine the quality of the gas. Another committee member noted that there are tariffs that prevent certain quantities of constituents that could be internally corrosive from entering a transmission system. That commenter also noted that operators continually monitor for internal corrosion on pipelines transporting tariff-quality gas as a part of IM.
GPAC members also noted that PHMSA should consider harmonizing these requirements with the existing corrosion control monitoring requirements, as they appeared to be duplicative in certain areas.
After discussing the provisions, the committee voted 10–0 that the proposed provisions related to internal corrosion were technically feasible, reasonable, cost-effective, and practicable if PHMSA limited the applicability of the requirements to those pipelines that are transporting corrosive gas and provided additional guidance based on the committee discussion; changed the reference from the use of “gas-quality monitoring equipment” to “gas-quality monitoring methods;” specified types of technologies operators can use to mitigate potentially corrosive gas streams; and changed the frequency of the monitoring and program review requirements from twice per year to once per calendar year, not to exceed 15 months. The committee also specifically recommended deleting language that was duplicative to existing requirements and instead recommended PHMSA cross-reference those existing requirements in this section.
PHMSA noted during the GPAC meeting, that, in its experience, transmission pipeline operators measure the quality of the gas coming into their transmission systems. Based on the quality of the gas, transmission pipeline operators are paying suppliers for the gas they receive or are receiving money for the gas they deliver. Therefore, PHMSA assumes transmission pipeline operators have monitoring systems for the quality of the gas entering their systems. PHMSA's intent with the proposed revision of this section was to help ensure that operators were getting that data to the necessary people in their organization. For instance, if an organization's accountants are getting gas quality data due to their work with tariffs, the personnel responsible for operations and integrity management should get that data.
Based on the comments received, PHMSA is revising the scope of proposed § 192.478 in this final rule to limit its applicability to the transportation of corrosive gas and is modifying the proposed language in paragraph (b)(1) to specify that operators perform monitoring at points where gas with potentially corrosive contaminants enters the pipeline. To address concerns regarding the monitoring frequency, PHMSA is changing the requirement from twice per year to once per calendar year, not to exceed 15 months. Making such a change is more consistent with the timeframes for similar requirements in the regulations as revised by this rulemaking and implements the recommendation made by the GPAC.
Further, to harmonize this rule with other rule requirements, PHMSA is deleting proposed paragraph (c), since § 192.477 currently requires the monitoring of internal corrosion. To address comments regarding technology, PHMSA revised paragraph (b)(2) to read “Technology to mitigate the potentially corrosive gas stream constituents. Such technologies may include product sampling and inhibitor injections.”
There have been instances where operators do transport corrosive gas by pipeline without investigating the possibility of corrosive effect of the gas on its pipeline and taking steps to minimize internal corrosion.
Appendix D to part 192, “Criteria for Cathodic Protection and Determination of Measurements,” which is referenced in § 192.465(f), specifies requirements for CP of steel, cast iron, and ductile pipelines. Appendix D has not been updated since 1971. The NPRM
Section 192.465 currently prescribes that operators monitor CP and take prompt remedial action to correct deficiencies indicated by the monitoring. The provisions in § 192.465 do not specify the remedial actions required to correct deficiencies and do not define “prompt.” To address this gap, the NPRM proposed to amend § 192.465(d) to require that operators must complete remedial action promptly, but no later than the next monitoring interval specified in § 192.465, or within 1 year, whichever is less. Additionally, new paragraph (f) proposed to add requirements for onshore gas transmission pipeline operators to perform CIS if annual test station readings indicate CP is below the level of protection required in subpart I. Unless it is impractical to do so, PHMSA proposed to require that operators complete CIS with the protective current interrupted. Whereas ACVG and DCVG are performed at the time of construction, before electrical current is on the pipe for CP, a CIS requires the pipe to be in the ground with the rectifiers installed. A CIS will discover areas of low current where CP might be weakened and can discover additional construction, operational or environmental damage along the pipeline when performed as a post-construction task. The NPRM's proposed revisions to § 192.465 would also require each operator to take remedial action to correct any deficiencies indicated by the CIS.
NAPSR and the PST generally agreed with and supported the revisions to § 192.465. NAPSR believed that the inclusion of a timeframe for operators to perform CIS and perform subsequent mitigation measures would increase pipeline safety but noted that PHMSA should provide further guidance on the intervals at which operators should perform the surveys. Both PST and NAPSR supported the revisions to appendix D.
Several industry entities commented on the proposed revisions to appendix D to part 192. INGAA stated that the proposed remaining criteria in appendix D for determining the adequacy of cathodic protection are too narrow, and that all industry standards provide for additional methods of assessing voltage drop. These commenters recommended that PHMSA follow the applicable paragraphs of NACE Standard Practice SP0169. Enterprise noted that appendix D should be consistent with § 195.571, which outlines the criteria that hazardous liquid pipeline operators must use when determining the adequacy of cathodic protection.
Commenters stated that the proposed changes to appendix D, as written, would apply to distribution pipelines as well as transmission pipelines and expressed concern that PHMSA has offered neither justification nor an estimate of the impact on distribution systems. These commenters requested that PHMSA clarify that the proposed changes to appendix D apply only to transmission pipelines.
Commenters, including committee members representing the industry during the meeting on June 6, 2017, stated that PHMSA should amend § 192.465 to include a more realistic timeframe for remedial action, specifically noting that the timeframe for remediation does not account for difficulties in obtaining the necessary permits. Additionally, commenters and GPAC committee members stated this provision could lead to unnecessary and costly work, as there are various situations that can produce a low CP reading that do not require CIS for the identification of the root cause. Those commenters stated there are certain conditions that do not require CIS and recommended allowing operators to identify, troubleshoot, and remediate these certain conditions on their own without the need to conduct CIS.
Further, GPAC members representing the industry disagreed with PHMSA's proposed revisions to the appendix D criteria for determining the adequacy of cathodic protection. Like their commentary on other provisions, these committee members also noted that the impact of these changes to distribution pipelines was not justified or analyzed, and therefore, distribution pipelines should be exempt from the proposed requirements.
Following their discussion, the committee voted 10–0 that the provisions related to the CP of steel, cast iron, and ductile pipelines were technically feasible, reasonable, cost-effective, and practicable if PHMSA clarified that the new requirements in § 192.465(d) only apply to gas transmission pipelines and withdrew the proposed revisions to appendix D. The committee also recommended that PHMSA address situations where CIS may not be an effective response by instead requiring operators investigate and mitigate any non-systemic or location-specific causes of corrosion and require CIS if operators need to address systemic causes of corrosion. Additionally, the committee recommended PHMSA address its comments regarding the timeframe by which the proposed provisions would need to be completed by requiring operators make a remedial action plan and apply for any necessary permits within 6 months and finish the remedial action within 1 calendar year, not to exceed 15 months, or as soon as practicable once the operator obtains the necessary permits.
PHMSA intended that the amendments proposed in the NPRM would apply only to transmission pipelines and has, in this final rule, added the phrase “onshore gas transmission pipelines” to § 192.465(d)(1) of to clarify that limitation. PHMSA will consider expanding application beyond onshore gas transmission pipelines in the future. PHMSA believes that modifying the timeline for remediation is appropriate, and therefore, is requiring operators develop a remedial action plan and apply for the necessary permits within 6 months of the inspection, with the completion of remediation activities to be completed prior to the next monitoring interval or within 1 year, not to exceed 15 months. Like the previous section, such a change is consistent with both the GPAC recommendation on the issue and the timeframes for the related regulations in this final rule. PHMSA understands that, in almost all cases where an operator performs an excavation of 1,000 feet or more, that excavation will probably require some permits. An operator should obtain such permits in a manner to allow the performance of coating surveys and any necessary repairs to the coating.
In the NPRM, PHMSA proposed to update appendix D but did not intend to introduce any new requirements. PHMSA agrees with certain commenters that the proposed revisions could have unintended consequences by creating potential tension with analogous cathodic protection evaluation criteria in NACE Standard Practice SP0169 and § 195.571 governing hazardous liquid lines (which section incorporates NACE Standard Practice SP0169 by reference). However, as PHMSA did not propose incorporation by reference of NACE Standard Practice SP0169 in appendix D, PHMSA is withdrawing the proposed changes to appendix D. PHMSA will continue to examine appropriate evaluation criteria for catholic protection of gas transmission pipelines and may pursue future rulemaking on
Currently, the gas transmission IM provisions do not explicitly address additional P&M measures for the threats of external and internal corrosion. For the same reasons that apply to the proposed changes for general corrosion control as discussed above, PHMSA proposed to address these gaps for HCAs. PHMSA determined that additional P&M measures are needed in § 192.935(f) and (g) to assure that public safety is enhanced in HCAs through additional protections from the time-dependent threats of internal and external corrosion. Specifically, PHMSA proposed to add § 192.935(f) and (g), which would require that operators enhance their corrosion control programs in HCAs to provide additional corrosion protections in addition to the proposed standards in subpart I. Under proposed § 192.935(f), operators would be required to enhance their internal corrosion management programs by performing mitigative actions if deleterious gas stream constituents are being transported and through performing semi-annual reviews of their programs.
Regarding the internal corrosion provisions discussed earlier in this document, § 192.477 prescribes requirements to monitor internal corrosion by coupon testing or other means if corrosive gas is being transported. However, the existing regulations do not prescribe that operators continually or periodically monitor the gas stream for the introduction of corrosive constituents through system changes, changing gas supply, abnormal conditions, or other changes. This could result in pipelines that are not monitored for internal corrosion because an operator's initial assessment did not identify the presence of corrosive gas. To provide additional protections for HCAs in addition to the standards proposed in subpart I, PHMSA proposed that § 192.935(f) would require operators use specific gas quality monitoring equipment for HCA segments, including but not limited to, a moisture analyzer, chromatograph, samplers for carbon dioxide, and samplers for hydrogen sulfide. The proposed provisions would also require operators sample at a certain frequency, use cleaning pigs to sample accumulated liquids and solids, and use corrosion inhibitors when corrosive constituents are present. PHMSA also proposed the maximum amounts of carbon dioxide, moisture content, and hydrogen sulfide that would require operator action.
Under proposed § 192.935(g), operators would also be required to enhance their external corrosion management programs, including controlling both alternating and direct electrical interference currents, confirming external corrosion control through indirect assessment, and controlling external corrosion through CP.
As described in the discussion on interference surveys above, interference currents can negate the effectiveness of CP systems. Section 192.473 prescribes general requirements to minimize the detrimental effects of interference currents. In the NPRM, PHMSA proposed to amend § 192.473 to require that an operator's corrosion control program include interference surveys to detect the presence of interference currents and require the operator take remedial actions within 6 months of completing the survey. In HCAs, PHMSA proposed additional prescriptive requirements in § 192.935(g) to afford extra protections for HCAs, including a maximum interval of 7 years for an operator to perform interference surveys; more specificity regarding the survey performance, including technical acceptance criteria; and a requirement that pipe-to-soil test stations be located at half-mile intervals within each HCA segment with at least one station in each HCA, if practicable.
Lastly, PHMSA proposed to make conforming edits to appendix E, which provides guidance for P&M measures for HCA segments subject to subpart O. PHMSA proposed to accommodate the proposed revised definition for “electrical survey” by replacing that term with “indirect assessment” to accommodate other techniques in addition to CIS.
NAPSR and the PST agreed with and supported the proposed changes to the P&M measures for addressing internal and external corrosion in HCAs and suggested strengthening the proposed provisions further.
While trade associations and individual operators supported certain aspects of the proposed provisions covering the P&M measures addressing external corrosion and internal corrosion in HCAs, these commenters objected to the specific requirements in § 192.935. Many of these commenters stated a preference for allowing operators the flexibility to implement corrosion control based on their own judgment of the severity of the threat. In general, many industry commenters stated that individual sections of the proposed provisions were too broad and prescriptive, and pipeline operators would incur greater costs without justified benefit. Further, they stated that the monitoring frequency of twice per year was too frequent. Some commenters recommended that PHMSA reference ASME standards for implementing P&M measures, and other commenters stated concern that some of the proposed provisions are not consistent with NACE standards.
Many commenters objected to several of the proposed aspects of internal corrosion control, such as the identification of threats, monitoring, and filtering, and these commenters stated that operators should have flexibility in implementing P&M measures. For example, INGAA opposed the proposed requirement in § 192.935(f) that requires operators to install continuous gas quality monitoring equipment at all points in which gas with potentially deleterious contaminants enters the pipeline. INGAA recommended that § 192.935(f) apply only to pipeline segments with a history of internal corrosion and stated that this would be consistent with the required risk analysis that operators perform to determine whether P&M measures are necessary. Similarly, Atmos Energy recommended that gas sources be monitored only at those sources suspected, in the judgment of the operator, of having deleterious gas stream constituents, and that such monitoring can be performed in real-time or periodically. INGAA stated that PHMSA should modify proposed § 192.935(g) to require that operators conduct periodic indirect inspections only where a pipeline segment has a known history of corrosion.
During the GPAC meeting on June 6, 2017, committee members representing the industry reiterated that § 192.935(f) and (g) were too broad and prescriptive and should not apply to every HCA pipeline segment indiscriminately. These members, echoing comments made by INGAA, stated that operators should use their risk assessments to be used to determine which specific P&M measures are needed in accordance with the current IM approach.
The committee also suggested that PHMSA should reference specific ASME standards for P&M measures and ensure they are consistent with NACE
Following the discussion, the committee voted 9–1 (with a representative from PST dissenting) that the proposed rule, regarding the provisions for P&M measures for internal and external corrosion, were technically feasible, reasonable, cost-effective, and practicable if PHMSA withdrew the specific provisions discussed in § 192.935(f) and (g) and appendix E, as the requirements would have been duplicative with subpart I.
PHMSA noted during the GPAC meeting that it was persuaded by commenters that the changes it is making to the general corrosion control requirements in subpart I in this final rule are sufficient and that the additional regulations proposed in § 192.935(f) and (g) and appendix E were duplicative. The proposed changes to subpart I that PHMSA is finalizing in this rulemaking apply to pipelines in both HCAs and non-HCAs, and they were similar to the P&M measures that PHMSA was proposing regarding corrosion control in HCAs specifically. Therefore, PHMSA believes that the changes to subpart I in this rule provide the safety that the proposed changes at § 192.935(f) and (g) intended to provide. The proposed changes to appendix E incorporated the proposed definition for “electrical survey” and did not contain further substantive changes. After considering those comments, and as recommended by the GPAC, PHMSA is withdrawing all the proposed changes to § 192.935(f) and (g) and appendix E.
Weather events and natural disasters that can cause river scour, soil subsidence or ground movement may subject pipelines to additional external loads, which could cause a pipeline to fail. These conditions can pose a threat to the integrity of pipeline facilities if those threats are not promptly identified and mitigated. While the existing regulations provide for design standards that consider the load that may be imposed by geological forces, weather events and natural disasters can quickly impact the safe operation of a pipeline and have severe consequences if not mitigated and remediated as quickly as possible.
In the NPRM, PHMSA proposed revising § 192.613 to require that an operator inspect all potentially affected pipeline facilities after an extreme weather event to help ensure that no conditions exist that could adversely affect the safe operation of that pipeline. The operator would be required to consider the nature of the event and the physical characteristics, operating conditions, location, and prior history of the affected pipeline in determining the appropriate method for performing the inspection required. The NPRM's proposed revisions to § 192.613 also provided that the initial inspection must occur within 72 hours after the cessation of the event, defined as the point in time when the affected area can be safely accessed by available personnel and equipment required to perform the inspection. If an operator finds an adverse condition, the NPRM' s proposed revisions to § 192.613 would require an operator to take appropriate remedial action to ensure the safe operation of a pipeline based on the information obtained because of performing the inspection.
The PST, NAPSR, and EnLink Midstream supported the proposed amendments to § 192.613, with many other stakeholders supporting the intent of the proposed provisions but requesting further clarification on some of the terms used within the proposal.
Some commenters expressed concern with the broad requirements of an “inspection” and requested PHMSA clarify what an inspection following an extreme weather event would entail. Additionally, these stakeholders stated that the proposed definition of an extreme weather event was vague and requested clarification. INGAA stated that operators are already required to have procedures to ensure a prompt and effective response to emergency conditions through § 192.615 and suggested that to avoid duplicative regulation, PHMSA should instead modify § 192.615(a)(3) to incorporate additional specificity on weather events that may trigger a response.
Many commenters objected to the proposed timeframe, stating that the 72-hour requirement listed in the rule could be problematic. Commenters stated that PHMSA should allow operators to determine when an impacted area can be safely accessed, and that pipeline operators are best positioned to evaluate the balance between the safety and the need for inspections to ensure continued safe operation of their systems. INGAA stated that the 72-hour requirement should either be replaced with a more general statement such as “as soon as practicable,” or that PHMSA should create a process to request an exception to the requirement. Louisiana Mid-Continent Oil and Gas Associations stated that extreme weather events vary significantly by region and commented that not all local geography and extreme weather events are the same. They further stated that the 72-hour deadline for inspection may be too prescriptive depending on the extreme weather event. They stated that because Louisiana is subjected to many unusual extraordinary events, such as spillway openings, high/low river flows, and rainwater flooding, PHMSA should clarify what “other events” means and how the cessation of an event is determined.
At the GPAC meeting of January 12, 2017, members noted concerns with the provisions as proposed but voted 12–0 that the provisions were technically feasible, reasonable, cost-effective, and practicable if PHMSA modified the proposed rule to clarify that the timing for this provision is to begin after the operator has made a reasonable determination that the area is safe, clarify in the preamble that operators are encouraged to consult with pipeline safety and public safety officials in order to make such determinations, delete the phrase “whichever is sooner” at the end of § 192.613(c)(2), and change the word “infrastructure” to “facilities.”
PHMSA agrees that an operator's ability to inspect a pipeline facility following an extreme weather event may vary greatly depending on the type of extreme weather event that has taken place and the specific location of the event. The NPRM's proposed revisions to § 192.613 would require operators to inspect its pipeline facilities after the cessation of an extreme weather event. Cessation of the event was defined as the point of time when the affected area could be safely accessed by the personnel and equipment, including availability of personnel and equipment, required to perform the inspection. However, in consideration of the comments received, PHMSA is persuaded that additional clarification is warranted and that 72 hours after the cessation of the event may not be enough time in all cases for operator personnel and equipment to assess and inspect a pipeline safely.
Therefore, as recommended by the GPAC, PHMSA has modified this final rule to require an operator perform an initial inspection 72 hours after the operator reasonably determines that the affected area can be safely accessed by personnel and equipment, and the necessary personnel and equipment required to perform such an inspection are available. PHMSA encourages operators to consult with pipeline and public safety officials, including the appropriate PHMSA regional office, when making these determinations. If an operator is unable to commence the inspection in the 72-hour timeframe due to the unavailability of personnel or equipment, the operator must notify the appropriate PHMSA Region Director as soon as practicable.
If an operator finds an adverse condition, the operator must take appropriate remedial action to ensure the safe operation of a pipeline based on the information obtained from the inspection. Such actions might include, but are not limited to:
• Reducing the operating pressure or shutting down the pipeline;
• Isolating pipelines in affected areas and performing “stand up” leak tests;
• Modifying, repairing, or replacing any damaged pipeline facilities;
• Preventing, mitigating, or eliminating any unsafe conditions in the pipeline rights-of-way;
• Performing additional patrols, depth of cover surveys and adding cover over the pipeline, ILI or hydrostatic tests, or other inspections to confirm the condition of the pipeline and identify any imminent threats to the pipeline;
• Implementing emergency response activities with Federal, State, or local personnel; and
• Notifying affected communities of the steps that can be taken to ensure public safety.
PHMSA would not expect operators to comply with these provisions for weather or other disruptive events when, considering the physical characteristics, operating conditions, location, and prior history of the affected system, the event would not be expected to impact the integrity of the pipeline. For example, extreme weather events would not include rain events that do not exceed the high-water banks of the rivers, streams or beaches in proximity to the pipeline; rain events that do not result in a landslide in the area of the pipeline; storms that do not produce winds at tropical storm or hurricane level velocities; or earthquakes that do not cause soil movement in the area of the pipeline.
PHMSA is also modifying § 192.613(c) introductory text and (c)(1) as the GPAC recommended, by removing the phrase “whichever is sooner” and replacing the term “infrastructure” with “facilities.” As discussed during the GPAC meeting, “pipeline facilities” is a defined term at § 192.3, and the use of that term will likely provide additional clarity.
The current regulations do not specify the quality and effectiveness of ICDA. NACE International submitted a petition for rulemaking on February 11, 2009, requesting that PHMSA address this issue. In the NPRM, PHMSA proposed amendments to §§ 192.923(b) and 192.927 to incorporate by reference NACE SP0206–2006 and further supplement the NACE standard to address issues observed by PHMSA.
For indirect inspections, PHMSA proposed to require that operators use pipeline-specific data, exclusively in performing an indirect inspection, and that the use of assumed pipeline or operational data would be prohibited. PHMSA also proposed operators be required to consider the accuracy, reliability, and uncertainty of data used to make calculations regarding the critical inclination angle of liquid holdup and the inclination profile of pipelines. Further, PHMSA proposed that operators be required to select locations for direct examination and establish the extent of pipe exposure needed, to explicitly account for these uncertainties and their cumulative effect on the precise location of predicted liquid dropout.
For detailed examinations as defined in NACE SP0206–2006, PHMSA proposed to require that operators identify a minimum of two locations for excavation within each covered segment associated with the ICDA Region and perform a detailed examination for internal corrosion at each location using ultrasonic thickness measurements, radiography, or other generally accepted measurement techniques. One required location would be the low point within the covered segment nearest to the beginning of the ICDA Region. The second required location would be near the end of the ICDA Region within the covered segment. If corrosion was found at any location, the operator would be required to evaluate the severity of the defect, expand the detailed examination program to determine all locations that have internal corrosion within the ICDA region, and expand the detailed examination program to evaluate the potential for internal corrosion in all pipeline segments (both covered and non-covered) with similar characteristics to the ICDA Region in the operator's pipeline system.
For post-assessment evaluation and monitoring, PHMSA proposed to require that operators evaluate the effectiveness of ICDA as an assessment method for addressing internal corrosion and determining whether a covered segment should be reassessed at more frequent intervals than those currently specified in the regulations at § 192.939. PHMSA also proposed to require that operators validate their flow modeling calculations by comparing locations of discovered internal corrosion with locations predicted by the model. Additionally, PHMSA proposed to require that operators continually monitor each ICDA Region that contains a covered segment where internal corrosion was identified and by periodically drawing off liquids at low points and chemically analyzing the liquids for the presence of corrosion products.
Finally, PHMSA proposed to require that operators include in their plans the criteria used in making key decisions in implementing each stage of the ICDA process and provisions that the analysis be carried out on the entire pipeline in which covered segments are present.
NAPSR expressed its agreement with, and support for, the proposed revisions to §§ 192.923(b) and 192.927. Multiple pipeline operators and industry trade associations commented that the proposed provisions should simply incorporate the NACE standard by reference, and should not exceed those established industry standards, be rigidly prescriptive, or otherwise be mandatory. PG&E, commenting on the incorporation of standards by reference, requested PHMSA replace the phrase “as required by” with “in accordance with” so that operators can meet the substantial requirement but have flexibility in the implementation of that requirement if the industry publishes new techniques to perform ICDA. NACE International expressed its belief that, as described in NACE SP0206–2006, ICDA is an acceptable standalone methodology for assessing pipeline integrity.
Atmos Energy commented that the proposed mandated monitoring for all ICDA regions would be potentially excessive and recommended that PHMSA delete the proposed language and restore the current language at
At the GPAC meeting on December 15, 2017, the GPAC committee voted, 13–0, to revise §§ 192.923(b)(2) and (3) and 192.927 according to the recommendations by PHMSA staff at the meeting, which included supplementing the NACE standard with additional requirements to address specific issues that could adversely affect ICDA results.
PHMSA believes that it is appropriate to address ICDA by incorporating by reference the NACE standard and supplementing it with additional requirements pertaining to indirect inspections (a step in the NACE standard's ICDA process to help in determining where direct assessments need to be made), detailed examinations, and post-assessments. For indirect inspections, PHMSA has implemented additional requirements regarding the data an operator must use and accounting for uncertainties in that data. Where an indirect inspection demonstrates that detailed examinations are needed, PHMSA is expanding the examinations that an operator must perform to evaluate for the potential for internal corrosion in all pipeline segments if corrosion is found in the ICDA region. Regarding post-assessments, PHMSA is requiring operators to evaluate the effectiveness of ICDA as an assessment method and determine whether a covered segment should be reassessed more frequently than the intervals specified at § 192.939. Additionally, PHMSA is requiring operators validate the flow modelling calculations they use in the ICDA process as well as continually monitor each ICDA region that contains a covered segment where internal corrosion has been identified.
When the first IM regulations were promulgated in the 2003 IM rule, there was no consensus industry standard for ICDA that could be adapted or incorporated into the regulations to promote better pipeline safety regarding internal corrosion. Incorporating by reference the NACE standard into the regulations would improve pipeline safety because the NACE standard (1) typically requires more direct examinations than the current regulatory requirements; (2) encompasses the entire pipeline segment and requires that all inputs and outputs be evaluated; and (3) is considered by many to be an equivalent or superior indirect inspection model compared to the Gas Technology Institute (GTI) model currently referenced in § 192.927. Its range of applicability with respect to operating pressure is greater than the GTI model, thus allowing the use of ICDA in pipelines with lower operating pressures and higher flow velocities.
The existing requirements in § 192.927 have one aspect that has proven problematic: the definition of regions and requirements for selection of direct examination locations in the regulations are tied to the covered segment. A “covered segment” is defined in § 192.903 as “a segment of gas transmission pipeline located in a high consequence area.” The terms “gas” and “transmission line” are defined in § 192.3. Therefore, covered segment boundaries are determined by population density and other consequence factors without regard to the orientation of the pipe and the presence of locations at which corrosive agents may be introduced or may collect and where internal corrosion would most likely be detected (
PHMSA believes requiring a notification requirement for operators is important so that PHMSA can review the specific proposal to use a standard to assess pipe segments that are explicitly excluded from the scope of the standard. PHMSA has also revised § 192.927(c) to clarify that an operator must conduct the ICDA process “in accordance with” the NACE standard to avoid the implication that all non-mandatory recommendations contained in the standard are required.
The current regulations do not specify a number of issues that affect the quality and effectiveness of SCCDA integrity assessments. Specifically, Appendix A3 of ASME/ANSI B31.8S, which is referenced in the regulations, provides some guidance for conducting SCCDA, but the guidance is limited to stress corrosion cracking (SCC) that occurs in high-pH environments. NACE International submitted a petition for rulemaking to PHMSA on February 11, 2009, requesting that PHMSA address this issue by incorporating by reference NACE SP0204–2008, which addresses near-neutral SCC in addition to high-pH SCC. Accordingly, in the NPRM, PHMSA proposed changes to §§ 192.923 and 192.929 to incorporate by reference NACE SP0204–2008 and supplement the NACE standard to address issues observed by PHMSA in the areas of data gathering and integration, indirect inspection, direct examinations, remediation and mitigation, and post-assessments.
PHMSA proposed to require an operator's SCCDA plan to evaluate the effects of a carbonate-bicarbonate environment; the effects of cyclic loading conditions on the susceptibility and propagation of SCC in both high-pH and near-neutral-pH environments; the effects of variations in applied CP, such as overprotection, CP loss for extended periods, and high negative potentials; the effects of coatings that shield CP when disbonded from the pipe; and other factors that affect the mechanistic properties associated with SCC.
For indirect inspections, PHMSA proposed to require an operator's plan include provisions for conducting at least two above-ground surveys using complementary measurement tools most appropriate for the pipeline segment based on the data gathered.
For direct examinations, PHMSA proposed to require an operator's procedures provide for conducting a minimum of three direct examinations within the SCC segment at locations determined to be the most likely for SCC to occur.
For post-assessments, PHMSA proposed to require that the operator's procedures include the development of a reassessment plan based on the
Multiple commenters supported the proposed changes to § 192.929 for SCCDA. NAPSR expressed its agreement with, and support of, these revisions. Spectra Energy Partners (SEP), which merged with Enbridge in 2017, provided comments in support of the proposed inclusion of explicit requirements for SCCDA. SEP expressed its belief that SCCDA is a diligent, practicable approach for assessments for SCC for cases where the pipeline has not previously experienced an in-service failure caused by SCC and provided specific edits to make the proposed requirements for SCCDA clearer and more practicable. A commenter recommended that the requirements for SCCDA specify that an operator is required to conduct assessments in areas that are most likely to be subject to SCC regardless of HCA designation.
Several other commenters questioned or opposed the proposed changes to § 192.929. Several commenters, including API, expressed their support of NACE standards SP0204–2008 for SCCDA but recommended that PHMSA not exceed those established industry standards and should not make the recommendations within those standards mandatory. NACE International stated it was unaware of any conclusive data regarding overprotection or high-negative potentials as a factor in SCC of pipelines, which is what the NPRM's proposed revisions to § 192.929 suggested. Additionally, NACE International commented that PHMSA went beyond the practices stated in NACE Standard SP0204–2008 by proposing to require a minimum of two above-ground surveys and three direct examinations.
INGAA proposed to clarify the way in which SCCDA can be used as an IM method, asserting that SCCDA is a valid method to assess SCC threats in gas pipeline segments that are susceptible to, but have no history of, SCC.
Other commenters provided specific technical comments regarding these proposed provisions. TransCanada asserted that applying the NACE “significant SCC” definition as the threshold for immediate repair is both overly conservative and overly complicated, and they suggested that PHMSA instead adopt the threshold of “noteworthy” as defined in ASME STP–PT–011.
Enable Midstream Partners (EMP) agreed that operators should consider the specific factors PHMSA proposed in § 192.929(b)(1) and (4) as part of the data gathering and integration and post-assessment remediation and mitigation process for SCCDA. However, EMP asserted that PHMSA should clarify these sections by including a referenced standard that provides guidance to operators on how they should consider these specific factors. Another commenter stated that PHMSA should include a reference to ASME/ANSI B31.8S, Appendix A3, for susceptibility criteria.
Commenters also suggested that PHMSA allow operators to use sound engineering judgments when calculating the remaining strength of the pipeline segment if the segment is subject to the pipeline material properties and attributes verification requirements of § 192.607 and those requirements have not yet been met.
At the GPAC meeting on December 15, 2017, the committee recommended PHMSA revise the approach proposed in the NPRM by making the changes to these provisions that were recommended by PHMSA staff during the meeting, which were to replace the spike hydrostatic pressure test requirements with a reference to § 192.506(e) to eliminate redundancy; address the gap pertaining to failure pressure calculations when data is not available; codify, as applicable, the expectation that the recommendations within the NACE standard are not mandatory; communicate additional guidance as needed during rule implementation; and consider how to structure the rule to apply results from non-HCAs to HCAs.
When the first IM rule was promulgated in 2003, there was no NACE standard for SCCDA. Additionally, the requirements pertaining to SCC in ASME/ANSI B31.8S, Appendix B, only applied to pipe susceptible to high pH SCC (
For data gathering and integration, PHMSA is requiring that operators gather and evaluate data related to SCC at all sites an operator excavates while conducting its pipeline operations where the criteria in NACE SP0204–2008 indicate the potential for SCC. Per this final rule, operators must additionally analyze the effects of a carbonate-bicarbonate environment, cyclic loading conditions, variations in applied CP, the effects of coatings that shield CP when disbonded from the pipe, and other factors that would affect the mechanics of SCC. For indirect inspections, PHMSA is requiring operators conduct at least two above-ground surveys using the measurement tools most appropriate for the pipeline segment based on an evaluation of the collected data. An operator's plan for direct examination must include a minimum of three direct examinations within the SCC segment at the locations where SCC would be most likely to occur. If an operator finds any indication of SCC in a segment, an operator must perform specific mitigation measures. Further, in this final rule, an operator must develop procedures for post-assessments based on the susceptibility of the pipeline segment to SCC as well as the mechanical behavior of identified cracking. Regarding EMP's comment stating that PHMSA should provide guidance to operators on how they should consider specific factors as a part of the data gathering and integration process by referring to a standard incorporated by reference within PHMSA regulations, as well as the comment recommending that PHMSA incorporate a reference to ASME/ANSI B31.8S, Appendix A3, for susceptibility criteria, PHMSA declines to incorporate by reference such standards because it could limit operators from considering all of the factors that they should.
PHMSA also agrees with commenters that referring to § 192.506,
PHMSA identified several improvements to the IM repair criteria based on its experience gained since the IM rule became effective in 2004; ongoing research and development, including developments in ASME/ANSI B31.8S; and investigations into recent incidents. In the NPRM, PHMSA
In the NPRM, PHMSA proposed to add more immediate repair conditions and more 1-year repair conditions for HCA pipeline segments in § 192.933. The specific anomalies and repair schedules for cracks, dents, and corrosion metal loss are discussed in their respective sections below. In certain cases, like for SCC and selective seam weld corrosion anomalies that were new to the repair criteria, PHMSA proposed to require that operators repair “any indication of ” such anomalies. In other cases, such as for dents, PHMSA did not make significant changes to the existing repair criteria at § 192.933, which require the repair of “any indication of ” metal loss, cracking, or a stress riser.
Public advocacy groups, including Pipeline Safety Coalition, the PST, and Clean Water for North Carolina, supported the proposed provisions that would strengthen the existing repair criteria at §§ 192.713 (non-HCAs) and 192.933 (HCAs). Additionally, NAPSR and the NTSB supported PHMSA's proposed repair criteria revisions.
There was common agreement from pipeline operators and the industry trade associations that the processes for HCA repairs and non-HCA repairs should be standardized. However, the trade associations and pipeline operators generally believed that the proposed provisions at §§ 192.713 and 192.933 were too prescriptive and would impede operators from performing repairs based on risks. They further stated that the proposed provisions do not take into consideration other factors that operators currently consider when optimizing plans to remediate anomalies, such as historical data, geography, and congestion of the right-of-way.
Some of the commenters representing the industry recommended PHMSA eliminate all references to the words “any indication of ” within the proposed revisions to §§ 192.713 and 192.933 when applied to anomalies needing repair so that it is the confirmed presence of a condition that requires a repair instead. These commenters stated that requiring operators to repair an “indication of ” certain anomalies would cause needless repairs and misallocate resources. Spectra Energy stated that PHMSA's annual report data indicates that only one repair is required for every three anomaly investigations, which demonstrates that the existing anomaly response criteria operators have implemented are appropriately conservative.
Based on PHMSA's annual report data, the number of immediate repairs have remained relatively constant even though the baseline assessment period has concluded. PHMSA understands that this is likely the result of operators deferring repair of non-immediate conditions until the defect progresses into an immediate repair condition, rather than immediate conditions arising spontaneously. PHMSA understands that most defects that become immediate repair conditions are observable by ILI equipment well in advance of progression to an immediate repair condition. The repair criteria in this final rule are intended to assure that anomalies are repaired before they become an immediate condition and are at or near failure. In this final rule, PHMSA has included reference to ASME/ANSI B31.8S within each of §§ 192.714 and 192.933 to take into consideration other factors that operators currently consider when establishing remediation plans.
In this final rule, PHMSA has removed the proposed repair criteria under §§ 192.714 (non-HCAs) and 192.933 (HCAs) for SCC and selective seam weld corrosion, which were new repair criteria that contained the phrase “any indication of.” PHMSA combined SCC and selective seam weld corrosion repair criteria into a more general cracking repair criteria because each of these phenomena is, or results in, cracking. PHMSA included remediation measures for SCC under the requirements at § 192.929, which are the requirements for using direct assessment for SCC but did not require the remediation of “any indication of ” SCC. PHMSA was not proposing to change any of the existing repair criteria that referenced “any indication of,” such as that for dents with any indication of metal loss, cracking, or a stress riser. Those repair criteria remain unchanged in this final rule.
In the NPRM, PHMSA proposed at § 192.713 repair criteria for non-HCA areas to assure that operators promptly repair injurious defects that are discovered outside of HCAs. These proposed repair criteria for non-HCAs were based on, and were similar, to, the repair criteria (regarding structure, anomaly types, and the repair timeframes) for HCA pipeline segments proposed at § 192.933.
For those anomalies for which a 1-year response is required on HCA pipeline segments, PHMSA proposed that a 2-year response would be required in non-HCA pipeline segments. This proposal would require operators to remediate anomalous conditions on gas transmission pipeline segments promptly and commensurate with the risk they present, while allowing operators to allocate their resources to those anomalies in HCAs that present a higher risk.
The specific anomalies and repair schedules for cracks, dents, and corrosion metal loss are discussed in their respective sections below.
Citizen groups, including Pipeline Safety Coalition, the PST, and Clean Water for North Carolina, supported the proposed provisions that would strengthen the repair criteria for HCAs and non-HCAs. Additionally, NAPSR and the NTSB supported PHMSA's revisions to the repair criteria.
Generally, the industry trade associations and pipeline operators supported PHMSA's intention of establishing repair criteria outside of HCAs but disagreed with some of the specific provisions. There was common agreement, however, that the processes for HCA repairs and non-HCA repairs should be standardized.
The trade associations and pipeline operators generally believed that the proposed provisions were too prescriptive and would impede operators from performing repairs based on risks. They further stated that the proposed provisions do not take into consideration other factors that operators currently consider when optimizing plans to remediate anomalies, such as historical data, geography, and congestion of the right-of-way.
AGA recommended that PHMSA create a new subpart to address assessment requirements outside of
Several industry commenters also stated that the rulemaking did not demonstrate that the safety benefit of strengthened repair criteria outweighs the costs. Multiple operators stated that the proposed repair provisions in § 192.713 would increase the number of digs operators would need to perform and asserted that the increased number of digs may not improve pipeline safety.
Certain commenters suggested that it would not be appropriate for PHMSA to require operators to repair immediate conditions in non-HCAs before repairing immediate conditions in HCAs, and that PHMSA should require operators to prioritize those conditions discovered within HCAs if operators discover multiple immediate conditions in HCAs and non-HCAs simultaneously. More specifically, AGA requested that the rule explicitly prioritize immediate conditions within HCAs over immediate conditions in other locations when conditions are discovered simultaneously and recommended that PHMSA adopt different terminology for “immediate repair conditions” inside and outside HCAs. Similarly, other industry trade organizations expressed concern that the proposed provisions for non-HCAs would complicate the allocation of resources to HCAs on a higher-priority basis when confronted with the large number of new, non-HCA pipelines needing assessments.
Commenters also requested PHMSA make the sections pertaining to non-HCA repairs and HCA repairs consistent regarding pressure reductions. Commenters representing the industry noted that, as proposed, certain notification requirements for long-term pressure reductions or for those operators unable to respond within the given timeframe were different depending on whether the pipeline was in an HCA or a non-HCA. These commenters suggested that those notification procedures be made consistent, wherever possible, between the HCA and non-HCA repair criteria. Multiple trade associations and pipeline industry entities also expressed concerns that the proposed provisions requiring “an operator to reduce the operating pressure of its affected pipeline until it can remediate the immediate repair conditions” are unnecessarily conservative. INGAA asserted that the proposed pressure reduction requirements for non-HCAs are more stringent than the pressure reductions requirements for HCAs, and several commenters offered alternative methods for determining appropriate operating pressure reductions. Specifically, these commenters requested PHMSA allow operators to take a pressure reduction other than 80 percent if they documented the analysis performed and assumptions used. These commenters claimed that, as proposed in the NPRM, operators were allowed to use a different pressure reduction in HCAs if an analysis supported it but were not allowed to do so in non-HCAs.
During its meeting in late March 2018, the GPAC recommended PHMSA clarify that pressure reductions would be required for immediate conditions in non-HCAs and in cases where repair schedules could not be met. As a part of this recommendation, the GPAC also recommended that operators notify PHMSA when they could not meet the schedule for anomaly evaluation and remediation or when a temporary pressure reduction exceeds 365 days. The GPAC also recommended that PHMSA should allow operators to calculate pressure reductions (following the discovery of repairable conditions) by using either class location factors, or 80 percent of the operating pressure, or 1.1 times the predicted failure pressure. The GPAC also recommended PHMSA require that operators document and keep records, for 5 years, of the calculations and decisions used to determine such pressure reductions and the implementation of the actual reduced operating pressure. Further, the GPAC recommended PHMSA avoid duplicating language regarding the need for repairs and pressure reductions found in other sections of the regulations.
In the 2019 Gas Transmission Rule, PHMSA promulgated new requirements for operators to conduct integrity assessments in areas outside of HCAs, including all Class 3 and Class 4 locations and the newly defined “moderate consequence areas” (MCA) that are piggable. This new requirement was in response to the congressional mandate in the 2011 Pipeline Safety Act (Pub. L. 112–90) to expand IM or elements of IM beyond HCAs. The non-HCA repair criteria PHMSA is issuing in this final rule are the companion requirements to those assessments and are necessary to extend the assessment and repair program elements of IM effectively to areas beyond HCAs. Although PHMSA agrees that this requirement will likely result in additional repairs, PHMSA believes it is necessary and important to assure that injurious defects are remediated before they lead to loss of pipeline integrity.
Commenters requested that the non-HCA repair criteria be split out from the general non-IM repair provisions that previously existed in the regulations. PHMSA determined that the non-HCA repair criteria would be clearer and easier to comply with if they were in a distinct section, and PHMSA has created a new § 192.714 with all of the non-HCA repair criteria.
To the comments that suggested that a different schedule be created for immediate conditions within HCAs and non-HCAs, PHMSA believes that the existing approach used in subpart O for HCAs is better because the identification of anomalies based on ILI results is an actionable indication that there might be an injurious defect in the pipeline. Establishing repair criteria based on operators discovering these actionable anomalies assures that the anomaly is investigated promptly and repaired, if necessary. PHMSA believes it is prudent for an operator to perform any necessary repairs once the operator has excavated the pipe and exposed the anomaly for field investigation, instead of deferring the repairs. Although PHMSA agrees that defects in HCAs, if they were to fail, could result in higher consequences, PHMSA reminds readers that ASME/ANSI B31.8S, section 7.2, defines an immediate condition as an “indication show[ing] that [a] defect is at failure point.” PHMSA believes that any indication of a pipe that is at the point of failure needs to be addressed immediately, and as such, for both HCAs and non-HCAs, operators must reduce pressure and immediately remediate the anomaly.
PHMSA agrees with several commenters and the GPAC recommendations for consistently addressing pressure reductions for repairs for both HCA and non-HCA pipeline segments. PHMSA believes that pressure reductions are needed for immediate conditions and when repair schedules cannot be met and has incorporated pressure reductions for non-HCA pipelines that are like the existing requirements for HCAs in subpart O, which include the operator notifying PHMSA. PHMSA also agrees that the amount of the pressure reduction should be established to be 80 percent of the operating pressure at the time of discovery of the defect, or the predicted failure pressure divided by 1.1, or the predicted failure pressure times the design factor for the class location in which the affected pipeline is located, and that records for such pressure reductions must be kept for a minimum of 5 years. PHMSA
PHMSA also notes that AGA suggested creating a new subpart for non-HCA assessments and repairs. Although PHMSA has not created a new subpart, PHMSA believes it has accomplished the same purpose by putting the new non-HCA assessment and repair requirements in separate, distinct sections.
In the NPRM, PHMSA proposed to add criteria to address cracking and crack-like defects, including SCC, because the existing regulations have no explicit repair criteria for those types of critical defects. The cracking criteria would apply to both HCAs and non-HCAs, but they would require repair at different size thresholds and at different timeframes depending on the anomaly location.
Following the Enbridge incident near Marshall, MI, the NTSB recommended that PHMSA revise the hazardous liquid regulations at § 195.452 to state clearly: (1) when an engineering assessment of crack defects, including environmentally assisted cracks, must be performed; (2) the acceptable methods for performing these engineering assessments, including the assessment of cracks coinciding with corrosion with a safety factor that considers the uncertainties associated with sizing of crack defects; (3) criteria for determining when a probable crack defect in a pipeline segment must be excavated and time limits for completing those excavations; (4) pressure restriction limits for crack defects that are not excavated by the required date; and (5) acceptable methods for determining crack growth for any cracks allowed to remain in the pipe, including growth caused by fatigue, corrosion fatigue, or SCC as applicable.
Therefore, in the NPRM, PHMSA proposed to allow operators to use an engineering critical assessment (ECA) to evaluate indications of SCC. If the SCC was “significant,” it would be categorized as an “immediate” repair condition. If the SCC was not “significant,” it would be categorized as a “1-year” condition. Further, PHMSA proposed to adopt the definition of significant SCC from the consensus industry standard NACE SP0204–2008. PHMSA also proposed that an operator could not use an ECA to justify not remediating any known indications of SCC.
The current regulations also do not have repair criteria for seam cracks or crack-like flaws. Current regulations also fail to address corrosion affecting a longitudinal seam and selective seam weld corrosion, which are time-sensitive integrity threats that behave like cracks and are categorized as crack-like defects. In the NPRM, PHMSA proposed to address these gaps by including repair criteria for cracks and crack-like flaws in § 192.933 and proposed similar criteria in § 192.713.
INGAA, API, and Piedmont strongly opposed the proposed provisions in § 192.713(d)(1)(v), that stated “any indication of significant SCC” constitutes an immediate repair condition. Commenters requested that PHMSA determine the repair condition of cracks and crack-like defects according to factors that capture the severity of the defect, such as predicted failure pressures or maximum depth. Many commenters believed that PHMSA's proposed criteria were too conservative and suggested the repair criteria be for anomalies with a crack depth of greater than 70 percent of the pipe wall thickness or with a predicted failure pressure of less than 1.1 times MAOP. Other commenters suggested PHMSA delete the definitions of specific significant crack defects and use the alternative cracking criterion proposed by PHMSA at the GPAC meeting on March 2, 2018.
INGAA recommended making the repair criteria for cracking consistent with the repair criteria for metal loss and suggested that PHMSA consider anomalies with a crack depth of 80 percent wall thickness as immediate conditions for this reason. INGAA also recommended that PHMSA adopt a failure pressure ratio approach for cracking.
Certain commenters noted that the classification of all cracks or crack-like defects as 2-year repair conditions was overly conservative and suggested PHMSA relax that requirement. For example, some commenters suggested requiring repairs at 50 percent crack depth or a predicted failure pressure of less than 1.25 times MAOP.
At the GPAC meeting, for the proposed repair criteria for cracks, members representing the industry stated PHMSA's criteria for the immediate repair of certain crack defects were too conservative and suggested establishing an immediate repair threshold for cracks up to 70 percent of wall thickness or those with a predicted failure pressure of less than 1.1 times MAOP rather than those cracks with a predicted failure pressure of less than 1.25 times MAOP. Members representing the public noted that public safety would be better served by the threshold for immediate crack repairs being more conservative but questioned whether the more stringent threshold would be practical.
Similarly, members representing the industry suggested that PHMSA's proposed criteria for 1-year and 2-year scheduled conditions were too conservative as well and suggested setting the relevant criteria as those cracks with a depth of 50 percent wall thickness or those cracks with a predicted failure pressure of less than 1.25 times MAOP. Members representing the industry also suggested that, in addition to relaxing the criteria for immediate cracks, PHMSA should also add language requiring operators to consider tool tolerance and other factors when examining crack growth rates. Further, members representing the industry suggested that PHMSA base the repair criteria on design conditions or design factors rather than class location factors. Committee members also suggested that PHMSA cross-reference specific regulatory language rather than repeat the text in full in other sections of the code.
Following the discussion, the committee voted 12–0 that, as published in the
In this final rule, PHMSA did not adopt the proposed definitions of “significant seam cracking” and “significant stress corrosion cracking.” With the revisions to the cracking repair criteria, these definitions weren't necessary. Similarly, with the deletion of the proposed repair criteria using those specific definitions, the recommendation for deleting the phrase “any indication of” from those criteria, became moot. Further, PHMSA's revisions to the cracking repair criteria also made the recommendation for PHMSA to combine the proposed SCC criteria and the seam cracking criteria moot.
PHMSA believes that the repair criteria it proposed in the NPRM for cracks are consistent with research findings and provides an adequate safety margin while accounting for the severity of the defects through the analysis of the predicted failure pressure.
While the GPAC did not have an explicit recommendation for scheduled (
For immediate conditions, the GPAC asked PHMSA to consider if a less conservative repair criterion of 1.1 times MAOP (after tool tolerance had been applied) would be appropriate. PHMSA considered this suggestion but notes that, after allowing for pressure excursions above MAOP due to over pressure protection device settings, the actual safety margin of such an approach would be between 0 and 6 percent. PHMSA has determined that this safety margin for immediate crack conditions is inadequate and, for this final rule, has retained the requirement that operators must immediately repair crack anomalies with a predicted failure pressure that is less than 1.25 times MAOP.
PHMSA took technical guidance information from several sources into account regarding significant SCC and significant seam weld corrosion when creating the repair criteria for these anomalies, including ASME ST–PT–011 (“Integrity Management of Stress Corrosion Cracking in Gas Pipeline High Consequence Areas”).
ASME ST–PT–011 states that stress corrosion cracks are “Noteworthy” if the maximum crack depth is greater than 10 percent of the wall thickness and if the maximum interacting crack length is more than the critical length of a 50 percent through-wall crack at a stress level of 110 percent SMYS.
Category 1: Predicted Failure Pressure (PFP) is above 110 percent SMYS (note that 110 percent SMYS is used to delineate Category 1 cracks because it corresponds to the pressure most commonly prescribed for hydrostatic testing).
Category 2: PFP is above 125 percent MAOP
Category 3: PFP is above 110 percent MAOP and below 125 percent MAOP.
Category 4: PFP is below 110 percent MAOP.
Category Zero: A crack below the threshold for Noteworthy cracks. These typically fall into two groups: (1) Those that are shallow (
In this final rule, operators can use an engineering analysis on cracks in Categories 1 through 2 as described above. However, any Category 3 or 4 cracking defect below 125 percent MAOP would require immediate remediation. Category 3 cracks would have a 10 percent or greater safety factor, which is similar to how PHMSA currently treats corrosion anomalies at § 192.933. PHMSA provides more conservatism in the cracking criteria because there is more uncertainty with the accuracy of current ILI technology in its ability to measure crack length and depth, as well operational factors.
These severity categories allow operators to estimate the minimum remaining life at operating pressure for each category. The following estimates from ASME ST–PT–011 are based on the time it would take for the crack depth to increase to a failure-causing depth at the operating pressure. For pipelines operating at 72 percent SMYS, the following minimum operational lives for each category of cracks are as follows:
Category Zero: Failure life exceeds 15 years (for short cracks) to 25 years (for shallow cracks).
Category 1: Failure life exceeds 10 years.
Category 2: Failure life exceeds 5 years.
Category 3: Failure life exceeds 2 years.
Category 4: Failure may be imminent.
ASME ST–PT–011 further states that mitigating a pipeline segment with SCC should be commensurate with the severity of the discovered crack, which would reflect the PFP and the estimated life at the operating pressure. For example, Category Zero cracks may warrant no more than ongoing SCC condition monitoring and reassessment after a period of 7 years. Cracks may be best assessed by direct assessment, hydrostatic testing, or ILI. The most severe cases would require an immediate pressure reduction, repair (if the location is known), and hydrostatic testing or ILI, followed by replacing the pipe or installing an appropriate sleeve over the crack or known cracking areas.
In the NPRM, PHMSA proposed that dents in non-HCA segments with any indication of metal loss, cracking, or a stress riser would be considered “immediate” repair conditions. Additionally, PHMSA proposed that dents meeting the “1-year” repair conditions under § 192.933 would be required to be repaired in non-HCAs within 2 years.
Multiple commenters, including the industry trade associations and operators, disagreed that all dents with metal loss should be considered immediate repair conditions. These commenters requested that PHMSA's final rule address different kinds of dents separately. Many pipeline operators stated that dents with metal loss from “scratches, gouges, and grooves” are appropriate as immediate repair conditions, while dents caused by corrosion are lower risk and should be conditions scheduled for later repair. Several organizations cited API Publication 1156
With further regard to the repair criteria for dents, commenters representing the industry believed PHMSA should allow operators to use an ECA to evaluate dents as an alternative to following the prescribed repair criteria. Some of this discussion focused on whether PHMSA should include a finite element analysis (FEA)
At the GPAC meeting on March 26, 2018, the committee recommended changes to several of the specific repair criteria for cracks, corrosion metal loss, and dents. Specific to dents, the committee recommended that PHMSA allow use of an ECA to evaluate certain dent-related anomalies and incorporate the ECA into the repair criteria.
Following the discussion, the committee voted 12–0 that, as published in the
PHMSA believes that the repair criteria it proposed in the NPRM for dents provide an adequate safety margin and believes the criteria for dents that were suggested by some of the commenters would not provide adequate safety margin. PHMSA based this judgment on R&D programs that have been sponsored by PHMSA and the Pipeline Research Council International, and on elements of dent repair criteria that are contained within API RP 1183.
PHMSA agrees with the GPAC recommendation for allowing an ECA method to evaluate dent anomalies and has revised the dent repair criteria for immediate, scheduled, and monitored conditions, as recommended by GPAC, to do so. PHMSA believes that the development of high-resolution deformation ILI tools has advanced enough to justify allowing operators to use an ECA method to evaluate dent anomalies and believes that it would be consistent with public safety while providing operators additional flexibility. While this rulemaking was under development, API published API RP 1183, which provides guidance for assessing and managing dents that are present in pipeline systems as a result of contact by rocks, machinery, or other forces. The RP presents guidance for developing a dent assessment and management program by (1) providing suitable methods for inspecting and characterizing the condition of the pipeline with respect to dents; (2) establishing data screening processes to evaluate dents relative to the extent and degree of deformation and operational severity; (3) providing response criteria for dents based on the dent shape and profile as determined by ILI; (4) applying engineering assessment methods to evaluate the fitness-for-service of dents, including the reassessment interval; (5) presenting remediation and repair options to address dents; and (6) developing preventive and mitigative measures for dents in lieu of, or in addition to,
PHMSA agrees with commenters that the criteria based on gouges and grooves would be duplicative with other criteria being proposed in the NPRM, namely the criteria related to metal loss anomalies. Accordingly, PHMSA has removed the criteria related to gouges and grooves from this final rule.
In the 2019 Gas Transmission Rule, PHMSA finalized an ECA method for operators to use as a part of the pipeline material property and attribute verification under § 192.607 and the MAOP reconfirmation requirements of § 192.624. A key aspect of that ECA method is the detailed analysis of the remaining strength of pipe with known or assumed defects. The 2019 Gas Transmission Rule created a new section, § 192.712, to address the techniques and procedures an operator could use to analyze the predicted failure pressures for pipe with corrosion metal loss and cracks or crack-like defects.
The required remediation of several types of corrosion defects that are incorporated in the hazardous liquid regulations in part 195 are currently omitted from part 192. The current gas transmission IM regulations allow operators to use ASME/ANSI B31.8S, Figure 4, for guiding repair decisions not specified in § 192.933(d), which can allow operators significant discretion in assessing and remediating pipe with corrosion or metal loss defects. PHMSA has found a wide variation in operators' interpretation of how to meet the requirements of the regulations in assessing, evaluating, and remediating corrosion and metal loss defects.
To address these gaps, and to harmonize part 192 with part 195, PHMSA proposed to amend § 192.933 to designate as immediate repair conditions those anomalies where metal loss is greater than 80 percent of nominal wall thickness and for indications of metal loss affecting certain legacy pipe with longitudinal seams.
To address gaps related to non-immediate conditions, the NPRM proposed that operators must repair the following within 1 year: (1) anomalies where a calculation of the remaining strength of the pipe shows a predicted failure pressure ratio at the location of the anomaly less than or equal to 1.25 times the MAOP for Class 1 locations, 1.39 times the MAOP for Class 2 locations, 1.67 times the MAOP for Class 3 locations, and 2.00 times the MAOP for Class 4 locations (comparable to the alternative design factor specified in § 192.620(a)); (2) areas of general corrosion with a predicted metal loss greater than 50 percent of nominal wall thickness; (3) anomalies with predicted metal loss greater than 50 percent of nominal wall thickness that are located at crossings of another pipeline, are in areas with widespread circumferential corrosion, or are in areas that could affect a girth weld; and (4) anomalies with metal loss due to gouges or grooves
A commenter noted that PHMSA should recognize that gouges and scrapes are metal loss defects that can be smoothed by grinding to eliminate stress concentrations.
Multiple commenters also provided input on the proposed provisions that determine repair criteria for metal loss affecting certain pipe with longitudinal seams. INGAA, AGA, and a pipeline industry entity generally supported a classification of “immediate” for anomalies with “an indication of metal loss affecting a detected longitudinal seam, if that seam was formed by direct current or low frequency or high frequency electric resistance welding or by electric flash welding.” However, PG&E requested that PHMSA not classify metal loss affecting a detected longitudinal seam as an immediate repair condition if that seam was formed by high-frequency electric resistance welding, as that pipe is considered ductile. National Fuel requested that PHMSA categorize longitudinal seam metal loss based on a minimum metal-loss threshold rather than “an indication.” Certain commenters requested PHMSA allow operators to perform a fitness-for-service evaluation or ECA on selective seam weld corrosion.
Kern River suggested PHMSA should consider applicable manufacturing and tool detection tolerances in the establishment of repair criteria that require response to “any indication of metal loss.”
Several commenters, including AGA, Pauite, and DTE, did not support the proposed inclusion of “any indication of significant seam weld corrosion” in § 192.713(d)(1)(vi). INGAA and AGA asserted that seam weld corrosion can only be conclusively determined by an in-field examination even though ILI tools are often employed to identify possible seam weld corrosion areas.
INGAA requested that gouge and groove metal loss anomalies be deleted from the 1-year and 2-year response conditions. Other commenters noted that current ILI tools do not have the capability of differentiating 12.5 percent gouge or groove metal loss anomalies from 12.5 percent external corrosion metal loss anomalies and suggested PHMSA delete this proposed requirement. These commenters argued that, given current ILI technology and per this proposal, operators would be required to investigate all metal loss indications greater than 12.5 percent to determine if the metal loss was a gouge or groove. Several trade associations and pipeline industry entities requested that operators be allowed to perform excavations to validate ILI results before classifying a segment as a high-priority repair.
Several pipeline industry commenters disagreed with the proposed repair criteria and repair methods that differed from industry standard ASME/ANSI B31.8S. For example, AGA stated that they opposed the inclusion of different repair criteria for different class locations because this contradicts ASME/ANSI B31.8S. API noted that PHMSA's proposal contradicted the ASME/ANSI standard by including depth-based criteria and also stated that PHMSA should not include the depth-
Some commenters thought that the new proposed criteria for corrosion anomalies made the existing corrosion repair requirements at § 192.485(c) duplicative and requested PHMSA delete the existing corrosion repair requirements for clarity. Other commenters noted that PHMSA's proposed requirement for corrosion greater than 50 percent of wall thickness was redundant to other proposed corrosion metal loss defects and suggested this specific item should be deleted. Similarly, commenters suggested that the criteria for predicted metal loss greater than 50 percent of nominal wall located at the crossing of another pipeline, areas with widespread circumferential corrosion, or areas that could affect a girth weld were both too conservative and duplicative of other corrosion repair criteria.
At the GPAC meeting on March 26, 2018, regarding the general provisions and applicability of the corrosion metal loss repair criteria, commenters representing the industry noted that for 1-year and 2-year scheduled conditions, the use of class location safety factors would be burdensome, as it would require more frequent repairs for pipelines in Class 2, Class 3, or Class 4 locations than contemplated by consensus industry standard ASME/ANSI B31.8S section 7, figure 4.
The committee also discussed specific requirements related to the repair of corrosion anomalies. Echoing many of the public comments on the topic, members representing the industry believed that the newly proposed corrosion repair requirements were either overly conservative or duplicative compared to existing repair requirements in the corrosion control subpart. These committee members suggested the new requirements should be deleted or otherwise changed to be less conservative. Additionally, these members noted that the proposed criteria for anomalies where corrosion is greater than 50 percent of wall thickness would be redundant with other repair criteria for evaluating corrosion metal loss defects using accepted analysis techniques, such as ASME B31G and remaining strength of corroded pipe (RSTRENG).
The committee also suggested that PHMSA evaluate predicted failure pressure ratings and thresholds for remediation schedules of anomalies at pipeline crossings with widespread circumferential corrosion or with corrosion that can affect a girth weld.
Following the discussion, the committee voted 11–0 that, as published in the
The committee then voted 8–3 (with each of two members representing State regulators and one member representing the public dissenting) that, as published in the
For corrosion metal loss anomalies that meet the “scheduled” criteria (
When developing the repair criteria in the NPRM, PHMSA evaluated grounding the predicted failure pressure for those criteria in one or more of the following three factors: (1) the test pressure of a pipeline, (2) the design factor of a pipeline, and (3) the HCA repair criteria. Because PHMSA sought to improve upon existing HCA repair criteria, PHMSA decided against using that factor as the basis for calculating predicted failure pressures and proposed using test pressure or design factor of a pipeline instead. PHMSA based its proposed threshold for Class 1 pipelines (less than or equal to 1.25 times MAOP predicted failure pressure) on the maximum test pressure in § 192.619 for Class 1 pipelines (1.25 times MAOP). For the repair thresholds for Class 2, Class 3, and Class 4 pipelines, PHMSA calculated predicted failure pressures using the reciprocals of the design factors listed at § 192.111 for the immediately preceding class location rating. This approach ensured an adequate margin to failure even if the pipeline were to experience a one-class bump (pursuant to § 192.611) from changes in population density of the surrounding area. The resulting predicted failure pressure thresholds were less than or equal to 1.39 times MAOP (reciprocal of the 0.72 Class 1 design factor) for pipelines in a Class 2 location, less than or equal to 1.67 times MAOP for pipelines in Class 3 locations, and less than or equal to 2.00 times MAOP for pipelines in Class 4 locations.
PHMSA believes the repair criteria for corrosion metal loss that were suggested by some of the commenters would not provide adequate safety margin compared to what PHMSA proposed in the NPRM. This was discussed at length by the GPAC, who recommended repair criteria that, in some cases, were less conservative than what PHMSA proposed in the NPRM.
In this final rule, PHMSA adopted the GPAC's recommendation to incorporate ASME/ANSI B31.8S section 7, figure 4, into the repair criteria by requiring operators to use it in Class 1 locations for metal loss anomalies with a
However, PHMSA did not accept the GPAC's recommendation for Class 2 locations. The number of immediate repair conditions being discovered during reassessments in Class 2 locations continues at approximately the same rate as they were discovered during the baseline assessment phase of the IM rule promulgated in 2004, according to PHMSA annual report data. PHMSA attributes this to defects that are not repaired and allowed to grow to a size that are at or near failure (
For Class 3 and Class 4 locations, PHMSA considered predicted failure pressure thresholds between 1.39 times and 1.50 times MAOP as requested by the committee. However, PHMSA has determined that, in order to provide adequate margin for public safety in higher- population-density Class 3 and 4 locations, PHMSA could not establish a predicted failure pressure threshold as low as 1.39 times MAOP. Therefore, in this final rule, PHMSA has provided a repair threshold for anomalies meeting a predicted failure pressure of less than 1.50 times MAOP for pipelines in Class 3 and Class 4 locations. PHMSA notes this approach would align repair criteria with the approach in § 192.619 for determining maximum allowable pressures for the same locations, and reflects that transmission pipelines in Class 3 and Class 4 locations are more robust (as a result of thicker walls and other design requirements) than those used in Class 1 and Class 2 locations.
PHMSA has provided similar repair criteria in this final rule for corrosion metal loss anomalies that are at a crossing of another pipeline; are in an area with widespread circumferential corrosion; could affect a girth weld; or that preferentially affects detected longitudinal seams that are formed by direct current, low-frequency or high-frequency electric resistance welding, electric flash welding, or with a longitudinal joint factor less than 1.0. Specifically, PHMSA is requiring the repair of conditions that reach less than 1.39 times the MAOP for anomalies in Class 1 locations or where Class 2 locations contain Class 1 pipe that has been uprated in accordance with § 192.611. For those corrosion metal loss anomalies at all other Class 2 locations, as well as those anomalies in Class 3 and Class 4 locations, operators will have to repair them once they reach a predicted failure pressure of less than 1.50 times MAOP.
PHMSA is requiring the additional stringency in Class 1 locations and Class 2 locations compared to the general corrosion metal loss repair standard discussed above because, should corrosion at the crossing of other pipelines induce failure, multiple pipelines could be damaged or fail. Pipelines with anomalies located at areas of widespread circumferential corrosion could additionally lose pipe strength due to outside longitudinal (pulling force) loading on the pipeline. And, historically, longitudinal seams that are formed by direct-current welding, low-frequency or high-frequency electric resistance welding, electric flash welding, or that have a longitudinal joint factor of less than 1.0, are more likely to fail. Therefore, PHMSA has determined that more stringent repair criteria are necessary for corrosion metal loss anomalies that preferentially affect these longitudinal seams. In contrast, because pipelines in Class 3 and Class 4 locations are (as noted above) more robust than those in Class 1 and Class 2 locations, PHMSA has determined that it is unnecessary to impose different thresholds for pipelines in Class 3 and Class 4 locations based on whether they are located at the crossing of another pipeline.
As explained in the discussion for dent anomalies above, PHMSA agreed with commenters that the specific criteria for gouges and grooves was duplicative with other metal loss conditions and has chosen not to finalize gouge and groove criteria in this final rule. Therefore, the comments related to whether ILI tools can properly or reliably identify gouges and grooves specifically are moot.
Following the Enbridge hazardous liquid incident in 2010 that spilled nearly 1 million barrels of oil near Marshall, MI, in 2010, the NTSB recommended that PHMSA revise requirements in the hazardous liquid pipeline safety regulations at § 195.452(h)(2) related to the “discovery of condition” to require, in cases where a determination about pipeline threats has not been obtained within 180 days following the date of inspection, that pipeline operators notify PHMSA and provide an expected date when adequate information will become available.
Accordingly, PHMSA proposed to amend paragraph (b) of § 192.933 to
PHMSA also proposed to amend paragraphs (a) and (d) of § 192.933 to require that operators document a pipeline's physical material properties and attributes that are used in remaining strength calculations in reliable, traceable, verifiable, and complete records. If such records were not available, operators would be required to base the pipe and material properties used in the remaining strength calculations on properties determined and documented in accordance with § 192.607.
Commenters noted that there were potential issues with how the revised repair criteria and the proposed material verification requirements at § 192.607 would interact regarding remaining strength calculations. These commenters requested that, absent reliable data, PHMSA allow operators to use supportable, sound engineering judgments when calculating remaining strength. This would allow operators to establish the remaining strength of affected segments while material verification was completed. Similarly, commenters suggested if the value for specified minimum yield strength is unknown, operators should be able to use a conservative default value, such as 30,000 pounds per square inch (psi). For predicted failure pressure calculations, operators suggested they should be able to use the records they have on hand and operator knowledge for calculations until any necessary material properties are verified through § 192.607. Similarly, at the GPAC meeting on March 26, 2018, commenters representing the industry suggested PHMSA should allow, in the absence of traceable, verifiable, and complete material records,
The EDF and PST supported PHMSA's proposals related to considering uncertainties in ILI results for identifying and characterizing anomalies. Several pipeline operators and industry trade associations on the other hand, including INGAA, expressed concern that the NPRM would require pipeline operators to repair anomalies that do not threaten pipeline integrity, stating that many anomalies that are identified by indirect measurements as requiring repair are later determined not to require repair upon examination in the field. These commenters requested that PHMSA change the proposed requirements to distinguish between ILI results and in-field examinations and start the repair timeline with the time an anomaly is examined in the field and not when it is identified by ILI.
INGAA suggested that PHMSA change the proposed requirements to differentiate between response, remediation, and repair, and that PHMSA replace “repair” with “response” in the terms “2-year repair criteria” and “1-year repair criteria” as those terms pertain to the non-HCA repair criteria. INGAA also requested that PHMSA further divide “2-year response conditions” into “2-year response conditions and scheduled responses” and similarly divide “1-year response conditions” into “1-year response conditions and scheduled responses.” INGAA suggested such a revision would be necessary because the proposed requirements for the response to, and repair of, potential pipeline anomalies do not recognize the differences between actions that operators take when evaluating the result of integrity assessments versus those actions operators take following in-field examinations of potential anomalies.
Several commenters requested that PHMSA change the proposed regulatory language to distinguish between ILI results and in-field examinations (response) and the actual remediation activity (repair) with a view to start the repair timeline after an anomaly is examined in the field and not when it is identified by ILI. Commenters suggested separate timelines to distinguish between the “response” and “repair” phases of pipeline remediation.
PHMSA addressed comments pertaining to the use of sound engineering judgment and assumed values to evaluate anomalies when data required for the evaluation is unknown or not available in traceable, verifiable, and complete records in the 2019 Gas Transmission Rule at § 192.712.
In the Response to Petitions for Reconsideration on the 2019 Gas Transmission Rule,
In an earlier section of the repair criteria discussion, PHMSA noted that the identification of anomalies based on ILI results is an actionable indication that there might be an injurious defect in the pipeline. Establishing repair criteria based on operators discovering these actionable anomalies assures that these anomalies are investigated promptly and repaired. Therefore, PHMSA disagrees with commenters who suggested that there should be separate timelines for anomaly responses and repairs, as it would be prudent for operators to perform any necessary repairs once the operator has excavated the pipe and exposed the anomaly for investigation rather than deferring such repairs.
Commenters were concerned that the requirements in this rulemaking would apply to gas gathering pipelines and requested that PHMSA clarify this is not the case. Similarly, the GPAC, in its late March 2018 meeting, recommended PHMSA clarify that the non-HCA repair criteria applied to those pipeline segments not currently covered under the IM regulations at subpart O.
Additionally, pipeline operators and their trade associations requested that PHMSA clarify the effective date of the repair provisions, as the requirements were proposed in an allegedly retroactive section of the regulations. These commenters claimed, as written, the proposed provisions would force operators to apply the revised repair criteria to prior ILI assessments that, at the time, met all the standards of the regulations. Some of these commenters recommended PHMSA establish reasonable, risk-based timeframes for operators to implement repairs of anomalies that were historically identified and were repaired in accordance with the code requirements of the time. The GPAC, during their meeting in late March of 2018, similarly recommended that PHMSA add an effective date to these general repair provisions to clarify that they were not retroactive.
Some commenters also discussed the application of the proposed repair criteria to pipelines outside of HCAs that have established their MAOP under the alternative requirements at § 192.620. The GPAC recommended PHMSA apply appropriate predicted failure pressure factors to alternative MAOP pipelines based on class location and design factors for scheduled conditions under the repair criteria.
PHMSA did not intend for the new repair criteria for non-HCA pipe segments to be applicable to gas gathering pipelines, HCA segments, or offshore transmission lines. However, PHMSA will consider expanding the application of these provisions in the future. In this final rule, to clarify that the new non-HCA repair criteria apply only to onshore transmission lines, PHMSA placed the new non-HCA repair criteria in a new § 192.714, which applies only to onshore transmission lines. Subsequently, PHMSA withdrew all proposed changes to § 192.713. PHMSA has also revised § 192.9 in this final rule to exempt regulated gas gathering lines from the requirements of § 192.714. Additionally, PHMSA has modified § 192.711 in this final rule to clarify that the new repair criteria in § 192.714 do not apply to gathering lines or HCA segments subject to subpart O. The current and unchanged § 192.713 would continue to apply to regulated gas gathering lines. Although the creation of a new § 192.714 was not discussed at the GPAC, PHMSA determined that this approach was a clearer means to specify that the new non-HCA repair criteria only apply to onshore transmission pipelines and meet the intent of the GPAC recommendation to clarify that the non-HCA repair criteria do not apply to gathering lines, HCA segments, or offshore transmission lines. Furthermore, PHMSA determined that this approach avoids duplication of repair language in other code sections.
PHMSA did not intend to imply that the new repair criteria were to be applied retroactively and has clarified this intent in this final rule by revising § 192.711(b) to include an effective date as recommended by the GPAC.
Regarding alternative MAOP pipelines, the NPRM did not propose, and therefore did not give opportunity for comment on, changes to repair criteria for alternative MAOP pipe segments. However, PHMSA agrees with commenters that the language proposed in the NPRM could create ambiguity with respect to the applicability of the non-HCA repair criteria to pipe with MAOP established in accordance with § 192.620. Therefore, in this final rule, PHMSA more broadly exempted alternative MAOP lines from compliance with non-HCA repair criteria and reiterated the applicability of the repair criteria provided at the alternative MAOP provisions under § 192.620(d)(11) as they provide a comparable level of safety based upon the operating factors. PHMSA did not make a corresponding change to § 192.933, as alternative MAOP pipelines in HCAs must meet both the HCA and the alternative MAOP repair criteria. This approach is preferable to repeating the alternate MAOP repair criteria in two locations of part 192.
In the NPRM, PHMSA proposed a new definition for “close interval survey” as a series of closely spaced pipe-to-electrolyte potential measurements taken to assess the adequacy of cathodic protection or to identify locations where a current may be leaving the pipeline and may cause corrosion, and for the purpose of quantifying voltage drops other than those across the structure electrolyte boundary.
Comments from the trade associations and GPAC members representing the industry questioned whether PHMSA should tie the definition of “close interval survey” to a corresponding NACE standard for consistency. PHMSA presented some minor changes to the definition at the meeting on March 28, 2018, and the committee voted 13–0 that PHMSA should adopt those changes into the final rule.
After considering the comments and GPAC recommendations, PHMSA is adopting the definition of “close interval survey” as recommended by GPAC. As such, PHMSA has specified that the pipe-to-electrolyte potential measurements are taken “over the pipe,” and added the phrase “such as when performed as a current interrupted, depolarized, or native survey” to qualify what is “other than those across the structure electrolyte boundary.”
PHMSA proposed to define a “distribution center” as a location where gas volumes are either metered or have a pressure or volume reduction prior to delivery to customers through a distribution line.
AGL Resources, Pipeline Safety Coalition, Southern California Gas
AGA supported PHMSA's effort to define a “distribution center” to ensure consistency and certainty in the identification of transmission lines. However, AGA also stated that PHMSA failed to provide any justification or explanation for its proposed definition, and AGA proposed an alternative definition of “distribution center” where piping downstream of a distribution center that operates above 20 percent SMYS would be classified as a transmission line. Other organizations, such as Alliant Energy, Dominion Energy, PECO Energy, Paiute Pipeline Company, and Southwest Gas Corporation, supported AGA's alternative definition.
TPA recommended PHMSA revise the proposed definition of “distribution center” to provide a clear endpoint for transmission lines and the start of distribution lines. Atmos Energy stated that the proposed definition did not recognize the many possible configurations of pipes in which transmission pipelines deliver to distribution systems. For example, Oleksa and Associates stated that some distribution systems may have no meters prior to delivery to customers and also may have no pressure or volume reductions (
At the GPAC meeting, PHMSA offered for the committee's consideration the option of recommending withdrawal of the proposed definition for “distribution center.” Committee members opposed this suggestion, stating that finalizing a definition for “distribution center” would provide the industry and regulators with regulatory certainty and clarity. During the meeting, committee members came to a consensus on the definition of a “distribution center” based on comments the industry provided. However, certain committee members representing the public were not inclined to adopt a definition of a “distribution center” that was based on the comments provided by industry and wished to defer to PHMSA regarding the wordsmithing of the definition.
Following the discussion, the committee voted 10–0 that the definition for “distribution center” was technically feasible, reasonable, cost-effective, and practicable if PHMSA incorporated a definition for “distribution center” in the final rule and considered revising the definition to mean the initial point where gas enters piping used to deliver gas to customers for end use as opposed to customers who purchase it for resale. Examples of a distribution center would include a metering location; a pressure reduction location; or where there is a reduction in the volume of gas, such as a lateral off a transmission pipeline.
After considering the comments received and the GPAC's recommendations, PHMSA is adopting the definition recommended by GPAC so that a “distribution center” means the initial point where gas enters piping used to deliver gas to customers for end use as opposed to customers who purchase it for resale.
PHMSA disagrees that an implementation period for the definition is appropriate, given that this term has been in use for a long period of time. PHMSA agrees with commenters for the need to clarify the end point of transmission and the start of distribution. PHMSA agrees with those commenters who suggested that piping downstream of a distribution center operating at above 20 percent SMYS should be considered a transmission line and is modifying the definition of “transmission line” accordingly in this final rule.
In the NPRM, PHMSA proposed a new definition for the term “dry gas or dry natural gas” to mean gas with less than 7 pounds of water per million cubic feet that is not subject to excessive upsets allowing electrolytes into the gas system.
GPAC members representing the industry asked whether PHMSA should tie the definition for dry gas to the corresponding NACE standard for continuity. Committee members representing the public were concerned about incorporating by reference the definition into the regulations but were amenable to lifting the language directly from the standard to ensure consistency. PHMSA representatives noted that the agency could consider the NACE definition and make the definition for dry gas less prescriptive than proposed.
After discussion, the committee voted 13–0 that the definition for “dry gas or dry natural gas” was technically feasible, reasonable, cost-effective, and practicable if PHMSA revised the definition to be consistent with the NACE definition as discussed at the meeting.
PHMSA has taken into consideration the comments as well as the GPAC recommendations and is modifying the definition for “dry gas or dry natural gas” to be consistent with the NACE standard. More specifically, the definition specifies that “dry gas or dry natural gas” is gas “above its dew point and without condensed liquids.”
In the NPRM, PHMSA proposed revising the term “electrical survey” so that it means a series of closely spaced measurements of the potential difference between two reference electrodes to determine where the current is leaving the pipe on ineffectively coated or bare pipelines.
PHMSA received a variety of comments on the definition for “electrical survey.” Some commenters expressed support for the definition and its inclusion in the regulations. Other commenters supported the concept of the definition but provided PHMSA with varying edits to improve on the clarity and functionality of the definition.
Several commenters noted that the proposed definition for electrical survey was duplicative with the proposed definition for “close interval survey” and recommended that PHMSA retain the definition for close interval survey instead. Some of these commenters noted that the proposed definition for electrical survey was more restrictive than the definition of electrical survey in NACE standards and excluded certain types of surveys. Other commenters suggested that the proposed definition for electrical survey should match the definition in various NACE standards.
NACE itself believed that the definition used in the NPRM for
The GPAC recommended that PHMSA withdraw the proposed changes to appendix D as a part of the recommended revisions to the proposed corrosion control regulations. There was no further discussion on the definition for the term, and the committee voted, 13–0, to delete the definition from the rule.
PHMSA notes that, when the committee voted to withdraw the proposed changes to appendix D as a part of the corrosion control discussion, a revised definition for electrical survey was unnecessary as all references to “electrical surveys” were removed. Therefore, PHMSA agrees with the GPAC recommendation and has struck the proposed revision to the definition of “electrical survey” from this final rule.
In the NPRM, PHMSA proposed to define a “hard spot” as steel pipe material with a minimum dimension greater than 2 inches (50.8 mm) in any direction with hardness greater than or equal to Rockwell 35 HRC, Brinnel 327 HB, or Vickers 345 HV
During the GPAC meeting, committee members noted there was a small editorial correction that needed to be made—changing “Brinnel” to “Brinell” —and also recommended that the definition be prefaced with the phrase “an area on” so that the definition reads “an area on steel pipe material [. . .].”
PHMSA has modified the proposed definition of hard spot as the GPAC recommended for this final rule.
In the NPRM, PHMSA proposed to add definitions for “in-line inspection (ILI)” and “in-line inspection tool or instrumental internal inspection device” to § 192.3. Specifically, the term “in-line inspection” would mean the inspection of a pipeline from the interior of the pipe using an ILI tool, which may also be known as intelligent or smart pigging. The term “in-line inspection tool or instrumented internal inspection device” would mean a device or vehicle that inspects a pipeline from the inside using a non-destructive technique. Such a device might also be called an intelligent or smart pig.
NACE International commented that the proposed definitions of “in-line inspection” and “in-line inspection tool or instrumented internal inspection device” do not align with the definition provided in NACE International Standard SP01024 or SP0102, respectively. NACE International suggested that PHMSA use the definition in NACE Standard SP0102, as PHMSA had proposed to incorporate by reference the standard in the regulations.
The GPAC reviewed the proposed definitions and, following their discussion, voted 13–0 that the definitions for “in-line inspection” and “in-line inspection tool or instrumented internal inspection device” were technically feasible, reasonable, cost-effective, and practicable if PHMSA considered clarifying in the preamble that the phrase “a line that can accommodate inspection by means of an instrumented in-line inspection tool” referred to pipeline segments that can be inspected with free-swimming ILI tools without any permanent physical modification of the pipeline segment.
After considering these comments, PHMSA is modifying the definitions of both “in-line inspection” and “in-line inspection tool or instrumented internal inspection device” based on the definitions in NACE SP0102–2010. In accordance with the GPAC recommendation, PHMSA is also noting that an ILI can include both tethered and self-propelled (
In the NPRM, PHMSA proposed to modify the second criterion of the “transmission line” definition to base the percentage of SMYS on the MAOP of the pipeline, whereas currently it is based on the pressure at which the pipeline is operating. PHMSA also proposed editorial changes to the “Note” section of the definition and make it clearer that “factories, power plants, and institutional users of gas” were examples of a large-volume customer.
AGA asserted that modifying the second criterion in the “transmission line” definition in conjunction with other definition changes PHMSA proposed would result in the reclassification of some transmission pipelines to distribution lines and some distribution pipelines to transmission lines. Several pipeline operators and industry representatives, including AGL Resources, Alliant Energy, Black Hills Energy, Cascade Natural Gas, Centerpoint Energy, Spire, Delmarva Power, National Grid, National Fuel Gas Supply Corporation, North Dakota Petroleum Council, Paiute Pipelines, TECO Peoples Gas, TPA, and PECO Energy, supported AGA's comments or provided similar recommendations. Additionally, Dominion East Ohio and Southwest Gas objected to PHMSA's proposed modifications to the definition, stating that the proposed definition would burden operators with ongoing IM programs with no additional benefit to public safety.
APGA commented that PHMSA's slight rewording of the note in the transmission definition regarding types of large-volume customers could be interpreted to mean that only factories, power plants, and institutional users of gas can be large-volume customers. APGA suggested PHMSA change the proposed language in the final rule to clarify that those listed items are examples of large-volume customers rather than a comprehensive list.
ONE Gas proposed an alternative simplified approach to the definition of “transmission line” that focuses on a line's MAOP as it relates to the percentage of yield strength.
There were various comments from other pipeline operators, including the suggestion that PHMSA remove the term “distribution center” from the definition of “transmission line,” allow operators to use MAOP to determine a transmission pipeline, and provide an implementation period for operators to incorporate regulatory requirements of the newly defined transmission lines.
During the GPAC meeting, committee members representing the industry expressed support for allowing operators to designate pipelines voluntarily as transmission lines, especially if their risk profile was high,
Following the discussion, the committee voted 10–0 that the definition for “transmission line” was technically feasible, reasonable, cost-effective, and practicable if PHMSA included the phrase “an interconnected series of pipelines” within the text of the definition and allowed operators to designate pipelines voluntarily as transmission lines.
PHMSA has considered the comments received regarding the proposed definition of a “transmission line.” PHMSA agrees with the recommendation from the GPAC to allow operators to designate pipelines voluntarily as transmission lines, as well as the recommendation from the GPAC to include the phrase “an interconnected series of pipelines.” Accordingly, PHMSA has revised the definition of “transmission line” in this final rule to include these recommendations.
PHMSA agrees with commenters that the language to clarify the examples of large-volume customers may imply a specific list and has withdrawn the changes to the note in the definition. In response to the comment on providing an implementation period for compliance with the new definition, PHMSA notes that it does not apply separate implementation periods to definitions outside of the effective date of the rule. If PHMSA determines that corresponding regulations would be affected by a change in a definition, it incorporates appropriate implementation time to those regulations as necessary.
PHMSA also notes that, per the comments received on the definition for “distribution center,” it agreed with commenters who suggested that piping downstream of a distribution center operating at above 20 percent of SMYS should be considered a transmission line and is modifying the definition of “transmission line” accordingly in this final rule.
PHMSA sees no functional difference in changing the definition of a transmission line from a pipeline that operators at a hoop stress of 20 percent or more of SMYS and a pipeline that has a MAOP of 20 percent or more of SMYS. For a pipeline to operate above 20 percent or more of SMYS, it will have an MAOP of 20 percent or more of SMYS. If an operator has a pipeline where the theoretical MAOP is higher than the pipeline's actual operating pressure, and therefore the line would need to be reclassified, the operator could reduce the MAOP of the line to keep the line's classification the same without affecting its operating pressure.
In the NPRM, PHMSA proposed to define “wrinkle bend” as a bend in the pipe that was formed in the field during construction such that the inside radius of the bend has one or more ripples of various sizes or where the ratio of peaks to peaks or peaks to valleys are of a certain size, or where a mathematical equation could be substituted when a wrinkle bend's length cannot reliably be determined.
There was no significant public comment on this definition, and the GPAC recommended PHMSA adopt the definition as it was published in the NPRM.
PHMSA adopts the definition as it was published in the NPRM.
Section 192.3 provides definitions for various terms used throughout part 192. In support of other regulations adopted in this final rule, PHMSA is amending the definition of “transmission line” and is adding new definitions for “close interval survey,” “distribution center,” “dry gas or dry natural gas,” “hard spot,” “in-line inspection,” “in-line inspection tool or instrumented internal inspection device,” and “wrinkle bend.” The definitions, including “in-line inspection,” “dry gas or dry natural gas,” and “hard spot,” clarify technical terms used in part 192 or in this rulemaking.
Section 192.7 lists documents that are incorporated by reference in part 192. PHMSA is making conforming amendments to § 192.7 to include two NACE standard practice documents regarding SCCDA and ICDA.
Section 192.9 lists the requirements that are applicable or not applicable to gathering lines. This final rule addresses several new requirements for transmission lines that are not intended to apply to gathering lines; PHMSA is adopting in this final rule revisions to § 192.9 to except each of offshore and Types A, B, and C
Section 192.13 prescribes general requirements for gas pipelines. PHMSA has determined that public safety and environmental protection would be improved by requiring operators of transmission lines to evaluate and mitigate risks during all phases of the useful life of a pipeline as an integral part of managing pipeline design, construction, operation, maintenance, and integrity, including the MOC process.
As such, PHMSA has added a new paragraph (d) to § 192.13 with a general clause for transmission pipeline operators that invokes the requirements for the MOC process as it is outlined in ASME/ANSI B31.8S, section 11, and explicitly articulates the requirements for a MOC process applicable to onshore gas transmission pipelines. This final rule requires each operator to have a MOC process that must include the reason for change, authority for approving changes, analysis of implications, acquisition of required work permits, documentation, communication of change to affected parties, time limitations, and qualification of staff. While these general attributes of change management are already required for covered segments by virtue of the incorporation by reference of ASME/ANSI B31.8S, PHMSA believes it will improve the visibility and emphasis on these important program elements to require them for all onshore transmission pipelines directly in the rule text.
Section 192.18 in subpart A contains the procedure for an operator to submit notifications to PHMSA. Paragraph (c) has been modified to incorporate notification requirements for the use of “other technology” with external corrosion control and ICDA per §§ 192.461(g) and 192.927(b).
Section 192.319 prescribes requirements for installing pipe in a ditch, including requirements to protect pipe coating from damage during the process. Sometimes pipe coating is damaged during the construction process while it is being handled, lowered, and backfilled, which can compromise its ability to protect against external corrosion. Accordingly, this final rule adds new paragraphs (d) through (g) to § 192.319, which require that onshore gas transmission operators perform an above-ground indirect assessment to identify locations of suspected damage promptly after backfilling is completed and remediate coating damage. Mechanical damage is also detectable by these indirect assessment methods, since the forces that can mechanically damage steel pipe usually result in detectable coating defects.
If an operator uses “other technology” to perform an assessment required under this section, paragraph (e) requires the operator to notify PHMSA in accordance with § 192.18. Paragraph (g) requires each operator of transmission pipelines to make and retain, for the life of the pipeline, records documenting the coating assessment findings and repairs. The additional requirements of this section do not apply to gas gathering pipelines or distribution mains.
Section 192.461 prescribes requirements for protective coating systems. Certain types of coating systems that have been used extensively in the pipeline industry can impede the process of cathodic protection if the coating disbonds from the pipe. Accordingly, this final rule amends paragraph (a)(4) to require that pipe coating has sufficient strength to resist damage during installation and backfill, and it also adds a new paragraph (f) to require that onshore gas transmission operators perform an above-ground indirect assessment to identify locations of suspected damage promptly after backfill is completed or anytime there is an indication that the coating might be compromised. To ensure the prompt remediation of any severe coating damage, new paragraph (h) requires operators create a remedial action plan and provides the specific timing requirements for repairs. New paragraph (g) requires an operator to notify PHMSA, in accordance with § 192.18, if using “other technology” for the coating assessment, and paragraph (i) specifies the documentation requirements for this section. The additional requirements of this section do not apply to gas gathering pipelines or distribution mains.
Section 192.465 requires that operators monitor CP and take prompt remedial action to correct deficiencies indicated by the monitoring. To clarify that regulatory requirement, this final rule amends paragraph (d) to require that operators of onshore transmission pipelines must complete remedial action no later than the next monitoring interval specified in § 192.465, within 1 year, or within 6 months of obtaining any permits, whichever is less.
This final rule also adds a new paragraph (f) to require onshore gas transmission operators to conduct annual test station readings to determine if CP is below the level of protection required in subpart I. For non-systemic or location-specific causes of insufficient CP, the operator must investigate and mitigate the cause. For insufficient CP due to systemic causes, an operator must complete CIS with the protective current interrupted, unless it is impractical to do so based on a geographical, technical, or safety reason. For example, issues related to cost would not be an adequate reason for not performing the survey, whereas performing a survey on a pipeline protected by direct buried sacrificial anodes (anodes directly connected to the pipelines) might be impractical. The revisions to paragraph (d) and new paragraph (f) do not apply to gas gathering lines or distribution mains.
Interference currents can negate the effectiveness of CP systems. Section 192.473 currently prescribes general requirements to minimize the detrimental effects of interference currents. However, subpart I does not presently contain specific requirements to monitor and mitigate detrimental interference currents. Accordingly, this final rule adds a new paragraph (c) to require that onshore gas transmission operator corrosion control programs include interference surveys to detect the presence of interference currents when potential monitoring indicates a significant increase in stray current, or when new potential stray current sources are introduced. Sources of stray current can include co-located pipelines, structures, HVAC power lines, new or enlarged power substations, new pipelines, and other structures. They can also include additional generation, a voltage uprating, and additional lines. The rule also requires operators perform remedial actions no later than 15 months after completing the interference survey, with an allowance for permitting, to protect the pipeline segment from detrimental interference currents. These additional requirements do not apply to gas gathering pipelines or distribution mains.
Section 192.477 prescribes requirements to monitor internal corrosion if corrosive gas is being transported. However, the existing rules do not prescribe operators continually or periodically monitor the gas stream for the introduction of corrosive constituents through system modifications, gas supply changes, upset conditions, or other changes. This could result in operators not identifying internal corrosion if an initial assessment did not identify the presence of corrosive gas. Accordingly, PHMSA has determined that additional requirements are needed to ensure that operators effectively monitor their gas stream quality to identify if, and when, corrosive gas is being transported and mitigate deleterious gas stream constituents (
Therefore, this final rule adds a new § 192.478 to require onshore gas transmission operators monitor for known deleterious gas stream constituents and evaluate gas monitoring data once every calendar year, not to exceed a period of 15 months. Additionally, this final rule adds a requirement for onshore gas transmission operators to review their internal corrosion monitoring and mitigation program annually, not to exceed 15 months, and adjust the program as necessary to mitigate the presence of deleterious gas stream constituents. These requirements are in addition to the existing requirements to check coupons or perform other methods to monitor for the actual
Section 192.485 prescribes requirements for operators to perform remedial measures to address general corrosion and localized corrosion pitting in transmission pipelines. For such conditions, the requirements specify that an operator may determine the strength of pipe based on actual remaining wall thickness by using the procedure in ASME/ANSI B31G or the procedure in AGA Pipeline Research Committee Project PR 3–805 (RSTRENG). PHMSA has determined that additional requirements are needed beyond ASME/ANSI B31G and RSTRENG to ensure such calculations have a sound basis and has revised § 192.485(c) to specify that an operator must calculate the remaining strength of the pipe in accordance with § 192.712, which prescribes important aspects such as pipe and material properties, assumptions allowed when data is unknown, accounting for uncertainties, and recordkeeping requirements.
Extreme weather and natural disasters can affect the safe operation of a pipeline. Accordingly, this final rule revises § 192.613 to require operators to perform inspections after these events and take appropriate remedial actions.
Section 192.710 prescribes requirements for the periodic assessment of certain pipelines outside of HCAs. In the NPRM, PHMSA proposed for operators to use the non-HCA repair criteria being finalized in this rule if they performed an assessment on a non-HCA pipeline and discovered an anomaly requiring repair. However, in splitting the rulemaking, PHMSA finalized the assessment requirement in the 2019 Gas Transmission Final Rule but did not incorporate regulatory text establishing the corresponding repair criteria. Therefore, in this final rule, PHMSA has revised the assessment requirement at § 192.710 to require operators to use the repair criteria finalized in this rulemaking if anomalies are discovered during these assessments.
Section 192.711 prescribes general requirements for repair procedures. For non-HCA segments, the existing regulations required that operators make permanent repairs as soon as feasible. However, no specific repair criteria were detailed, and no specific timeframe or pressure reduction requirements were provided. PHMSA has determined that more specific repair criteria are needed for pipelines not covered under the integrity management regulations. Such repair criteria will help to maintain safety in a consistent manner in Class 1 through Class 4 locations that may have significant populations but that are not HCAs. Accordingly, this final rule amends paragraph (b)(1) of § 192.711 to require operators remediate specific conditions, as defined in § 192.714, on non-HCA gas transmission pipelines. Paragraph (b)(1) retains the existing requirement that operators must repair anomalies on gathering pipelines regulated in accordance with § 192.9 as soon as feasible.
In the 2019 Gas Transmission Rule, PHMSA updated and codified minimum standards for determining the predicted failure pressure of pipelines containing anomalies or defects associated with corrosion metal loss and cracks. In this final rule, PHMSA is revising the repair criteria for gas transmission pipelines, including for dents. Some of the revised dent repair criteria allow operators to determine critical strain levels for dents and defer repairs if critical strain levels are not exceeded. As such, PHMSA has established minimum standards for operators to calculate critical strain levels in pipe with dent anomalies or defects and has included those standards in a new paragraph (c) of § 192.712. The title of this section has also been updated to reflect this addition. PHMSA has also provided reassessment schedules for engineering critical assessments that operators perform to determine maximum reevaluation intervals to ensure that anomalies do not grow to critical sizes.
Section 192.713 prescribes requirements for the permanent repair of pipeline imperfections or damage that impairs the serviceability of steel transmission pipelines operating at or above 40 percent of SMYS. PHMSA has determined that more explicit requirements are needed in § 192.714 to identify criteria for the severity of imperfections or damage that must be repaired, and to identify the timeframe within which repairs must be made for pipelines in all class locations that are not in HCAs. Pipelines not in HCAs can still have significant populations that could be harmed by a pipeline leak or rupture. As such, PHMSA has determined that repair criteria should apply to any onshore transmission pipeline not covered under the IM regulations in subpart O. PHMSA believes that establishing these non-HCA segment repair conditions for Class 1 locations through Class 4 locations are important because, even though they are not within HCAs, these locations could be in highly populated areas and are not without consequence to public safety and the environment.
Accordingly, this final rule creates a new § 192.714 to establish repair criteria for immediate, 2-year, and monitored conditions that the operator must remediate or monitor to ensure pipeline safety. PHMSA is using the same criteria as it is issuing for HCAs, except conditions for which a 1-year response is required in HCAs will require a 2-year response in non-HCA pipeline segments so that operators can allocate their resources to HCAs on a higher-priority basis. Additionally, PHMSA is prescribing more explicit requirements for the
Paragraph (k) of § 192.911 requires that IM programs include a MOC process as outlined in ASME/ANSI B31.8S, section 11. PHMSA has determined that specific attributes and features of the MOC process that are currently specified in ASME/ANSI B31.8S, section 11, should be codified directly within the text of subpart O for HCAs to make the requirements readily available to all operators of onshore gas transmission pipelines. This change is consistent with the new paragraph (d) in § 192.13 for all onshore transmission pipelines.
Section 192.917 requires that operators with IM programs for covered pipeline segments identify potential threats to pipeline integrity and use the threat identification in their integrity program. This performance-based process includes requirements to identify threats to which the pipeline is susceptible, collect data for analysis, and perform a risk assessment. The regulations include special requirements for operators to address plastic pipe and particular threats, such as third-party damage and manufacturing and construction defects.
As specified in § 192.907(a), PHMSA expected operators to start with a framework for IM, which would later evolve into a more detailed and comprehensive program, and expected that an operator would continually improve its IM program as it learned more about the process and about the material condition of its pipelines through integrity assessments. PHMSA elaborated on this philosophy in the 2003 IM rule.
Even though the IM regulations have been in effect since 2004, PHMSA still finds certain operators have poorly developed IM programs. The clarifications and additional specificity adopted in this final rule, with respect to the processes an operator must use in implementing the threat identification, risk assessment, and preventive and mitigative measure program elements, reflect PHMSA's expectation regarding the degree of progress operators should be making, or should have made, during the first 10 years of the implementation of the IM regulations.
The current IM regulations incorporate by reference ASME/ANSI B31.8S to require that operators implement specific attributes and features of the threat identification, data analysis, and risk assessment process in their IM programs. In this final rule, PHMSA is amending § 192.917 to insert certain critical features of ASME/ANSI B31.8S directly into the regulatory text. PHMSA is specifying several pipeline attributes that must be included in pipeline risk assessments and is explicitly requiring that operators integrate analyzed information and ensure that data is verified and validated to the maximum extent practical. To the degree that subjective data from SMEs must be used, PHMSA is requiring that an operator's program account and compensate for uncertainties in the risk model used and the data used in the operator's risk assessment. PHMSA is also in this final rule revising the non-exhaustive list of data to be collected for clarity or to eliminate redundant language.
PHMSA will note that in its advisory bulletin on the verification of records that “verifiable” records are those in which information is confirmed by other complementary, but separate, documentation. Such records might include contract specifications for a pressure test of a line segment complemented by field logs or purchase orders with pipe specifications verified by metallurgical tests of coupons pulled from the same pipe segment.
Additionally, PHMSA is clarifying the performance-based risk assessment aspects of the IM regulations in this final rule by specifying that operators must perform risk assessments that are adequate for evaluating the effects of interacting threats; determine additional P&M measures needed; analyze how a potential failure could affect HCAs, including the consequences of the entire worst-case incident scenario from initial failure to incident termination; identify the contribution to risk of each risk factor, or each unique combination of risk factors that interact or simultaneously contribute to risk at a common location; account for, and compensate for, uncertainties in the model and the data used in the risk assessment; and evaluate risk reduction associated with candidate risk reduction activities, such as P&M measures.
In consideration of NTSB recommendation P–11–18, PHMSA is adopting regulations that require operators to validate their risk models considering incident, leak, and failure history and other historical information. These features are currently requirements because they are incorporated by reference in ASME/ANSI B31.8S. However, PHMSA has found that provisions incorporated directly into its regulatory text have higher levels of compliance. The final rule also amends the requirements for plastic pipe to provide specific examples of integrity threats for plastic pipe that must be addressed.
This final rule incorporates by reference NACE SP0206–2006, “Internal Corrosion Direct Assessment Methodology for Pipelines Carrying Normally Dry Natural Gas,” for addressing ICDA, and NACE SP0204–2008, “Stress Corrosion Cracking Direct Assessment,” for addressing SCCDA. Accordingly, PHMSA has revised § 192.923(b)(2) and (3) to require operators comply with these standards.
Section 192.927 specifies requirements for gas transmission pipeline operators who use ICDA for IM assessments. The requirements in § 192.927 were promulgated before NACE SP0206–2006 was published and require that operators follow ASME/ANSI B31.8S provisions related to ICDA. PHMSA has reviewed NACE SP0206–2006 and finds that it is more comprehensive and rigorous than either § 192.927 or ASME/ANSI B31.8S in many respects. Therefore, PHMSA is incorporating NACE SP0206–2006 into the regulations for the performance of ICDA and is establishing additional requirements for addressing covered segments within the technical process defined by the NACE standard.
This final rule requires that operators perform two direct examinations within each covered segment the first time ICDA is performed. These examinations are in addition to those required to comply with the NACE standard. The additional examinations are consistent with the current requirement in § 192.927(c)(5)(ii) that operators apply more restrictive criteria when conducting ICDA for the first time and are intending to verify, within the HCA, that the results of applying the process of NACE SP0206–2006 for the ICDA are acceptable. Applying the process for NACE SP0206–2006 requires more precise knowledge of the pipeline orientation (particularly slope) than operators may have in many cases. Conducting examinations within the HCA during the first application of ICDA will verify that applying the ICDA process provides an operator with adequate information about the covered segment. Operators who identify internal corrosion on these additional examinations, even though excavations at locations determined using NACE SP0206–2006 did not identify any internal corrosion, will know that improvements are needed to their knowledge of pipeline orientation. In addition, operators will know they need other adjustments to their application of the NACE standard to the covered segment for using ICDA in the future. Section 192.927(b) and (c) are revised in this final rule to address these issues.
PHMSA notes that, for these requirements, operators are prohibited from using assumed pipeline or operational data. Any data an operator
Section 192.929 specifies requirements for gas transmission pipeline operators who use SCCDA for IM assessments. The requirements in § 192.929 were promulgated before NACE Standard Practice SP0204–2008 was published, and the standard requires that operators follow Appendix A3 of ASME/ANSI B31.8S. That appendix provides some guidance for conducting SCCDA but is limited to SCC that occurs in high-pH environments. Experience has shown that pipelines can also experience SCC degradation in areas where the surrounding soil has a pH near neutral (referred to as near-neutral SCC). NACE SP0204–2008 addresses near-neutral SCC as well as high-pH SCC. NACE SP0204–2008 also provides technical guidelines and process requirements that are both more comprehensive and rigorous for conducting SCCDA than § 192.929 or ASME/ANSI B31.8S.
Since NACE SP0204–2008 provides comprehensive guidelines on conducting SCCDA and is more comprehensive in scope than Appendix A3 of ASME/ANSI B31.8S, PHMSA has concluded the quality and consistency of SCCDA conducted under IM requirements would be improved by requiring operators to use NACE SP0204–2008. The final rule accomplishes this.
Section 192.933 specifies injurious anomalies and defects that operators must remediate and the timeframes within which such remediation must occur. PHMSA determined that the existing regulations for repair criteria had gaps, as some injurious anomalies and defects were not listed as requiring remediation in a timely manner commensurate with their seriousness. To remedy this, in this final rule, PHMSA is designating the following types of defects as immediate conditions: (1) anomalies where the metal loss is greater than 80 percent of nominal wall thickness; (2) metal loss anomalies with a predicted failure pressure less than or equal to 1.1 times the MAOP; (3) a topside dent that has metal loss, cracking, or a stress riser; (4) anomalies where there is an indication of metal loss affecting certain longitudinal seams; and (5) cracks or crack-like anomalies meeting specified criteria.
The final rule also designates the following types of defects as 1-year conditions: (1) smooth topside dents with a depth greater than 6 percent of the pipeline diameter; (2) dents greater than 2 percent of the pipeline diameter that are located at a girth weld or spiral seam weld; (3) a bottom-side dent that has metal loss, cracking, or a stress riser; (4) metal loss anomalies where a calculation of the remaining strength of the pipe shows a predicted failure pressure ratio less than or equal to 1.39 for Class 2 locations, and 1.50 for Class 3 locations and Class 4 locations; (5) anomalies where there is metal loss that is at a crossing of another pipeline, is in an area with widespread circumferential corrosion, or is in an area that could affect a girth weld, and that has a predicted failure pressure less than 1.39 in Class 1 locations or where Class 2 locations contain Class 1 pipe that has been uprated in accordance with § 192.611, and less than 1.50 times the MAOP in all other Class 2 locations and all Class 3 and 4 locations; (6) anomalies where there is metal loss affecting a longitudinal seam; and (7) any indications of cracks or crack-like defects other than those listed as an immediate condition.
In this final rule, PHMSA is also adding requirements for addressing regulatory gaps related to the methods for calculating predicted failure pressure if metal loss exceeds 80 percent of wall thickness; time-sensitive integrity threats including corrosion affecting a longitudinal seam, especially those associated with seam types that are known to be susceptible to latent manufacturing defects, such as the failed pipe at San Bruno,
With respect to SCC, PHMSA has incorporated repair criteria to specify that operators must use engineering assessment techniques specified in § 192.712 to evaluate if cracks or crack-like anomalies should be categorized as an “immediate” condition, a “1-year” condition, or a “monitored” condition. PHMSA believes that this will help address NTSB recommendation P–12–3, which resulted from the investigation of the Enbridge accident near Marshall, MI.
The current regulations do not include 1-year conditions for metal loss anomalies. For non-immediate conditions, the regulations direct operators to use Figure 4 in ASME/ANSI B31.8S to determine the repair criteria for metal loss anomalies that do not meet the “immediate” threshold. To address this gap, PHMSA is including certain metal loss anomalies in the list of 1-year conditions. These changes make the gas transmission repair criteria more consistent with the hazardous liquid repair criteria at 49 CFR 195.452(h).
PHMSA is also incorporating safety factors commensurate with the class location in which the pipeline is located to make 1-year conditions anomalies where the predicted failure pressure is less than or equal to 1.39 times MAOP in Class 2 locations, and 1.50 times MAOP in Class 3 and Class 4 locations in HCAs. Operators must continue to use ASME/ANSI B31.8S, Figure 4 for corrosion metal loss anomalies in Class 1 locations.
Additionally, the NTSB recommended that PHMSA revise the “discovery of condition” at 49 CFR 195.452(h)(2) to require, in cases where a determination about pipeline threats has not been obtained within 180 days following the date of inspection, that pipeline operators notify PHMSA and provide an expected date when adequate information will become available.
Although the NTSB made the recommendation for hazardous liquid pipelines regulated under part 195, the issue applies to gas transmission pipelines regulated under part 192 as well. Accordingly, PHMSA has
PHMSA is also finalizing requirements for the
Section 192.935 requires an operator to take additional measures beyond those already required by part 192 to prevent a pipeline failure and to mitigate the consequences of a pipeline failure in an HCA. An operator must conduct a risk analysis to identify the additional measures to protect the HCA and improve public safety. As discussed earlier, PHMSA is amending § 192.917 to clarify the guidance for risk analyses operators use to evaluate and select additional P&M measures. This final rule also adds specific enhanced measures for operators to use for managing internal and external corrosion in HCAs and expands the list of P&M measures operators must consider when providing for public safety.
Specifically, operators must explicitly consider the following P&M measures:
(i) Correcting the root causes of past incidents in order to prevent recurrence;
(ii) O&M processes that maintain safety and the pipeline MAOP;
(iii) Adequate resources for the successful execution of these activities within the required timeframe;
(iv) Pressure transmitters that communicate with the pipeline control center on both sides of automatic shut-off valves and remote-control valves;
(v) Additional right-of-way patrols;
(vi) Hydrostatic tests in areas where pipeline material has quality issues or records that are not traceable, verifiable, and complete;
(vii) Tests to determine unknown material, mechanical, or chemical properties that are needed to ensure pipeline integrity or substantiate MAOP, including material property tests from removed pipe that is representative of the in-service pipeline;
(viii) The re-coating of damaged, poorly performing, or disbonded coatings, and
(ix) Additional depth-of-cover surveys at roads, streams, and rivers, among other areas.
These P&M measures do not alter the fundamental requirement for operators to identify and implement P&M measures; rather, they provide additional guidance and clarify PHMSA's expectations with this important aspect of IM.
Section 29 of the 2011 Pipeline Safety Act requires operators to consider seismicity when evaluating threats. In the 2019 Gas Transmission Rule, PHMSA revised § 192.917 to include seismicity as a potential threat for operators to identify and evaluate. In this final rule, PHMSA is revising this section to require operators consider the seismicity of the area when evaluating additional P&M measures against the threat of outside force damage.
Section 192.941 specifies that, to address the threat of external corrosion on cathodically protected pipe in an HCA segment, an operator must perform an electrical survey (
Consistent with the amendments in this document, PHMSA is incorporating by reference into the PSR several standards as described below. Some of these standards are already incorporated by reference into the PSR and are being extended to other sections of the regulations. Other standards provide a technical basis for corresponding regulatory changes in this final rule.
• NACE Standard Practice 0204–2008, “Stress Corrosion Cracking (SCC) Direct Assessment Methodology” (Sept. 18, 2008).
This standard addresses the situation in which a portion of a pipeline has been identified as an area of interest with respect to SCC based on its history, operations, and risk assessment process, and it has been decided that direct assessment is an appropriate approach for integrity assessment. The incorporation of this standard into the PSR would provide guidance for managing SCC through the selection of potential pipeline segments, selecting dig sites within those segments, inspecting the pipe, collecting and analyzing data during the dig, establishing a mitigation program, defining the re-evaluation interval, and evaluating the effectiveness of the SCCDA process.
• NACE Standard Practice 0206–2006, “Internal Corrosion Direct Assessment Methodology for Pipelines Carrying Normally Dry Natural Gas” (DG–ICDA) (Dec. 1, 2006).
This standard practice formalizes an internal corrosion direct assessment method (DG–ICDA) that can be used to help ensure pipeline integrity for pipelines carrying normally dry natural gas. The method is applicable to natural gas pipelines that normally carry dry gas but that may suffer from infrequent, short-term upsets of liquid water (or other electrolyte). This standard is intended for use by pipeline operators and others who manage pipeline integrity. The basis of DG–ICDA is a detailed examination of locations along a pipeline where water would first accumulate and provides information about the downstream condition of the pipeline. If the locations along a length of pipe most likely to accumulate water have not corroded, other downstream locations less likely to accumulate water may be considered free from corrosion. The presence of extensive corrosion found at many locations during the evaluation suggests that the transported gas was not normally dry, and this standard would not be considered applicable.
• ASME/ANSI B31.8S–2004, “Supplement to B31.8 on Managing System Integrity of Gas Pipelines” (Jan. 14, 2005).
This standard covers onshore gas pipeline systems constructed with ferrous materials, including pipe, valves, appurtenances attached to pipe, compressor units, metering stations, regulator stations, delivery stations, holders, and fabricated assemblies. ASME/ANSI B31.8S is specifically designed to provide the operator with the information necessary to develop and implement an effective IM program using proven industry practices and processes. Effective system management can decrease repair and replacement costs, prevent malfunctions, and minimize system downtime.
The incorporation by reference of ASME/ANSI B31.8S–2004 was approved for §§ 192.921 and 192.937 as of January 14, 2004. That approval is unaffected by the section revisions in this final rule.
• ANSI/NACE Standard Practice 0502–2010, “Pipeline External Corrosion Direct Assessment Methodology” (June 24, 2010).
This standard covers the NACE external corrosion direct assessment (ECDA) process, which assesses and
The incorporation by reference of ANSI/NACE Standard Practice 0502–2010 was approved for §§ 192.923, 192.925, 192.931, 192.935, and 192.939 as of March 6, 2015. That approval is unaffected by the section revisions in this final rule.
The incorporation by reference of R–STRENG and ASME/ANSI B31G in certain sections of this rule was approved July 1, 2020, and remains unaffected by the revisions in this final rule.
PHMSA currently incorporates by reference into 49 CFR parts 192, 193, and 195 all or parts of more than 80 standards and specifications developed and published by standard developing organizations (SDO). In general, SDOs update and revise their published standards every 2 to 5 years to reflect modern technology and best technical practices.
The National Technology Transfer and Advancement Act of 1995 (Pub. L. 104–113; NTTAA) directs Federal agencies to use standards developed by voluntary consensus standards bodies in lieu of government-written standards whenever possible. Voluntary consensus standards bodies develop, establish, or coordinate technical standards using agreed-upon procedures. In addition, the Office of Management and Budget (OMB) issued Circular A–119 to implement section 12(d) of the NTTAA relative to the utilization of consensus technical standards by Federal agencies.
Accordingly, PHMSA has the responsibility for determining, via petitions or otherwise, which currently referenced standards should be updated, revised, or removed, and which standards should be added to the PSR. Revisions to materials incorporated by reference in the PSR are handled via the rulemaking process, which allows for the public and regulated entities to provide input. During the rulemaking process, PHMSA must also obtain approval from the Office of the Federal Register to incorporate by reference any new materials.
Pursuant to 49 U.S.C. 60102(p), PHMSA may not issue PSR amendments that incorporate by reference any documents or portions thereof unless the documents or portions thereof are made available to the public, free of charge. Further, the Office of the Federal Register issued a rulemaking on November 7, 2014, revising 1 CFR 51.5(b) to require that agencies detail in the preamble of a final rulemaking the ways the materials it incorporates by reference are reasonably available to interested parties, and how interested parties can obtain those materials.
To meet its statutory obligation for this rulemaking, PHMSA negotiated agreements with SDOs to provide free online access to standards that are incorporated by reference or proposed to be incorporated by reference. PHMSA will also provide individual members of the public temporary access to any standard that is incorporated by reference. Requests for access can be sent to the following email address:
This final rule is published under the existing authorities of the Secretary of Transportation delegated to the PHMSA Administrator pursuant to 49 CFR 1.97. Among the statutory authorities delegated to PHMSA are section 60102 of the Federal Pipeline Safety Statutes (49 U.S.C. 60101
Executive Order 12866 (“Regulatory Planning and Review”)
This action has been determined to be significant under Executive Order 12866. It is also considered significant under DOT Order 2100.6A because of significant congressional, State, industry, and public interest in pipeline safety. The final rule has been reviewed by the Office of Management and Budget in accordance with Executive Order 12866 and is consistent with the requirements of Executive Order 12866, 49 U.S.C. 60102(b)(5), and DOT Order 2100.6. The Office of Information and Regulatory Affairs (OIRA) has not designated this rule as a “major rule” as defined by the Congressional Review Act (5 U.S.C. 801
Executive Order 12866 and DOT Order 2100.6A also require PHMSA to provide a meaningful opportunity for public participation, which also reinforces requirements for notice and comment under the Administrative Procedure Act (5 U.S.C. 551
The table below summarizes the annualized costs for the provisions in the final rule. These estimates reflect the timing of the compliance actions taken by operators and are annualized, where applicable, over 20 years and discounted using rates of 3 percent and 7 percent. PHMSA estimates incremental costs for the final requirements in section 5 of the RIA. The costs of this final rule reflect MOC process improvements, additional corrosion control requirements, programmatic changes related to inspections following extreme weather events, and compliance with the revised repair criteria. PHMSA finds that the other final rule requirements will not result in an incremental cost. PHMSA estimates the annualized cost of this rule is $16.7 million at a 7 percent discount rate.
The benefits of the final rule consist of improved safety and avoided environmental harms (including greenhouse gas emissions) from reduction of risk of incidents on natural gas pipelines and will depend on the degree to which compliance actions result in additional safety measures, relative to the baseline, and the effectiveness of these measures in preventing or mitigating future pipeline releases or other incidents. PHMSA changed its benefit analysis approach for the RIA relative to the PRIA. The PRIA quantified and monetized the NPRM's benefits, while the RIA does not monetize this final rule's benefits. PHMSA chose not to monetize benefits in the RIA based on the public comments received in response to the PRIA and the uncertainty associated with quantifying changes in incident rates that can be explicitly attributed to the final rule's provisions.
For more information, please see the RIA posted in the rulemaking docket.
The Regulatory Flexibility Act (5 U.S.C. 601
PHMSA prepared a FRFA, which is available in the docket for the rulemaking. In it, PHMSA certifies that the rule will not have a significant impact on a substantial number of small entities.
PHMSA analyzed this final rule per the principles and criteria in Executive Order 13175 (“Consultation and Coordination with Indian Tribal Governments”)
PHMSA assessed the impact of the rulemaking and determined that it would not significantly or uniquely affect Tribal communities or Tribal governments. The rulemaking's regulatory amendments are facially neutral and would have broad, national scope; PHMSA, therefore, does not expect this rulemaking to significantly or uniquely affect Tribal communities, much less impose substantial compliance costs on Native American Tribal governments or mandate Tribal action. And insofar as PHMSA expects the rulemaking will improve transmission pipeline safety and environmental risks, PHMSA does not expect it would entail disproportionately high adverse risks for Tribal communities. PHMSA also received no comments alleging “substantial direct compliance costs” or “substantial direct effects” on Tribal communities and Governments. For these reasons, PHMSA has determined the funding and consultation requirements of Executive Order 13175 and DOT Order 5301.1 do not apply.
Under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
On April 8, 2016, PHMSA published an NPRM seeking public comments on proposed revisions of the PSR
PHMSA estimates that the proposals in this final rule will involve new and amended information collections as described below. The following information is provided for each information collection: (1) title of the information collection; (2) OMB control number; (3) current expiration date; (4) type of request; (5) abstract of the information collection activity; (6) description of affected public; (7) estimate of total annual reporting and recordkeeping burden; and (8) frequency of collection. Relevant information collections consist of the following:
Requests for copies of these information collections should be directed to Angela Hill or Cameron Satterthwaite, Office of Pipeline Safety (PHP–30), Pipeline Hazardous Materials Safety Administration (PHMSA), 2nd Floor, 1200 New Jersey Avenue, SE, Washington, DC 20590–0001, Telephone (202) 366–4595.
The Unfunded Mandates Reform Act (2 U.S.C. 1501
As explained in the RIA, PHMSA determined that this final rule does not impose enforceable duties on State, local, or Tribal governments or on the private sector of $100 million or more (in 1996 dollars) in any one year. A copy of the RIA is available for review in the docket.
The National Environmental Policy Act of 1969 (42 U.S.C. 4321
PHMSA has completed its NEPA analysis. Based on the environmental assessment, PHMSA determined that an environmental impact statement is not required for this rulemaking because it will not have a significant impact on the human environment. The final EA and Finding of No Significant Impact have been placed into the docket addressing the comments received.
PHMSA analyzed this final rule in accordance with Executive Order 13132 (“Federalism”).
The final rule does not have a substantial direct effect on the State and local governments, the relationship between the Federal Government and the States, or the distribution of power and responsibilities among the various levels of government. This rulemaking action does not impose substantial direct compliance costs on State and local governments. Section 60104(c) of the Federal Pipeline Safety Statutes prohibits certain State safety regulation of interstate pipelines. Under the Federal Pipeline Safety Statutes, States can augment pipeline safety requirements for intrastate pipelines regulated by PHMSA but may not approve safety requirements less stringent than those required by Federal law. A State may also regulate an intrastate pipeline facility that PHMSA does not regulate. In this instance, the preemptive effect of the final rule is limited to the minimum level necessary to achieve the objectives of the pipeline safety laws under which the final rule is promulgated. Therefore, the consultation and funding requirements of Executive Order 13132 do not apply.
Executive Order 13211 (“Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use”)
This final rule is a significant action under Executive Order 12866; however, it is expected to have an annual effect on the economy of less than $100 million. Further, this action is not likely to have a significant adverse effect on the supply, distribution, or use of energy in the United States. The Administrator of OIRA has not designated the final rule as a significant energy action. For additional discussion of the anticipated economic impact of this rulemaking, please review the RIA posted in the rulemaking docket.
Anyone may search the electronic form of all comments received for any of our dockets. You may review DOT's complete Privacy Act Statement
Executive Order 13609 (“Promoting International Regulatory Cooperation”)
Similarly, the Trade Agreements Act of 1979 (Pub. L. 96–39), as amended by the Uruguay Round Agreements Act (Pub. L. 103–465), prohibits Federal agencies from establishing any standards or engaging in related activities that create unnecessary obstacles to the foreign commerce of the United States. For purposes of these requirements, Federal agencies may participate in the establishment of international standards, so long as the standards have a legitimate domestic objective, such as providing for safety, and do not operate to exclude imports that meet this objective. The statute also requires consideration of international standards and, where appropriate, that they be the basis for U.S. standards.
PHMSA participates in the establishment of international standards to protect the safety of the American public. PHMSA has assessed the effects of the rulemaking and determined that it will not cause unnecessary obstacles to foreign trade.
DOT Order 5610.2(b) and Executive Orders 12898 (“Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations”),
PHMSA has evaluated this final rule under DOT Order 5610.2(b) and the Executive Orders listed above and determined it would not cause disproportionately high and adverse human health and environmental effects on minority populations, low-income populations, and other underserved and disadvantaged communities. The rulemaking is facially neutral and national in scope; it is neither directed toward a particular population, region, or community, nor is it expected to adversely impact any particular population, region, or community. And insofar as PHMSA expects the rulemaking would reduce the safety and environmental risks associated with natural gas transmission pipelines, many of which are located in the vicinity of environmental justice communities,
Corrosion control, Incorporation by reference, Installation of pipe in a ditch, Integrity management, Internal inspection device, Management of change, Pipeline safety, Repair criteria, Surveillance.
In consideration of the foregoing, PHMSA amends 49 CFR part 192 as follows:
30 U.S.C. 185(w)(3), 49 U.S.C. 5103, 60101
The additions and revision read as follows:
(1) At a metering location;
(2) A pressure reduction location; or
(3) Where there is a reduction in the volume of gas, such as a lateral off a transmission line.
(1) Transports gas from a gathering pipeline or storage facility to a distribution center, storage facility, or large volume customer that is not down-stream from a distribution center;
(2) Has an MAOP of 20 percent or more of SMYS;
(3) Transports gas within a storage field; or
(4) Is voluntarily designated by the operator as a transmission pipeline.
Note 1 to
(1) Was formed in the field during construction such that the inside radius of the bend has one or more ripples with:
(i) An amplitude greater than or equal to 1.5 times the wall thickness of the pipe, measured from peak to valley of the ripple; or
(ii) With ripples less than 1.5 times the wall thickness of the pipe and with a wrinkle length (peak to peak) to wrinkle height (peak to valley) ratio under 12.
(2)(i) If the length of the wrinkle bend cannot be reliably determined, then wrinkle bend means a bend in the pipe where (h/D)*100 exceeds 2 when S is less than 37,000 psi (255 MPa), where (h/D)*100 exceeds for psi [ for MPa] when S is greater than 37,000 psi (255 MPa) but less than 47,000 psi (324 MPa), and where (h/D)*100 exceeds 1 when S is 47,000 psi (324 MPa) or more.
(ii) Where:
(A) D = Outside diameter of the pipe, in. (mm);
(B) h = Crest-to-trough height of the ripple, in. (mm); and
(C) S = Maximum operating hoop stress, psi (S/145, MPa).
The revisions and additions read as follows:
(a) Certain material is incorporated by reference into this part with the approval of the Director of the Federal Register under 5 U.S.C. 552(a) and 1 CFR part 51. All approved material is available for inspection at the Office of Pipeline Safety, Pipeline and Hazardous Materials Safety Administration, 1200 New Jersey Avenue SE, Washington, DC 20590, 202–366–4046,
(c) * * *
(6) ASME/ANSI B31.8S–2004, “Supplement to B31.8 on Managing System Integrity of Gas Pipelines,” approved January 14, 2005, (ASME/ANSI B31.8S), IBR approved for §§ 192.13(d); 192.714(c) and (d); 192.903 note to
(h) * * *
(2) NACE SP0204–2008, Standard Practice, “Stress Corrosion Cracking (SCC) Direct Assessment Methodology,” reaffirmed September 18, 2008, (NACE SP0204); IBR approved for §§ 192.923(b); 192.929(b) introductory text, (b)(1) through (3), (b)(5) introductory text, and (b)(5)(i).
(3) NACE SP0206–2006, Standard Practice, “Internal Corrosion Direct Assessment Methodology for Pipelines Carrying Normally Dry Natural Gas (DG–ICDA),” approved December 1, 2006, (NACE SP0206), IBR approved for §§ 192.923(b); 192.927(b), (c) introductory text, and (c)(1) through (4).
(4) ANSI/NACE SP0502–2010, Standard Practice, “Pipeline External Corrosion Direct Assessment Methodology,” revised June 24, 2010, (NACE SP0502), IBR approved for §§ 192.319(f); 192.461(h); 192.923(b); 192.925(b); 192.931(d); 192.935(b); and 192.939(a).
(b)
(c)
(d) * * *
(1) If a line is new, replaced, relocated, or otherwise changed, the design, installation, construction, initial inspection, and initial testing must be in accordance with requirements of this part applicable to transmission lines. Compliance with §§ 192.67, 192.127, 192.179(e) and (f), 192.205, 192.227(c), 192.285(e), 192.319(d) through (g), 192.506, 192.634, and 192.636 is not required;
(2) If the pipeline is metallic, control corrosion according to requirements of subpart I of this part applicable to transmission lines, except the requirements in §§ 192.461(f) through (i), 192.465(d) and (f), 192.473(c), 192.478, 192.485(c), and 192.493;
(e) * * *
(1) * * *
(i) Except as provided in paragraph (h) of this section for pipe and components made with composite materials, the design, installation, construction, initial inspection, and initial testing of a new, replaced, relocated, or otherwise changed Type C gathering line, must be done in accordance with the requirements in subparts B through G and J of this part applicable to transmission lines. Compliance with §§ 192.67, 192.127, 192.179(e) and (f), 192.205, 192.227(c), 192.285(e), 192.319(d) through (g), 192.506, 192.634, and 192.636 is not required;
(ii) If the pipeline is metallic, control corrosion according to requirements of subpart I of this part applicable to transmission lines, except the requirements in §§ 192.461(f) through (i), 192.465(d) and (f), 192.473(c), 192.478, 192.485(c), and 192.493;
(d) Each operator of an onshore gas transmission pipeline must evaluate and mitigate, as necessary, significant changes that pose a risk to safety or the environment through a management of change process. Each operator of an onshore gas transmission pipeline must develop and follow a management of change process, as outlined in ASME/ANSI B31.8S, section 11 (incorporated by reference,
(c) Unless otherwise specified, if an operator submits, pursuant to § 192.8, § 192.9, § 192.13, § 192.179, § 192.319, § 192.461, § 192.506, § 192.607, § 192.619, § 192.624, § 192.632, § 192.634, § 192.636, § 192.710, § 192.712, § 192.714, § 192.745, § 192.917, § 192.921, § 192.927, § 192.933, or § 192.937, a notification for use of a different integrity assessment method, analytical method, compliance period, sampling approach, pipeline material, or technique (
(d) Promptly after a ditch for an onshore steel transmission line is backfilled (if the construction project involves 1,000 feet or more of continuous backfill length along the
(e) An operator must notify PHMSA in accordance with § 192.18 at least 90 days in advance of using other technology to assess integrity of the coating under paragraph (d) of this section.
(f) An operator must repair any coating damage classified as severe (voltage drop greater than 60 percent for DCVG or 70 dBµV for ACVG) in accordance with section 4 of NACE SP0502 (incorporated by reference,
(g) An operator of an onshore steel transmission pipeline must make and retain for the life of the pipeline records documenting the coating assessment findings and remedial actions performed under paragraphs (d) through (f) of this section.
(a) * * *
(4) Have sufficient strength to resist damage due to handling (including, but not limited to, transportation, installation, boring, and backfilling) and soil stress; and
(f) Promptly after the backfill of an onshore steel transmission pipeline ditch following repair or replacement (if the repair or replacement results in 1,000 feet or more of backfill length along the pipeline), but no later than 6 months after the backfill, the operator must perform an assessment to assess any coating damage and ensure integrity of the coating using direct current voltage gradient (DCVG), alternating current voltage gradient (ACVG), or other technology that provides comparable information about the integrity of the coating. Coating surveys must be conducted, except in locations where effective coating surveys are precluded by geographical, technical, or safety reasons.
(g) An operator must notify PHMSA in accordance with § 192.18 at least 90 days in advance of using other technology to assess integrity of the coating under paragraph (f) of this section.
(h) An operator of an onshore steel transmission pipeline must develop a remedial action plan and apply for any necessary permits within 6 months of completing the assessment that identified the deficiency. The operator must repair any coating damage classified as severe (voltage drop greater than 60 percent for DCVG or 70 dBµV for ACVG) in accordance with section 4 of NACE SP0502 (incorporated by reference,
(i) An operator of an onshore steel transmission pipeline must make and retain for the life of the pipeline records documenting the coating assessment findings and remedial actions performed under paragraphs (f) through (h) of this section.
(d) Each operator must promptly correct any deficiencies indicated by the inspection and testing required by paragraphs (a) through (c) of this section. For onshore gas transmission pipelines, each operator must develop a remedial action plan and apply for any necessary permits within 6 months of completing the inspection or testing that identified the deficiency. Remedial action must be completed promptly, but no later than the earliest of the following: prior to the next inspection or test interval required by this section; within 1 year, not to exceed 15 months, of the inspection or test that identified the deficiency; or as soon as practicable, not to exceed 6 months, after obtaining any necessary permits.
(f) An operator must determine the extent of the area with inadequate cathodic protection for onshore gas transmission pipelines where any annual test station reading (pipe-to-soil potential measurement) indicates cathodic protection levels below the required levels in appendix D to this part.
(1) Gas transmission pipeline operators must investigate and mitigate any non-systemic or location-specific causes.
(2) To address systemic causes, an operator must conduct close interval surveys in both directions from the test station with a low cathodic protection reading at a maximum interval of approximately 5 feet or less. An operator must conduct close interval surveys unless it is impractical based upon geographical, technical, or safety reasons. An operator must complete close interval surveys required by this section with the protective current interrupted unless it is impractical to do so for technical or safety reasons. An operator must remediate areas with insufficient cathodic protection levels, or areas where protective current is found to be leaving the pipeline, in accordance with paragraph (d) of this section. An operator must confirm the restoration of adequate cathodic protection following the implementation of remedial actions undertaken to mitigate systemic causes of external corrosion.
(c) For onshore gas transmission pipelines, the program required by paragraph (a) of this section must include:
(1) Interference surveys for a pipeline system to detect the presence and level of any electrical stray current. Interference surveys must be conducted when potential monitoring indicates a significant increase in stray current, or when new potential stray current sources are introduced, such as through co-located pipelines, structures, or high voltage alternating current (HVAC) power lines, including from additional generation, a voltage up-rating, additional lines, new or enlarged power substations, or new pipelines or other structures;
(2) Analysis of the results of the survey to determine the cause of the interference and whether the level could cause significant corrosion, impede safe operation, or adversely affect the environment or public;
(3) Development of a remedial action plan to correct any instances where interference current is greater than or equal to 100 amps per meter squared or if it impedes the safe operation of a pipeline, or if it may cause a condition that would adversely impact the environment or the public; and
(4) Application for any necessary permits within 6 months of completing the interference survey that identified
(a) Each operator of an onshore gas transmission pipeline with corrosive constituents in the gas being transported must develop and implement a monitoring and mitigation program to mitigate the corrosive effects, as necessary. Potentially corrosive constituents include, but are not limited to: carbon dioxide, hydrogen sulfide, sulfur, microbes, and liquid water, either by itself or in combination. An operator must evaluate the partial pressure of each corrosive constituent, where applicable, by itself or in combination, to evaluate the effect of the corrosive constituents on the internal corrosion of the pipe and implement mitigation measures as necessary.
(b) The monitoring and mitigation program described in paragraph (a) of this section must include:
(1) The use of gas-quality monitoring methods at points where gas with potentially corrosive contaminants enters the pipeline to determine the gas stream constituents.
(2) Technology to mitigate the potentially corrosive gas stream constituents. Such technologies may include product sampling, inhibitor injections, in-line cleaning pigging, separators, or other technology that mitigates potentially corrosive effects.
(3) An evaluation at least once each calendar year, at intervals not to exceed 15 months, to ensure that potentially corrosive gas stream constituents are effectively monitored and mitigated.
(c) An operator must review its monitoring and mitigation program at least once each calendar year, at intervals not to exceed 15 months, and based on the results of its monitoring and mitigation program, implement adjustments, as necessary.
(c)
(c) Following an extreme weather event or natural disaster that has the likelihood of damage to pipeline facilities by the scouring or movement of the soil surrounding the pipeline or movement of the pipeline, such as a named tropical storm or hurricane; a flood that exceeds the river, shoreline, or creek high-water banks in the area of the pipeline; a landslide in the area of the pipeline; or an earthquake in the area of the pipeline, an operator must inspect all potentially affected onshore transmission pipeline facilities to detect conditions that could adversely affect the safe operation of that pipeline.
(1) An operator must assess the nature of the event and the physical characteristics, operating conditions, location, and prior history of the affected pipeline in determining the appropriate method for performing the initial inspection to determine the extent of any damage and the need for the additional assessments required under this paragraph (c)(1).
(2) An operator must commence the inspection required by paragraph (c) of this section within 72 hours after the point in time when the operator reasonably determines that the affected area can be safely accessed by personnel and equipment, and the personnel and equipment required to perform the inspection as determined by paragraph (c)(1) of this section are available. If an operator is unable to commence the inspection due to the unavailability of personnel or equipment, the operator must notify the appropriate PHMSA Region Director as soon as practicable.
(3) An operator must take prompt and appropriate remedial action to ensure the safe operation of a pipeline based on the information obtained as a result of performing the inspection required by paragraph (c) of this section. Such actions might include, but are not limited to:
(i) Reducing the operating pressure or shutting down the pipeline;
(ii) Modifying, repairing, or replacing any damaged pipeline facilities;
(iii) Preventing, mitigating, or eliminating any unsafe conditions in the pipeline right-of-way;
(iv) Performing additional patrols, surveys, tests, or inspections;
(v) Implementing emergency response activities with Federal, State, or local personnel; or
(vi) Notifying affected communities of the steps that can be taken to ensure public safety.
(f)
(b) * * *
(1)(i) Non-integrity management repairs for gathering lines and offshore transmission lines: For gathering lines subject to this section in accordance with § 192.9 and for offshore transmission lines, an operator must make permanent repairs as soon as feasible.
(ii) Non-integrity management repairs for onshore transmission lines: Except for gathering lines exempted from this section in accordance with § 192.9 and offshore transmission lines, after May 24, 2023, whenever an operator discovers any condition that could adversely affect the safe operation of a pipeline segment not covered by an integrity management program under subpart O of this part, it must correct the condition as prescribed in § 192.714.
(b)
(1) If an operator would choose to use a remaining strength calculation method that could provide a less conservative result than the methods listed in
(2) The notification provided for by paragraph (b)(1) of this section must include a comparison of its predicted failure pressures to R–STRENG or ASME/ANSI B31G, all burst pressure tests used, and any other technical reviews used to qualify the calculation method(s) for varying corrosion profiles.
(c)
(1) Identify and evaluate potential threats to the pipe segment in the vicinity of the anomaly or defect, including ground movement, external loading, fatigue, cracking, and corrosion.
(2) Review high-resolution magnetic flux leakage (HR–MFL) high-resolution deformation, inertial mapping, and crack detection inline inspection data for damage in the dent area and any associated weld region, including available data from previous inline inspections.
(3) Perform pipeline curvature-based strain analysis using recent HR-Deformation inspection data.
(4) Compare the dent profile between the most recent and previous in-line inspections to identify significant changes in dent depth and shape.
(5) Identify and quantify all previous and present significant loads acting on the dent.
(6) Evaluate the strain level associated with the anomaly or defect and any nearby welds using Finite Element Analysis, or other technology in accordance with this section. Using Finite Element Analysis to quantify the dent strain, and then estimating and evaluating the damage using the Strain Limit Damage (SLD) and Ductile Failure Damage Indicator (DFDI) at the dent, are appropriate evaluation methods.
(7) The analyses performed in accordance with this section must account for material property uncertainties, model inaccuracies, and inline inspection tool sizing tolerances.
(8) Dents with a depth greater than 10 percent of the pipe outside diameter or with geometric strain levels that exceed the lessor of 10 percent or exceed the critical strain for the pipe material properties must be remediated in accordance with § 192.713, § 192.714, or § 192.933, as applicable.
(9) Using operational pressure data, a valid fatigue life prediction model that is appropriate for the pipeline segment, and assuming a reassessment safety factor of 5 or greater for the assessment interval, estimate the fatigue life of the dent by Finite Element Analysis or other analytical technique that is technically appropriate for dent assessment and reassessment intervals in accordance with this section. Multiple dent or other fatigue models must be used for the evaluation as a part of the engineering critical assessment.
(10) If the dent or mechanical damage is suspected to have cracks, then a crack growth rate assessment is required to ensure adequate life for the dent with crack(s) until remediation or the dent with crack(s) must be evaluated and remediated in accordance with the criteria and timing requirements in § 192.713, § 192.714, or § 192.933, as applicable.
(11) An operator using an engineering critical assessment procedure, other technologies, or techniques to comply with paragraph (c) of this section must submit advance notification to PHMSA, with the relevant procedures, in accordance with § 192.18.
(h)
(1) If the anomaly is in an HCA, the operator must reassess the anomaly within a maximum of 7 years in accordance with § 192.939(a), unless the safety factor is expected to go below what is specified in paragraph (c) or (d) of this section.
(2) If the anomaly is outside of an HCA, the operator must perform a reassessment of the anomaly within a maximum of 10 years in accordance with § 192.710(b), unless the anomaly safety factor is expected to go below what is specified in paragraph (c) or (d) of this section.
(a)
(b)
(c)
(1) Removed by cutting out and replacing a cylindrical piece of pipe that will permanently restore the pipeline's MAOP based on the use of § 192.105 and the design factors for the class location in which it is located; or
(2) Repaired by a method, shown by technically proven engineering tests and analyses, that will permanently restore the pipeline's MAOP based upon the determined predicted failure pressure times the design factor for the class location in which it is located.
(d)
(1)
(i) Metal loss anomalies where a calculation of the remaining strength of the pipe at the location of the anomaly
(ii) A dent located between the 8 o'clock and 4 o'clock positions (upper
(iii) Metal loss greater than 80 percent of nominal wall regardless of dimensions.
(iv) Metal loss preferentially affecting a detected longitudinal seam, if that seam was formed by direct current, low-frequency or high-frequency electric resistance welding, electric flash welding, or has a longitudinal joint factor less than 1.0, and the predicted failure pressure determined in accordance with § 192.712(d) is less than 1.25 times the MAOP.
(v) A crack or crack-like anomaly meeting any of the following criteria:
(A) Crack depth plus any metal loss is greater than 50 percent of pipe wall thickness;
(B) Crack depth plus any metal loss is greater than the inspection tool's maximum measurable depth; or
(C) The crack or crack-like anomaly has a predicted failure pressure, determined in accordance with § 192.712(d), that is less than 1.25 times the MAOP.
(vi) An indication or anomaly that, in the judgment of the person designated by the operator to evaluate the assessment results, requires immediate action.
(2)
(i) A smooth dent located between the 8 o'clock and 4 o'clock positions (upper
(ii) A dent with a depth greater than 2 percent of the pipeline diameter (0.250 inches in depth for a pipeline diameter less than NPS 12) that affects pipe curvature at a girth weld or at a longitudinal or helical (spiral) seam weld, unless an engineering analysis performed in accordance with § 192.712(c) demonstrates critical strain levels are not exceeded.
(iii) A dent located between the 4 o'clock and 8 o'clock positions (lower
(iv) For metal loss anomalies, a calculation of the remaining strength of the pipe shows a predicted failure pressure, determined in accordance with § 192.712(b) at the location of the anomaly, of less than 1.39 times the MAOP for Class 2 locations, or less than 1.50 times the MAOP for Class 3 and 4 locations. For metal loss anomalies in Class 1 locations with a predicted failure pressure greater than 1.1 times MAOP, an operator must follow the remediation schedule specified in ASME/ANSI B31.8S (incorporated by reference,
(v) Metal loss that is located at a crossing of another pipeline, is in an area with widespread circumferential corrosion, or could affect a girth weld, and that has a predicted failure pressure, determined in accordance with § 192.712(b), less than 1.39 times the MAOP for Class 1 locations or where Class 2 locations contain Class 1 pipe that has been uprated in accordance with § 192.611, or less than 1.50 times the MAOP for all other Class 2 locations and all Class 3 and 4 locations.
(vi) Metal loss preferentially affecting a detected longitudinal seam, if that seam was formed by direct current, low-frequency or high-frequency electric resistance welding, electric flash welding, or that has a longitudinal joint factor less than 1.0, and where the predicted failure pressure determined in accordance with § 192.712(d) is less than 1.39 times the MAOP for Class 1 locations or where Class 2 locations contain Class 1 pipe that has been uprated in accordance with § 192.611, or less than 1.50 times the MAOP for all other Class 2 locations and all Class 3 and 4 locations.
(vii) A crack or crack-like anomaly that has a predicted failure pressure, determined in accordance with § 192.712(d), that is less than 1.39 times the MAOP for Class 1 locations or where Class 2 locations contain Class 1 pipe that has been uprated in accordance with § 192.611, or less than 1.50 times the MAOP for all other Class 2 locations and all Class 3 and 4 locations.
(3)
(i) A dent that is located between the 4 o'clock and 8 o'clock positions (bottom
(ii) A dent located between the 8 o'clock and 4 o'clock positions (upper
(iii) A dent with a depth greater than 2 percent of the pipeline diameter (0.250 inches in depth for a pipeline diameter less than NPS 12) that affects pipe curvature at a girth weld or longitudinal or helical (spiral) seam weld, and where an engineering analysis of the dent and girth or seam weld, performed in accordance with § 192.712(c), demonstrates critical strain levels are not exceeded. These analyses must consider weld mechanical properties.
(iv) A dent that has metal loss, cracking, or a stress riser, and where an engineering analysis performed in accordance with § 192.712(c) demonstrates critical strain levels are not exceeded.
(v) Metal loss preferentially affecting a detected longitudinal seam, if that seam was formed by direct current, low-frequency or high-frequency electric resistance welding, electric flash welding, or that has a longitudinal joint factor less than 1.0, and where the predicted failure pressure, determined in accordance with § 192.712(d), is greater than or equal to 1.39 times the MAOP for Class 1 locations or where Class 2 locations contain Class 1 pipe that has been uprated in accordance with § 192.611, or is greater than or equal to 1.50 times the MAOP for all other Class 2 locations and all Class 3 and 4 locations.
(vi) A crack or crack-like anomaly for which the predicted failure pressure, determined in accordance with § 192.712(d), is greater than or equal to 1.39 times the MAOP for Class 1 locations or where Class 2 locations contain Class 1 pipe that has been uprated in accordance with § 192.611, or is greater than or equal to 1.50 times the MAOP for all other Class 2 locations and all Class 3 and 4 locations.
(e)
(i) A level not exceeding 80 percent of the operating pressure at the time the condition was discovered;
(ii) A level not exceeding the predicted failure pressure times the design factor for the class location in which the affected pipeline is located; or
(iii) A level not exceeding the predicted failure pressure divided by 1.1.
(2) An operator must notify PHMSA in accordance with § 192.18 if it cannot meet the schedule for evaluation and remediation required under paragraph (c) or (d) of this section and cannot provide safety through a temporary reduction in operating pressure or other action. Notification to PHMSA does not alleviate an operator from the evaluation, remediation, or pressure reduction requirements in this section.
(3) When a pressure reduction, in accordance with paragraph (e) of this section, exceeds 365 days, an operator must notify PHMSA in accordance with § 192.18 and explain the reasons for the remediation delay. This notice must include a technical justification that the continued pressure reduction will not jeopardize the integrity of the pipeline.
(4) An operator must document and keep records of the calculations and decisions used to determine the reduced operating pressure and the implementation of the actual reduced operating pressure for a period of 5 years after the pipeline has been repaired.
(f)
(g)
(h)
(k) A management of change process as required by § 192.13(d).
(a)
(1) Time dependent threats such as internal corrosion, external corrosion, and stress corrosion cracking;
(2) Stable threats, such as manufacturing, welding, fabrication, or construction defects;
(3) Time independent threats, such as third party damage, mechanical damage, incorrect operational procedure, weather related and outside force damage, to include consideration of seismicity, geology, and soil stability of the area; and
(4) Human error, such as operational or maintenance mishaps, or design and construction mistakes.
(b)
Operators must begin to integrate all pertinent data elements specified in this section starting on May 24, 2023, with all available attributes integrated by February 26, 2024. An operator may request an extension of up to 1 year by submitting a notification to PHMSA at least 90 days before February 26, 2024, in accordance with § 192.18. The notification must include a reasonable and technically justified basis, an up-to-date plan for completing all actions required by this paragraph (b), the reason for the requested extension, current safety or mitigation status of the pipeline segment, the proposed completion date, and any needed temporary safety measures to mitigate the impact on safety. An operator must gather and evaluate the set of data listed in paragraph (b)(1) of this section. The evaluation must analyze both the covered segment and similar non-covered segments, and it must:
(1) Integrate pertinent information about pipeline attributes to ensure safe operation and pipeline integrity, including information derived from operations and maintenance activities required under this part, and other relevant information, including, but not limited to:
(i) Pipe diameter, wall thickness, seam type, and joint factor;
(ii) Manufacturer and manufacturing date, including manufacturing data and records;
(iii) Material properties including, but not limited to, grade, specified minimum yield strength (SMYS), and ultimate tensile strength;
(iv) Equipment properties;
(v) Year of installation;
(vi) Bending method;
(vii) Joining method, including process and inspection results;
(viii) Depth of cover;
(ix) Crossings, casings (including if shorted), and locations of foreign line crossings and nearby high voltage power lines;
(x) Hydrostatic or other pressure test history, including test pressures and test leaks or failures, failure causes, and repairs;
(xi) Pipe coating methods (both manufactured and field applied), including the method or process used to apply girth weld coating, inspection reports, and coating repairs;
(xii) Soil, backfill;
(xiii) Construction inspection reports, including but not limited to:
(A) Post backfill coating surveys; and
(B) Coating inspection (“jeeping” or “holiday inspection”) reports;
(xiv) Cathodic protection installed, including, but not limited to, type and location;
(xv) Coating type;
(xvi) Gas quality;
(xvii) Flow rate;
(xviii) Normal maximum and minimum operating pressures, including maximum allowable operating pressure (MAOP);
(xix) Class location;
(xx) Leak and failure history, including any in-service ruptures or leaks from incident reports, abnormal operations, safety-related conditions (both reported and unreported) and failure investigations required by § 192.617, and their identified causes and consequences;
(xxi) Coating condition;
(xxii) Cathodic protection (CP) system performance;
(xxiii) Pipe wall temperature;
(xxiv) Pipe operational and maintenance inspection reports, including, but not limited to:
(A) Data gathered through integrity assessments required under this part, including, but not limited to, in-line inspections, pressure tests, direct assessments, guided wave ultrasonic testing, or other methods;
(B) Close interval survey (CIS) and electrical survey results;
(C) CP rectifier readings;
(D) CP test point survey readings and locations;
(E) Alternating current, direct current, and foreign structure interference surveys;
(F) Pipe coating surveys, including surveys to detect coating damage, disbonded coatings, or other conditions that compromise the effectiveness of corrosion protection, including, but not limited to, direct current voltage gradient or alternating current voltage gradient inspections;
(G) Results of examinations of exposed portions of buried pipelines (
(H) Stress corrosion cracking excavations and findings;
(I) Selective seam weld corrosion excavations and findings;
(J) Any indication of seam cracking; and
(K) Gas stream sampling and internal corrosion monitoring results, including cleaning pig sampling results;
(xxv) External and internal corrosion monitoring;
(xxvi) Operating pressure history and pressure fluctuations, including an analysis of effects of pressure cycling and instances of exceeding MAOP by any amount;
(xxvii) Performance of regulators, relief valves, pressure control devices, or any other device to control or limit operating pressure to less than MAOP;
(xxviii) Encroachments;
(xxix) Repairs;
(xxx) Vandalism;
(xxxi) External forces;
(xxxii) Audits and reviews;
(xxxiii) Industry experience for incident, leak, and failure history;
(xxxiv) Aerial photography; and
(xxxv) Exposure to natural forces in the area of the pipeline, including seismicity, geology, and soil stability of the area.
(2) Use validated information and data as inputs, to the maximum extent practicable. If input is obtained from subject matter experts (SME), an operator must employ adequate control measures to ensure consistency and accuracy of information. Control measures may include training of SMEs or the use of outside technical experts (independent expert reviews) to assess the quality of processes and the judgment of SMEs. An operator must document the names and qualifications of the individuals who approve SME inputs used in the current risk assessment.
(3) Identify and analyze spatial relationships among anomalous information (
(4) Analyze the data for interrelationships among pipeline integrity threats, including combinations of applicable risk factors that increase the likelihood of incidents or increase the potential consequences of incidents.
(c)
(1) Analyze how a potential failure could affect high consequence areas;
(2) Analyze the likelihood of failure due to each individual threat and each unique combination of threats that interact or simultaneously contribute to risk at a common location;
(3) Account for, and compensate for, uncertainties in the model and the data used in the risk assessment; and
(4) Evaluate the potential risk reduction associated with candidate risk reduction activities, such as preventive and mitigative measures, and reduced anomaly remediation and assessment intervals.
(5) In conjunction with § 192.917(b), an operator may request an extension of up to 1 year for the requirements of this paragraph by submitting a notification to PHMSA at least 90 days before February 26, 2024, in accordance with § 192.18. The notification must include a reasonable and technically justified basis, an up-to-date plan for completing all actions required by this paragraph (c)(5), the reason for the requested extension, current safety or mitigation status of the pipeline segment, the proposed completion date, and any needed temporary safety measures to mitigate the impact on safety.
(d)
(b) * * *
(2) Section 192.927 and NACE SP0206 (incorporated by reference,
(3) Section 192.929 and NACE SP0204 (incorporated by reference,
(b)
(c)
(1)
(2)
(3)
(i) Evaluate the severity of the defect (remaining strength) and remediate the defect in accordance with § 192.933 if the condition is in a covered segment, or in accordance with §§ 192.485 and 192.714 if the condition is not in a covered segment;
(ii) Expand the detailed examination program to determine all locations that have internal corrosion within the ICDA region, and accurately characterize the nature, extent, and root cause of the internal corrosion. In cases where the internal corrosion was identified within the ICDA region but outside the covered segment, the expanded detailed examination program must also include at least two detailed examinations within each covered segment associated with the ICDA region, at the location within the covered segment(s) most likely to have internal corrosion. One location must be the low point (
(iii) Expand the detailed examination program to evaluate the potential for internal corrosion in all pipeline segments (both covered and non-covered) in the operator's pipeline system with similar characteristics to the ICDA region in which the corrosion was found and remediate identified instances of internal corrosion in accordance with either § 192.933 or §§ 192.485 and 192.714, as appropriate.
(4)
(i) An evaluation of the effectiveness of ICDA as an assessment method for addressing internal corrosion and determining whether a covered segment should be reassessed at more frequent intervals than those specified in § 192.939. An operator must carry out this evaluation within 1 year of conducting an ICDA;
(ii) Validation of the flow modeling calculations by comparison of actual locations of discovered internal corrosion with locations predicted by the model (if the flow model cannot be validated, then ICDA is not feasible for the segment); and
(iii) Continuous monitoring of each ICDA region that contains a covered segment where internal corrosion has been identified by using techniques such as coupons or ultrasonic (UT) sensors or electronic probes, and by periodically drawing off liquids at low points and chemically analyzing the liquids for the presence of corrosion products. An operator must base the frequency of the monitoring and liquid analysis on results from all integrity assessments that have been conducted in accordance with the requirements of this subpart and risk factors specific to the ICDA region.
At a minimum, the monitoring frequency must be two times each calendar year, but at intervals not exceeding 7
(A) Conduct excavations of, and detailed examinations at, locations downstream from where the electrolytes might have entered the pipe to investigate and accurately characterize the nature, extent, and root cause of the corrosion, including the monitoring and mitigation requirements of § 192.478; or
(B) Assess the covered segment using another integrity assessment method allowed by this subpart.
(5)
(i) Criteria an operator will apply in making key decisions (including, but not limited to, ICDA feasibility, definition of ICDA regions and sub-regions, and conditions requiring excavation) in implementing each stage of the ICDA process; and
(ii) Provisions that the analysis be carried out on the entire pipeline in which covered segments are present, except that application of the remediation criteria of § 192.933 may be limited to covered segments.
(a)
(b)
(1)
(i) The effects of a carbonate-bicarbonate environment, including the implications of any factors that promote the production of a carbonate-bicarbonate environment, such as soil temperature, moisture, the presence or generation of carbon dioxide, or cathodic protection (CP);
(ii) The effects of cyclic loading conditions on the susceptibility and propagation of SCC in both high-pH and near-neutral-pH environments;
(iii) The effects of variations in applied CP, such as overprotection, CP loss for extended periods, and high negative potentials;
(iv) The effects of coatings that shield CP when disbonded from the pipe; and
(v) Other factors that affect the mechanistic properties associated with SCC, including, but not limited to, historical and present-day operating pressures, high tensile residual stresses, flowing product temperatures, and the presence of sulfides.
(2)
(3)
(4)
(i) Removing the pipe with SCC; remediating the pipe with a Type B sleeve; performing hydrostatic testing in accordance with paragraph (b)(4)(ii) of this section; or by grinding out the SCC defect and repairing the pipe. If an operator uses grinding for repair, the operator must also perform the following as a part of the repair procedure: nondestructive testing for any remaining cracks or other defects; a measurement of the remaining wall thickness; and a determination of the remaining strength of the pipe at the repair location that is performed in accordance with § 192.712 and that meets the design requirements of §§ 192.111 and 192.112, as applicable. The pipe and material properties an operator uses in remaining strength calculations must be documented in traceable, verifiable, and complete records. If such records are not available, an operator must base the pipe and material properties used in the remaining strength calculations on properties determined and documented in accordance with § 192.607, if applicable.
(ii) Performing a spike pressure test in accordance with § 192.506 based upon the class location of the pipeline segment. The MAOP must be no greater than the test pressure specified in
(5)
(i) The evaluation of discovered crack clusters during the direct examination step in accordance with NACE SP0204, sections 5.3.5.7, 5.4, and 5.5 (incorporated by reference,
(ii) Conditions conducive to the creation of a carbonate-bicarbonate environment;
(iii) Conditions in the application (or loss) of CP that can create or exacerbate SCC;
(iv) Operating temperature and pressure conditions, including operating stress levels on the pipe;
(v) Cyclic loading conditions;
(vi) Mechanistic conditions that influence crack initiation and growth rates;
(vii) The effects of interacting crack clusters;
(viii) The presence of sulfides; and
(ix) Disbonded coatings that shield CP from the pipe.
(a)
(1)
(A) A level not exceeding 80 percent of the operating pressure at the time the condition was discovered;
(B) A level not exceeding the predicted failure pressure times the design factor for the class location in which the affected pipeline is located; or
(C) A level not exceeding the predicted failure pressure divided by 1.1.
(ii) An operator must determine the predicted failure pressure in accordance with § 192.712. An operator must notify PHMSA in accordance with § 192.18 if it cannot meet the schedule for evaluation and remediation required under paragraph (c) or (d) of this section and cannot provide safety through a temporary reduction in operating pressure or other action. The operator must document and keep records of the calculations and decisions used to determine the reduced operating pressure, and the implementation of the actual reduced operating pressure, for a period of 5 years after the pipeline has been remediated.
(b)
(d)
(i) A metal loss anomaly where a calculation of the remaining strength of the pipe shows a predicted failure pressure determined in accordance with § 192.712(b) less than or equal to 1.1 times the MAOP at the location of the anomaly.
(ii) A dent located between the 8 o'clock and 4 o'clock positions (upper
(iii) Metal loss greater than 80 percent of nominal wall regardless of dimensions.
(iv) Metal loss preferentially affecting a detected longitudinal seam, if that seam was formed by direct current, low-frequency or high-frequency electric resistance welding, electric flash welding, or with a longitudinal joint factor less than 1.0, and where the predicted failure pressure determined in accordance with § 192.712(d) is less than 1.25 times the MAOP.
(v) A crack or crack-like anomaly meeting any of the following criteria:
(A) Crack depth plus any metal loss is greater than 50 percent of pipe wall thickness;
(B) Crack depth plus any metal loss is greater than the inspection tool's maximum measurable depth; or
(C) The crack or crack-like anomaly has a predicted failure pressure,
(vi) An indication or anomaly that, in the judgment of the person designated by the operator to evaluate the assessment results, requires immediate action.
(2)
(i) A smooth dent located between the 8 o'clock and 4 o'clock positions (upper
(ii) A dent with a depth greater than 2 percent of the pipeline diameter (0.250 inches in depth for a pipeline diameter less than NPS 12) that affects pipe curvature at a girth weld or at a longitudinal or helical (spiral) seam weld, unless engineering analyses performed in accordance with § 192.712(c) demonstrate critical strain levels are not exceeded.
(iii) A dent located between the 4 o'clock and 8 o'clock positions (lower
(iv) Metal loss anomalies where a calculation of the remaining strength of the pipe at the location of the anomaly shows a predicted failure pressure, determined in accordance with § 192.712(b), less than 1.39 times the MAOP for Class 2 locations, and less than 1.50 times the MAOP for Class 3 and 4 locations. For metal loss anomalies in Class 1 locations with a predicted failure pressure greater than 1.1 times MAOP, an operator must follow the remediation schedule specified in ASME/ANSI B31.8S (incorporated by reference,
(v) Metal loss that is located at a crossing of another pipeline, or is in an area with widespread circumferential corrosion, or could affect a girth weld, that has a predicted failure pressure, determined in accordance with § 192.712(b), of less than 1.39 times the MAOP for Class 1 locations or where Class 2 locations contain Class 1 pipe that has been uprated in accordance with § 192.611, or less than 1.50 times the MAOP for all other Class 2 locations and all Class 3 and 4 locations.
(vi) Metal loss preferentially affecting a detected longitudinal seam, if that seam was formed by direct current, low-frequency or high-frequency electric resistance welding, electric flash welding, or with a longitudinal joint factor less than 1.0, and where the predicted failure pressure, determined in accordance with § 192.712(d), is less than 1.39 times the MAOP for Class 1 locations or where Class 2 locations contain Class 1 pipe that has been uprated in accordance with § 192.611, or less than 1.50 times the MAOP for all other Class 2 locations and all Class 3 and 4 locations.
(vii) A crack or crack-like anomaly that has a predicted failure pressure, determined in accordance with § 192.712(d), that is less than 1.39 times the MAOP for Class 1 locations or where Class 2 locations contain Class 1 pipe that has been uprated in accordance with § 192.611, or less than 1.50 times the MAOP for all other Class 2 locations and all Class 3 and 4 locations.
(3)
(i) A dent with a depth greater than 6 percent of the pipeline diameter (greater than 0.50 inches in depth for a pipeline diameter less than NPS 12), located between the 4 o'clock position and the 8 o'clock position (bottom
(ii) A dent located between the 8 o'clock and 4 o'clock positions (upper
(iii) A dent with a depth greater than 2 percent of the pipeline diameter (0.250 inches in depth for a pipeline diameter less than NPS 12) that affects pipe curvature at a girth weld or longitudinal or helical (spiral) seam weld, and for which engineering analyses, performed in accordance with § 192.712(c), of the dent and girth or seam weld demonstrate that critical strain levels are not exceeded.
(iv) A dent that has metal loss, cracking, or a stress riser, and where engineering analyses performed in accordance with § 192.712(c) demonstrate critical strain levels are not exceeded.
(v) Metal loss preferentially affecting a detected longitudinal seam, if that seam was formed by direct current, low-frequency or high-frequency electric resistance welding, electric flash welding, or with a longitudinal joint factor less than 1.0, and where the predicted failure pressure, determined in accordance with § 192.712(d), is greater than or equal to 1.39 times the MAOP for Class 1 locations or where Class 2 locations contain Class 1 pipe that has been uprated in accordance with § 192.611, or greater than or equal to 1.50 times the MAOP for all other Class 2 locations and all Class 3 and 4 locations.
(vi) A crack or crack-like anomaly for which the predicted failure pressure, determined in accordance with § 192.712(d), is greater than or equal to 1.39 times the MAOP for Class 1 locations or where Class 2 locations contain Class 1 pipe that has been uprated in accordance with § 192.611, or greater than or equal to 1.50 times the MAOP for all other Class 2 locations and all Class 3 and 4 locations.
(e)
(a)
(i) Correcting the root causes of past incidents to prevent recurrence;
(ii) Establishing and implementing adequate operations and maintenance processes that could increase safety;
(iii) Establishing and deploying adequate resources for the successful execution of preventive and mitigative measures;
(iv) Installing automatic shut-off valves or remote-control valves;
(v) Installing pressure transmitters on both sides of automatic shut-off valves and remote-control valves that communicate with the pipeline control center;
(vi) Installing computerized monitoring and leak detection systems;
(vii) Replacing pipe segments with pipe of heavier wall thickness or higher strength;
(viii) Conducting additional right-of-way patrols;
(ix) Conducting hydrostatic tests in areas where pipe material has quality issues or lost records;
(x) Testing to determine material mechanical and chemical properties for unknown properties that are needed to assure integrity or substantiate MAOP evaluations, including material property tests from removed pipe that is representative of the in-service pipeline;
(xi) Re-coating damaged, poorly performing, or disbonded coatings;
(xii) Performing additional depth-of-cover surveys at roads, streams, and rivers;
(xiii) Remediating inadequate depth-of-cover;
(xiv) Providing additional training to personnel on response procedures and conducting drills with local emergency responders; and
(xv) Implementing additional inspection and maintenance programs.
(2) Operators must document the risk analysis, the preventive and mitigative measures considered, and the basis for implementing or not implementing any preventive and mitigative measures considered, in accordance with § 192.947(d).
(d) * * *
(3) Perform instrumented leak surveys using leak detector equipment at least twice each calendar year, at intervals not exceeding 7
(b) * * *
(1)
(2)
Office of Energy Efficiency and Renewable Energy, Department of Energy.
Supplemental notice of proposed rulemaking and request for comment.
The Energy Policy and Conservation Act, as amended (“EPCA”), prescribes energy conservation standards for various consumer products and certain commercial and industrial equipment, including microwave ovens. EPCA also requires the U.S. Department of Energy (“DOE” or “the Department”) to periodically determine whether more-stringent standards would be technologically feasible and economically justified, and would result in significant energy savings. In this supplemental notice of proposed rulemaking (“SNOPR”), DOE proposes amended energy conservation standards for microwave ovens, and requests comment on these proposed standards and associated analyses and results.
DOE will accept comments, data, and information regarding this SNOPR no later than October 24, 2022. See section VII, “Public Participation,” for details.
Comments regarding the likely competitive impact of the proposed standard should be sent to the Department of Justice contact listed in the
Interested persons are encouraged to submit comments using the Federal eRulemaking Portal at
(1)
(2)
(3)
No telefacsimiles (“faxes”) will be accepted. For detailed instructions on submitting comments and additional information on this process, see section VII of this document.
The docket web page can be found at
EPCA requires the Attorney General to provide DOE a written determination of whether the proposed standard is likely to lessen competition. The U.S. Department of Justice Antitrust Division invites input from market participants and other interested persons with views on the likely competitive impact of the proposed standard. Interested persons may contact the Division at
Dr. Stephanie Johnson, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Office, EE–5B, 1000 Independence Avenue SW, Washington, DC 20585–0121. Email:
Ms. Celia Sher, U.S. Department of Energy, Office of the General Counsel, GC–33, 1000 Independence Avenue SW, Washington, DC 20585–0121. Telephone: (202) 287–6122. Email:
For further information on how to submit a comment, review other public comments and the docket, or participate in the public meeting, contact the Appliance and Equipment Standards Program staff at (202) 287–1445 or by email:
Title III, Part B
Pursuant to EPCA, any new or amended energy conservation standard must be designed to achieve the maximum improvement in energy efficiency that DOE determines is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new or amended standard must result in a significant conservation of energy. (42 U.S.C. 6295(o)(3)(B)) EPCA also provides that not later than 6 years after issuance of any final rule establishing or amending a standard, DOE must publish either a notice of determination that standards for the product do not need to be amended, or a notice of proposed rulemaking (“NOPR”) including new proposed energy conservation standards (proceeding to a final rule, as appropriate). (42 U.S.C. 6295(m))
In accordance with these and other statutory provisions discussed in this document, DOE proposes amended energy conservation standards for microwave ovens. The proposed standards, which are expressed in maximum allowable average standby power, as expressed in watts (“W”), are shown in Table I.1. These proposed standards, if adopted, would apply to all microwave ovens listed in Table I.1 manufactured in, or imported into, the United States starting on the date 3 years after the publication of the final rule for this rulemaking.
Table I.2 presents DOE's evaluation of the economic impacts of the proposed standards on consumers of microwave ovens, as measured by the average life-cycle cost (“LCC”) savings and the simple payback period (“PBP”).
DOE's analysis of the impacts of the proposed standards on consumers is described in section IV.F of this document.
The industry net present value (“INPV”) is the sum of the discounted cash flows to the industry from the base year through the end of the analysis period (2022–2055). Using a real discount rate of 8.5 percent, DOE estimates that the INPV for manufacturers of microwave ovens in the case without amended standards is $1.40 billion in 2021$. Under the proposed standards, the change in INPV is estimated to range from −$34.3 million, which represents a change of −2.5 percent, to no change in INPV. To bring products into compliance with amended standards, it is estimated that the industry would incur total conversion costs of approximately $46.1 million.
DOE's analysis of the impacts of the proposed standards on manufacturers is described in section IV.J of this document. The analytic results of the manufacturer impact analysis (“MIA”) are presented in section V.B.2 of this document.
DOE's analyses indicate that the proposed energy conservation standards for microwave ovens would save a significant amount of energy. Relative to the case without amended standards, the lifetime energy savings for microwave ovens purchased in the 30-year period that begins in the anticipated year of compliance with the amended standards (2026–2055) amount to 0.06 quadrillion British thermal units (“Btu”), or quads.
The cumulative net present value (“NPV”) of total consumer benefits of the proposed standards for microwave ovens ranges from $0.15 billion (at a 7-percent discount rate) to $0.33 (at a 3-percent discount rate). This NPV expresses the estimated total value of future operating-cost savings minus the estimated increased product costs for microwave ovens purchased in 2026–2055.
In addition, the proposed standards for microwave ovens are projected to yield significant environmental benefits. DOE estimates that the proposed standards would result in cumulative emission reductions (over the same period as for energy savings) of 1.86 million metric tons (“Mt”)
DOE estimates the value of climate benefits from a reduction in greenhouse gases (“GHG”) using four different estimates of the social cost of CO
DOE estimated the monetary health benefits of SO
Table I.3 summarizes the economic benefits and costs expected to result from the proposed standards for microwave ovens. There are other important unquantified effects, including certain unquantified climate benefits, unquantified public health benefits from the reduction of toxic air pollutants and other emissions, unquantified energy security benefits, and distributional effects, among others.
The benefits and costs of the proposed standards can also be expressed in terms of annualized values. The monetary values for the total annualized net benefits are (1) the reduced consumer operating costs, minus (2) the increase in product purchase prices and installation costs, plus (3) the value of of climate and health benefits of emission reduction, all annualized.
The national operating savings are domestic private U.S. consumer monetary savings that occur as a result of purchasing the covered products and are measured for the lifetime of microwave ovens shipped in 2026–2055. The benefits associated with reduced emissions achieved as a result of the proposed standards are also calculated based on the lifetime of microwave ovens shipped in 2026–2055. Total benefits for both the 3-percent and 7-percent cases are presented using the average GHG social costs with 3-percent discount rate. Estimates of SC–GHG values are presented for all four discount rates in section V.B.8 of this document.
Table I.4 presents the total estimated monetized benefits and costs associated with the proposed standard, expressed in terms of annualized values. The results under the primary estimate are as follows.
Using a 7-percent discount rate for consumer benefits and costs and health benefits from reduced NO
Using a 3-percent discount rate for all benefits and costs, the estimated cost of the proposed standards is $4.8 million per year in increased product costs, while the estimated annual benefits are $23.3 million in reduced operating costs, $5.2 million in climate benefits, and $9.1 million in health benefits. In this case, the net benefit would amount to $32.7 million per year.
DOE's analysis of the national impacts of the proposed standards is described in sections IV.H, IV.K, and IV.L of this document.
DOE has tentatively concluded that the proposed standards represent the maximum improvement in energy efficiency that is technologically feasible and economically justified, and would result in the significant conservation of energy. Specifically, with regards to technological feasibility, products achieving these standard levels are already commercially available for all product classes covered by this proposal. As for economic justification, DOE's analysis shows that the benefits of the proposed standard exceed the burdens of the proposed standards.
Using a 7-percent discount rate for consumer benefits and costs and health benefits from NO
The significance of energy savings offered by a new or amended energy conservation standard cannot be determined without knowledge of the specific circumstances surrounding a given rulemaking.
As previously mentioned, the proposed standards would result in estimated national energy savings of 0.06 quads FFC, the equivalent of the electricity use of 1.6 million homes in one year. In addition, they are projected to reduce GHG emissions. Based on these findings, DOE has initially determined the energy savings from the proposed standard levels are “significant” within the meaning of 42 U.S.C. 6295(o)(3)(B).
DOE also considered more-stringent energy efficiency levels as potential standards, and is still considering them in this proposed rulemaking. However, DOE has tentatively concluded that the potential benefits of the more-stringent energy efficiency levels would outweigh the projected burdens.
Based on consideration of the public comments DOE receives in response to this document and related information collected and analyzed during the course of this rulemaking effort, DOE may adopt energy efficiency levels presented in this document that are either higher or lower than the proposed standards, or some combination of level(s) that incorporate the proposed standards in part.
The following section briefly discusses the statutory authority underlying this proposed rule, as well as some of the relevant historical background related to the establishment of standards for microwave ovens.
EPCA authorizes DOE to regulate the energy efficiency of a number of consumer products and certain industrial equipment. Title III, Part B of EPCA established the Energy Conservation Program for Consumer Products Other Than Automobiles. These products include kitchen ranges and ovens, which include microwave ovens, the subject of this document. (42 U.S.C. 6292(a)(10)) EPCA prescribed energy conservation standards for these products, and directs DOE to conduct future rulemakings to determine whether to amend these standards. (42 U.S.C. 6295(h)(2)(A)–(B)) EPCA further provides that, not later than 6 years after the issuance of any final rule establishing or amending a standard, DOE must publish either a notice of determination that standards for the product do not need to be amended, or a NOPR including new proposed energy conservation standards (proceeding to a final rule, as appropriate). (42 U.S.C. 6295(m)(1))
The energy conservation program under EPCA consists essentially of four parts: (1) testing, (2) labeling, (3) the establishment of Federal energy conservation standards, and (4) certification and enforcement procedures. Relevant provisions of EPCA specifically include definitions (42 U.S.C. 6291), test procedures (42 U.S.C. 6293), labeling provisions (42 U.S.C. 6294), energy conservation standards (42 U.S.C. 6295), and the authority to require information and reports from manufacturers (42 U.S.C. 6296).
Federal energy efficiency requirements for covered products established under EPCA generally supersede State laws and regulations concerning energy conservation testing, labeling, and standards. (42 U.S.C. 6297(a)–(c)) DOE may, however, grant waivers of Federal preemption for particular State laws or regulations, in accordance with the procedures and other provisions set forth under EPCA. (
Subject to certain criteria and conditions, DOE is required to develop test procedures to measure the energy efficiency, energy use, or estimated annual operating cost of each covered product. (42 U.S.C. 6295(o)(3)(A) and 42 U.S.C. 6295(r)) Manufacturers of covered products must use the prescribed DOE test procedure as the basis for certifying to DOE that their products comply with the applicable energy conservation standards adopted under EPCA and when making representations to the public regarding the energy use or efficiency of those products. (42 U.S.C. 6293(c) and 42 U.S.C. 6295(s)) Similarly, DOE must use these test procedures to determine whether the products comply with standards adopted pursuant to EPCA. (42 U.S.C. 6295(s)) The DOE test procedures for microwave ovens appear at title 10 of the Code of Federal Regulations (“CFR”) part 430.23(i) and 10 CFR part 430, subpart B, appendix I (“appendix I”).
DOE must follow specific statutory criteria for prescribing new or amended standards for covered products, including microwave ovens. Any new or amended standard for a covered product must be designed to achieve the maximum improvement in energy efficiency that the Secretary of Energy determines is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A) and 42 U.S.C. 6295(o)(3)(B)) Furthermore, DOE may not adopt any standard that would not result in the significant conservation of energy. (42 U.S.C. 6295(o)(3))
Moreover, DOE may not prescribe a standard if DOE determines by rule that the standard is not technologically feasible or economically justified. (42 U.S.C. 6295(o)(3)(B)) In deciding whether a proposed standard is economically justified, DOE must determine whether the benefits of the standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make this determination after receiving comments on the proposed standard, and by considering, to the greatest extent practicable, the following seven statutory factors:
(1) The economic impact of the standard on manufacturers and consumers of the products subject to the standard;
(2) The savings in operating costs throughout the estimated average life of the covered products in the type (or class) compared to any increase in the price, initial charges, or maintenance expenses for the covered products that are likely to result from the standard;
(3) The total projected amount of energy (or as applicable, water) savings likely to result directly from the standard;
(4) Any lessening of the utility or the performance of the covered products likely to result from the standard;
(5) The impact of any lessening of competition, as determined in writing by the Attorney General, that is likely to result from the standard;
(6) The need for national energy and water conservation; and
(7) Other factors the Secretary of Energy (“Secretary”) considers relevant.
Further, EPCA establishes a rebuttable presumption that a standard is economically justified if the Secretary finds that the additional cost to the consumer of purchasing a product complying with an energy conservation standard level will be less than three times the value of the energy savings during the first year that the consumer will receive as a result of the standard, as calculated under the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii))
EPCA also contains what is known as an “anti-backsliding” provision, which prevents the Secretary from prescribing
Additionally, EPCA specifies requirements when promulgating an energy conservation standard for a covered product that has two or more subcategories. DOE must specify a different standard level for a type or class of product that has the same function or intended use, if DOE determines that products within such group: (A) consume a different kind of energy from that consumed by other covered products within such type (or class); or (B) have a capacity or other performance-related feature which other products within such type (or class) do not have and such feature justifies a higher or lower standard. (42 U.S.C. 6295(q)(1)) In determining whether a performance-related feature justifies a different standard for a group of products, DOE must consider such factors as the utility to the consumer of the feature and other factors DOE deems appropriate.
Finally, pursuant to the amendments contained in the Energy Independence and Security Act of 2007 (“EISA 2007”), Publish Law 110–140, any final rule for new or amended energy conservation standards promulgated after July 1, 2010, is required to address standby mode and off mode energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE adopts a standard for a covered product after that date, it must, if justified by the criteria for adoption of standards under EPCA (42 U.S.C. 6295(o)), incorporate standby mode and off mode energy use into a single standard, or, if that is not feasible, adopt a separate standard for such energy use for that product. (42 U.S.C. 6295(gg)(3)(A)–(B)) DOE's current test procedures for microwave ovens address standby mode and off mode energy use. In this rulemaking, DOE intends to incorporate such energy use into any amended energy conservation standards that it may adopt.
In a final rule published on June 17, 2013 (“June 2013 Final Rule”), DOE prescribed the current energy conservation standards for microwave ovens manufactured on and after June 17, 2016. 78 FR 36316. These standards are set forth in DOE's regulations at 10 CFR 430.32(j)(3) and are repeated in Table II.1.
EPCA prescribed an energy conservation standard for kitchen ranges and ovens, and directed DOE to conduct two cycles of rulemakings to determine whether to amend standards for these products. (42 U.S.C. 6295(h)(2)(A)–(B)) DOE completed the first of these rulemaking cycles by publishing a final rule on September 8, 1998, that codified the prescriptive design standard for gas cooking products established in EPCA, but found that no standards were justified for electric cooking products, including microwave ovens, at that time. 63 FR 48038, 48053–48054. DOE completed the second rulemaking cycle and published a final rule on April 8, 2009, in which it determined, among other things, that standards for microwave oven active mode energy use were not economically justified. 74 FR 16040 (“April 2009 Final Rule”).
Most recently, DOE published the June 2013 Final Rule, adopting energy conservation standards for microwave ovens. 78 FR 36316. In the June 2013 Final Rule, DOE maintained its prior determination that active mode standards are not warranted for microwave ovens and prescribed energy conservation standards that address the standby and off mode energy use of microwave ovens. 78 FR 36316, 36317.
In support of the present review of the microwave oven energy conservation standards, DOE published an early assessment request for information (“RFI”) on August 13, 2019 (“August 2019 RFI”), which identified various issues on which DOE sought comment to inform its determination of whether the standards need to be amended. 84 FR 39980.
DOE subsequently published a notice of proposed determination (“NOPD”) on August 12, 2021, in which DOE initially determined that current standards for microwave ovens do not need to be amended. 86 FR 44298. (“August 2021 NOPD”) In the August 2021 NOPD, DOE tentatively determined that there are technology options that would improve the efficiency of microwave ovens. 86 FR 44298, 44310. Based on the analysis conducted for the August 2021 NOPD, DOE estimated that amended standards for microwave oven standby power at the maximum technologically feasible (“max-tech”) level would result in 0.1 quads of energy saved over a 30-year period (representing an estimated 8 percent reduction in site energy use of microwave ovens). 86 FR 44298, 44310.
After the publication of the NOPD, DOE conducted investigative testing and manufacturer discussions, and updated the engineering analysis accordingly for this SNOPR. As a result, DOE revised the efficiency levels, manufacturer selling price (“MSP”)-efficiency relationships, and LCC and PBP analyses to evaluate the economic impacts of potential energy conservation standards for microwave ovens on individual consumers. Updates to the shipments and NIA analyses from the NOPD include the market shares of both product classes, historical shipments, shipment projections, the standard year, no-new-standards case efficiency distribution, and FFC conversion rates.
In evaluating the significance of the estimated energy savings for the August 2021 NOPD, DOE applied a two-part numeric threshold test that was then applicable under section 6(b) of appendix A to 10 CFR part 430 subpart C (Jan. 1, 2021 edition). Specifically, the
DOE held a public meeting on September 13, 2021, to solicit feedback from stakeholders concerning the August 2021 NOPD, and received comments in response from the interested parties listed in Table II.2.
A parenthetical reference at the end of a comment quotation or paraphrase provides the location of the item in the public record.
On December 13, 2021, DOE published in the
In accordance with section 3(a) of appendix A, DOE notes that it is deviating from the provision in appendix A regarding the pre-NOPR stages for an energy conservation standards rulemaking. Section 6(a)(2) of appendix A states that if the Department determines it is appropriate to proceed with a rulemaking (after initiating the rulemaking process through an early assessment), the preliminary stages of a rulemaking to issue or amend an energy conservation standard that DOE will undertake will be a framework document and preliminary analysis, or an advance notice of proposed rulemaking (“ANOPR”).
DOE is deviating from this provision by proposing amended standards without first issuing a framework document and preliminary analysis or an ANOPR. As discussed previously, DOE proposed in the August 2021 NOPD that standards for microwave ovens did not need to be amended. 86 FR 44298. The August 2021 NOPD contained analyses that DOE generally conducts as part of a preliminary analysis, including a market and technology assessment, screening analysis, engineering analysis, and national impacts analysis (“NIA”). DOE provided a 60-day comment period for the August 2021 NOPD. As such, DOE believes it is appropriate to proceed with this SNOPR without once again conducting the pre-NOPR stages of a rulemaking.
Section 6(f)(2) of appendix A provides that the length of the public comment period for a notice of proposed rulemaking to amend an energy conservation standard will be at least 75 days. As stated previously, DOE requested comment on the analytical approach taken in the August 2021 NOPD and provided stakeholders with a 60-day comment period. Given that this supplemental notice relies largely on the same analytical approach taken in that NOPD, DOE believes a 60-day comment period is appropriate and will provide interested parties with a meaningful opportunity to comment on the proposed rule.
DOE developed this proposal after considering oral and written comments, data, and information submitted by stakeholders. The following discussion addresses issues raised by these commenters.
When evaluating and establishing energy conservation standards, DOE divides covered products into product classes by the type of energy used or by capacity or other performance-related features that justify differing standards. In making a determination whether a performance-related feature justifies a different standard, DOE must consider such factors as the utility of the feature to the consumer and other factors DOE determines are appropriate. (42 U.S.C. 6295(q)) The microwave oven product classes for this SNOPR are discussed in further detail in section IV.A.1 of this document. This proposal covers microwave ovens defined as household cooking appliances consisting of a compartment designed to cook or heat food by means of microwave energy, including microwave ovens with or without thermal elements designed for surface browning of food and convection microwave ovens. This includes any microwave oven components of a combined cooking product. 10 CFR 430.2. The scope of coverage is discussed in further detail in section IV.A.1 of this document.
EPCA sets forth generally applicable criteria and procedures for DOE's adoption and amendment of test procedures. (42 U.S.C. 6293) Manufacturers of covered products must use these test procedures to certify to DOE that their product complies with energy conservation standards and to
In response to the August 2021 NOPD, AHAM stated that active mode standards are not justified because the current test procedure does not measure active mode power and an active mode measurement would be unduly burdensome. (AHAM, No. 14 at p. 3) DOE is not currently proposing active mode standards because it has not identified a method for capturing active mode energy performance in a repeatable and representative manner.
On March 9, 2011, DOE published an interim final rule establishing test procedures for microwave ovens regarding the measurement of the average standby mode and average off mode power consumption that incorporated by reference specific clauses from the IEC Standard 62301, “Household electrical appliances—Measurement of standby power,” First Edition 2005–06. 76 FR 12825. On January 18, 2013, DOE published a final rule amending the microwave oven test procedure to incorporate by reference certain provisions of the revised IEC Standard 62301 Edition 2.0 2011–01, along with clarifying language for the measurement of standby mode and off mode energy use. 78 FR 4015.
On December 16, 2016, DOE published a final rule (“December 2016 TP Final Rule”) amending the cooking products test procedure to, in part, incorporate methods for calculating the annual standby mode and off mode energy consumption of the microwave oven component of a combined cooking product by allocating a portion of the combined low-power mode energy consumption measured for the combined cooking product to the microwave oven component using the estimated annual cooking hours for the given components comprising the combined cooking product. 81 FR 91418, 91438–91439. That final rule, which resulted in the most recent version of the microwave oven test procedure, was codified in the CFR at appendix I.
On January 18, 2018, DOE published an RFI (“January 2018 RFI”) initiating a data collection process to assist in its evaluation of the test procedure for microwave ovens. 83 FR 2366. On November 14, 2019, DOE published a NOPR (“November 2019 TP NOPR”) proposing amendments to the existing test procedure with requirements for both the clock display and network functionality when testing standby mode and off mode power consumption and certain technical corrections. 84 FR 61836. DOE subsequently published an SNOPR on August 3, 2021 (“the August 2021 TP SNOPR”) providing additional clarification on the requirements for testing microwave ovens with network functionality. 86 FR 41759. On March 30, 2022, DOE published a final rule amending the microwave oven test procedure as proposed in the August 2021 TP SNOPR. 87 FR 18261.
In each energy conservation standards rulemaking, DOE conducts a screening analysis based on information gathered on all current technology options and prototype designs that could improve the efficiency of the products or product that are the subject of the rulemaking. As the first step in such an analysis, DOE develops a list of technology options for consideration in consultation with manufacturers, design engineers, and other interested parties. DOE then determines which of those means for improving efficiency are technologically feasible. DOE considers technologies incorporated in commercially-available products or in working prototypes to be technologically feasible. Sections 6(b)(3)(i) and 7(b)(1) of appendix A to 10 CFR part 430 subpart C.
After DOE has determined that particular technology options are technologically feasible, it further evaluates each technology option in light of the following additional screening criteria: (1) practicability to manufacture, install, and service; (2) adverse impacts on product utility or availability; (3) adverse impacts on health or safety, and (4) unique-pathway proprietary technologies. 10 CFR part 430, subpart C, appendix A, sections 6(c)(3)(ii)–(v) and 7(b)(2)–(5). Section IV.B of this document discusses the results of the screening analysis for microwave ovens, particularly the designs DOE considered, those it screened out, and those that are the basis for the standards considered in this rulemaking. For further details on the screening analysis for this rulemaking, see chapter 4 of the SNOPR TSD.
When DOE proposes to adopt an amended standard for a type or class of covered product, it must determine the maximum improvement in energy efficiency or maximum reduction in energy use that is technologically feasible for such product. (42 U.S.C. 6295(p)(1)) Accordingly, in the engineering analysis, DOE determined the maximum technologically feasible (max-tech) improvements in energy efficiency for microwave ovens, using the design parameters for the most efficient products available on the market or in working prototypes. The max-tech levels that DOE determined for this rulemaking are described in section IV.C of this proposed rule and in chapter 5 of the SNOPR TSD.
For each trial standard level (“TSL”), DOE projected energy savings from application of the TSL to microwave ovens purchased in the 30-year period that begins in the year of compliance with the proposed standards (2026–2055).
DOE used its NIA spreadsheet model to estimate NES from potential amended or new standards for microwave ovens. The NIA spreadsheet model (described in section IV.H of this document) calculates energy savings in terms of site energy, which is the energy directly consumed by products at the locations where they are used. For electricity, DOE reports national energy savings in terms of primary energy savings, which is the savings in the energy that is used to generate and transmit the site electricity. DOE also calculates NES in terms of FFC energy savings. The FFC metric includes the energy consumed in extracting, processing, and transporting primary fuels (
To adopt any new or amended standards for a covered product, DOE must determine that such action would result in significant energy savings. (42 U.S.C. 6295(o)(3)(B))
In response to the August 2021 NOPD, IPI suggested that DOE re-consider its tentative determination regarding the significance of energy conservation in light of the amendments to appendix A that DOE had recently proposed in a separate rulemaking, which included changes to the definition of “significant energy savings.” (IPI, No. 15 at p. 1) CA IOUs requested DOE consider the proposed appendix A changes to the quantitative significant savings of energy threshold, economic justification, and technological feasibility of the proposed standard levels. (CA IOUs, No. 17 at p. 2)
AHAM stated that amended standards are not justified for microwave ovens regardless of whether DOE continues to use the then-current appendix A's definition of “significant conservation of energy” or relies on the previous definition of “merely trivial.” (AHAM, No. 14 at p. 2)
As discussed, the numeric threshold for determining the significance of energy savings was subsequently eliminated in the December 2021 Final Rule and DOE has reverted to its longstanding practice of evaluating the significance of energy savings on a case-by-case basis. 86 FR 70892.
The significance of energy savings offered by a new or amended energy conservation standard cannot be determined without knowledge of the specific circumstances surrounding a given rulemaking.
Accordingly, DOE evaluates the significance of energy savings on a case-by-case basis. As stated, the proposed standards would result in estimated national energy savings of 0.04 quads, the equivalent of the electricity use of 1 million homes in one year. DOE has initially determined the energy savings for the TSL proposed in this rulemaking are “significant” within the meaning of 42 U.S.C. 6295(o)(3)(B).
As noted previously, EPCA provides seven factors to be evaluated in determining whether a potential energy conservation standard is economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)–(VII)) The following sections discuss how DOE has addressed each of those seven factors in this SNOPR.
In determining the impacts of a potential amended standard on manufacturers, DOE conducts an MIA, as discussed in section IV.J of this document. DOE first uses an annual cash-flow approach to determine the quantitative impacts. This step includes both a short-term assessment—based on the cost and capital requirements during the period between when a regulation is issued and when entities must comply with the regulation—and a long-term assessment over a 30-year period. The industry-wide impacts analyzed include (1) INPV, which values the industry on the basis of expected future cash flows, (2) cash flows by year, (3) changes in revenue and income, and (4) other measures of impact, as appropriate. Second, DOE analyzes and reports the impacts on different types of manufacturers, including impacts on small manufacturers. Third, DOE considers the impact of standards on domestic manufacturer employment and manufacturing capacity, as well as the potential for standards to result in plant closures and loss of capital investment. Finally, DOE takes into account cumulative impacts of various DOE regulations and other regulatory requirements on manufacturers.
For individual consumers, measures of economic impact include the changes in LCC and PBP associated with new or amended standards. These measures are discussed further in the following section. For consumers in the aggregate, DOE also calculates the national net present value of the consumer costs and benefits expected to result from particular standards. DOE also evaluates the impacts of potential standards on identifiable subgroups of consumers that may be affected disproportionately by a standard.
EPCA requires DOE to consider the savings in operating costs throughout the estimated average life of the covered product in the type (or class) compared to any increase in the price of, or in the initial charges for, or maintenance expenses of, the covered product that are likely to result from a standard. (42 U.S.C. 6295(o)(2)(B)(i)(II)) DOE conducts this comparison in its LCC and PBP analysis.
The LCC is the sum of the purchase price of a product (including its installation) and the operating expense (including energy, maintenance, and repair expenditures) discounted over the lifetime of the product. The LCC
The PBP is the estimated amount of time (in years) it takes consumers to recover the increased purchase cost (including installation) of a more-efficient product through lower operating costs. DOE calculates the PBP by dividing the change in purchase cost due to a more-stringent standard by the change in annual operating cost for the year that standards are assumed to take effect.
For its LCC and PBP analysis, DOE assumes that consumers will purchase the covered products in the first year of compliance with new or amended standards. The LCC savings for the considered efficiency levels are calculated relative to the case that reflects projected market trends in the absence of new or amended standards. DOE's LCC and PBP analysis is discussed in further detail in section IV.F of this document.
Although significant conservation of energy is a separate statutory requirement for adopting an energy conservation standard, EPCA requires DOE, in determining the economic justification of a standard, to consider the total projected energy savings that are expected to result directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) As discussed in section III.D of this document, DOE uses the NIA spreadsheet models to project national energy savings.
In establishing product classes and in evaluating design options and the impact of potential standard levels, DOE evaluates potential standards that would not lessen the utility or performance of the considered products. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) Based on data available to DOE, the standards proposed in this document would not reduce the utility or performance of the products under consideration in this rulemaking.
EPCA directs DOE to consider the impact of any lessening of competition, as determined in writing by the Attorney General, that is likely to result from a proposed standard. (42 U.S.C. 6295(o)(2)(B)(i)(V)) It also directs the Attorney General to determine the impact, if any, of any lessening of competition likely to result from a proposed standard and to transmit such determination to the Secretary within 60 days of the publication of a proposed rule, together with an analysis of the nature and extent of the impact. (42 U.S.C. 6295(o)(2)(B)(ii)) DOE will transmit a copy of this proposed rule to the Attorney General with a request that the Department of Justice (“DOJ”) provide its determination on this issue. DOE will publish and respond to the Attorney General's determination in the final rule. DOE invites comment from the public regarding the competitive impacts that are likely to result from this proposed rule. In addition, stakeholders may also provide comments separately to DOJ regarding these potential impacts. See the
DOE also considers the need for national energy and water conservation in determining whether a new or amended standard is economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) The energy savings from the proposed standards are likely to provide improvements to the security and reliability of the Nation's energy system. Reductions in the demand for electricity also may result in reduced costs for maintaining the reliability of the Nation's electricity system. DOE conducts a utility impact analysis to estimate how standards may affect the Nation's needed power generation capacity, as discussed in section IV.M of this document.
DOE maintains that environmental and public health benefits associated with the more efficient use of energy are important to take into account when considering the need for national energy conservation. The proposed standards are likely to result in environmental benefits in the form of reduced emissions of air pollutants and GHGs associated with energy production and use. As part of the analysis of the need for national energy and water conservation, DOE conducts an emissions analysis to estimate how potential standards may affect these emissions, as discussed in section IV.K of this document; the estimated emissions impacts are reported in section V.B.6 of this document. DOE also estimates the economic value of emissions reductions resulting from the considered TSLs, as discussed in section IV.L of this document.
In determining whether an energy conservation standard is economically justified, DOE may consider other factors that the Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) To the extent DOE identifies any relevant information regarding economic justification that does not fit into the other categories described previously, DOE could consider such information under “other factors.”
As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA creates a rebuttable presumption that an energy conservation standard is economically justified if the additional cost to the consumer of a product that meets the standard is less than three times the value of the first year's energy savings resulting from the standard, as calculated under the applicable DOE test procedure. DOE's LCC and PBP analyses generate values used to calculate the effects that proposed energy conservation standards would have on the payback period for consumers. These analyses include, but are not limited to, the 3-year payback period contemplated under the rebuttable-presumption test. In addition, DOE routinely conducts an economic analysis that considers the full range of impacts to consumers, manufacturers, the Nation, and the environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). The results of this analysis serve as the basis for DOE's evaluation of the economic justification for a potential standard level (thereby supporting or rebutting the results of any preliminary determination of economic justification). The rebuttable presumption payback calculation is discussed in section IV.F.9 of this proposed rule.
This section addresses the analyses DOE has performed for this rulemaking regarding microwave ovens. Separate subsections address each component of DOE's analyses.
DOE used several analytical tools to estimate the impact of the standards proposed in this document. The first tool is a spreadsheet that calculates the LCC savings and PBP of potential amended or new energy conservation standards. The national impacts analysis uses a second spreadsheet set that provides shipments projections.
Stakeholders asked that DOE publish the analysis used in the NOPD. (ASAP, NRDC, CA IOUs, No. 14 at p. 1; CA IOUs, No. 17 at p. 1)
DOE has provided spreadsheet models in the docket to support the SNOPR analyses. The LCC spreadsheet model used to support the SNOPR analysis had not been developed for the NOPD analyses. The shipments and NIA spreadsheet models used in the NOPD analyses now have updated values. Primary and FFC energy savings in the NOPD Table V.2 Cumulative National Energy Savings for Microwave Ovens can be found in the NIA's Input and Summary worksheet.
DOE develops information in the market and technology assessment that provides an overall picture of the market for the products concerned, including the purpose of the products, the industry structure, manufacturers, market characteristics, and technologies used in the products. This activity includes both quantitative and qualitative assessments, based primarily on publicly-available information. The subjects addressed in the market and technology assessment for this rulemaking include (1) a determination of the scope of the rulemaking and product classes, (2) manufacturers and industry structure, (3) existing efficiency programs, (4) shipments information, (5) market and industry trends, and (6) technologies or design options that could improve the energy efficiency of microwave ovens. The key findings of DOE's market assessment are summarized in the following sections. See chapter 3 of the SNOPR TSD for further discussion of the market and technology assessment.
In this analysis, DOE relies on the definition of microwave ovens in 10 CFR 430.2, which defines “microwave oven” as a category of cooking products which is a household cooking appliance consisting of a compartment designed to cook or heat food by means of microwave energy, including microwave ovens with or without thermal elements designed for surface browning of food and convection microwave ovens. This includes any microwave oven(s) component of a combined cooking product. Any product meeting the definition of microwave oven is included in DOE's scope of coverage.
For this proposal, DOE considered the two product classes of microwave ovens prescribed in the current energy conservation standards: (1) Microwave-Only Ovens and Countertop Convection Microwave Ovens, and (2) Built-In and Over-the-Range Convection Microwave Ovens.
For these two classes of microwave ovens, DOE's current test procedure measures the energy consumption in standby mode and off mode only. Consequently, DOE's current energy conservation standards for microwave ovens are also expressed in terms of standby mode and off mode power. There are currently no active mode energy conservation standards nor a prescribed test procedure for measuring the active mode energy use or efficiency (
In the preliminary market analysis and technology assessment, DOE identified four technology options that would be expected to improve the efficiency of microwave ovens, as measured by the DOE test procedure:
CA IOUs stated that microwave ovens are available on the market that do not appear to use automatic power-down functionality, but achieve lower standby power than the DOE-stated max-tech standby power levels. They requested that DOE review and revise the max-tech levels based on the knowledge of market-ready models. (CA IOUs, No. 17 at p. 4) ASAP stated that there are additional potential efficiency levels between the level associated with automatic power down and the current baseline standards (1.0 W for microwave-only ovens and countertop convection microwave ovens and 2.2 W for built-in and over-the-range convection microwave ovens). ASAP further stated DOE's Compliance Certification (“CCMS”) database lists microwave oven models with standby power levels significantly below 0.84 W without automatic power-down. (ASAP, ACEEE, CFA, NRDC, NEEA, No. 16 at p. 1) For the SNOPR, DOE purchased and tested 33 microwave ovens representing the two product classes, and the results confirm that microwave oven models currently on the market are able to achieve standby power consumption values between that of automatic power-down and the proposed levels. Further, DOE's testing suggested that microwave ovens are frequently rated conservatively, such that their certified standby power level is higher than actual values obtained when tested in accordance with appendix I. Therefore, DOE was unable to accurately assess the relationship between specific standby power levels and utilized technology options based on data from the CCMS database. Instead, DOE used the measured standby power levels of microwave oven models in its test sample as a proxy to determine the representative distribution of standby power levels among microwave ovens on the market, as shown in Table IV.2. Details of the methodology and results from DOE's investigative testing are included in chapter 3 and chapter 5 of the SNOPR TSD.
DOE subsequently tore down all 33 microwave ovens but was unable to isolate a unique set of technology options associated with each standby power level. As such, DOE tentatively concludes that models demonstrating lower standby power consumption than the current energy conservation standards are not implementing specific technology options, but rather incorporate a comprehensive system-level control board redesign that prioritizes standby power performance from the ground up. Examples of possible redesign strategies include the use of modern microcontrollers that demonstrate significantly lower quiescent current comsumption and firmware that emphasizes the shutting down of all subassemblies that are not in use while idle. DOE tentatively estimates that while these improvements would not contribute to the incremental manufacturer production cost (“MPC”) of a control board, the redesign would result in significant conversion costs for manufacturers as they attempt to bring their microwave oven models into compliance with any proposed standards. See section IV.J.2.a of this document.
DOE requests feedback on its tentative conclusion that reducing the standby power consumption of microwave ovens would require full redesigns of control boards, and that while such redesigns would not result in increased MPCs, manufacturers would incur significant one-time conversation costs.
DOE uses the following five screening criteria to determine which technology options are suitable for further consideration in an energy conservation standards rulemaking:
(1)
(2)
(3)
(4)
(5)
10 CFR part 430, subpart C, appendix A, sections 6(b)(3) and 7(b).
In summary, if DOE determines that a technology, or a combination of technologies, fails to meet one or more of the listed five criteria, it will be excluded from further consideration in the engineering analysis. The reasons for eliminating any technology are discussed in the following sections.
The subsequent sections include comments from interested parties pertinent to the screening criteria, DOE's evaluation of each technology option against the screening analysis criteria, and whether DOE determined that a technology option should be excluded (“screened out”) based on the screening criteria.
In response to the August 2021 NOPD, AHAM stated that there are no available technology options to improve standby power energy consumption without impacting functionality for consumers. (AHAM, No. 14 at p. 2)
As discussed in section IV.A.2 of this document, DOE has identified microwave ovens on the market that have standby energy consumption lower than the maximum currently required, indicating that there are potential technology options to improve standby power consumption. DOE's initial testing results and review of the CCMS database show that the majority of microwave ovens in both product classes are performing better than the current standards.
As discussed, DOE considers whether a technology option will adversely impact consumer utility and product availability. In response to the August 2021 NOPD, IPI stated that DOE should reconsider all technology options (
DOE has previously stated it is uncertain the extent to which consumers value the function of a continuous display clock, but that loss of such function may result in significant loss of consumer utility. 78 FR 36316, 36362. Consistent with this prior concern, DOE has screened out “automatic power-down” as a technology option due to its impact on consumer utility.
Through a review of each technology, DOE tentatively concludes that all of the other identified technologies listed in section IV.A.2 of this document meet all five screening criteria to be examined further as design options in DOE's SNOPR analysis. In summary, DOE did not screen out the following technology options:
(1) Lower-power display technologies;
(2) Cooking sensors with no standby power requirement; and
(3) More efficient power supply and control board options
DOE has initially determined that these technology options are technologically feasible because they are being used or have previously been used in commercially-available products or working prototypes. DOE also finds that all of the remaining technology options meet the other screening criteria (
The purpose of the engineering analysis is to establish the relationship between the efficiency and cost of microwave ovens. There are two elements to consider in the engineering analysis; the selection of efficiency levels to analyze (
DOE typically uses one of two approaches to develop energy efficiency levels for the engineering analysis: (1) relying on observed efficiency levels in the market (
In this rulemaking, DOE applied the efficiency-level approach. As discussed, DOE was unable to use the design-option approach because it did not identify specific design options associated with each standby power level.
For each product/product class, DOE generally selects a baseline model as a reference point for each class, and measures changes resulting from potential energy conservation standards against the baseline. The baseline model in each product/product class represents the characteristics of a product/product typical of that class (
For microwave-only ovens and countertop convection microwave ovens (“Product Class 1”), the baseline standby power level, EL 0, is equal to the current standard of 1.0 W. For the built-in and over-the-range convection microwave ovens product class (“Product Class 2”), the baseline standby power consumption used for the analysis at EL 0 is equal to the current standard of 2.2 W. This maximum allowable average standby power consumption for Product Class 2 microwave ovens is higher than that allowed for Product Class 1 microwave ovens because, in the June 2013 Final Rule, DOE had concluded that built-in and over-the-range convection microwave ovens require a larger power supply to support additional features such as an exhaust fan, additional relays, and additional lights, and that the larger power supply contributes to a higher standby power consumption. 78 FR 36316, 36328. Nonetheless, DOE expects that certain available design options for reducing standby power consumption for Product Class 2 microwave ovens would be similar to those for Product Class 1 microwave ovens.
Using the efficiency-level approach, the higher efficiency levels established for the analysis are determined based on the market distribution of existing products (in other words, based on the range of efficiencies and efficiency level “clusters” that already exist on the market). As noted in section IV.A.2 of this document, DOE's testing suggests that microwave ovens are frequently rated conservatively, such that their certified standby power level is higher than actual values obtained when tested in accordance with appendix I. DOE therefore used the measured standby power levels of microwave oven models in its test sample as a proxy to determine the representative distribution of standby power levels among microwave ovens currently on the market, as shown in Table IV.2 of this document.
According to this efficiency distribution, 85 percent of Product Class 1 microwave ovens achieve a standby power consumption lower than the current standard of 1.0 W, with 45 percent of the market estimated to be achieving 0.8 W, 29 percent achieving 0.6 W, and 11 percent achieving 0.4 W, all without the use of automatic powerdown. For Product Class 1, therefore, DOE analyzed three efficiency levels (“ELs”) above the baseline which correspond to these three standby power levels, as shown in Table IV.3 of this document.
The test results also showed that all of the Product Class 2 test units achieved a standby power consumption in the range of 0.5 W to 1.5 W, lower than the current standard of 2.2 W. As such, DOE analyzed higher efficiency levels for this product class at standby power values evenly distributed within that range: EL 1 at 1.5 W, EL 2 at 1.0 W and EL 3 (max-tech) at 0.5 W. DOE estimates that there are currently no built-in and over-the-range convection microwave ovens in the market at the baseline standby power consumption of 2.2 W.
DOE requests feedback on the efficiency levels analyzed for each product class in this proposal.
In summary, DOE analyzed the following efficiency levels for this proposal:
The cost analysis portion of the engineering analysis is conducted using one or a combination of cost approaches. The selection of cost approach depends on a suite of factors, including the availability and reliability of public information, characteristics of the regulated product, the availability and timeliness of purchasing the
•
•
•
For microwave ovens, DOE attempted to estimate the MPC of attaining each efficiency level using the physical teardowns approach described previously. As stated in section IV.A.2 of this document, DOE tore down all 33 microwave ovens in its test sample but was unable to isolate a unique set of technology options associated with each standby power level. As such, DOE tentatively concluded that models demonstrating lower standby power consumption than the current energy conservation standards are not implementing specific technology options, but rather incorporate a comprehensive system-level control board redesign that prioritizes standby power performance from the ground up. Examples of possible redesign strategies include the replacement of microcontrollers and switch mode controllers with modern ones that demonstrate significantly lower quiescent current comsumption at no additional cost compared to those found in inefficient systems and firmware that emphasizes the shutting down of all subassemblies that are not in use while idle. DOE tentatively estimates that while these improvements would not contribute to an increase in the MPC of a control board (
DOE requests comment on its tentative conclusion that improvements in standby performance are the result of system-level control board redesigns that require conversion costs but would not result in increases to the manufacturing product cost compared to a control board at baseline.
The results of the engineering analysis are reported as cost-efficiency data (or “curves”) in the form of MPC (in dollars) versus standby power consumption (in W). For the reasons discussed in sections IV.A.2 and IV.C.2 of this document, DOE estimated an incremental MPC of $0 at all higher efficiency levels, compared to the baseline MPC, for both of the the product classes, as shown in Table IV.5 and Table IV.6 of this document. See chapter 5 of the SNOPR TSD for additional detail on the engineering analysis.
DOE requests comment on the incremental MPCs from the SNOPR engineering analysis.
DOE developed a manufacturer markup to convert MPCs to MSPs. The MSP includes direct manufacturing production costs (
DOE estimated the manufacturer markup based on publicly available information from publicly traded microwave oven manufacturers and the manufacturer markup that was used in the June 2013 Final Rule.
Typically, DOE uses the same manufacturer markups in the consumer analyses (
DOE first estimated the conversion costs associated with redesigning non-compliant microwave oven models at each efficiency level for both product classes. These conversion costs include capital conversion costs (
DOE then calibrated the manufacturer markups for each product class at each TSL to result in microwave oven manufacturers to be able to fully recover these conversion costs. DOE conservatively calibrated these increased manufacturer markups to result in the INPV in the standards cases to be equal to the INPV in the no-new-standards case. INPV is the sum of the microwave oven manufacturers' industry annual cash flows over the analysis period, discounted using the industry-weighted average cost of capital. Therefore, DOE estimates that if manufacturers were able to increase their manufacturer markups by the values shown in Table IV.7, microwave oven manufacturers would not be any worse off, as measured by INPV, due to standards compared to the no-new-standards case (
The increase in manufacturer markups in the standards cases results in an increase in the MSP, despite no incremental increase in MPC. Table IV.7 displays the increase in manufacturer markups and the incremental increase in MSP applied to non-compliant models that are redesigned due to the analyzed energy conservation standards.
DOE requests comment on the estimated increased manufacturer markups and incremental MSPs that result from the analyzed energy conservation standards from the SNOPR engineering analysis.
The markups analysis develops appropriate markups (
For microwave ovens, DOE further developed baseline and incremental markups for each link in the distribution chain (after the product leaves the manufacturer). Baseline markups are applied to the price of products with baseline efficiency, while incremental markups are applied to the difference in price between baseline and higher-efficiency models (the incremental cost increase). The incremental markup is typically less than the baseline markup and is designed to maintain similar per-unit operating profit before and after new or amended standards.
DOE relied on economic data from the U.S. Census Bureau to estimate average baseline and incremental markups. Specifically, DOE used the 2017 Annual Retail Trade Survey for the “electronics and appliance stores” sector to develop retailer markups.
Chapter 6 of the SNOPR TSD provides additional detail on DOE's development of the baseline and incremental retail markups.
The purpose of the energy use analysis is to determine the annual energy consumption of microwave ovens at different efficiencies in representative U.S. single-family homes, multi-family residences, and mobile homes, and to assess the energy savings potential of increased microwave ovens efficiency. The energy use analysis estimates the range of energy use of microwave ovens in the field (
For this SNOPR, DOE used the same methodology as that described in section IV.D of the August 2021 NOPD. In the June 2013 Final Rule, DOE determined the average hours of operation for microwaves to be 44.9 hours per year.
Chapter 7 of the SNOPR TSD provides details on DOE's energy use analysis for microwave ovens.
DOE conducted LCC and PBP analyses to evaluate the economic impacts on individual consumers of potential energy conservation standards for microwave ovens. The effect of new or amended energy conservation standards on individual consumers usually involves a reduction in operating cost and an increase in purchase cost. DOE used the following two metrics to measure consumer impacts:
(1) The LCC is the total consumer expense of an appliance or product over the life of that product, consisting of total installed cost (manufacturer selling price, distribution chain markups, sales tax, and installation costs) plus operating costs (expenses for energy use, maintenance, and repair). To compute the operating costs, DOE discounts future operating costs to the time of purchase and sums them over the lifetime of the product.
(2) The PBP is the estimated amount of time (in years) it takes consumers to recover the increased purchase cost (including installation) of a more-efficient product through lower operating costs. DOE calculates the PBP by dividing the change in purchase cost at higher efficiency levels by the change in annual operating cost for the year that amended or new standards are assumed to take effect.
For any given efficiency level, DOE measures the change in LCC relative to the LCC in the no-new-standards case, which reflects the estimated efficiency distribution of microwave ovens in the absence of new or amended energy conservation standards. In contrast, the PBP for a given efficiency level is measured relative to the baseline product.
For each considered efficiency level in each product class, DOE calculated the LCC and PBP for a nationally representative set of housing units. As stated previously, DOE developed household samples from the
Inputs to the calculation of total installed cost include the cost of the product—which includes MPCs, manufacturer markups, retailer and distributor markups, and sales taxes—and installation costs. Inputs to the calculation of operating expenses include annual energy consumption, energy prices and price projections, repair and maintenance costs, product lifetimes, and discount rates. DOE created distributions of values for product lifetime, discount rates, and sales taxes, with probabilities attached to each value, to account for their uncertainty and variability.
The computer model DOE uses to calculate the LCC and PBP relies on a Monte Carlo simulation to incorporate uncertainty and variability into the analysis. The Monte Carlo simulations randomly sample input values from the probability distributions and microwave ovens user samples. For this rulemaking, the Monte Carlo approach is implemented in MS Excel together with the Crystal Ball
DOE calculated the LCC and PBP for all consumers of microwave ovens as if each were to purchase a new product in the expected year of compliance with new or amended standards. Amended standards would apply to microwave ovens manufactured 3 years after the date on which any new or amended standard is published. (42 U.S.C. 6295(g)(10)(B)) At this time, DOE estimates publication of a final rule in 2022. Therefore, for purposes of its analysis, DOE used 2026 as the first year of compliance with any amended standards for microwave ovens.
Table IV.8 summarizes the approach and data DOE used to derive inputs to the LCC and PBP calculations. The subsections that follow provide further discussion. Details of the spreadsheet model, and of all the inputs to the LCC and PBP analyses, are contained in chapter 8 of the SNOPR TSD and its appendices.
To calculate consumer product costs, DOE multiplied the MPCs developed in the engineering analysis by the markups described previously (along with sales taxes). DOE used different markups for baseline products and higher-efficiency products because DOE applied an incremental markup to the increase in MSP associated with higher-efficiency products.
Economic literature and historical data suggest that the real costs of many products may trend downward over time according to “learning” or “experience” curves. An experience curve analysis implicitly includes factors such as efficiencies in labor, capital investment, automation, materials prices, distribution, and economies of scale at an industry-wide level. To derive the learning rate parameter for microwave ovens, DOE obtained historical Producer Price Index (“PPI”) data for microwave ovens from the Bureau of Labor Statistics (“BLS”). A PPI for “Household Cooking Appliance Manufacturing: Electric (Including Microwave) Household Ranges, Ovens, Surface Cooking Units, and Equipment” was available for the time period between 1972 and 2020.
Installation cost includes labor, overhead, and any miscellaneous materials and parts needed to install the product. DOE found no evidence that installation costs would be impacted with increased efficiency levels.
For each sampled household, DOE determined the energy consumption for a microwave ovens at different efficiency levels using the approach described previously in section IV.E of this document.
Because it captures the incremental savings associated with a change in energy use from higher efficiency, a marginal electricity price more accurately represents an incremental change in consumer costs than would average electricity prices. Therefore, DOE applied average electricity prices for the energy use of the product purchased in the no-new-standards case, and marginal electricity prices for the incremental change in energy use associated with the other efficiency levels considered.
DOE derived electricity prices in 2021 using data from Edison Electric Institute (“EEI”) Typical Bills and Average Rates reports.
To estimate energy prices in future years, DOE multiplied the 2021 energy prices by a projection of annual average price changes for each of the nine census divisions from the Reference case in
Maintenance costs are associated with maintaining the operation of the product; repair costs are associated with repairing or replacing product components that have failed in an appliance. Typically, small incremental increases in product efficiency produce no, or only minor, changes in maintenance and repair costs compared to baseline efficiency products. In this SNOPR analysis, DOE included no changes in maintenance or repair costs for microwave ovens that exceed baseline efficiency.
For microwave ovens, DOE developed a distribution of lifetimes from which specific values are assigned to the appliances in the samples. DOE conducted an analysis of actual lifetime in the field using a combination of historical shipments data, the stock of the considered appliances in the
In the calculation of LCC, DOE applies discount rates appropriate to households to estimate the present value of future operating cost savings. DOE estimated a distribution of discount rates for microwave ovens based on the opportunity cost of consumer funds.
DOE applies weighted-average discount rates calculated from consumer debt and asset data, rather than marginal or implicit discount rates.
To establish residential discount rates for the LCC analysis, DOE identified all relevant household debt or asset classes in order to approximate a consumer's opportunity cost of funds related to appliance energy cost savings. It estimated the average percentage shares of the various types of debt and equity by household income group using data from the Federal Reserve Board's Survey of Consumer Finances
To accurately estimate the share of consumers that would be affected by a potential energy conservation standard at a particular efficiency level, DOE's LCC analysis considered the projected distribution (market shares) of product efficiencies under the no-new-standards case (
To estimate the energy efficiency distribution of microwave ovens for 2026, DOE used data from the engineering analysis. The estimated market shares for the no-new-standards case for microwave ovens are shown in Table IV.9 and reflect no efficiency shift. See chapter 8 of the SNOPR TSD for further information.
DOE requests feedback on its approach to projecting the efficiency distribution in 2026.
The payback period is the amount of time it takes the consumer to recover the additional installed cost of more-efficient products, compared to baseline products, through energy cost savings. Payback periods are expressed in years. Payback periods that exceed the life of the product signify that the increased total installed cost is not recovered in reduced operating expenses.
The inputs to the PBP calculation for each efficiency level are the change in total installed cost of the product and the change in the first-year annual operating expenditures relative to the baseline. The PBP calculation uses the same inputs as the LCC analysis, except that discount rates are not needed.
ASAP, ACEEE, and the CA IOUs commented that efficiency levels presented in the NOPD have payback periods below the average lifetime of the product, which shows economic justification for amended standards. (ASAP, ACEEE, No. 15 at p. 1 and CA IOUs, No. 17 at p. 1)
As noted previously, EPCA establishes a rebuttable presumption that a standard is economically justified if the Secretary finds that the additional cost to the consumer of purchasing a product complying with an energy conservation standard level will be less than three times the value of the first year's energy savings resulting from the standard, as calculated under the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii)) For each considered efficiency level, DOE determined the value of the first year's energy savings by calculating the energy savings in accordance with the applicable DOE test procedure, and multiplying those savings by the average energy price projection for the year in which compliance with the amended standards would be required.
DOE uses projections of annual product shipments to calculate the national impacts of potential amended or new energy conservation standards on energy use, NPV, and future manufacturer cash flows.
Total shipments for microwave ovens are developed by considering the demand from replacements for units in stock that fail and the demand from new installations in newly constructed homes. DOE calculated shipments due to replacements using the retirement function developed for the LCC analysis and historical data from AHAM. DOE calculated shipments due to new installations using estimates from microwave oven saturation rate in new homes in
For this SNOPR analysis, DOE used data from a market research report and estimated the market share for built-in and over-the-range convection microwave ovens at 4 percent.
DOE considers the impacts on shipments from changes in product purchase price and operating cost associated with higher energy efficiency levels using a price elasticity and an efficiency elasticity. DOE employs a 0.2-percent efficiency elasticity rate and a price elasticity of –0.45 in its shipments model.
DOE requests comment on its methodology for estimating shipments. DOE also requests comment on its approach to estimate the market share for built-in and over-the-range convection microwave ovens.
The NIA assesses the NES and the NPV from a national perspective of total consumer costs and savings that would be expected to result from new or amended standards at specific efficiency levels.
DOE evaluates the impacts of new or amended standards by comparing a case without such standards with standards-case projections. The no-new-standards case characterizes energy use and consumer costs for each product class in the absence of new or amended energy conservation standards. For this projection, DOE considers historical trends in efficiency and various forces that are likely to affect the mix of efficiencies over time. DOE compares the no-new-standards case with projections characterizing the market for each product class if DOE adopted new or amended standards at specific energy efficiency levels (
DOE uses a spreadsheet model to calculate the energy savings and the national consumer costs and savings from each TSL. Interested parties can review DOE's analyses by changing various input quantities within the spreadsheet. The NIA spreadsheet model uses point values (as opposed to probability distributions) as inputs.
Table IV.10 summarizes the inputs and methods DOE used for the NIA analysis for the SNOPR. Discussion of these inputs and methods follows the table. See chapter 10 of the SNOPR TSD for further details.
A key component of the NIA is the trend in energy efficiency projected for the no-new-standards case and each of the standards cases. Section IV.F.8 of this document describes how DOE developed an energy efficiency distribution for the no-new-standards case (which yields a shipment-weighted average efficiency) for each of the considered product classes for the year
ASAP, NRDC, and the CA IOUs commented that in the public meeting held on September 13, 2021, DOE included an assumption that unit efficiencies will improve by 0.25 percent between 2019 and 2053 and requested how the assumption is derived and how it is integrated into the energy savings evaluation. (ASAP, NRDC, CA IOUs, No. 12 at p. 1)
To project the trend in efficiency absent amended standards for microwave ovens over the entire shipments projection period, DOE used the shipments-weighted standby power (“SWSP”) as a starting point. DOE assumed that the shipment-weighted efficiency would not increase annually for the microwave oven product classes.
For the standards cases, DOE used a “roll-up” scenario to establish the shipment-weighted efficiency for the year that standards are assumed to become effective in 2026. In the year of compliance, the market shares of products in the no-new-standards case that do not meet the standard under consideration would “roll up” to meet the new standard level, and the market share of products above the standard would remain unchanged.
The national energy savings analysis involves a comparison of national energy consumption of the considered products between each TSL and the case with no new or amended energy conservation standards. DOE calculated the national energy consumption by multiplying the number of units (stock) of each product (by vintage or age) by the unit energy consumption (also by vintage). DOE calculated annual NES based on the difference in national energy consumption for the no-new standards case and for each higher efficiency standard case. DOE estimated energy consumption and savings based on site energy and converted the electricity consumption and savings to primary energy (
Use of higher-efficiency products is occasionally associated with a direct rebound effect, which refers to an increase in utilization of the product due to the increase in efficiency. DOE did not find any data on the rebound effect specific to microwave ovens.
In 2011, in response to the recommendations of a committee on “Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy Efficiency Standards” appointed by the National Academy of Sciences, DOE announced its intention to use FFC measures of energy use and greenhouse gas and other emissions in the national impact analyses and emissions analyses included in future energy conservation standards rulemakings. 76 FR 51281 (Aug. 18, 2011). After evaluating the approaches discussed in the August 18, 2011 notice, DOE published a statement of amended policy in which DOE explained its determination that EIA's National Energy Modeling System (“NEMS”) is the most appropriate tool for its FFC analysis and its intention to use NEMS for that purpose. 77 FR 49701 (Aug. 17, 2012). NEMS is a public domain, multi-sector, partial equilibrium model of the U.S. energy sector
The inputs for determining the NPV of the total costs and benefits experienced by consumers are (1) total annual installed cost, (2) total annual operating costs (energy costs and repair and maintenance costs), and (3) a discount factor to calculate the present value of costs and savings. DOE calculates net savings each year as the difference between the no-new-standards case and each standards case in terms of total savings in operating costs versus total increases in installed costs. DOE calculates operating cost savings over the lifetime of each product shipped during the projection period.
As discussed in section IV.F.1 of this document, DOE developed microwave oven price trends based on historical PPI data. DOE applied the same trends to project prices for each product class at each considered efficiency level. By 2055, which is the end date of the projection period, the average microwave oven price is projected to drop 11 percent relative to 2021. DOE's projection of product prices is described in appendix 10C of the SNOPR TSD.
To evaluate the effect of uncertainty regarding the price trend estimates, DOE investigated the impact of different product price projections on the consumer NPV for the considered TSLs for microwave ovens. In addition to the default price trend, DOE considered two product price sensitivity cases: (1) a low price decline case based on the “electric household cooking products” PPI series from 1972 to 1992 and (2) a high price decline scenario based on the same PPI series from 1993 to 2021, which shows a faster price decline than the full time series between 1972–2021. The derivation of these price trends and the results of these sensitivity cases are described in appendix 10C of the SNOPR TSD.
The operating cost savings are energy cost savings, which are calculated using the estimated energy savings in each year and the projected price of the appropriate form of energy. To estimate energy prices in future years, DOE multiplied the average regional energy prices by the projection of annual national-average residential energy price changes in the Reference case from
In calculating the NPV, DOE multiplies the net savings in future years by a discount factor to determine their present value. For this SNOPR, DOE estimated the NPV of consumer benefits using both a 3-percent and a 7-percent real discount rate. DOE uses these discount rates in accordance with guidance provided by the Office of Management and Budget (“OMB”) to Federal agencies on the development of regulatory analysis.
In analyzing the potential impact of new or amended energy conservation standards on consumers, DOE evaluates the impact on identifiable subgroups of consumers that may be disproportionately affected by a new or amended national standard. The purpose of a subgroup analysis is to determine the extent of any such disproportional impacts. DOE evaluates impacts on particular subgroups of consumers by analyzing the LCC impacts and PBP for those particular consumers from alternative standard levels. For this SNOPR, DOE analyzed the impacts of the considered standard levels on two subgroups: (1) low-income households and (2) senior-only households. The analysis used subsets of the
DOE performed an MIA to estimate the financial impacts of amended energy conservation standards on manufacturers of microwave ovens and to estimate the potential impacts of such standards on employment and manufacturing capacity. The MIA has both quantitative and qualitative aspects and includes analyses of projected industry cash flows; the INPV; investments in R&D and manufacturing capital; and domestic manufacturing employment. Additionally, the MIA seeks to determine how amended energy conservation standards might affect manufacturing employment, capacity, and competition, as well as how standards contribute to overall regulatory burden. Finally, the MIA serves to identify any disproportionate impacts on manufacturer subgroups, including small business manufacturers.
The quantitative part of the MIA primarily relies on the GRIM, an industry cash flow model with inputs specific to this rulemaking. The key GRIM inputs include data on the industry cost structure, MPCs, product shipments, manufacturer markups, and investments in R&D and manufacturing capital required to produce compliant products. The key GRIM output is the INPV, which is the sum of industry annual cash flows over the analysis period, discounted using the industry-weighted average cost of capital. The model uses standard accounting principles to estimate the impacts of more-stringent energy conservation standards on a given industry by comparing changes in INPV between a no-new-standards case and the various standards cases (TSLs). To capture the uncertainty relating to manufacturer pricing strategies following amended standards, the GRIM estimates a range of possible impacts under different manufacturer markup scenarios.
The qualitative part of the MIA addresses manufacturer characteristics and market trends. Specifically, the MIA considers such factors as a potential standard's impact on manufacturing capacity, competition within the industry, the cumulative impact of other DOE and non-DOE regulations, and impacts on manufacturer subgroups. The complete MIA is outlined in chapter 12 of the SNOPR TSD.
DOE prepared a profile of the microwave oven manufacturing industry based on the market and technology assessment and information from the June 2013 Final Rule.
Additionally, DOE prepared a framework industry cash-flow analysis to quantify the potential impacts of amended energy conservation standards. The GRIM uses several factors to determine a series of annual cash flows starting with the announcement of the standard and extending over a 30-year period following the compliance date of the standard. These factors include annual expected revenues, costs of sales, SG&A and R&D expenses, taxes, and capital expenditures. In general, energy conservation standards can affect manufacturer cash flow in three distinct ways: (1) creating a need for increased investment, (2) raising production costs per unit, and (3) altering revenue due to higher per-unit prices and changes in sales volumes.
DOE also evaluated subgroups of manufacturers that may be disproportionately impacted by amended standards or that may not be accurately represented by the average cost assumptions used to develop the industry cash flow analysis. Such manufacturer subgroups may include small business manufacturers, low-volume manufacturers, niche players, and/or manufacturers exhibiting a cost structure that largely differs from the industry average. DOE identified one subgroup for a separate impact analysis: small business manufacturers. The small business subgroup is discussed in section VI.B of this document, “Review under the Regulatory Flexibility Act,” and in chapter 12 of the SNOPR TSD.
DOE uses the GRIM to quantify the changes in cash flow due to amended standards that result in a higher or lower industry value. The GRIM uses a standard, annual discounted cash-flow analysis that incorporates manufacturer costs, manufacturer markups, shipments, and industry financial information as inputs. The GRIM models changes in costs, distribution of shipments, investments, and manufacturer margins that could result from amended energy conservation standards. The GRIM spreadsheet uses the inputs to arrive at a series of annual cash flows, beginning in 2022 (the reference year of the analysis) and continuing to 2055. DOE calculated INPVs by summing the stream of annual discounted cash flows during this period. For manufacturers of microwave ovens, DOE used a real discount rate of 8.5 percent, which was the same real discount rate used in the June 2013 Final Rule and that was verified during manufacturer interviews for that rulemakings analysis.
The GRIM calculates cash flows using standard accounting principles and compares changes in INPV between the no-new-standards case and each standards case. The difference in INPV between the no-new-standards case and a standards case represents the financial impact of the amended energy conservation standard on manufacturers. As discussed previously, DOE developed critical GRIM inputs using a number of sources, including publicly available data, results of the engineering analysis, and information used in the June 2013 Final Rule. The GRIM results are presented in section V.B.2 of this document. Additional details about the GRIM, the discount rate, and other financial parameters can be found in chapter 12 of the SNOPR TSD.
Manufacturing a more efficient product is typically more expensive than manufacturing a baseline product due to the use of more complex
The GRIM estimates manufacturer revenues based on total unit shipment projections and the distribution of those shipments by efficiency level. Changes in sales volumes and efficiency mix over time can significantly affect manufacturer finances. For this analysis, the GRIM uses the NIA's annual shipment projections derived from the shipments analysis from 2022 (the reference year) to 2055 (the end year of the analysis period). See chapter 9 of the SNOPR TSD for additional details.
Amended energy conservation standards could cause manufacturers to incur conversion costs to bring their production facilities and product designs into compliance. DOE evaluated the level of conversion-related expenditures that would be needed to comply with each considered efficiency level in each product class. For the MIA, DOE classified these conversion costs into two major groups: (1) product conversion costs and (2) capital conversion costs. Product conversion costs are investments in research, development, testing, marketing, and other non-capitalized costs necessary to make product designs comply with amended energy conservation standards. Capital conversion costs are investments in property, plant, and product necessary to adapt or change existing production facilities such that new compliant product designs can be fabricated and assembled.
DOE used a bottom-up cost estimate to arrive at a total industry conversion cost at each EL for both product classes. First DOE estimated the investments manufacturers are likely to incur to resdesign a single microwave oven control board to be able to meet the analyzed energy conservation standards. These per-board conversion costs were based on manufacturer interviews and include both a per-board capital conversion costs (
Next, based on engineering teardowns and market research, DOE estimated the total number of unique control boards used across all covered microwave ovens. DOE used the percent of unique microwave oven models for each product class that were certified in DOE's publicly available Compliance Certification Database (“CCD”)
MSPs include direct manufacturing production costs (
For the MIA, DOE modeled two standards case manufacturer markup scenarios to represent uncertainty regarding the potential impacts on prices and profitability for manufacturers following the implementation of amended energy conservation standards: (1) a conversion cost recovery markup scenario and (2) a constant price scenario. These scenarios lead to different manufacturer markup values at each TSL that, when applied to the MPCs, result in varying revenue and cash flow impacts.
Under the conversion cost recovery markup scenario, DOE modeled a scenario where manufacturers increase their manufacturer markups in response to amended energy conservation standards. Because DOE's engineering analysis assumed there were no increases in the MPCs at higher ELs, compared to the baseline MPCs, and that microwave oven manufacturers would incur conversion costs to redesign non-compliant models, DOE modeled a manufacturer markup scenario where microwave oven manufacturers attempt to recover these investment through an increase in their manufacturer markup. Therefore, in the standards cases the manufacturer markup of models that would need to be re-designed is a value larger than the 1.298 manufacturer markup used in the no-new-standards case. DOE calibrated these manufacturer markups for each product class at each EL to cause manufacturer INPV in the standards cases to be equal to the INPV in the no-new-standards case. This represents the upper-bound of manufacturer profitability, as in this manufacturer markup scenario, microwave oven manufacturers are no worse off, as measured by INPV, with energy conservation standards than in the no-new-standards case (
Under the constant price scenario, DOE applied the same manufacturer markup, 1.298, for all efficiency levels in the no-new-standards case and the standards cases. Because DOE's engineering analysis assumed there were no increases in the MPCs at higher ELs and that microwave oven manufacturers would incur conversion costs to redesign non-compliant models, microwave oven manufacturers do not earn any additional revenue in the standards cases than in the no-new-standards case, despite incurring conversion costs to redesign non-compliant microwave oven models. This represents the lower-bound of manufacturer profitability, as microwave oven manufacturers incur conversion costs but do not receive any additional revenue from these redesign efforts.
A comparison of industry financial impacts under the two manufacturer markup scenarios is presented in section V.B.2.a of this document.
In response to the August 2021 NOPD, AHAM stated that if DOE decides to amend the microwave oven standards, it should conduct manufacturer interviews to better understand the challenges with existing technology options and what the costs associated with energy efficiency improvements would be. (AHAM, No. 14 at p. 2) In response to AHAM's comment, DOE conducted interviews with manufacturers to discuss the potential impacts of energy conservation standards for microwave ovens to manufacturers. DOE included
The emissions analysis consists of two components. The first component estimates the effect of potential energy conservation standards on power sector and site (where applicable) combustion emissions of CO
The analysis of power sector emissions of CO
Power sector emissions of CO
The emissions intensity factors are expressed in terms of physical units per megawatt-hours (“MWh”) or million British thermal units (“MMBtu”) of site energy savings. For power sector emissions, specific emissions intensity factors are calculated by sector and end use. Total emissions reductions are estimated using the energy savings calculated in the national impact analysis.
DOE's no-new-standards case for the electric power sector reflects the
SO
Beginning in 2016, SO
CSAPR also established limits on NO
The MATS limit mercury emissions from power plants, but they do not include emissions caps and, as such, DOE's energy conservation standards would be expected to slightly reduce Hg emissions. DOE estimated mercury emissions reduction using emissions factors based on
As part of the development of this proposed rule, for the purpose of complying with the requirements of Executive Order 12866, DOE considered the estimated monetary benefits from the reduced emissions of CO
On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22–30087) granted the federal government's emergency motion for stay pending appeal of the February 11, 2022, preliminary injunction issued in
DOE estimated the monetized benefits of the reductions in emissions of CO
DOE exercises its own judgment in presenting monetized climate benefits as recommended by applicable Executive Orders, and DOE would reach the same conclusion presented in this proposed rulemaking in the absence of the social cost of greenhouse gases, including the February 2021 Interim Estimates presented by the Interagency Working Group on the Social Cost of Greenhouse Gases.
DOE estimated the global social benefits of CO
The SC–GHGs estimates presented here were developed over many years, using a transparent process, peer-reviewed methodologies, the best science available at the time of that process, and with input from the public. Specifically, in 2009, the IWG, that included DOE and other executive branch agencies and offices, was established to ensure that agencies were using the best available science and to promote consistency in the SC–CO
On January 20, 2021, President Biden issued Executive Order 13990, which re-established the IWG and directed it to ensure that the U.S. Government's estimates of the social cost of carbon and other greenhouse gases reflect the best available science and the recommendations of the National Academies (2017). The IWG was tasked with first reviewing the SC–GHG estimates currently used in Federal analyses and publishing interim estimates within 30 days of the E.O. that reflect the full impact of GHG emissions, including by taking global damages into account. The interim SC–GHG estimates published in February 2021, specifically the SC–CH
First, the IWG found that the SC–GHG estimates used under E.O. 13783 fail to fully capture many climate impacts that affect the welfare of U.S. citizens and residents, and those impacts are better reflected by global measures of the SC–GHG. Examples of omitted effects from the E.O. 13783 estimates include direct effects on U.S. citizens, assets, and investments located abroad, supply chains, U.S. military assets and interests abroad, and tourism, and spillover pathways such as economic and political destabilization and global migration that can lead to adverse impacts on U.S. national security, public health, and humanitarian concerns. In addition, assessing the benefits of U.S. GHG mitigation activities requires consideration of how those actions may affect mitigation activities by other countries, as those international mitigation actions will provide a benefit to U.S. citizens and residents by mitigating climate impacts that affect U.S. citizens and residents. A wide range of scientific and economic experts have emphasized the issue of reciprocity as support for considering global damages of GHG emissions. If the United States does not consider impacts on other countries, it is difficult to convince other countries to consider the impacts of their emissions on the United States. The only way to achieve an efficient allocation of resources for emissions reduction on a global basis—and so benefit the United States and its citizens—is for all countries to base their policies on global estimates of damages. As a member of the IWG involved in the development of the February 2021 SC–GHG TSD, DOE agrees with this assessment and, therefore, in this proposed rule DOE centers attention on a global measure of SC–GHG. This approach is the same as that taken in DOE regulatory analyses from 2012 through 2016. A robust estimate of climate damages to U.S. citizens and residents does not currently exist in the literature. As explained in the February 2021 TSD, existing estimates are both incomplete and an underestimate of total damages that accrue to the citizens and residents of the United States because they do not fully capture the regional interactions and spillovers discussed above, nor do they include all of the important physical, ecological, and economic impacts of climate change recognized in the climate change literature. As noted in the February 2021 SC–GHG TSD, the IWG will continue to review developments in the literature, including more robust methodologies for estimating a U.S.-specific SC–GHG value, and explore ways to better inform the public of the full range of carbon impacts. As a member of the IWG, DOE will continue to follow developments in the literature pertaining to this issue.
Second, the IWG found that the use of the social rate of return on capital (7 percent under current OMB Circular A–4 guidance) to discount the future benefits of reducing GHG emissions inappropriately underestimates the impacts of climate change for the purposes of estimating the SC–GHG. Consistent with the findings of the National Academies (2017) and the economic literature, the IWG continued to conclude that the consumption rate of interest is the theoretically appropriate discount rate in an intergenerational context,
Furthermore, the damage estimates developed for use in the SC–GHG are estimated in consumption-equivalent terms, and so an application of OMB Circular A–4's guidance for regulatory analysis would then use the consumption discount rate to calculate the SC–GHG. DOE agrees with this assessment and will continue to follow developments in the literature pertaining to this issue. DOE also notes that while OMB Circular A–4, as published in 2003, recommends using 3 percent and 7 percent discount rates as “default” values, Circular A–4 also reminds agencies that “different regulations may call for different emphases in the analysis, depending on the nature and complexity of the regulatory issues and the sensitivity of the benefit and cost estimates to the key assumptions.” On discounting, Circular A–4 recognizes that “special ethical considerations arise when comparing benefits and costs across generations,” and Circular A–4 acknowledges that analyses may appropriately “discount future costs and consumption benefits . . . at a lower rate than for intragenerational analysis.” In the 2015 Response to Comments on the Social Cost of Carbon for Regulatory Impact Analysis, OMB, DOE, and the other IWG members recognized that “Circular A–4 is a living document” and “the use of 7 percent is not considered appropriate for intergenerational discounting. There is wide support for this view in the
As a member of the IWG involved in the development of the February 2021 SC–GHG TSD, DOE agrees with this assessment and will continue to follow developments in the literature pertaining to this issue.
While the IWG works to assess how best to incorporate the latest, peer reviewed science to develop an updated set of SC–GHG estimates, it set the interim estimates to be the most recent estimates developed by the IWG prior to the group being disbanded in 2017. The estimates rely on the same models and harmonized inputs and are calculated using a range of discount rates. As explained in the February 2021 SC–GHG TSD, the IWG has recommended that agencies revert to the same set of four values drawn from the SC–GHG distributions based on three discount rates as were used in regulatory analyses between 2010 and 2016 and subject to public comment. For each discount rate, the IWG combined the distributions across models and socioeconomic emissions scenarios (applying equal weight to each) and then selected a set of four values recommended for use in benefit-cost analyses: an average value resulting from the model runs for each of three discount rates (2.5 percent, 3 percent, and 5 percent), plus a fourth value, selected as the 95th percentile of estimates based on a 3-percent discount rate. The fourth value was included to provide information on potentially higher-than-expected economic impacts from climate change. As explained in the February 2021 SC–GHG TSD, and DOE agrees, this update reflects the immediate need to have an operational SC–GHG for use in regulatory benefit-cost analyses and other applications that was developed using a transparent process, peer-reviewed methodologies, and the science available at the time of that process. Those estimates were subject to public comment in the context of dozens of proposed rulemakings as well as in a dedicated public comment period in 2013.
There are a number of limitations and uncertainties associated with the SC–GHG estimates. First, the current scientific and economic understanding of discounting approaches suggests discount rates appropriate for intergenerational analysis in the context of climate change are likely to be less than 3 percent, near 2 percent or lower.
DOE's derivations of the SC–GHG (
The SC–CO
In calculating the potential global benefits resulting from reduced CO
DOE multiplied the CO
The SC–CH
Interim Estimates Under Executive Order 13990, Washington, DC, February 2021.
DOE multiplied the CH
For the SNOPR, DOE estimated the monetized value of NO
DOE multiplied the emissions reduction (in tons) in each year by the associated $/ton values, and then discounted each series using discount rates of 3 percent and 7 percent as appropriate.
The SCoC Commenters presented reasons why DOE should, as it has in the past, monetize the full climate benefits of greenhouse gas emissions reductions, using the best available estimates, which were derived by the Interagency Working Group on the Social Cost of Greenhouse Gases. The SCoC Commenters also stated that DOE should factor these benefits into its choice of the maximum efficiency level that is economically justified, consistent with its statutory requirement to assess the national need to conserve energy under the Energy Policy and Conservation Act. (SCoC, No. 21 at p. 1)
As discussed, on March 16, 2022, the Fifth Circuit Court of Appeals (No. 22–30087) granted the federal government's emergency motion for stay pending appeal of the February 11, 2022, preliminary injunction issued in
The utility impact analysis estimates the changes in installed electrical capacity and generation projected to result for each considered TSL. The analysis is based on published output from the NEMS associated with
The output of this analysis is a set of time-dependent coefficients that capture the change in electricity generation, primary fuel consumption, installed capacity and power sector emissions due to a unit reduction in demand for a given end use. These coefficients are multiplied by the stream of electricity savings calculated in the NIA to provide estimates of selected utility impacts of potential new or amended energy conservation standards.
DOE considers employment impacts in the domestic economy as one factor in selecting a proposed standard. Employment impacts from new or amended energy conservation standards include both direct and indirect impacts. Direct employment impacts are any changes in the number of production and non-production employees of manufacturers of the products subject to standards.
One method for assessing the possible effects on the demand for labor of such shifts in economic activity is to compare sector employment statistics developed by the Labor Department's BLS. BLS regularly publishes its estimates of the number of jobs per million dollars of economic activity in different sectors of the economy, as well as the jobs created elsewhere in the economy by this same economic activity. Data from BLS indicate that expenditures in the utility sector generally create fewer jobs (both directly and indirectly) than expenditures in other sectors of the economy.
DOE estimated indirect national employment impacts for the standard levels considered in this SNOPR using an input/output model of the U.S. economy called Impact of Sector Energy Technologies version 4 (“ImSET”).
DOE notes that ImSET is not a general equilibrium forecasting model, and that the uncertainties involved in projecting employment impacts, especially changes in the later years of the analysis. Because ImSET does not incorporate price changes, the employment effects predicted by ImSET may over-estimate actual job impacts over the long run for this rule. Therefore, DOE used ImSET only to generate results for near-term timeframes, where these uncertainties are reduced. For more details on the employment impact analysis, see chapter 16 of the SNOPR TSD.
The following section addresses the results from DOE's analyses with respect to the considered energy conservation standards for microwave ovens. It addresses the TSLs examined by DOE, the projected impacts of each of these levels if adopted as energy conservation standards for microwave ovens, and the standards levels that DOE is proposing to adopt in this SNOPR. Additional details regarding DOE's analyses are contained in the SNOPR TSD supporting this document.
In general, DOE typically evaluates potential amended standards for products and equipment by grouping individual efficiency levels for each class into TSLs. Use of TSLs allows DOE to identify and consider manufacturer cost interactions between the product classes, to the extent that there are such interactions, and market cross elasticity from consumer purchasing decisions that may change when different standard levels are set. DOE analyzed the benefits and burdens of three TSLs for microwave ovens. DOE developed TSLs that combine efficiency levels for each analyzed product class. DOE presents the results for the TSLs in this document, while the results for all efficiency levels that DOE analyzed are in the SNOPR TSD.
Table V.1 presents the TSLs and the corresponding efficiency levels that DOE has identified for potential amended energy conservation standards for microwave ovens. TSL 3 represents the max-tech energy efficiency for all product classes and corresponds to EL 3 for both product classes. TSL 2 and TSL 1 represent interim energy efficiency levels between the current standard level and the max-tech energy efficiency level.
DOE constructed the TSLs for this SNOPR to include ELs representative of ELs with similar characteristics (
DOE analyzed the economic impacts on microwave ovens consumers by looking at the effects that potential amended standards at each TSL would have on the LCC and PBP. DOE also examined the impacts of potential standards on selected consumer subgroups. These analyses are discussed in the following sections.
In general, higher-efficiency products affect consumers in two ways: (1) purchase price increases and (2) annual operating costs decrease. Inputs used for calculating the LCC and PBP include total installed costs (
Table V.2 through Table V.5 show the default case LCC and PBP results for the TSLs considered for both product classes. The LCC and PBP results based on the incremental MPC sensitivity cases are presented in appendix 8D of the SNOPR TSD. In the first of each pair of tables, the simple payback is measured relative to the baseline product. In the second of each pair of tables, impacts are measured relative to the efficiency distribution in the no-new-standards case in the compliance year (see section IV.F.8 of this document). Because some consumers purchase products with higher efficiency in the no-new-standards case, the average savings are less than the difference between the average LCC of the baseline product and the average LCC at each TSL. The savings refer only to consumers who are affected by a standard at a given TSL. Those who already purchase a product with efficiency at or above a given TSL are not affected. Consumers for whom the LCC increases at a given TSL experience a net cost.
In the consumer subgroup analysis, DOE estimated the impact of the considered TSLs on low-income households and senior-only households. Table V.6 and Table V.7 compare the average LCC savings and PBP at each efficiency level for the consumer subgroups with similar metrics for the entire consumer sample for both product classes. In most cases, the average LCC savings and PBP for low-income households and senior-only households at the considered efficiency levels are not substantially different from the average for all households. Chapter 11 of the SNOPR TSD presents the complete LCC and PBP results for the subgroups.
As discussed in section III.E.2 of this document, EPCA establishes a rebuttable presumption that an energy conservation standard is economically justified if the increased purchase cost for a product that meets the standard is less than three times the value of the first-year energy savings resulting from the standard. (42 U.S.C. 6295(o)(2)(B)(iii)) In calculating a rebuttable presumption payback period for each of the considered TSLs, DOE used discrete values, and, as required by EPCA, based the energy use calculation on the DOE test procedure for microwave ovens. In contrast, the PBPs presented in section V.B.1.a of this document were calculated using distributions that reflect the range of energy use in the field.
Table V.8 presents the rebuttable-presumption payback periods for the considered TSLs for microwave ovens. While DOE examined the rebuttable-presumption criterion, it also considered whether the standard levels considered for the SNOPR are economically justified through a more detailed analysis of the economic impacts of those levels, pursuant to 42 U.S.C. 6295(o)(2)(B)(i), that considers the full range of impacts to the consumer, manufacturer, Nation, and environment. The results of that analysis serve as the basis for DOE to definitively evaluate the economic justification for a potential standard level, thereby supporting or rebutting the results of any preliminary determination of economic justification.
DOE performed an MIA to estimate the impact of amended energy conservation standards on manufacturers of microwave ovens. The following section describes the expected impacts on manufacturers at each considered TSL. Chapter 12 of the SNOPR TSD explains the analysis in further detail.
In this section, DOE provides GRIM results from the analysis, which examines changes in the industry that would result from amended energy conservation standards. The following tables illustrate the estimated financial impacts (represented by changes in INPV) of potential amended energy conservation standards on manufacturers of microwave ovens, as well as the conversion costs that DOE estimates manufacturers of microwave ovens would incur at each TSL. To evaluate the range of cash-flow impacts on the microwave oven industry, DOE modeled two manufacturer markup scenarios using different assumptions that correspond to the range of anticipated market responses to amended energy conservation standards: (1) the conversion cost recovery markup scenario and (2) the constant price scenario.
To assess the less severe end of the range of potential impacts, DOE
As noted in the MIA methodology discussion (see section IV.J of this document), in addition to manufacturer markup scenarios, the MPCs, shipments, and conversion cost assumptions also affect INPV results.
The results in Table V.9 and Table V.10 present potential INPV impacts for microwave oven manufacturers. Table V.9 reflects the less severe set of potential impacts (conversion cost recovery markup scenario), and Table V.10 represents the more severe set of potential impacts (constant price scenario). In the following discussion, the INPV results refer to the difference in industry value between the no-new-standards case and each standards case that results from the sum of discounted cash flows from 2022 (the reference year) through 2055 (the end of the analysis period).
At TSL 1, DOE estimates impacts on INPV will range from −$3.9 million, which represents a change of −0.3 percent, to no change in INPV. At TSL 1, industry free cash-flow decrease to $99 million, which represents a decrese of approximately 2.1 percent, compared to the no-new-standards case value of $101 million.
TSL 1 would set the energy conservation standard for both product classes at EL 1. DOE estimates that 85 percent of Product Class 1 shipments and 100 percent of Product Class 2 shipments would already meet or exceed the efficiency levels required at TSL 1. DOE expects microwave oven manufacturers to incur approximately $2.8 million in product conversion costs to redesign and re-test non-compliant models and approximately $2.5 million in capital conversion costs to purchase new tooling and equipment necessary to produce these redesigned models.
At TSL 2, DOE estimates impacts on INPV will range from −$34.3 million, which represents a change of −2.5 percent, to no change in INPV. At TSL 2, industry free cash-flow decrease to $83 million, which represents a decrese of approximately 18.3 percent, compared to the no-new-standards case value of $101 million.
TSL 2 would set the energy conservation standard for both product classes at EL 2. DOE estimates that 40 percent of Product Class 1 shipments and 64 percent of Product Class 2 shipments would already meet or exceed the efficiency levels required at TSL 2. DOE expects microwave oven manufacturers to incur approximately $23.6 million in product conversion costs to redesign and re-test non-compliant models and approximately $22.5 million in capital conversion costs to purchase new tooling and equipment necessary to produce these redesigned models.
At TSL 3, DOE estimates impacts on INPV will range from −$80.7 million, which represents a change of −5.8 percent, to no change in INPV. At TSL 3, industry free cash-flow decrease to $58 million, which represents a decrese of approximately 42.9 percent, compared to the no-new-standards case value of $101 million.
TSL 3 would set the energy conservation standard for both product classes at EL 3. DOE estimates that 11 percent of Product Class 1 shipments and 5 percent of Product Class 2 shipments would already meet the efficiency levels required at TSL 3. DOE expects microwave oven manufacturers to incur approximately $55.0 million in product conversion costs to redesign and re-test non-compliant models and approximately $53.3 million in capital conversion costs to purchase new tooling and equipment necessary to produce these redesigned models.
DOE estimates that over 95 percent of microwave oven manufacturing occurs outside of the United States. Furthermore, all of the analzyed efficiency levels do not require additional labor and would not impact current manufacturing labor practices.
As previously mentioned, DOE's proposed amended energy conservation standards for microwave ovens requires a control board re-design. As such, DOE does not estimate significant impacts on manufacturing capacity at any of the analyzed TSLs. Furthermore, given the compliance period, and taking into account that manufacturers currently make products that meet the proposed efficiency levels, DOE expects manufacturers to have sufficient time to incorporate the improved control boards and re-test those models.
Small manufacturers, niche equipment manufacturers, and manufacturers exhibiting a cost structure substantially different from the industry average could be affected disproportionately. Using average cost assumptions developed for an industry cash-flow estimate is inadequate to assess differential impacts among manufacturer subgroups.
For the microwave oven industry, DOE identified and evaluated the impact of amended energy conservation standards on one subgroup—small manufacturers. The Small Business Administration (“SBA”) defines a “small business” as having 1,500 employees or fewer for the North American Industry Classification System (“NAICS”) code 335220, “Major Household Appliance Manufacturing.” Based on this definition, DOE identified two small, domestic manufacturers of the covered products that would be subject to amended energy conservation standards.
For a discussion of the impacts on the small manufacturer subgroup, see the regulatory flexibility analysis in section VI.B of this document and chapter 12 of the SNOPR TSD.
One aspect of assessing manufacturer burden involves looking at the cumulative impact of multiple DOE standards and the product-specific regulatory actions of other Federal agencies that affect the manufacturers of a covered product or product. While any one regulation may not impose a significant burden on manufacturers, the combined effects of several existing or impending regulations may have serious consequences for some manufacturers, groups of manufacturers, or an entire industry. Assessing the impact of a single regulation may overlook this cumulative regulatory burden. In addition to energy conservation standards, other regulations can significantly affect manufacturers' financial operations. Multiple regulations affecting the same manufacturer can strain profits and lead companies to abandon product lines or markets with lower expected future returns than competing products. For these reasons, DOE conducts an analysis of cumulative regulatory burden as part of its rulemakings pertaining to appliance efficiency.
DOE evaluates product-specific regulations that will take effect approximately 3 years before or after the estimated 2026 compliance date of any amended energy conservation standards for microwave ovens. This information is presented in Table V.11.
In addition to the rulemakings listed in Table V.11, DOE has ongoing rulemakings for other products or equipment that microwave oven manufacturers produce, including dehumidifiers;
This section presents DOE's estimates of the national energy savings and the NPV of consumer benefits that would result from each of the TSLs considered as potential amended standards.
To estimate the energy savings attributable to potential amended standards for microwave ovens, DOE compared their energy consumption under the no-new-standards case to
OMB Circular A–4
The energy savings in the SNOPR analyses differ from the energy savings in the NOPD primarily due to the updated product class market share distribution. In the NOPD, national energy savings were estimated by using the same product class market share as presented in the June 2013 Final Rule TSD.
In response to the August 2021 NOPD, IPI stated that the decision not to pursue any efficiency improvements due to falling just short of what it asserted was an arbitrary threshold for “significance” is troubling given that, for Product Class 2 EL 1 microwave ovens, DOE's initial analysis suggests that some level of efficiency improvement could be achieved at “$0” incremental costs. (IPI, No. 15 at p. 1) ASAP, ACEEE, CFA, NRDC, and NEEA urged DOE to adopt the efficiency levels evaluated for the NOPD if DOE does not evaluate any additional efficiency levels, since the max-tech levels would result in an incremental manufacturing cost of $0.16 for energy savings of 8 percent over the 30-year analysis period. (ASAP, ACEEE, CFA, NRDC, NEEA, No. 16 at p. 2)
As discussed, DOE updated its analysis, including efficiency levels, based on more current information regarding shipments of microwave ovens, resulting in energy savings of around 0.06 quads over 30 years. Further, as also discussed in section III.D of this document, DOE recently
DOE estimated the cumulative NPV of the total costs and savings for consumers that would result from the TSLs considered for microwave ovens. In accordance with OMB's guidelines on regulatory analysis,
The NPV results based on the aforementioned 9-year analytical period are presented in Table V.15. The impacts are counted over the lifetime of products purchased in 2026–2033. As mentioned previously, such results are presented for informational purposes only and are not indicative of any change in DOE's analytical methodology or decision criteria.
It is estimated that that amended energy conservation standards for microwave ovens would reduce energy expenditures for consumers of those products, with the resulting net savings being redirected to other forms of economic activity. These expected shifts in spending and economic activity could affect the demand for labor. As described in section IV.N of this document, DOE used an input/output model of the U.S. economy to estimate indirect employment impacts of the TSLs that DOE considered. There are uncertainties involved in projecting employment impacts, especially changes in the later years of the analysis. Therefore, DOE generated results for near-term timeframe (2026–2031), where these uncertainties are reduced.
The results suggest that the proposed standards would be likely to have a negligible impact on the net demand for labor in the economy. The net change in jobs is so small that it would be imperceptible in national labor statistics and might be offset by other, unanticipated effects on employment. Chapter 16 of the SNOPR TSD presents detailed results regarding anticipated indirect employment impacts.
As discussed in section III.E.1.d of this document, DOE has tentatively concluded that the standards proposed in this SNOPR would not lessen the utility or performance of the microwave ovens under consideration in this proposed rulemaking. Manufacturers of these products currently offer units that meet or exceed the proposed standards.
DOE considered any lessening of competition that would be likely to result from new or amended standards. As discussed in section III.E.1.e of this document, the Attorney General determines the impact, if any, of any lessening of competition likely to result from a proposed standard, and transmits such determination in writing to the Secretary, together with an analysis of the nature and extent of such impact. To assist the Attorney General in making this determination, DOE has provided DOJ with copies of this SNOPR and the accompanying TSD for review. DOE will consider DOJ's comments on the proposed rule in determining whether to proceed to a final rule. DOE will publish and respond to DOJ's comments in that document. DOE invites comment from the public regarding the competitive impacts that are likely to
Enhanced energy efficiency, where economically justified, improves the Nation's energy security, strengthens the economy, and reduces the environmental impacts (costs) of energy production. Reduced electricity demand due to energy conservation standards is also likely to reduce the cost of maintaining the reliability of the electricity system, particularly during peak-load periods. Chapter 15 in the SNOPR TSD presents the estimated impacts on electricity generating capacity, relative to the no-new-standards case, for the TSLs that DOE considered in this proposed rulemaking.
Energy conservation resulting from potential energy conservation standards for microwave ovens is expected to yield environmental benefits in the form of reduced emissions of certain air pollutants and greenhouse gases. Table V.16 provides DOE's estimate of cumulative emissions reductions expected to result from the TSLs considered in this rulemaking. The emissions were calculated using the multipliers discussed in section III.D of this document. DOE reports annual emissions reductions for each TSL in chapter 13 of the SNOPR TSD.
As part of the analysis for this rulemaking, DOE estimated monetary benefits likely to result from the reduced emissions of CO
As discussed in section IV.L.2 of this document, DOE estimated monetary benefits likely to result from the reduced emissions of CH
DOE is well aware that scientific and economic knowledge about the contribution of CO
DOE also estimated the monetary value of the economic benefits associated with SO
DOE also estimated the monetary value of the economic benefits associated with NO
The benefits of reduced CO
DOE has not considered the monetary benefits of the reduction of Hg for this SNOPR. Not all the public health and environmental benefits from the reduction of greenhouse gases, NO
The Secretary of Energy, in determining whether a standard is economically justified, may consider any other factors that the Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) No other factors were considered in this analysis.
Table V.22 presents the NPV values that result from adding the monetized estimates of the potential economic, climate, and health benefits resulting from reduced GHG, SO
The national operating cost savings are domestic U.S. monetary savings that occur as a result of purchasing the covered microwave ovens, and are measured for the lifetime of products shipped in 2026–2055. The benefits associated with reduced GHG emissions achieved as a result of the adopted standards are also calculated based on the lifetime of microwave ovens shipped in 2026–2055.
When considering new or amended energy conservation standards, the standards that DOE adopts for any type (or class) of covered product must be designed to achieve the maximum improvement in energy efficiency that the Secretary determines is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)) In determining whether a standard is economically justified, the Secretary must determine whether the benefits of the standard exceed its burdens by, to the greatest extent practicable, considering the seven statutory factors discussed previously. (42 U.S.C. 6295(o)(2)(B)(i)) The new or amended standard must also result in significant conservation of energy. (42 U.S.C. 6295(o)(3)(B))
For this SNOPR, DOE considered the impacts of amended standards for microwave ovens at each TSL, beginning with the maximum technologically feasible level, to determine whether that level was economically justified. Where the max-tech level was not justified, DOE then considered the next most efficient level and undertook the same evaluation until it reached the highest efficiency level that is both technologically feasible and economically justified and saves a significant amount of energy. DOE refers to this process as the “walk-down” analysis.
To aid the reader as DOE discusses the benefits and/or burdens of each TSL, tables in this section present a summary of the results of DOE's quantitative analysis for each TSL. In addition to the
DOE also notes that the economics literature provides a wide-ranging discussion of how consumers trade off upfront costs and energy savings in the absence of government intervention. Much of this literature attempts to explain why consumers appear to undervalue energy efficiency improvements. There is evidence that consumers undervalue future energy savings as a result of (1) a lack of information; (2) a lack of sufficient salience of the long-term or aggregate benefits; (3) a lack of sufficient savings to warrant delaying or altering purchases; (4) excessive focus on the short term, in the form of inconsistent weighting of future energy cost savings relative to available returns on other investments; (5) computational or other difficulties associated with the evaluation of relevant tradeoffs; and (6) a divergence in incentives (for example, between renters and owners, or builders and purchasers). Having less than perfect foresight and a high degree of uncertainty about the future, consumers may trade off these types of investments at a higher than expected rate between current consumption and uncertain future energy cost savings.
In DOE's current regulatory analysis, potential changes in the benefits and costs of a regulation due to changes in consumer purchase decisions are included in two ways. First, if consumers forego the purchase of a product in the standards case, this decreases sales for product manufacturers, and the impact on manufacturers attributed to lost revenue is included in the MIA. Second, DOE accounts for energy savings attributable only to products actually used by consumers in the standards case; if a standard decreases the number of products purchased by consumers, this decreases the potential energy savings from an energy conservation standard. DOE provides estimates of shipments and changes in the volume of product purchases in chapter 9 of the SNOPR TSD. However, DOE's current analysis does not explicitly control for heterogeneity in consumer preferences, preferences across subcategories of products or specific features, or consumer price sensitivity variation according to household income.
While DOE is not prepared at present to provide a fuller quantifiable framework for estimating the benefits and costs of changes in consumer purchase decisions due to an energy conservation standard, DOE is committed to developing a framework that can support empirical quantitative tools for improved assessment of the consumer welfare impacts of appliance standards. DOE has posted a paper that discusses the issue of consumer welfare impacts of appliance energy conservation standards, and potential enhancements to the methodology by which these impacts are defined and estimated in the regulatory process.
Table V.23 and Table V.24 summarize the quantitative impacts estimated for each TSL for microwave ovens. The national impacts are measured over the lifetime of microwave ovens purchased in the 30-year period that begins in the anticipated year of compliance with amended standards (2026–2055). The energy savings, emissions reductions, and value of emissions reductions refer to FFC results. DOE exercises its own judgment in presenting monetized climate benefits as recommended in applicable Executive Orders, and DOE would reach the same conclusion presented in this notice in the absence of the social cost of greenhouse gases, including the February 2021 Interim Estimates presented by the Interagency Working Group on the Social Cost of Greenhouse Gases. The efficiency levels contained in each TSL are described in section V.A of this document.
DOE first considered TSL 3, which represents the max-tech efficiency levels. TSL 3 would save an estimated 0.12 quads of energy, an amount DOE considers significant. Under TSL 3, the NPV of consumer benefit would be $0.28 billion using a discount rate of 7 percent, and $0.65 billion using a discount rate of 3 percent.
The cumulative emissions reductions at TSL 3 are 4.18 Mt of CO
At TSL 3, the average LCC impact is a savings of $2.13 for PC 1 and $1.78 for
At TSL 3, the projected change in manufacturer INPV ranges from a decrease of approximately $80.7 million, which corresponds to a decrease of approximately 5.8 percent, to no change in INPV. At this TSL, free cash flow is estimated to decrease by 42.9 percent compared to the no-new-standards case value in the year before the compliance year. DOE estimates manufacturers will incur approximately $108.3 million in conversion costs at this TSL.
TSL 3 represents commercially available microwave ovens that have a standby power level of no more than 0.4 W for PC 1 and 0.5 W for PC 2.
The Secretary tentatively concludes that, while TSL 3 for microwave ovens meets the criteria for establishing a rebuttable presumption of economic justification, the benefits of energy savings, positive NPV of consumer benefits, emission reductions, and the estimated monetary value of the climate and health benefits would be outweighed by the impacts on manufacturers, including the conversion costs and profit margin impacts that could result in a reduction in INPV, and the percentage of consumers in PC 2 that would experience a net LCC cost. Consequently, the Secretary has tentatively concluded that TSL 3 is not economically justified.
DOE then considered TSL 2, which would save an estimate 0.06 quads of energy, an amount that DOE considers significant. Under TSL 2, the NPV of consumer benefit would be $0.15 billion using a discount rate of 7 percent, and $0.33 billion using a discount rate of 3 percent.
The cumulative emissions reductions at TSL 2 are 1.86 Mt of CO
At TSL 2, the average LCC impact is a savings of $0.98 for PC 1 and $0.78 for PC 2. The simple payback period is 1.4 years for PC 1 and 0.8 years for PC 2. The fraction of consumers experiencing a net LCC cost is 5 percent for PC 1 and 8 percent for PC 2.
At TSL 2, the projected change in manufacturer INPV ranges from a decrease of approximately $34.3 million, which corresponds to a decrease of approximately 2.5 percent, to no change in INPV. At this TSL, free cash flow is estimated to decrease by 18.5 percent compared to the no-new-standards case value in the year before the compliance year. DOE estimates manufacturers will incur approximately $46.1 million in conversion costs at this TSL.
The estimated cost of the proposed standards for microwave ovens is $4.8 million per year in increased product costs, while the estimated net benefits are $32.7 million per year. After considering the analysis and weighing the benefits and burdens, the Secretary has tentatively concluded that a standard set at TSL 2 for microwave ovens would be economically justified. At this TSL, the average LCC savings for microwave oven consumers is positive. An estimated 6 percent of microwave oven consumers would experience a net cost. The FFC national energy savings are significant and the NPV of consumer benefits is positive using both a 3-percent and 7-percent discount rate. Notably, the benefits to consumers vastly outweigh the cost to manufacturers. At TSL 2, the NPV of consumer benefits, even measured at the more conservative discount rate of 7 percent, is over 4 times higher than the maximum estimated manufacturers' loss in INPV. The positive LCC savings—a different way of quantifying consumer benefits—reinforces this conclusion. The standard levels at TSL 2 are economically justified even without weighing the estimated monetary value of emissions reductions. When those emissions reductions are included—representing $0.16 billion (using a 3-percent discount rate) or $0.07 billion (using a 7-percent discount rate) in health benefits—the rationale becomes stronger still.
Accordingly, the Secretary has tentatively concluded that TSL 2 would offer the maximum improvement in efficiency that is technologically feasible and economically justified and would result in the significant conservation of energy. Although results are presented here in terms of TSLs, DOE analyzes and evaluates all possible ELs for each product class in its analysis.
Therefore, based on the previous considerations, DOE proposes to adopt the energy conservation standards for microwave ovens at TSL 2. The proposed amended energy conservation standards for microwave ovens, which are expressed as watts, are shown in Table V.25.
The benefits and costs of the proposed standards can also be expressed in terms of annualized values. The annualized net benefit is (1) the annualized national economic value (expressed in 2021$) of the benefits from operating products that meet the proposed standards (consisting primarily of operating cost savings from using less energy, minus increases in product purchase costs, and (2) the annualized monetary value of the benefits of GHGs, NO
Table V.26 shows the annualized values for microwave ovens under TSL 2, expressed in 2021$. The results under the primary estimate are as follows.
Using a 7-percent discount rate for consumer benefits and costs and health benefits from reduced SO
Using a 3-percent discount rate for all benefits and costs, the estimated cost of the proposed standards for microwave ovens is $4.8 million per year in increased product costs, while the estimated annual benefits are $23.3 million in reduced operating costs, $5.2 million in climate benefits, and $9.1 million in monetized health benefits. In this case, the net benefit amounts to $32.7 million per year.
Executive Order (“E.O.”) 12866, “Regulatory Planning and Review,” as supplemented and reaffirmed by E.O. 13563, “Improving Regulation and Regulatory Review, 76 FR 3821 (Jan. 21, 2011), requires agencies, to the extent permitted by law, to (1) propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs (recognizing that some benefits and costs are difficult to quantify); (2) tailor regulations to impose the least burden on society, consistent with obtaining regulatory objectives, taking into account, among other things, and to the extent practicable, the costs of cumulative regulations; (3) select, in choosing among alternative regulatory approaches, those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity); (4) to the extent feasible, specify performance objectives, rather than specifying the behavior or manner of compliance that regulated entities must adopt; and (5) identify and assess available alternatives to direct regulation, including providing economic incentives to encourage the desired behavior, such as user fees or marketable permits, or providing information upon which choices can be made by the public. DOE emphasizes as well that E.O. 13563 requires agencies to use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible. In its guidance, the Office of Information and Regulatory Affairs (“OIRA”) in the Office of Management and Budget (“OMB”) has emphasized
Section 6(a) of E.O. 12866 also requires agencies to submit “significant regulatory actions” to OIRA for review. OIRA has determined that this proposed regulatory action does not constitute a “significant regulatory action” under section 3(f) of E.O. 12866. Accordingly, this action was not submitted to OIRA for review under E.O. 12866.
The Regulatory Flexibility Act (5 U.S.C. 601
DOE reviewed this proposed rule under the provisions of the Regulatory Flexibility Act and the procedures and policies published on February 19, 2003. DOE certifies that the proposed rule, if adopted, would not have a significant economic impact on a substantial number of small entities. The factual basis of this certification is set forth in the following paragraphs.
For manufacturers of microwave ovens, the SBA has set a size threshold, which defines those entities classified as “small businesses” for the purposes of the statute. DOE used the SBA's small business size standards to determine whether any small entities would be subject to the requirements of the rule. See 13 CFR part 121. The product covered by this rule is classified under NAICS code 335220,
Based on the initial finding that there are no microwave oven manufacturers who would qualify as small businesses, DOE certifies that the proposed rule, if finalized, would not have a significant economic impact on a substantial number of small entities and has not prepared an IRFA for this rulemaking. DOE will transmit the certification and supporting statement of factual basis to the Chief Counsel for Advocacy of the Small Business Administration for review under 5 U.S.C. 605(b). DOE requests comment on its initial conclusion that there are no small business manufacturers.
Manufacturers of microwave ovens must certify to DOE that their products comply with any applicable energy conservation standards. In certifying compliance, manufacturers must test their products according to the DOE test procedures for microwave ovens, including any amendments adopted for those test procedures. DOE has established regulations for the certification and recordkeeping requirements for all covered consumer products and commercial product, including microwave ovens. 76 FR 12422 (Mar. 7, 2011); 80 FR 5099 (Jan. 30, 2015). The collection-of-information requirement for the certification and recordkeeping is subject to review and approval by OMB under the Paperwork Reduction Act (“PRA”). This requirement has been approved by OMB under OMB control number 1910–1400. Public reporting burden for the certification is estimated to average 35 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information.
Notwithstanding any other provision of the law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with, a collection of information subject to the requirements of the PRA, unless that collection of information displays a currently valid OMB Control Number.
DOE is analyzing this proposed regulation in accordance with the National Environmental Policy Act of 1969 (“NEPA”) and DOE's NEPA implementing regulations (10 CFR part 1021). DOE's regulations include a categorical exclusion for rulemakings that establish energy conservation standards for consumer products or industrial product. 10 CFR part 1021, subpart D, appendix B5.1. DOE anticipates that this rulemaking qualifies for categorical exclusion B5.1 because it is a rulemaking that establishes energy conservation standards for consumer products or industrial product, none of the exceptions identified in categorical exclusion B5.1(b) apply, no extraordinary circumstances exist that require further environmental analysis, and it otherwise meets the requirements for application of a categorical exclusion. See 10 CFR 1021.410. DOE will complete its NEPA review before issuing the final rule.
E.O. 13132, “Federalism,” 64 FR 43255 (Aug. 10, 1999), imposes certain requirements on Federal agencies formulating and implementing policies or regulations that preempt State law or that have federalism implications. The Executive order requires agencies to examine the constitutional and statutory
With respect to the review of existing regulations and the promulgation of new regulations, section 3(a) of E.O. 12988, “Civil Justice Reform,” imposes on Federal agencies the general duty to adhere to the following requirements: (1) eliminate drafting errors and ambiguity, (2) write regulations to minimize litigation, (3) provide a clear legal standard for affected conduct rather than a general standard, and (4) promote simplification and burden reduction. 61 FR 4729 (Feb. 7, 1996). Regarding the review required by section 3(a), section 3(b) of E.O. 12988 specifically requires that Executive agencies make every reasonable effort to ensure that the regulation: (1) clearly specifies the preemptive effect, if any, (2) clearly specifies any effect on existing Federal law or regulation, (3) provides a clear legal standard for affected conduct while promoting simplification and burden reduction, (4) specifies the retroactive effect, if any, (5) adequately defines key terms, and (6) addresses other important issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney General. Section 3(c) of Executive Order 12988 requires Executive agencies to review regulations in light of applicable standards in section 3(a) and section 3(b) to determine whether they are met or it is unreasonable to meet one or more of them. DOE has completed the required review and determined that, to the extent permitted by law, this proposed rule meets the relevant standards of E.O. 12988.
Title II of the Unfunded Mandates Reform Act of 1995 (“UMRA”) requires each Federal agency to assess the effects of Federal regulatory actions on State, local, and Tribal governments and the private sector. Public Law 104–4, section 201 (codified at 2 U.S.C. 1531). For a proposed regulatory action likely to result in a rule that may cause the expenditure by State, local, and Tribal governments, in the aggregate, or by the private sector of $100 million or more in any one year (adjusted annually for inflation), section 202 of UMRA requires a Federal agency to publish a written statement that estimates the resulting costs, benefits, and other effects on the national economy. (2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to develop an effective process to permit timely input by elected officers of State, local, and Tribal governments on a proposed “significant intergovernmental mandate,” and requires an agency plan for giving notice and opportunity for timely input to potentially affected small governments before establishing any requirements that might significantly or uniquely affect them. On March 18, 1997, DOE published a statement of policy on its process for intergovernmental consultation under UMRA. 62 FR 12820. DOE's policy statement is also available at
Although this proposed rule does not contain a Federal intergovernmental mandate, it may require expenditures of $100 million or more in any one year by the private sector. Such expenditures may include: (1) investment in research and development and in capital expenditures by microwave ovens manufacturers in the years between the final rule and the compliance date for the new standards and (2) incremental additional expenditures by consumers to purchase higher-efficiency microwave ovens, starting at the compliance date for the applicable standard.
Section 202 of UMRA authorizes a Federal agency to respond to the content requirements of UMRA in any other statement or analysis that accompanies the proposed rule. (2 U.S.C. 1532(c)) The content requirements of section 202(b) of UMRA relevant to a private sector mandate substantially overlap the economic analysis requirements that apply under section 325(o) of EPCA and Executive Order 12866. The
Under section 205 of UMRA, the Department is obligated to identify and consider a reasonable number of regulatory alternatives before promulgating a rule for which a written statement under section 202 is required. (2 U.S.C. 1535(a)) DOE is required to select from those alternatives the most cost-effective and least burdensome alternative that achieves the objectives of the proposed rule unless DOE publishes an explanation for doing otherwise, or the selection of such an alternative is inconsistent with law. In accordance with the statutory provisions discussed in this document, this proposed rule would amend energy conservation standards for microwave ovens that are designed to achieve the maximum improvement in energy efficiency that DOE has determined to be both technologically feasible and economically justified, as required by 42 U.S.C. 6295(o)(2)(A) and 6295(o)(3)(B). A full discussion of the alternatives considered by DOE is presented in chapter 17 of the TSD for this proposed rule.
Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 105–277) requires Federal agencies to issue a Family Policymaking Assessment for any rule that may affect family well-being. This proposal, if finalized as proposed, would not have any impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment.
Pursuant to E.O. 12630, “Governmental Actions and Interference with Constitutionally Protected Property Rights,” 53 FR 8859 (Mar. 15, 1988), DOE has determined that this proposed rule, if finalized as proposed, would not result in any takings that might require compensation under the Fifth Amendment to the U.S. Constitution.
Section 515 of the Treasury and General Government Appropriations
E.O. 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,” 66 FR 28355 (May 22, 2001), requires Federal agencies to prepare and submit to OIRA at OMB, a Statement of Energy Effects for any proposed significant energy action. A “significant energy action” is defined as any action by an agency that promulgates or is expected to lead to promulgation of a final rule, and that (1) is a significant regulatory action under Executive Order 12866, or any successor order; and (2) is likely to have a significant adverse effect on the supply, distribution, or use of energy, or (3) is designated by the Administrator of OIRA as a significant energy action. For any proposed significant energy action, the agency must give a detailed statement of any adverse effects on energy supply, distribution, or use should the proposal be implemented, and of reasonable alternatives to the action and their expected benefits on energy supply, distribution, and use.
DOE has tentatively concluded that this regulatory action, which proposes amended energy conservation standards for microwave ovens, is not a significant energy action because the proposed standards are not likely to have a significant adverse effect on the supply, distribution, or use of energy, nor has it been designated as such by the Administrator at OIRA. Accordingly, DOE has not prepared a Statement of Energy Effects on this proposed rule.
On December 16, 2004, OMB, in consultation with the Office of Science and Technology Policy (“OSTP”), issued its Final Information Quality Bulletin for Peer Review (“the Bulletin”). 70 FR 2664 (Jan. 14, 2005). The Bulletin establishes that certain scientific information shall be peer reviewed by qualified specialists before it is disseminated by the Federal Government, including influential scientific information related to agency regulatory actions. The purpose of the bulletin is to enhance the quality and credibility of the Government's scientific information. Under the Bulletin, the energy conservation standards rulemaking analyses are “influential scientific information,” which the Bulletin defines as “scientific information the agency reasonably can determine will have, or does have, a clear and substantial impact on important public policies or private sector decisions.” 70 FR 2664, 2667.
In response to OMB's Bulletin, DOE conducted formal peer reviews of the energy conservation standards development process and the analyses that are typically used and has prepared a report describing that peer review.
DOE invites public participation in this process through participation in the submission of written comments and information. After the closing of the comment period, DOE will consider all timely-submitted comments and additional information obtained from interested parties, as well as information obtained through further analyses.
DOE will accept comments, data, and information regarding this proposed rule no later than the date provided in the
However, your contact information will be publicly viewable if you include it in the comment itself or in any documents attached to your comment. Any information that you do not want to be publicly viewable should not be included in your comment, nor in any document attached to your comment. Otherwise, persons viewing comments will see only first and last names, organization names, correspondence containing comments, and any documents submitted with the comments.
Do not submit to
DOE processes submissions made through
Include contact information each time you submit comments, data, documents, and other information to DOE. No telefacsimiles (“faxes”) will be accepted.
Comments, data, and other information submitted to DOE electronically should be provided in PDF (preferred), Microsoft Word or Excel, WordPerfect, or text (ASCII) file format. Provide documents that are not secured, that are written in English, and that are free of any defects or viruses. Documents should not contain special characters or any form of encryption and, if possible, they should carry the electronic signature of the author.
It is DOE's policy that all comments may be included in the public docket, without change and as received, including any personal information provided in the comments (except information deemed to be exempt from public disclosure).
Although DOE welcomes comments on any aspect of this proposal, DOE is particularly interested in receiving comments and views of interested parties concerning the following issues:
(1) DOE requests feedback on its tentative conclusion that reducing the standby power consumption of microwave ovens would require full redesigns of control boards, and that while such redesigns would not result in increased MPCs, manufacturers would incur significant one-time conversation costs.
(2) DOE requests feedback on the efficiency levels analyzed for each product class in this proposal.
(3) DOE requests comment on its tentative conclusion that improvements in standby performance are the result of system-level control board redesigns that require conversion costs but would not result in increases to the manufacturing product cost compared to a control board at baseline.
(4) DOE requests comment on the incremental MPCs from the SNOPR engineering analysis.
(5) DOE requests comment on the estimated increased manufacturer markups and incremental MSPs that result from the analyed energy conservation standards from the SNOPR engineering analysis.
(6) DOE requests feedback on its approach to projecting the efficiency distribution in 2026.
(7) DOE requests comment on its methodology for estimating shipments. DOE also requests comment on its approach to estimate the market share for built-in and over-the-range convection microwave ovens.
(8) DOE requests comment on its initial findings that there are not any manufacturers of microwave ovens covered by this rulemaking that meet SBA's definition of a “small business.”
Additionally, DOE welcomes comments on other issues relevant to the conduct of this rulemaking that may not specifically be identified in this document.
The Secretary of Energy has approved publication of this supplemental notice of proposed rulemaking and request for comment.
Administrative practice and procedure, Confidential business information, Energy conservation, Household appliances, Imports, Intergovernmental relations, Small businesses.
This document of the Department of Energy was signed on August 14, 2022, by Kelly J. Speakes-Backman, Principal Deputy Assistant Secretary, Energy Efficiency and Renewable Energy, pursuant to delegated authority from the Secretary of Energy. That document with the original signature and date is maintained by DOE. For administrative purposes only, and in compliance with requirements of the Office of the Federal Register, the undersigned DOE Federal Register Liaison Officer has been authorized to sign and submit the document in electronic format for publication, as an official document of the Department of Energy. This administrative process in no way alters the legal effect of this document upon publication in the
For the reasons set forth in the preamble, DOE proposes to amend part 430 of chapter II, subchapter D, of title 10 of the Code of Federal Regulations, as set forth below:
42 U.S.C. 6291–6309; 28 U.S.C. 2461 note.
(j) * * *
(3) Microwave-only ovens and countertop convection microwave ovens manufactured on or after June 17, 2016 and before [
(4) Microwave-only ovens and countertop convection microwave ovens manufactured on or after [